Document:

CHANGE IN TERMS AGREEMENT

Borrower:         US Global Nanospace, Inc.          Lender:  USDR(NV), Inc.
                  f/k/a US Global Aerospace, Inc.
                  2533 N. Carson St., Suite 5107
                  Carson City, NV  89706

Principal:        Amounts up to $125,000.00          Interest Rate:    10.000%

Loan Date:        June 6, 2003

Maturity:         October 31, 2004

Date of Agreement:         June 11, 2004

                      DESCRIPTION OF EXISTING INDEBTEDNESS

A Revolving Promissory Note dated June 6, 2003 in original principal amounts up
to $125,000.00.

                         DESCRIPTION OF CHANGE IN TERMS

Original principal amounts have been increased from $125,000.00 to $500,000.00.
All other terms and conditions remain unchanged.

                                 PROMISE TO PAY

US Global Nanospace, Inc. f/k/a US Global Aerospace, Inc., ("Borrower") promises
to pay to USDR(NV), Inc. ("Lender"), the principal balance then outstanding,
together with interest at the rate of 10.000% per annum on the unpaid principal
balance from June 6, 2003, until paid in full.

                                     PAYMENT

Borrower will pay these loans in one principal payment of the balance then
outstanding, plus interest on or before October 31, 2004. This payment due on
October 31, 2004 will be for all principal and all accrued interest not yet
paid. Unless otherwise agreed or required by applicable law, payments will be
applied first to any accrued unpaid interest, than to principal. Borrower may
pay without penalty all or a portion of the amount owed earlier than it is due.

                             SUCCESSORS AND ASSIGNS

This agreement shall be binding upon and inure to the benefit of the parties,
their successors and assigns.

BORROWER:                               LENDER:

US Global Nanospace, Inc.,              USDR(NV), Inc.
f/k/a US Global Aerospace, Inc.

By: /s/ John Robinson                   By: /s/ Julie Seaman
  ----------------------------------       -------------------------------------
  John Robinson, Chairman                  Julie Seaman, Secretary[CONFIDENTIAL TREATMENT REQUESTED, CERTAIN PORTIONS OF THIS AGREEMENT HAVE
            BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION.]

                             DISTRIBUTION AGREEMENT

THIS AGREEMENT, dated as of this 25th day of June, 2004 (the "Effective Date"),
is between VITUSA PRODUCTS, INC., a New Jersey corporation, with its principal
corporate address at 343 Snyder Avenue, Berkeley Heights, NJ 07922 ("Vitusa")
and U.S. GLOBAL NANOSPACE, INC, a Nevada corporation, with its principal
corporate address at 2533 North Carson, Suite 5107, Carson City, NV 89706
("USGN").

RECITALS

A.    Vitusa desires to purchase the Product from USGN from time to time and
      USGN desires to sell the Product to Vitusa in accordance with the terms
      and conditions set forth in this Agreement.

B.    USGN desires to appoint Vitusa as its nonexclusive distributor to market
      the Product to Authorized Customers (as hereinafter defined) and Vitusa
      accepts such appointment on the terms set forth in this Agreement.

NOW, THEREFORE, in consideration of the Recitals, the mutual covenants contained
in this Agreement, and other good and valuable consideration, Vitusa and USGN
hereby agree as follows:

                                    ARTICLE I
                 DEFINITIONS, APPOINTMENT AND TERM OF AGREEMENT

1.1   Definitions. The following definitions shall apply to this Agreement.

(a)   "Authorized Customer" shall mean a corporation, limited liability company
      or other entity which manufactures tobacco products for retail sale.

(b)   "Authorized Use" shall mean the use of the Product for tobacco filtration.

(c)   "Documentation" shall mean training materials, product descriptions and
      specifications, brochures, technical manuals, supporting materials and
      other printed information relating to the Product, whether distributed in
      print, electronic, or video format, which is made available by USGN for
      use in the distribution of the Product.

(d)   "Product" shall mean NanoFilterCX(TM) and any other product marketed by
      USGN for use in tobacco filtration during the Term of this Agreement.

