Document:

Unassociated Document

    INTERCREDITOR
      AGREEMENT

     

    This
      INTERCREDITOR
      AGREEMENT (this
      “Agreement”),
      dated
      as of August 25, 2006, is by and among ADVANTAGE
      FUND I, LLC,
      a
      Florida limited liability company (“Advantage
      Fund”),
      and
ADVANTAGE
      CAPTIAL DEVELOPMENT CORP.,
      a
      Nevada corporation (“Advantage
      Capital”)
      (Advantage Fund and Advantage Capital shall individually be referred to as
      a
“Creditor”
and
      collectively be referred to as the “Creditors”),
      CORNELL
      CAPITAL PARTNERS, LP,
      LP
      (“Cornell”
or
      the
“Lender”),
      a
      Delaware limited partnership,
      and
GLOBAL
      IT HOLDINGS, INC.,
      a
      Nevada corporation (“Borrower”).
      All
      terms
      used herein which are defined in Section 1 hereof or in the text of any other
      Section hereof shall have the meanings given therein. 

     

    WITNESSETH:

     

     WHEREAS,
      the
      Borrower has granted liens in substantially all of its assets in favor of
      Advantage Fund pursuant to the financing documents entered into by and between
      the Borrower and Advantage Fund dated August 26, 2004 (the “Advantage
      Fund Documents”)
      secured under the UCC-1 filed on or about February 28, 2006 (#2006006544-2),
      to
      secure certain obligations of the Borrower to Advantage Fund;

     

     WHEREAS,
      the
      Borrower has granted liens in substantially all of its assets in favor of
      Advantage Capital pursuant to the financing documents entered into by and
      between the Borrower and Advantage Fund dated August 26, 2004 (the “Advantage
      Capital Documents”)
      secured under the UCC-1 filed on or about February 28, 2006 (#2006006544-2),
      to
      secure certain obligations of the Borrower to Advantage Capital;

     

    WHEREAS,
      Cornell
      is purchasing Nine Hundred Fifty Thousand Dollars ($950,000) of secured
      convertible debentures of the Company (the “Cornell
      Convertible Debentures”)
      pursuant to that certain Securities Purchase Agreement (the “Securities
      Purchase Agreement”)
      of
      even date herewith by and between the Borrower and Cornell; 

     

    WHEREAS,
      the
      Borrower shall file a form UCC -1 with regard to the “Pledged Property” as
      defined in the Security Agreement (the Pledged Property shall be referred to
      herein as the “Collateral”)
      by and
      between the Borrower and Cornell dated the date hereof (the “Cornell
      Security Agreement”)
      and
      provided proof of such filing to Cornell; and 

     

     WHEREAS,
      each
      Creditor agrees that, upon the First Closing (as such term is defined in the
      Securities Purchase Agreement) of the Cornell Convertible Debentures, Cornell
      shall be a secured party pursuant to the UCC-1 filed on behalf of Cornell and
      shall be superior to the Creditors herein as if Cornell’s UCC-1 was filed before
      any and all of Creditors’ liens and the Advantage Fund Documents and the
      Advantage Capital Documents, and for the application of proceeds of the
      Collateral after certain events and certain payments with respect to the
      Indebtedness and to agree upon various other matters with respect to their
      respective agreements with the Borrower and their rights there under.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    1.  Definitions.

     

    Unless
      otherwise defined herein, for the purposes of this Agreement, the following
      terms shall have the meanings specified with respect thereto below. Any plural
      term that is used herein in the singular shall be taken to mean each entity
      or
      item of the defined class and any singular term that is used herein in the
      plural shall be taken to mean all of the entities or items of the defined class,
      collectively.

     

    “Enforcement”
shall
      mean (a) for the Lender to make written demand for payment of or accelerate
      the
      time for payment of any of the Indebtedness (as that term is defined below)in
      favor of such Lender, (b) for the Lender to commence enforcement of any rights
      or remedies under or with respect to the Cornell Convertible Debentures, (c)
      for
      the Lender to commence the judicial or non judicial enforcement of any rights
      or
      remedies under the Cornell Convertible Debentures, this Agreement and the
      Cornell Security Agreement (the “Collateral
      Documents”)
      (other
      than an action solely for the purpose of establishing, continuing or defending
      the lien or security interest intended to be created by the Collateral Documents
      upon or in any Collateral as against or from claims of third parties on or
      in
      such Collateral) or to otherwise take any action to realize upon the Collateral,
      or (d) the commencement by, against or with respect to Borrower of any
      proceeding under any bankruptcy, reorganization, compromise, arrangement,
      insolvency, readjustment of debt, dissolution or liquidation or similar law
      or
      for the appointment of a receiver (“Insolvency
      Proceedings”).

     

    “Enforcement
      Proceeds”
shall
      have the meaning given in Section 4(a) hereof.

     

    “Event
      of Default”
      shall
      mean the occurrence of an “Event of Default”, as defined in the Cornell
      Convertible Debentures, which is not waived by the Lender.

     

    “Indebtedness”
      shall
      mean the principal amount of and interest due to the Lender, and all of the
      other present or future indebtedness, liabilities and obligations of Borrower
      now or hereafter owed to the Lender under the Cornell Convertible Debentures,
      the Collateral Documents or any agreements or instruments delivered under or
      in
      connection therewith, and all renewals and extensions thereof.

     

    “Enforcement
      Date”
with
      respect to an Enforcement shall mean the earliest date on or prior to the date
      of such Enforcement and (a) on which an Enforcement Event occurs and (b) on
      each
      date after which, until the date of such Enforcement, one or more Enforcement
      Events were in effect.

     

    “Enforcement
      Event”
shall
      mean (a) an Enforcement or (b) the occurrence of any Event of Default (unless
      such Event of Default has been waived pursuant to the terms of the Advantage
      Convertible with the consent of the Lender)

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    2. Lien
      Priorities.
      The
      parties hereto expressly agree that the security interests and liens granted
      to
      the Lender shall secure the Indebtedness of the Lender and that, notwithstanding
      the relative priority or the time of grant, creation, attachment or perfection
      under applicable law of any security interests and liens of Creditor upon or
      in
      any of the Collateral to secure any Indebtedness, whether these security
      interests and liens are now existing or hereafter acquired or arising and
      whether the security interests and liens are in or upon now existing or
      hereafter arising Collateral, the security interests and liens of the Lender
      on
      the Collateral shall be first and prior security interests and liens in favor
      of
      the Lender (with the except of the security interests created in favor of
Highgate
      House, LLC)
      to
      secure the Indebtedness. The Lender agrees that it will not subordinate its
      first security interest and lien to any party without Creditor’s prior written
      consent.

     

    3. Certain
      Notices.
      The
      Lender agrees to give to Creditor (a) copies of any notice of the occurrence
      or
      existence of an Event of Default sent to Borrower, upon the sending of such
      notice to Borrower, (b) notice of the occurrence or existence of an Event of
      Default of which such party has knowledge, promptly after obtaining knowledge
      thereof, (c) notice of refusal of a Lender to make a revolving loan promptly
      after such refusal, and (d) notice of an Enforcement by such party, prior to
      commencing such Enforcement, but the failure to give any of the foregoing
      notices shall not affect the validity of such notice of an Event of Default
      given to the Borrower or create a cause of action against or cause a forfeiture
      of any rights of the party failing to give such notice or create any claim
      or
      right on behalf of any other Lender or third party, except to the extent such
      failure damages or prejudices the rights and remedies of Creditor.

     

    4. Distribution
      of Proceeds of Collateral After Enforcement; Sharing of Certain
      Payments.

     

    (a) Distribution
      of Enforcement Proceeds.
      On and
      after the occurrence of an Event of Default, all proceeds of Collateral received
      by the Lender (including, without limitation, any amount of any balances held
      by
      any Lender for the account of any other Lender or any other property held or
      owing by it to or for the credit or for the account of any Lender setoff or
      appropriated by it) (“Enforcement
      Proceeds”)
      shall
      be delivered to the Lender. 

     

    (b) Distribution
      of Payments.
      On and
      after the occurrence of an Event of Default, and any other payments received,
      directly or indirectly, by the Lender on or with respect to any Indebtedness
      (including, without limitation, any payment under any guaranty agreement, any
      payment in any Insolvency Proceeding and the proceeds from any sale of any
      Indebtedness or any interest therein to Borrower) shall not be shared by the
      Lender and Creditor. 

     

    (c) 
      Any
      payments received, directly or indirectly, by the Lender in excess of the
      Indebtedness shall be deemed delivered in trust for the benefit of Creditor,
      and
      the Lender shall promptly pay over to Creditor such amounts.

     

    5. Other
      Rights.

     

    (a) The
      Lender and Creditor agree that the Lender may exercise any rights or remedies
      under the Cornell Convertible Debentures or the Collateral Documents which
      have
      or may have arisen or which may arise as a result of an Event of Default or
      an
      acceleration of the maturities of the Indebtedness and that the Lender will
      give
      the Creditor prompt written notice of the exercise of any such rights or
      remedies.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

     (b) Nothing
      contained in this Agreement shall (i) prevent the Lender from imposing a default
      rate of interest in accordance with the Cornell Convertible Debentures, as
      applicable, or prevent the Lender from raising any defenses in any action in
      which it has been made a party defendant or has been joined as a third party,
      or
      (ii) affect or impair the right the Lender may have under the terms and
      conditions governing the Indebtedness to accelerate and demand repayment of
      such
      Indebtedness. Subject only to the express limitations set forth in this
      Agreement, the Lender retains the right to freely exercise its rights and
      remedies as a general creditor of Borrower in accordance with applicable law
      and
      agreements with Borrower, including without limitation the right to file a
      lawsuit and obtain a judgment therein against Borrower and to enforce such
      judgment against the Collateral. Nothing contained in this Agreement shall
      be
      construed as an amendment of, or a waiver of or a consent to the departure
      by
      Borrower from, any provision of the Cornell Convertible Debentures.

     

    (c) Subject
      to the provisions set forth in this Agreement, the Lender may own, sell, acquire
      and hold equity and debt securities of the Borrower and lend money to and
      generally engage in any kind of business with the Borrower, and, subject to
      the
      provisions of this Agreement, the Lender may prior to an Event of Default accept
      interest, principal payments, fees and other consideration from the Borrower
      in
      accordance with the terms of the Cornell Convertible Debentures.

     

    6. Accounting;
      Adjustments.

     

    (a) The
      Lender agrees to render an accounting to Creditor of the amounts of the
      outstanding Indebtedness, receipts of payments from the Borrower and of other
      items relevant to the provisions of this Agreement upon the reasonable request
      from Creditor as soon as reasonably practicable after any request, giving effect
      to the application of payments and collections as hereinbefore provided in
      this
      Agreement.

     

    (b) Each
      party hereto agrees that (i) to the extent any portion of any payment
      distributed to it hereunder is in excess of the amount due to be distributed
      to
      it hereunder, it shall pay to the other parties hereto such amounts so that,
      after giving effect to such payments, the amounts received by all parties are
      equal to the amounts to be paid to them hereunder, and (ii) in the event any
      payment of any payment made to any party hereto is subsequently invalidated,
      declared fraudulent or preferential, set aside or required to be paid to a
      trustee, receiver, or any other party under any bankruptcy act, state or federal
      law, common law or equitable cause, then each of the other parties hereto shall
      pay such party such amounts so that, after giving effect to the payments
      hereunder by all other parties, the amounts received by all parties are not
      in
      excess of the amounts to be paid to them hereunder as though such payment so
      invalidated, declared to be fraudulent or preferential, set aside or required
      to
      be repaid had not been made.

     

    7. Notices.
      Except
      as otherwise expressly provided herein, any notice required or desired to be
      served, given or delivered hereunder shall be in writing, and shall be deemed
      to
      have been validly served, given or delivered three (3) business days after
      deposit in the United States mails, with proper postage prepaid, one business
      day after delivery to a courier for next day delivery, upon delivery by courier
      or upon transmission by telecopy or similar electronic medium (provided that
      a
      copy of any such notice sent by such transmission is also sent by one of the
      other means provided hereunder within one day after the date sent by such
      transmission) to the addresses set forth below the signatures hereto, with
      a
      copy to any person or persons set forth below such signature shown as to receive
      a copy, or to such other address as any party designates to the others in the
      manner herein prescribed. Any party giving notice to any other party hereunder
      shall also give copies of such notice to all other parties.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    8. Contesting
      Liens or Security Interests; Contesting Indebtedness.

     

    Creditors
      shall not contest the validity, perfection, priority, or enforceability of
      or
      seek to avoid, have declared fraudulent or have put aside any lien or security
      interest granted to the Lender as contemplated hereby, and each party hereby
      agrees to cooperate in the defense of any action contesting the validity,
      perfection, priority or enforceability of such liens or security interests.
      

     

    9. No
      Additional Rights for Borrower Hereunder.
      Borrower, by its consent hereto, acknowledges that it shall have no rights
      under
      this Agreement. If the Lender shall violate the terms of this Agreement,
      Borrower agrees, by its consent hereto, that it shall not use such violation
      as
      a defense to any enforcement by any such party against Borrower nor assert
      such
      violation as a counterclaim or basis for setoff or recoupment against any
      party.

     

    10. Insolvency
      Proceedings.
      Nothing
      contained herein shall limit or restrict the independent right of either party
      to initiate an action or actions in any Insolvency Proceeding in its individual
      capacity and to appear or be heard on any matter before the bankruptcy or other
      applicable court in any such proceeding, including, without limitation, with
      respect to any question concerning the post-petition usage of collateral and
      post-petition financing arrangements. This Agreement shall survive the
      commencement of any Insolvency Proceeding.

     

    11. {Intentionally
      omitted}

     

    12. {Intentionally
      omitted}

     

    13. Amendment.
      This
      Agreement and the provisions hereof may be amended, modified or waived only
      by a
      writing signed by the Lender and Creditor.

