Document:

f8k0808ex10iii_guangzhou.htm

    EXHIBIT
      E

    

    SECURITY
      AGREEMENT

    

                This
      SECURITY AGREEMENT, dated as of July 31, 2007 (this “Agreement”), is
      among Guangzhou Global Telecom, Inc., a Florida corporation (the
“Company”), all of the Subsidiaries of the Company (such subsidiaries,
      the “Guarantors” and together with the Company, the “Debtors”) and
      the holders of the Company’s 8% Senior Secured Convertible Debentures due
      issued on July __, 2007 in the original aggregate principal amount of
      $_________ (collectively, the “Debentures”) signatory hereto,
      their endorsees, transferees and assigns (collectively, the “Secured
      Parties”).

    

    W
      I T N E S S E T H:

    

                WHEREAS,
      pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
      Parties have severally agreed to extend the loans to the Company evidenced
      by
      the Debentures;

    

                WHEREAS,
      pursuant to a certain Subsidiary Guarantee, dated as of the date hereof
      (the “Guarantee”), the Guarantors have jointly and severally
      agreed to guarantee and act as surety for payment of such Debentures;
      and

    

                WHEREAS,
      in order to induce the Secured Parties to extend the loans evidenced by the
      Debentures, each Debtor has agreed to execute and deliver to the Secured Parties
      this Agreement and to grant the Secured
      Parties, pari passu with each other Secured Party and
      through the Agent, a security interest in certain property of such Debtor to
      secure the prompt payment, performance and discharge in full of all of the
      Company’s obligations under the Debentures and the Guarantors’ obligations under
      the Guarantee.

    

                NOW,
      THEREFORE, in consideration of the agreements herein contained and for other
      good and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereto hereby agree as follows:

    

                1.                 Certain
      Definitions. As used in this Agreement, the following terms shall have
      the meanings set forth in this Section 1.  Terms used but not
      otherwise defined in this Agreement that are defined in Article 9 of the UCC
      (such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”,
“document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”,
“proceeds” and “supporting obligations”) shall have the respective meanings
      given such terms in Article 9 of the UCC.

    

    (a)           “Collateral”
      means the collateral in which the Secured Parties are granted a security
      interest by this Agreement and which shall include the following personal
      property of the Debtors, whether presently owned or existing or hereafter
      acquired or coming into existence, wherever situated, and all additions and
      accessions thereto and all substitutions and replacements thereof, and all
      proceeds, products and accounts thereof, including, without limitation, all
      proceeds from the sale or transfer of the Collateral and of insurance covering
      the same and of any tort claims in connection therewith, and all dividends,
      interest, cash, notes, securities, equity interest or other property at any
      time
      and from time to time acquired, receivable or otherwise distributed in respect
      of, or in exchange for, any or all of the Pledged Securities (as defined
      below):

     

     

    
      
        
        

      

      
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    (i)   All
      goods, including, without limitation, (A) all machinery, equipment, computers,
      motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
      and
      general tools, fixtures, test and quality control devices and other equipment
      of
      every kind and nature and wherever situated, together with all documents of
      title and documents representing the same, all additions and accessions thereto,
      replacements therefor, all parts therefor, and all substitutes for any of the
      foregoing and all other items used and useful in connection with any Debtor’s
      businesses and all improvements thereto; and (B) all inventory;

    

    (ii)
                 All contract
      rights and other general intangibles, including, without limitation, all
      partnership interests, membership interests, stock or other securities, rights
      under any of the Organizational Documents, agreements related to the Pledged
      Securities, licenses, distribution and other agreements, computer software
      (whether “off-the-shelf”, licensed from any third party or developed by any
      Debtor), computer software development rights, leases, franchises, customer
      lists, quality control procedures, grants and rights, goodwill, trademarks,
      service marks, trade styles, trade names, patents, patent applications,
      copyrights, and income tax refunds;

     

    (iii)           All
      accounts, together with all instruments, all documents of title representing
      any
      of the foregoing, all rights in any merchandising, goods, equipment, motor
      vehicles and trucks which any of the same may represent, and all right, title,
      security and guaranties with respect to each account, including any right of
      stoppage in transit;

    

    (iv)           All
      documents, letter-of-credit rights, instruments and chattel paper;

    

    (v)           
      All commercial tort claims;

    

    (vi)           All
      deposit accounts and all cash (whether or not deposited in such deposit
      accounts);

    

    (vii)          All
      investment property;

    

    (viii)         All
      supporting obligations; and

    

    (ix)           
      All files, records, books of account, business papers, and computer programs;
      and

     

     

    
      
        
        

      

      
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    (x)           the
      products and proceeds of all of the foregoing Collateral set forth in clauses
      (i)-(ix) above.

    

    Without
      limiting the generality of the foregoing, the “Collateral” shall include
      all investment property and general intangibles respecting ownership and/or
      other equity interests in each Guarantor, including, without limitation, the
      shares of capital stock and the other equity interests listed on Schedule
      H hereto (as the same may be modified from time to time pursuant to the
      terms hereof), and any other shares of capital stock and/or other equity
      interests of any other direct or indirect subsidiary of any Debtor obtained
      in
      the future, and, in each case, all certificates representing such shares and/or
      equity interests and, in each case, all rights, options, warrants, stock, other
      securities and/or equity interests that may hereafter be received, receivable
      or
      distributed in respect of, or exchanged for, any of the foregoing and all rights
      arising under or in connection with the Pledged Securities, including, but
      not
      limited to, all dividends, interest and cash.

     

    Notwithstanding
      the foregoing, nothing herein shall be deemed to constitute an assignment of
      any
      asset which, in the event of an assignment, becomes void by operation of
      applicable law or the assignment of which is otherwise prohibited by applicable
      law (in each case to the extent that such applicable law is not overridden
      by
      Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
      provided, however, that to the extent permitted by applicable law,
      this Agreement shall create a valid security interest in such asset and, to
      the
      extent permitted by applicable law, this Agreement shall create a valid security
      interest in the proceeds of such asset.

    

    (b)           “Intellectual
      Property” means the collective reference to all rights, priorities and
      privileges relating to intellectual property, whether arising under United
      States, multinational or foreign laws or otherwise, including, without
      limitation, (i) all copyrights arising under the laws of the United States,
      any
      other country or any political subdivision thereof, whether registered or
      unregistered and whether published or unpublished, all registrations and
      recordings thereof, and all applications in connection therewith, including,
      without limitation, all registrations, recordings and applications in the United
      States Copyright Office, (ii) all letters patent of the United States, any
      other
      country or any political subdivision thereof, all reissues and extensions
      thereof, and all applications for letters patent of the United States or any
      other country and all divisions, continuations and continuations-in-part
      thereof, (iii) all trademarks, trade names, corporate names, company names,
      business names, fictitious business names, trade dress, service marks, logos,
      domain names and other source or business identifiers, and all goodwill
      associated therewith, now existing or hereafter adopted or acquired, all
      registrations and recordings thereof, and all applications in connection
      therewith, whether in the United States Patent and Trademark Office or in any
      similar office or agency of the United States, any State thereof or any other
      country or any political subdivision thereof, or otherwise, and all common
      law
      rights related thereto, (iv) all trade secrets arising under the laws of the
      United States, any other country or any political subdivision thereof, (v)
      all
      rights to obtain any reissues, renewals or extensions of the foregoing, (vi)
      all
      licenses for any of the foregoing, and (vii) all causes of action for
      infringement of the foregoing.

     

     

    
      
        
        

      

      
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               (c)           “Majority
      in Interest” means, at any time of determination, the majority in
      interest (based on then-outstanding principal amounts of Debentures at the
      time
      of such determination) of the Secured Parties.

    

               (d)           “Necessary
      Endorsement” means undated stock powers endorsed in blank or other
      proper instruments of assignment duly executed and such other instruments or
      documents as the Agent (as that term is defined below) may reasonably
      request.

     

        (e)           “Obligations”
      means all of the liabilities and obligations (primary, secondary, direct,
      contingent, sole, joint or several) due or to become due, or that are now or
      may
      be hereafter contracted or acquired, or owing to, of any Debtor to the Secured
      Parties, including, without limitation, all obligations under this Agreement,
      the Debentures, the Guarantee and any other instruments, agreements or other
      documents executed and/or delivered in connection herewith or therewith, in
      each
      case, whether now or hereafter existing, voluntary or involuntary, direct or
      indirect, absolute or contingent, liquidated or unliquidated, whether or not
      jointly owed with others, and whether or not from time to time decreased or
      extinguished and later increased, created or incurred, and all or any portion
      of
      such obligations or liabilities that are paid, to the extent all or any part
      of
      such payment is avoided or recovered directly or indirectly from any of the
      Secured Parties as a preference, fraudulent transfer or otherwise as such
      obligations may be amended, supplemented, converted, extended or modified from
      time to time.  Without limiting the generality of the foregoing, the
      term “Obligations” shall include, without limitation: (i) principal of, and
      interest on the Debentures and the loans extended pursuant thereto; (ii) any
      and
      all other fees, indemnities, costs, obligations and liabilities of the Debtors
      from time to time under or in connection with this Agreement, the Debentures,
      the Guarantee and any other instruments, agreements or other documents executed
      and/or delivered in connection herewith or therewith; and (iii) all amounts
      (including but not limited to post-petition interest) in respect of the
      foregoing that would be payable but for the fact that the obligations to pay
      such amounts are unenforceable or not allowable due to the existence of a
      bankruptcy, reorganization or similar proceeding involving any
      Debtor.

     

        (f)           
      “Organizational Documents” means with respect to any Debtor, the
      documents by which such Debtor was organized (such as a certificate of
      incorporation, certificate of limited partnership or articles of organization,
      and including, without limitation, any certificates of designation for preferred
      stock or other forms of preferred equity) and which relate to the internal
      governance of such Debtor (such as bylaws, a partnership agreement or an
      operating, limited liability or members agreement).

     

       (g)             “Pledged
      Securities” shall have the meaning ascribed to such term in Section
      4(i).

     

     

    
      
        
        

      

      
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    (h)           “UCC”
      means the Uniform Commercial Code of the State of New York and or any other
      applicable law of any state or states which has jurisdiction with respect to
      all, or any portion of, the Collateral or this Agreement, from time to
      time.  It is the intent of the parties that defined terms in the UCC
      should be construed in their broadest sense so that the term “Collateral” will
      be construed in its broadest sense.  Accordingly if there are, from
      time to time, changes to defined terms in the UCC that broaden the definitions,
      they are incorporated herein and if existing definitions in the UCC are broader
      than the amended definitions, the existing ones shall be
      controlling.

    

               2.           Grant
      of Security Interest in
      Collateral. As an inducement for the Secured Parties to extend the
      loans as evidenced by the Debentures and to secure the complete and timely
      payment, performance and discharge in full, as the case may be, of all of the
      Obligations, each Debtor hereby unconditionally and irrevocably pledges, grants
      and hypothecates to the Secured Parties a security interest in and to, a lien
      upon and a right of set-off against all of their respective right, title and
      interest of whatsoever kind and nature in and to, the Collateral (a “Security
      Interest” and, collectively, the “Security Interests”).

    

               3.           Delivery
      of Certain Collateral.  Contemporaneously or prior to the
      execution of this Agreement, each Debtor shall deliver or cause to be delivered
      to the Agent (a) any and all certificates and other instruments representing
      or
      evidencing the Pledged Securities, and (b) any and all certificates and other
      instruments or documents representing any of the other Collateral, in each
      case, together with all Necessary Endorsements.  The Debtors are,
      contemporaneously with the execution hereof, delivering to Agent, or have
      previously delivered to Agent, a true and correct copy of each Organizational
      Document governing any of the Pledged Securities.

    

                4.          Representations,
      Warranties, Covenants and Agreements of the Debtors. Except as set
      forth under the corresponding section of the disclosure schedules delivered
      to
      the Secured Parties concurrently herewith (the “Disclosure
      Schedules”), which Disclosure Schedules shall be deemed a part hereof, each
      Debtor represents and warrants to, and covenants and agrees with, the Secured
      Parties as follows:

    

    (a)   Each
      Debtor has the requisite corporate, partnership, limited liability company
      or
      other power and authority to enter into this Agreement and otherwise to carry
      out its obligations hereunder. The execution, delivery and performance by each
      Debtor of this Agreement and the filings contemplated therein have been duly
      authorized by all necessary action on the part of such Debtor and no further
      action is required by such Debtor.  This Agreement has been duly
      executed by each Debtor.  This Agreement constitutes the legal, valid
      and binding obligation of each Debtor, enforceable against each Debtor in
      accordance with its terms except as such enforceability may be limited by
      applicable bankruptcy, insolvency, reorganization and similar laws of general
      application relating to or affecting the rights and remedies of creditors and
      by
      general principles of equity.

     

     

    
      
        
        

      

      
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     (b)           The
      Debtors have no place of business or offices where their respective books of
      account and records are kept (other than temporarily at the offices of its
      attorneys or accountants) or places where Collateral is stored or located,
      except as set forth on Schedule A attached hereto.  Except as
      specifically set forth on Schedule A, each Debtor is the record owner of
      the real property where such Collateral is located, and there exist no mortgages
      or other liens on any such real property except for Permitted Liens (as defined
      in the Debentures).  Except as disclosed on Schedule A, none of
      such Collateral is in the possession of any consignee, bailee, warehouseman,
      agent or processor.

    

    (c)           Except
      for Permitted Liens (as defined in the Debentures) and except as set forth
      on
Schedule B attached hereto, the Debtors are the sole owner of the
      Collateral (except for non-exclusive licenses granted by any Debtor in the
      ordinary course of business), free and clear of any liens, security interests,
      encumbrances, rights or claims, and are fully authorized to grant the Security
      Interests.  Except as set forth on Schedule B attached hereto,
      there is not on file in any governmental or regulatory authority, agency or
      recording office an effective financing statement, security agreement, license
      or transfer or any notice of any of the foregoing (other than those that will
      be
      filed in favor of the Secured Parties pursuant to this Agreement) covering
      or
      affecting any of the Collateral.  Except as set forth on Schedule
      B attached hereto and except pursuant to this Agreement, as long as this
      Agreement shall be in effect, the Debtors shall not execute and shall not
      knowingly permit to be on file in any such office or agency any other financing
      statement or other document or instrument (except to the extent filed or
      recorded in favor of the Secured Parties pursuant to the terms of this
      Agreement).

    

    (d)           No
      written claim has been received that any Collateral or Debtor's use of any
      Collateral violates the rights of any third party. There has been no adverse
      decision to any Debtor's claim of ownership rights in or exclusive rights to
      use
      the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
      such Collateral in full force and effect, and there is no proceeding
      involving said rights pending or, to the best knowledge of any Debtor,
      threatened before any court, judicial body, administrative or regulatory agency,
      arbitrator or other governmental authority.

    

    (e)           Each
      Debtor shall at all times maintain its books of account and records relating
      to
      the Collateral at its principal place of business and its Collateral at the
      locations set forth on Schedule A attached hereto and may not relocate
      such books of account and records or tangible Collateral unless it delivers
      to
      the Secured Parties at least 30 days prior to such relocation (i) written notice
      of such relocation and the new location thereof (which must be within the United
      States) and (ii) evidence that appropriate financing statements under the UCC
      and other necessary documents have been filed and recorded and other steps
      have
      been taken to perfect the Security Interests to create in favor of the Secured
      Parties a valid, perfected and continuing perfected first priority lien in
      the
      Collateral.

    

    (f)           This
      Agreement creates in favor of the Secured Parties a valid security interest
      in the Collateral, subject only to Permitted Liens (as defined in the
      Debentures) securing the payment and performance of the
      Obligations.  Upon making the filings described in the immediately
      following paragraph, all security interests created hereunder in any Collateral
      which may be perfected by filing Uniform Commercial Code financing statements
      shall have been duly perfected.  

     

     

    
      
        
        

      

      
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    Except
      for the filing of the Uniform Commercial Code financing statements referred
      to
      in the immediately following paragraph, the recordation of the Intellectual
      Property Security Agreement (as defined below) with respect to copyrights and
      copyright applications in the United States Copyright Office referred to in
      paragraph (m), the execution and delivery of deposit account control agreements
      satisfying the requirements of Section 9-104(a)(2) of the UCC with respect
      to
      each deposit account of the Debtors, and the delivery of the certificates and
      other instruments provided in Section 3, no action is necessary to create,
      perfect or protect the security interests created hereunder.  Without
      limiting the generality of the foregoing, except for the filing of said
      financing statements, the recordation of said Intellectual Property Security
      Agreement, and the execution and delivery of said deposit account control
      agreements, no consent of any third parties and no authorization, approval
      or
      other action by, and no notice to or filing with, any governmental
      authority or regulatory body is required for (i) the execution, delivery and
      performance of this Agreement, (ii) the creation or perfection of the Security
      Interests created hereunder in the Collateral or (iii) the enforcement of the
      rights of the Agent and the Secured Parties hereunder.

    

     (g)           Each
      Debtor hereby authorizes the Agent to file one or more financing statements
      under the UCC, with respect to the Security Interests, with the proper filing
      and recording agencies in any jurisdiction deemed proper by it.

    

     (h)           The
      execution, delivery and performance of this Agreement by the Debtors does not
      (i) violate any of the provisions of any Organizational Documents of any Debtor
      or any judgment, decree, order or award of any court, governmental body or
      arbitrator or any applicable law, rule or regulation applicable to any Debtor
      or
      (ii) conflict with, or constitute a default (or an event that with notice or
      lapse of time or both would become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation (with or without
      notice, lapse of time or both) of, any agreement, credit facility, debt or
      other
      instrument (evidencing any Debtor's debt or otherwise) or other understanding
      to
      which any Debtor is a party or by which any property or asset of any Debtor
      is bound or affected. If any, all required consents (including, without
      limitation, from stockholders or creditors of any Debtor) necessary for any
      Debtor to enter into and perform its obligations hereunder have been
      obtained.

    

     (i)             The
      capital stock and other equity interests listed on Schedule H hereto (the
“Pledged Securities”) represent all of the capital stock and other equity
      interests of the Guarantors, and represent all capital stock and other equity
      interests owned, directly or indirectly, by the Company.  All of the
      Pledged Securities are validly issued, fully paid and nonassessable, and the
      Company is the legal and beneficial owner of the Pledged Securities, free and
      clear of any lien, security interest or other encumbrance except for the
      security interests created by this Agreement and other Permitted Liens (as
      defined in the Debentures).  

    

    (j)           The
      ownership and other equity interests in partnerships and limited liability
      companies (if any) included in the Collateral (the “Pledged Interests”)
      by their express terms do not provide that they are securities governed by
      Article 8 of the UCC and are not held in a securities account or by any
      financial intermediary.

     

     

    
      
        
        

      

      
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    (k)           Except
      for Permitted Liens (as defined in the Debentures), each Debtor shall at all
      times maintain the liens and Security Interests provided for hereunder as valid
      and perfected first priority liens and security interests in the Collateral
      in
      favor of the Secured Parties until this Agreement and the Security Interest
      hereunder shall be terminated pursuant to Section 11 hereof.  Each
      Debtor hereby agrees to defend the same against the claims of any and all
      persons and entities. Each Debtor shall safeguard and protect all
      Collateral for the account of the Secured Parties.  At the
      request of the Agent, each Debtor will sign and deliver to the Agent on behalf
      of the Secured Parties at any time or from time to time one or more financing
      statements pursuant to the UCC in form reasonably satisfactory to the Agent
      and
      will pay the cost of filing the same in all public offices wherever filing
      is,
      or is deemed by the Agent to be, necessary or desirable to effect the rights
      and
      obligations provided for herein. Without limiting the generality of the
      foregoing, each Debtor shall pay all fees, taxes and other amounts necessary
      to
      maintain the Collateral and the Security Interests hereunder, and each Debtor
      shall obtain and furnish to the Agent from time to time, upon demand, such
      releases and/or subordinations of claims and liens which may be required to
      maintain the priority of the Security Interests hereunder.

    

    (l)           
      No Debtor will transfer, pledge, hypothecate, encumber, license, sell or
      otherwise dispose of any of the Collateral (except for non-exclusive licenses
      granted by a Debtor in its ordinary course of business and sales of inventory
      by
      a Debtor in its ordinary course of business) without the prior written consent
      of a Majority in Interest.

    

    (m)         
      Each Debtor shall keep and preserve its equipment, inventory and other tangible
      Collateral in good condition, repair and order and shall not operate or locate
      any such Collateral (or cause to be operated or located) in any area excluded
      from insurance coverage.

    

    (n)           Each
      Debtor shall maintain with financially sound and reputable insurers, insurance
      with respect to the Collateral, including Collateral hereafter acquired, against
      loss or damage of the kinds and in the amounts customarily insured against
      by
      entities of established reputation having similar properties similarly situated
      and in such amounts as are customarily carried under similar circumstances
      by
      other such entities and otherwise as is prudent for entities engaged in similar
      businesses but in any event sufficient to cover the full replacement cost
      thereof.  Each Debtor shall cause each insurance policy issued in
      connection herewith to provide, and the insurer issuing such policy to certify
      to the Agent, that (a) the Agent will be named as lender loss payee and
      additional insured under each such insurance policy; (b) if such insurance
      be
      proposed to be cancelled or materially changed for any reason whatsoever, such
      insurer will promptly notify the Agent and such cancellation or change shall
      not
      be effective as to the Agent for at least thirty (30) days after receipt by
      the
      Agent of such notice, unless the effect of such change is to extend or increase
      coverage under the policy; and (c) the Agent will have the right (but no
      obligation) at its election to remedy any default in the payment of premiums
      within thirty (30) days of notice from the insurer of such
      default.  

