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Exhibit 10.6  

 
 

DIVIDEND CAPITAL TOTAL REALTY TRUST INC.
  EQUITY INCENTIVE PLAN    
    

        DIVIDEND CAPITAL TOTAL REALTY TRUST INC., a Maryland corporation (the "Company"), adopted this Equity Incentive Plan (the "Plan") effective
January 12, 2006, for the benefit of the eligible non-employee directors, officers, other employees, advisors and consultants providing services to the Company (which may include
employees of the Advisor and the Manager). 

        The
purpose of the Plan is to enable the Company to obtain and retain the services of eligible individuals considered essential to the long range success of the Company, by offering such
individuals an opportunity to participate in the Company's growth through the ownership of stock in the Company. 

ARTICLE I

DEFINITIONS  

        Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. 

        "Administrator"
shall mean, with respect to the Company, the Board or, if the Board so delegates its authority, the Compensation Committee. 

        "Advisor"
shall mean Dividend Capital Total Advisors LLC, a Delaware limited liability company. 

        "Affiliate"
or "Affiliated" means, as to any individual, corporation, partnership, trust, limited liability company or other legal entity (i) any person or entity directly or
indirectly through one or more intermediaries controlling, controlled by or under common control with another person or entity; (ii) any person or entity directly or indirectly owning,
controlling, or holding with power to vote ten
percent (10%) or more of the outstanding voting securities of another person or entity; (iii) any officer, director, general partner or trustee of such person or entity; (iv) any person
ten percent (10%) or more whose outstanding voting securities are directly or indirectly owned, controlled or held, with power to vote, by such other person; and (v) if such other person or
entity is an officer, director, general partner or trustee of a person or entity, the person or entity for which such person or entity acts in any such capacity. 

        "Award"
shall mean any grant of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, or Other Share-Based Awards under the Plan. 

        "Beneficial
Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. 

        "Board"
shall mean the Board of Directors of the Company. 

        "Cause,"
for purposes of all awards other than Directors Options, and unless otherwise defined in a Participant's employment or severance agreement with the Participant's Employer or the
Company, shall mean (i) gross negligence or willful misconduct, (ii) an uncured breach of any of the Participant's material duties, (iii) fraud or other conduct against the
material best interests of the Company, or (iv) a conviction of a felony, if such conviction has a material adverse effect on the Company or an Affiliate of the Company. 

        "Change
in Control" shall mean a change in ownership or control of the Company effected through either of the following transactions: 

        (a)   any
Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person
any securities acquired directly from the Company or its affiliates) representing 50% or more of the combined voting power of the Company's then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (c) below; or 

 

        (b)   a
change in the composition of the Board over a period of 36 consecutive months (or less) such that a majority of the Board members (rounded up to the nearest whole
number) ceases, by reason of one or more proxy contests for the election of Board members, to be comprised of individuals who either (i) have been Board members continuously since the beginning
of such period or (ii) have been elected or nominated for election as Board members during such period by at least two-thirds (2/3) of the Board members described in
clause (i) who were still in office at the time such election or nomination was approved by the Board; or 

        (c)   there
is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its Affiliates) representing 50% or more of the combined voting power of the Company's then outstanding securities; or 

        (d)   the
stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least 50% of the
combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale. 

Notwithstanding
the foregoing, a Change of Control shall not be deemed to have occurred (i) solely as the result of a Public Offering or (ii) by virtue of the consummation of any
transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of
transactions. 

        "Code"
shall mean the Internal Revenue Code of 1986, as amended. 

        "Common
Stock" shall mean the common stock of the Company, par value $0.01 per share, issued or authorized to be issued in the future, but excluding any preferred stock and any warrants,
options or other rights to purchase Common Stock. 

        "Company"
shall mean Dividend Capital Total Realty Trust Inc., a Maryland corporation. 

        "Compensation
Committee" shall mean the compensation committee of the Board, which shall at all times consist of two or more persons who are (i) "non-employee
directors" within the meaning of Rule 16b(3), (ii) Independent Directors and (iii) "outside directors" within the meaning of Section 162(m) of the Code. 

        "Director
Option" shall mean an Option granted pursuant to Article V. 

        "Eligible
Individual" shall mean any director, officer or other employee of the Company, or any consultant or advisor of the Company who is a natural person. 

        "Employer"
shall mean either the Company, the Advisor or the Manager as the context may require. 

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        "Exchange
Act" shall mean the Securities Exchange Act of 1934, as amended. 