     

    14. Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the respective
      successors and assigns of each of the parties hereof, including subsequent
      holders of the Indebtedness and persons subsequently becoming parties to the
      Cornell Convertible Debentures as a “Lender” thereunder, provided that no Lender
      shall assign or transfer any interest in any Indebtedness or permit such person
      to become such a party to a Cornell Convertible Debentures unless such transfer
      or assignment is made subject to this Agreement and such transferee, assignee
      or
      person becomes a signatory to this Agreement and assumes the obligations of
      the
      transferor or assignor hereunder from and after the time of such transfer or
      assignment or the time such person becomes a party to a Cornell Convertible
      Debentures. Upon an assignment by any Lender of all or any portion of the
      Cornell Convertible Debentures and the assumption by the transferee of such
      Lender’s obligations hereunder in respect of such Cornell Convertible
      Debentures, or portion thereof, so assigned, such Lender shall be automatically
      released from all obligations thereafter accruing hereunder in respect of such
      Cornell Convertible Debentures or portion thereof, so assigned, except to the
      extent such Lender has received proceeds in excess of the amount to which it
      is
      entitled to receive with respect to the Indebtedness which it would be required
      to pay over to Creditor hereunder.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    15. Termination.
      In the
      event (i) a Cornell Convertible Debentures is terminated, all Indebtedness
      of
      the Borrower is paid in full, and (ii) the Lender shall have no outstanding
      obligations hereunder with respect to payments previously received and
      distributed hereunder, this Agreement shall terminate ninety one (91) business
      days after the last to occur of any event referred to in the preceding clauses
      (i) and (ii) so long as no proceeding under any bankruptcy, reorganization,
      compromise, arrangement, insolvency, readjustment of debt, dissolution or
      liquidation or similar law or for the appointment of a receiver for Borrower
      or
      its assets is commenced prior to such 91st
      day.

     

    16. Amendment,
      Supplement or Waiver of Agreements with Borrower, etc.
      Nothing
      contained in this Agreement shall limit or restrict the rights of the Lender
      and
      the Borrower to amend, supplement, restate or waive any provision of the Cornell
      Convertible Debentures to which they are a party, any note, Cornell Convertible
      Debentures or any guaranty agreement or other agreement or instrument related
      thereto or executed and delivered in connection therewith (including, without
      limitation, to increase the amount of Indebtedness or waive an Event of
      Default), provided no such amendment increases the amount of the Cornell
      Convertible Debentures or otherwise prejudices the rights of
      Creditor.

     

    17. Cooperation.
      The
      Lender and Creditor hereby agree to fully cooperate with each other in order
      to
      promptly discharge the terms and provisions of this Agreement. The Lender and
      Creditor also hereby agree, from time to time, to execute and deliver any and
      all other agreements, documents or instruments and to take such actions, all
      as
      may be reasonably necessary to effectuate the terms, provisions and intent
      of
      this Agreement.

     

    18. Representations
      and Warranties.
      Each of
      the Lender and (to the extent applicable) Creditor represents and warrants
      that
      it is duly organized, validly existing and in good standing under the laws
      of
      this respective jurisdiction of incorporation or organization, that it has
      all
      necessary corporate power and authority to execute and deliver this Agreement
      and to perform its respective obligations hereunder, that this Agreement has
      been duly authorized, executed and delivered by it or on its behalf, and that
      this Agreement is enforceable against it in accordance with its terms, except
      as
      such enforceability may be limited by applicable bankruptcy, reorganization,
      arrangement, insolvency, fraudulent conveyance, moratorium or similar laws
      affecting the enforcement of the rights of creditors generally as at the time
      in
      effect, by common law or statutory requirements with respect to commercial
      reasonableness, and by general principles of equity.

     

    19. No
      Third Party Beneficiaries.
      This
      Agreement is intended solely to govern the relationship among the Lender and
      Creditor, and intended for the sole benefit of the Lender and Creditor and
      their
      transferees, successors and assigns. This Agreement shall not benefit or create
      any right or cause of action in, or on behalf of, Borrower or other person,
      other than the Lender, Creditor and their transferees, successors and
      assigns.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    20. Counterparts.
      This
      Agreement may be executed in several counterparts and by each party on a
      separate counterpart, each of which, when so executed and delivered, shall
      be an
      original, but all of which together shall constitute but one and the same
      instrument. In proving this Agreement, it shall not be necessary to produce
      or
      account for more than one such counterpart signed by the party against whom
      enforcement is sought.

     

    21. Governing
      Law.
      THIS AGREEMENT SHALL BE GOVERNED AS TO VALIDITY, INTERPRETATIONS, ENFORCEMENT
      EVENT AND EFFECT BY THE LAWS OF THE STATE OF NEW JERSEY (EXCLUDING ANY CONFLICTS
      OF LAW RULES WHICH WOULD OTHERWISE CAUSE THIS AGREEMENT TO BE GOVERNED BY THE
      LAWS OF ANY OTHER JURISDICTION). THE PARTIES HERETO AGREE THAT ANY DISPUTES,
      CLAIMS, DISAGREEMENTS, LAWSUITS, ACTIONS OR CONTROVERSIES OF ANY TYPE OR NATURE
      WHATSOEVER THAT, DIRECTLY OR INDIRECTLY, ARISE FROM OR RELATE TO THIS AGREEMENT,
      INCLUDING WITHOUT LIMITATION, CLAIMS RELATING TO THE INDUCEMENT, CONSTRUCTION,
      PERFORMANCE OR TERMINATION OF THIS AGREEMENT, SHALL BE BROUGHT IN THE STATE
      SUPERIOR COURT LOCATED IN HUDSON COUNTY, NEW JERSEY OR THE FEDERAL DISTRICT
      COURT LOCATED IN NEWARK, NEW JERSEY, AND THE PARTIES HERETO AGREE NOT TO
      CHALLENGE THE SELECTION OF THAT VENUE IN ANY SUCH PROCEEDING FOR ANY REASON,
      INCLUDING, WITHOUT LIMITATION, ON THE GROUNDS THAT SUCH VENUE IS AN INCONVENIENT
      FORUM. THE PARTIES HERETO SPECIFICALLY AGREE THAT SERVICE OF PROCESS MAY BE
      MADE, AND SUCH SERVICE OF PROCESS SHALL BE EFFECTIVE IF MADE, PURSUANT TO
      SECTION 7 HEREIN. 

     

    

     

    [SIGNATURE
      PAGE TO IMMEDIATELY FOLLOW]

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the parties have executed this Agreement as of the day and
      year
      first written above.

     

    Cornell
      Capital Partners, LP

    

    By:
       Yorkville
      Advisors, LLC

    Its: General
      Partner

    

    

    By:     

    Name: Mark
      Angelo

    Title: Portfolio
      Manager

    

    Creditors

    

    Advantage
      Fund I, LLC

    

    

    By:     

    Name: Alyce
      Schreiber

    Title: Managing
      Member

     

    

    Advantage
      Capital Development Corp.

    

    

    By:     

    Name: Jeffrey
      Sternberg

    Title: President

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    ACKNOWLEDGMENT
      OF AND CONSENT AND AGREEMENT

    TO
      INTERCREDITOR AGREEMENT

     

    The
      undersigned, the Borrower described in the Intercreditor Agreement set forth
      above, acknowledges and, to the extent required, consents to the terms and
      conditions thereof. The undersigned Borrower does hereby further acknowledge
      and
      agree to its agreements under the Intercreditor Agreement and acknowledges
      and
      agrees that it is not a third-party beneficiary of, and has no rights under,
      the
      Intercreditor Agreement. The undersigned hereby further agrees that any proceeds
      or any payment made to any Lender which is required to be delivered to the
      Lender in accordance with the provisions of the Intercreditor Agreement shall
      be
      deemed to have been delivered by the Borrower to pay the Indebtedness in the
      amounts in which any such proceeds or payments are allocated under Section
      4
      notwithstanding the amount initially paid to or received by any particular
      Lender.

     

    This
      Acknowledgment of and Agreement to Intercreditor Agreement and any amendment
      hereof may be executed in several counterparts and by each party on a separate
      counterpart, each of which, when so executed and delivered, shall be an
      original, but all of which together shall constitute but one of the same
      instrument. In proving this Acknowledgment of and Agreement to Intercreditor
      Agreement it shall not be necessary to produce or account for more than one
      such
      counterpart signed by the party against whom enforcement is sought.

     

    IN
      WITNESS WHEREOF, the undersigned has caused this Acknowledgment of and Consent
      and Agreement to Intercreditor Agreement to be executed by its duly authorized
      officers as of August __, 2006.

     

    
      	 	 	 
	 	GLOBAL
              IT
              HOLDINGS, INC.
	 
 	 
 	 
 
	
            	By:  	/s/ 
	 	
              
Name:
              Craig Press
	 	Title:
              Vice PresidentUnassociated Document

    

     

    CONVERTIBLE
      DEBENTURE PURCHASE AGREEMENT

     

    Between

     

    GLOBAL
      IT HOLDINGS, INC.

    and

     

    THE
      PURCHASER LISTED ON

    SCHEDULE
      1 HERETO

     

    
      
        

      

    

    June
      30, 2005

    
      
        

      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    TABLE
      OF CONTENTS

     

    

      
        	
                ARTICLE
                  I

              	
                CERTAIN
                  DEFINITIONS

              	
                1

              
	
                1.1

              	
                Certain
                  Definitions

              	
                1

              
	 	 	 
	
                ARTICLE
                  II

              	
                PURCHASE
                  AND SALE OF CONVERTIBLE DEBENTURE

              	
                5

              
	
                2.1

              	
                Purchase
                  and Sale; Purchase Price; Issuance of Warrant

              	
                5

              
	
                2.2

              	
                Execution
                  and Delivery of Documents; the Closing

              	
                6

              
	
                2.3

              	
                The
                  Post-Closing

              	
                7

              
	 	 	 
	
                ARTICLE
                  III

              	
                REPRESENTATIONS
                  AND WARRANTIES

              	
                8

              
	
                3.1

              	
                Representations,
                  Warranties and Agreements of the Company

              	
                8

              
	
                3.2

              	
                Representations
                  and Warranties of the Purchaser

              	
                11

              
	 	 	 
	
                ARTICLE
                  IV

              	
                OTHER
                  AGREEMENTS OF THE PARTIES

              	
                13

              
	
                4.1

              	
                Manner
                  of Offering

              	
                13

              
	
                4.2

              	
                Furnishing
                  of Information

              	
                13

              
	
                4.3

              	
                Notice
                  of Certain Events

              	
                13

              
	
                4.4

              	
                Copies
                  and Use of Disclosure Documents and Non-Public Filings

              	
                14

              
	
                4.5

              	
                Modification
                  to Disclosure Documents

              	
                14

              
	
                4.6

              	
                Blue
                  Sky Laws

              	
                14

              
	
                4.7

              	
                Integration

              	
                14

              
	
                4.8

              	
                Furnishing
                  of Rule 144(c) Materials

              	
                14

              
	
                4.9

              	
                Solicitation
                  Materials

              	
                15

              
	
                4.10

              	
                Subsequent
                  Financial Statements

              	
                15

              
	
                4.11

              	
                Prohibition
                  on Certain Actions

              	
                15

              
	
                4.12

              	
                Listing
                  of Common Stock

              	
                15

              
	
                4.13

              	
                Escrow

              	
                15

              
	
                4.14

              	
                Conversion
                  and Exercise Procedures; Maintenance of Escrow Shares

              	
                15

              
	
                4.15

              	
                Attorney-in-Fact

              	
                16

              
	
                4.16

              	
                Reservation
                  of Common Stock

              	
                16

              
	
                4.17

              	
                Indemnification

              	
                16

              
	
                4.18

              	
                Exclusivity

              	
                18

              
	
                4.19

              	
                Purchaser’s
                  Ownership of Common Stock

              	
                19

              
	
                4.20

              	
                Purchaser’s
                  Rights if Trading in Common Stock is Suspended

              	
                19

              
	
                4.21

              	
                No
                  Violation of Applicable Law

              	
                20

              
	
                4.22

              	
                Redemption
                  Restrictions

              	
                20

              
	
                4.23

              	
                No
                  Other Registration Rights

              	
                21

              
	
                4.24

              	
                Merger
                  or Consolidation

              	
                21

              
	
                4.25

              	
                Registration
                  of Escrow Shares and Warrant Shares

              	
                21

              
	
                4.26

              	
                Liquidated
                  Damages

              	
                23

              
	
                4.27

              	
                Short
                  Sales

              	
                23

              
	
                4.28

              	
                Fees

              	
                24

              
	
                4.29

              	
                Changes
                  to Federal and State Securities Laws

              	
                24

              
	
                4.30

              	
                Future
                  Financing

              	
                24

              
	
                4.31

              	
                Company’s
                  Right of Redemption

              	
                24

              
	 	 	 

      

       

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        	
                ARTICLE
                  V

              	
                TERMINATION

              	
                25

              
	
                5.1

              	
                Termination
                  by the Company or the Purchaser

              	
                25

              
	
                5.2.

              	
                Remedies

              	
                26

              
	 	 	 
	
                ARTICLE
                  VI

              	
                LEGAL
                  FEES AND DEFAULT INTEREST RATE

              	
                26

              
	 	 	 
	
                ARTICLE
                  VII

              	
                MISCELLANEOUS

              	
                26

              
	
                7.1

              	
                Fees
                  and Expenses

              	
                26

              
	
                7.2

              	
                Entire
                  Agreement; Amendments

              	
                27

              
	
                7.3

              	
                Notices

              	
                27

              
	
                7.4

              	
                Amendments;
                  Waivers

              	
                28

              
	
                7.5

              	
                Headings

              	
                28

              
	
                7.6

              	
                Successors
                  and Assigns

              	
                28

              
	
                7.7

              	
                No
                  Third Party Beneficiaries

              	
                28

              
	
                7.8

              	
                Governing
                  Law; Venue; Service of Process

              	
                28

              
	
                7.9

              	
                Survival

              	
                29

              
	
                7.10

              	
                Counterpart
                  Signatures

              	
                29

              
	
                7.11

              	
                Publicity

              	
                29

              
	
                7.12

              	
                Severability

              	
                29

              

      

    

     

    LIST
      OF
      SCHEDULES:

    

      
        	
                Schedule
                  1

              	
                Purchaser

              
	
                Schedule
                  3.1(a)

              	
                Subsidiaries

              
	
                Schedule
                  3.1(c)

              	
                Capitalization
                  and Registration Rights

              
	
                Schedule
                  3.1(d)

              	
                Equity
                  and Equity Equivalent Securities

              
	
                Schedule
                  3.1(e)

              	
                Conflicts

              
	
                Schedule
                  3.1(f)

              	
                Consents
                  and Approvals

              
	
                Schedule
                  3.1(g)

              	
                Litigation

              
	
                Schedule
                  3.1(h)

              	
                Defaults
                  and Violations

              

      

      
         

        LIST
          OF
          EXHIBITS:

      

       

      
        	
                Exhibit
                  A

              	
                Debenture
                  A

              
	
                Exhibit
                  B

              	
                Warrant

              
	
                Exhibit C

              	
                Registration
                  Rights Agreement

              
	
                Exhibit
                  D

              	
                Security
                  Agreement

              
	
                Exhibit
                  E

              	
                Conversion
                  and Exercise Procedures

              
	
                Exhibit
                  F

              	
                Irrevocable
                  Transfer Agent Instructions to Transfer Agent

              
	
                Exhibit G

              	
                Escrow
                  Agreement

              
	
                Exhibit
                  H

              	
                Power
                  of Attorney

              
	
                Exhibit I

              	
                Legal
                  Opinion

              
	
                Exhibit J

              	
                Legal
                  Opinion

              
	
                Exhibit
                  K

              	
                Officer’s
                  Certificate

              
	
                Exhibit
                  L

              	
                Company
                  Certificate

              
	
                Exhibit
                  M

              	
                Company
                  Certificate

              

      

    

    

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

    

    THIS
      CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (“Agreement”)
      is
      made and entered into as of June 30, 2005, between Global IT Holdings, Inc.,
      a
      corporation organized and existing under the laws of the State of Nevada (the
      “Company”),
      and
      the purchaser listed on Schedule 1
      hereto
      (the “Purchaser”).