     

     

    
      
        
        

      

      
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    If
      no
      Event of Default (as defined in the Debentures) exists and if the proceeds
      arising out of any claim or series of related claims do not exceed $100,000,
      loss payments in each instance will be applied by the applicable Debtor to
      the
      repair and/or replacement of property with respect to which the loss was
      incurred to the extent reasonably feasible, and any loss payments or the balance
      thereof remaining, to the extent not so applied, shall be payable to the
      applicable Debtor; provided, however, that payments received
      by any Debtor after an Event of Default occurs and is continuing or in excess
      of
      $100,000 for any occurrence or series of related occurrences shall be paid
      to
      the Agent on behalf of the Secured Parties and, if received by such Debtor,
      shall be held in trust for the Secured Parties and immediately paid over to
      the
      Agent unless otherwise directed in writing by the Agent.   Copies
      of such policies or the related certificates, in each case, naming the Agent
      as
      lender loss payee and additional insured shall be delivered to the Agent at
      least annually and at the time any new policy of insurance is
      issued.

    

    (o)           Each
      Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
      Secured Parties promptly, in sufficient detail, of any material adverse change
      in the Collateral, and of the occurrence of any event which would have a
      material adverse effect on the value of the Collateral or on the Secured
      Parties’ security interest, through the Agent, therein.

    

     (p)          Each
      Debtor shall promptly execute and deliver to the Agent such further deeds,
      mortgages, assignments, security agreements, financing statements or other
      instruments, documents, certificates and assurances and take such further action
      as the Agent may from time to time request and may in its sole discretion deem
      necessary to perfect, protect or enforce the Secured Parties’ security interest
      in the Collateral including, without limitation, if applicable, the execution
      and delivery of a separate security agreement with respect to each Debtor’s
      Intellectual Property (“Intellectual Property Security Agreement”) in
      which the Secured Parties have been granted a security interest hereunder,
      substantially in a form reasonably acceptable to the Agent, which
      Intellectual Property Security Agreement, other than as stated therein, shall
      be
      subject to all of the terms and conditions hereof.

    

    (q)           Each
      Debtor shall permit the Agent and its representatives and agents to inspect
      the
      Collateral during normal business hours and upon reasonable prior notice, and
      to
      make copies of records pertaining to the Collateral as may be reasonably
      requested by the Agent from time to time.

    

    (r)           Each
      Debtor shall take all steps reasonably necessary to diligently pursue and seek
      to preserve, enforce and collect any rights, claims, causes of action and
      accounts receivable in respect of the Collateral.

    

    (s)           Each
      Debtor shall promptly notify the Secured Parties in sufficient detail upon
      becoming aware of any attachment, garnishment, execution or other legal process
      levied against any Collateral and of any other information received by such
      Debtor that may materially affect the value of the Collateral, the Security
      Interest or the rights and remedies of the Secured Parties
      hereunder.

     

     

    
      
        
        

      

      
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    (t)           All
      information heretofore, herein or hereafter supplied to the Secured Parties
      by
      or on behalf of any Debtor with respect to the Collateral is accurate and
      complete in all material respects as of the date furnished.

    

    (u)           The
      Debtors shall at all times preserve and keep in full force and effect their
      respective valid existence and good standing and any rights and franchises
      material to its business.

    

    (v)           No
      Debtor will change its name, type of organization, jurisdiction of organization,
      organizational identification number (if it has one), legal or corporate
      structure, or identity, or add any new fictitious name unless it provides at
      least 30 days prior written notice to the Secured Parties of such change and,
      at
      the time of such written notification, such Debtor provides any financing
      statements or fixture filings necessary to perfect and continue the perfection
      of the Security Interests granted and evidenced by this Agreement.

    

    (w)          Except
      in the ordinary course of business, no Debtor may consign any of its inventory
      or sell any of its inventory on bill and hold, sale or return, sale on approval,
      or other conditional terms of sale without the consent of the Agent which shall
      not be unreasonably withheld.

    

    (x)           No
      Debtor may relocate its chief executive office to a new location without
      providing 30 days prior written notification thereof to the Secured Parties
      and
      so long as, at the time of such written notification, such Debtor provides
      any
      financing statements or fixture filings necessary to perfect and continue the
      perfection of the Security Interests granted and evidenced by this
      Agreement.

    

     (y)         Each
      Debtor was organized and remains organized solely under the laws of the state
      set forth next to such Debtor’s name in Schedule D attached hereto, which
Schedule D sets forth each Debtor’s organizational identification number
      or, if any Debtor does not have one, states that one does not
      exist.

    

    (z)           
      (i) The actual name of each Debtor is the name set forth in Schedule
      D attached hereto; (ii) no Debtor has any trade names except as set forth
      on
Schedule E attached hereto; (iii) no Debtor has used any name other than
      that stated in the preamble hereto or as set forth on Schedule E for the
      preceding five years; and (iv) no entity has merged into any Debtor or been
      acquired by any Debtor within the past five years except as set forth on
Schedule E.

    

    (aa)           At
      any time and from time to time that any Collateral consists of instruments,
      certificated securities or other items that require or permit possession by
      the
      secured party to perfect the security interest created hereby, the applicable
      Debtor shall deliver such Collateral to the Agent.

     

     

    
      
        
        

      

      
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               (bb)           Each
      Debtor, in its capacity as issuer, hereby agrees to comply with any and all
      orders and instructions of Agent regarding the Pledged Interests consistent
      with
      the terms of this Agreement without the further consent of any Debtor as
      contemplated by Section 8-106 (or any successor section) of the
      UCC.  Further, each Debtor agrees that it shall not enter into a
      similar agreement (or one that would confer “control” within the meaning of
      Article 8 of the UCC) with any other person or entity.

     

        (cc)           Each
      Debtor shall cause all tangible chattel paper constituting Collateral to be
      delivered to the Agent, or, if such delivery is not possible, then to cause
      such
      tangible chattel paper to contain a legend noting that it is subject to the
      security interest created by this Agreement.  To the extent that any
      Collateral consists of electronic chattel paper, the applicable Debtor shall
      cause the underlying chattel paper to be “marked” within the meaning of Section
      9-105 of the UCC (or successor section thereto).

    

    (dd)       If
      there is any investment property or deposit account included as Collateral
      that
      can be perfected by “control” through an account control agreement, the
      applicable Debtor shall cause such an account control agreement, in form and
      substance in each case satisfactory to the Agent, to be entered into and
      delivered to the Agent for the benefit of the Secured Parties.

    

    (ee)        To
      the extent that any Collateral consists of letter-of-credit rights, the
      applicable Debtor shall cause the issuer of each underlying letter of credit
      to
      consent to an assignment of the proceeds thereof to the Secured
      Parties.

    

    (ff)         To
      the extent that any Collateral is in the possession of any third party, the
      applicable Debtor shall join with the Agent in notifying such third party of
      the
      Secured Parties’ security interest in such Collateral and shall use its best
      efforts to obtain an acknowledgement and agreement from such third party with
      respect to the Collateral, in form and substance reasonably satisfactory to
      the
      Agent.

    

    (gg)        If
      any Debtor shall at any time hold or acquire a commercial tort claim, such
      Debtor shall promptly notify the Secured Parties in a writing signed by such
      Debtor of the particulars thereof and grant to the Secured Parties in such
      writing a security interest therein and in the proceeds thereof, all upon the
      terms of this Agreement, with such writing to be in form and substance
      satisfactory to the Agent.

    

    (hh)        Each
      Debtor shall immediately provide written notice to the Secured Parties of any
      and all accounts which arise out of contracts with any governmental authority
      and, to the extent necessary to perfect or continue the perfected status of
      the
      Security Interests in such accounts and proceeds thereof, shall execute and
      deliver to the Agent an assignment of claims for such accounts and cooperate
      with the Agent in taking any other steps required, in its judgment, under the
      Federal Assignment of Claims Act or any similar federal, state or local statute
      or rule to perfect or continue the perfected status of the Security Interests
      in
      such accounts and proceeds thereof.

     

     

    
      
        
        

      

      
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     (ii)         
      Each Debtor shall cause each subsidiary of such Debtor to immediately become
      a
      party hereto (an “Additional Debtor”), by executing and delivering an
      Additional Debtor Joinder in substantially the form of Annex A attached
      hereto and comply with the provisions hereof applicable to the
      Debtors.  Concurrent therewith, the Additional Debtor shall deliver
      replacement schedules for, or supplements to all other Schedules to (or referred
      to in) this Agreement, as applicable, which replacement schedules shall
      supersede, or supplements shall modify, the Schedules then in
      effect.  The Additional Debtor shall also deliver such opinions of
      counsel, authorizing resolutions, good standing certificates, incumbency
      certificates, organizational documents, financing statements and other
      information and documentation as the Agent may reasonably
      request.  Upon delivery of the foregoing to the Agent, the Additional
      Debtor shall be and become a party to this Agreement with the same rights and
      obligations as the Debtors, for all purposes hereof as fully and to the same
      extent as if it were an original signatory hereto and shall be deemed to have
      made the representations, warranties and covenants set forth herein as of the
      date of execution and delivery of such Additional Debtor Joinder, and all
      references herein to the “Debtors” shall be deemed to include each Additional
      Debtor.

    

    (jj)           Each
      Debtor shall vote the Pledged Securities to comply with the covenants and
      agreements set forth herein and in the Debentures.

    

    (kk)           Each
      Debtor shall register the pledge of the applicable Pledged Securities on the
      books of such Debtor.  Each Debtor shall notify each issuer of Pledged
      Securities to register the pledge of the applicable Pledged Securities in the
      name of the Secured Parties on the books of such issuer.  Further,
      except with respect to certificated securities delivered to the Agent, the
      applicable Debtor shall deliver to Agent an acknowledgement of pledge (which,
      where appropriate, shall comply with the requirements of the relevant UCC with
      respect to perfection by registration) signed by the issuer of the applicable
      Pledged Securities, which acknowledgement shall confirm that: (a) it has
      registered the pledge on its books and records; and (b) at any time directed
      by
      Agent during the continuation of an Event of Default, such issuer will transfer
      the record ownership of such Pledged Securities into the name of any designee
      of
      Agent, will take such steps as may be necessary to effect the transfer, and
      will
      comply with all other instructions of Agent regarding such Pledged Securities
      without the further consent of the applicable Debtor.

    

    (ll)           In
      the event that, upon an occurrence of an Event of Default, Agent shall sell
      all
      or any of the Pledged Securities to another party or parties (herein called
      the
“Transferee”) or shall purchase or retain all or any of the
      Pledged Securities, each Debtor shall, to the extent applicable: (i) deliver
      to
      Agent or the Transferee, as the case may be, the articles of incorporation,
      bylaws, minute books, stock certificate books, corporate seals, deeds, leases,
      indentures, agreements, evidences of indebtedness, books of account, financial
      records and all other Organizational Documents and records of the Debtors and
      their direct and indirect subsidiaries; (ii) use its best efforts to obtain
      resignations of the persons then serving as officers and directors of the
      Debtors and their direct and indirect subsidiaries, if so requested; and (iii)
      use its best efforts to obtain any approvals that are required by any
      governmental or regulatory body in order to permit the sale of the Pledged
      Securities to the Transferee or the purchase or retention of the Pledged
      Securities by Agent and allow the Transferee or Agent to continue the business
      of the Debtors and their direct and indirect subsidiaries.

     

     

    
      
        
        

      

      
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    (mm)                  Without
      limiting the generality of the other obligations of the Debtors hereunder,
      each
      Debtor shall promptly (i) cause to be registered at the United States Copyright
      Office all of its material copyrights, (ii) cause the security interest
      contemplated hereby with respect to all Intellectual Property registered at
      the
      United States Copyright Office or United States Patent and Trademark Office
      to
      be duly recorded at the applicable office, and (iii) give the Agent notice
      whenever it acquires (whether absolutely or by license) or creates any
      additional material Intellectual Property.

    

     (nn)                   Each
      Debtor will from time to time, at the joint and several expense of the Debtors,
      promptly execute and deliver all such further instruments and documents, and
      take all such further action as may be necessary or desirable, or as the Agent
      may reasonably request, in order to perfect and protect any security interest
      granted or purported to be granted hereby or to enable the Secured Parties
      to
      exercise and enforce their rights and remedies hereunder and with respect to
      any
      Collateral or to otherwise carry out the purposes of this
      Agreement.

    

    (oo)                    Schedule
      F attached hereto lists all of the patents, patent applications, trademarks,
      trademark applications, registered copyrights, and domain names owned by any
      of
      the Debtors as of the date hereof.  Schedule F lists all
      material licenses in favor of any Debtor for the use of any patents, trademarks,
      copyrights and domain names as of the date hereof.  All material
      patents and trademarks of the Debtors have been duly recorded at the United
      States Patent and Trademark Office and all material copyrights of the Debtors
      have been duly recorded at the United States Copyright Office.

    

    (pp)                    Except
      as set forth on Schedule G attached hereto, none of the account debtors
      or other persons or entities obligated on any of the Collateral is a
      governmental authority covered by the Federal Assignment of Claims Act or any
      similar federal, state or local statute or rule in respect of such
      Collateral.

    

               5.           Effect
      of Pledge on Certain Rights. If any of the
      Collateral subject to this Agreement consists of nonvoting equity or ownership
      interests (regardless of class, designation, preference or rights) that may
      be
      converted into voting equity or ownership interests upon the occurrence of
      certain events (including, without limitation, upon the transfer of all or
      any
      of the other stock or assets of the issuer), it is agreed that the pledge of
      such equity or ownership interests pursuant to this Agreement or the enforcement
      of any of Agent’s rights hereunder shall not be deemed to be the type of event
      which would trigger such conversion rights notwithstanding any provisions in
      the
      Organizational Documents or agreements to which any Debtor is subject or to
      which any Debtor is party.

    

               6.
                 Defaults.
      The following events shall be “Events of Default”:

     

     

    
      
        
        

      

      
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    (a)   The
      occurrence of an Event of Default (as defined in the Debentures) under the
      Debentures;

    

    (b)   Any
      representation or warranty of any Debtor in this Agreement shall prove to have
      been incorrect in any material respect when made;

    

    (c)   The
      failure by any Debtor to observe or perform any of its obligations hereunder
      for
      five (5) days after delivery to such Debtor of notice of such failure by or
      on
      behalf of a Secured Party unless such default is capable of cure but cannot
      be
      cured within such time frame and such Debtor is using best efforts to cure
      same
      in a timely fashion; or

    

    (d)   If
      any provision of this Agreement shall at any time for any reason be declared
      to
      be null and void, or the validity or enforceability thereof shall be contested
      by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
      governmental authority having jurisdiction over any Debtor, seeking to establish
      the invalidity or unenforceability thereof, or any Debtor shall deny that any
      Debtor has any liability or obligation purported to be created under this
      Agreement.

    

                7.              Duty
      To Hold In Trust.

    

    (a)           Upon
      the occurrence of any Event of Default and at any time thereafter, each Debtor
      shall, upon receipt of any revenue, income, dividend, interest or other sums
      subject to the Security Interests, whether payable pursuant to the Debentures
      or
      otherwise, or of any check, draft, note, trade acceptance or other instrument
      evidencing an obligation to pay any such sum, hold the same in trust for the
      Secured Parties and shall forthwith endorse and transfer any such sums or
      instruments, or both, to the Secured Parties, pro-rata in proportion to their
      respective then-currently outstanding principal amount of Debentures for
      application to the satisfaction of the Obligations (and if any Debenture is
      not
      outstanding, pro-rata in proportion to the initial purchases of the remaining
      Debentures).

    

    (b)           If
      any Debtor shall become entitled to receive or shall receive any securities
      or
      other property (including, without limitation, shares of Pledged Securities
      or
      instruments representing Pledged Securities acquired after the date hereof,
      or
      any options, warrants, rights or other similar property or certificates
      representing a dividend, or any distribution in connection with any
      recapitalization, reclassification or increase or reduction of capital, or
      issued in connection with any reorganization of such Debtor or any of its direct
      or indirect subsidiaries) in respect of the Pledged Securities (whether as
      an
      addition to, in substitution of, or in exchange for, such Pledged Securities
      or
      otherwise), such Debtor agrees to (i) accept the same as the agent of the
      Secured Parties; (ii) hold the same in trust on behalf of and for the benefit
      of
      the Secured Parties; and (iii) to deliver any and all certificates or
      instruments evidencing the same to Agent on or before the close of business
      on
      the fifth business day following the receipt thereof by such Debtor, in the
      exact form received together with the Necessary Endorsements, to be held by
      Agent subject to the terms of this Agreement as Collateral.

    
 

    
      
        
        

      

      
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              8.              Rights
      and Remedies Upon Default.

    

               (a)           Upon
      the occurrence of any Event of Default and at any time thereafter, the Secured
      Parties, acting through the Agent, shall have the right to exercise all of
      the
      remedies conferred hereunder and under the Debentures, and the Secured Parties
      shall have all the rights and remedies of a secured party under the
      UCC.  Without limitation, the Agent, for the benefit of the Secured
      Parties, shall have the following rights and powers:

    

    (i)           The
      Agent shall have
      the right to take possession of the Collateral and, for that purpose, enter,
      with the aid and assistance of any person, any premises where the Collateral,
      or
      any part thereof, is or may be placed and remove the same, and each Debtor
      shall
      assemble the Collateral and make it available to the Agent at places which
      the
      Agent shall reasonably select, whether at such Debtor's premises or elsewhere,
      and make available to the Agent, without rent, all of such Debtor’s respective
      premises and facilities for the purpose of the Agent taking possession of,
      removing or putting the Collateral in saleable or disposable form.

    

    (ii)            Upon
      notice to the
      Debtors by Agent, all rights of each Debtor to exercise the voting and other
      consensual rights which it would otherwise be entitled to exercise and all
      rights of each Debtor to receive the dividends and interest which it would
      otherwise be authorized to receive and retain, shall cease.  Upon such
      notice, Agent shall have the right to receive, for the benefit of the Secured
      Parties, any interest, cash dividends or other payments on the Collateral and,
      at the option of Agent, to exercise in such Agent’s discretion all voting rights
      pertaining thereto.  Without limiting the generality of the foregoing,
      Agent shall have the right (but not the obligation) to exercise all rights
      with
      respect to the Collateral as it were the sole and absolute owner thereof,
      including, without limitation, to vote and/or to exchange, at its sole
      discretion, any or all of the Collateral in connection with a merger,
      reorganization, consolidation, recapitalization or other readjustment concerning
      or involving the Collateral or any Debtor or any of its direct or indirect
      subsidiaries.

    

    (iii)           The
      Agent shall have
      the right to operate the business of each Debtor using the Collateral and shall
      have the right to assign, sell, lease or otherwise dispose of and deliver all
      or
      any part of the Collateral, at public or private sale or otherwise, either
      with
      or without special conditions or stipulations, for cash or on credit or for
      future delivery, in such parcel or parcels and at such time or times and at
      such
      place or places, and upon such terms and conditions as the Agent may deem
      commercially reasonable, all without (except as shall be required by applicable
      statute and cannot be waived) advertisement or demand upon or notice to any
      Debtor or right of redemption of a Debtor, which are hereby expressly
      waived.  Upon each such sale, lease, assignment or other transfer of
      Collateral, the Agent, for the benefit of the Secured Parties, may, unless
      prohibited by applicable law which cannot be waived, purchase all or any part
      of
      the Collateral being sold, free from and discharged of all trusts, claims,
      right
      of redemption and equities of any Debtor, which are hereby waived and
      released.

    

    
      
        
        

      

      
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    (iv)                       The
      Agent shall have the right (but not the obligation) to notify any account
      debtors and any obligors under instruments or accounts to make payments directly
      to the Agent, on behalf of the Secured Parties, and to enforce the Debtors’
rights against such account debtors and obligors.

    

    (v)                       The
      Agent, for the benefit of the Secured Parties, may (but is not obligated to)
      direct any financial intermediary or any other person or entity holding any
      investment property to transfer the same to the Agent, on behalf of the Secured
      Parties, or its designee.

    

    (vi)                       The
      Agent may (but is not obligated to) transfer any or all Intellectual Property
      registered in the name of any Debtor at the United States Patent and Trademark
      Office and/or Copyright Office into the name of the Secured Parties or any
      designee or any purchaser of any Collateral.

    

               (b)           The
      Agent shall comply with any applicable law in connection with a disposition
      of
      Collateral and such compliance will not be considered adversely to affect the
      commercial reasonableness of any sale of the Collateral.  The Agent
      may sell the Collateral without giving any warranties and may specifically
      disclaim such warranties.  If the Agent sells any of the Collateral on
      credit, the Debtors will only be credited with payments actually made by the
      purchaser.  In addition, each Debtor waives any and all rights that it
      may have to a judicial hearing in advance of the enforcement of any of the
      Agent’s rights and remedies hereunder, including, without limitation, its right
      following an Event of Default to take immediate possession of the Collateral
      and
      to exercise its rights and remedies with respect thereto.