1.2   Term of Agreement; Renewal and Conditional Renewal. The "Term" of this
      Agreement shall commence on the Effective Date and shall end on December
      31, 2004, unless earlier terminated pursuant to Article V hereof. On that
      date and on each successive last day of the Term (a "Termination Date"),
      the Term shall be automatically renewed for one (1) additional year unless
      either (a) one of the parties has, no less than forty-five (45) days prior
      to the Termination Date, delivered written notice that the Agreement will
      terminate on the Termination Date, or (b) USGN has, no less than thirty
      (30) days prior to the Termination Date, delivered written notice to
      Vitusa that the renewal of the Term shall be conditioned on Vitusa's
      accomplishment during the next contract year (or part thereof) of certain
      sales goals specified in the notice, and Vitusa shall have rejected the
      conditions in a writing delivered to USGN. If Vitusa does not reject
      renewal conditions specified by USGN, then the conditions will be deemed
      to have been integrated into this Agreement as of the first day of the
      renewal Term.

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1.3   Appointment as Distributor. USGN hereby grants to Vitusa the non-exclusive
      right to distribute the Product to Authorized Customers for Authorized Use
      worldwide during the Term of this Agreement. This Agreement does not grant
      USGN or Vitusa an exclusive right to purchase or sell Products and shall
      not prevent either party from developing or acquiring other vendors or
      customers for competing Products. Vitusa will use commercially reasonable
      efforts to promote sales of the Product. USGN agrees that Vitusa may
      obtain Products in accordance with this Agreement for the benefit of its
      parent, affiliates and subsidiaries of Vitusa. Said parent, affiliates and
      subsidiaries of Vitusa shall be entitled to order Products directly from
      USGN pursuant to this Agreement. USGN shall provide Documentation to
      Vitusa as reasonably requested.

                                   ARTICLE II
                         PURCHASE ORDERS AND DELIVERIES

2.1   Issuance and Acceptance of Purchase Order.

(a)   This Agreement shall not obligate Vitusa to purchase any Product except as
      specifically set forth in a written purchase order.

(b)   Vitusa may issue to USGN one or more purchase orders identifying the
      quantity of Products Vitusa desires to purchase from USGN. Notwithstanding
      any preprinted terms or conditions on Vitusa's purchase orders, the terms
      and conditions of this Agreement shall apply to and govern all purchase
      orders accepted or shipped by USGN hereunder, except that purchase orders
      may include other terms and conditions which are consistent with the terms
      and conditions of this Agreement, or which are mutually agreed to in
      writing by Vitusa and USGN. Purchase orders will be placed by Vitusa by
      fax or electronically transferred.

(c)   A purchase order shall be deemed accepted by USGN unless USGN notifies
      Vitusa in writing within five (5) days of the date of the purchase order
      that USGN does not accept the purchase order.

2.2   Purchase Order Alterations or Cancellations. Prior to shipment of
      Products, USGN shall accept alterations or cancellation to a purchase
      order in order to: (i) change a location for delivery, (ii) modify the
      quantity of Products to be delivered or (iii) correct typographical or
      clerical errors providing the order has not already been specially
      manufactured for Vitusa.

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<PAGE>

2.3   Evaluation or Demonstration Purchase Orders. USGN shall provide to Tech
      Data a reasonable quantity of demonstration or evaluation Products at no
      charge.

2.4   Product Shortages. If for any reason USGN's production is not on schedule,
      USGN may allocate available inventory to Vitusa and make shipments based
      upon a fair and reasonable percentage allocation among USGN's customers.

2.5   Proof of Delivery. USGN shall provide to Vitusa, at no charge, a hard copy
      Proof of Delivery ("POD") for any drop shipment requested by Vitusa. The
      POD shall be faxed to Vitusa within five (5) business days of the initial
      request. If the POD is not received within the specified time, the invoice
      will be considered disputed and no payment shall be made to USGN on that
      invoice.

2.6   Acceptance of Products. Vitusa shall be deemed to have accepted product on
      the seventh day after delivery of the Products and all necessary
      documentation unless Vitusa shall have, within that period, notified USGN
      of non-conformity to the purchase order. Any Products not ordered or not
      otherwise in accordance with the purchase order (e.g. misshipments,
      overshipments) may be returned to USGN at USGN's expense (including
      without limitation costs of shipment or storage). USGN shall refund to
      Vitusa within ten (10) business days following notice thereof, all monies
      paid in respect to such rejected Products. Vitusa shall not be required to
      accept partial shipment unless Vitusa is notified prior to shipment.