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement, the Company
      desires to issue and sell to the Purchaser and the Purchaser desires to acquire
      from the Company the Company’s $950,000, 5% Secured Convertible Debenture, due
      June 30, 2007 in the aggregate amount of Nine Hundred Fifty Thousand Dollars
      ($950,000), at the aggregate price of Nine Hundred Fifty Thousand Dollars
      ($950,000) in the form of Exhibit
      A
      (“Debenture
      A”),
      annexed hereto and made a part hereof.

     

    IN
      CONSIDERATION of the mutual covenants contained in this Agreement, the Company
      and the Purchaser agree as follows:

     

     

    ARTICLE
      I

     

    CERTAIN
      DEFINITIONS

     

    1.1  Certain
      Definitions.
      As used
      in this Agreement, and unless the context requires a different meaning, the
      following terms have the meanings indicated:

     

    “Advisory
      Fee”
shall
      have the meaning set forth in Section
      4.28
      hereof.

    

    “Affiliate”
means,
      with respect to any Person, any Person that, directly or indirectly, controls,
      is controlled by or is under common control with such Person. For the purposes
      of this definition, “control”
      (including, with correlative meanings, the terms “controlled
      by”
and
      “under
      common control with”)
      shall
      mean the possession, directly or indirectly, of the power to direct or cause
      the
      direction of the management and policies of such Person, whether through the
      ownership of voting securities or by contract or otherwise.

    

    “Agreement”
shall
      have the meaning set forth in the introductory paragraph of this
      Agreement.

    

    “Attorney-in-Fact”
shall
      have the meaning set forth in Section
      2.2(a)(iv)
      hereof.

     

    “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a legal holiday
      or a
      day on which banking institutions in the State of New York are authorized or
      required by law or other government actions to close.

    

    “Closing”
shall
      have the meaning set forth in Section
      2.2(a).

    

    “Closing
      Date”
shall
      have the meaning set forth in Section
      2.2(a).

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
 

    “Common
      Stock”
means
      shares now or hereafter authorized of the class of common stock, par value
      $.001, of the Company and stock of any other class into which such shares may
      hereafter have been reclassified or changed.

    

    “Company”
shall
      have the meaning set forth in the introductory paragraph.

    

    “Control
      Person”
shall
      have the meaning set forth in Section
      4.17(a)(i)
      hereof.

    

    “Conversion
      Date”
shall
      have the meaning set forth in Debenture A.

    

    “Debenture
      A”
shall
      have the meaning set forth in the recital.

    

    “Default”
means
      any event or condition which constitutes an Event of Default or which with
      the
      giving of notice or lapse of time or both would, unless cured or waived, become
      an Event of Default.

    

    “Disclosure
      Documents”
means
      (a) all documents and written materials provided to the Purchaser and/or its
      representatives in connection with the Company and this offering, including,
      but
      not limited to, the Company’s unaudited balance sheet as at March 31, 2005 and
      profit and loss statement for the period from inception to March 31, 2005 and
      (b) the Schedules required to be furnished to the Purchaser by or on behalf
      of
      the Company pursuant to Section
      3.1
      hereof.

    

    “Escrow
      Agent”
means
      Gottbetter & Partners, LLP, 488 Madison Avenue, 12th
      Floor,
      New York, NY 10022; Tel: 212-400-6900; Fax: 212-400-6901.

    

    “Escrow
      Agreement”
shall
      have the meaning set forth in Section 4.13
      hereof.

    

    “Escrow
      Shares”
means
      the certificates representing Four Billion Seven Hundred Fifty Million
      (4,750,000,000) shares of duly issued Common Stock, without restriction and
      freely tradable pursuant to Rule 504 of Regulation D of the Securities Act,
      in
      the share denominations specified by the Purchaser, registered in the name
      of
      the Purchaser and/or its assigns to be held in escrow pursuant to this Agreement
      and the Escrow Agreement; 475,000 of which shares shall be held in escrow for
      the Warrant and the remainder for Debenture A.

    

    “Event
      of Default”
shall
      have the meaning set forth in Section 5.1.

    

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

    

    “Execution
      Date”
means
      the date of this Agreement first written above.

    

    “G&P”
means
      Gottbetter & Partners, LLP.

    

    “Indemnified
      Party”
shall
      have the meaning set forth in Section
      4.17(b)
      hereof.

    

    “Indemnifying
      Party”
shall
      have the meaning set forth in Section
      4.17(b)
      hereof.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
 

    “Instruction
      Letter”
shall
      mean the Irrevocable Letter of Instruction to Transfer Agent annexed hereto
      as
Exhibit
      F.

    

    “Limitation
      on Conversion”
shall
      have the meaning set forth in Section
      4.19
      hereof.

    

    “Limitation
      Notice”
shall
      have the meaning set forth in Section
      4.19
      hereof.

    

    “Losses”
shall
      have the meaning set forth in Section
      4.17(a)
      hereof.

    

    “Lump
      Sum Payment”
shall
      have the meaning set forth in Section
      4.30
      hereof.

    

    “Material”
shall
      mean having a financial consequence in excess of $10,000.

    

    “Material
      Adverse Effect”
shall
      have the meaning set forth in Section
      3.1(a).

    

    “NASD”
means
      the National Association of Securities Dealers, Inc.

    

    “Nasdaq”
shall
      mean the Nasdaq Stock Market, Inc.®

    

    “Non-Public
      Filings”
shall
      have the meaning set forth in Section
      4.2
      hereof.

    

    “Notice
      of Conversion”
shall
      have the meaning set forth in paragraph 1 of Exhibit
      E
      annexed
      hereto.

    

    “Notice
      of Exercise”
shall
      have the meaning set forth in paragraph 1 of Exhibit
      E
      annexed
      hereto.

    

    “Original
      Issuance Date,”
shall
      have the meaning set forth in the Debenture A.

    

    “OTCBB”
shall
      mean the NASD over-the counter Bulletin Board®
      or
      similar organization or agency succeeding to its functions.

    

    “Per
      Share Market Value”
of
      the
      Common Stock means on any particular date (a) the last sale price of shares
      of Common Stock on such date or, if no such sale takes place on such date,
      the
      last sale price on the most recent prior date, in each case as officially
      reported on the principal national securities exchange on which the Common
      Stock
      is then listed or admitted to trading, or (b) if the Common Stock is not
      then listed or admitted to trading on any national securities exchange, the
      closing bid price per share as reported by Nasdaq, or (c) if the Common
      Stock is not then listed or admitted to trading on the Nasdaq, the closing
      bid
      price per share of the Common Stock on such date as reported on the OTCBB or
      if
      there is no such price on such date, then the last bid price on the date nearest
      preceding such date, or (d) if the Common Stock is not quoted on the OTCBB,
      the closing bid price for a share of Common Stock on such date in the
      over-the-counter market as reported by the Pinksheets LLC (or similar
      organization or agency succeeding to its functions of reporting prices) or
      if
      there is no such price on such date, then the last bid price on the date nearest
      preceding such date, or (e) if the Common Stock is not publicly traded, the
      fair market value of a share of the Common Stock as determined by an Appraiser
      (as defined in and pursuant to the procedures set forth in Section 4(c)(iv)
      of
      the Debenture A) selected in good faith by the holders of a majority of the
      Debenture A; provided,
      however,
      that
      the Company, after receipt of the determination by such Appraiser, shall have
      the right to select an additional Appraiser, in which case, the fair market
      value shall be equal to the average of the determinations by each such
      Appraiser.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    
 

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

    

    “Post-Closing”
shall
      have the meaning set forth in Section
      2.3(a).

    

    “Post-Closing
      Date”
shall
      have the meaning set forth in Section
      2.3(a).

    

    “Power
      of Attorney”
means
      the power of attorney in the form of Exhibit
      H
      annexed
      hereto.

    

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

    

    “Purchase
      Price”
shall
      have the meaning set forth in Section
      2.1(a).

    

    “Purchaser”
shall
      have the meaning set forth in the introductory paragraph.

     

    “Registrable
      Securities”
means
      the Underlying Shares, the Warrant Shares and the Escrow Shares entitled to
      registration pursuant to Section
      4.25
      and
Section
      4.29.

    

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement between the Purchaser and the Company, annexed
      as Exhibit
      C
      hereto.

    

    “Reporting
      Issuer”
means
      a
      company that is subject to the reporting requirements of Section 13 or 15(d)
      of
      the Exchange Act.

    

    “Required
      Approvals”
shall
      have the meaning set forth in Section
      3.1(f).

    

    “Restriction
      Period”
shall
      have the meaning set forth in Section
      4.18.

    

    “Securities”
means
      the Debenture A, the Underlying Shares, the Warrant, the Warrant Shares and
      Escrow Shares.

    

    “SEC”
means
      the Securities and Exchange Commission.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Security
      Agreement”
means
      the Security Agreement between the Purchaser and the Company, annexed as
Exhibit
      D
      hereto.

    

    “Short
      Sale”
shall
      have the meaning set forth in Section
      4.27
      hereof.

    

    “Structure
      Fee”
shall
      have the meaning set forth in Section
      4.28
      hereof.

    

    “Subsidiaries”
shall
      have the meaning set forth in Section
      3.1(a).

    

    “Successors-in-Interest”
shall
      have the meaning set forth in Section
      4.30
      hereof.

    

    “Trading
      Day”
means
      (a) a day on which the Common Stock is quoted on the Nasdaq, the OTCBB or
      the principal stock exchange on which the Common Stock has been listed, or
      (b) if the Common Stock is not quoted on the Nasdaq, the OTCBB or any stock
      exchange, a day on which the Common Stock is quoted in the over-the-counter
      market, as reported by the Pinksheets LLC (or any similar organization or agency
      succeeding its functions of reporting prices).

    

    “Transaction
      Documents”
means
      this Agreement and all exhibits and schedules hereto and all other agreements
      executed pursuant to this Agreement.

    

    “Underlying
      Shares”
means
      the shares of duly issued Common Stock, without restriction and freely tradable
      pursuant to Rule 504 of Regulation D of the Securities Act, into which the
      Debenture A is convertible in accordance with the terms hereof and the Debenture
      A.

    

    “Warrant”
means
      the Common Stock purchase warrant issued to the Purchaser and/or its assigns,
      annexed as Exhibit
      B
      hereto,
      pursuant to which the Purchaser and/or its assigns shall have the right to
      acquire the Warrant Shares at $.01 per share.

    

    “Warrant
      Shares”
means
      the 475,000 shares of duly issued Common Stock without restriction and freely
      tradable upon resale pursuant to Rule 504 of Regulation D of the Securities
      Act,
      for which the Warrant may be exercised in accordance with the terms hereof
      and
      of the Warrant.

    

     

    ARTICLE
      II  

     

    PURCHASE
      AND SALE OF CONVERTIBLE DEBENTURE; ISSUANCE OF WARRANT 

     

    2.1  Purchase
      and Sale; Purchase Price; Issuance of Warrant.

     

    (a) Subject
      to the terms and conditions set forth herein, the Company shall issue and sell
      and the Purchaser shall purchase an aggregate principal amount of Nine Hundred
      Fifty Thousand Dollars ($950,000) (the “Purchase
      Price”)
      of the
      Debenture A. The Debenture A shall have the rights, preferences and privileges
      as set forth in the Debenture A annexed as Exhibit A.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (b) The
      Purchase Price for the Debenture A shall be paid in cash in the amount of Nine
      Hundred Fifty Thousand Dollars ($950,000).

     

    (c) In
      consideration for the payment of the Purchase Price by the Purchaser, the
      Company shall issue the Warrant to the Purchaser.

     

     

    2.2  Execution
      and Delivery of Documents; The Closing.

     

    (a)  The
      Closing of the purchase and sale of the Debenture A (the “Closing”)
      shall
      take place simultaneously with the execution and delivery of this Agreement
      (the
“Closing
      Date”).
      On
      the Closing Date,

     

    (i)  the
      parties shall execute and deliver the Escrow Agreement, the Registration Rights
      Agreement and the Security Agreement to the Escrow Agent;

     

    (ii)  the
      Company shall deliver to the Purchaser the (A) the Disclosure Documents and
      (B)
      the legal opinion of counsel to the Company substantially in the form of
Exhibit I
      and
Exhibit
      J
      annexed
      hereto, addressed to the Purchaser and dated the date hereof;

     

    (iii)  the
      Company shall deliver to the Escrow Agent (A) original and duly executed
      Debenture A registered in the name of the Purchaser and/or its assigns in the
      amount set forth in Schedule 1,
      (B) an
      original and duly executed Warrant registered in the name of the Purchaser
      and/or its assigns, (C) an
      original and duly executed Instruction Letter, (D) an original and duly executed
      Power of Attorney and (E) certificates representing the original Escrow
      Shares;

     

    (iv)  the
      Company shall execute and deliver to the Purchaser a certificate of its Chief
      Executive Officer, in the form of Exhibit
      K
      annexed
      hereto, certifying that attached thereto is a copy of resolutions duly adopted
      by the Board of Directors of the Company authorizing the Company to execute
      and
      deliver the Transaction Documents and to enter into the transactions
      contemplated thereby and the appoint-ment pursuant to Section
      4.15
      hereof,
      of the attorney-in-fact pursuant to the Power of Attorney (the “Attorney-in-Fact”);
      and

     

    (v)  the
      Purchaser shall deliver to the Escrow Agent the Purchase Price by wire transfer
      of immediately available funds in the amount of Nine Hundred Fifty Thousand
      Dollars ($950,000) pursuant to written wire transfer instructions delivered
      by
      the Escrow Agent to the Purchaser at least three (3) Business Days prior to
      the
      Closing.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (b)  If
      this
      Agreement is terminated pursuant to Section
      5.1
      hereof,
      then, within two (2) Business Days from the date of termination, either the
      Company or the Purchaser shall notify the Escrow Agent of same, and

     

    (i)  the
      Escrow Agent shall, within two (2) Business Days of its receipt of such
      notice,

     

    (A)  return
      the Purchase Price to the Purchaser; and

    
       

      (B)     
        return
        the Instruction Letter, the Escrow Shares, the Debenture A and Warrant to
        the
        Company.

