Document:

Filed by Bowne Pure Compliance

Exhibit 10.17

SUBLEASE

THIS SUBLEASE (the “Sublease”) is entered into October 8, 2008, between Digital Angel
Corporation f/k/a Applied Digital Solutions, Inc., a Delaware corporation (“Landlord”), and IFTH
Acquisition Corp., a Delaware corporation (“Tenant”). 

1. BASIC LEASE PROVISIONS AND CERTAIN DEFINITIONS.

A. Property Address: 1690 South Congress Avenue, Delray Beach, Florida 33445.

B. Premises: Suite 200, consisting of 7,911 rentable square feet.

C. Tenant’s Address until the Commencement Date: 7 Kingsbridge Road, Fairfield, New
Jersey 07004; thereafter, the Premises.

D. Landlord’s Address (for notices): 490 Villaume Avenue,
South St. Paul, Minnesota 55075.

E. Prime Landlord: The Realty Associates Fund V, L.P., a Delaware limited partnership.

F. Prime Landlord’s Address (for notices): The Realty Associates Fund V, L.P., c/o
Terranova Corporation, 1200 Brickell Avenue, Suite 1500, Miami, Florida 33131, Attention:
President.

G. Identification of Prime Lease: Office Lease dated January 29, 2004.

H. Sublease Term: Twenty-one (21) months.

I. Commencement Date: October 1, 2008.

J. Expiration Date: June 30, 2010.

K. Rent: $157,500 for the entire Sublease Term, payable in one lump sum immediately
upon full execution of this Sublease and receipt of Prime Landlord’s written consent to this
Sublease.

2. PRIME LEASE. Landlord is the tenant under a Prime Lease with Prime Landlord. Landlord
warrants that (a) Landlord has delivered to Tenant a complete copy of the Prime Lease and all other
agreements between Prime Landlord and Landlord relating to the leasing, use or occupancy of the
Premises, (b) the Prime Lease is, as of the date of this Sublease, in full force and effect, and
(c) no event of default has occurred under the Prime Lease and, to Landlord’s knowledge, no event
has occurred and is continuing which would constitute an event of default by Landlord, but for the
requirement of the giving of notice and the expiration of the period of time to cure.

 

 

 

3. SUBLEASE. Landlord, in consideration of the rents and the agreements to be performed by
Tenant, subleases to Tenant the Premises that are situated within the building located at the
Property Address (the “Building”), and being a part of the Property.

A. SUBLEASE TERM. The Sublease Term shall commence on the Commencement Date and shall
expire on the Expiration Date.

4. POSSESSION. The Premises are to be delivered by Landlord as of the execution and delivery
of this Sublease by Landlord.

5. TENANT’S USE. The Premises shall be used and occupied only for the uses permitted under
the Prime Lease.

6. RENT. Tenant shall pay only the one-time, lump sum Rent payment described in Section 1.K
as the total consideration for Tenant’s occupancy and use of the Premises during the Sublease Term.
Tenant shall pay no additional rent or other charges of any kind, including any utility charges or
expenses, either to Landlord or to Prime Landlord; provided, however, that Tenant shall be
responsible for any utility charges or expenses incurred due to Tenant’s use of the Premises
outside the normal “hours of service,” as set forth within Section 11.3 of the Prime Lease, and
Tenant shall pay the Landlord for any such expenses, if applicable. Landlord shall be responsible
for prompt and full compliance with all terms of the Prime Lease, including payments of any and all
charges required thereunder, including but not limited to, Base Rent and Tenant’s Share of
Operating Expenses, including utility charges or expenses, and Real Property Taxes, as provided in
the Prime Lease; provided, however, that Tenant shall reimburse Landlord for any utility charges or
expenses incurred due to Tenant’s use of the Premises outside the normal “hours of service,” as set
forth within Section 11.3 of the Prime Lease.

7. QUIET ENJOYMENT. Landlord represents that it has full power and authority to enter into
this Sublease, subject to the consent of Prime Landlord. So long as no Event of Default (defined
below) has occurred, Tenant’s quiet and peaceable enjoyment of the Premises shall not be disturbed
by Landlord or by anyone claiming through Landlord.

8. INSURANCE. Landlord will at all times during the Sublease Term, and at its sole cost and
expense, maintain the commercial general liability insurance policy that is required under Section
8.1 of the Prime Lease, and Landlord shall name Tenant as an additional insured under such
insurance. Tenant will at all times during the Sublease Term, and at its sole cost and expense,
maintain (i) the “all-risk” extended coverage property insurance policy that is required under
Section 8.1(a) of the Prime Lease and (ii) the workers’ compensation insurance policy that is
required under Section 8.1(b) of the Prime Lease.

9. ASSIGNMENT OR SUBLETTING. Upon request by Tenant, Landlord shall use reasonable efforts to
obtain the consent of Prime Landlord, if its consent is required under the Prime Lease, if Tenant
wishes to assign this Sublease or sub-sublet the Premises. In addition, prior to Tenant assigning
this Sublease or sub-subletting the Premises, Tenant must obtain the consent of Landlord to such
assignment or sub-subletting; provided, however, that Landlord’s
consent shall not be necessary for Tenant to share the Premises with VeriChip Corporation, a
Delaware corporation.

 

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10. FIRE OR CASUALTY OR EMINENT DOMAIN. In the event of a fire or other casualty affecting
the Building or the Premises, or of a taking of all or a part of the Building or Premises by the
exercise of the power of eminent domain, Landlord shall not exercise any right which may have the
effect of terminating the Prime Lease without first obtaining the prior consent of Tenant. If
Landlord is entitled, under the Prime Lease, to a rent abatement as a result of a fire or other
casualty or as a result of a taking under the power of eminent domain, then Tenant shall be
entitled to a prompt refund of Rent calculated by multiplying the percentage of the Premises made
untenantable by the lump sum payment of Rent multiplied by the percentage of the Sublease Term
during which the abatement continues. If the Prime Lease imposes on Landlord the obligation to
repair or restore leasehold improvements or alterations, Landlord shall promptly perform such
repairs or restoration, and Tenant shall permit Landlord to enter the Premises to perform them,
subject to reasonable conditions which Tenant may impose.

11. ALTERATIONS. Tenant may make any alterations in or additions to the Premises
(“Alterations”) if to do so would not create a default under the Prime Lease. Landlord shall use
reasonable efforts to obtain the consent of Prime Landlord, if its consent is required under the
Prime Lease. If Alterations by Tenant are permitted or consented to as provided above, Tenant
shall comply with all of the obligations of Landlord in the Prime Lease pertaining to the
performance of the Alterations.

12. SURRENDER. At the expiration or termination of this Sublease or of Tenant’s right to
possession of the Premises, Tenant will at once surrender and deliver to Landlord the Premises,
together with their improvements, in good condition and repair (reasonable wear and tear excepted),
but free of any and all fixtures, equipment, furnishings and other items of property belonging to
Tenant. Tenant shall be responsible for any extraordinary wear and tear, relative to the condition
of the Premises as of the Commencement Date, at the expiration or termination of this Sublease or
of Tenant’s right to possession of the Premises.

13. TENANT DEFAULT. Tenant agrees that any one or more of the following events shall be
considered Events of Default:

A. Tenant, by its actions, causes a default under the Prime Lease and such default, if
curable, is not cured within the time, if any permitted for cure under the Prime Lease.