        "Fair
Market Value" on any date shall mean the Closing Price (as defined below) per Share on such date if such date is a Trading Day or, if such date is not a Trading Day, the Trading
Day immediately prior to such date. The "Closing Price" on any date shall mean the last sale price, regular way (as defined below), or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the
principal national securities exchange on which the Shares are listed or admitted to trading or, if the Shares are not listed or admitted to trading on any national securities exchange, the last
quoted price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by The NASDAQ Stock Market, Inc.
("NASDAQ") or, if NASDAQ is no longer in use, the principal automated quotation system that may then be in use or, if the Shares are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market-maker authorized to make a market in the Shares selected by the Board or, if there is no professional market maker making a market in the Shares,
the price at which the Company is then offering Shares to the public if the Company is then engaged in a public offering of Shares, or if the Company is not then offering Shares to the public, the
fair market value of a Share as determined by the Board, in its absolute discretion. "Trading Day" shall mean a day on which the principal national securities exchange or national automated quotation
system on which the Shares are listed or admitted to trading is open for the transaction of business or, if the Shares are not listed or admitted to trading on any national securities exchange or
national automated quotation system, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of Colorado are authorized or obligated by law or executive
order to close. The term "regular way" means a trade that
is effected in a recognized securities market for clearance and settlement pursuant to the rules and procedures of the National Securities Clearing Corporation, as opposed to a trade effected
"ex-clearing" for same day or next day settlement. 

        "Incentive
Stock Option" shall mean an Option that is intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. 

        "Independent
Director" shall mean a member of the Board who is not, and within the last two years has not been, directly or indirectly, associated with the Advisor or the Manager
or any of their Affiliates by virtue of (i) ownership of an interest in the Advisor or the Manager or any of their Affiliates, (ii) employment by the Advisor or the Manager or any of
their Affiliates, (iii) service as an officer or director of the Advisor or the Manager or any of their Affiliates, (iv) performance of services, other than as a director, for the
Company, (v) service as a director or trustee of more than three real estate investment trusts advised by the Advisor or its Affiliates, or (vi) maintenance of a material business or
professional relationship with the Advisor or the Manager or any of their Affiliates. An indirect relationship shall include circumstances in which a director's spouse, parents, children, siblings,
mother- or father-in-law, sons- or daughters-in-law or brothers- or sisters-in-law is or has been associated with
the Advisors or the Manager or any of their Affiliates. A business or a professional relationship is considered material if gross income derived by the director from the Advisor or the Manager or
Affiliates thereof exceeds five percent (5%) of either the director's annual gross income during either of the last two years or the director's net worth determined on a fair market value
basis. 

        "Liquidity
Event" shall have the meaning ascribed to such term in the Company's prospectus contained in the Form S-11 Registration Statement (file
no. 333-125338), as declared effective on January     , 2006. 

        "Manager"
shall mean Dividend Capital Property Management LLC, a Colorado limited liability company. 

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        "Non-Employee
Director" shall have the meaning ascribed to such term in Section 5.1. 

        "Non-Qualified
Stock Option" shall mean an Option which is not intended to be an Incentive Stock Option. 

        "Option"
shall mean a stock option granted under Article IV or V. 

        "Other
Share-Based Award" shall mean an Award granted under Article IX. 

        "Participant"
shall mean an eligible person who is granted an Award. 

        "Person"
shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (i) the Company or any of its Affiliates, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates,
(iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company. 

        "Plan"
shall mean this Equity Incentive Plan of Dividend Capital Total Realty Trust Inc. 

        "Restricted
Stock" shall mean an Award of Shares granted under Article VII. 

        "Restricted
Stock Unit" shall mean an Award of a Unit granted under Article VIII. 

        "Rule 16b-3"
shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time. 

        "Securities
Act" shall mean the Securities Act of 1933, as amended. 

        "Shares"
shall mean shares of Common Stock issuable upon the grant, vesting and/or exercise of Awards under the Plan. 

        "Stock
Appreciation Right" or "SAR" shall mean an Award granted under Article VI. 

        "Termination
of Service" shall mean the time when the service provider/service recipient relationship between a Participant and the Company is terminated for any reason, with or without
Cause, including,
but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding (i) termination where there is a simultaneous reemployment or continuing
employment of a Participant by the Manager or the Advisor or, in the absolute discretion of the Administrator, an Affiliate of the Manager or the Advisor, (ii) at the absolute discretion of the
Administrator, terminations which result in a temporary severance of the service provider/service recipient relationship, and (iii) at the absolute discretion of the Administrator, terminations
which are followed by the simultaneous establishment of a consulting relationship with the Participant by the Company, the Manager or the Advisor. The Administrator, in its absolute discretion, shall
determine the effect of all matters and questions relating to Termination of Service, including, but not by way of limitation, the question of whether a Termination of Service resulted from a
discharge for Cause, and all questions or whether a particular leave of absence constitutes a Termination of Service. 

        "Unit"
shall mean a unit, the value of which shall always be equal to the value of one Share. 

ARTICLE II

SHARES SUBJECT TO PLAN  

        2.1    Shares Subject to Plan.    The aggregate number of Shares which may be issued upon grant, vesting or exercise
of Awards under the Plan shall not exceed five million (5,000,000), subject to adjustment as provided herein. The Shares issuable under the Plan may be either previously authorized but unissued
shares or treasury shares. 

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        2.2    Individual Limitations.    No more than two hundred thousand (200,000) Shares may be made subject to Options or
SARs to a single individual in a single calendar year, subject to adjustment as provided herein, and no more than two hundred thousand (200,000) Share may be made subject to stock-based awards other
than Options or SARs (including Restricted Stock and Restricted Stock Units or Other Stock-Based Awards) to a single individual in a single calendar year, in either case, subject to adjustment as
provided herein. Determinations made in respect of the limitations set forth in the immediately preceding sentence shall be made in a manner consistent with Section 162(m) of the Code. 