     

        (c)           For
      the purpose of enabling the Agent to further exercise rights and remedies under
      this Section 8 or elsewhere provided by agreement or applicable law, each Debtor
      hereby grants to the Agent, for the benefit of the Agent and the Secured
      Parties, an irrevocable, nonexclusive license (exercisable without payment
      of
      royalty or other compensation to such Debtor) to use, license or sublicense
      following an Event of Default, any Intellectual Property now owned or hereafter
      acquired by such Debtor, and wherever the same may be located, and including
      in
      such license access to all media in which any of the licensed items may be
      recorded or stored and to all computer software and programs used for the
      compilation or printout thereof.

    

                9.              Applications
      of Proceeds. The proceeds of any such sale, lease or other disposition
      of the Collateral hereunder or from payments made on account of any insurance
      policy insuring any portion of the Collateral shall be applied first, to the
      expenses of retaking, holding, storing, processing and preparing for sale,
      selling, and the like (including, without limitation, any taxes, fees and other
      costs incurred in connection therewith) of the Collateral, to the reasonable
      attorneys’ fees and expenses incurred by the Agent in enforcing the Secured
      Parties’ rights hereunder and in connection with collecting, storing and
      disposing of the Collateral, and then to satisfaction of the Obligations pro
      rata among the Secured Parties (based on then-outstanding principal amounts
      of
      Debentures at the time of any such determination), and to the payment of any
      other amounts required by applicable law, after which the Secured Parties shall
      pay to the applicable Debtor any surplus proceeds. 

     

     

    
      
        
        

      

      
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    If,
      upon
      the sale, license or other disposition of the Collateral, the proceeds thereof
      are insufficient to pay all amounts to which the Secured Parties are legally
      entitled, the Debtors will be liable for the deficiency, together with interest
      thereon, at the rate of 18% per annum or the lesser amount permitted by
      applicable law (the “Default Rate”), and the reasonable fees of any attorneys
      employed by the Secured Parties to collect such deficiency.  To the
      extent permitted by applicable law, each Debtor waives all claims, damages
      and
      demands against the Secured Parties arising out of the repossession, removal,
      retention or sale of the Collateral, unless due solely to the gross negligence
      or willful misconduct of the Secured Parties as determined by a final judgment
      (not subject to further appeal) of a court of competent
      jurisdiction.

    

               10.           Securities
      Law Provision.  Each Debtor recognizes that Agent may be
      limited in its ability to effect a sale to the public of all or part of the
      Pledged Securities by reason of certain prohibitions in the Securities Act
      of
      1933, as amended, or other federal or state securities laws (collectively,
      the
“Securities Laws”), and may be compelled to resort to one or more sales
      to a restricted group of purchasers who may be required to agree to acquire
      the
      Pledged Securities for their own account, for investment and not with a view
      to
      the distribution or resale thereof.  Each Debtor agrees that sales so
      made may be at prices and on terms less favorable than if the Pledged Securities
      were sold to the public, and that Agent has no obligation to delay the sale
      of
      any Pledged Securities for the period of time necessary to register the Pledged
      Securities for sale to the public under the Securities Laws.  Each
      Debtor shall cooperate with Agent in its attempt to satisfy any requirements
      under the Securities Laws (including, without limitation, registration
      thereunder if requested by Agent) applicable to the sale of the Pledged
      Securities by Agent.

     

                11.              Costs
      and Expenses. Each Debtor agrees to pay all reasonable
      out-of-pocket fees, costs and expenses incurred in connection with any filing
      required hereunder, including without limitation, any financing statements
      pursuant to the UCC, continuation statements, partial releases and/or
      termination statements related thereto or any expenses of any searches
      reasonably required by the Agent.  The Debtors shall also pay all
      other claims and charges which in the reasonable opinion of the Agent is
      reasonably likely to prejudice, imperil or otherwise affect the Collateral
      or
      the Security Interests therein.  The Debtors will also, upon demand,
      pay to the Agent the amount of any and all reasonable expenses, including the
      reasonable fees and expenses of its counsel and of any experts and agents,
      which
      the Agent, for the benefit of the Secured Parties, may incur in connection
      with
      (i) the enforcement of this Agreement, (ii) the custody or preservation of,
      or
      the sale of, collection from, or other realization upon, any of the Collateral,
      or (iii) the exercise or enforcement of any of the rights of the Secured Parties
      under the Debentures. Until so paid, any fees payable hereunder shall be added
      to the principal amount of the Debentures and shall bear interest at the Default
      Rate.

    

                12.              Responsibility
      for Collateral. The Debtors assume all liabilities and responsibility
      in connection with all Collateral, and the Obligations shall in no way be
      affected or diminished by reason of the loss, destruction, damage or theft
      of
      any of the Collateral or its unavailability for any reason.  Without
      limiting the generality of the foregoing, (a) neither the Agent nor any Secured
      Party (i) has any duty (either before or after an Event of Default) to collect
      any amounts in respect of the Collateral or to preserve any rights relating
      to
      the Collateral, or (ii) has any obligation to clean-up or otherwise prepare
      the
      Collateral for sale, and (b) each Debtor shall remain obligated and liable
      under
      each contract or agreement included in the Collateral to be observed or
      performed by such Debtor thereunder.  

     

     

    
      
        
        

      

      
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    Neither
      the Agent nor any Secured Party shall have any obligation or liability under
      any
      such contract or agreement by reason of or arising out of this Agreement or
      the
      receipt by the Agent or any Secured Party of any payment relating to any of
      the
      Collateral, nor shall the Agent or any Secured Party be obligated in any manner
      to perform any of the obligations of any Debtor under or pursuant to any such
      contract or agreement, to make inquiry as to the nature or sufficiency of any
      payment received by the Agent or any Secured Party in respect of the Collateral
      or as to the sufficiency of any performance by any party under any such contract
      or agreement, to present or file any claim, to take any action to enforce any
      performance or to collect the payment of any amounts which may have been
      assigned to the Agent or to which the Agent or any Secured Party may be entitled
      at any time or times.

    

               13.           Security
      Interests Absolute. All rights of the
      Secured Parties and all obligations of the Debtors hereunder, shall be absolute
      and unconditional, irrespective of: (a) any lack of validity or enforceability
      of this Agreement, the Debentures or any agreement entered into in connection
      with the foregoing, or any portion hereof or thereof; (b) any change in the
      time, manner or place of payment or performance of, or in any other term of,
      all
      or any of the Obligations, or any other amendment or waiver of or any consent
      to
      any departure from the Debentures or any other agreement entered into in
      connection with the foregoing; (c) any exchange, release or nonperfection of
      any
      of the Collateral, or any release or amendment or waiver of or consent to
      departure from any other collateral for, or any guarantee, or any other
      security, for all or any of the Obligations; (d) any action by the Secured
      Parties to obtain, adjust, settle and cancel in its sole discretion any
      insurance claims or matters made or arising in connection with the Collateral;
      or (e) any other circumstance which might otherwise constitute any legal or
      equitable defense available to a Debtor, or a discharge of all or any part
      of
      the Security Interests granted hereby.  Until the Obligations shall
      have been paid and performed in full, the rights of the Secured Parties shall
      continue even if the Obligations are barred for any reason, including, without
      limitation, the running of the statute of limitations or
      bankruptcy.  Each Debtor expressly waives presentment, protest, notice
      of protest, demand, notice of nonpayment and demand for performance. In the
      event that at any time any transfer of any Collateral or any payment received
      by
      the Secured Parties hereunder shall be deemed by final order of a court of
      competent jurisdiction to have been a voidable preference or fraudulent
      conveyance under the bankruptcy or insolvency laws of the United States, or
      shall be deemed to be otherwise due to any party other than the Secured Parties,
      then, in any such event, each Debtor’s obligations hereunder shall survive
      cancellation of this Agreement, and shall not be discharged or satisfied by
      any
      prior payment thereof and/or cancellation of this Agreement, but shall remain
      a
      valid and binding obligation enforceable in accordance with the terms and
      provisions hereof.  Each Debtor waives all right to require the
      Secured Parties to proceed against any other person or entity or to apply any
      Collateral which the Secured Parties may hold at any time, or to marshal assets,
      or to pursue any other remedy. Each Debtor waives any defense arising by reason
      of the application of the statute of limitations to any obligation secured
      hereby.

     

    
 

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

                

        14.             Term
      of Agreement. This Agreement and the Security Interests shall terminate
      on the date on which all payments under the Debentures have been indefeasibly
      paid in full and all other Obligations have been paid or discharged; provided,
      however, that all indemnities of the Debtors contained in this Agreement
      (including, without limitation, Annex B hereto) shall survive and remain
      operative and in full force and effect regardless of the termination of this
      Agreement.

     

        15.
                 Power
      of Attorney; Further Assurances.

    

     (a)           Each
      Debtor authorizes the Agent, and does hereby make, constitute and appoint the
      Agent and its officers, agents, successors or assigns with full power of
      substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
      the name of the Agent or such Debtor, to, after the occurrence and during the
      continuance of an Event of Default, (i) endorse any note, checks, drafts, money
      orders or other instruments of payment (including payments payable under or
      in
      respect of any policy of insurance) in respect of the Collateral that may come
      into possession of the Agent; (ii) to sign and endorse any financing statement
      pursuant to the UCC or any invoice, freight or express bill, bill of lading,
      storage or warehouse receipts, drafts against debtors, assignments,
      verifications and notices in connection with accounts, and other documents
      relating to the Collateral; (iii) to pay or discharge taxes, liens,
      security interests or other encumbrances at any time levied or placed on or
      threatened against the Collateral; (iv) to demand, collect, receipt for,
      compromise, settle and sue for monies due in respect of the Collateral; (v)
      to
      transfer any Intellectual Property or provide licenses respecting any
      Intellectual Property; and (vi) generally, at the option of the Agent, and
      at
      the expense of the Debtors, at any time, or from time to time, to execute and
      deliver any and all documents and instruments and to do all acts and things
      which the Agent deems necessary to protect, preserve and realize upon the
      Collateral and the Security Interests granted therein in order to effect the
      intent of this Agreement and the Debentures all as fully and effectually as
      the
      Debtors might or could do; and each Debtor hereby ratifies all that said
      attorney shall lawfully do or cause to be done by virtue hereof.  This
      power of attorney is coupled with an interest and shall be irrevocable for
      the
      term of this Agreement and thereafter as long as any of the Obligations shall
      be
      outstanding.  The designation set forth herein shall be deemed to
      amend and supersede any inconsistent provision in the Organizational Documents
      or other documents or agreements to which any Debtor is subject or to which
      any
      Debtor is a party.  Without limiting the generality of the foregoing,
      after the occurrence and during the continuance of an Event of Default, each
      Secured Party is specifically authorized to execute and file any applications
      for or instruments of transfer and assignment of any patents, trademarks,
      copyrights or other Intellectual Property with the United States Patent and
      Trademark Office and the United States Copyright Office.

    

     (b)           On
      a continuing basis, each Debtor will make, execute, acknowledge, deliver, file
      and record, as the case may be, with the proper filing and recording agencies
      in
      any jurisdiction, including, without limitation, the jurisdictions indicated
      on
Schedule C attached hereto, all such instruments, and take all such
      action as may reasonably be deemed necessary or advisable, or as reasonably
      requested by the Agent, to perfect the Security Interests granted hereunder
      and
      otherwise to carry out the intent and purposes of this Agreement, or for
      assuring and confirming to the Agent the grant or perfection of a perfected
      security interest in all the Collateral under the UCC.

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    
 

    (c)           Each
      Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact,
      with full authority in the place and instead of such Debtor and in the name
      of
      such Debtor, from time to time in the Agent’s discretion, to take any action and
      to execute any instrument which the Agent may deem necessary or advisable to
      accomplish the purposes of this Agreement, including the filing, in its sole
      discretion, of one or more financing or continuation statements and amendments
      thereto, relative to any of the Collateral without the signature of such Debtor
      where permitted by law, which financing statements may (but need not) describe
      the Collateral as “all assets” or “all personal property” or words of like
      import, and ratifies all such actions taken by the Agent.  This power
      of attorney is coupled with an interest and shall be irrevocable for the term
      of
      this Agreement and thereafter as long as any of the Obligations shall be
      outstanding.

    

                16.              Notices.
      All notices, requests, demands and other communications hereunder shall be
      subject to the notice provision of the Purchase Agreement (as such term is
      defined in the Debentures).

    

                17.              Other
      Security. To the extent that the Obligations are now or
      hereafter  secured by property other than the Collateral or by the
      guarantee, endorsement or property of any other person, firm, corporation or
      other entity, then the Agent shall have the right, in its sole discretion,
      to
      pursue, relinquish, subordinate, modify or take any other action with respect
      thereto, without in any way modifying or affecting any of the Secured Parties’
rights and remedies hereunder.

    

               18.             
      Appointment of Agent. The Secured Parties
      hereby appoint Enable Growth Partners, LP to act as their agent
      (“Enable”or
      “Agent”) for purposes of exercising any and all rights and
      remedies of the Secured Parties hereunder. Such appointment shall continue
      until
      revoked in writing by a Majority in Interest, at which time a Majority in
      Interest shall appoint a new Agent, provided that the existing Agent may not
      be
      removed as Agent unless such Agent shall then hold less than
      $100,000 in principal amount of Debentures;
provided, further, that such removal may occur only if
      each of the other Secured Parties shall then hold not less than an aggregate
      of
      $50,000 in principal amount of Debentures.  The Agent shall have
      the rights, responsibilities and immunities set forth in Annex B
      hereto.

     

                19.              Miscellaneous.

    

    (a)           No
      course of dealing between the Debtors and the Secured Parties, nor any failure
      to exercise, nor any delay in exercising, on the part of the Secured Parties,
      any right, power or privilege hereunder or under the Debentures shall operate
      as
      a waiver thereof; nor shall any single or partial exercise of any right, power
      or privilege hereunder or thereunder preclude any other or further exercise
      thereof or the exercise of any other right, power or privilege.

    

    (b)           All
      of the rights and remedies of the Secured Parties with respect to the
      Collateral, whether established hereby or by the Debentures or by any other
      agreements, instruments or documents or by law shall be cumulative and may
      be
      exercised singly or concurrently.

     

    
 

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (c)           This
      Agreement, together with the exhibits and schedules hereto, contain the entire
      understanding of the parties with respect to the subject matter hereof and
      supersede all prior agreements and understandings, oral or written, with respect
      to such matters, which the parties acknowledge have been merged into this
      Agreement and the exhibits and schedules hereto. No provision of this
      Agreement may be waived, modified, supplemented or amended except in a written
      instrument signed, in the case of an amendment, by the Debtors and the Secured
      Parties or, in the case of a waiver, by the party against whom enforcement
      of
      any such waived provision is sought.

    

    (d)           If
      any term, provision, covenant or restriction of this Agreement is held by a
      court of competent jurisdiction to be invalid, illegal, void or unenforceable,
      the remainder of the terms, provisions, covenants and restrictions set forth
      herein shall remain in full force and effect and shall in no way be affected,
      impaired or invalidated, and the parties hereto shall use their commercially
      reasonable efforts to find and employ an alternative means to achieve the same
      or substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

    

    (e)
                 No waiver of
      any default with respect to any provision, condition or requirement of this
      Agreement shall be deemed to be a continuing waiver in the future or a waiver
      of
      any subsequent default or a waiver of any other provision, condition or
      requirement hereof, nor shall any delay or omission of any party to exercise
      any
      right hereunder in any manner impair the exercise of any such
      right.

    

    (f)
                 This Agreement
      shall be binding upon and inure to the benefit of the parties and their
      successors and permitted assigns.  The Company and the Guarantors may
      not assign this Agreement or any rights or obligations hereunder without the
      prior written consent of each Secured Party (other than by
      merger).  Any Secured Party may assign any or all of its rights under
      this Agreement to any Person to whom such Secured Party assigns or transfers
      any
      Securities, provided such transferee agrees in writing to be bound, with respect
      to the transferred Securities, by the provisions of this Agreement that apply
      to
      the “Secured Parties.”

    

    (g)           Each
      party shall take such further action and execute and deliver such further
      documents as may be necessary or appropriate in order to carry out the
      provisions and purposes of this Agreement.

     

    
 

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (h)   All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof.  Each Debtor agrees that all
      proceedings concerning the interpretations, enforcement and defense of the
      transactions contemplated by this Agreement and the Debentures (whether brought
      against a party hereto or its respective affiliates, directors, officers,
      shareholders, partners, members, employees or agents) shall be commenced
      exclusively in the state and federal courts sitting in the City of New York,
      Borough of Manhattan. Each Debtor hereby irrevocably submits to the exclusive
      jurisdiction of the state and federal courts sitting in the City of New York,
      Borough of Manhattan for the adjudication of any dispute hereunder or in
      connection herewith or with any transaction contemplated hereby or discussed
      herein, and hereby irrevocably waives, and agrees not to assert in any
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such proceeding is improper. Each party hereto hereby
      irrevocably waives personal service of process and consents to process being
      served in any such proceeding by mailing a copy thereof via registered or
      certified mail or overnight delivery (with evidence of delivery) to such party
      at the address in effect for notices to it under this Agreement and agrees
      that
      such service shall constitute good and sufficient service of process and notice
      thereof. Nothing contained herein shall be deemed to limit in any way any right
      to serve process in any manner permitted by law.  Each party hereto
      hereby irrevocably waives, to the fullest extent permitted by applicable law,
      any and all right to trial by jury in any legal proceeding arising out of
      or relating to this Agreement or the transactions contemplated hereby. If any
      party shall commence a proceeding to enforce any provisions of this Agreement,
      then the prevailing party in such proceeding shall be reimbursed by the
      other party for its reasonable attorney’s fees and other costs and expenses
      incurred with the investigation, preparation and prosecution of such
      proceeding.

    

    (i)           This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

    

    (j)           All
      Debtors shall jointly and severally be liable for the obligations of each Debtor
      to the Secured Parties hereunder.

    

    (k)           Each
      Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
      Parties and their respective partners, members, shareholders, officers,
      directors, employees and agents (and any other persons with other titles
      that have similar functions) (collectively, “Indemnitees”) from and
      against any and all losses, claims, liabilities, damages, penalties, suits,
      costs and expenses, of any kind or nature, (including fees relating to the
      cost
      of investigating and defending any of the foregoing) imposed on, incurred by
      or
      asserted against such Indemnitee in any way related to or arising from or
      alleged to arise from this Agreement or the Collateral, except any such losses,
      claims, liabilities, damages, penalties, suits, costs and expenses which result
      from the gross negligence or willful misconduct of the Indemnitee as determined
      by a final, nonappealable decision of a court of competent
      jurisdiction.  

     

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    This
      indemnification provision is in addition to, and not in limitation of, any
      other indemnification provision in the Debentures, the Purchase Agreement (as
      such term is defined in the Debentures) or any other agreement, instrument
      or
      other document executed or delivered in connection herewith or
      therewith.

    

    (l)           Nothing
      in this Agreement shall be construed to subject Agent or any Secured Party
      to
      liability as a partner in any Debtor or any if its direct or indirect
      subsidiaries that is a partnership or as a member in any Debtor or any of its
      direct or indirect subsidiaries that is a limited liability company, nor shall
      Agent or any Secured Party be deemed to have assumed any obligations under
      any
      partnership agreement or limited liability company agreement, as applicable,
      of
      any such Debtor or any if its direct or indirect subsidiaries or otherwise,
      unless and until any such Secured Party exercises its right to be substituted
      for such Debtor as a partner or member, as applicable, pursuant
      hereto.

    

    (m)           To
      the extent that the grant of the security interest in the Collateral and the
      enforcement of the terms hereof require the consent, approval or action of
      any
      partner or member, as applicable, of any Debtor or any direct or indirect
      subsidiary of any Debtor or compliance with any provisions of any of the
      Organizational Documents, the Debtors hereby grant such consent and approval
      and
      waive any such noncompliance with the terms of said documents.

    

    [SIGNATURE
      PAGES FOLLOW]

     

     

     

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

     

    
 

                IN
      WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
      be duly executed on the day and year first above written.

    

    

    
      	
              GUANGZHOU
                GLOBAL TELECOM, INC.

               

            
	
              By: 
                /s/  Li Yanquan                        

                   Name:
                Li Yanquan

                   Title:
                Chief Executive Officer

               

            
	 
	
              GLOBAL
                TELECOM HOLDING LIMITED

               

               

            
	
              By:/s/ 
                Li Yanquan                        

                   Name:
                Li Yanquan

                   Title:
                Chief Executive Officer

               

            
	 
	
              GUANGZHOU
                GLOBAL TELECOMMUNICATION COMPANY LIMITED

               

               

            
	
              By:/s/ 
                Li Yanquan                        

                   Name:
                Li Yanquan

                   Title:
                Chief Executive Officer

               

            

    

    

    

    

    

    

    

                          [SIGNATURE
      PAGE OF HOLDERS FOLLOWS]

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    [SIGNATURE
      PAGE OF HOLDERS TO GZGT SA]

    

               Name
      of Investing Entity: __________________________

    Signature
      of Authorized Signatory of Investing entity:
      _________________________

    Name
      of
      Authorized Signatory: _________________________

    Title
      of
      Authorized Signatory: __________________________

    

     

    [SIGNATURE
      PAGE OF HOLDERS FOLLOWS]

    

    

    

    
 

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    

    SECURITY
      AGREEMENT SCHEDULES

    

    

    SCHEDULE
      A

    

    Principal
      Place of Business of Debtors:

    APT
      29D,
      Block E

    No.11
      Hao
      Jing Street, Zhu Jiang Di Jing Yuan

    YiZhou
      Road, HaiZhu District,

    Guangzhou
      China, 510310

    

    

    Locations
      Where Collateral is Located or Stored:

    APT
      29D,
      Block E

    No.11
      Hao
      Jing Street, Zhu Jiang Di Jing Yuan

    YiZhou
      Road, HaiZhu District,

    Guangzhou
      China, 510310

     

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

     

     

    
 

    SCHEDULE
      B

    PERMITTED
      LIENS

    

    None

     

     

     

    
 

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      C

    JURISDICTIONS
      TO FILE AND RECORD SECURITY INTERESTS

    

    Florida

    

    

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    SCHEDULE
      D

    STATE
      OF ORGANIZATION

    

    Guangzhou
      Global Telecom, Inc. – Florida

    

    Global
      Telecom Holding Limited - British Virgin Islands

    

    Guangzhou
      Global Telecom Limited - 广州寰球通讯有限公司–
      People’s Republic of China

     

     

     

     

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

     

     

    SCHEDULE
      E

    TRADE
      NAMES

    

    Guangzhou
      Global Telecom, Inc. was previously known as Avalon Development Enterprises,
      Inc.