B. Tenant defaults in any of the other agreements contained in this Sublease to be
performed by Tenant, and the default continues for 30 days after written notice.

 

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14. LANDLORD DEFAULT. If Landlord fails to pay any amounts to Prime Landlord or any other
party as required under the Prime Lease, or fails to comply with any other provisions of the Prime
Lease, such failure shall constitute a default by Landlord under this Sublease. If Tenant is
unable to occupy the Premises during any part of the Sublease Term due to Landlord’s default under
the Prime Lease, Tenant shall be entitled to liquidated damages in an
amount equal to two times the Rent payment under this Sublease (a total of $315,000.00 in
liquidated damages); provided, however, that Landlord shall have five (5) days from the date of
such default to cure such default before Landlord must pay the liquidated damages to Tenant. The
parties agree that Tenant’s damages would be difficult to calculate if Tenant is unable to use the
Premises as a result of Landlord’s default, and have therefore agreed to the foregoing amount as
liquidated damages for such a default by Landlord.

15. COMMUNICATIONS. All notices, demands, requests, consents, approvals, agreements or other
communications (“Communications”) which may or are required to be given by either party to the
other shall be in writing and shall be deemed given when received or refused if sent by United
States registered or certified mail, postage prepaid, return receipt requested or if sent by
overnight commercial courier service (a) if to Tenant, addressed to Tenant at Tenant’s Address or
at such other place as Tenant may from time to time designate by notice to Landlord or (b) if to
Landlord, addressed to Landlord at Landlord’s Address or at such other place as Landlord may from
time to time designate by notice to Tenant. Each party agrees promptly to deliver a copy of each
Communication from the other party to Prime Landlord, and promptly to deliver to the other party a
copy of any Communication received from Prime Landlord. The copies shall be delivered by
commercial courier for delivery on the next business day.

16. PROVISIONS REGARDING SUBLEASE. This Sublease and all the rights of parties under it are
subject and subordinate to the Prime Lease. Each party agrees that it will not, by its act or
omission to act, cause a default under the Prime Lease. In furtherance of the foregoing, the
parties confirm, each to the other, that it is not practical in this Sublease to enumerate all of
the rights and obligations of the various parties under the Prime Lease and specifically to
allocate those rights and obligations in this Sublease. Accordingly, in order to afford to Tenant
the benefits of this Sublease and of those provisions of the Prime Lease which by their nature are
intended to benefit the party in possession of the Premises, and in order to protect Landlord
against a default by Tenant which might cause a default or event of default by Landlord under the
Prime Lease, the parties agree:

A. Landlord shall pay, when due, all Base Rent, additional rent and other charges
payable by Landlord to Prime Landlord under the Prime Lease; 

B. Landlord shall perform its covenants and obligations under the Prime Lease which are
not otherwise to be performed under this Sublease by Tenant on behalf of Landlord. For
example, Landlord shall at all times keep in full force and effect all insurance required of
Landlord as tenant under the Prime Lease;

C. Landlord shall not agree to any amendment to the Prime Lease which might have an
adverse effect on Tenant’s occupancy of the Premises or its use of the Premises for their
intended purpose, unless Landlord shall first obtain Tenant’s prior approval;

 

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D. Landlord grants to Tenant the right to receive all of the services and benefits with
respect to the Premises which are to be provided by Prime Landlord under
the Prime Lease. The parties contemplate that Prime Landlord will, in fact, perform
its obligations under the Prime Lease and in the event of any default or failure of
performance by Prime Landlord, Landlord agrees that it will, upon notice from Tenant, make
demand upon Prime Landlord to perform its obligations under the Prime Lease, and if Tenant
agrees to pay all costs and expenses of Landlord (to be shared by Landlord pro rata if Prime
Landlord’s default adversely affects Landlord), and provides Landlord with security for that
payment reasonably satisfactory to Landlord, Landlord will take appropriate legal action to
enforce the Prime Lease;

E. Each party shall indemnify, defend and hold harmless the other party from any and
all liabilities, judgments, costs, damages, claims or demands, including reasonable
attorneys’ fees, arising out of or relating to any act or omission by the indemnifying party
which constitutes or would constitute a default under the Prime Lease or this Sublease; and

F. Tenant acknowledges that Landlord may pre-pay all rent and other expenses
contemplated under the Prime Lease to Prime Landlord, including, but not limited to, Base
Rent, Tenant’s Share of Operating Expenses, including utility charges or expenses, and Real
Property Taxes (as these terms are defined within the Prime Lease); provided, however, that
such pre-payment does not relieve Landlord of any of its obligations under the Prime Lease
or this Sublease.

17. ADDITIONAL SERVICES. Landlord shall cooperate with Tenant to cause Prime Landlord to
provide services required by Tenant in addition to those otherwise required to be provided by Prime
Landlord under the Prime Lease (such as after-hours heating or cooling).

18. PRIME LANDLORD’S CONSENT. This Sublease and the obligations of the parties under it are
expressly conditioned upon Landlord’s obtaining Prime Landlord’s consent to this Sublease.
Landlord and Tenant agree, for the benefit of Prime Landlord, that this Sublease and Prime
Landlord’s consent hereto shall not (a) create privity of contract between Prime Landlord and
Tenant; (b) be deemed to have amended the Prime Lease in any regard (unless Prime Landlord shall
have expressly agreed to the amendment); or (c) be construed as a waiver of Prime Landlord’s right
to consent to any assignment of the Prime Lease by Landlord or any further subletting of premises
leased pursuant to the Prime Lease, or as a waiver of Prime Landlord’s right to consent to any
assignment by Tenant of this Sublease or any sub-subletting of all or any part of the Premises.
Prime Landlord’s consent shall, however, be deemed to evidence Prime Landlord’s agreement that (y)
Tenant may use the Premises for the purposes described herein and (z) Tenant shall be entitled to
any waiver of claims and of the right of subrogation for damage to Prime Landlord’s property if and
to the extent that the Prime Lease provides such waivers for the benefit of Landlord.

19. BROKERAGE. Each party warrants to the other that it has had no dealings with any broker
in connection with this Sublease. Each party agrees to indemnify the other party from and as to
any liability for any compensation claimed by any broker or agent with respect to this Sublease or
its negotiation on behalf of the party through whom the claim is made.

 

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20. ADDITIONAL PROVISIONS.

A. Counterparts. This Sublease may be executed in any numbers of counterparts; each
such counterpart hereof shall be deemed to be an original document, but all such
counterparts together shall constitute but one Sublease. The signatures of all of the
parties need not appear on the same counterpart, and delivery of an executed counterpart
signature page by facsimile is as effective as executing and delivering this Sublease in the
presence of the other party to this Sublease. This Sublease is effective upon delivery of
one executed counterpart from one party to the other party. In proving this Sublease, a
party must produce or account only for the executed counterpart of the party to be charged.

B. No Partnership. Nothing contained in this Sublease shall be deemed to create a
partnership or joint venture between Landlord and Tenant or to create any other relationship
other than sublandlord and subtenant.

C. Entire Agreement. This Sublease embodies and constitutes the entire agreement and
understanding between the parties hereto with respect to the transaction contemplated
herein, and all prior or contemporaneous agreements, understandings, representations, and
warranties are merged into this Sublease. Landlord and Tenant expressly acknowledge that
they have not relied on any prior or contemporaneous oral or written representations or
statements by the other party in connection with the subject matter of this Sublease except
as expressly set forth in this Sublease.