    

     

     

    2.3  The
      Post-Closing.

     

    (a)  The
      post-closing of the purchase and sale of the Debenture A (the “Post-Closing”)
      shall
      take place as soon as practicable after the Closing Date (the “Post-Closing
      Date”)
      at the
      offices of Gottbetter & Partners, 488 Madison Avenue, New York, NY 10022;
      and provided,
      however,
      that
      the Post-Closing may not occur later than ten (10) days after the Closing Date
      (except if such 10th
      day is
      not a Business Day, then the next Business Day), unless the Purchaser agrees
      in
      writing in advance to an extension, which writing shall set forth the new
      Post-Closing Date. 

     

    (b)  At
      the
      Post-Closing,

     

    (i)  the
      Escrow Agent shall deliver to the Purchaser and/or its assigns (A) the original
      and duly issued Debenture A, registered in the name of the Purchaser and in
      denominations specified by the Purchaser in the amounts set forth in
Schedule 1
      hereto
      or with written notice to the Escrow Agent prior to the Post-Closing, (B) the
      Warrant, (C) the Registration Rights Agreement and (D) the Security
      Agreement;

     

    (ii)  the
      Company shall deliver to the Purchaser the following:

     

    (A)
      a
      certificate in the form of Exhibit
      L
      annexed
      hereto, dated the Post-Closing Date and signed by the Secretary of the Company,
      certify-ing (1) that attached thereto are true, correct and complete copies
      of
      (a) the Company’s Certificate of Incorporation, as amended to the date thereof,
      (b) the Company’s by-laws, as amended to the date thereof, and (c) a
      certificate of good standing from the State of Nevada and (2) the
      incumbency of the officer executing this Agreement; 

     

    (B)  a
      certificate of the Company’s Chief Executive Officer, dated the Post-Closing
      Date, in the form of Exhibit
      M
      annexed
      hereto, certifying that the representations and warranties of the Company
      contained in Article III hereof are true and correct in all material respects
      on
      the Post-Closing Date (except for representations and warranties that speak
      of a
      specific date, which representations and warrants shall be true, correct and
      complete in all material respects as of such date); and

     

    (C) all
      other
      documents, instruments and writings required to have been delivered by the
      Company at or prior to the Post-Closing pursuant to this Agreement.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (iii) the
      Escrow Agent shall deliver the Instruction Letter to the Company’s transfer
      agent.

    

    (c)  Upon
      receipt by the Purchaser of those items set forth in Sections
      2.3(b)(i) through (ii)
      above,
      the Escrow Agent shall as soon as practicable deliver the following to or on
      behalf of the Company, as applicable:

     

    (i)  the
      Purchase Price, (A) attributable to Debenture A by wire transfer of immediately
      available funds in the amount of Nine Hundred Fifty Thousand Dollars ($950,000),
      minus all fees and expenses due under the Transaction Documents, to the Company
      pursuant to written wire transfer instructions delivered by the Company to
      the
      Escrow Agent at least three (3) Business Days prior to the Post-Closing Date
      and
      (B) the Advisory Fee and Structure Fee to the Purchaser; and

     

    (ii)  all
      documents, instruments, and writings required to have been delivered or
      necessary at or prior to the Post-Closing by the Purchaser pursuant to this
      Agreement.

     

    (d)   The
      Escrow Agent shall retain and hold the Escrow Shares, of which shall be held
      in
      accordance with the terms of this Agreement, the Warrant and the Escrow
      Agreement.

     

     

    ARTICLE
      III

     

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1  Representations,
      Warranties and Agreements of the Company.
      The
      Company hereby makes the following representations and warranties to the
      Purchaser, all of which shall survive the Post-Closing; 

     

    (a)  Organization
      and Qualification.
      The
      Company is a corporation, duly incorporated, validly existing and in good
      standing under the laws of the State of Nevada, with the requisite corporate
      power and authority to own and use its properties and assets and to carry on
      its
      business as currently conducted. The Company has no subsidiaries other than
      as
      set forth on Schedule
      3.1(a) attached
      hereto (collectively, the “Subsidiaries”).
      Each
      of the Subsidiaries is a corporation duly incorporated, validly existing and
      in
      good standing under the laws of the jurisdiction of its incorporation, with
      the
      full corporate authority to own and use its properties and assets and to carry
      on its business as currently conducted. Each of the Company and the Subsidiaries
      is
      duly
      qualified
      to do
      business and is in good standing as a foreign corporation in each jurisdiction
      in which the nature of the business conducted or property owned by it makes
      such
      qualification necessary, except where the failure to be so qualified or in
      good
      standing, as the case may be, would not, individually or in the aggregate,
      have
      a material adverse effect on the results of operations, assets, prospects,
      or
      financial condition of the Company and the Subsidiaries, taken as a whole (a
      “Material
      Adverse Effect”).

     

    (b)  Authorization,
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated hereby and by each other Transaction
      Document and to otherwise to carry out its obligations hereunder and thereunder.
      The execution and delivery of this Agreement and each of the other Transaction
      Documents to which it is a party by the Company and the consummation by it
      of
      the transactions contemplated hereby and thereby have been duly authorized
      by
      all necessary action on the part of the Company. Each of this Agreement and
      each
      of the other Transaction Documents to which it is a party has been or will
      be
      duly executed by the Company and when delivered in accordance with the terms
      hereof or thereof will constitute the valid and binding obligation of the
      Company enforceable against the Company in accordance with its terms, except
      as
      such enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally the enforcement of, creditors’ rights and remedies or by
      other equitable principles of general application.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (c)  Capitalization.
      The
      authorized, issued and outstanding capital stock of the Company is set forth
      on
Schedule
      3.1(c)(1).
      Except
      as described in Schedule
      3.1(c)(2),
      no
      Debentures have been issued as of the date hereof. No shares of Common Stock
      are
      entitled to preemptive or similar rights, nor is any holder of the Common Stock
      entitled to preemptive or similar rights arising out of any agreement or
      understanding with the Company by virtue of this Agreement. Except as described
      in this Agreement, or disclosed in Schedule 3.1(c)(2),
      there
      are no outstanding options, voting agreements or merger agreements,
      arrangements, warrants, script, rights to subscribe to, registration rights,
      calls or commitments of any character whatsoever relating to, or, except as
      a
      result of the purchase and sale of the Debenture A hereunder, securities, rights
      or obligations convertible into or exchangeable for, or giving any person any
      right to subscribe for or acquire, any shares of Common Stock or other
      securities, or contracts, commitments, understandings, or arrangements by which
      the Company or any Subsidiary is or may become bound to issue additional shares
      of Common Stock or other securities, or securities or rights convertible or
      exchangeable into shares of Common Stock or other securities. Neither the
      Company nor any Subsidiary is in violation of any of the provisions of its
      respective Certificate of Incorporation, bylaws or other charter
      documents.

     

    (d)  Issuance
      of Securities.
      The
      Debenture A, the Warrant, the Escrow Shares and the Underlying Shares have
      been
      duly and validly authorized for issuance, offer and sale pursuant to this
      Agreement and, the Securities when issued and delivered as provided hereunder
      or
      in the Debenture A against payment in accordance with the terms hereof, shall
      be
      valid and binding obligations of the Company enforceable against the Company
      in
      accordance with their respective terms. The Company has and at all times while
      the Debenture A and the Warrant are outstanding will continue to maintain an
      adequate reserve of shares of Common Stock to enable it to perform its
      obligations under this Agreement, the Warrant and the Debenture A except as
      otherwise permitted in this Agreement, the Warrant or the Debenture A. When
      issued in accordance with the terms hereof, the Warrant and the Debenture A,
      the
      Securities will be duly authorized, validly issued, fully paid and
      non-assessable. Except as set forth in Schedule 3.1(d)
      or
Schedule
      3.1(c)
      hereto,
      there is no equity, equity equivalent security, debt or equity lines of credit
      outstanding that is substantially similar to the Debenture A, including any
      security having a floating conversion substantially similar to the Debenture
      A;
provided,
      however,
      that,
      except, as otherwise provided herein, nothing contained in this Section 3.1(d)
      shall be
      deemed to permit the Company to issue any convertible security or instrument
      or
      equity line of credit.

     

    (e)  No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and the other Transaction
      Documents by the Company and the consummation by the Company of the transactions
      contemplated hereby and thereby do not and will not (i) conflict with or
      violate any provision of its Certificate of Incorporation or bylaws (each as
      amended through the date hereof) or (ii) be subject to obtaining any of the
      consents referred to in Section
      3.1(f),
      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 its Subsidiaries is a party,
      or
      (iii) result in a violation of any law, rule, regulation, order, judgment,
      injunction, decree or other restriction of any court or governmental authority
      to which the Company or its Subsidiaries is subject (including, but not limited
      to, those of other countries and the federal and state securities laws and
      regulations), or by which any property or asset of the Company or its
      Subsidiaries is bound or affected, except in the case of clause (ii), such
      conflicts, defaults, terminations, amendments, accelerations, cancellations
      and
      violations as would not, individually or in the aggregate, have a Material
      Adverse Effect. The business of the Company is not being conducted in violation
      in any material respect of any law, ordinance or regulation of any governmental
      authority.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (f)  Consents
      and Approvals.
      Other
      than the approval of its board of directors and stockholders, which have been
      obtained, and except as specifically set forth in
      Schedule 3.1(f),
      neither
      the Company nor any Subsidiary is required to obtain any consent, waiver,
      authorization or order of, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority or other Person
      in
      connection with the execution, delivery and performance by the Company of this
      Agreement and each of the other Transaction Documents (the consents, waivers,
      authorizations, orders, notices and filings referred to in Schedule 3.1(f),
      the
“Required
      Approvals”).

     

    (g)  Litigation;
      Proceedings.
      Except
      as specifically disclosed in
      Schedule 3.1(g),
      there
      is no action, suit, notice of violation, proceeding or investigation pending
      or,
      to the best knowledge of the Company, threatened against the Company or any
      of
      its Subsidiaries or any of their respective properties before or by any court,
      governmental or administrative agency or regulatory authority (federal, state,
      county, local or foreign) which (i) relates to or challenges the legality,
      validity or enforceability of any of the Transaction Documents, the Debenture
      A,
      the Underlying Shares or the Warrant Shares (ii) could, individually or in
      the aggregate, have a Material Adverse Effect or (iii) could, individually
      or in
      the aggregate, materially impair the ability of the Company to perform fully
      on
      a timely basis its obligations under the Transaction Documents.

     

    (h)  No
      Default or Violation.
      Except
      as set forth in Schedule 3.1(h)
      hereto,
      neither the Company nor any Subsidiary (i) is in default under or in vio-lation
      of any indenture, loan or credit agreement or any other agreement or instrument
      to which it is a party or by which it or any of its properties is bound, except
      such defaults or violations as do not have a Material Adverse Effect, (ii)
      is in
      violation of any order of any court, arbitrator or governmental body, except
      for
      such violations as do not have a Material Adverse Effect, or (iii) is in
      violation of any statute, rule or regulation of any governmental authority
      which
      could (individually or in the aggregate) (x) adversely affect the legality,
      validity or enforceability of this Agreement, (y) have a Material Adverse Effect
      or (z) adversely impair the Company’s ability or obligation to perform fully on
      a timely basis its obligations under this Agreement.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (i)  Certain
      Fees.
      No fees
      or commission will be payable by the Company to any investment banker, broker,
      placement agent or bank with respect to the consummation of the transactions
      contemplated hereby except as provided in Section
      4.28
      hereof.

     

    (j)  Disclosure
      Documents.
      The
      Disclosure Documents taken as a whole are accurate in all material respects
      and
      do not contain any untrue statement of a material fact or omit to state any
      material fact necessary in order to make the statements made therein, in light
      of the circumstances under which they were made, not misleading.

     

    (k)  Manner
      of Offering.
      Assuming the Purchaser’s representations and warranties contained in Section 3.2
      are true and correct (a) the Securities are being offered and sold to the
      Purchaser without registration under the Securities Act in a private placement
      that is exempt from registration pursuant to Rule 504 of Regulation D of the
      Securities Act and without registration under the Minnesota Revised Statues,
      1986 (the “Minnesota
      Act”)
      in
      reliance upon the exemption provided by Section 80A.15.2(g) of the Minnesota
      Act
      and Administrative Rule 2875.0170; and (b) accordingly, the Securities are
      being
      issued without restriction and may be freely traded pursuant to Rule 504 of
      Regulation D of the Securities Act.

     

    (l)  Non-Registered
      Offering.
      Neither
      the Company nor any Person acting on its behalf has taken or will take any
      action (including, without limitation, any offering of any securities of the
      Company under circumstances which would require the integration of such offering
      with the offering of the Securities under the Securities Act) which might
      subject the offering, issuance or sale of the Securities to the registration
      requirements of Section 5 of the Securities Act.

     

    (m)  Not
      a
      Reporting Company; Eligibility to use Exemption under 504(b).
      The
      Company is not subject to the reporting requirements of Section 13 or Section
      15(d) of the Exchange Act. The Company has not sold any securities under Rule
      504(b) in the last twelve months. The Company is eligible to issue securities
      exempt from registration pursuant to Rule 504 of Regulation D promulgated under
      the Securities Act. 

     

    (n)  No
      Undisclosed Liabilities.
      Except
      for the transactions contemplated in this Agreement and as set forth in
Schedule
      3.1(n),
      there
      are no material liabilities of the Company, whether absolute, accrued,
      contingent or otherwise. 

     

    The
      Purchaser acknowledges and agrees that the Company makes no representation
      or
      warranty with respect to itself or the transactions contemplated hereby other
      than those specifically set forth in Section
      3.1
      hereof.