        2.3    Expired Awards and Other Rights.    If any shares subject to an Award are forfeited, cancelled, exchanged or
surrendered or if an Award terminates or expires without a distribution of shares to the Participant, or if Shares are surrendered or withheld as payment of either the exercise price of an Award
and/or withholding taxes in respect of an Award, the Shares with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, withholding, termination or
expiration, again be available for Awards under the Plan. Upon the exercise of any Award granted in tandem with any other Award, such related Award shall be cancelled to the extent of the number of
Shares as to which the Award is exercised and, notwithstanding the foregoing, such number of Shares shall no longer be available for Awards under the Plan. 

        2.4    Adjustments to Shares, Awards.    In the event that the Administrator shall determine that any dividend or
other distribution (whether in the form of cash, Shares, or other property), recapitalization, stock split, reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or event, affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of
Participants under the Plan, then the Administrator shall make such equitable changes or adjustments as it deems necessary or appropriate to any or all of (i) the number and kind of Shares or
other property (including cash) that may thereafter be issued in connection with Awards, (ii) the number and kind of Shares or other property (including cash) issued or issuable in respect of
outstanding Awards, (iii) the exercise price, grant price, or purchase price relating to any Award; provided, that, with respect to Incentive
Stock Options, such adjustment shall be made in accordance with Section 424(h) of the Code; and (iv) the performance goals applicable to outstanding Awards. 

ARTICLE III

GRANTING OF AWARDS  

        3.1    Eligibility.    Any Eligible Individual selected by the Administrator pursuant to
Section 3.2(a)(i) shall be eligible to receive an Award. 

        3.2    Granting of Awards.    

        (a)   The
Administrator shall from time to time, in its absolute discretion, and subject to applicable limitations of the Plan: 

        (i)    determine
which Eligible Individuals should be granted Awards; 

        (ii)   determine
the number of Shares to be subject to such Awards; and 

        (iii)  determine
the terms and conditions of such Awards, consistent with the Plan. 

        (b)   Upon
the selection of a Participant to be granted an Award, the Administrator shall instruct the Secretary of the Company to issue the Award and may impose such
conditions on the grant of the Option as it deems appropriate. 

        (c)   Notwithstanding
Section 3.1(a) and (b), no Award shall be granted to any Participant to the extent that the grant of such Award could, at the time of grant
or afterwards, impair the Company's status as a real estate investment trust within the meaning of the Code or result in a 

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violation
of any of the stock ownership and transfer restrictions imposed under the Company's Articles of Incorporation. 

ARTICLE IV

STOCK OPTIONS  

        4.1    Option Agreement.    Each Option shall be evidenced by a written Stock Option Agreement, which shall be
executed by the Participant and an authorized officer of the Company and which shall contain such terms and conditions as the Administrator shall determine consistent with the Plan. 

        4.2    Exercise Price.    The exercise price per Share of the Shares subject to each Option shall be set by the
Administrator; provided, however, that such exercise price shall not be less than the Fair Market Value
of a Share on the date the Option is granted. 

        4.3    Option Term.    The term of an Option shall be set by the Administrator in its absolute discretion;  provided, however, that no Option shall be granted with a term of more than five years from the later of
(i) the date of a Liquidity Event, or (ii) the date the Option is granted. The Administrator may extend the term of any outstanding Option in connection with any Termination of Service
of the Participant, or amend any other term or condition of such Option relating to such a termination. 

        4.4    Option Vesting.    

        (a)   The
period during which the right to exercise an Option in whole or in part vests in the Participant shall be set by the Administrator and the Administrator may
determine that an Option may not be exercised in whole or in part for a specified period after it is granted; provided,  however, that, unless the
Administrator otherwise provides in the terms of the Stock Option Agreement or otherwise, no Option shall be exercisable by any Participant who is then subject to Section 16 of the Exchange Act
within the period ending six months and one day after the date the Option is granted. The vesting of an Option may be made subject to the attainment of one or more performance goals. 

        (b)   No
portion of an Option which is unexercisable at Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator in
any Stock Option Agreement or by action of the Administrator following the grant of the Option. 

        4.5    Partial Exercise.    An Option may be exercised in whole or in part; however, an Option shall not be
exercisable with respect to fractional Shares and the Administrator may require that, by the terms of the Stock Option Agreement, a partial exercise be allowed only with respect to a minimum number of
Shares. 