D. Severability. If any provision of this Sublease is determined to be invalid,
illegal, or unenforceable, the remaining provisions of this Sublease shall remain in full
force if the essential provisions of this Sublease for each party remain valid, binding, and
enforceable.

E. Amendments. The parties may amend this Sublease only by a written agreement of the
parties that identifies itself as an amendment to this Sublease.

F. Time of Essence. Time is of the essence of this Sublease.

G. Captions; Interpretation. The captions at the beginning of the several paragraphs
are for convenience only and shall not control or affect the meaning or construction of any
provision of this Sublease. Landlord and Tenant have both conferred with counsel in
negotiating this Sublease; and accordingly, this Sublease shall be construed neither for nor
against Landlord or Tenant, but shall be given a fair and reasonable interpretation in
accordance with the meaning of its terms.

H. Governing Law and Venue. The internal substantive laws of the State of Florida,
excluding its conflict and choice of law principles, shall govern all questions related to
the execution, construction, validity, interpretation and performance of this Sublease and
to all other issues and claims arising under or related to it. Any action to
enforce the terms of this Sublease shall be brought in a court of competent
jurisdiction located in West Palm Beach, Florida.

 

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The parties have executed this Sublease the day and year first above written.

	 	 	 	 	 	 	 
	LANDLORD:

	 	 	 	TENANT:	 	 
	 
	 	 	 	 	 	 
	DIGITAL ANGEL CORPORATION,

	 	 	 	IFTH ACQUISITION CORP., 	 	 
	a Delaware corporation

	 	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	By: /s/ Lorraine M. Breece
 

Name: Lorraine M. Breece

	 	 
	 	By: /s/ Michael Feder
 

Name: Michael Feder
	 	 
	Its: SVP, CFO

	 	 	 	Its: Acting Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	Date: October 8, 2008

	 	 	 	Date: October 8, 2008	 	 
	 
	 	 	 	 	 	 
	Witnesses:

	 	 	 	Witnesses:	 	 
	 
	 	 	 	 	 	 
	/s/ Patricia Petersen
 

Print Name: Patricia Petersen

	 	 
	 	/s/ Courtney Cady
 

Print Name: Courtney Cady
	 	 
	 
	 	 	 	 	 	 
	/s/ Andrew Kingston
 

Print Name: Andrew Kingston

	 	 
	 	/s/ William J. Caragol
 

Print Name: William J. Caragol
	 	 

 

-7-SECURITIES
PURCHASE AGREEMENT

          THIS
SECURITIES PURCHASE AGREEMENT (this “Agreement”),
dated as of March 26, 2008, by and among National Automation Services, Inc. a
Colorado corporation, with headquarters located at 2053 Pabco, Henderson, NV
89011 (the “Company”), and the Buyers listed on Schedule I attached
hereto (individually, a “Buyer” or collectively “Buyers”).

WITNESSETH:

          WHEREAS,
the Company and the Buyer(s) are executing and delivering this Agreement in
reliance upon an exemption from securities registration pursuant to Section
4(2) and/or Rule 506 of Regulation D (“Regulation
D”) as promulgated by the U.S. Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”);

          WHEREAS,
the parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Buyer(s), as provided herein,
and the Buyer(s) shall purchase up to Ten Million Dollars ($10,000,000) of
secured redeemable debentures (the “Redeemable Debentures”), of which
One Million Five Hundred Thousand Dollars
($1,500,000) shall be funded on the date hereof (the “First Closing”),
with any remaining balance purchased on dates mutually agreed to by the
Company and Buyers and contingent upon the Company using such funds for
acquisitions which shall be subject to Buyer’s consent for a total purchase
price of up to Ten Million Dollars ($10,000,000), (the “Purchase Price”)
in the respective amounts set forth opposite each Buyer(s) name on Schedule I
(the “Subscription Amount”); and

          WHEREAS,
the aggregate proceeds of the sale of the Redeemable Debentures contemplated
hereby shall be held in escrow pursuant to the terms of an escrow agreement
substantially in the form of the Escrow Agreement attached hereto as Exhibit
B (the “Escrow Agreement”); and

          WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Security Agreement substantially
in the form attached hereto as Exhibit C (the “Security Agreement”)
pursuant to which the Company has agreed to provide the Buyer a security
interest in Pledged Collateral (as this term is defined in the Security
Agreement dated the date hereof) to secure Company’s obligations under this
Agreement, the Redeemable Debenture, the Warrant, the Security Agreement, and
the Escrow Agreement (collectively, the “Transaction Documents”) or any other
obligations of the Company to the Buyer;

          NOW, THEREFORE, in consideration of the
mutual covenants and other agreements contained in this Agreement the Company
and the Buyer(s) hereby agree as follows:

               1.
PURCHASE AND SALE OF REDEEMABLE DEBENTURES. 

               (a) Purchase of Redeemable Debentures. Subject
to the satisfaction (or waiver) of the terms and conditions of this Agreement,
each Buyer agrees, severally and not jointly, to purchase at each Closing (as
defined herein below) and the Company agrees to sell and issue to each Buyer,
severally and not jointly, at such Closing, Redeemable Debentures in an aggregate
amount of up to Ten Million Dollars ($10,000,000.00) (the “Purchase Price”) in
amounts corresponding with the Subscription Amount set forth opposite each
Buyer’s name on Schedule I hereto, as follows: (i) Buyer(s) shall purchase an
aggregate of One Million Five Hundred Thousand Dollars ($1,500,000.00) of
Redeemable Debentures (the “First Closing”) on the date hereof (or such other date as may be mutually agreed to by
Buyers and the Company) on the date set forth in such letter (the “First
Certificate”); (ii) any remaining
purchase shall take place (each, an “Additional Closing”) on such date as may
be mutually agreed to by Buyers and the Company with any and all such purchases
contingent upon the Company using such funds for acquisitions which shall be
subject to Buyer’s consent (each, including the First Closing individually
referred to as a “Closing” and collectively referred to as the “Closings”). All
Redeemable Debentures purchased by Buyer shall have a maturity date of thirty
(30) months from such Redeemable
Debenture’s respective Closing. Upon execution hereof by a Buyer, the Buyer shall wire transfer the Subscription Amount
set forth opposite his name on Schedule I in same-day funds or a check
payable to: “James G. Dodrill II, P.A. as Escrow Agent for Trafalgar - National Automation”, which Subscription Amount
shall be held in escrow pursuant to the terms of the Escrow Agreement (as
hereinafter defined) and disbursed in accordance therewith.

               (b)
Closing Date. The First Closing of the purchase and sale of the Redeemable Debentures shall take place at 10:00
a.m. Eastern Standard Time on the date of this Agreement, subject to
notification of satisfaction of the conditions to the First Closing set forth in Sections 6 and 7 below, (or such later date as
is mutually agreed to by the Company and the Buyer(s)) (the “First Closing Date”). Any Additional Closings of the
purchase-and sale of the Redeemable
Debentures shall take place on or before such date as is mutually agreed to by
the Company and the Buyers, subject to notification of satisfaction of
the conditions to the Additional Closings set forth in Sections 6 and 7 below
(or such later date as is mutually agreed to by the Company and the Buyer(s))
(the “Additional Closing Dates”, and together with the First Closing Date, the
“Closing Dates”). The Closings shall occur on their respective Closing Dates at the offices of James G. Dodrill II, P.A.,
5800 Hamilton Way, Boca Raton, FL 33496 (or such other place as is mutually agreed to by the Company and the
Buyer(s)).