2.7   Title and Risk of Loss. Title and risk of loss or damage to Products shall
      pass to Vitusa at the time the Products are delivered to Vitusa or to
      Vitusa's designated carrier.

2.8   Transportation of Products. USGN shall deliver the Products to Vitusa at
      the location shown and on the delivery date set forth in the applicable
      purchase order or as otherwise agreed upon by the parties. Each Product
      package shall be clearly marked with serial number, Product description
      and machine readable bar code (employing UPC or other industry standard
      bar code). Charges for transportation of the Products shall be paid by
      VITUSA.

                                   ARTICLE III
                                 PAYMENT TO USGN

3.1   Prices. The price of the Product will be *** as modified from time to
      time, ***. During the period from the Effective Date to December 31, 2004
      the "***" will be *** percent (***%). After December 31, 2004 (if the
      Agreement is renewed), the "***" will be *** percent (***%). USGN shall
      have the right to increase or decrease its *** from time to time, upon
      written notice to Vitusa given not less than thirty (30) days prior to the
      effective date of such change. All orders placed prior to the effective
      date of the increase or decrease, for shipment within thirty (30) days
      after placement of the order, shall be invoiced by USGN at the *** of the
      two prices.

*** Confidential Treatment Requested

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<PAGE>

3.2   Payment. Any undisputed sum due to USGN pursuant to this Agreement shall
      be payable net Twenty (20) days after the invoice date. USGN shall invoice
      Vitusa no earlier than the applicable shipping date for the Products
      covered by such invoice. Products which are shipped internationally shall
      not be invoiced to Vitusa prior to the Products being placed with a common
      carrier within the destination country for final delivery to Vitusa but
      would be payable within 10 days of receipt by Virtusa*. The due date for
      payments directly associated with a bona fide dispute shall be extended
      during any time the parties have a bona fide dispute concerning such
      payment. During the time a bona fide dispute is being rectified all other
      payments shall be made as per the terms in this section.

3.3   Taxes. Vitusa shall be responsible for franchise taxes, sales or use taxes
      or shall provide USGN with an appropriate exemption certificate. USGN
      shall be responsible for all other taxes, assessments, permits and fees,
      however designated, which are levied upon this Agreement or the Products,
      except for taxes based upon Vitusa's income. No taxes of any type shall be
      added to invoices without the prior written approval of Vitusa.

                                   ARTICLE IV
                  WARRANTIES, INDEMNITIES AND OTHER OBLIGATIONS

4.1   Warranty. USGN hereby represents and warrants that USGN has all right,
      title, ownership interest and marketing rights necessary to provide the
      Products to Vitusa. USGN further represents and warrants that it has not
      entered into any agreements or commitments which are inconsistent with or
      in conflict with the rights granted to Vitusa in this Agreement; the
      Products are new and shall be free and clear of all liens and
      encumbrances; Vitusa and its Authorized Customers shall be entitled to use
      the Products for the Authorized Use without disturbance; and the Products
      conform in all respects to the Product warranties. USGN agrees that Vitusa
      shall be entitled to pass through to Authorized Customers all Product
      warranties granted by USGN. Vitusa shall have no authority to alter or
      extend any of the warranties of USGN without prior approval of USGN. USGN
      has made express warranties in this Agreement and in Documentation. EXCEPT
      AS SET FORTH HEREIN OR THEREIN, USGN DISCLAIMS ALL WARRANTIES WITH REGARD
      TO THE PRODUCTS, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
      MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THIS SECTION SHALL
      SURVIVE TERMINATION OR EXPIRATION OF THIS AGREEMENT.