        4.6    Manner of Exercise.    All or a portion of an Option shall be deemed exercised upon delivery of all of the
following to the Secretary of the Company (or such other officer as identified in the applicable Stock Option Agreement) with a copy of such documents delivered concurrently to the Secretary of the
Participant's Employer: 

        (a)   a
written notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised, and such notice shall
be signed by the Participant or other person then entitled to exercise the Option or such portion of the Option; 

        (b)   such
representations and documents as the Administrator, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of
the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations; provided, the Administrator may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing
stop-transfer notices to agents and registrars; 

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        (c)   in
the event that the Option shall be exercised by any person or persons other than the Participant, as determined pursuant to Section 12.2, appropriate proof of
the right of such person or persons to exercise the Option; and 

        (d)   full
satisfaction of the exercise price for the Shares with respect to which the Option, or portion thereof, is exercised;  provided, that the in the discretion of the Administrator and subject to the terms
set forth in the applicable Award Agreement, the exercise price for
Shares subject to an Option may be paid (i) in cash or cash equivalents, (ii) by an exchange of Shares previously owned by the Participant, (iii) through a "broker cashless
exercise" procedure approved by the Administrator (to the extent permitted by law), (iv) by having Shares with an aggregate Fair Market Value on the date of exercise equal to the aggregate
exercise price withheld by the Company or (v) a combination of the above, in any case in an amount having a combined value equal to such exercise price. 

ARTICLE V

DIRECTOR OPTIONS  

        5.1    Eligibility.    Only directors of the Company who at the time a Director Option is granted under this
Article V are "non-employee directors" within the meaning of Rule 16b-3 or any similar rule which may subsequently be in effect ("Non-Employee
Directors") shall be eligible to receive a Director Option under this Article V. 

        5.2    Award of Stock Options.    

        (a)   Effective
on the later of (i) the date on which a Non-Employee Director becomes a member of the Board or (ii) the date the Plan is adopted by
the Company, or (iii) the date on which the Company closes on the sale of at least two hundred thousand (200,000) shares of its common stock pursuant to its Form S-11
Registration Statement (file no. 333-125338), then each Non-Employee Director who satisfies the conditions set forth in Section 5.1 will automatically be awarded
a Director Option to purchase ten thousand (10,000) Shares (subject to adjustment pursuant to Section 2.4) (an "Initial Option"). Effective on the date of each Annual Meeting of Stockholders of
the Company (an "Annual Meeting"), commencing with the Company's Annual Meeting in 2007, each Non-Employee Director then in office will automatically be awarded, unless otherwise
determined by the Administrator, a Director Option to purchase five thousand (5,000) Shares (subject to adjustment pursuant to Section 2.4) (a "Subsequent Option"). The Director Options are not
intended to qualify as Incentive Stock Options. 

        (b)   Notwithstanding
any other provision of the Plan, the number of Director Options to be issued pursuant to this Article V shall be reduced or eliminated to the
extent that the issuance of such Director Options would otherwise (i) enable the Independent Directors as a group to hold more than 10% of the outstanding Shares if such Director Options were
exercised; (ii) result in the Company being "closely-held" within the meaning of Section 856(h) of the Code; (iii) cause the Company to own, directly or
constructively, 10% or more of the ownership interests in a tenant of the property of the Company (or of the property of one or more partnerships in which the Company is a partner), within the meaning
of Section 856(d)(2)(B) of the Code; (iv) result in a violation of any of the stock ownership and transfer restrictions imposed under the Company's Articles of Incorporation; or
(v) cause, in the opinion of counsel to the Company, the Company to fail to qualify (or create, in the opinion of counsel to the Company, a risk that the Company would no longer qualify) as a
real estate investment trust within the meaning of the Code. To the extent that the issuance of Director Options pursuant to Section 5.2(a) would violate any of these limitations, the
number of Director Options to be issued to each of the Non-Employee Directors shall be reduced pro rata (with those Director Options not granted pursuant to this
Section 5.2(b) referred to as the "Excess Options"). To the extent that the number of Director Options issued to a Non-Employee Director is reduced in any year as a result of
the application of 

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these
limitations, the Excess Options shall be issued to the Non-Employee Director in any subsequent year in which issuance of such Excess Options, after taking into account the Director
Options to be issued to the Non-Employee Directors in such subsequent year under Section 5.2(a), would not violate the limitations imposed by this Section 5.2(b). To the
extent that the issuance of an Excess Option is delayed until a subsequent year under this Section 5.2, the Excess Option shall be treated for all purposes under the Plan as having been issued
in such subsequent year. 

        5.3    Stock Option Certificates.    The award of a Director Option shall be evidenced by a certificate executed by an
officer of the Company. 

        5.4    Option Price.    The exercise price per Share of the Shares subject to each Initial Option granted shall be
$11.00 per Share, and the exercise price per Share of the Shares subject to each Subsequent Option granted shall be set by the Administrator; provided,  however, that the exercise price per Share under each Subsequent Option shall not be less than the Fair Market Value of a Share on the date such
Subsequent Option is granted. 

        5.5    Exercise and Term of Director Options.    

        (a)   Director
Options may be exercised by the delivery of written notice of exercise and full satisfaction of the exercise price for the Shares with respect to which the
Option, or portion thereof, is exercised; provided, that the in the discretion of the Administrator and subject to the terms set forth in the applicable
Stock Option Certificate, the exercise price for Shares subject to an Option may be paid (i) in cash or cash equivalents, (ii) by an exchange of Shares previously owned by the
Participant, (iii) through a "broker cashless exercise" procedure approved by the Administrator (to the extent permitted by law), (iv) by having Shares with an aggregate Fair Market
Value on the date of exercise
equal to the aggregate exercise price withheld by the Company or (v) a combination of the above, in any case in an amount having a combined value equal to such exercise price. 