               (c)
Escrow Arrangements; Form of Payment. Upon execution hereof by Buyer(s)
and pending the Closings, the portion of the Purchase Price for the Redeemable
Debentures to be purchased in the First Closing shall be deposited in an escrow
account with James G. Dodrill II, P.A., as escrow agent (the “Escrow Agent”),
pursuant to the terms of an escrow agreement between the Company, the Buyer(s)
and the Escrow Agent in the form attached hereto as Exhibit B (the “Escrow
Agreement”). Such portion of the Purchase Price for the Redeemable Debentures
to be purchased in any Additional Closings shall be deposited into the Escrow
Account prior to such applicable Closing Date. Subject to the satisfaction of
the terms and conditions of this Agreement,
on each of the Closing Dates, (i) the Escrow Agent shall deliver to the
Company in accordance with the terms of the Escrow Agreement that portion of the Escrow Funds (as that term is defined in the
Escrow Agreement) equal to the gross amount of the Redeemable Debentures being
purchased by such Buyer(s) as set forth on Schedule I (minus the fees
and expenses as set forth herein which shall be paid directly from the Escrow
Funds at each Closing) by wire transfer of
immediately available funds and (ii) the Company shall deliver to each Buyer, Redeemable Debentures which such
Buyer(s) is purchasing in amounts indicated opposite such Buyer’s name on Schedule I, duly executed on behalf of
the Company.

2

               (d)
“Closing Date Exchange Rate” means
the Euro to US dollar spot exchange rate as quoted in the London edition of the
Financial Times on the Closing Date.

               (e) “Repayment Exchange Rate” means in
relation to each date of a Redemption
Notice, the Euro to US dollar spot exchange rate as quoted in the London
edition of the Financial Times on such date.

               (f)
If on the date of any Redemption Notice, the Repayment Exchange Rate is less
than the Closing Date Exchange Rate then the payment due to Holder shall be
increased by the same percentage as results
from dividing the Closing Date Exchange Rate by the relevant Repayment Exchange Rate. By way of example, if the
payment due in respect of a particular Redemption Notice would, but for this
Section 1.08, be $1,000 and if the Closing Date Exchange Rate is 1.80 and the relevant Repayment Exchange
Rate is 1.75, then $1,028.57 will be paid in relation to that Redemption
Notice.

               (g)
If on the date any payment of principal or interest is due (each, a “Repayment
Date”), the Cash Payment Date Exchange Rate, as defined below is less than the Closing Date Exchange Rate then the amount of cash
required to satisfy the amounts due at such time shall be increased by
the same percentage as results from dividing the Closing Date Exchange Rate by
the relevant Cash Payment Date Exchange Rate. “Cash Payment Date Exchange Rate” means in relation to each
Repayment Date the Euro to US dollar spot exchange rate as quoted in the
London edition of the Financial Times on such date. By way of example, if the
amount of cash required to repay all
amounts due on such date would, but for this Section 1.08, be $1,000 and if the Closing Date Exchange Rate is 1.80 and the
relevant Repayment Date Exchange Rate is 1.75 then the amount of cash
from the Cash Payment required to repay all amounts due on such date will be
$1,028.57.

               2.
BUYER’S REPRESENTATIONS AND WARRANTIES. 

          Each Buyer represents and warrants, severally and
not jointly, that:

                    (a)
Investment Purpose. Each Buyer is acquiring the Redeemable Debentures for its own account for investment
only and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act.

                    (b)
Accredited Investor Status. Each Buyer is an “Accredited investor” as that
term is defined in Rule 501(a)(3) of Regulation D.

                    (c)
Reliance on Exemptions. Each Buyer understands that the Redeemable Debentures are being offered and sold
to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Buyer’s
compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire such securities.

3

                    (d)
Information. Each Buyer and its advisors (and his or, its counsel), if any, have been
furnished with all materials relating
to the business, finances and operations of the
Company and information he deemed material to making an informed investment
decision regarding his purchase of the Redeemable Debentures, which have
been requested by such Buyer. Each Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its management.
Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer’s right to rely
on the Company’s representations and warranties contained in Section 3 below. Each Buyer understands that its
investment in the Redeemable Debentures involves a high degree of risk. Each
Buyer is in a position regarding the Company, which, based upon employment, family relationship or economic bargaining
power, enabled and enables such
Buyer to obtain information from the Company in order to evaluate the merits
and risks of this investment. Each
Buyer has sought such accounting, legal and tax advice, as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Redeemable Debentures.

                    (e)
No Governmental Review. Each Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or endorsement of the
Redeemable Debentures, or the fairness or suitability of the investment
in the Redeemable Debentures, nor have such authorities passed upon or endorsed the merits of the offering of
the Redeemable Debentures.

                    (f)
Transfer or Resale. Each Buyer understands that: (i) the Redeemable
Debentures have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned
or transferred unless (A) subsequently registered thereunder, or (B) such Buyer
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration requirements; (ii) any
sale of such securities made in reliance on Rule 144 under the 1933 Act (or a successor rule thereto) (“Rule
144”) may be made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any resale of such securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (iii) neither
the Company nor any other person is under any obligation to register such
securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.

                    (g)
Legends. Each Buyer understands that the certificates or other
instruments representing the Redeemable Debentures shall bear a restrictive
legend in substantially the following form
(and a stop transfer order may be placed against transfer of such certificates):

THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN

4

ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, GENERALLY
ACCEPTABLE TO COMPANY’S COUNSEL, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.

The legend set forth above shall be removed and the
Company within three (3) business days shall issue a certificate without such
legend to the holder of the security upon which it is stamped, if, unless
otherwise required by state securities laws, (i) in connection with a sale transaction, provided the securities are
registered under the 1933 Act or (ii) in connection with a sale
transaction, after such holder provides the Company with an opinion of counsel,
which opinion shall be in form, substance
and scope reasonably acceptable to counsel for the Company, to the
effect that a public sale, assignment or transfer of the securities may be made
without registration under the 1933 Act.

                    (h)
Authorization, Enforcement. This Agreement has been duly and validly authorized, executed and delivered on
behalf of such Buyer and is a valid and binding agreement of such Buyer enforceable in accordance with its terms,
except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies.

                    (i)
Receipt of Documents. Each Buyer and his or its counsel has received and read in their entirety: (i) this Agreement
and each representation, warranty and covenant set forth herein, and the
Transaction Documents; (ii) all due
diligence and other information necessary to verify the accuracy and
completeness of such representations, warranties and covenants; and (iii) answers to all questions each Buyer submitted to
the Company regarding an investment
in the Company; and each Buyer has relied on the information contained therein
and has not been furnished any other documents, literature, memorandum or
prospectus.

                    (j)
Due Formation of Corporate and Other Buyers. If the Buyer(s) is a
corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized
for the specific purpose of purchasing the Redeemable Debentures and is not
prohibited from doing so.