     

    3.2  Representations
      and Warranties of the Purchaser.
      The
      Purchaser hereby represents and warrants to the Company as follows:

     

    (a)  Organization;
      Authority.
      The
      Purchaser is a limited liability company, duly organized, validly existing
      and
      in good standing under the laws of Minnesota with the requisite power and
      authority to enter into and to consummate the transactions contemplated hereby
      and by the other Transaction Documents and otherwise to carry out its
      obligations hereunder and thereunder. The acquisition of the Debenture A and
      the
      Warrant to be purchased by the Purchaser hereunder has been duly authorized
      by
      all necessary action on the part of the Purchaser. This Agreement has been
      duly
      executed and delivered by the Purchaser and constitutes the valid and legally
      binding obligation of the Purchaser, enforceable against it in accordance with
      its terms, except as such enforceability may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium or similar laws relating
      to,
      or affecting generally the enforcement of, creditors rights and remedies or
      by
      other general principles of equity.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (b)  Investment
      Intent.
      The
      Purchaser is acquiring the Debenture A and the Warrant to be purchased by it
      hereunder, and will acquire the Underlying Shares and the Warrant Shares
      relating to such Debenture A and the Warrant, for its own account for investment
      purposes only and not with a view to or for distributing or reselling such
      Debenture A, Underlying Shares or Warrant or Warrant Shares or any part thereof
      or interest therein, without prejudice, however, to the Purchaser’s right,
      subject to the provisions of this Agreement, at all times to sell or otherwise
      dispose of all or any part of such Debenture A or Underlying Shares or Warrant
      or Warrant Shares in compliance with applicable federal and state securities
      laws.

     

    (c)  Purchaser
      Status.
      At the
      time the Purchaser was offered the Debenture A to be acquired by it hereunder,
      it was, at the date hereof it is and at the Post-Closing it will be an
“accredited investor” as defined in Rule 501(a) under the Securities Act. The
      Purchaser is a resident in the State of Minnesota and no other
      jurisdiction.

     

    (d)  Experience
      of Purchaser.
      The
      Purchaser, either alone or together with its representatives, has such
      knowledge, sophistication and experience in business and financial matters
      so as
      to be capable of evaluating the merits and risks of an investment in the
      Securities to be acquired by it hereunder, and has so evaluated the merits
      and
      risks of such investment.

     

    (e)  Ability
      of Purchaser to Bear Risk of Investment.
      The
      Purchaser is able to bear the economic risk of an investment in the Securities
      to be acquired by it hereunder and, at the pre-sent time, is able to afford
      a
      complete loss of such investment.

     

    (f)  Prohibited
      Transactions.
      The
      Securities to be acquired by the Purchaser hereunder are not being acquired,
      directly or indirectly, with the assets of any “employee benefit plan,” within
      the meaning of Section 3(3) of the Employment Retirement Income Security Act
      of
      1974, as amended.

     

    (g)  Access
      to Information.
      The
      Purchaser acknowledges receipt of the Disclosure Documents and further
      acknowledges that it has been afforded (i) the opportunity to ask such questions
      as it has deemed necessary of, and to receive answers from, representatives
      of
      the Company concerning the terms and conditions of the Securities and the merits
      and risks of investing in the Securities; (ii) access to information about
      the
      Company and the Company’s financial condition, results of operations, business,
      properties, management and prospects sufficient to enable it to evaluate its
      investment in the Securities; and (iii) the opportunity to obtain such
      additional information which the Company possesses or can acquire without
      unreasonable effort or expense that is necessary to make an informed investment
      decision with respect to the investment and to verify the accuracy and
      completeness of the information contained in the Disclosure
      Documents.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (h)  Reliance.
      The
      Purchaser understands and acknowledges that (i) the Securities being offered
      and
      sold to it hereunder are being offered and sold without registration under
      the
      Securities Act in a private placement that is exempt from the registration
      provisions of the Securities Act under Rule 504 of Regulation D under the
      Securities Act and (ii) the availability of such exemption depends in part
      on,
      and that the Company will rely upon the accuracy and truthfulness of, the
      foregoing representations and the Purchaser hereby consents to such
      reliance.

     

    The
      Company acknowledges and agrees that the Purchaser makes no representations
      or
      warranties with respect to the transactions contemplated hereby other than
      those
      specifically set forth in this Section
      3.2.

     

     

    ARTICLE
      IV

    

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1  Manner
      of Offering.
      The
      Securities are being issued pursuant to Rule 504 (b) of Regulation D of the
      Securities Act. The Securities will be exempt from restrictions on transfer,
      and
      will carry no restrictive legend with respect to the exemption from registration
      under the Securities Act. The Company will use its best efforts to insure that
      it takes no actions that would jeopardize the availability of the exemption
      from
      registration under Rule 504(b) for the Securities and, if for any reason such
      exemption becomes unavailable due to the Company’s action or failure to act, the
      Company shall cause the Registrable Securities to be registered under the
      Securities Act as required by Section
      4.29.

     

    4.2  Furnishing
      of Information.
      As long
      as the Purchaser owns any of the Securities, the Company will promptly furnish
      to the Purchaser financial information similar to that required to be reported
      in annual and quarterly reports comparable to those required by Section 13(a)
      or
      15(d) of the Exchange Act (the “Non-Public
      Filings”).

     

    4.3  Notice
      of Certain Events.
      The
      Company shall, on a continuing basis, as long as the Purchaser owns any of
      the
      Securities, (i) advise the Purchaser promptly after obtaining knowledge of,
      and, if requested by the Purchaser, confirm such advice in writing, of (A)
      the
      issuance by any state securities commission of any stop order suspending the
      qualification or exemption from qualification of the Securities, for offering
      or
      sale in any jurisdiction, or the initiation of any proceeding for such purpose
      by any state securities commission or other regulatory authority, or
      (B) any event that makes any statement of a material fact made by the
      Company in Section
      3.1
      or in
      the Disclosure Documents untrue or that requires the making of any additions
      to
      or changes in Section
      3.1
      or in
      the Disclosure Documents in order to make the statements therein, in each case
      at the time such Disclosure Documents were delivered to the Purchaser and in
      the
      light of the circumstances under which they were made, not misleading, (ii)
      use
      its commercially reasonable best efforts to prevent the issuance of any stop
      order or order suspending the qualification or exemption from qualification
      of
      the Securities under any state securities or Blue Sky laws, and (iii) if at
      any
      time any state securities commission or other regulatory authority shall issue
      an order suspending the qualification or exemption from qualification of the
      Securities under any such laws, use its commercially reasonable best efforts
      to
      obtain the withdrawal or lifting of such order at the earliest possible
      time.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    4.4  Copies
      and Use of Disclosure Documents and Non-Public Filings.
      The
      Company shall furnish the Purchaser, without charge, as many copies of the
      Disclosure Documents and the Non-Public Filings and any amendments or
      supplements thereto as the Purchaser may reasonably request. The Company
      consents to the use of the Disclosure Documents and the Non-Public Filings
      and
      any amendments and supplements to any of them by the Purchaser in connection
      with resales of the Securities.

     

    4.5  Modification
      to Disclosure Documents.
      If any
      event shall occur as a result of which, in the reasonable judgment of the
      Company or the Purchaser, it becomes necessary or advisable to amend or
      supplement any of the Disclosure Documents or the Non-Public Filings in order
      to
      make the statements therein, at the time such Disclosure Documents or the
      Non-Public Filings were delivered to the Purchaser and in the light of the
      circumstances under which they were made, not misleading, or if it becomes
      necessary to amend or supplement any of the Disclosure Documents or the
      Non-Public Filings to comply with applicable law, the Company shall as soon
      as
      practicable prepare an appropriate amendment or supplement to each such document
      in form and substance reasonably satisfactory to both the Purchaser and Company
      so that (i) as so amended or supplemented, each such document will not include
      an untrue statement of material fact or omit to state a material fact necessary
      in order to make the statements therein, in the light of the circumstances
      existing at the time it is delivered to the Purchaser, not misleading and
      (ii) the Disclosure Documents and the Non-Public Filings will comply with
      applicable law in all material respects.

     

    4.6  Blue
      Sky Laws.
      The
      Company shall cooperate with the Purchaser in connection with the exemption
      from
      registration of the Securities under the securities or Blue Sky laws of such
      jurisdictions as the Purchaser may request; provided,
      however,
      that
      neither the Company nor its Subsidiaries shall be required in connection
      therewith to (a) qualify as a foreign corporation where they are not now so
      qualified, or (b) submit to taxation or general service of process in such
      jurisdiction. The Company agrees that it will execute all necessary documents
      and pay all necessary state filing or notice fees to enable the Company to
      sell
      the Securities to the Purchaser.

     

    4.7  Integration.
      The
      Company shall not and shall use its best efforts to ensure that no Affiliate
      shall sell, offer for sale or solicit offers to buy or otherwise negotiate
      in
      respect of any security (as defined in Section 2 of the Securities Act) that
      would be integrated with the offer or sale of the Securities in a manner that
      would require the registration under the Securities Act of the sale of the
      Securities to the Purchaser.

     

    4.8  Furnishing
      of Rule 144(c) Materials.
      The
      Company shall, for so long as any of the Securities remain outstanding and
      during any period in which the Company is not subject to Section 13 or
      15(d) of the Exchange Act, make available to any registered holder of the
      Securities in connection with any sale thereof and any prospective purchaser
      of
      such Securities from such Person, such information in accordance with
      Rule 144(c)(2) promulgated under the Securities Act as is required to sell
      the Securities under Rule 144 promulgated under the Securities
      Act.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    4.9  Solicitation
      Materials.
      The
      Company shall not (i) distribute any offering materials in connection with
      the
      offering and sale of the Debenture A, Warrant, Warrant Shares or the Underlying
      Shares other than the Disclosure Documents and any amendments and supplements
      thereto prepared in compliance herewith or (ii) solicit any offer to buy or
      sell
      the Debenture A, Warrant, Warrant Shares or the Underlying Shares by means
      of
      any form of general solicitation or advertising.

     

    4.10  Subsequent
      Financial Statements.
      If not
      otherwise publicly available, upon the written request of Purchaser, the Company
      shall promptly furnish to the Purchaser a copy of all financial statements
      for
      any period subsequent to the period covered by the financial statements included
      in the Disclosure Documents until the full conversion of the Debenture A and
      exercise of the Warrant. 

     

    4.11  Prohibition
      on Certain Actions.
      The
      Company shall not and shall cause the Subsidiaries not to, without the prior
      written consent of the Purchaser, (i) amend its certificate or articles of
      incorporation, by-laws or other charter documents so as to adversely affect
      any
      rights of the Purchaser; (ii) split, combine or reclassify its outstanding
      capital stock; (iii) declare, authorize, set aside or pay any dividend or other
      distribution with respect to the Common Stock; (iv) redeem, repurchase or offer
      to repurchase or other-wise acquire shares of its Common Stock; or (v) enter
      into any agreement with respect to any of the foregoing.

     

    4.12  Listing
      of Common Stock.
      If the
      Common Stock shall become listed on the OTCBB or on another exchange, the
      Company shall (a) use its commercially reasonable best efforts to maintain
      the listing of its Common Stock on the OTCBB or such other exchange on which
      the
      Common Stock is then listed until expiration of each of the periods during
      which
      the Debenture A may be converted or the Warrant may be exercised and
      (b) shall provide to the Purchaser evidence of such listing. 

     

    4.13  Escrow.
      The
      Company and the Purchaser agree to execute and deliver, simultaneously with
      the
      execution and delivery of this Agreement, the escrow agreement attached hereto
      and made part hereof as Exhibit G
      (the
“Escrow
      Agreement”),
      and
      to issue into escrow the stock certificates to be held by the Escrow Agent,
      registered in the name of the Purchaser and without any restrictive legend
      of
      any kind, pursuant to the terms of such escrow.

     

    4.14   Conversion
      and Exercise Procedures; Maintenance of Escrow Shares.
      (a)
Exhibit
      E
      attached
      hereto and made a part hereof sets forth the procedures with respect to the
      conversion of the Debenture A and the exercise of the Warrant, including the
      forms of Notice of Conversion and Notice of Exercise to be provided upon
      conversion or exercise, instructions as to the procedures for conversion or
      exercise and such other information and instructions as may be reasonably
      necessary to enable the Purchaser or its permitted transferee(s) to exercise
      the
      right of conversion or exercise smoothly and expeditiously.

     

    (b)  
      The
      Company agrees that, at any time, the conversion price of the Debenture A is
      such that the number of Escrow Shares for the Debenture A is less than 500%
      of
      the number of shares of Common Stock that would be needed to satisfy full
      conversion of all such Debenture A then outstanding, given the then current
      conversion price (the “Full
      Conversion Shares”),
      upon
      five (5) Business Days written notice of such circumstance to the Company by
      the
      Purchaser and/or Escrow Agent, the Company shall issue additional share
      certificates in the name of the Purchaser and/or its assigns in denominations
      specified by the purchaser, and deliver same to the Escrow Agent, such that
      the
      new number of Escrow Shares with respect to the Debenture A is equal to 500%
      of
      the Full Conversion Shares.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    4.15   Attorney-in-Fact.
      To
      effectuate the terms and provisions of this Agreement, the Escrow Agreement
      and
      the Warrant, the Company hereby agrees to give the Power of Attorney. All acts
      done under such power of attorney are hereby ratified and approved and neither
      the Attorney-in-Fact nor any designee or agent thereof shall be liable for
      any
      acts of commission or omission, for any error of judgment or for any mistake
      of
      fact or law, as long as the Attorney-in-Fact is operating within the scope
      of
      the Power of Attorney and this Agreement and its exhibits. The Power of
      Attorney, being coupled with an interest, shall be irrevocable while any of
      the
      Debenture A remains unconverted or any of the Warrant remains unexercised or
      any
      portion of this Agreement or the Escrow Agreement remains unsatisfied. In
      addition, the Company shall give the Attorney-in-Fact resolutions executed
      by
      the Board of Directors of the Company which authorize transfers of the Debenture
      A and the Warrant, future instances of the Underlying Shares for the Debenture
      A
      and the Warrant Shares for the Warrant, and which resolutions state that they
      are irrevocable while any of the Debenture A remain unconverted or any of the
      Warrant remains unexercised, or any portion of this Agreement or the Escrow
      Agreement remains unsatisfied.

     

    4.16   Reservation
      of Common Stock.
      (a) The
      Company shall take all action reasonably necessary to at all times have
      authorized, and reserved for the purpose of issuance, that number of shares
      of
      Common Stock equal to a multiple of five (5) times the number of shares of
      Common Stock into which the Debentures are from time to time convertible unless
      a change in such multiple is agreed to in writing by the Purchaser and the
      Company. If at any time the Company does not have available such shares of
      Common Stock equal to a multiple of four (4) times the number of shares of
      Common Stock into which the Debentures are from time to time convertible, the
      Company shall call and hold a special meeting of the shareholders within sixty
      (60) days of 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. For the purposes of this Section
      4.16,
      only,
      the Escrow Shares shall be counted as reserved for the purpose of issuance
      by
      the Company.

     

    (b) The
      Company shall, at all times while any of the Warrant remains outstanding,
      reserve for issuance in the event of the exercise of all of the outstanding
      Warrant, that number of shares of Common Stock into which the Warrant is from
      time to time exercisable.