4.2   Proprietary Rights Indemnification. USGN hereby represents and warrants
      that the Products and the sale and use of the Products do not infringe
      upon any copyright, patent, trademark, trade secret or other proprietary
      or intellectual property right of any third party, and that there are no
      suits or proceedings, pending or threatened, alleging any such
      infringement. USGN shall indemnify and hold Vitusa, Vitusa's parent,
      affiliates and subsidiaries and their respective officers, directors,
      employees and agents harmless from and against any and all actions,
      claims, losses, damages, liabilities, awards, costs and expenses, which
      they or any of them incur or become obligated to pay resulting from or
      arising out of any breach or claimed breach of the foregoing warranty.
      Vitusa shall inform USGN of any such suit or proceeding filed against
      Vitusa and shall have the right, but not the obligation, to participate in
      the defense of any such suit or proceeding at Vitusa's expense. USGN
      shall, at its option and expense, either (i) procure for Vitusa and its
      Authorized Customers the right to continue to use the Product as set forth
      in this Agreement, or (ii) replace, to the extent Products are available,
      or modify the Product to make its use noninfringing while being capable of
      performing the same function without degradation of performance. If
      neither of the foregoing alternatives (i) or (ii) is reasonably available,
      USGN shall accept a return of the Products from Vitusa, at USGN's sole
      cost and expense, and shall refund to Vitusa the full amount of the price
      paid by Vitusa for said returned Products. USGN shall have no liability
      under this Section 4.2 for any infringement based on the use of the
      Product other than the Authorized Use. USGN's obligations under this
      Section 6.2 shall survive termination or expiration of this Agreement.

                                       5
<PAGE>

4.3   Indemnification.

(a)   USGN. USGN shall be solely responsible for the design, development,
      supply, production and performance of the Products. USGN agrees to
      indemnify and hold Vitusa, its parent, affiliates and subsidiaries and
      their officers, directors and employees harmless from and against any and
      all claims, damages, costs, expenses (including, but not limited to,
      reasonable attorneys' fees and costs) or liabilities that may result, in
      whole or in part, from any warranty or Product liability claim, or any
      claim for infringement, or for claims for violation of any of the
      warranties contained in this Agreement.

(b)   Vitusa. Vitusa agrees to indemnify and hold USGN, its officers, directors
      and employees harmless from and against any and all claims, damages,
      costs, expenses (including, but not limited to, reasonable attorneys' fees
      and costs) or liabilities that may result, in whole or in part, from
      Vitusa's gross negligence or willful misconduct in the distribution of the
      Products pursuant to this Agreement, or for representations or warranties
      made by Vitusa related to the Products in excess of the warranties of
      USGN.

4.4   ECCN/Export. USGN agrees to provide Vitusa, upon signing this Agreement
      and at any time thereafter that USGN modifies or adds Products distributed
      or to be distributed by Vitusa, with the Export Control Classification
      Number (ECCN) for USGN's Products, and information as to whether or not
      any of such Products are classified under the U.S. Munitions List.

4.5   Trademark Usage. Vitusa is hereby authorized to use trademarks and trade
      names of USGN and third parties licensing USGN, if any, used in connection
      with advertising, promoting or distributing the Product and will use their
      best efforts to get their customers to include the USGN NanofilterCX
      trademark onto each retail pack*. Vitusa recognizes USGN or other third
      parties may have rights or ownership of certain trademarks, trade names
      and patents associated with the Products. Vitusa will act consistent with
      such rights, and Vitusa shall comply with any reasonable written
      guidelines when provided by USGN or third parties licensing USGN related
      to such trademark or trade name usage. Vitusa will notify USGN of any
      infringement of which Vitusa has actual knowledge. Vitusa shall
      discontinue use of USGN's trademarks or trade names upon termination of
      this Agreement, except as may be necessary to sell or liquidate any
      Product remaining in Vitusa's inventory.

                                       6
<PAGE>

                                    ARTICLE V
                             TERMINATION; EXPIRATION

5.1   Termination.

(a)   Termination With Cause. In the event that either party materially or
      repeatedly defaults in the performance of any of its duties or obligations
      set forth in this Agreement, and such default is not substantially cured
      within thirty (30) days after written notice is given to the defaulting
      party specifying the default, then the party not in default may, by giving
      written notice thereof to the defaulting party, terminate this Agreement
      or the applicable purchase order relating to such default as of the date
      specified in such notice of termination.

(b)   Termination for Insolvency or Bankruptcy Either party may immediately
      terminate this Agreement and any purchase orders by giving written notice
      to the other party in the event of (i) the liquidation or insolvency of
      the other party, (ii) the appointment of a receiver or similar officer for
      the other party, (iii) an assignment by the other party for the benefit of
      all or substantially all of its creditors, (iv) entry by the other party
      into an agreement for the composition, extension, or readjustment of all
      or substantially all of its obligations, or (v) the filing of a petition
      in bankruptcy by or against a party under any bankruptcy or debtors' law
      for its relief or reorganization which is not dismissed within ninety (90)
      days.