                    (k)
No Legal Advice From the Company. Each Buyer acknowledges, that it had
the opportunity to review this Agreement and the transactions contemplated by
this Agreement with his or its own legal counsel and investment and tax
advisors. Each Buyer is relying solely on
such counsel and advisors and not on any statements or representations of the Company
or any of its representatives or agents for legal, tax or investment advice
with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any jurisdiction.

5

               3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 

          Except
as otherwise provided in the Company Disclosure Schedule delivered herewith,
the Company represents and warrants as of the date hereof and as of the Closing
Date to each of the Buyers that:

                    (a)
Organization and Qualification. The Company and its subsidiaries
are corporations duly organized and validly existing in good standing under the
laws of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and
to carry on their business as now being conducted. Each of the Company and its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its subsidiaries
taken as a whole.

                    (b)
Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Transaction Documents, and any related
agreements, and to issue the Redeemable Debentures in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement, the
Transaction Documents and any related agreements by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Redeemable Debentures, have
been duly authorized by the Company’s Board of Directors and no further consent
or authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement, the Transaction Documents and any related
agreements have been duly executed and delivered by the Company, (iv) this
Agreement, the Transaction Documents and any related agreements constitute the
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies. The
Company knows of no reason why the Company cannot perform any of the Company’s
obligations under this Agreement or the Transaction Documents.

                    (c)
Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, par value $0.001 per share and
no shares of Preferred Stock. As of the date hereof, the Company has 41,050,081
shares of Common Stock and no shares of Preferred Stock issued and outstanding.
All of such outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company. As of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, or
contracts, commitments, understandings or arrangements by which the Company or
any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, (ii) there are no

6

outstanding debt securities other
than existing credit lines and (iii) there are no agreements or arrangements under which the Company or any of
its subsidiaries is obligated to register the sale of any of their
securities under the 1933 Act and (iv) there are no outstanding registration statements and there are no outstanding comment
letters from the SEC or any other regulatory agency. There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Redeemable Debentures as described in this
Agreement. The Company has furnished to the Buyer true and correct copies of
the Company’s Certificate of Incorporation,
as amended and as in effect on the date hereof (the “Certificate of
Incorporation”), and the Company’s By-laws, as in effect on the date hereof
(the “By-laws”), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in respect thereto other than
stock options issued to employees and consultants.  

                    (d)
Issuance of Securities. The Redeemable Debentures are duly
authorized and, upon issuance in accordance with the terms hereof, shall be
duly issued, fully paid and nonassessable, are free from all taxes, liens and charges with respect
to the issue thereof.

                    (e)
No Conflicts. The execution, delivery and performance of this Agreement, the Transaction Documents and any
related agreements by the Company and the consummation by the Company of the transactions contemplated hereby and
thereby will not (i) result in a violation of the Articles of
Incorporation or the By-laws or (ii), to the best knowledge of the Company,
conflict with or constitute a default (or an event which 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 of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal
and state securities laws and regulations
and the rules and regulations of The National Association of Securities Dealers
Inc.’s OTC Bulletin Board on which the Common Shares are quoted)
applicable to the Company or any of its subsidiaries or by which any property
or asset of the Company or any of its subsidiaries is bound or affected. To the
best knowledge of the Company, neither the Company nor its subsidiaries is in
violation of any term of or in default under its Articles of Incorporation or By-laws or their organizational charter or
by-laws, respectively, or, any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its subsidiaries. The business
of the Company and its subsidiaries is not being conducted, and shall not be
conducted in violation of any material law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make
any filing or registration with, any court or governmental
agency in order for it to execute, deliver
or perform any of its obligations under or contemplated by this Agreement in
accordance with the terms hereof,
All consents, authorizations, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof, except for any required
post-Closing notice filings under applicable United States federal or state
securities laws, if any.

                    (f)
Intentionally Omitted.

7

                    (g)
No Material Misstatement or Omission. None of the materials provided to
the Buyer(s) by the Company and none of the representation and warranties made
in this Agreement or any of the other Transaction Documents include any untrue
statements of material fact, nor do the materials provided to the Buyer(s) by
the Company and the representations and warranties made in this Agreement or
any of the other Transaction Documents omit to state any material fact required
to be stated therein necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.

                    (h)
Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body
pending against or affecting the Company, the Common Stock or any of the Company’s
subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have
a material adverse effect on the transactions contemplated hereby or (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under,
this Agreement or any of the Transaction Documents have a material adverse
effect on the business, operations, properties, financial condition or
results of operations of the Company and its subsidiaries taken as a whole.

                    (i)
Acknowledgment Regarding Buyer’s Purchase of the Redeemable Debentures.
The Company acknowledges and agrees that the Buyer(s) is acting solely in the
capacity of an arm’s length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the
Buyer(s) is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Buyer(s) or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer’s purchase
of the Redeemable Debentures. The Company further represents to the Buyer that
the Company’s decision to enter into this Agreement has been based solely on
the independent evaluation by the Company and its representatives.

                    (j)
No General Solicitation. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D
under the 1933 Act) in connection with the offer or sale of the Redeemable
Debentures.

                    (k)
No Integrated Offering. 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 require registration of the Redeemable
Debentures under the 1933 Act or cause this offering of the Redeemable
Debentures to be integrated with prior offerings by the Company for purposes of
the 1933 Act.

                    (l)
Employee Relations. Neither the Company nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company or any of
its subsidiaries, is any such dispute threatened. None of the Company’s or its
subsidiaries’ employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are good.

8

                    (m)
Intellectual Property Rights. The Company and its subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now conducted. The
Company and its subsidiaries do not have any knowledge of any infringement by
the Company or its subsidiaries of trademark, trade name rights, patents,
patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company there is no claim, action or
proceeding being made or brought against, or to the Company’s knowledge,
being threatened against, the Company or its subsidiaries regarding trademark,
trade name, patents, patent rights, invention, copyright, license, service
names, service marks, service mark registrations, trade secret or other
infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.

                    (n)
Environmental Laws. The Company and its subsidiaries are (i) in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances
or wastes, pollutants or contaminants (“Environmental Laws”), (ii)
have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval.

                    (o)
Title. Any real property and facilities held under lease by the Company
and its subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.

                    (p)
Insurance. The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the
Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged.
Neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such 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 at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.

                    (q)
Regulatory Permits. The Company and its subsidiaries possess all material certificates, authorizations and permits
issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification
of any such certificate, authorization or permit.

9

                    (r)
Internal Accounting Controls. The Company and each of its 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 generally accepted
accounting principles and to maintain asset accountability, and (iii) the recorded amounts for assets is compared with
the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

                    (s)
No Material Adverse Breaches, etc. Neither the Company nor any of its
subsidiaries is subject to any charter, corporate or other legal restriction,
or any judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in
the future to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries. Neither the Company nor any of its
subsidiaries is in breach of any contract or agreement which breach, in the
judgment of the Company’s officers, has or is expected to have a material
adverse effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries.

                    (t)
Tax Status. The Company and each of its subsidiaries has made and filed
all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and (unless
and only to the extent that the Company and each
of its subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) has paid all taxes
and other governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.

                    (u)
Certain Transactions. Except for arm’s length transactions pursuant to which
the Company makes payments in the ordinary course of business upon terms no
less favorable than the Company could obtain from third parties and other than
the grant of stock options disclosed to the
Buyer, none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company (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 corporation, partnership, trust or other entity in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.