    

    4.17  Indemnification.

     

    (a)  Indemnification

     

    (i)  The
      Company shall, notwithstanding termination of this Agreement, indemnify and
      hold
      harmless the Purchaser and its officers, directors, agents, employees and
      affiliates, each Person who controls the Purchaser (within the meaning of
      Section 15 of the Securities Act or Section 20 of the Exchange Act) (each such
      Person, a “Control
      Person”)
      and
      the officers, directors, agents, employees and affiliates of each such Control
      Person, to the fullest extent permitted by applicable law, from and against
      any
      and all losses, claims, damages, liabilities, costs (including, without
      limitation, costs of preparation and reasonable attorneys’ fees) and expenses
      (collectively, “Losses”),
      as
      incurred, arising out of, or relating to, a breach or breaches of any
      representation, warranty, covenant or agreement by the Company under this
      Agreement or any other Transaction Document.

     

    
      
        
        

      

      
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    (ii)  The
      Purchaser shall, notwithstanding termination of this Agreement, indemnify and
      hold harmless the Company, its officers, directors, agents and employees, each
      Control Person of the Company and the officers, directors, agents and employees
      of each Control Person, to the fullest extent permitted by applicable law,
      from
      and against any and all Losses, as incurred, arising out of, or relating to,
      a
      breach or breaches of any representation, warranty, covenant or agreement by
      the
      Purchaser under this Agreement or any other Transaction Documents.

     

    (b)  Conduct
      of Indemnification Proceedings.
      If any
      Proceeding shall be brought or asserted against any Person entitled to indemnity
      hereunder (an “Indemnified
      Party”),
      such
      Indemnified Party promptly shall notify the Person from whom indemnity is sought
      (the “Indemnifying
      Party”)
      in
      writing, and the Indemnifying Party shall assume the defense thereof, including
      the employment of counsel reasonably satisfactory to the Indemnified Party
      and
      the payment of all fees and expenses incurred in connection with defense
      thereof; provided, that the failure of any Indemnified Party to give such notice
      shall not relieve the Indemnifying Party of its obligations or liabilities
      pursuant to this Agreement, except (and only) to the extent that it shall be
      finally determined by a court of competent jurisdiction (which determination
      is
      not subject to appeal or further review) that such failure shall have
      proximately and materially adversely prejudiced the Indemnifying
      Party.

     

    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in, but not control, the defense thereof, but
      the
      fees and expenses of such counsel shall be at the expense of such Indemnified
      Party or Parties unless: (1) the Indemnifying Party has agreed to pay such
      fees
      and expenses; or (2) the Indemnifying Party shall have failed promptly to assume
      the defense of such Proceeding and to employ counsel reasonably satisfactory
      to
      such Indemnified Party in any such Proceeding; or (3) the named parties to
      any
      such Proceeding (including any impeded parties) include both such Indemnified
      Party and the Indemnifying Party, and such Indemnified Party shall have been
      advised by counsel that a conflict of interest is likely to exist if the same
      counsel were to represent such Indemnified Party and the Indemnifying Party
      (in
      which case, if such Indemnified Party notifies the Indemnifying Party in writing
      that it elects to employ separate counsel at the expense of the Indemnifying
      Party, the Indemnifying Party shall not have the right to assume the defense
      of
      the claim against the Indemnified Party but will retain the right to control
      the
      overall Proceedings out of which the claim arose and such counsel employed
      by
      the Indemnified Party shall be reasonably acceptable to the Indemnifying Party
      and shall be at the expense of the Indemnifying Party). The Indemnifying Party
      shall not be liable for any settlement of any such Proceeding effected without
      its written consent. No Indemnifying Party shall, without the prior written
      consent of the Indemnified Party, effect any settlement of any pending
      Proceeding in respect of which any Indemnified Party is a party, unless such
      settlement includes an unconditional release of such Indemnified Party from
      all
      liability on claims that are the subject matter of such Proceeding, provided,
      however,
      the
      Indemnifying Party may settle or compromise any asserted liability without
      the
      consent of the Indemnitee so long as such settlement or compromise releases
      the
      Indemnitee and does not include any admission or statement of fault against
      the
      Indemnitee.

     

    
      
        
        

      

      
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    All
      fees
      and expenses of the Indemnified Party to which the Indemnified Party is entitled
      hereunder (including reasonable fees and expenses to the extent incurred in
      connection with investigating or preparing to defend such Proceeding in a manner
      not inconsistent with this Section) shall be paid to the Indemnified Party,
      as
      incurred, within ten (10) Business Days of written notice thereof to the
      Indemnifying Party.

     

    No
      right
      of indemnification under this Section
      4.17
      shall be
      available as to a particular Indemnified Party if there is a non-appealable
      final judicial determination that such Losses arise solely or substantially
      out
      of the negligence or bad faith of such Indemnified Party in performing the
      obligations of such Indemnified Party under this Agreement or a breach by such
      Indemnified Party of its obligations under this Agreement.

     

    (c)  Contribution.
      If a
      claim for indemnification under Section
      4.17(a)
      is
      unavailable to an Indemnified Party or is insufficient to hold such Indemnified
      Party harmless for any Losses in respect of which this Section
      4.17
      would
      apply by its terms (other than by reason of exceptions provided in this
Section
      4.17),
      then
      each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
      contribute to the amount paid or payable by such Indemnified Party as a result
      of such Losses in such proportion as is appropriate to reflect the relative
      benefits received by the Indemnifying Party on the one hand and the Indemnified
      Party on the other and the relative fault of the Indemnifying Party and
      Indemnified Party in connection with the actions or omissions that resulted
      in
      such Losses as well as any other relevant equitable considerations. The relative
      fault of such Indemnifying Party and Indemnified Party shall be determined
      by
      reference to, among other things, whether there was a judicial determination
      that such Losses arise in part out of the negligence or bad faith of the
      Indemnified Party in performing the obligations of such Indemnified Party under
      this Agreement or the Indemnified Party’s breach of its obligations under this
      Agreement. The amount paid or payable by a party as a result of any Losses
      shall
      be deemed to include any attorneys’ or other fees or expenses incurred by such
      party in connection with any Proceeding to the extent such party would have
      been
      indemnified for such fees or expenses if the indemnification provided for in
      this Section was available to such party.

     

    (d)  Non-Exclusivity.
      The
      indemnity and contribution agreements contained in this Section are in addition
      to any obligation or liability that the Indemnifying Parties may have to the
      Indemnified Parties.

     

    4.18  Exclusivity.
      During
      the two year period commencing on the Post-Closing Date (the “Restriction
      Period”)
      or
      until the principal amount of Debenture A is converted, redeemed or paid in
      full
      which ever comes first, the Company and its Affiliates shall not (A) issue
      or
      offer any convertible security, (B) issue or offer any security issued pursuant
      to Rule 504 of Regulation D promulgated under the Securities Act that would
      cause the Debenture A, the Warrant or the Underlying Shares to not qualify
      under
      Rule 504 of Regulation D promulgated under the Securities Act, (C) issue or
      offer any debt and (D) offer any equity lines of credit, except with Cornell
      Capital Partners, LP. The Company may request that the restrictions in this
      Section
      4.18
      be
      waived. Except as specifically set forth above, the Company may engage in any
      other debt or equity financing during the Restriction Period.

     

    
      
        
        

      

      
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    4.19  Purchaser’s
      Ownership of Common Stock.
      In
      addition to and not in lieu of the limitations on conversion set forth in the
      Debenture A and the Warrant, the conversion rights and exercise rights of the
      Purchaser set forth in the Debenture A and the Warrant shall be limited, solely
      to the extent required, from time to time, such that, unless the Purchaser
      gives
      written notice 75 days in advance to the Company of the Purchaser’s
      intention to exceed the Limitation on Conversion as defined herein, with respect
      to all or a specified amount of the Debenture A and the corresponding number
      of
      the Underlying Shares in no instance the Purchaser (singularly, together with
      any Persons who in the determination of the Purchaser, together with the
      Purchaser, constitute a group as defined in Rule 13d-5 of the Exchange Act)
      be
      entitled to convert the Debenture A and exercise the Warrant to the extent
      such
      conversion or exercise, as the case may be, would result in the Purchaser
      beneficially owning more than ten percent (10%) of the outstanding shares of
      Common Stock of the Company. For these purposes, beneficial ownership shall
      be
      defined and calculated in accordance with Rule 13d-3, promulgated under the
      Exchange Act (the foregoing being herein referred to as the “Limitation
      on Conversion”);
      provided,
      however,
      that
      the Limitation on Conversion shall not apply to any forced or automatic
      conversion pursuant to this Agreement or the Debenture A; and provided,
      further
      that if
      the Purchaser shall have declared an Event of Default and, if a cure period
      is
      provided, the Company shall not have properly and fully cured such Event of
      Default within any such cure period, the provisions of this Section
      4.19
      shall be
      null and void from and after such date. The Company shall, promptly upon its
      receipt of a Notice of Conversion tendered by the Purchaser (or its sole
      designee) for the Debenture A, as applicable, and upon its receipt of a Notice
      of Exercise under the terms of the Warrant notify the Purchaser by telephone
      and
      by facsimile (the “Limitation
      Notice”)
      of the
      number of shares of Common Stock outstanding on such date and the number of
      Underlying Shares or Warrant Shares, as the case may be, which would be issuable
      to the Purchaser (or its sole designee, as the case may be) if the conversion
      requested in such Notice of Conversion or exercise requested in such Notice
      of
      Exercise were effected in full and the number of shares of Common Stock
      outstanding giving full effect to such conversion or exercise, as the case
      may
      be, whereupon, in accordance with the Debenture A, notwithstanding anything
      to
      the contrary set forth in the Debenture A, the Purchaser may, by notice to
      the
      Company within one (1) Business Day of its receipt of the Limitation Notice
      by
      facsimile, revoke such conversion or exercise to the extent (in whole or in
      part) that the Purchaser determines that such conversion or exercise would
      result in the ownership by the Purchaser of shares of Common Stock in excess
      of
      the Limitation on Conversion. The Limitation Notice shall begin the 75 day
      advance notice required in this Section
      4.19.
      

     

    4.20  Purchaser’s
      Rights if Trading in Common Stock is Suspended.
      If the
      Common Stock is listed on any exchange, then at any time after the Post-Closing
      if trading in the shares of the Common Stock is suspended on such stock exchange
      or market upon which the Common Stock is then listed for trading (other than
      as
      a result of the suspension of trading in securities on such market generally
      or
      temporary suspensions pending the release of material information), or the
      Common Stock is delisted from the OTCBB, then, at the option of the Purchaser
      exercisable by giving written notice to the Company (the “Redemption
      Notice”),
      the
      Company shall redeem, as applicable, all of the Debenture A, the Warrant, the
      Warrant Shares and Underlying Shares owned by the Purchaser within seven (7)
      Business Days at an aggregate purchase price equal to the sum of:

     

    
      
        
        

      

      
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    (i)  the
      product of (1) the average Per Share Market Value for the five (5) Trading
      Days
      immediately preceding (a) the date of the Redemption Notice, (b) the date of
      payment in full of the repurchase price under this Section 4.20
      recalculated as of such payment date, or (c) the day when the Common Stock
      was
      suspended, delisted or deleted from trading, whichever is greater, multiplied
      by
      (2) the aggregate number of Underlying Shares and Warrant Shares then held
      and
      owned by the Purchaser;

     

    (ii)  the
      greater of (A) the outstanding principal amount and accrued and unpaid interest
      on the Debenture A owned by the Purchaser and (B) the product of (1) the average
      Per Share Market Value for the five (5) Trading Days immediately preceding
      (a)
      the date of the Redemption Notice, (b) the date of payment in full of the
      repurchase price under this Section 4.20
      recalculated as of such payment date, or (c) the day when the Common Stock
      was
      suspended, delisted or deleted from trading, whichever is greater, and (2)
      the
      aggregate number of Underlying Shares issuable upon the conversion of the
      outstanding Debenture A then held and owned by the Purchaser utilizing the
      conversion procedures contained in the Debenture A (without taking into account
      the Limitation on Conversion described in Section 4.19 hereof); and

     

    (iii)  the
      product of (A) the difference, but not below zero, between (1) the average
      Per
      Share Market Value for the five (5) Trading Days immediately preceding (a)
      the
      date of the Redemption Notice, (b) the date of payment in full of the repurchase
      price under this Section
      4.20
      recalculated as of such date, or (c) the day when the Common Stock was
      suspended, delisted or deleted from trading, whichever is greater, and (2)
      the
      then-current exercise price of the Warrant, multiplied by (B) the aggregate
      number of Warrant Shares issuable upon exercise of the Warrant then held and
      owned by such Purchaser (without taking into account the Limitation on
      Conversion described in Section
      4.19
      hereof);
provided,
      however,
      that,
      in the event that such product is less than zero, then the calculation for
      this
Section
      4.20(iii)
      shall be
      zero; and

     

    (iv)   interest
      on such amounts set forth in (i)-(iii) above accruing from the seventh
      (7th)
      Business Day after the date of the Redemption Notice until the repurchase price
      under this Section 4.20 is paid in full, at the rate of fifteen percent (15%)
      per annum.

     

    4.21  No
      Violation of Applicable Law.
      Notwithstanding any provision of this Agreement to the contrary, if the
      redemption of the Debenture A, the Warrant, the Warrant Shares or the Underlying
      Shares otherwise required under this Agreement, the Warrant or the Debenture
      A
      would be prohibited by the relevant provisions of law of the State of Nevada,
      such redemption shall be effected as soon as it is permitted under such law;
      provided,
      however,
      that
      interest payable by the Company with respect to any such redemption shall accrue
      in accordance with Section
      4.20.

     

    4.22  Redemption
      Restrictions.
      Notwithstanding any provision of this Agreement to the contrary, if any
      redemption of the Debenture A, the Warrant, the Warrant Shares or the Underlying
      Shares otherwise required under this Agreement or the Debenture A would be
      prohibited in the absence of consent from any lender to the Company, or by
      the
      holders of any class of securities of the Company or any of the Subsidiaries,
      the Company shall use its best efforts to obtain such consent as promptly as
      practicable after any such redemption is required. Interest payable by the
      Company with respect to any such redemption shall accrue in accordance with
      Section
      4.20
      until
      such consent is obtained. Nothing contained in this Section
      4.22
      shall be
      construed as a waiver by the Purchaser of any rights it may have by virtue
      of
      any breach of any representation or warranty of the Company herein as to the
      absence of any requirement to obtain any such consent.