    

    

    

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      F

    INTELLECTUAL
      PROPERTY

    

    None.

     

     

     

     

     

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      G

    GOVERNMENTAL
      AUTHORITY

    

    None.

    

     

     

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

     

     

     

    SCHEDULE
      H

    PLEDGED
      SECURITIES

    

    

    Global
      Telecom Holding Limited

    1,000
      shares of common stock

    

    Guangzhou
      Global Telecom Limited

    All
      registered capital of RMB 3,030,000

    

    

    

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    

    

    

    ANNEX
      A

    to

    SECURITY

    AGREEMENT

    
       

      FORM
        OF ADDITIONAL DEBTOR JOINDER

       

    

     

    Security
      Agreement dated as of [_____ ___, 200__ made by

    Guangzhou
      Global Telecom, Inc

    and
      its
      subsidiaries party thereto from time to time, as Debtors

    to
      and in
      favor of

    the
      Secured Parties identified therein (the “Security
      Agreement”)

    

               Reference
      is made to the Security Agreement as defined above; capitalized terms used
      herein and not otherwise defined herein shall have the meanings given to such
      terms in, or by reference in, the Security Agreement.

    

               The
      undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
      to the Secured Parties referred to above, the undersigned shall (a) be an
      Additional Debtor under the Security Agreement, (b) have all the rights and
      obligations of the Debtors under the Security Agreement as fully and to the
      same
      extent as if the undersigned was an original signatory thereto and (c) be deemed
      to have made the representations and warranties set forth therein as of the
      date
      of execution and delivery of this Additional Debtor Joinder.  WITHOUT
      LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS
      TO
      THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET
      FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF
      JURY TRIAL PROVISIONS SET FORTH THEREIN.

    

               Attached
      hereto are supplemental and/or replacement Schedules to the Security Agreement,
      as applicable.

    

               An
      executed copy of this Joinder shall be delivered to the Secured Parties, and
      the
      Secured Parties may rely on the matters set forth herein on or after the date
      hereof.  This Joinder shall not be modified, amended or terminated
      without the prior written consent of the Secured Parties.

     

     

          

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

     

     

     IN
      WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
      the
      name and on behalf of the undersigned.

    

    
      	 	
              [Name
                of Additional Debtor]

            

    

    

    
      	 	
              By:

            

    

    
      	 	
              Name:

            

    

    
      	 	
              Title:

            

    

    

    
      	 	
              Address:

            

    

    

    

    

    

    

    
      	
               

            	
              Dated:

            

    

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    ANNEX
      B

    to

    SECURITY

    AGREEMENT

    

    THE
      AGENT

    

                          1.  Appointment. The
      Secured Parties (all capitalized terms used herein and not otherwise defined
      shall have the respective meanings provided in the Security Agreement to which
      this Annex B is attached (the "Agreement")), by their acceptance of the
      benefits of the Agreement, hereby designate Enable Growth Partners, LP
      (“Enable” or “Agent”) as the Agent to act as specified herein
      and in the Agreement.  Each Secured Party shall be deemed irrevocably
      to authorize the Agent to take such action on its behalf under the provisions
      of
      the Agreement and any other Transaction Document (as such term is defined in
      the
      Debentures) and to exercise such powers and to perform such duties hereunder
      and
      thereunder as are specifically delegated to or required of the Agent by the
      terms hereof and thereof and such other powers as are reasonably incidental
      thereto.  The Agent may perform any of its duties hereunder by or
      through its agents or employees.

    

                          2.
      Nature of Duties.  The Agent shall have no
      duties or responsibilities except those expressly set forth in the
      Agreement.  Neither the Agent nor any of its partners, members,
      shareholders, officers, directors, employees or agents shall be liable for
      any
      action taken or omitted by it as such under the Agreement or hereunder or in
      connection herewith or therewith, be responsible for the consequence of any
      oversight or error of judgment or answerable for any loss, unless caused solely
      by its or their gross negligence or willful misconduct as determined by a final
      judgment (not subject to further appeal) of a court of competent
      jurisdiction.  The duties of the Agent shall be mechanical and
      administrative in nature; the Agent shall not have by reason of the Agreement
      or
      any other Transaction Document a fiduciary relationship in respect of any Debtor
      or any Secured Party; and nothing in the Agreement or any other Transaction
      Document, expressed or implied, is intended to or shall be so construed as
      to
      impose upon the Agent any obligations in respect of the Agreement or any other
      Transaction Document except as expressly set forth herein and
      therein.

    

                          3.
      Lack of Reliance on the
Agent.  Independently and without reliance
      upon the Agent, each Secured Party, to the extent it deems appropriate, has
      made
      and shall continue to make (i) its own independent investigation of the
      financial condition and affairs of the Company and its subsidiaries in
      connection with such Secured Party’s investment in the Debtors, the creation and
      continuance of the Obligations, the transactions contemplated by the Transaction
      Documents, and the taking or not taking of any action in connection therewith,
      and (ii) its own appraisal of the creditworthiness of the Company and its
      subsidiaries, and of the value of the Collateral from time to time, and the
      Agent shall have no duty or responsibility, either initially or on a continuing
      basis, to provide any Secured Party with any credit, market or other
      information with respect thereto, whether coming into its possession before
      any
      Obligations are incurred or at any time or times
      thereafter.  

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    The
      Agent
      shall not be responsible to the Debtors or any Secured Party for any
      recitals, statements, information, representations or warranties herein or
      in
      any document, certificate or other writing delivered in connection herewith,
      or
      for the execution, effectiveness, genuineness, validity, enforceability,
      perfection, collectibility, priority or sufficiency of the Agreement or any
      other Transaction Document, or for the financial condition of the Debtors or
      the
      value of any of the Collateral, or be required to make any inquiry concerning
      either the performance or observance of any of the terms, provisions or
      conditions of the Agreement or any other Transaction Document, or the financial
      condition of the Debtors, or the value of any of the Collateral, or the
      existence or possible existence of any default or Event of Default under the
      Agreement, the Debentures or any of the other Transaction
      Documents.

    

                          4.
      Certain Rights of the Agent.  The Agent shall have
      the right to take any action with respect to the Collateral, on behalf of all
      of
      the Secured Parties.  To the extent practical, the Agent shall request
      instructions from the Secured Parties with respect to any material act or action
      (including failure to act) in connection with the Agreement or any other
      Transaction Document, and shall be entitled to act or refrain from acting in
      accordance with the instructions of Secured Parties holding a majority in
      principal amount of Debentures (based on then-outstanding principal amounts
      of
      Debentures at the time of any such determination); if such instructions are
      not
      provided despite the Agent’s request therefor, the Agent shall be entitled to
      refrain from such act or taking such action, and if such action is taken, shall
      be entitled to appropriate indemnification from the Secured Parties in respect
      of actions to be taken by the Agent; and the Agent shall not incur liability
      to
      any person or entity by reason of so refraining.  Without limiting the
      foregoing, (a) no Secured Party shall have any right of action whatsoever
      against the Agent as a result of the Agent acting or refraining from acting
      hereunder in accordance with the terms of the Agreement or any other Transaction
      Document, and the Debtors shall have no right to question or challenge the
      authority of, or the instructions given to, the Agent pursuant to the foregoing
      and (b) the Agent shall not be required to take any action which the Agent
      believes (i) could reasonably be expected to expose it to personal liability
      or
      (ii) is contrary to this Agreement, the Transaction Documents or applicable
      law.

    

                          5.  Reliance.  The
      Agent shall be entitled to rely, and shall be fully protected in relying, upon
      any writing, resolution, notice, statement, certificate, telex, teletype or
      telecopier message, cablegram, radiogram, order or other document or telephone
      message signed, sent or made by the proper person or entity, and, with respect
      to all legal matters pertaining to the Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of counsel selected by it
      and
      upon all other matters pertaining to this Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of other experts selected
      by
      it. Anything to the contrary notwithstanding, the Agent shall have no
      obligation whatsoever to any Secured Party to assure that the Collateral exists
      or is owned by the Debtors or is cared for, protected or insured or that the
      liens granted pursuant to the Agreement have been properly or sufficiently
      or
      lawfully created, perfected, or enforced or are entitled to any particular
      priority.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

                          6.  Indemnification.  To
      the extent that the Agent is not reimbursed and indemnified by the Debtors,
      the
      Secured Parties will jointly and severally reimburse and indemnify the Agent,
      in
      proportion to their initially purchased respective principal amounts of
      Debentures, from and against any and all liabilities, obligations, losses,
      damages, penalties, actions, judgments, suits, costs, expenses or disbursements
      of any kind or nature whatsoever which may be imposed on, incurred by or
      asserted against the Agent in performing its duties hereunder or under the
      Agreement or any other Transaction Document, or in any way relating to or
      arising out of the Agreement or any other Transaction Document except for those
      determined by a final judgment (not subject to further appeal) of a court of
      competent jurisdiction to have resulted solely from the Agent's own gross
      negligence or willful misconduct.  Prior to taking any action
      hereunder as Agent, the Agent may require each Secured Party to deposit with
      it
      sufficient sums as it determines in good faith is necessary to protect the
      Agent for costs and expenses associated with taking such action.

    

                          7.  Resignation
      by the Agent.

    

    (a)  The
      Agent may resign from the performance of all its functions and duties under
      the
      Agreement and the other Transaction Documents at any time by giving 30 days'
      prior written notice (as provided in the Agreement) to the Debtors and the
      Secured Parties.  Such resignation shall take effect upon the
      appointment of a successor Agent pursuant to clauses (b) and (c)
      below.

    

    (b)  Upon
      any such notice of resignation, the Secured Parties, acting by a Majority
      in Interest, shall appoint a successor Agent hereunder.

    

    (c)
      If a
      successor Agent shall not have been so appointed within said 30-day period,
      the
      Agent shall then appoint a successor Agent who shall serve as Agent until such
      time, if any, as the Secured Parties appoint a successor Agent as provided
      above.  If a successor Agent has not been appointed within such 30-day
      period, the Agent may petition any court of competent jurisdiction or may
      interplead the Debtors and the Secured Parties in a proceeding for the
      appointment of a successor Agent, and all fees, including, but not limited
      to,
      extraordinary fees associated with the filing of interpleader and expenses
      associated therewith, shall be payable by the Debtors on demand.

    

                          8.  Rights
      with respect to Collateral.  Each Secured Party
      agrees with all other Secured Parties and the Agent (i) that it shall not,
      and
      shall not attempt to, exercise any rights with respect to its security interest
      in the Collateral, whether pursuant to any other agreement or otherwise (other
      than pursuant to this Agreement), or take or institute any action against the
      Agent or any of the other Secured Parties in respect of the Collateral or its
      rights hereunder (other than any such action arising from the breach of this
      Agreement) and (ii) that such Secured Party has no other rights with respect
      to
      the Collateral other than as set forth in this Agreement and the other
      Transaction Documents. Upon the acceptance of any appointment as Agent
      hereunder by a successor Agent, such successor Agent shall thereupon succeed
      to
      and become vested with all the rights, powers, privileges and duties of the
      retiring Agent and the retiring Agent shall be discharged from its duties and
      obligations under the Agreement.  After any retiring Agent’s resignation or
      removal hereunder as Agent, the provisions of the Agreement including this
      Annex
      B shall inure to its benefit as to any actions taken or omitted to be taken
      by
      it while it was Agent.f8k0808ex10iv_guangzhou.htm

    

    

    SECURITIES
      PURCHASE AGREEMENT

    
       

       

      This
        Securities Purchase Agreement (this “Agreement”) is dated as of July 31,
        2007 between Guangzhou Global Telecom, Inc., a Florida corporation (the
“Company”), and each purchaser identified on the signature pages hereto
        (each, including its successors and assigns, a “Purchaser” and
        collectively the “Purchasers”).

           

    

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act of 1933, as amended (the “Securities
      Act”), and Rule 506 promulgated thereunder, the Company desires to issue and
      sell to each Purchaser, and each Purchaser, severally and not jointly, desires
      to purchase from the Company, securities of the Company as more fully described
      in this Agreement.

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration, the receipt and adequacy of
      which
      are hereby acknowledged, the Company and each Purchaser agree as
      follows:

     

     

    ARTICLE
      I.

    DEFINITIONS

     

    1.1   Definitions.  In
      addition to the terms defined elsewhere in this Agreement: (a) capitalized
      terms
      that are not otherwise defined herein have the meanings given to such terms
      in
      the Debentures (as defined herein), and (b) the following terms have the
      meanings set forth in this Section 1.1:

     

    “Action”
      shall have the meaning ascribed to such term in Section 3.1(j).

     

    “Affiliate”
      means any Person that, directly or indirectly through one or more
      intermediaries, controls or is controlled by or is under common control with
      a
      Person, as such terms are used in and construed under Rule 405 under the
      Securities Act.  With respect to a Purchaser, any investment fund or
      managed account that is managed on a discretionary basis by the same investment
      manager as such Purchaser will be deemed to be an Affiliate of such
      Purchaser.

     

    “Board
      of Directors” means the board of directors of the Company.

     

    “Business
      Day” means any day except any Saturday, any Sunday, any day which is a
      federal legal holiday in the United States or any day on which banking
      institutions in the State of New York are authorized or required by law or
      other
      governmental action to close.

     

    “Closing
      Dates” means, collectively, the dates of the First Closing and the Second
      Closing.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    “Closing(s)”
      means the closing(s) of the purchase and sale of the Securities pursuant to
      Section 2.1.

     

    “Commission”
      means the Securities and Exchange Commission.

     

    “Common
      Stock” means the common stock of the Company, par value $0.01 per share, and
      any other class of securities into which such securities may hereafter be
      reclassified or changed into.

     

    “Common
      Stock Equivalents” means any securities of the Company or the Subsidiaries
      which would entitle the holder thereof to acquire at any time Common Stock,
      including, without limitation, any debt, preferred stock, rights, options,
      warrants or other instrument that is at any time convertible into or exercisable
      or exchangeable for, or otherwise entitles the holder thereof to receive, Common
      Stock.

     

    “Company
      Counsel” means Anslow & Jaclin, LLP, with offices located at 195 Route 9
      South, Suite 204, Manalapan, New Jersey 07726.

     

    “Conversion
      Price” shall have the meaning ascribed to such term in the
      Debentures.

     

    “Debentures”
      means the 8% Senior Secured Convertible Debentures due, subject to the terms
      therein, 2 years from their date of issuance, issued by the Company to the
      Purchasers hereunder, in the form of Exhibit A attached
      hereto.

     

    “Disclosure
      Schedules” shall have the meaning ascribed to such term in Section
      3.1.

     

    “Effective
      Date” means the date that the initial Registration Statement filed by the
      Company pursuant to the Registration Rights Agreement is first declared
      effective by the Commission.

     

    “Evaluation
      Date” shall have the meaning ascribed to such term in Section
      3.1(r).

     

    “Exchange
      Act” means the Securities Exchange Act of 1934, as amended, and the rules
      and regulations promulgated thereunder.

    

    “Exempt
      Issuance” means the issuance of (a) shares of Common Stock or options to
      employees, officers or directors of the Company pursuant to any stock or option
      plan duly adopted for such purpose by a majority of the non-employee members
      of
      the Board of Directors or a majority of the members of a committee of
      non-employee directors established for such purpose, (b) securities upon the
      exercise or exchange of or conversion of any Securities issued hereunder and/or
      other securities exercisable or exchangeable for or convertible into shares
      of
      Common Stock issued and outstanding on the date of this Agreement, provided
      that
      such securities have not been amended since the date of this Agreement to
      increase the number of such securities or to decrease the exercise, exchange
      or
      conversion price of such securities, and 

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (c)
      securities issued pursuant to acquisitions or strategic transactions approved
      by
      a majority of the disinterested directors of the Company, provided that any
      such
      issuance shall only be to a Person which is, itself or through its subsidiaries,
      an operating company in a business synergistic with the business of the Company
      and in which the Company receives benefits in addition to the investment of
      funds, but shall not include a transaction in which the Company is issuing
      securities primarily for the purpose of raising capital or to an entity whose
      primary business is investing in securities.

     

     “FWS”
      means Feldman Weinstein & Smith LLP with offices located at 420 Lexington
      Avenue, Suite 2620, New York, New York 10170-0002.

     

    “GAAP”
      shall have the meaning ascribed to such term in Section 3.1(h).

     

    “Indebtedness”
      shall have the meaning ascribed to such term in Section 3.1(aa).

     

    “Intellectual
      Property Rights” shall have the meaning ascribed to such term in Section
      3.1(o).

     

    “Legend
      Removal Date” shall have the meaning ascribed to such term in Section
      4.1(c).

     

    “Liens”
      means a lien, charge, security interest, encumbrance, right of first refusal,
      preemptive right or other restriction.

     

    “Material
      Adverse Effect” shall have the meaning assigned to such term in Section
      3.1(b).

     

    “Material
      Permits” shall have the meaning ascribed to such term in Section
      3.1(m).

     

    “Maximum
      Rate” shall have the meaning ascribed to such term in Section
      5.17.

     

    “Participation
      Maximum” shall have the meaning ascribed to such term in Section
      4.12.

     

    “Person”
      means an individual or corporation, partnership, trust, incorporated or
      unincorporated association, joint venture, limited liability company, joint
      stock company, government (or an agency or subdivision thereof) or other entity
      of any kind.

     

    “Placement
      Agent” shall mean Midtown Partners & Co., LLC.

     

    “Pre-Notice”
      shall have the meaning ascribed to such term in Section 4.12.

     

    “Principal
      Amount” shall mean, as to each Purchaser, the amounts set forth below such
      Purchaser’s signature block on the signature pages hereto and next to the
      heading “Principal Amount,” in United States Dollars, which shall equal such
      Purchaser’s Subscription amount multiplied by 1.142857.

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Proceeding”
      means an action, claim, suit, investigation or proceeding (including, without
      limitation, an informal investigation or partial proceeding, such as a
      deposition), whether commenced or threatened.

     

    “Purchaser
      Party” shall have the meaning ascribed to such term in Section
      4.10.

     

    “Registration
      Rights Agreement” means the Registration Rights Agreement, dated the date
      hereof, among the Company and the Purchasers, in the form of Exhibit B
      attached hereto.

     

    “Registration
      Statement” means a registration statement meeting the requirements set forth
      in the Registration Rights Agreement and covering the resale of the Underlying
      Shares by each Purchaser as provided for in the Registration Rights
      Agreement.

     

    “Required
      Approvals” shall have the meaning ascribed to such term in Section
      3.1(e).

     

    “Required
      Minimum” means, as of any date, the maximum aggregate number of shares of
      Common Stock then issued or potentially issuable in the future pursuant to
      the
      Transaction Documents, including any Underlying Shares issuable upon exercise
      or
      conversion in full of all Warrants and Debentures (including Underlying Shares
      issuable as payment of interest), ignoring any conversion or exercise limits
      set
      forth therein, and assuming that the Conversion Price is at all times on and
      after the date of determination 75% of the then Conversion Price on the Trading
      Day immediately prior to the date of determination.

     

    “Rule
      144” means Rule 144 promulgated by the Commission pursuant to the Securities
      Act, as such Rule may be amended from time to time, or any similar rule or
      regulation hereafter adopted by the Commission having substantially the same
      effect as such Rule.

     

    “SEC
      Reports” shall have the meaning ascribed to such term in Section
      3.1(h).

     

    “Securities”
      means the Debentures, the Warrants, the Warrant Shares and the Underlying
      Shares.

     

    “Securities
      Act” means the Securities Act of 1933, as amended, and the rules and
      regulations promulgated thereunder.

     

    “Security
      Agreement” means the Security Agreement, dated the date hereof, among the
      Company and the Purchasers, in the form of Exhibit E attached
      hereto.

    

    “Security
      Documents” shall mean the Security Agreement, the Subsidiary Guarantees and
      any other documents and filing required thereunder in order to grant the
      Purchasers a first priority security interest in the assets of the Company
      and
      the Subsidiaries as provided in the Security Agreement, including all UCC-1
      filing receipts.

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Short
      Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
      under the Exchange Act (but shall not be deemed to include the location and/or
      reservation of borrowable shares of Common Stock). 