                    (v)
Fees and Rights of First Refusal. The Company is not obligated to offer the
securities offered hereunder on a right of first refusal basis or otherwise to
any third parties including, but not limited to, current or former shareholders
of the Company, underwriters, brokers, agents or other third parties. 

10

               4.
COVENANTS.

                    (a)
Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.

                    (b)
Form D. The Company agrees to file a Form D with respect
to the Redeemable Debentures as
required under Regulation D and to provide a copy thereof to each Buyer
promptly after such filing. The Company shall, on or before the Closing Date,
take such action as the Company shall reasonably determine is necessary
to qualify the Redeemable Debentures, or
obtain an exemption for the Redeemable Debentures for sale to the Buyers at the
Closing pursuant to this Agreement under applicable securities or “Blue
Sky” laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date.

                    (c)
Reporting Status. Until the date on which none of the Redeemable Debentures
are outstanding (the “Registration Period”), the Company, upon becoming a reporting company under Section 13 or 15(d) of
the 1934 Act, shall file in a timely manner all reports required to be filed with the SEC pursuant to the 1934 Act and
the regulations of the SEC thereunder, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would otherwise permit such termination. 

                    (d)
Use of Proceeds. The Company will use the proceeds from the sale
of the Redeemable Debentures for the purposes of completing acquisitions and
for working capital.

                    (e)
Reservation of Shares. The Company shall take all action reasonably necessary
to at all times have authorized, and reserved for the purpose of issuance, such
number of shares of Common Stock as shall be necessary to effect the issuance
of the shares upon exercise of the Warrants
(as defined below). If at any time the Company does not have available such shares of Common Stock as shall from time to
time be sufficient to effect the issuance of all shares upon exercise of the Warrants, the Company shall file a
preliminary proxy statement with the Securities and Exchange Commission within
ten (10) business day and shall call and hold a special meeting of the
shareholders as soon as practicable after such occurrence, for the sole purpose
of increasing the number of shares authorized. The Company’s management shall recommend to the shareholders to vote in favor of
increasing the number of shares of Common Stock authorized. Management
shall also vote all of its shares in favor of increasing the number of
authorized shares of Common Stock.

                    (f)Fees and Expenses.

                    (i)
Each of the Company and the Buyer(s) shall pay all costs and expenses incurred
by such party in connection with the negotiation, investigation, preparation,
execution and delivery of this Agreement the Transaction
Documents and any other documents relating to this transaction.

                    (ii)
The Company has agreed to pay a legal and documentation review fee to Buyer of
Seventeen Thousand Five Hundred Dollars ($17,500), of which Ten Thousand
Dollars ($10,000) remains outstanding and shall be paid directly from the
proceeds of the First Closing.

11

                    (iii) The Company has agreed to pay a Due
Diligence Fee to Buyer of Fifteen Thousand Dollars ($15,000), one-half of which
has been paid prior to this date and
one-half of which shall be paid directly from the proceeds of the First
Closing.

                    (iv)
The Company shall issue to the Buyer warrants to purchase one hundred thousand
(100,000) shares of the Company’s Common Stock for every One Million Dollars ($1,000,000) of Redeemable Debentures
purchased by the Buyer. The warrants shall be exercisable for a period of five
(5) years at an exercise price equal to $0.001 per share (“Warrants”).
The Warrants shall be issued in full at
each Closing and shall be exercised on a cash basis provided that the Company
is not in Default and the shares underlying the Warrants hold one demand
registration right and standard and customary anti-dilution protection. Upon
the Buyer purchasing an aggregate of Five Million Dollars ($5,000,000) worth of
Redeemable Debentures, the Buyer shall receive an additional Warrant to
purchase one percent (1%) of the fully diluted outstanding Common Stock of the
Company (the “One Percent Warrant”). Upon the Buyer purchasing an aggregate of
Ten Million Dollars ($10,000,000)
worth of Redeemable Debentures, the Warrant
coverage shall increase to two percent (2%) of the fully diluted
outstanding Common Stock of the Company. 

                    (v)
The Company shall pay to the Buyer a Commitment Fee equal to five percent (5%) of the principal amount of each Redeemable
Debenture which shall be paid
directly from the proceeds of and proportionally upon each Closing. The
total cost of capital to the Company shall not exceed thirteen percent (13%).

                    (vi)
The Company shall pay to the Buyer a Loan Commitment Fee equal to two percent
(2%) of the principal amount of each Redeemable Debenture which shall be paid
directly from the proceeds of and proportionally upon each Closing.

                    (g)
Corporate Existence. So long as any of the Redeemable Debentures remain outstanding, the Company shall not directly
or indirectly consummate any merger, reorganization, restructuring,
reverse stock split consolidation, sale of all or substantially all of the Company’s assets or any similar transaction
or related transactions (each such transaction, an “Organizational Change”)
unless, prior to the consummation an Organizational Change, the Company obtains the written consent of each
Buyer. In any such case, the Company will make appropriate provision
with respect to such holders’ rights and interests to insure that the provisions of this Section 4(g) will thereafter
be applicable to the Redeemable Debentures.

                    (h)
Transactions With Affiliates. So long as any Redeemable Debentures are outstanding, the Company shall not, and shall
cause each of its subsidiaries not to, enter into, amend, modify or
supplement, or permit any subsidiary to enter into, amend, modify or

12

supplement any agreement, transaction, commitment, or
arrangement with any of its or any subsidiary’s officers, directors, persons
who were officers or directors at any time during the previous two (2) years,
stockholders who beneficially own five percent (5%) or more of the Common
Stock, or Affiliates (as defined below) or with any individual related by
blood, marriage, or adoption to any such individual or with any entity in which
any such entity or individual owns a five percent (5%) or more beneficial
interest (each a “Related Party”), except for
(a) customary employment arrangements and benefit programs on reasonable terms,
(b) any investment in an Affiliate
of the Company, (c) any agreement, transaction, commitment, or arrangement
on an arms-length basis on terms no less favorable than terms which would have been obtainable from a person other than such
Related Party, (d) any agreement transaction, commitment, or arrangement which
is approved by a majority of the disinterested directors of the Company,
for purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement. “Affiliate” for
purposes hereof means, with respect to any
person or entity, another person or entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii)
has ten percent (10%) or more common ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. “Control” or “controls”
for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the policies
of another person or entity.  

                    (i)
Transfer Agent. The Company covenants and agrees that, in the event that
the Company’s agency relationship with the transfer agent should be terminated
for any reason prior to a date which is two (2) years after the Closing Date,
the Company shall immediately appoint a new transfer.

                    (j)
Restriction on Issuance of the Capital Stock. So long as any Redeemable
Debentures are outstanding, the Company shall not, without the prior written consent of the Buyer(s), (i) issue or sell shares
of Common Stock or Preferred Stock without consideration or for a
consideration per share less than the bid price of the Common Stock determined
immediately prior to its issuance except for issuances to Richardson &
Patel, LLP, (ii) issue any preferred stock,
warrant, option, right, contract, call, or other security instrument granting the holder thereof, the right to acquire
Common Stock without consideration or for a consideration less than such
Common Stock’s bid price value determined immediately prior to it’s issuance, (iii) enter into any security
instrument granting the holder a security interest in any and all
assets of the Company, or (iv) file any registration statement on Form S-8
other than on behalf of Richardson & Patel, LLP. 