     

    
      
        
        

      

      
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    4.23  No
      Other Registration Rights.
      During
      the period commencing on the date hereof and ending on the Post-Closing Date,
      the Company shall not file any registration statement that provides for the
      registration of shares of Common Stock to be sold by security holders of the
      Company, other than the Purchaser and/or its respective Affiliates or assigns,
      without the prior written consent of the Purchaser or its assigns, provided,
      however, that the limitation on the right to file registration statements
      contained in this Section 4.23
      shall
      not apply to registration statements relating solely to (i) employee
      benefit plans, notwithstanding the inclusion of a resale prospectus for
      securities received under any such employee benefit plan, or (ii) business
      combinations not otherwise prohibited by the terms of this Agreement or the
      other Transaction Documents. This registration restriction is in addition to
      the
      Company’s registration restrictions set forth in Section
      4.25.

     

    4.24  Merger
      or Consolidation.
      Until
      the earlier of (a) the full redemption, payment or conversion of the
      Debenture A or (b) the Maturity Date of the Debenture A (as that term is
      defined in the Debenture A), the Company and each Subsidiary will not, in a
      single transaction or a series of related transactions, (i) consolidate
      with or merge with or into any other Person, or (ii) permit any other
      Person to consolidate with or merge into it, unless (w) either (A) the Company
      shall be the survivor of such merger or consolidation or (B) the surviving
      Person shall expressly assume by supplemental agreement all of the obligations
      of the Company under the Debenture A, the Warrant, this Agreement and the other
      Transaction Documents; (x) immediately before and immediately after giving
      effect to such transactions (including any indebtedness incurred or anticipated
      to be incurred in connection with the transactions), no Event of Default shall
      have occurred and be continuing; (y) if the Company is not the surviving entity,
      such surviving entity’s common shares will be listed on either The New York
      Stock Exchange, American Stock Exchange, Nasdaq National Market or Nasdaq
      SmallCap Market, or the OTCBB on or prior to the closing of such transaction(s)
      and (z) the Company shall have delivered to the Purchaser an officer’s
      certificate and opinion of counsel, each stating that such consolidation, merger
      or transfer complies with this Agreement, that the agreements relating to such
      transaction(s) provide that the surviving Person agrees to be bound by this
      Agreement and that all conditions precedent in this Agreement relating to such
      transaction(s) have been satisfied.

     

    4.25  Registration
      of Escrow Shares and Warrant Shares.
      (a) So
      long as the Purchaser and/or its assigns owns any of the Securities and the
      Underlying Shares and Warrant Shares would not be freely transferable without
      registration, the Company agrees not to file a registration statement with
      the
      SEC without Purchaser’s express written consent, other than on Form 10, Form S-4
      (except for a public reoffering or resale) or Form S-8 without first having
      registered (or simultaneous registering) the Registrable Securities for resale
      under the Securities Act and in such states of the United States as the holders
      thereof shall reasonably request.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (b)
      If
      the Company shall propose to file with the SEC any registration statement other
      than a Form 10, Form S-4 (except for a public reoffering or resale) or Form
      S-8
      which would cause, or have the effect of causing, the Company to become a
      Reporting Issuer or to take any other action, other than the sale of the
      Debenture A and the issuance of the Warrant to the Purchaser hereunder, the
      effect of which would be to cause the Underlying Shares or the Warrant Shares
      to
      be restricted securities (as such term is defined in Rule 144 promulgated under
      the Securities Act), the Company agrees to give written notification of such
      to
      the holders of the Securities at least two weeks prior to such filing or taking
      of the proposed action. If any of the Securities are then outstanding, the
      Company agrees to include in such registration statement the Registrable
      Securities. 

     

    If
      the
      registration of which the Company gives notice is for a registered public
      offering involving an underwriting, the Company will so advise the holders
      of
      the Securities. In such event, these registration rights shall be conditioned
      upon such holder's participation in such underwriting and the inclusion of
      such
      holder's Registrable Securities in the underwriting to the extent provided
      herein. All holders proposing to distribute their Registrable Securities through
      such underwriting shall enter into an underwriting agreement in customary form
      with the underwriter selected by the Company. In the event that the lead or
      managing underwriter in its good faith judgment determines that material adverse
      market factors require a limitation on the number of shares to be underwritten,
      the underwriter may limit the number of Registrable Securities. In such event,
      the Company shall so advise all holders of securities requesting registration,
      and the number of shares of the Registrable Securities that are entitled to
      be
      included in the registration and underwriting shall be allocated pro
      rata
      among
      all holders and other participants, including the Company, in proportion, as
      nearly as practicable, to the respective amounts of Registrable Securities
      and
      other securities which they had requested to be included in such registration
      statement at the time of filing the registration statement. If any holder
      disapproves of the terms of any such underwriting, he may elect to withdraw
      therefrom by written notice to the Company and the underwriter, provided such
      notice is delivered within sixty (60) days of full disclosure of such terms
      to
      such holder, without thereby affecting the right of such holder to participate
      in subsequent offerings hereunder.

     

    (c)
      Notwithstanding the foregoing, if the Company for any reason shall have taken
      any action, other than the sale of the Debenture A and issuance of the Warrant
      to the Purchaser hereunder, the effect of which would be to cause the
      Registrable Securities to be restricted securities (as such term is defined
      in
      Rule 144 promulgated under the Securities Act), the Company agrees to use its
      best efforts to file a registration statement with the SEC and use its best
      efforts to have such registration statement declared effective by the SEC which
      would permit the public resale of the Registrable Securities under the
      Securities Act and in such states of the United States as the holders thereof
      shall reasonably request. 

     

    (d)
      The
      Company agrees to keep any registration required pursuant to this Section
      4.25
      continuously effective under the Securities Act and with such states of the
      United States as the holders of the Registrable Securities shall reasonably
      request until the earlier of (i) the date on which all of the Registrable
      Securities covered by any such registration have been sold, (ii) two (2) years
      from the effective date of any such registration, or (iii) the date on which
      all
      of the Registrable Securities may be sold without restriction pursuant to Rule
      144 of the Securities Act. All costs and expenses of any such registration
      and
      related Blue Sky filings and maintaining continuous effectiveness of such
      registration and filings shall be borne by the Company, other than underwriters
      and brokers, fees and commissions. 

     

    
      
        
        

      

      
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    (e)
      The
      Escrow Shares shall be registered by the Company under the Securities Act if
      required by Section
      4.29
      and
      subject to the conditions stated therein.

     

    (f)
      Each
      holder of Registrable Securities agrees to cooperate and assist the Company
      in
      preparing and filing any registration statement required to be filed pursuant
      to
      this Agreement, including, without limitation, providing the Company with such
      information about the holder and answering such questions as deemed reasonably
      necessary by the Company in order to complete such registration statement.
      Until
      such time as the Company is no longer required to keep the registration
      statement effective, each holder of Registrable Securities agrees to immediately
      notify the Company of any change to the information provided to the Company
      in
      connection with the preparation or maintenance of the registration statement,
      and each such holder agrees to certify to the accuracy and completeness of
      all
      information provided by it to the Company or its representatives in connection
      with such registration statement.

    

    4.26  Liquidated
      Damages.
      The
      Company understands and agrees that a breach by the Company of Article IV or
      an
      Event of Default as contained in this Agreement and/or any other Transaction
      Document will result in substantial economic loss to the Purchaser, which loss
      will be extremely difficult to calculate with precision. Therefore, if, for
      any
      reason the Company breaches Article IV or fails to cure any Event of Default
      under Section 5.1, as compensation and liquidated damages for such breach or
      default, and not
      as a
      penalty, the Company agrees to pay the Purchaser an amount equal to three times
      the Purchase Price and the Purchaser, upon receipt of such payment, shall return
      any unconverted Debenture A to the Company. The Company shall, upon demand,
      pay
      the Purchaser such liquidated damages by wire transfer of immediately available
      funds to an account designated by the Purchaser. Nothing herein shall limit
      the
      right of the Purchaser to pursue actual damages (less the amount of any
      liquidated damages received pursuant to the foregoing) for the Company’s breach
      of Article IV or failure to cure an Event of Default under Section 5.1,
      consistent with the terms of this Agreement. NOTWITHSTANDING ANYTHING TO THE
      CONTRARY CONTAINED IN THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, THE
      COMPANY’S OBLIGATIONS UNDER THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS
      AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.

     

    4.27  Short
      Sales.
      The
      Purchaser agrees it will not enter into any Short Sales (as hereinafter defined)
      until the earlier to occur of the date that the Purchaser no longer owns the
      Debenture A and the Maturity Date. For purpose hereof, a “Short
      Sale”
shall
      mean a sale of Common Stock by the Purchaser that is marked as a short sale
      and
      that is made at a time when there is no equivalent offsetting long position
      in
      the Common Stock by the Purchaser. For the purposes of determining whether
      there
      is an equivalent offsetting long position in the Common Stock held by the
      Purchaser, shares of Common Stock issuable upon conversion of the Debenture
      A or
      exercise of the Warrant shall be deemed to be held long by the Purchaser with
      respect to the Underlying Shares and/or Warrant Shares for which a Notice of
      Conversion or Notice of Exercise, as appropriate, is delivered within two (2)
      Trading Days following the Trading Day that such Short Sale is entered into.
      

     

    
      
        
        

      

      
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    4.28  Fees.
      The
      Company will pay the following fees and expenses in connection with the
      transactions contemplated hereby: (a) to G&P (i) legal fees for document
      production in the amount of $10,000; (ii) legal fees of Hand and Hand in the
      amount of $5,000; and (iii) all reasonable out-of-pocket expenses incurred
      in
      connection with such document production, (b) to the Escrow Agent, $5,000
      for the escrow agent fee, (c) a commitment fee in an amount equal to ten percent
      (10%) of the Purchase Price to the Purchaser (the “Advisory
      Fee”)
      and
      (d) a structure fee of Five Thousand Dollars ($5,000) to the Purchaser (the
      “Structure
      Fee”).
      Unless paid prior, all fees and expenses will be paid at Post-Closing and the
      Company and the Purchaser hereby authorize and direct the Escrow Agent to deduct
      such fees and expenses directly from escrow prior to distributing any funds
      to
      the Company. Except with respect to the fees set forth in part (b) of this
      Section
      4.28
      and
      except as otherwise set forth in the Retainer Agreement, all fees and expenses
      shall be paid regardless of whether the transactions contemplated hereby are
      closed or otherwise completed. All fees to be paid hereunder shall have no
      offsets, are non-refundable and non-cancelable. 

     

    4.29   Changes
      to Federal and State Securities Laws.
      If
      any of
      the Securities require registration with or approval of any governmental
      authority under any federal (including but not limited to the Securities Act
      or
      similar federal statute then in force) or state law, or listing on any national
      securities exchange, before they may be resold or transferred without any
      restrictions on their resale or transfer for reasons including, but not limited
      to, a material change in Rule 504 of Regulation D promulgated under the
      Securities Act or a change to the exemption for sales made to Accredited
      Investors in the state in which the Purchaser resides, the Company will, at
      its
      expense, (a) as expeditiously as possible cause the Registrable Securities
      to be
      duly registered or approved or listed on the relevant national securities
      exchange, as the case may be, and
      (b)
      keep such registration, approval or listing, as the case may be, continuously
      effective until the earlier of (i) the date on which all of the Registrable
      Securities have been sold, (ii) two (2) years from the effective date of any
      such registration, or (iii) the date on which all of the Securities may be
      sold
      without restriction pursuant to Rule 144 of the Securities Act; subject to
      the
      terms
      and
      limitations set forth in Section 4.25. The Registrable Securities shall be
      registered by the Company under the Securities Act if required by Section 4.25
      and subject to the conditions stated therein.

     

    4.30   Future
      Financing.If,
      at
      any time the Debenture A is outstanding, the Company, or its successors in
      interest due to mergers, consolidations and/or acquisitions (the “Successors-in-Interest”),
      is
      funded an amount equal to or exceeding Five Million United States Dollars
      ($5,000,000), the Company or the Successors-in-Interest, as the case may be,
      agrees to pay the Purchaser an amount equal to One Hundred Fifty Percent (150%)
      of the then outstanding Debenture A (the “Lump
      Sum Payment”).
      Upon
      the Purchaser’s receipt of the Lump Sum Payment, any and all remaining
      obligations then outstanding between the Company or the Successors-in-Interest,
      as the case may be, and the Purchaser in connection with this Agreement and
      the
      Debenture A shall be deem satisfied, and the Agreement and the Debenture A
      shall
      be terminated. This provision shall survive both Closing and
      Post-Closing.

     

    4.31   Company’s
      Right of Redemption.
      In
      addition to any right of the Company to redeem any unconverted amount of the
      Debenture A, the Company shall have any redemption right set forth in the
      Debenture A. Notwithstanding anything contained herein or in the Debenture
      A to
      the contrary, the Company shall only have the right to redeem, in whole, the
      aggregate principal balance of the outstanding Debenture A. The Company shall
      specifically not have the right to redeem a portion of the aggregate principal
      balance of the outstanding Debenture A. 

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    4.32  Restriction
      on Sale of Capital Stock.
      During
      the Restriction Period, the Company shall not, without the prior written consent
      of the Purchaser, (i) issue or sell any Common Stock or Preferred Stock without
      consideration or for a consideration per share less than the eighty percent
      (80%) of the closing bid price of the Common Stock determined immediately prior
      to its issuance, (ii) issue or sell any Preferred Stock, Convertible Debenture,
      warrant, option, right, contract, call, or other security or instrument granting
      the holder thereof the right to acquire shares of Common Stock without
      consideration or for a consideration per share less than eighty percent (80%)
      of
      the closing bid price of the Common Stock determined immediately prior to its
      issuance, or for a consideration per share which is variable, floating or
      adjustable after issuance, or (iii) file any registration statement on Form
      S-8.

     

     

    ARTICLE
      V

     

    TERMINATION

     

    5.1  Termination
      by the Company or the Purchaser.
      This
      Agreement shall be terminated as follows upon the occurrence of any of the
      following events (each an “Event of Default”):

     

    (a)  Automatically
      terminated prior to Post-Closing if:

     

    (i)  there
      shall be in effect any statute, rule, law or regulation, including an amendment
      to Regulation D or an interpretive release promulgated or issued thereunder,
      that prohibits the consummation of the Post-Closing or if the consummation
      of
      the Post-Closing would violate any non-appealable final judgment, order, decree,
      ruling or injunction of any court of or governmental authority having competent
      jurisdiction;

     

    (ii)  the
      Post-Closing shall not have occurred by the Post-Closing Date through no fault
      of the Company; 

     

    (iii)  the
      Company causes the Post-Closing to not occur by the Post-Closing
      Date;

     

    (iv)  if
      the
      Company becomes listed for trading on the OTCBB, trading in the common stock
      of
      the Company has been suspended, delisted, or otherwise ceased by the Commission
      or the NASD or other exchange or the Nasdaq (whether the National Market or
      otherwise); or

     

    (v)  the
      Company fails to deliver or cause to be delivered the Debenture A, the Escrow
      Shares and the Warrant as required by and by the date set forth in Section
      2.2
      hereof.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    (b)  By
      Purchaser giving written notice of such termination to the Company, if the
      Company has breached any representation, warranty, covenant or agreement
      contained in this Agreement or the other Transaction Documents following receipt
      by the Company of notice of such breach.