5.2   Rights Upon Termination or Expiration.

(a)   Termination or expiration of this Agreement shall not affect USGN's right
      to be paid for undisputed invoices for Products already shipped and
      accepted by Vitusa or Vitusa's rights to any credits or payments owed or
      accrued to the date of termination or expiration.

(b)   USGN shall accept purchase orders from Vitusa for additional Products
      which Vitusa is contractually obligated to furnish to its Customers and
      does not have in its inventory upon the termination or expiration of this
      Agreement; provided Vitusa notifies USGN of any and all such transactions
      within fifteen (15) days following the termination or expiration date.

(c)   Upon termination or expiration of this Agreement, Vitusa shall discontinue
      holding itself out as a distributor of the Products.

                                       7
<PAGE>

                                   ARTICLE VI
                                  MISCELLANEOUS

6.1   Binding Nature, Assignment, and Subcontracting. This Agreement shall be
      binding on the parties and their respective successors and assigns.
      Neither party shall have the power to assign this Agreement without the
      prior written consent of the other party.

6.2   Counterparts. This Agreement may be executed in counterparts, all of which
      taken together shall constitute one single agreement between the parties.

6.3   Relationship of Parties. The Parties are performing pursuant to this
      Agreement only as independent contractors. Nothing set forth in this
      Agreement shall be construed to create the relationship of principal and
      agent between Vitusa and USGN. Neither party shall act or represent
      itself, directly or by implication, as an agent of the other party.

6.4   Confidentiality. Each party acknowledges that in the course of performance
      of its obligations pursuant to this Agreement, it may obtain certain
      information which is either (a) specifically marked as confidential or
      proprietary or (b) of such a nature that the recipient should reasonably
      understand that the disclosing party considers the information
      confidential or proprietary. Each party hereby agrees that all such
      information communicated to it by the other party, its parent, affiliates,
      subsidiaries, or customers, whether before or after the Effective Date,
      shall be and was received in strict confidence, shall be used only for
      purposes of this Agreement, and shall not be disclosed without the prior
      written consent of the other party, except as may be necessary by reason
      of legal, accounting or regulatory requirements beyond either party's
      reasonable control. The provisions of this Section shall survive
      termination or expiration of this Agreement for any reason for a period of
      one (1) year after said termination or expiration.

6.5   Arbitration. Any disputes arising under this Agreement shall be submitted
      to arbitration in accordance with the Commercial Arbitration Rules of the
      American Arbitration Association.

6.6   Notices. Wherever one party is required or permitted to give notice to the
      other party pursuant to this Agreement, such notice shall be deemed given
      when actually delivered by hand, by telecopier (if and when immediately
      confirmed in writing by any of the other means provided herein ensuring
      acknowledgment of receipt thereof for purposes of providing notice of
      default or termination), or via overnight courier, and addressed as
      follows:

                                       8
<PAGE>

      In the Case of USGN:

            U.S. Global Nanospace, Inc.
            2533 North Carson, Suite 5107
            Carson City, NV 89706
            Telephone: (817) 375-3400
            Fax: (817) 375-3401
            Attention: Julie Seaman

      In the Case of Vitusa:

             Vitusa Products, Inc.
             343 Snyder Avenue
             Berkeley Heights, NJ 07922
             Telephone: (908) 665-2900
             Fax:  (908) 665-2662
             Attention:  David Grande

      Either party may from time to time change its address for notification
      purposes by giving the other party written notice of the new address and
      the date upon which it will become effective.

6.7   Entire Agreement. This Agreement constitutes the entire and exclusive
      statement of Agreement between the parties with respect to its subject
      matter and there are no oral or written representations, understandings or
      agreements relating to this Agreement which are not fully expressed
      herein. The parties agree that unless otherwise agreed to in writing by
      the party intended to be bound, the terms and conditions of this Agreement
      shall prevail over any contrary terms in any purchase order, sales
      acknowledgment, confirmation or any other document issued by either party
      affecting the purchase or sale of Products hereunder.

IN WITNESS WHEREOF, the parties have each caused this Agreement to be signed and
delivered by its duly authorized officer or representative as of the Effective
Date.

U.S. GLOBAL NANOSPACE, INC.             VITUSA PRODUCTS, INC.

By: /s/ John Robinson                   By: /s/ David Grande
   --------------------------------     ----------------------------------------
   John Robinson, CEO                   David Grande, CEO

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