                    (k)
Restriction on “Short” Position. Neither the Buyer nor any of its
affiliates have an open short position in the Common Stock of the Company, and
the Buyer agrees that it shall not, and that it will cause its affiliates not
to, engage in any short sales with respect
to the Common Stock as long as any Redeemable Debentures shall remain
outstanding.

                    (l)
Restriction on Incurring Additional Debt. The Company shall not incur any additional debt without the prior
written approval of the Buyer with the exception of equipment purchases and real estate acquisitions
used in the normal course of business.

13

               5. Intentionally
Omitted.

               6. CONDITIONS TO THE COMPANY’S
OBLIGATION TO SELL.

          The
obligation of the Company hereunder to issue and sell the Redeemable Debentures
to the Buyer(s) at the Closings is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion:

                    (a)
Each Buyer shall have executed this
Agreement, and the Transaction Documents and delivered the same to the
Company.

                    (b)
The Buyer(s) shall have delivered to the Escrow Agent the Purchase Price
for Redeemable Debentures in respective amounts as set forth next to each Buyer
as outlined on Schedule I attached hereto and the Escrow Agent shall have
delivered the net proceeds to the Company by wire transfer of immediately
available U.S. funds pursuant to the wire instructions provided by the Company.

                    (c)
The representations and warranties of the Buyer(s) shall be true and correct in all material respects as of the date when made and as of each Closing Date
as though made at that time (except for representations and warranties that speak
as of a specific date), and the Buyer(s) shall have performed, satisfied
and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Buyer(s) at or prior to
such Closing Date.

                    (d)
The Company shall have filed a form UCC-1 with regard to the Pledged
Property and Pledged Collateral as detailed in the Security Agreement dated the
date hereof and provided proof of such filing to the Buyer(s).

               7.
CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE.

          The
obligation of the Buyer(s) hereunder to purchase the Redeemable Debentures at
the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions:

                    (a)
The Company shall have executed this
Agreement the Transaction Documents and any other documents relating to this
transaction and delivered the same to the Buyer(s).

                    (b)
The trading in the Common Shares on
the pink sheets, or the over-the-counter
bulletin board upon the company’s listing thereon, shall not have been
suspended for any reason.

                    (c)
The representations and warranties
of the Company shall be true and correct in all material respects
(except to the extent that any of such representations and warranties is
already qualified as to materiality in Section 3 above, in which case, such

14

representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date. If requested by the Buyer, the Buyer shall have received a certificate, executed by the President
of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by the Buyer
including, without limitation an update as of the Closing Date regarding the
representation contained in Section 3(c) above.

                    (d)
The Company shall have executed and delivered to the Buyer(s) the
Redeemable Debentures in the respective amounts set forth opposite each
Buyer(s) name on Schedule I attached hereto.

                    (e)
The Buyer(s) shall have received an opinion of counsel from counsel to
the Company in a form satisfactory to the Buyer(s).

                    (f)            The Company
shall have provided to the Buyer(s) a certificate of good standing from
the secretary of state from the state in which the company is incorporated.

                    (g)           As of the
Closing Date, the Company shall have reserved out of its authorized and
unissued Common Stock, solely for the purpose of issuing shares of Common Stock
upon exercise of the Warrant, shares of Common Stock to effect the issuance of
the shares of Common Stock upon exercise of the Warrants.

                    (h)
Intentionally omitted.

                    (i)
Upon issuance of the Company’s audits, and prior to the Company filing a Form
10 or other registration statement with the Securities and Exchange Commission,
the Company shall provide to the Buyer an acknowledgement, to the satisfaction
of the Buyer, from the Company’s independent certified public accountants as to
its ability to provide all consents required in order to file a registration
statement in connection with this transaction.

                    (j)
The Company shall file a form UCC-1 or such other forms as may be required to
perfect the Buyer’s interest in the Pledged Collateral as detailed in the
Security Agreement dated the date hereof, providing the Buyer with a senior
lien on all of the Company’s assets and intellectual property and provided
proof of such filing to the Buyer(s).

                    (k)
The satisfactorily completion of all due diligence.

                    (1)
With respect to each Additional Closing, such Closings shall only occur, and
the Buyer shall only purchase Redeemable Debentures for which the proceeds are
being used for acquisitions to which Buyer has consented.

15

               8.
INDEMNIFICATION.

                    (a)
In consideration of the Buyer’s execution and delivery of this Agreement and acquiring the Redeemable Debentures
hereunder, and in addition to all of
the Company’s other obligations under this Agreement, the Company shall
defend, protect, indemnify and hold
harmless the Buyer(s) and each other holder of the Redeemable Debentures, and
all of their officers, directors, employees and agents (including, without
limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the “Buyer
indemnitees”) from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the
action for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by
the Buyer Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of
any representation or warranty made by the Company in this Agreement, the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, or the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, or (c) any cause of action, suit or claim brought or made against
such Indemnitee by a third party and arising
out of or resulting from the execution, delivery, performance or enforcement of
this Agreement or any other instrument, document or agreement executed
pursuant hereto by any of the Indemnities, any transaction financed or to be
financed in whole or in part, directly or indirectly,
with the proceeds of the issuance of the Redeemable Debentures or the status of
the Buyer or holder of the Redeemable Debentures, as a Buyer of Redeemable Debentures
in the Company. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction
of each of the Indemnified Liabilities, which is permissible under applicable
law. 

                    (b)
In consideration of the Company’s execution and delivery of this
Agreement, and in addition to all of
the Buyer’s other obligations under this Agreement, the Buyer shall defend, protect, indemnify and hold harmless the Company
and all of its officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement)
(collectively, the “Company Indemnitees”) from and against any and all
Indemnified Liabilities incurred by the Indemnitees or any of them as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of
any representation or warranty made by the Buyer(s) in this Agreement, the
Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby executed by
the Buyer, (b) any breach of any covenant, agreement or obligation of the
Buyer(s) contained in this Agreement, the Transaction Documents or any
other certificate, instrument or document contemplated
hereby or thereby executed by the Buyer, or (c) any cause of action, suit or
claim brought or made against such Company Indemnitee based on material
misrepresentations or due to a material
breach and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement, the Transaction Documents or any
other certificate instrument, document or agreement executed pursuant
hereto by any of the Company Indemnities. To the extent that the foregoing undertaking by each Buyer may be unenforceable
for any reason, each Buyer shall make the maximum contribution to the
payment and satisfaction of each of the
Indemnified Liabilities, which is permissible under applicable law. 

16

               9. GOVERNING LAW: MISCELLANEOUS.

                    (a) Governing
Law. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of Florida
without regard to the principles of conflict of laws. The parties further agree that any action between them shall be
heard in Broward County, Florida and
expressly consent to the jurisdiction and venue of the State Court sitting in
Broward County, Florida and the
United States District Court for the Southern District of Florida for the adjudication
of any civil action asserted pursuant to this Paragraph.

                    (b) Counterparts. This Agreement may
be executed in two or more identical counterparts, all of which 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.

                    (c) Headings. The headings of this
Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.

                    (d)
Severability. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability
of any provision of this Agreement in any other jurisdiction.

                    (e) Entire
Agreement Amendments. This
Agreement supersedes all other prior oral or written agreements between the
Buyer(s), the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically
set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement
may be waived or amended other than by an
instrument in writing signed by the party to be charged with enforcement.