        (b)   Director
Options shall lapse on such date as shall be determined by the Administrator and set forth in the Award Agreement evidencing such Director Option;  provided, that such date shall not be later than the
tenth anniversary of the date of grant of such Director Option. Unless otherwise determined by the
Administrator and subject to such terms and conditions as are set forth in the Award Agreement evidencing such Director Option, each Non-Employee Director's Initial Option shall become
exercisable as follows: (i) 20% of the Shares on the date of grant, (ii) an additional 20% of the Shares on each anniversary following the date of grant for a period of four years
until 100% of the Shares become exercisable. In the event such Director Options have not lapsed prior thereto, a Non-Employee Director's Subsequent Options shall become fully exercisable
on the second anniversary of the date on which each such Subsequent Option was granted. 

        (c)   Director
Options shall continue to be exercisable until the such date as shall be determined by the Administrator and set forth in the Award Agreement evidencing such
Director Option; provided, that such date shall not be later than the tenth anniversary of the date of grant of such Director Option. Notwithstanding
the generality of the foregoing, Director Options shall continue to be exercisable in the case of the Non-Employee Director's death or disability for a period ending on the first
anniversary of such death or disabling event, provided that the death or disabling event occurs while the person is a Non-Employee Director and prior to his or her removal for Cause,
resignation or ceasing to be a Director of the Company for any other reason and the Director Option is otherwise exercisable on the date of the death or disabling event;  provided, however, if the Option is exercised within the first six months after it becomes
exercisable, any Shares issued pursuant to such exercise may not be sold until the six-month anniversary of the date the Option became exercisable. For purposes of this Article V, a
Non-Employee Director is removed "for Cause" for gross negligence or willful misconduct in the execution of his duties; or 

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for
conviction of, or entry of a plea of guilty or nolo contendere to, any felony or any act of fraud, embezzlement, misappropriation, or a crime
involving moral turpitude. 

ARTICLE VI

STOCK APPRECIATION RIGHTS  

        6.1    In General.    An SAR may be granted as a stand-alone Award or in tandem with an Option. An SAR
(i) granted in tandem with an Option may be granted at the time of grant of the related Option or at any time thereafter or (ii) granted in tandem with an Incentive Stock Option may only
be granted at the time of grant of the related Incentive Stock Option. A SAR granted in tandem with an Option shall be
exercisable only to the extent the underlying Option is exercisable. Payment of a SAR may be made in cash, Shares, or other property as specified in the Award Agreement or determined by the
Administrator. 

        6.2    SAR Agreement.    Each SAR shall be evidenced by a written SAR Agreement, which shall be executed by the
Participant and an authorized officer of the Company and which shall contain such terms and conditions as the Administrator shall determine consistent with the Plan. 

        6.3    Right Conferred.    An SAR shall confer on the Participant a right to receive an amount with respect to each
Share subject thereto, upon exercise thereof, equal to the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the SAR (which in the
case of an SAR granted in tandem with an Option shall be equal to the exercise price of the underlying Option). 

        6.4    Exercise Price.    The exercise price per share of the Shares subject to each SAR shall be set by the
Administrator; provided, however, that such exercise price shall not be less than the Fair Market Value of a Share on the date the SAR is granted. 

        6.5    SAR Term.    The term of an SAR shall be set by the Administrator in its absolute discretion;  provided, however, that no SAR shall be granted with a term of more than five years from the
later of (i) the date of a Liquidity Event, or (ii) the date the SAR is granted. The Administrator may extend the term of any outstanding SAR in connection with any Termination of
Service of the Participant, or amend any other term or condition of such SAR relating to such a termination. 

        6.6    SAR Vesting.    

        (a)   The
period during which the right to exercise an SAR in whole or in part vests in the Participant shall be set by the Administrator and the Administrator may determine
that an SAR may not be exercised in whole or in part for a specified period after it is granted; provided,  however, that, unless the Administrator
otherwise provides in the terms of the SAR Agreement or otherwise, no SAR shall be exercisable by any
Participant who is then subject to Section 16 of the Exchange Act within the period ending six months and one day after the date the SAR is granted. The vesting of an SAR may be made
subject to the attainment of one or more performance goals. 

        (b)   No
portion of an SAR which is unexercisable at Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator in
any SAR Agreement or by action of the Administrator following the grant of the SAR. 

        6.7    Partial Exercise.    An SAR may be exercised in whole or in part; however, an SAR shall not be exercisable with
respect to fractional Shares and the Administrator may require that, by the terms of the SAR Agreement, a partial exercise be allowed only with respect to a minimum number of Shares. 

        6.8    Manner of Exercise.    All or a portion of an SAR shall be deemed exercised upon delivery of all of the
following to the Secretary of the Company (or such other officer as identified in the applicable SAR Agreement) with a copy of such documents delivered concurrently to the Secretary of the Company: 

9

 

        (a)   a
written notice complying with the applicable rules established by the Administrator stating that the SAR, or a portion thereof, is exercised, and such notice shall be
signed by the Participant or other person then entitled to exercise the SAR or such portion of the SAR; 

        (b)   such
representations and documents as the Administrator, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of
the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations; provided, the Administrator may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing
stop-transfer notices to agents and registrars; and 

        (c)   in
the event that the SAR shall be exercised by any person or persons other than the Participant, as determined pursuant to Section 12.2, appropriate proof of the
right of such person or persons to exercise the SAR. 