     

    (c)  By
      Company giving written notice of such termination to the Purchaser, if the
      Purchaser has materially breached any representation, warranty, covenant or
      agreement contained in this Agreement or the other Transaction Documents and
      such breach is not cured within five (5) Business Days following receipt by
      the
      Purchaser of notice of such breach. 

     

    5.2  Remedies.
      Notwithstanding anything else contained herein to the contrary, if an Event
      of
      Default has occurred pursuant to Section 5.1, the defaulting party shall be
      deemed in default hereof and the non-defaulting party shall be entitled to
      pursue all available rights without further notice. The defaulting party shall
      pay all attorney’s fees and costs incurred in enforcing this Agreement and the
      other Transaction Documents. In addition, all unpaid amounts shall accrue
      interest at a rate of 15% per
      annum.

     

     

    ARTICLE
      VI

     

    LEGAL
      FEES AND DEFAULT INTEREST RATE

     

    In
      the
      event any party hereto commences legal action to enforce its rights under this
      Agreement or any other Transaction Document, the non-prevailing party shall
      pay
      all reasonable costs and expenses (including but not limited to reasonable
      attorney’s fees, accountant’s fees, appraiser’s fees and investigative fees)
      incurred in enforcing such rights. In the event of an Event of Default by any
      party hereunder, interest shall accrue on all unpaid amounts due the aggrieved
      party at the rate of 15% per
      annum,
      compounded annually.

     

     

    ARTICLE
      VII

     

    MISCELLANEOUS

     

    7.1  Fees
      and Expenses.
      Except
      as set forth in this Agreement each party shall pay the fees and expenses of
      its
      advisers, counsel, accountants and other experts, if any, and all other expenses
      incurred by such party incident to the negotiation, preparation, execution,
      delivery and performance of this Agreement. The Company shall pay the fees
      of
      $5,000 to the Escrow Agent as set forth in Section 4.28 hereto and all stamp
      and
      similar taxes and duties levied in connection with the issuance of the Debenture
      A and the Warrant (and, upon conversion or exercise thereof, the Underlying
      Shares and the Warrant Shares) pursuant hereto. The Purchaser shall be
      responsible for any taxes (other than income taxes) payable by the Purchaser
      that may arise as a result of the investment hereunder or the transactions
      contemplated by this Agreement or any other Transaction Document. Whether or
      not
      the transactions contemplated hereby and thereby are consummated or this
      Agreement is terminated. The Company shall pay (i) all costs, expenses,
      fees and all taxes incident to and in connection with: (A) the preparation,
      printing and distribution of any registration statement required hereunder
      and
      all amendments and supplements thereto (including, without limitation, financial
      statements and exhibits), and all preliminary and final Blue Sky memoranda
      and
      all other agreements, memoranda, correspondence and other documents prepared
      and
      delivered in connection herewith, (B) the issuance and delivery of the
      Securities, (C) the exemption from registration of the Securities for offer
      and sale to the Purchaser under the securities or Blue Sky laws of the
      applicable jurisdiction, (D) furnishing such copies of any registration
      statement required hereunder, the preliminary and final prospectuses and all
      amendments and supplements thereto, as may reasonably be requested for use
      in
      connection with resales of the Securities, and (E) the preparation of
      certificates for the Securities (including, without limitation, printing and
      engraving thereof), (ii) all fees and expenses of counsel and accountants
      of the Company and (iii) all expenses and fees of listing on securities
      exchanges, if any. 

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    7.2  Entire
      Agreement; Amendments.
      This
      Agreement, together with all of the Exhibits and Schedules annexed hereto,
      and
      any other Transaction Document contain the entire understanding of the parties
      with respect to the subject matter hereof and supersede all prior agreements
      and
      understandings, oral or written, with respect to such matters. This Agreement
      shall be deemed to have been drafted and negotiated by both parties hereto
      and
      no presumptions as to interpretation, construction or enforceability shall
      be
      made by or against either party in such regard.

     

    7.3  Notices.
      Any
      notice, request, demand, waiver, consent, approval, or other communication
      which
      is required or permitted to be given to any party hereunder shall be in writing
      and shall be deemed to have been duly given only if delivered to the party
      personally or sent to the party by facsimile upon electronic confirmation and
      receipt (promptly followed by a hard-copy delivered in accordance with this
      Section 7.3) or three days after being mailed by registered or certified mail
      (return receipt requested), with postage and registration or if sent by
      nationally recognized overnight courier, one day after being mailed
      certification fees thereon prepaid, addressed to the party at its address set
      forth below:

     

     

     

    
 

    
      
        	
                If
                  to the Company:

              	
                Global
                  IT Holdings, Inc.

              
	 	
                589
                  8th Avenue

              
	 	
                18th
                  Floor

              
	 	
                New
                  York, NY 10018

              
	 	
                Attn:
                  Ralph Clark

              
	 	
                Tel:
                  (212) 983-5630 

              
	 	
                Fax:
                  (212) 972-4012

              
	 	 
	
                With
                  copies to:

              	
                Anslow
                  & Jaclin, LLP

              
	 	
                195
                  Route 9 South, Suite 204

              
	 	
                Manalapan,
                  NJ 07726

              
	 	
                Attn:
                  Gregg E. Jaclin, Esq.

              
	 	
                Tel:
                  (732) 409-1212

              
	 	
                Fax:
                  (732) 577-1188

              

      

       

    

    
      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      
         

        
          	
                  If
                    to the Purchaser:

                	
                  See
                    Schedule
                    1
                    attached hereto

                

        

        
          	
                  With
                    copies to:

                	
                  Gottbetter
                    & Partners, LLP

                
	 	
                  488
                    Madison Avenue

                
	 	
                  New
                    York, NY 10022

                
	 	
                  Attn:
                    Adam S. Gottbetter, Esq.

                
	 	
                  Tel:
                    (212) 400-6900

                
	 	
                  Fax:
                    (212) 400-6901

                
	 	 
	
                  If
                    to Escrow Agent:

                	
                  Gottbetter
                    & Partners, LLP 

                
	 	
                  488
                    Madison Avenue

                
	 	
                  New
                    York, NY 10022

                
	 	
                  Attn:
                    Adam S. Gottbetter, Esq.

                
	 	
                  Tel:
                    (212) 400-6900

                
	 	
                  Fax:
                    (212) 400-6901

                

        

         

        
           

        

      

    

    or
      such
      other address as may be designated hereafter by notice given pursuant to the
      terms of this Section 7.3.

     

    7.4  Amendments;
      Waivers.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed, in the case of an amendment, by both the Company and the
      Purchaser, or, in the case of a waiver, by the party against whom enforce-ment
      of any such waiver is sought. No waiver of any default with respect to any
      provision, condition or require-ment of this Agreement shall be deemed to be
      a
      continuing waiver in the future or a waiver of any other provision, condition
      or
      requirement hereof, nor shall any delay or omission of either party to exercise
      any right hereunder in any manner impair the exercise of any such right accruing
      to it thereafter.

     

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

     

    7.6  Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and permitted assigns. This Agreement and any of
      the
      rights, interests or obligations hereunder may be assigned by the Purchaser
      to
      an accredited investor without the consent of the Company as long as such
      assignee agrees to be bound by this Agreement. This Agreement and any of the
      rights, interests or obligations hereunder may not be assigned by the Company
      without the prior written consent of the Purchaser. 

     

    7.7  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.

     

    7.8  Governing
      Law; Venue; Service of Process.
      The
      parties hereto acknowledge that the transactions contemplated by this Agreement
      and the exhibits hereto bear a reasonable relation to the State of New York.
      The
      parties hereto agree that the internal laws of the State of New York shall
      govern this Agreement and the exhibits hereto, including, but not limited to,
      all issues related to usury. Any action to enforce the terms of this Agreement
      or any of its exhibits shall be brought exclusively in the state and/or federal
      courts situated in the County and State of New York. Service of process in
      any
      action by the Purchaser to enforce the terms of this Agreement may be made
      by
      serving a copy of the summons and complaint, in addition to any other relevant
      documents, by commercial overnight courier to the Company at its principal
      address set forth in this Agreement.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    7.9  Survival.
      The
      agreements and covenants of the parties contained in Article IV and this
      Article VII shall survive the Post-Closing (or any earlier termination of
      this Agreement).

     

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

     

    7.11  Publicity.
      The
      Company and the Purchaser shall consult with each other in issuing any press
      releases or otherwise making public statements with respect to the transactions
      contemplated hereby and neither party shall issue any such press release or
      otherwise make any such public statement without the prior written consent
      of
      the other, which consent shall not be unreasonably withheld or delayed, unless
      counsel for the disclosing party deems such public statement to be required
      by
      applicable federal and/or state securities laws. Except as otherwise required
      by
      applicable law or regulation, the Company will not disclose to any third party
      the names of the Purchaser.

     

    7.12  Severability.
      In case
      any one or more of the provisions of this Agreement shall be invalid or
      unenforceable in any respect, the validity and enforceability of the remaining
      terms and provisions of this Agreement shall not in any way be affected or
      impaired thereby and the parties will attempt to agree upon a valid and
      enforceable provision which shall be a reasonable substitute therefore, and
      upon
      so agreeing, shall incorporate such substitute provision in this
      Agreement.

     

    [Signature
      Page Follows]

     

     

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    
 

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed as of the date first indicated above.

     

    Company:

    

    GLOBAL
      IT
      HOLDINGS, INC.,

    a
      Nevada
      corporation

    

    

    By: ________________________

    Name:
      Craig Press

    Title:  
      Chairman and Senior Vice President

    

    

    Purchaser:

    

    HIGHGATE
      HOUSE, LLC,

    a
      Minnesota limited liability company

    

    By:
      HH
      Advisors, LLC, its managing member,

    a
      New
      York limited liability company

    

    By:
       Spencer
      Investment Group, Inc., its 

    managing
      member,

    a
      New
      York corporation

    

    By:
           

    Name:
      Adam S. Gottbetter

    Title:  
      President

    

     

     

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    
 

    Schedule
      1

    

    Purchaser

    

     

    

      
        	
                 

                Name
                  and Address of Purchaser

                 

              	
                 

                Amount
                  of Debenture A to be Purchased

                 

              	
                 

                Number
                  of Warrants

                 

              
	
                 

                Highgate
                  House, LLC

                8400
                  Normandale Lake Blvd.

                Suite
                  920

                Minneapolis,
                  Minnesota 55437

                 

              	
                 

                $950,000
                  Debenture A

              	
                 

                475,000

              

      

    

    

     

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    Schedule
      3.1(a)

    

    Subsidiaries

    

    Platinum
      IT Holdings, Inc., a Delaware corporation 

     

     

     

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    
 

    Schedule
      3.1(c)(1)

    

    Capitalization
      and Registration Rights

    

    The
      certificate of incorporation authorizes 10,000,000,000 shares of Common Stock
      to
      be outstanding at one time. 697,500,000 shares of Common Stock are outstanding.
      The certificate of incorporation also authorizes 10,000,000 shares of Preferred
      Stock to be outstanding at one time. 10 shares of Series A Preferred Stock
      are
      outstanding.

    

    

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    

    

    Schedule
      3.1(2)

    

    Other
      Outstanding Convertible Securities

    

    

    
      	
              Cornell
                Capital Partners, LLC

            	
              $20,000,000
                Standby Equity Distribution Agreement, dated August 25, 2004, and
                Registration Rights Agreement.

            
	
              Advantage
                Fund I, LLC

            	
              Convertible
                Note in the amount of $464,500

            
	
              Lloyd
                Glick

            	
              Convertible
                Note in the amount of $50,000

            
	
              Advantage
                Capital Development Corp.

            	
              Convertible
                Note in the amount of $671,500, and 

              Registration
                Rights Agreement.

            

    

     

     

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

     

    Schedule
      3.1(d)

    

    Equity
      and Equity Equivalent Securities

    

     

    

    
      	
              Cornell
                Capital Partners, LLC

            	
              $20,000,000
                Standby Equity Distribution Agreement, dated August 25, 2004, and
                Registration Rights Agreement.

            
	
              Advantage
                Fund I, LLC

            	
              Convertible
                Note in the amount of $464,500

            
	
              Lloyd
                Glick

            	
              Convertible
                Note in the amount of $50,000

            
	
              Advantage
                Capital Development Corp.

            	
              Convertible
                Note in the amount of $671,500, and 

              Registration
                Rights Agreement.

            

    

     

     

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

     

    

    Schedule
      3.1(e)

    

    Conflicts

    

    None.
      

    

     

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

     

    
 

    Schedule
      3.1(f)

    

    Consents
      and Approvals

    

    SEC
      Filing - Form D

    

    Minnesota
      Blue Sky Filing (or exemption therefrom)

    

     

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

     

    

    Schedule
      3.1(g)

    

    Litigation

    

    None.
      

    

     

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    
 

    Schedule
      3.1(h)

    

    Defaults
      and Violations

    

    As
      part
      of the Asset Purchase Agreement with Parker, Clark Data Processing and Platinum
      I.T. Consulting, Inc., Global and Platinum assumed the lease for a portion
      of
      the 10th
      Floor in
      the building located at 535 Fifth Avenue, New York, New York. Global and
      Platinum subsequently defaulted on such lease, and the parties are presently
      communicating to determine an appropriate resolution to the matter.

    

    

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    

    Schedule
      3.1(n)

    

    Undisclosed
      Liabilities

    

    

    
      	
              Cornell
                Capital Partners, LLC

            	
              $20,000,000
                Standby Equity Distribution Agreement, dated August 25, 2004, and
                Registration Rights Agreement.

            
	
              Advantage
                Fund I, LLC

            	
              Convertible
                Note in the amount of $464,500

            
	
              Lloyd
                Glick

            	
              Convertible
                Note in the amount of $50,000

            
	
              Advantage
                Capital Development Corp.

            	
              Convertible
                Note in the amount of $671,500, and 

              Registration
                Rights Agreement.

            
	
              Parker,
                Clark Data Processing, Inc., and Platinum I.T. Consulting,
                Inc.

            	
              Promissory
                Note in the amount of $1,100,000 dated August 26,
                2004

            

    

    

     

    
      
        
        

      

      
        40

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