     

     “Subscription
      Amount” means, as to each Purchaser, the aggregate amount to be paid for
      Debentures and Warrants purchased hereunder as specified below such Purchaser’s
      name on the signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in immediately available
      funds.

     

    “Subsequent
      Financing” shall have the meaning ascribed to such term in Section
      4.12.

     

    “Subsequent
      Financing Notice” shall have the meaning ascribed to such term in Section
      4.12.

     

    “Subsidiary”
      means any subsidiary of the Company as set forth on Schedule 3.1(a) and
      shall, where applicable, include any direct or indirect subsidiary of the
      Company formed or acquired after the date hereof.

     

    “Subsidiary
      Guarantee” means the Subsidiary Guarantee, dated the date hereof, by each
      Subsidiary in favor of the Purchasers, in the form of Exhibit F attached
      hereto.

     

    “Trading
      Day” means a day on which the New York Stock Exchange is open for
      trading.

     

    “Trading
      Market” means the following markets or exchanges on which the Common Stock
      is listed or quoted for trading on the date in question: the American Stock
      Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
      Select Market, the New York Stock Exchange or the OTC Bulletin
      Board.

     

     “Transaction
      Documents” means this Agreement, the Debentures, the Warrants, the
      Registration Rights Agreement, the Security Agreement, the Subsidiary
      Guarantee,  all exhibits and schedules thereto and hereto and any
      other documents or agreements executed in connection with the transactions
      contemplated hereunder.

     

    “Transfer
      Agent” means Interwest Transfer Co., Inc., the current transfer agent of the
      Company with a mailing address of 1981 East 4800 South, Suite 100, Salt Lake
      City, Utah 84117 and a facsimile number of (801) 277-3147, and any successor
      transfer agent of the Company.

     

    “Underlying
      Shares” means the shares of Common Stock issued and issuable upon conversion
      or redemption of the Debentures and upon exercise of the Warrants and issued
      and
      issuable in lieu of the cash payment of interest on the Debentures in accordance
      with the terms of the Debentures.

     

    “Variable
      Rate Transaction” shall have the meaning ascribed to such term in Section
      4.13(b).

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     

    “VWAP”
      means, for any date, the price determined by the first of the following clauses
      that applies: (a) if the Common Stock is then listed or quoted on a Trading
      Market, the daily volume weighted average price of the Common Stock for such
      date (or the nearest preceding date) on the Trading Market on which the Common
      Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
      Day from 9:30 a.m. New York City time to 4:02 p.m. New York City time);
      (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted
      average price of the Common Stock for such date (or the nearest preceding date)
      on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted
      on the OTC Bulletin Board and if prices for the Common Stock are then reported
      in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or
      agency succeeding to its functions of reporting prices), the most recent bid
      price per share of the Common Stock so reported; or (d) in all other cases,
      the fair market value of a share of Common Stock as determined by an independent
      appraiser selected in good faith by the Purchasers of a majority in interest
      of
      the Securities then outstanding and reasonably acceptable to the Company, the
      fees and expenses of which shall be paid by the Company.

     

    “Warrants”
      means, collectively, the Common Stock purchase warrants delivered to the
      Purchasers at the First Closing in accordance with Section 2.2(a) hereof, which
      Warrants shall be exercisable immediately and have a term of exercise equal
      to 5
      years, in the form of Exhibit C attached hereto.

     

    “Warrant
      Shares” means the shares of Common Stock issuable upon exercise of the
      Warrants.

     

     

    ARTICLE
      II.

    PURCHASE
      AND SALE

     

    2.1  Closings.  On
      each Closing Date, upon the terms and subject to the conditions set forth
      herein, substantially concurrent with the execution and delivery of this
      Agreement by the parties hereto, the Company agrees to sell, and each Purchaser,
      severally and not jointly, agrees to purchase, the Principal Amount of the
      Debentures set forth on such Purchaser’s signature page hereto and corresponding
      to the applicable Closing.  Each Purchaser shall deliver to the
      Company, via wire transfer or a certified check, immediately available funds
      equal to the Subscription Amount applicable to such Closing and the Company
      shall deliver to each Purchaser its respective Debenture, as determined pursuant
      to Section 2.2(a), and the Company and each Purchaser shall deliver the other
      items set forth in Section 2.2 deliverable at the applicable
      Closing.  Upon satisfaction of the conditions set forth in Sections
      2.2 and 2.3, each Closing shall occur at the offices of FWS or such other
      location as the parties shall mutually agree as follows:

     

    (a)  First
      Closing.  The First Closing shall be for up to, in the aggregate,
      $2,285,714 Principal Amount of Debentures and shall occur on, or as soon as
      reasonably practicable following, the date hereof (the “First Closing”);
      and

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

         (b)           Second
      Closing.  The Second Closing shall be for up to, in the aggregate,
      $1,142,857 Principal Amount of Debentures and shall occur on, or as soon as
      reasonably practicable following the Effective Date (the “Second
      Closing”).

     

    2.2  Deliveries

     

    (a)  On
      each
      Closing Date (except as otherwise specified below), the Company shall deliver
      or
      cause to be delivered to each Purchaser the following:

     

    (i)  as
      to the
      First Closing, this Agreement duly executed by the Company;

     

    (ii)  as
      to the
      First Closing, a legal opinion of Company Counsel, in substantially the form
      of
Exhibit D attached hereto;

     

    (iii)  a
      Debenture with a principal amount equal to such Purchaser’s Principal Amount as
      to such Closing, registered in the name of such Purchaser;

     

    (iv)  a
      Warrant
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Common Stock equal to 50% of such Purchaser’s Principal Amount at the First and
      Second Closings, divided by the initial Conversion Price, with an exercise
      price
      equal to $1.12, subject
      to adjustment
      therein;

     

    (v)  as
      to the
      First Closing only, the Security Agreement, duly executed by the Company and
      each Subsidiary, along with all of the Security Documents, including the
      Subsidiary Guarantee, duly executed by the parties thereto; and

     

    (vi)  as
      to the
      First Closing only, the Registration Rights Agreement duly executed by the
      Company.

     

    (b)  On
      each
      Closing Date (except as otherwise specified below), each Purchaser shall deliver
      or cause to be delivered to the Company the following:

     

    (i)   as
      to the
      First Closing only, this Agreement duly executed by such
      Purchaser;

     

    (ii)  such
      Purchaser’s Subscription Amount as to the applicable Closing by wire transfer to
      the account as specified in writing by the Company;

     

    (iii)  as
      to the
      First Closing only, the Security Agreement duly executed by such Purchaser;
      and

     

    (iv)  as
      to the
      First Closing only, the Registration Rights Agreement duly executed by such
      Purchaser.

     

    2.3  Closing
      Conditions.

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (a)  The
      obligations of the Company hereunder in connection with applicable Closing
      are
      subject to the following conditions being met:

     

    (i)  the
      accuracy in all material respects on the applicable Closing Date of the
      representations and warranties of the Purchasers contained herein;

     

    (ii)  all
      obligations, covenants and agreements of each Purchaser required to be performed
      at or prior to the applicable Closing Date shall have been performed;
      and

     

    (iii)  the
      delivery by each Purchaser of the items set forth in Section 2.2(b) of this
      Agreement.

     

    (b)  The
      respective obligations of the Purchasers hereunder in connection with applicable
      Closing are subject to the following conditions being met:

     

    (i)  the
      accuracy in all material respects when made and on applicable Closing Date
      of
      the representations and warranties of the Company contained herein;

     

    (ii)  all
      obligations, covenants and agreements of the Company required to be performed
      at
      or prior to applicable Closing Date shall have been performed;

     

    (iii)  the
      delivery by the Company of the items set forth in Section 2.2(a) of this
      Agreement;

     

    (iv)  there
      shall have been no Material Adverse Effect with respect to the Company since
      the
      date hereof;

     

    (v)  as
      to the
      Second Closing only, the Company shall have filed with the Commission a
      Registration Statement registering 130% of the Registrable Securities (as
      defined in the Registration Rights Agreement) and such Registration Statement
      shall have been declared effective by the Commission as to all such Registrable
      Securities on or before February 1, 2008 and shall have thereafter remained
      effective (for avoidance of doubt, in the event of a cutback as a result of
      SEC
      Guidance, this condition shall not be met until such time as all Conversion
      Shares underlying all Debentures are then subject to an effective Registration
      Statement); and

     

    (vi)  from
      the
      date hereof to applicable Closing Date, trading in the Common Stock shall not
      have been suspended by the Commission  or the Company’s principal
      Trading Market (except for any suspension of trading of limited duration agreed
      to by the Company, which suspension shall be terminated prior to applicable
      Closing), and, at any time prior to applicable Closing Date, trading in
      securities generally as reported by Bloomberg L.P. shall not have been suspended
      or limited, or minimum prices shall not have been established on securities
      whose trades are reported by such service, or on any Trading Market, nor shall
      a
      banking moratorium have been declared either by the United States or New York
      State authorities nor shall there have occurred any material outbreak or
      escalation of hostilities or other national or international calamity of such
      magnitude in its effect on, or any material adverse change in, any financial
      market which, in each case, in the reasonable judgment of each Purchaser, makes
      it impracticable or inadvisable to purchase the Securities at applicable
      Closing.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1  Representations
      and Warranties of the Company.

     

    Except
      as set forth under the corresponding section of the disclosure schedules
      delivered to the Purchasers concurrently herewith (the “Disclosure Schedules”)
      which Disclosure Schedules shall be deemed a part hereof, the Company hereby
      makes the representations and warranties set forth below to each
      PurchaserExcept as set forth in the Disclosure Schedules, which Disclosure
      Schedules shall be deemed a part hereof and shall qualify any representation
      or
      otherwise made herein to the extent of the disclosure contained in the
      corresponding section of the Disclosure Schedules, the Company hereby makes
      the
      following representations and warranties to each Purchaser:

     

    (a)  Subsidiaries.  All
      of the direct and indirect subsidiaries of the Company are set forth on
Schedule 3.1(a).  The Company owns, directly or indirectly, all
      of the capital stock or other equity interests of each Subsidiary free and
      clear
      of any Liens, and all of the issued and outstanding shares of capital stock
      of
      each Subsidiary are validly issued and are fully paid, non-assessable and free
      of preemptive and similar rights to subscribe for or purchase
      securities.  If the Company has no subsidiaries, all other references
      to the Subsidiaries or any of them in the Transaction Documents shall be
      disregarded.

     

    (b)  Organization
      and Qualification.  The Company and each of the Subsidiaries is an
      entity duly incorporated or otherwise organized, validly existing and in good
      standing under the laws of the jurisdiction of its incorporation or organization
      (as applicable), with the requisite power and authority to own and use its
      properties and assets and to carry on its business as currently
      conducted.  Neither the Company nor any Subsidiary is in violation or
      default of any of the provisions of its respective certificate or articles
      of
      incorporation, bylaws or other organizational or charter
      documents.  Each of the Company and the Subsidiaries is duly qualified
      to conduct business and is in good standing as a foreign corporation or other
      entity in each jurisdiction in which the nature of the business conducted or
      property owned by it makes such qualification necessary, except where the
      failure to be so qualified or in good standing, as the case may be, could not
      have or reasonably be expected to result in (i) a material adverse effect on
      the
      legality, validity or enforceability of any Transaction Document, (ii) a
      material adverse effect on the results of operations, assets, business,
      prospects or condition (financial or otherwise) of the Company and the
      Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
      Company’s ability to perform in any material respect on a timely basis its
      obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse Effect”) and no Proceeding has been instituted in any
      such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit
      or curtail such power and authority or qualification.

     

     

    
      
        
        

      

      
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    (c)  Authorization;
      Enforcement.  The Company has the requisite corporate power and
      authority to enter into and to consummate the transactions contemplated by
      each
      of the Transaction Documents and otherwise to carry out its obligations
      hereunder and thereunder.  The execution and delivery of each of the
      Transaction Documents by the Company and the consummation by it of the
      transactions contemplated hereby and thereby have been duly authorized by all
      necessary action on the part of the Company and no further action is required
      by
      the Company, the Board of Directors or the Company’s stockholders in connection
      therewith other than in connection with the Required Approvals.  Each
      Transaction Document has been (or upon delivery will have been) duly executed
      by
      the Company and, when delivered in accordance with the terms hereof and thereof,
      will constitute the valid and binding obligation of the Company enforceable
      against the Company in accordance with its terms, except (i) as limited by
      general equitable principles and applicable bankruptcy, insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement of creditors’ rights generally, (ii) as limited by laws relating to
      the availability of specific performance, injunctive relief or other equitable
      remedies and (iii) insofar as indemnification and contribution provisions may
      be
      limited by applicable law.

     

    (d)  No
      Conflicts.  The execution, delivery and performance of the
      Transaction Documents by the Company and the consummation by the Company of
      the
      other transactions contemplated hereby and thereby do not and will not: (i)
      conflict with or violate any provision of the Company’s or any Subsidiary’s
      certificate or articles of incorporation, bylaws or other organizational or
      charter documents, or (ii) conflict with, or constitute a default (or an event
      that with notice or lapse of time or both would become a default) under, result
      in the creation of any Lien upon any of the properties or assets of the Company
      or any Subsidiary, or give to others any rights of termination, amendment,
      acceleration or cancellation (with or without notice, lapse of time or both)
      of,
      any agreement, credit facility, debt or other instrument (evidencing a Company
      or Subsidiary debt or otherwise) or other understanding to which the Company
      or
      any Subsidiary is a party or by which any property or asset of the Company
      or
      any Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
      conflict with or result in a violation of any law, rule, regulation, order,
      judgment, injunction, decree or other restriction of any court or governmental
      authority to which the Company or a Subsidiary is subject (including federal
      and
      state securities laws and regulations), or by which any property or asset of
      the
      Company or a Subsidiary is bound or affected; except in the case of each of
      clauses (ii) and (iii), such as could not have or reasonably be expected to
      result in a Material Adverse Effect.

     

    (e)  Filings,
      Consents and Approvals.  The Company is not required to obtain any
      consent, waiver, authorization or order of, give any notice to, or make any
      filing or registration with, any court or other federal, state, local or other
      governmental authority or other Person in connection with the execution,
      delivery and performance by the Company of the Transaction Documents, other
      than
      (i) filings required pursuant to Section 4.6, (ii) the filing with the
      Commission of the Registration Statement, (iii) the notice and/or application(s)
      to each applicable Trading Market for the issuance and sale of the Securities
      and the listing of the Underlying Shares for trading thereon in the time and
      manner required thereby and (iv) the filing of Form D with the Commission and
      such filings as are required to be made under applicable state securities laws
      (collectively, the “Required Approvals”).

     

     

    
      
        
        

      

      
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    (f)  Issuance
      of the Securities.  The Securities are duly authorized and, when
      issued and paid for in accordance with the applicable Transaction Documents,
      will be duly and validly issued, fully paid and nonassessable, free and clear
      of
      all Liens imposed by the Company other than restrictions on transfer provided
      for in the Transaction Documents.  The Underlying Shares, when issued
      in accordance with the terms of the Transaction Documents, will be validly
      issued, fully paid and nonassessable, free and clear of all Liens imposed by
      the
      Company other than restrictions on transfer provided for in the Transaction
      Documents.  The Company has reserved from its duly authorized capital
      stock a number of shares of Common Stock for issuance of the Underlying Shares
      at least equal to the Required Minimum on the date hereof.

     

    (g)  Capitalization.  The
      capitalization of the Company is as set forth on Schedule 3.1(g), which
Schedule 3.1(g) shall also include the number of shares of Common Stock
      owned beneficially, and of record, by Affiliates of the Company as of the date
      hereof. The Company has not issued any capital stock since its most recently
      filed periodic report under the Exchange Act, other than pursuant to the
      exercise of employee stock options under the Company’s stock option plans, the
      issuance of shares of Common Stock to employees pursuant to the Company’s
      employee stock purchase plans and pursuant to the conversion or exercise of
      Common Stock Equivalents outstanding as of the date of the most recently filed
      periodic report under the Exchange Act.  No Person has any right of
      first refusal, preemptive right, right of participation, or any similar right
      to
      participate in the transactions contemplated by the Transaction
      Documents.  Except as a result of the purchase and sale of the
      Securities, there are no outstanding options, warrants, scrip rights to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities, rights or obligations convertible into or exercisable or
      exchangeable for, or giving any Person any right to subscribe for or acquire,
      any shares of Common Stock, or contracts, commitments, understandings or
      arrangements by which the Company or any Subsidiary is or may become bound
      to
      issue additional shares of Common Stock or Common Stock Equivalents. The
      issuance and sale of the Securities will not obligate the Company to issue
      shares of Common Stock or other securities to any Person (other than the
      Purchasers) and will not result in a right of any holder of Company securities
      to adjust the exercise, conversion, exchange or reset price under any of such
      securities. All of the outstanding shares of capital stock of the Company are
      validly issued, fully paid and nonassessable, have been issued in compliance
      with all federal and state securities laws, and none of such outstanding shares
      was issued in violation of any preemptive rights or similar rights to subscribe
      for or purchase securities.  No further approval or authorization of
      any stockholder, the Board of Directors or others is required for the issuance
      and sale of the Securities.  There are no stockholders agreements,
      voting agreements or other similar agreements with respect to the Company’s
      capital stock to which the Company is a party or, to the knowledge of the
      Company, between or among any of the Company’s stockholders.

     

    
      
        
        

      

      
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    (h)  SEC
      Reports; Financial Statements.  The Company has filed all reports,
      schedules, forms, statements and other documents required to be filed by the
      Company under the Securities Act and the Exchange Act, including pursuant to
      Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
      (or
      such shorter period as the Company was required by law or regulation to file
      such material) (the foregoing materials, including the exhibits thereto and
      documents incorporated by reference therein, being collectively referred to
      herein as the “SEC Reports”) on a timely basis or has received a valid
      extension of such time of filing and has filed any such SEC Reports prior to
      the
      expiration of any such extension.  As of their respective dates, the
      SEC Reports complied in all material respects with the requirements of the
      Securities Act and the Exchange Act, as applicable, and none of the SEC Reports,
      when filed, contained any untrue statement of a material fact or omitted to
      state a material fact required to be stated therein or necessary in order to
      make the statements therein, in the light of the circumstances under which
      they
      were made, not misleading.  The financial statements of the Company
      included in the SEC Reports comply in all material respects with applicable
      accounting requirements and the rules and regulations of the Commission with
      respect thereto as in effect at the time of filing.  Such financial
      statements have been prepared in accordance with United States generally
      accepted accounting principles applied on a consistent basis during the periods
      involved (“GAAP”), except as may be otherwise specified in such financial
      statements or the notes thereto and except that unaudited financial statements
      may not contain all footnotes required by GAAP, and fairly present in all
      material respects the financial position of the Company and its consolidated
      Subsidiaries as of and for the dates thereof and the results of operations
      and
      cash flows for the periods then ended, subject, in the case of unaudited
      statements, to normal, immaterial, year-end audit adjustments.

     

    (i)  Material
      Changes.  Since the date of the latest audited financial
      statements included within the SEC Reports, except as specifically disclosed
      in
      a subsequent SEC Report filed prior to the date hereof, (i) there has been
      no
      event, occurrence or development that has had or that could reasonably be
      expected to result in a Material Adverse Effect, (ii) the Company has not
      incurred any liabilities (contingent or otherwise) other than (A) trade payables
      and accrued expenses incurred in the ordinary course of business consistent
      with
      past practice and (B) liabilities not required to be reflected in the Company’s
      financial statements pursuant to GAAP or disclosed in filings made with the
      Commission, (iii) the Company has not altered its method of accounting, (iv)
      the
      Company has not declared or made any dividend or distribution of cash or other
      property to its stockholders or purchased, redeemed or made any agreements
      to
      purchase or redeem any shares of its capital stock and (v) the Company has
      not
      issued any equity securities to any officer, director or Affiliate, except
      pursuant to existing Company stock option plans. The Company does not have
      pending before the Commission any request for confidential treatment of
      information.  Except for the issuance of the Securities contemplated
      by this Agreement or as set forth on Schedule 3.1(i), no event, liability
      or development has occurred or exists with respect to the Company or its
      Subsidiaries or their respective business, properties, operations or financial
      condition, that would be required to be disclosed by the Company under
      applicable securities laws at the time this representation is made or deemed
      made that has not been publicly disclosed at least one Trading Day prior to
      the
      date that this representation is made.

     

    
      
        
        

      

      
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    (j)  Litigation.  There
      is no action, suit, inquiry, notice of violation, proceeding or investigation
      pending or, to the knowledge of the Company, threatened against or affecting
      the
      Company, any Subsidiary or any of their respective properties before or by
      any
      court, arbitrator, governmental or administrative agency or regulatory authority
      (federal, state, county, local or foreign) (collectively, an “Action”)
      which (i) adversely affects or challenges the legality, validity or
      enforceability of any of the Transaction Documents or the Securities or (ii)
      could, if there were an unfavorable decision, have or reasonably be expected
      to
      result in a Material Adverse Effect.  Neither the Company nor any
      Subsidiary, nor any director or officer thereof, is or has been the subject
      of
      any Action involving a claim of violation of or liability under federal or
      state
      securities laws or a claim of breach of fiduciary duty.  There has not
      been, and to the knowledge of the Company, there is not pending or contemplated,
      any investigation by the Commission involving the Company or any current or
      former director or officer of the Company.  The Commission has not
      issued any stop order or other order suspending the effectiveness of any
      registration statement filed by the Company or any Subsidiary under the Exchange
      Act or the Securities Act.