ARTICLE VII

RESTRICTED STOCK  

        7.1    Restricted Stock.    The Administrator is authorized to grant Restricted Stock to Participants on the following
terms and conditions: 

        7.2    Restricted Stock Agreement.    Each Restricted Stock Award shall be evidenced by a written Restricted Stock
Agreement, which shall be executed by the Participant and an authorized officer of the Company
and which shall contain such terms and conditions as the Administrator shall determine consistent with the Plan. 

        7.3    Issuance and Restrictions.    Restricted Stock shall be subject to such restrictions on transferability and
other restrictions, if any, as the Administrator may impose at the date of grant or thereafter, which restrictions may lapse separately or in combination at such times, under such circumstances, in
such installments, or otherwise, as the Administrator may determine. The Administrator may place restrictions on Restricted Stock that shall lapse, in whole or in part, only upon the attainment of
performance goals. Except to the extent restricted under the Award Agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a stockholder
including, without limitation, the right to vote Restricted Stock and the right to receive dividends thereon. 

        7.4    Forfeiture.    Upon Termination of Service during the applicable restriction period, Restricted Stock and any
accrued but unpaid dividends that are then subject to restrictions shall be forfeited; provided, that the Administrator may provide, by rule or
regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event
of terminations resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of Restricted Stock. 

        7.5    Certificates for Stock.    Certificates representing Restricted Stock granted under the Plan may be evidenced
in such manner as the Administrator shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company shall retain physical possession of the certificate. 

        7.6    Dividends.    Dividends paid on Restricted Stock shall be either paid at the dividend payment date, or deferred
for payment to such date as determined by the Administrator, in cash or in unrestricted Shares having a Fair Market Value equal to the amount of such dividends. Shares distributed in connection with a
stock split or stock dividend, and other property distributed as a 

10

 

dividend,
shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Shares or other property has been distributed. 

ARTICLE VIII

RESTRICTED STOCK UNITS  

        8.1    Restricted Stock Units.    The Administrator is authorized to grant Restricted Stock Units to Participants,
subject to the terms and conditions contained in the Plan and the applicable Award Agreement. 

        8.2    Restricted Stock Agreement.    Each Restricted Stock Unit Award shall be evidenced by a written Restricted
Stock Unit Agreement, which shall be executed by the Participant and an authorized officer of the Company and which shall contain such terms and conditions as the Administrator shall determine
consistent with the Plan. 

        8.3    Award and Restrictions.    Delivery of Shares or cash, as determined by the Administrator, will occur upon
expiration of the deferral period specified for Restricted Stock Units by the Administrator. The Administrator may place restrictions on Restricted Stock Units that shall lapse, in whole or in part,
only upon the attainment of performance goals. 

        8.4    Forfeiture.    Upon Termination of Service during the applicable deferral period or portion thereof to which
forfeiture conditions apply, or upon failure to satisfy any other conditions precedent to the delivery of Shares or cash to which such Restricted Stock Units relate, all Restricted Stock Units shall
be forfeited; provided, that the Administrator may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Restricted Stock Units will be waived in whole or in part in the event of termination resulting from specified causes, and the Administrator may
in other cases waive in whole or in part the forfeiture of Restricted Stock Units. 

ARTICLE IX

OTHER AWARDS  

        9.1    Other Share-Based Awards.    The Administrator shall have the authority to grant Awards to Participants in the
form of Other Share-Based Awards, as deemed by the Administrator to be consistent with the purposes of the Plan. Each Other Share-Based Award shall be evidenced by a written Award Agreement, which
shall be executed by the Participant and an authorized officer of the Company and which shall contain such terms and conditions as the Administrator shall determine. Awards granted pursuant to this
Article IX may be granted with value and payment contingent upon the attainment of one or more performance goals. The Administrator shall determine the terms and conditions of such Awards at
the date of grant or thereafter. 

ARTICLE X

CONDITIONS TO ISSUANCE OF SHARES.  

        10.1    Issuance.    The Company shall not be required to issue or deliver any Shares purchased upon the grant,
vesting and/or exercise of any Award, or portion thereof, prior to fulfillment of all of the following conditions: 

        (a)   the
registration of such Shares for listing on all stock exchanges on which the Shares are then listed; 

        (b)   the
completion of any registration or other qualification of such Shares under any state or federal law, or under the rulings of regulations of the Securities and
Exchange Commission or any 

11

 

other
governmental regulatory body which the Administrator shall, in its absolute discretion, deem necessary or advisable; 

        (c)   the
obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be
necessary or advisable; 

        (d)   the
lapse of such reasonable period of time following the grant, vesting and/or exercise of the Award as the Administrator may establish from time to time for reasons of
administrative convenience; and 

        (e)   full
satisfaction of the exercise or purchase price for such Shares, plus satisfaction of any Company applicable withholding tax obligations, in either case, in
accordance with the terms of the Plan and the applicable Award Agreement. 