                    (f) Notices. Any notices, consents,
waivers, or other communications required or permitted to be given under the
terms of this Agreement must be in writing and will be deemed to have been
delivered (i) upon receipt, when delivered personally; (ii) upon confirmation
of receipt, when sent by facsimile; (iii) three (3) days after being sent by
U.S. certified mail, return receipt requested, or (iv) one (1) day after
deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such
communications shall be:

17

	
 

	
 

	
If to the Company, to:

	
National Automation Services, Inc.

	
 

	
2053 Pabco

	
 

	
Henderson, NV 89011

	
 

	
Attention: Mr. Bob Chance, President

	
 

	
Telephone: (702) 642-7720

	
 

	
Facsimile: (702) 564-5411

	
 

	
 

	
With a copy to:

	
Richardson & Patel, LLP 

  10900 Wilshire Boulevard, Suite 500 

  Los Angeles, CA 90024 

  Attention: Peter Hogan 

  Telephone: (310) 208-1182 

  Facsimile: (310) 208-1154

	
 

	
 

	
With Copy to:

	
James G. Dodrill II, P.A. 

  5800 Hamilton Way 

  Boca Raton, FL 33496 

  Attention:        Jim Dodrill, Esq. 

  Telephone:      (561) 862-0529 

  Facsimile:       (561) 892-7787

          If
to the Buyer(s), to its address and facsimile number on 
Schedule I, with copies
to the Buyer’s counsel as set forth on Schedule I. Each party shall provide
five (5) days’ prior written notice to the other party of any change in address
or facsimile number.

                    (g)
Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto.

                    (h)
No Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns,
and is not for the benefit of, nor may any provision hereof be enforced by, any
other person.

                    (i)
Survival. Unless this Agreement is terminated under Section 9(1), the
representations and warranties of the Company and the Buyer(s) contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive the
Closing for a period of two (2) years following the date on which the
Redeemable Debentures are redeemed in full. The Buyer(s) shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.

18

                    (j)
Publicity. The Company and the Buyer(s) shall have the right to approve,
before issuance any press release or any other public statement with respect to
the transactions contemplated hereby made
by any party; provided, however, that the Company shall be entitled, without the prior approval of the
Buyer(s), to issue any press release or other public disclosure with respect to
such transactions required under applicable securities or other laws or
regulations (the Company shall use its best efforts to consult the Buyer(s) in
connection with any such press release or other public disclosure prior
to its release and Buyer(s) shall be provided with a copy thereof upon release
thereof).

                    (k)
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.

                    (l)
Termination. In the event that the Closing shall not have occurred with respect to the Buyers on or before five (5)
business days from the date hereof due to the Company’s or the Buyer’s
failure to satisfy the conditions set forth in Sections 6 and 7 above (and the non-breaching party’s failure to waive
such unsatisfied condition(s)), the non-breaching party shall have the
option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability
of any party to any other party; provided, however, that if this Agreement is
terminated by the Company pursuant to this Section 9(1), the Company shall remain obligated to pay the
Buyer(s) for the structuring fee described in Section 4(g) above.

                    (m)
No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parlies to express their mutual intent, and no
rules of strict construction will be applied against any party.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

19

          IN WITNESS WHEREOF, the Buyers and the Company have caused
this Securities Purchase Agreement to be
duly executed as of the date first written above.

	
 

	
 

	
 

	
 

	
 

	
COMPANY:

	
 

	
 

	
NATIONAL AUTOMATION SERVICES, INC.

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	

	
 

	
 

	
 

	

	
 

	
 

	
Name:

	
Bob Chance

	
 

	
 

	
Title:

	
President

	
 

	
 

	
 

	
 

	
 

	
 

	
BUYER:

	
 

	
 

	
TRAFALGAR CAPITAL SPECIALIZED
  INVESTMENT FUND, LUXEMBOURG 

	
 

	
 

	
 

	
By:

	
Trafulgar Capital Sarl

	
 

	
 

	
Its:

	
General Partner

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Name:

	
Andrew Garai

	
 

	
 

	
Title:

	
Chairman of the Board

	
 

20

          IN
WITNESS WHEREOF, the Buyers and the Company have caused this Securities Purchase Agreement to be duly executed as of the
date first written above. 

	
 

	
 

	
 

	
 

	
 

	
COMPANY:

	
 

	
 

	
NATIONAL AUTOMATION SERVICES, INC.

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Name:

	
Bob Chance

	
 

	
 

	
Title:

	
President

	
 

	
 

	
 

	
 

	
 

	
 

	
BUYER:

	
 

	
 

	
TRAFALGAR CAPITAL SPECIALIZED
  INVESTMENT FUND, LUXEMBOURG 

	
 

	
 

	
 

	
By:

	
Trafulgar Capital Sarl

	
 

	
 

	
Its:

	
General Partner

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	

	
 

	
 

	
 

	

	
 

	
 

	
Name:

	
Andrew Garai

	
 

	
 

	
Title:

	
Chairman of the Board

	
 

20

SCHEDULE
I 

SCHEDULE
OF BUYERS

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Name

	
 

	
Signature

	
 

	
Address/Facsimile
  

  Number of Buyer

	
 

	
Amount
  of Subscription

	

	
 

	

	
 

	

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
8-10 Rue Mathias Hardt

	
 

	
 

	
 

	
Trafalgar Capital Specialized

	
 

	
By:

	
 

	
Trafalgar Capital Sarl

	
 

	
BP 3023

	
 

	
$

	
10,000,000

	
Investment Fund, Luxembourg

	
 

	
Its:

	
 

	
General Partner

	
 

	
L-1030 Luxembourg 

  Facsimile: 011-44-207-405-0161

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	

	
 

	
and
001-786-323-1651

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Name:

	
 

	
Andrew Garai

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Its:

	
 

	
Chairman of the Board

	
 

	
 

	
 

	
 

	
 

Buyer’s Counsel:

James G. Dodrill II, P.A.

5800 Hamilton Way 

Boca Raton, FL 33496 

Telephone: (561) 862-0529 

Facsimile: (561) 892-7787

EXHIBIT
A

[RESERVED]

21

EXHIBIT
B 

FORM
OF ESCROW AGREEMENT 

EXHIBIT
C 

FORM
OF SECURITY AGREEMENT 

SCHEDULE
I 

SCHEDULE
OF BUYERS

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Name

	
 

	
Signature

	
 

	
Address/Facsimile
  

  Number of Buyer

	
 

	
Amount
  of Subscription

	

	
 

	

	
 

	

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
8-10 Rue Mathias Hardt

	
 

	
 

	
 

	
Trafalgar Capital Specialized

	
 

	
By:

	
 

	
Trafalgar Capital Sarl

	
 

	
BP 3023

	
 

	
$

	
10,000,000

	
Investment Fund, Luxembourg

	
 

	
Its:

	
 

	
General Partner

	
 

	
L-1030 Luxembourg 

  Facsimile: 011-44-207-405-0161

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	
and
001-786-323-1651

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Name:

	
 

	
Andrew Garai

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Its:

	
 

	
Chairman of the Board

	
 

	
 

	
 

	
 

	
 

Buyer’s Counsel:

James G. Dodrill II, P.A.

5800 Hamilton Way 

Boca Raton, FL 33496 

Telephone: (561) 862-0529 

Facsimile: (561) 892-7787

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