     

    (k)  Labor
      Relations.  No material labor dispute exists or, to the knowledge
      of the Company, is imminent with respect to any of the employees of the Company
      which could reasonably be expected to result in a Material Adverse
      Effect.  None of the Company’s or its Subsidiaries’ employees is a
      member of a union that relates to such employee’s relationship with the Company
      or such Subsidiary, and neither the Company nor any of its Subsidiaries is
      a
      party to a collective bargaining agreement, and the Company and its Subsidiaries
      believe that their relationships with their employees are good.  No
      executive officer, to the knowledge of the Company, is, or is now expected
      to
      be, in violation of any material term of any employment contract,
      confidentiality, disclosure or proprietary information agreement or
      non-competition agreement, or any other contract or agreement or any restrictive
      covenant in favor of any third party, and the continued employment of each
      such
      executive officer does not subject the Company or any of its Subsidiaries to
      any
      liability with respect to any of the foregoing matters.  The Company
      and its Subsidiaries are in compliance with all U.S. federal, state, local
      and
      foreign laws and regulations relating to employment and employment practices,
      terms and conditions of employment and wages and hours, except where the failure
      to be in compliance could not, individually or in the aggregate, reasonably
      be
      expected to have a Material Adverse Effect.

     

    (l)  Compliance.  Neither
      the Company nor any Subsidiary (i) is in default under or in violation of (and
      no event has occurred that has not been waived that, with notice or lapse of
      time or both, would result in a default by the Company or any Subsidiary under),
      nor has the Company or any Subsidiary received notice of a claim that it is
      in
      default under or that it is in violation of, any indenture, loan or credit
      agreement or any other agreement or instrument to which it is a party or by
      which it or any of its properties is bound (whether or not such default or
      violation has been waived), 

     

     

    
      
        
        

      

      
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    (ii)
      is
      in violation of any order of any court, arbitrator or governmental body, or
      (iii) is or has been in violation of any statute, rule or regulation of any
      governmental authority, including without limitation all foreign, federal,
      state
      and local laws applicable to its business and all such laws that affect the
      environment, except in each case as could not have or reasonably be expected
      to
      result in a Material Adverse Effect.

     

    (m)  Regulatory
      Permits.  The Company and the Subsidiaries possess all
      certificates, authorizations and permits issued by the appropriate federal,
      state, local or foreign regulatory authorities necessary to conduct their
      respective businesses as described in the SEC Reports, except where the failure
      to possess such permits could not reasonably be expected to result in a Material
      Adverse Effect (“Material Permits”), and neither the Company nor any
      Subsidiary has received any notice of proceedings relating to the revocation
      or
      modification of any Material Permit.

     

    (n)  Title
      to Assets.  The Company and the Subsidiaries have good and
      marketable title in fee simple to all real property owned by them and good
      and
      marketable title in all personal property owned by them that is material to
      the
      business of the Company and the Subsidiaries, in each case free and clear of
      all
      Liens, except for Liens as do not materially affect the value of such property
      and do not materially interfere with the use made and proposed to be made of
      such property by the Company and the Subsidiaries and Liens for the payment
      of
      federal, state or other taxes, the payment of which is neither delinquent nor
      subject to penalties.  Any real property and facilities held under
      lease by the Company and the Subsidiaries are held by them under valid,
      subsisting and enforceable leases with which the Company and the Subsidiaries
      are in compliance.

     

    (o)  Patents
      and Trademarks.  The Company and the Subsidiaries have, or have
      rights to use, all patents, patent applications, trademarks, trademark
      applications, service marks, trade names, trade secrets, inventions, copyrights,
      licenses and other intellectual property rights and similar rights necessary
      or
      material for use in connection with their respective businesses as described
      in
      the SEC Reports and which the failure to so have could have a Material Adverse
      Effect (collectively, the “Intellectual Property
      Rights”).  Neither the Company nor any Subsidiary has received a
      notice (written or otherwise) that any of the Intellectual Property Rights
      used
      by the Company or any Subsidiary violates or infringes upon the rights of any
      Person. To the knowledge of the Company, all such Intellectual Property Rights
      are enforceable and there is no existing infringement by another Person of
      any
      of the Intellectual Property Rights.  The Company and its Subsidiaries
      have taken reasonable security measures to protect the secrecy, confidentiality
      and value of all of their intellectual properties, except where failure to
      do so
      could not, individually or in the aggregate, reasonably be expected to have
      a
      Material Adverse Effect.

     

    (p)  Insurance.  The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged, including, but not limited to, directors and officers insurance
      coverage at least equal to the aggregate Subscription
      Amount.  

     

     

    
      
        
        

      

      
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    Neither
      the Company nor any Subsidiary has any reason to believe that it will not be
      able to renew its existing insurance coverage as and when such coverage expires
      or to obtain similar coverage from similar insurers as may be necessary to
      continue its business without a significant increase in cost.

     

    (q)  Transactions
      with Affiliates and Employees.  Except as set forth in the SEC
      Reports, none of the officers or directors of the Company and, to the knowledge
      of the Company, none of the employees of the Company is presently a party to
      any
      transaction with the Company or any Subsidiary (other than for services as
      employees, officers and directors), including any contract, agreement or other
      arrangement providing for the furnishing of services to or by, providing for
      rental of real or personal property to or from, or otherwise requiring payments
      to or from any officer, director or such employee or, to the knowledge of the
      Company, any entity in which any officer, director, or any such employee has
      a
      substantial interest or is an officer, director, trustee or partner, in each
      case in excess of $60,000 other than for (i) payment of salary or consulting
      fees for services rendered, (ii) reimbursement for expenses incurred on behalf
      of the Company and (iii) other employee benefits, including stock option
      agreements under any stock option plan of the Company.

     

    (r)  Sarbanes-Oxley;
      Internal Accounting Controls.  The Company is in material
      compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are
      applicable to it as of applicable Closing Date.  The Company and the
      Subsidiaries maintain a system of internal accounting controls sufficient to
      provide reasonable assurance that (i) transactions are executed in accordance
      with management’s general or specific authorizations, (ii) transactions are
      recorded as necessary to permit preparation of financial statements in
      conformity with GAAP and to maintain asset accountability, (iii) access to
      assets is permitted only in accordance with management’s general or specific
      authorization, and (iv) the recorded accountability for assets is compared
      with
      the existing assets at reasonable intervals and appropriate action is taken
      with
      respect to any differences. The Company has established disclosure controls
      and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
      Company and designed such disclosure controls and procedures to ensure that
      information required to be disclosed by the Company in the reports it files
      or
      submits under the Exchange Act is recorded, processed, summarized and reported,
      within the time periods specified in the Commission’s rules and
      forms.  The Company’s certifying officers have evaluated the
      effectiveness of the Company’s disclosure controls and procedures as of the end
      of the period covered by the Company’s most recently filed periodic report under
      the Exchange Act (such date, the “Evaluation Date”).  The
      Company presented in its most recently filed periodic report under the Exchange
      Act the conclusions of the certifying officers about the effectiveness of the
      disclosure controls and procedures based on their evaluations as of the
      Evaluation Date.  Since the Evaluation Date, there have been no
      changes in the Company’s internal control over financial reporting (as such term
      is defined in the Exchange Act) that has materially affected, or is reasonably
      likely to materially affect, the Company’s internal control over financial
      reporting.

     

    
      
        
        

      

      
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    (s)  Certain
      Fees.  No brokerage or finder’s fees or commissions are or will be
      payable by the Company to any broker, financial advisor or consultant, finder,
      placement agent, investment banker, bank or other Person with respect to the
      transactions contemplated by the Transaction Documents.  The
      Purchasers shall have no obligation with respect to any fees or with respect
      to
      any claims made by or on behalf of other Persons for fees of a type contemplated
      in this Section that may be due in connection with the transactions contemplated
      by the Transaction Documents.

     

    (t)  Private
      Placement.  Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, no registration
      under
      the Securities Act is required for the offer and sale of the Securities by
      the
      Company to the Purchasers as contemplated hereby. The issuance and sale of
      the
      Securities hereunder does not contravene the rules and regulations of the
      Trading Market.

     

    (u)  Investment
      Company. The Company is not, and is not an Affiliate of, and immediately
      after receipt of payment for the Securities, will not be or be an Affiliate
      of,
      an “investment company” within the meaning of the Investment Company Act of
      1940, as amended.  The Company shall conduct its business in a manner
      so that it will not become subject to the Investment Company Act of 1940, as
      amended.

     

    (v)  Registration
      Rights.  Other than each of the Purchasers, no Person has any
      right to cause the Company to effect the registration under the Securities
      Act
      of any securities of the Company.

     

    (w)  Listing
      and Maintenance Requirements.  The Common Stock is registered
      pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
      taken no action designed to, or which to its knowledge is likely to have the
      effect of, terminating the registration of the Common Stock under the Exchange
      Act nor has the Company received any notification that the Commission is
      contemplating terminating such registration.  The Company has not, in
      the 12 months preceding the date hereof, received notice from any Trading Market
      on which the Common Stock is or has been listed or quoted to the effect that
      the
      Company is not in compliance with the listing or maintenance requirements of
      such Trading Market. The Company is, and has no reason to believe that it will
      not in the foreseeable future continue to be, in compliance with all such
      listing and maintenance requirements.

     

    (x)  Application
      of Takeover Protections.  The Company and the Board of Directors
      have taken all necessary action, if any, in order to render inapplicable any
      control share acquisition, business combination, poison pill (including any
      distribution under a rights agreement) or other similar anti-takeover provision
      under the Company’s certificate of incorporation (or similar charter documents)
      or the laws of its state of incorporation that is or could become applicable
      to
      the Purchasers as a result of the Purchasers and the Company fulfilling their
      obligations or exercising their rights under the Transaction Documents,
      including without limitation as a result of the Company’s issuance of the
      Securities and the Purchasers’ ownership of the Securities.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (y)  Disclosure.  Except
      with respect to the material terms and conditions of the transactions
      contemplated by the Transaction Documents, the Company confirms that neither
      it
      nor any other Person acting on its behalf has provided any of the Purchasers
      or
      their agents or counsel with any information that it believes constitutes or
      might constitute material, nonpublic information.  The Company
      understands and confirms that the Purchasers will rely on the foregoing
      representation in effecting transactions in securities of the
      Company.  All disclosure furnished by or on behalf of the Company to
      the Purchasers regarding the Company, its business and the transactions
      contemplated hereby, including the Disclosure Schedules to this Agreement,
      is
      true and correct and does not contain any untrue statement of a material fact
      or
      omit to state any material fact necessary in order to make the statements made
      therein, in light of the circumstances under which they were made, not
      misleading.   The press releases disseminated by the Company
      during the twelve months preceding the date of this Agreement taken as a whole
      do not contain any untrue statement of a material fact or omit to state a
      material fact required to be stated therein or necessary in order to make the
      statements therein, in light of the circumstances under which they were made
      and
      when made, not misleading.  The Company acknowledges and agrees that
      no Purchaser makes or has made any representations or warranties with respect
      to
      the transactions contemplated hereby other than those specifically set forth
      in
      Section 3.2 hereof.

     

    (z)  No
      Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company,
      nor any of its Affiliates, nor any Person acting on its or their behalf has,
      directly or indirectly, made any offers or sales of any security or solicited
      any offers to buy any security, under circumstances that would cause this
      offering of the Securities to be integrated with prior offerings by the Company
      for purposes of (i) the Securities Act which would require the registration
      of
      any such securities under the Securities Act, or (ii) any applicable shareholder
      approval provisions of any Trading Market on which any of the securities of
      the
      Company are listed or designated.

     

    (aa)  Solvency.  Based
      on the consolidated financial condition of the Company as of applicable Closing
      Date after giving effect to the receipt by the Company of the proceeds from
      the
      sale of the Securities hereunder, (i) the fair saleable value of the Company’s
      assets exceeds the amount that will be required to be paid on or in respect
      of
      the Company’s existing debts and other liabilities (including known contingent
      liabilities) as they mature, (ii) the Company’s assets do not constitute
      unreasonably small capital to carry on its business as now conducted and as
      proposed to be conducted including its capital needs taking into account the
      particular capital requirements of the business conducted by the Company, and
      projected capital requirements and capital availability thereof, and (iii)
      the
      current cash flow of the Company, together with the proceeds the Company would
      receive, were it to liquidate all of its assets, after taking into account
      all
      anticipated uses of the cash, would be sufficient to pay all amounts on or
      in
      respect of its liabilities when such amounts are required to be
      paid.  The Company does not intend to incur debts beyond its ability
      to pay such debts as they mature (taking into account the timing and amounts
      of
      cash to be payable on or in respect of its debt).  

     

     

    
      
        
        

      

      
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    The
      Company has no knowledge of any facts or circumstances which lead it to believe
      that it will file for reorganization or liquidation under the bankruptcy or
      reorganization laws of any jurisdiction within one year from applicable Closing
      Date.  Schedule 3.1(aa) sets forth as of the date hereof all
      outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
      or for which the Company or any Subsidiary has commitments.  For the
      purposes of this Agreement, “Indebtedness” means (a) any liabilities for
      borrowed money or amounts owed in excess of $50,000 (other than trade accounts
      payable incurred in the ordinary course of business), (b) all guaranties,
      endorsements and other contingent obligations in respect of indebtedness of
      others, whether or not the same are or should be reflected in the Company’s
      balance sheet (or the notes thereto), except guaranties by endorsement of
      negotiable instruments for deposit or collection or similar transactions in
      the
      ordinary course of business; and (c) the present value of any lease payments
      in
      excess of $50,000 due under leases required to be capitalized in accordance
      with
      GAAP.  Neither the Company nor any Subsidiary is in default with
      respect to any Indebtedness.

     

    (bb)  Tax
      Status.   Except for matters that would not, individually or
      in the aggregate, have or reasonably be expected to result in a Material Adverse
      Effect, the Company and each Subsidiary has filed all necessary federal, state
      and foreign income and franchise tax returns and has paid or accrued all taxes
      shown as due thereon, and the Company has no knowledge of a tax deficiency
      which
      has been asserted or threatened against the Company or any
      Subsidiary.

     

    (cc)  No
      General Solicitation. Neither the Company nor any person acting on behalf of
      the Company has offered or sold any of the Securities by any form of general
      solicitation or general advertising.  The Company has offered the
      Securities for sale only to the Purchasers and certain other “accredited
      investors” within the meaning of Rule 501 under the Securities Act.

     

    (dd)  Foreign
      Corrupt Practices.  Neither the Company, nor to the knowledge of
      the Company, any agent or other person acting on behalf of the Company, has
      (i)
      directly or indirectly, used any funds for unlawful contributions, gifts,
      entertainment or other unlawful expenses related to foreign or domestic
      political activity, (ii) made any unlawful payment to foreign or domestic
      government officials or employees or to any foreign or domestic political
      parties or campaigns from corporate funds, (iii) failed to disclose fully any
      contribution made by the Company (or made by any person acting on its behalf
      of
      which the Company is aware) which is  in violation of law, or (iv)
      violated in any material respect any provision of the Foreign Corrupt Practices
      Act of 1977, as amended.

     

    (ee)  Accountants.  The
      Company’s accounting firm is set forth on Schedule 3.1(ee) of the
      Disclosure Schedule.  To the knowledge and belief of the Company, such
      accounting firm (i) is a registered public accounting firm as required by the
      Exchange Act and (ii) shall express its opinion with respect to the financial
      statements to be included in the Company’s Annual Report on Form 10-KSB for the
      year ending December 31, 2007.

     

    (ff)  Seniority.  As
      of applicable Closing Date, no Indebtedness or other claim against the Company
      is senior to the Debentures in right of payment, whether with respect to
      interest or upon liquidation or dissolution, or otherwise, other than
      indebtedness secured by purchase money security interests (which is senior
      only
      as to underlying assets covered thereby) and capital lease obligations (which
      is
      senior only as to the property covered thereby).

     

    
      
        
        

      

      
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    (gg)  No
      Disagreements with Accountants and Lawyers.  There are no
      disagreements of any kind presently existing, or reasonably anticipated by
      the
      Company to arise, between the Company and the accountants and lawyers formerly
      or presently employed by the Company and the Company is current with respect
      to
      any fees owed to its accountants and lawyers which could affect the Company’s
      ability to perform any of its obligations under any of the Transaction
      Documents.

     

    (hh)  Acknowledgment
      Regarding Purchasers’ Purchase of Securities.  The Company
      acknowledges and agrees that each of the Purchasers is acting solely in the
      capacity of an arm’s length purchaser with respect to the Transaction Documents
      and the transactions contemplated thereby.  The Company further
      acknowledges that no Purchaser is acting as a financial advisor or fiduciary
      of
      the Company (or in any similar capacity) with respect to the Transaction
      Documents and the transactions contemplated thereby and any advice given by
      any
      Purchaser or any of their respective representatives or agents in connection
      with the Transaction Documents and the transactions contemplated thereby is
      merely incidental to the Purchasers’ purchase of the Securities.  The
      Company further represents to each Purchaser that the Company’s decision to
      enter into this Agreement and the other Transaction Documents has been based
      solely on the independent evaluation of the transactions contemplated hereby
      by
      the Company and its representatives.

     

    (ii)  Acknowledgment
      Regarding Purchasers’ Trading Activity.  Notwithstanding anything
      in this Agreement or elsewhere herein to the contrary (except for
      Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged by the
      Company that (i) none of the Purchasers has been asked to agree by the Company,
      nor has any Purchaser agreed, to desist from purchasing or selling, long and/or
      short, securities of the Company, or “derivative” securities based on securities
      issued by the Company or to hold the Securities for any specified term, (ii)
      past or future open market or other transactions by any Purchaser, specifically
      including, without limitation, Short Sales or “derivative” transactions, before
      or after the closing of this or future private placement transactions, may
      negatively impact the market price of the Company’s publicly-traded securities,
      (iii) any Purchaser, and counter-parties in “derivative” transactions to which
      any such Purchaser is a party, directly or indirectly, may presently have a
      “short” position in the Common Stock, and (iv) each Purchaser shall not be
      deemed to have any affiliation with or control over any arm’s length
      counter-party in any “derivative” transaction.  The Company further
      understands and acknowledges that (a) one or more Purchasers may engage in
      hedging activities at various times during the period that the Securities are
      outstanding, including, without limitation, during the periods that the value
      of
      the Underlying Shares deliverable with respect to Securities are being
      determined and (b) such hedging activities (if any) could reduce the value
      of
      the existing stockholders' equity interests in the Company at and after the
      time
      that the hedging activities are being conducted.  The Company acknowledges
      that such aforementioned hedging activities do not constitute a breach of any
      of
      the Transaction Documents.

     

    
      
        
        

      

      
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    (jj)  Regulation
      M Compliance.  The Company has not, and to its knowledge no one acting
      on its behalf has, (i) taken, directly or indirectly, any action designed to
      cause or to result in the stabilization or manipulation of the price of any
      security of the Company to facilitate the sale or resale of any of the
      Securities, (ii) sold, bid for, purchased, or paid any compensation for
      soliciting purchases of, any of the securities of the Company or (iii) paid
      or
      agreed to pay to any Person any compensation for soliciting another to purchase
      any other securities of the Company, other than, in the case of clauses (ii)
      and
      (iii), compensation paid to the Company’s placement agent in connection with the
      placement of the Securities.

     

    

    3.2  Representations
      and Warranties of the Purchasers.    Each Purchaser, for
      itself and for no other Purchaser hereby, represents and warrants as of the
      date
      hereof and as of applicable Closing Date to the Company as follows:

     

    (a)  Organization;
      Authority.  Such Purchaser is an entity duly organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      organization with full right, corporate or partnership power and authority
      to
      enter into and to consummate the transactions contemplated by the Transaction
      Documents and otherwise to carry out its obligations hereunder and thereunder.
      The execution and delivery of the Transaction Documents and performance by
      such
      Purchaser of the transactions contemplated by the Transaction Documents have
      been duly authorized by all necessary corporate or similar action on the part
      of
      such Purchaser.  Each Transaction Document to which it is a party has
      been duly executed by such Purchaser, and when delivered by such Purchaser
      in
      accordance with the terms hereof, will constitute the valid and legally binding
      obligation of such Purchaser, enforceable against it in accordance with its
      terms, except (i) as limited by general equitable principles and applicable
      bankruptcy, insolvency, reorganization, moratorium and other laws of general
      application affecting enforcement of creditors’ rights generally, (ii) as
      limited by laws relating to the availability of specific performance, injunctive
      relief or other equitable remedies and (iii) insofar as indemnification and
      contribution provisions may be limited by applicable law.

     

    (b)  Own
      Account.  Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
      any applicable state securities law and is acquiring the Securities as principal
      for its own account and not with a view to or for distributing or reselling
      such
      Securities or any part thereof in violation of the Securities Act or any
      applicable state securities law, has no present intention of distributing any
      of
      such Securities in violation of the Securities Act or any applicable state
      securities law and has no direct or indirect arrangement or understandings
      with
      any other persons to distribute or regarding the distribution of such Securities
      (this representation and warranty not limiting such Purchaser’s right to sell
      the Securities pursuant to the Registration Statement or otherwise in compliance
      with applicable federal and state securities laws) in violation of the
      Securities Act or any applicable state securities law.  Such Purchaser
      is acquiring the Securities hereunder in the ordinary course of its
      business.