ARTICLE XI

ADMINISTRATION  

        11.1    Administration.    The Plan shall be administered by the Board or, if the Board so delegates its authority, by
the Compensation Committee. If the Board administers the Plan, all references herein to the "Administrator" shall be references to the Board. If the Compensation Committee is appointed to administer
the Plan, all references herein to the "Administrator" shall be references to the Compensation Committee. The Administrator shall have the authority in its absolute discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable
in the administration of the Plan, including, without limitation, the authority to grant Awards; to determine the Eligible Individuals to whom and the time or times at which Awards shall be granted;
to determine the type and number of Awards to be granted, the number of Shares to which an Award may relate and the terms, conditions, restrictions and performance criteria relating to any Award; to
accelerate the vesting and/or of any Award at any time; and to determine whether, to what extent, and under what circumstances an Award may be settled, cancelled, forfeited, exchanged, or surrendered;
to make adjustments in the terms and conditions of, and the performance goals (if any) included in, Awards; to construe and interpret the Plan and any Award; to prescribe, amend and rescind rules and
regulations relating to the Plan; to determine the terms and provisions of the Award Agreements (which need not be identical for each Participant); and to make all other determinations deemed
necessary or advisable for the administration of the Plan. 

        Notwithstanding
the foregoing, neither the Board, the Compensation Committee nor their respective delegates shall have the authority to reprice (or cancel and regrant) any Option or, if
applicable, other Award at a lower exercise, base or purchase price without first obtaining the approval of the Company's stockholders. 

        In
addition, an Award shall not be granted, become vested, be exercised or paid if, in the sole and absolute discretion of the Administrator, the grant, vesting, exercise or payment of
such Award could result in any of the following: 

        (a)   the
Participant's or any other person's ownership of Shares being in violation of any of the stock ownership and transfer restrictions imposed under the Company's
Articles of Incorporation; 

        (b)   the
Shares shall be deemed not to be transferable within the meaning of Section 856 of the Code; 

        (c)   income
to the Company or any other result that could impair the Company's status as a real estate investment trust within the meaning of the Code. 

12

 

        11.2    Duties and Powers of Administrator.    The Administrator may appoint a chairperson and a secretary and may
make such rules and regulations for the conduct of its business as it shall deem advisable, and shall keep minutes of its meetings. All determinations of the Administrator shall be made by a majority
of its members either present in person or participating by conference telephone at a meeting or by written consent. The Administrator may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Administrator or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with
respect to any responsibility the Administrator or such person may have under the Plan. All decisions, determinations and interpretations of the Administrator shall be final and binding on all
persons, including but not limited to the Company, any Parent or Subsidiary of the Company or any Participant (or any person claiming any rights under the Plan from or through any Participant) and any
stockholder. 

        11.3    Professional Assistance; Good Faith Actions.    The Administrator may employ attorneys, consultants,
accountants, appraisers, brokers, or other persons. The Administrator, the Company and the Company's officers shall be entitled to rely upon the advice, opinions or valuations of any such persons. All
actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon all Participants, the Company, stockholders and all other interested
persons. No members of the Administrator shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan and all members of the Administrator and
shall be fully protected by the Company in respect of any such action, determination or interpretation. 

        11.4    Delegation of Authority to Grant Awards.    The Administrator may, but need not, delegate from time to time to
a committee consisting of one or more of the Company's officers authority to grant Awards under the Plan to Eligible Individuals; provided,  however, that
each such Eligible Individual must be an individual other than an "officer," "director" or "beneficial owner of more than ten per cent of
any class of any equity security" of the Company within the meaning of each such term as it is used under Section 16(b) of the Exchange Act. Any delegation hereunder shall be subject to
the restrictions and limits that the Administrator specifies at the time of such delegation of authority and may be rescinded at any time by the Administrator. At all times, any subcommittee appointed
under this Section 11.4 shall serve in such capacity at the pleasure of the Administrator. 

ARTICLE XII

MISCELLANEOUS PROVISIONS  

        12.1    Rights as Stockholders.    Except as determined by the Administrator and set forth in an Award Agreement, the
holders of Awards shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any Shares subject to an Award unless and until such Shares have been issued by
the Company to such holders. 

        12.2    Not Transferable.    Awards granted under the Plan may not be sold, pledged, assigned, or transferred in any
manner other than by will or applicable laws of descent and distribution. No Award holder shall be liable for the debts, contracts or engagements of the Participant or his or her
successors-in-interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof
shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. 

        During
the lifetime of the Participant, only he or she may exercise an Option or SAR (or any portion thereof) granted to him or her under the Plan. After the death of the Participant,
any exercisable portion of the Option or SAR may, prior to the time when such portion becomes 

13

 

unexercisable
under the Plan or the applicable Award Agreement, be exercised by his or her personal representative or by any person empowered to do so under the deceased Participant's will or under
the then applicable laws of descent and distribution. 