     

    
      
        
        

      

      
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    (c)  Purchaser
      Status.  At the time such Purchaser was offered the Securities, it
      was, and at the date hereof it is, and on each date on which it exercises any
      Warrants or converts any Debentures it will be either: (i) an “accredited
      investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
      the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
      144A(a) under the Securities Act.  Such Purchaser is not required to
      be registered as a broker-dealer under Section 15 of the Exchange
      Act.

     

    (d)  Experience
      of Such Purchaser.  Such Purchaser, either alone or together with
      its representatives, has such knowledge, sophistication and experience in
      business and financial matters so as to be capable of evaluating the merits
      and
      risks of the prospective investment in the Securities, and has so evaluated
      the
      merits and risks of such investment.  Such Purchaser is able to bear
      the economic risk of an investment in the Securities and, at the present time,
      is able to afford a complete loss of such investment.

     

    (e)  General
      Solicitation.  Such Purchaser is not purchasing the Securities as
      a result of any advertisement, article, notice or other communication regarding
      the Securities published in any newspaper, magazine or similar media or
      broadcast over television or radio or presented at any seminar or any other
      general solicitation or general advertisement.

     

    (f)  Short
      Sales and Confidentiality Prior To The Date Hereof.  Other
      than consummating the transactions contemplated hereunder, such Purchaser has
      not directly or indirectly, nor has any Person acting on behalf of or pursuant
      to any understanding with such Purchaser, executed any purchases or sales,
      including Short Sales, of the securities of the Company during the period
      commencing from the time that such Purchaser first received a term sheet
      (written or oral) from the Company or any other Person representing the Company
      setting forth the material terms of the transactions contemplated hereunder
      until the date hereof (“Discussion Time”).  Notwithstanding the
      foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
      whereby separate portfolio managers manage separate portions of such Purchaser's
      assets and the portfolio managers have no direct knowledge of the investment
      decisions made by the portfolio managers managing other portions of such
      Purchaser's assets, the representation set forth above shall only apply with
      respect to the portion of assets managed by the portfolio manager that made
      the
      investment decision to purchase the Securities covered by this
      Agreement.  Other than to other Persons party to this Agreement, such
      Purchaser has maintained the confidentiality of all disclosures made to it
      in
      connection with this transaction (including the existence and terms of this
      transaction).

     

     

    ARTICLE
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1  Transfer
      Restrictions.

     

    
      
        
        

      

      
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    (a)  The
      Securities may only be disposed of in compliance with state and federal
      securities laws.  In connection with any transfer of Securities other
      than pursuant to an effective registration statement or Rule 144, to the Company
      or to an Affiliate of a Purchaser or in connection with a pledge as contemplated
      in Section 4.1(b), the Company may require the transferor thereof to provide
      to
      the Company an opinion of counsel selected by the transferor and reasonably
      acceptable to the Company, the form and substance of which opinion shall be
      reasonably satisfactory to the Company, to the effect that such transfer does
      not require registration of such transferred Securities under the Securities
      Act.  As a condition of transfer, any such transferee shall agree in
      writing to be bound by the terms of this Agreement and shall have the rights
      of
      a Purchaser under this Agreement and the Registration Rights
      Agreement.

     

    (b)  The
      Purchasers agree to the imprinting, so long as is required by this Section
      4.1,
      of a legend on any of the Securities in the following form:

     

    [NEITHER]
      THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
      [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
      COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
      EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
      “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
      TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
      TO
      AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
      REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
      APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
      TO
      THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
      ACCEPTABLE TO THE COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE
      UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION
      WITH
      A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

     

    The
      Company acknowledges and agrees that a Purchaser may from time to time pledge
      pursuant to a bona fide margin agreement with a registered broker-dealer or
      grant a security interest in some or all of the Securities to a financial
      institution that is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act and who agrees to be bound by the provisions of this Agreement
      and the Registration Rights Agreement and, if required under the terms of such
      arrangement, such Purchaser may transfer pledged or secured Securities to the
      pledgees or secured parties.  Such a pledge or transfer would not be
      subject to approval of the Company and no legal opinion of legal counsel of
      the
      pledgee, secured party or pledgor shall be required in connection
      therewith.  Further, no notice shall be required of such
      pledge.  

     

     

    
      
        
        

      

      
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    At
      the
      appropriate Purchaser’s expense, the Company will execute and deliver such
      reasonable documentation as a pledgee or secured party of Securities may
      reasonably request in connection with a pledge or transfer of the Securities,
      including, if the Securities are subject to registration pursuant to the
      Registration Rights Agreement, the preparation and filing of any required
      prospectus supplement under Rule 424(b)(3) under the Securities Act or other
      applicable provision of the Securities Act to appropriately amend the list
      of
      Selling Stockholders thereunder.

     

    (c)  Certificates
      evidencing the Underlying Shares shall not contain any legend (including the
      legend set forth in Section 4.1(b) hereof): (i) while a registration statement
      (including the Registration Statement) covering the resale of such security
      is
      effective under the Securities Act, or (ii) following any sale of such
      Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares
      are
      eligible for sale under Rule 144(k), or (iv) if such legend is not required
      under applicable requirements of the Securities Act (including judicial
      interpretations and pronouncements issued by the staff of the Commission).
      The
      Company shall cause its counsel to issue a legal opinion to the Transfer Agent
      promptly after the Effective Date if required by the Transfer Agent to effect
      the removal of the legend hereunder.  If all or any portion of a
      Debenture or Warrant is converted or exercised (as applicable) at a time when
      there is an effective registration statement to cover the resale of the
      Underlying Shares, or if such Underlying Shares may be sold under Rule 144(k)
      or
      if such legend is not otherwise required under applicable requirements of the
      Securities Act (including judicial interpretations and pronouncements issued
      by
      the staff of the Commission) then such Underlying Shares shall be issued free
      of
      all legends.  The Company agrees that following the Effective Date or
      at such time as such legend is no longer required under this Section 4.1(c),
      it
      will, no later than three Trading Days following the delivery by a Purchaser
      to
      the Company or the Transfer Agent of a certificate representing Underlying
      Shares, as applicable, issued with a restrictive legend (such third Trading
      Day,
      the “Legend Removal Date”), deliver or cause to be delivered to such
      Purchaser a certificate representing such shares that is free from all
      restrictive and other legends.  The Company may not make any notation
      on its records or give instructions to the Transfer Agent that enlarge the
      restrictions on transfer set forth in this Section.  Certificates for
      Underlying Shares subject to legend removal hereunder shall be transmitted
      by
      the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s
      prime broker with the Depository Trust Company System as directed by such
      Purchaser.

    

    (d)  In
      addition to such Purchaser’s other available remedies, the Company shall pay to
      a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
      each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on
      the
      date such Securities are submitted to the Transfer Agent) delivered for removal
      of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day
      (increasing to $20 per Trading Day 5 Trading Days after such damages have begun
      to accrue) for each Trading Day after the Legend Removal Date until such
      certificate is delivered without a legend.  Nothing herein shall limit
      such Purchaser’s right to pursue actual damages for the Company’s failure to
      deliver certificates representing any Securities as required by the Transaction
      Documents, and such Purchaser shall have the right to pursue all remedies
      available to it at law or in equity including, without limitation, a decree
      of
      specific performance and/or injunctive relief.

     

    
      
        
        

      

      
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    (e)  Each
      Purchaser, severally and not jointly with the other Purchasers, agrees that
      such
      Purchaser will sell any Securities pursuant to either the registration
      requirements of the Securities Act, including any applicable prospectus delivery
      requirements, or an exemption therefrom, and that if Securities are sold
      pursuant to a Registration Statement, they will be sold in compliance with
      the
      plan of distribution set forth therein, and acknowledges that the removal of
      the
      restrictive legend from certificates representing Securities as set forth in
      this Section 4.1 is predicated upon the Company’s reliance upon this
      understanding.

     

    4.2  Acknowledgment
      of Dilution.  The Company acknowledges that the issuance of the
      Securities may result in dilution of the outstanding shares of Common Stock,
      which dilution may be substantial under certain market
      conditions.  The Company further acknowledges that its obligations
      under the Transaction Documents, including without limitation its obligation
      to
      issue the Underlying Shares pursuant to the Transaction Documents, are
      unconditional and absolute and not subject to any right of set off,
      counterclaim, delay or reduction, regardless of the effect of any such dilution
      or any claim the Company may have against any Purchaser and regardless of the
      dilutive effect that such issuance may have on the ownership of the other
      stockholders of the Company.

     

    4.3  Furnishing
      of Information.  Until the earliest of the time that (i) no
      Purchaser owns Securities, the Company covenants to timely file (or obtain
      extensions in respect thereof and file within the applicable grace period)
      all
      reports required to be filed by the Company after the date hereof pursuant
      to
      the Exchange Act even if the Company is not then subject to the reporting
      requirements of the Exchange Act.    As long as any
      Purchaser owns Securities, if the Company is not required to file reports
      pursuant to the Exchange Act, it will prepare and furnish to the Purchasers
      and
      make publicly available in accordance with Rule 144(c) such information as
      is
      required for the Purchasers to sell the Securities under Rule
      144.  The Company further covenants that it will take such further
      action as any holder of Securities may reasonably request, to the extent
      required from time to time to enable such Person to sell such Securities without
      registration under the Securities Act within the requirements of the exemption
      provided by Rule 144.

     

    4.4  Integration.  The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities to the
      Purchasers in a manner that would require the registration under the Securities
      Act of the sale of the Securities to the Purchasers or that would be integrated
      with the offer or sale of the Securities for purposes of the rules and
      regulations of any Trading Market.

     

    4.5  Conversion
      and Exercise Procedures.  The form of Notice of Exercise included
      in the Warrants and the form of Notice of Conversion included in the
      Debentures set forth the totality of the procedures
      required of the Purchasers in order to exercise the Warrants or convert the
      Debentures.  No additional legal opinion or other information or
      instructions shall be required of the Purchasers to exercise their Warrants
      or
      convert their Debentures.  The Company shall honor exercises of the
      Warrants and conversions of the Debentures and shall deliver Underlying Shares
      in accordance with the terms, conditions and time periods set forth in the
      Transaction Documents.

     

    
      
        
        

      

      
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    4.6  Securities
      Laws Disclosure; Publicity.  The Company shall, by 8:30 a.m. (New
      York City time) on the Trading Day following the date hereof, issue a Current
      Report on Form 8-K disclosing the material terms of the transactions
      contemplated hereby and attaching the Transaction Documents as exhibits
      thereto.  The Company and each Purchaser shall consult with each other
      in issuing any other press releases with respect to the transactions
      contemplated hereby, and neither the Company nor any Purchaser shall issue
      any
      such press release or otherwise make any such public statement without the
      prior
      consent of the Company, with respect to any press release of any Purchaser,
      or
      without the prior consent of each Purchaser, with respect to any press release
      of the Company, which consent shall not unreasonably be withheld or delayed,
      except if such disclosure is required by law, in which case the disclosing
      party
      shall promptly provide the other party with prior notice of such public
      statement or communication.  Notwithstanding the foregoing, the
      Company shall not publicly disclose the name of any Purchaser, or include the
      name of any Purchaser in any filing with the Commission or any regulatory agency
      or Trading Market, without the prior written consent of such Purchaser, except
      (i) as required by federal securities law in connection with (A) any
      registration statement contemplated by the Registration Rights Agreement and
      (B)
      the filing of final Transaction Documents (including signature pages thereto)
      with the Commission and (ii) to the extent such disclosure is required by law
      or
      Trading Market regulations, in which case the Company shall provide the
      Purchasers with prior notice of such disclosure permitted under this clause
      (ii).

     

    4.7  Shareholder
      Rights Plan.  No claim will be made or enforced by the Company or,
      with the consent of the Company, any other Person, that any Purchaser is an
      “Acquiring Person” under any control share acquisition, business combination,
      poison pill (including any distribution under a rights agreement) or similar
      anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
      or that any Purchaser could be deemed to trigger the provisions of any such
      plan
      or arrangement, by virtue of receiving Securities under the Transaction
      Documents or under any other agreement between the Company and the
      Purchasers.

     

    4.8  Non-Public
      Information.  Except with respect to the material terms and
      conditions of the transactions contemplated by the Transaction Documents, the
      Company covenants and agrees that neither it nor any other Person acting on
      its
      behalf will provide any Purchaser or its agents or counsel with any information
      that the Company believes constitutes material non-public information, unless
      prior thereto such Purchaser shall have executed a written agreement regarding
      the confidentiality and use of such information.  The Company
      understands and confirms that each Purchaser shall be relying on the foregoing
      covenant in effecting transactions in securities of the Company.

     

    4.9  Use
      of
      Proceeds.  Except as set forth on Schedule 4.9 attached
      hereto, the Company shall use the net proceeds from the sale of the Securities
      hereunder for working capital purposes and shall not use such proceeds for
      (a)
      the satisfaction of any portion of the Company’s debt (other than payment of
      trade payables in the ordinary course of the Company’s business and prior
      practices), (b) the redemption of any Common Stock or Common Stock Equivalents
      or (c) the settlement of any outstanding litigation.

     

    
      
        
        

      

      
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    4.10  Indemnification
      of Purchasers.   Subject to the provisions of this Section
      4.10, the Company will indemnify and hold each Purchaser and its directors,
      officers, shareholders, members, partners, employees and agents (and any other
      Persons with a functionally equivalent role of a Person holding such titles
      notwithstanding a lack of such title or any other title), each Person who
      controls such Purchaser (within the meaning of Section 15 of the Securities
      Act
      and Section 20 of the Exchange Act), and the directors, officers, shareholders,
      agents, members, partners or employees (and any other Persons with a
      functionally equivalent role of a Person holding such titles notwithstanding
      a
      lack of such title or any other title) of such controlling person (each, a
      “Purchaser Party”) harmless from any and all losses, liabilities,
      obligations, claims, contingencies, damages, costs and expenses, including
      all
      judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and costs of investigation that any such Purchaser Party may suffer or
      incur as a result of or relating to (a) any breach of any of the
      representations, warranties, covenants or agreements made by the Company in
      this
      Agreement or in the other Transaction Documents or (b) any action instituted
      against a Purchaser in any capacity, or any of them or their respective
      Affiliates, by any stockholder of the Company who is not an Affiliate of such
      Purchaser, with respect to any of the transactions contemplated by the
      Transaction Documents (unless such action is based upon a breach of such
      Purchaser’s representations, warranties or covenants under the Transaction
      Documents or any agreements or understandings such Purchaser may have with
      any
      such stockholder or any violations by the Purchaser of state or federal
      securities laws or any conduct by such Purchaser which constitutes fraud, gross
      negligence, willful misconduct or malfeasance).  If any action shall
      be brought against any Purchaser Party in respect of which indemnity may be
      sought pursuant to this Agreement, such Purchaser Party shall promptly notify
      the Company in writing, and the Company shall have the right to assume the
      defense thereof with counsel of its own choosing reasonably acceptable to the
      Purchaser Party.  Any Purchaser Party shall have the right to employ
      separate counsel in any such action and participate in the defense thereof,
      but
      the fees and expenses of such counsel shall be at the expense of such Purchaser
      Party except to the extent that (i) the employment thereof has been specifically
      authorized by the Company in writing, (ii) the Company has failed after a
      reasonable period of time to assume such defense and to employ counsel or (iii)
      in such action there is, in the reasonable opinion of such separate counsel,
      a
      material conflict on any material issue between the position of the Company
      and
      the position of such Purchaser Party, in which case the Company shall be
      responsible for the reasonable fees and expenses of no more than one such
      separate counsel.  The Company will not be liable to any Purchaser
      Party under this Agreement (i) for any settlement by a Purchaser Party effected
      without the Company’s prior written consent, which shall not be unreasonably
      withheld or delayed; or (ii) to the extent, but only to the extent that a loss,
      claim, damage or liability is attributable to any Purchaser Party’s breach of
      any of the representations, warranties, covenants or agreements made by such
      Purchaser Party in this Agreement or in the other Transaction
      Documents.

     

    4.11  Reservation
      and Listing of Securities.

     

    (a)  The
      Company shall maintain a reserve from its duly authorized shares of Common
      Stock
      for issuance pursuant to the Transaction Documents in such amount as may be
      required to fulfill its obligations in full under the Transaction
      Documents.

     

    
      
        
        

      

      
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    (b)  If,
      on
      any date, the number of authorized but unissued (and otherwise unreserved)
      shares of Common Stock is less than the Required Minimum on such date, then
      the
      Board of Directors shall use commercially reasonable efforts to amend the
      Company’s certificate or articles of incorporation to increase the number of
      authorized but unissued shares of Common Stock to at least the Required Minimum
      at such time, as soon as possible and in any event not later than the 75th
      day
      after such date.

     

    (c)  The
      Company shall, if applicable: (i) in the time and manner required by the
      principal Trading Market, prepare and file with such Trading Market an
      additional shares listing application covering a number of shares of Common
      Stock at least equal to the Required Minimum on the date of such application,
      (ii) take all steps necessary to cause such shares of Common Stock to be
      approved for listing on such Trading Market as soon as possible thereafter,
      (iii) provide to the Purchasers evidence of such listing, and (iv) maintain
      the
      listing of such Common Stock on any date at least equal to the Required Minimum
      on such date on such Trading Market or another Trading Market.

     

    4.12  Participation
      in Future Financing.

     

    (a)  From
      the
      date hereof until the date that is the 12 month anniversary of the Effective
      Date, upon any issuance by the Company or any of its Subsidiaries of Common
      Stock or Common Stock Equivalents (a “Subsequent Financing”), each
      Purchaser shall have the right to participate in up to an amount of the
      Subsequent Financing equal to 100% of the Subsequent Financing (the
“Participation Maximum”) on the same terms, conditions and price provided
      for in the Subsequent Financing.

     

    (b)  At
      least
      5 Trading Days prior to the closing of the Subsequent Financing, the Company
      shall deliver to each Purchaser a written notice of its intention to effect
      a
      Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such
      Purchaser if it wants to review the details of such financing (such additional
      notice, a “Subsequent Financing Notice”).  Upon the request of
      a Purchaser, and only upon a request by such Purchaser, for a Subsequent
      Financing Notice, the Company shall promptly, but no later than 1 Trading Day
      after such request, deliver a Subsequent Financing Notice to such
      Purchaser.  The Subsequent Financing Notice shall describe in
      reasonable detail the proposed terms of such Subsequent Financing, the amount
      of
      proceeds intended to be raised thereunder and the Person or Persons through
      or
      with whom such Subsequent Financing is proposed to be effected and shall include
      a term sheet or similar document relating thereto as an attachment.

     

    (c)  Any
      Purchaser desiring to participate in such Subsequent Financing must provide
      written notice to the Company by not later than 5:30 p.m. (New York City time)
      on the 5th
      Trading Day after all of the Purchasers have received the Pre-Notice that the
      Purchaser is willing to participate in the Subsequent Financing, the amount
      of
      the Purchaser’s participation, and that the Purchaser has such funds ready,
      willing, and available for investment on the terms set forth in the Subsequent
      Financing Notice.  If the Company receives no notice from a Purchaser
      as of such 5th
      Trading Day, such Purchaser shall be deemed to have notified the Company that
      it
      does not elect to participate.

     

    
      
        
        

      

      
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    (d)  If
      by
      5:30 p.m. (New York City time) on the 5th Trading
      Day after
      all of the Purchasers have received the Pre-Notice, notifications by the
      Purchasers of their willingness to participate in the Subsequent Financing
      (or
      to cause their designees to participate) is, in the aggregate, less than the
      total amount of the Subsequent Financing, then the Company may effect the
      remaining portion of such Subsequent Financing on the terms and with the Persons
      set forth in the Subsequent Financing Notice.

     

    (e)  If
      by
      5:30 p.m. (New York City time) on the 5th Trading
      Day after
      all of the Purchasers have received the Pre-Notice, the Company receives
      responses to a Subsequent Financing Notice from Purchasers seeking to purchase
      more than the aggregate amount of the Participation Maximum, each such Purchaser
      shall have the right to purchase its Pro Rata Portion (as defined below) of
      the
      Participation Maximum.  “Pro Rata Portion” means the ratio of (x)
      the Subscription Amount of Securities purchased on the First Closing Date by
      a
      Purchaser participating under this Section 4.12 and (y) the sum of the aggregate
      Subscription Amounts of Securities purchased on the First Closing Date by all
      Purchasers participating under this Section 4.12.

     

    (f)  The
      Company must provide the Purchasers with a second Subsequent Financing Notice,
      and the Purchasers will again have the right of participation set forth above
      in
      this Section 4.12, if the Subsequent Financing subject to the initial Subsequent
      Financing Notice is not consummated for any reason on the terms set forth in
      such Subsequent Financing Notice within 60 Trading Days after the date of the
      initial Subsequent Financing Notice.

     

    (g)  Notwithstanding
      the foregoing, this Section 4.12 shall not apply in respect of (i) an Exempt
      Issuance or (ii) an underwritten public offering of Common Stock.

     

    4.13  Subsequent
      Equity Sales.

     

    (a)  From
      the
      date hereof until 90 days after the Effective Date, neither the Company nor
      any
      Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
      provided, however, the 90 day period set forth in this Section
      4.13 shall be extended for the number of Trading Days during such period in
      which (i) trading in the Common Stock is suspended by any Trading Market, or
      (ii) following the Effective Date, the Registration Statement is not effective
      or the prospectus included in the Registration Statement may not be used by
      the
      Purchasers for the resale of the Underlying Shares.

     

    (b)  From
      the
      date hereof until such time as no Purchaser holds any of the Securities, the
      Company shall be prohibited from effecting or entering into an agreement to
      effect any Subsequent Financing involving a Variable Rate Transaction.
“Variable Rate Transaction” means a transaction in which the Company
      issues or sells (i) any debt or equity securities that are convertible into,
      exchangeable or exercisable for, or include the right to receive additional
      shares of Common Stock either (A) at a conversion, exercise or exchange rate
      or
      other price that is based upon and/or varies with the trading prices of or
      quotations for the shares of Common Stock at any time after the initial issuance
      of such debt or equity securities, or (B) with a conversion, exercise or
      exchange price that is subject to being reset at some future date after the
      initial issuance of such debt or equity security or upon the occurrence of
      specified or contingent events directly or indirectly related to the business
      of
      the Company or the market for the Common Stock or (ii) enters into any
      agreement, including, but not limited to, an equity line of credit, whereby
      the
      Company may sell securities at a future determined price.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    (c)  Notwithstanding
      the foregoing, this Section 4.13 shall not apply in respect of an Exempt
      Issuance, except that no Variable Rate Transaction shall be an Exempt
      Issuance.

     

    4.14  Equal
      Treatment of Purchasers.  No consideration shall be offered or
      paid to any Person to amend or consent to a waiver or modification of any
      provision of any of the Transaction Documents unless the same consideration
      is
      also offered to all of the parties to the Transaction Documents. Further, the
      Company shall not make any payment of principal or interest on the Debentures
      in
      amounts which are disproportionate to the respective principal amounts
      outstanding on the Debentures at any applicable time.  For
      clarification purposes, this provision constitutes a separate right granted
      to
      each Purchaser by the Company and negotiated separately by each Purchaser,
      and
      is intended for the Company to treat the Purchasers as a class and shall not
      in
      any way be construed as the Purchasers acting in concert or as a group with
      respect to the purchase, disposition or voting of Securities or
      otherwise.

     

    4.15  Short
      Sales and Confidentiality After The Date Hereof. Each Purchaser, severally
      and not jointly with the other Purchasers, covenants that neither it nor any
      Affiliate acting on its behalf or pursuant to any understanding with it will
      execute any Short Sales during the period commencing at the Discussion Time
      and
      ending at the time that the transactions contemplated by this Agreement are
      first publicly announced as described in Section 4.6.  Each Purchaser,
      severally and not jointly with the other Purchasers, covenants that until such
      time as the transactions contemplated by this Agreement are publicly disclosed
      by the Company as described in Section 4.6, such Purchaser will maintain the
      confidentiality of the existence and terms of this transaction and the
      information included in the Disclosure Schedules.  Each Purchaser severally
      and not jointly with any other Purchaser understands and acknowledges, and
      agrees, to act in a manner that will not violate the positions of the Commission
      as set forth in Item 65, Section A, of the Manual of Publicly Available
      Telephone Interpretations, dated July 1997, compiled by the Office of Chief
      Counsel, Division of Corporation Finance. Notwithstanding the foregoing, no
      Purchaser makes any representation, warranty or covenant hereby that it will
      not
      engage in Short Sales in the securities of the Company after the time that
      the
      transactions contemplated by this Agreement are first publicly announced as
      described in Section 4.6.  Notwithstanding the foregoing, in the case of a
      Purchaser that is a multi-managed investment vehicle whereby separate portfolio
      managers manage separate portions of such Purchaser’s assets and the portfolio
      managers have no direct knowledge of the investment decisions made by the
      portfolio managers managing other portions of such Purchaser’s assets, the
      covenant set forth above shall only apply with respect to the portion of assets
      managed by the portfolio manager that made the investment decision to purchase
      the Securities covered by this Agreement.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

     

    4.16  Form
      D; Blue Sky Filings.  The Company agrees to timely file a Form D
      with respect to the Securities as required under Regulation D and to provide
      a
      copy thereof, promptly upon request of any Purchaser. The Company shall take
      such action as the Company shall reasonably determine is necessary in order
      to
      obtain an exemption for, or to qualify the Securities for, sale to the
      Purchasers at applicable Closing under applicable securities or “Blue Sky” laws
      of the states of the United States, and shall provide evidence of such actions
      promptly upon request of any Purchaser.

     

    4.18           Capital
      Changes.  Until the one year anniversary of the Effective Date,
      the Company shall not undertake a reverse or forward stock split or
      reclassification of the Common Stock without the prior written consent of the
      Purchasers holding a majority in principal amount outstanding of the
      Debentures.

     

     

    ARTICLE
      V.

    MISCELLANEOUS

     

    5.1  Termination. 
      This Agreement may be terminated by any Purchaser, as to such Purchaser’s
      obligations hereunder only and without any effect whatsoever on the obligations
      between the Company and the other Purchasers, by written notice to the other
      parties, if the First Closing has not been consummated on or before August
      2,
      2007; provided, however, that such termination will not affect the
      right of any party to sue for any breach by the other party (or
      parties).

     

    5.2  Fees
      and Expenses.  At the First Closing, the Company has agreed to
      reimburse Enable Capital Management, LLC (“Enable”) the non-accountable
      sum of $40,000 for its legal fees and expenses, $10,000 of which has been paid
      prior to the First Closing.  The Company shall deliver to each
      Purchaser, prior to the Closing, a completed and executed copy of the Closing
      Statement attached hereto as Annex A.   Except as
      expressly set forth in the Transaction Documents to the contrary, each party
      shall pay the fees and expenses of its advisers, counsel, accountants and other
      experts, if any, and all other expenses incurred by such party incident to
      the
      negotiation, preparation, execution, delivery and performance of this
      Agreement.  The Company shall pay all transfer agent fees, stamp taxes
      and other taxes and duties levied in connection with the delivery of any
      Securities to the Purchasers.

     

    5.3  Entire
      Agreement.  The Transaction Documents, together with the exhibits
      and schedules thereto, contain the entire understanding of the parties with
      respect to the subject matter hereof and supersede all prior agreements and
      understandings, oral or written, with respect to such matters, which the parties
      acknowledge have been merged into such documents, exhibits and
      schedules.

     

    5.4  Notices.  Any
      and all notices or other communications or deliveries required or permitted
      to
      be provided hereunder shall be in writing and shall be deemed given and
      effective on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number set forth
      on
      the signature pages attached hereto prior to 5:30 p.m. (New York City time)
      on a
      Trading Day, (b) the next Trading Day after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile number
      set
      forth on the signature pages attached hereto on a day that is not a Trading
      Day
      or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
      Trading Day following the date of mailing, if sent by U.S. nationally recognized
      overnight courier service, or (d) upon actual receipt by the party to whom
      such
      notice is required to be given.  

     

     

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    The
      address for such notices and communications shall be as set forth on the
      signature pages attached hereto.

     

    5.5  Amendments;
      Waivers.  No provision of this Agreement may be waived, modified,
      supplemented or amended except in a written instrument signed, in the case
      of an
      amendment, by the Company and the Purchasers of at least 75% in interest of
      the
      Securities still held by Purchasers or, in the case of a waiver, by the party
      against whom enforcement of any such waived provision is sought.  No
      waiver of any default with respect to any provision, condition or requirement
      of
      this Agreement shall be deemed to be a continuing waiver in the future or a
      waiver of any subsequent default or a waiver of any other provision, condition
      or requirement hereof, nor shall any delay or omission of any party to exercise
      any right hereunder in any manner impair the exercise of any such
      right.

     

    5.6  Headings.  The
      headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof.

     

    5.7  Successors
      and Assigns.  This Agreement shall be binding upon and inure to
      the benefit of the parties and their successors and permitted
      assigns.  The Company may not assign this Agreement or any rights or
      obligations hereunder without the prior written consent of each Purchaser (other
      than by merger).  Any Purchaser may assign any or all of its rights
      under this Agreement to any Person to whom such Purchaser assigns or transfers
      any Securities, provided that such transferee agrees in writing to be bound,
      with respect to the transferred Securities, by the provisions of the Transaction
      Documents that apply to the “Purchasers.”

     

    5.8  No
      Third-Party Beneficiaries.  This Agreement is intended for the
      benefit of the parties hereto and their respective successors and permitted
      assigns and is not for the benefit of, nor may any provision hereof be enforced
      by, any other Person, except as otherwise set forth in Section
      4.10.

     

    5.9  Governing
      Law.  All questions concerning the construction, validity,
      enforcement and interpretation of the Transaction Documents shall be governed
      by
      and construed and enforced in accordance with the internal laws of the State
      of
      New York, without regard to the principles of conflicts of law
      thereof.  Each party agrees that all legal proceedings concerning the
      interpretations, enforcement and defense of the transactions contemplated by
      this Agreement and any other Transaction Documents (whether brought against
      a
      party hereto or its respective affiliates, directors, officers, shareholders,
      employees or agents) shall be commenced exclusively in the state and federal
      courts sitting in the City of New York.  Each party hereby irrevocably
      submits to the exclusive jurisdiction of the state and federal courts sitting
      in
      the City of New York, borough of Manhattan for the adjudication of any dispute
      hereunder or in connection herewith or with any transaction contemplated hereby
      or discussed herein (including with respect to the enforcement of any of the
      Transaction Documents), and hereby irrevocably waives, and agrees not to assert
      in any suit, action or proceeding, any claim that it is not personally subject
      to the jurisdiction of any such court, that such suit, action or proceeding
      is
      improper or is an inconvenient venue for such
      proceeding.  

     

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

     

    Each
      party hereby irrevocably waives personal service of process and consents to
      process being served in any such suit, action or proceeding by mailing a copy
      thereof via registered or certified mail or overnight delivery (with evidence
      of
      delivery) to such party at the address in effect for notices to it under this
      Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof.  Nothing contained herein shall
      be deemed to limit in any way any right to serve process in any other manner
      permitted by law.   If either party shall commence an action or
      proceeding to enforce any provisions of the Transaction Documents, then the
      prevailing party in such action or proceeding shall be reimbursed by the other
      party for its reasonable attorneys’ fees and other costs and expenses incurred
      with the investigation, preparation and prosecution of such action or
      proceeding.

     

    5.10  Survival.  The
      representations and warranties shall survive the Closings and the delivery
      of
      the Securities for the applicable statue of limitations.

     

    5.11  Execution.  This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart.  In the event that any signature is delivered by
      facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
      signature shall create a valid and binding obligation of the party executing
      (or
      on whose behalf such signature is executed) with the same force and effect
      as if
      such facsimile or “.pdf” signature page were an original thereof.

     

    5.12  Severability.
      If any term, provision, covenant or restriction of this Agreement is held by
      a
      court of competent jurisdiction to be invalid, illegal, void or unenforceable,
      the remainder of the terms, provisions, covenants and restrictions set forth
      herein shall remain in full force and effect and shall in no way be affected,
      impaired or invalidated, and the parties hereto shall use their commercially
      reasonable efforts to find and employ an alternative means to achieve the same
      or substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

     

    5.13  Rescission
      and Withdrawal Right.  Notwithstanding anything to the contrary
      contained in (and without limiting any similar provisions of) any of the other
      Transaction Documents, whenever any Purchaser exercises a right, election,
      demand or option under a Transaction Document and the Company does not timely
      perform its related obligations within the periods therein provided, then such
      Purchaser may rescind or withdraw, in its sole discretion from time to time
      upon
      written notice to the Company, any relevant notice, demand or election in whole
      or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of a conversion of a Debenture
      or
      exercise of a Warrant, the Purchaser shall be required to return any shares
      of
      Common Stock delivered in connection with any such rescinded conversion or
      exercise notice.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    5.14  Replacement
      of Securities.  If any certificate or instrument evidencing any
      Securities is mutilated, lost, stolen or destroyed, the Company shall issue
      or
      cause to be issued in exchange and substitution for and upon cancellation
      thereof (in the case of mutilation), or in lieu of and substitution therefor,
      a
      new certificate or instrument, but only upon receipt of evidence reasonably
      satisfactory to the Company of such loss, theft or destruction.  The
      applicant for a new certificate or instrument under such circumstances shall
      also pay any reasonable third-party costs (including customary indemnity)
      associated with the issuance of such replacement Securities.

     

    5.15  Remedies.  In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, each of the Purchasers and the Company
      will
      be entitled to specific performance under the Transaction
      Documents.  The parties agree that monetary damages may not be
      adequate compensation for any loss incurred by reason of any breach of
      obligations contained in the Transaction Documents and hereby agrees to waive
      and not to assert in any action for specific performance of any such obligation
      the defense that a remedy at law would be adequate.

     

    5.16  Payment
      Set Aside. To the extent that the Company makes a payment or payments to any
      Purchaser pursuant to any Transaction Document or a Purchaser enforces or
      exercises its rights thereunder, and such payment or payments or the proceeds
      of
      such enforcement or exercise or any part thereof are subsequently invalidated,
      declared to be fraudulent or preferential, set aside, recovered from, disgorged
      by or are required to be refunded, repaid or otherwise restored to the Company,
      a trustee, receiver or any other person under any law (including, without
      limitation, any bankruptcy law, state or federal law, common law or equitable
      cause of action), then to the extent of any such restoration the obligation
      or
      part thereof originally intended to be satisfied shall be revived and continued
      in full force and effect as if such payment had not been made or such
      enforcement or setoff had not occurred.

     

    5.17  Usury.  To
      the extent it may lawfully do so, the Company hereby agrees not to insist upon
      or plead or in any manner whatsoever claim, and will resist any and all efforts
      to be compelled to take the benefit or advantage of, usury laws wherever
      enacted, now or at any time hereafter in force, in connection with any claim,
      action or proceeding that may be brought by any Purchaser in order to enforce
      any right or remedy under any Transaction Document.  Notwithstanding
      any provision to the contrary contained in any Transaction Document, it is
      expressly agreed and provided that the total liability of the Company under
      the
      Transaction Documents for payments in the nature of interest shall not exceed
      the maximum lawful rate authorized under applicable law (the “Maximum
      Rate”), and, without limiting the foregoing, in no event shall any rate of
      interest or default interest, or both of them, when aggregated with any other
      sums in the nature of interest that the Company may be obligated to pay under
      the Transaction Documents exceed such Maximum Rate.  It is agreed that
      if the maximum contract rate of interest allowed by law and applicable to the
      Transaction Documents is increased or decreased by statute or any official
      governmental action subsequent to the date hereof, the new maximum contract
      rate
      of interest allowed by law will be the Maximum Rate applicable to the
      Transaction Documents from the effective date forward, unless such application
      is precluded by applicable law.  If under any circumstances
      whatsoever, interest in excess of the Maximum Rate is paid by the Company to
      any
      Purchaser with respect to indebtedness evidenced by the Transaction Documents,
      such excess shall be applied by such Purchaser to the unpaid principal balance
      of any such indebtedness or be refunded to the Company, the manner of handling
      such excess to be at such Purchaser’s election.

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

     

    5.18  Independent
      Nature of Purchasers’ Obligations and Rights.  The obligations of
      each Purchaser under any Transaction Document are several and not joint with
      the
      obligations of any other Purchaser, and no Purchaser shall be responsible in
      any
      way for the performance or non-performance of the obligations of any other
      Purchaser under any Transaction Document.  Nothing contained herein or
      in any other Transaction Document, and no action taken by any Purchaser pursuant
      thereto, shall be deemed to constitute the Purchasers as a partnership, an
      association, a joint venture or any other kind of entity, or create a
      presumption that the Purchasers are in any way acting in concert or as a group
      with respect to such obligations or the transactions contemplated by the
      Transaction Documents.  Each Purchaser shall be entitled to
      independently protect and enforce its rights, including without limitation
      the
      rights arising out of this Agreement or out of the other Transaction Documents,
      and it shall not be necessary for any other Purchaser to be joined as an
      additional party in any proceeding for such purpose.  Each Purchaser
      has been represented by its own separate legal counsel in their review and
      negotiation of the Transaction Documents.  For reasons of
      administrative convenience only, Purchasers and their respective counsel have
      chosen to communicate with the Company through FWS.  FWS does not
      represent all of the Purchasers but only Enable.  The Company has
      elected to provide all Purchasers with the same terms and Transaction Documents
      for the convenience of the Company and not because it was required or requested
      to do so by the Purchasers.

     

    5.19  Liquidated
      Damages.  The Company’s obligations to pay any partial liquidated
      damages or other amounts owing under the Transaction Documents is a continuing
      obligation of the Company and shall not terminate until all unpaid partial
      liquidated damages and other amounts have been paid notwithstanding the fact
      that the instrument or security pursuant to which such partial liquidated
      damages or other amounts are due and payable shall have been
      canceled.

     

    5.20  Saturdays,
      Sundays, Holidays, etc.   If the last or appointed day for
      the taking of any action or the expiration of any right required or granted
      herein shall not be a Business Day, then such action may be taken or such right
      may be exercised on the next succeeding Business Day.

     

    5.21  Construction.
      The parties agree that each of them and/or their respective counsel has reviewed
      and had an opportunity to revise the Transaction Documents and, therefore,
      the
      normal rule of construction to the effect that any ambiguities are to be
      resolved against the drafting party shall not be employed in the interpretation
      of the Transaction Documents or any amendments hereto.

     

    5.22  Waiver
      of Jury Trial.  In any action, suit or proceeding in any
      jurisdiction brought by any party against any other party, the parties each
      knowingly and intentionally, to the greatest extent permitted by applicable
      law,
      hereby absolutely, unconditionally, irrevocably and expressly waives forever
      trial by jury.

     

    

     

    (Signature
      Pages Follow)

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

     

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.

     

    
      	
              GUANGZHOU
                GLOBAL TELECOM, INC.

               

               

            	
              Address
                for Notice:

              APT
                29D, Block E

              No.11
                Hao Jing Street, Zhu Jiang Di Jing Yuan

              YiZhou
                Road, HaiZhu District,

              Guangzhou
                China, 510310

               

            
	
              By:/s/ 
                Li Yanquan                        

                   Name:
                Li Yankuan

                   Title:
                Chief Executive Officer

               

            	
              Fax:

              Attn:
                Li Yankuan

              Tel:
                (011) 86 20 61299413

              e-mail:
                lyk1688@163.com

            
	
              With
                a copy to (which shall not constitute notice):

              Anslow
                & Jaclin, LLP

              195
                Route 9 South, Suite 204

              Manalapan,
                New Jersey 07726

              Attn:
                Richard I. Anslow, Esq.

              FAX:
                (732) 577-1188

               

               

            	 

    

    

     

     

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     

    
      
        
        

      

      
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    [PURCHASER
      SIGNATURE PAGES TO GZGT SECURITIES PURCHASE AGREEMENT]

    

    IN
      WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
      to be duly executed by their respective authorized signatories as of the date
      first indicated above.

     

    Name
      of
      Purchaser: ________________________________________________________

    Signature
      of Authorized Signatory of Purchaser:
      __________________________________

    Name
      of
      Authorized Signatory:
      ____________________________________________________

    Title
      of
      Authorized Signatory:
      _____________________________________________________

    Email
      Address of Purchaser:
      ________________________________________________

    Facsimile
      Number of Purchaser:
      ________________________________________________

    

    Address
      for Notice of Purchaser:

    

    

    

    Address
      for Delivery of Securities for Purchaser (if not same as address for
      notice):

    

    

    

    Subscription
      Amount:

    

       First
      Closing:
      _____________

               Second
      Closing: ______________

    

    Principal
      Amount (Subscription Amount x 1.142857):

     

       First
      Closing:
      _____________

               Second
      Closing: ______________

    

    

    Warrant
      Shares: _________________

    

    

    EIN
      Number:

    [SIGNATURE
      PAGES CONTINUE]

     

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

     

    Annex
      A

    

    CLOSING
      STATEMENT

    

    Pursuant
      to the attached Securities Purchase Agreement, dated as of the date hereto,
      the
      purchasers shall purchase up to $3,000,000 of Debentures and Warrants from
      Guangzhou Global Telecom, Inc. (the “Company”).  All funds will
      be wired into an account maintained by the Company.  All funds will be
      disbursed in accordance with this Closing Statement.

    

    
      	
              Disbursement
                Date:

            	
              August
                ___, 2007

            

    

    

    
      
        	
                I.   PURCHASE
                  PRICE

                 

              	 	 	 
	
                Gross
                  Proceeds to be Received

              	 	$	
              	 
	 	 	 	 	 
	
                II.   DISBURSEMENTS

                 

              	 	 	 	 
	
                 Enable
                  Capital

              	 	$	
                30,000

              	 
	
                 Midtown
                  Partners

              	 	$	
              	 
	 	 	$	
              	 
	 	 	$	
              	 
	 	 	$	
              	 
	 	 	 	 	 
	
                Total
                  Amount Disbursed:

              	 	$	
              	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
                WIRE
                  INSTRUCTIONS:

                 

                 

              	 	 	 	 
	
                To:
                  _____________________________________

                 

                 

              	 	 	 	 
	 	 	 	 	 

      

    

     

    EXECUTED
      THIS ___ DAY OF AUGUST, 2007

     

    
      	
              GUANGZHOU
                GLOBAL TELECOM, INC.

               

            
	
              By:/s/ 
                Li Yanquan                        

                   Name:
                Li Yankuan

                   Title:
                Chief Executive Officer

            

    

    
37

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