        12.3    No Right to Employment or Other Service Relationship.    Nothing in the Plan or in any Award Agreement
hereunder shall (i) confer upon any Participant any right to (a) continue in the employ of his or her Employer or to provide services to the Company, or (b) receive any severance
pay from the Company or his or her Employer, or (ii) interfere with or restrict in any way the rights of the Company or his or her Employer, which are hereby expressly reserved, to terminate
the services of any Participant at any time for any reason whatsoever, with or without Cause. 

        12.4    Term of Plan.    Unless earlier terminated by the Board, the Plan shall automatically expire and terminate on
the tenth anniversary of the date on which it was adopted by the Company. The expiration or other termination of the Plan shall have no adverse affect on any Awards that are outstanding on the date of
such expiration or other termination. 

        12.5    Amendment, Suspension or Termination of the Plan.    The Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by the Board; provided, however, that
unless otherwise determined by the Board, an amendment that requires stockholder approval in order for the Plan to continue to comply with applicable law, regulation or stock exchange requirement
shall not be effective unless approved by the requisite vote of stockholders. Notwithstanding the foregoing, no amendment, suspension or termination of the Plan shall, without the consent of the
holder of an Award, alter or impair any rights or obligations under such Award theretofore granted or awarded unless the Award Agreement itself otherwise expressly so provides, and no amendment shall
be made that could jeopardize the status of the Company as a real estate investment trust under the Code. No Awards may be granted or awarded during any period of suspension or after termination of
the Plan. 

        12.6    Change in Control and Other Corporate Events.    

        (a)   Subject
to Section 12.6(b), in the event of any Change in Control or other transaction or event described in Section 2.4 or any unusual or nonrecurring
transactions or events affecting the Company, any Affiliate of the Company, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Administrator is hereby authorized to any action with respect to Awards at such time and on such terms and conditions as the Administrator determines in its absolute direction to be
desirable, which action(s) may include, without limitation: 

        (i)    a
determination that the Company shall pay to the holder of any Award, in consideration for the cancellation of such Award, an amount of cash equal to the amount that
could have been attained upon the vesting or exercise of such Award had such Award been currently exercisable or payable or fully vested, as applicable, or the replacement of such Award with other
rights or property selected by the Administrator; 

        (ii)   a
determination that Awards cannot vest, be exercised or become payable after such event; 

        (iii)  a
determination that all or some Awards shall become immediately vested and/or exercisable either prior to or as of such event, or that for a specified period of time
prior to transaction or event, an Option or SAR shall be exercisable as to all Shares covered thereby; 

        (iv)  a
determination that upon such event, such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of Shares or other property and
prices which are the subject of such Award; or 

14

 

        (v)   a
determination to make adjustments to Awards consistent with Section 2.4. 

        (b)   With
respect to Awards, no adjustment or action described in this Section 12.6 or in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would result in short-swing profits liability under Section 16 of the Exchange Act or violate the exemptive conditions of Rule 16b-3 unless the
Administrator determines that the Award is not to comply with
such exemptive conditions. The number of Shares subject to any Option shall always be rounded to the next whole number. 

        12.7    Approval of Plan by Stockholders.    This Plan will be submitted for the approval of the Company's
stockholders following the Board's initial adoption of the Plan. Awards may be granted prior to such stockholder approval, provided, that no Award shall
become vested or exercisable prior to the time when the Plan is approved by the stockholders and, provided further, that, if such approval has not been
obtained within 12 months following the date of adoption of the Plan, all Awards previously granted under the Plan shall thereupon be cancelled and shall automatically become null and void. 

        12.8    Tax Withholding.    The Company shall be entitled to require of each Participant satisfaction of the Company's
withholding obligations under federal, state or local tax law with respect to the issuance, vesting, exercise or payment of any Award, and the Company may defer such issuance, vesting, exercise or
payment unless indemnified to its satisfaction. The Administrator shall provide in the applicable Award Agreement the acceptable methods of satisfying such withholding obligations, which shall
include: (i) deducting such amounts from other compensation otherwise payable to the Participant; (ii) having Shares otherwise issuable hereunder withheld, the Fair Market Value of which
is sufficient to satisfy the Participant's minimum estimated tax obligations associated with the transaction; (iii) tendering back to the Company previously acquired Shares or (iv) a
combination of the foregoing. 

        12.9    Forfeiture Provisions.    Pursuant to its general authority to determine the terms and conditions applicable
to Awards granted under the Plan, the Administrator shall have the right to provide, in the terms of an Award Agreement, or by separate written instrument, that (i) any proceeds, gains or other
economic benefit actually or constructively received by an Participant upon the receipt or exercise of the Option, or upon the receipt or resale of any Shares underlying such Award, must be paid to
the Company, and (ii) the Award shall terminate and any outstanding portion of such Award (whether or not vested) shall be forfeited, if (a) a Termination of Service occurs prior to a
specified date, or within a specified time period following receipt or exercise of the Award, or (b) the Participant, at any time, or during a specified time period, engages in any activity in
competition with his or her Employer or the Company, or which is inimical, contrary or harmful to the interests of his or her Employer or the Company, as may be further defined from time to time by
the Administrator. 

        12.10    Limitations Applicable to Section 16.    Notwithstanding any other provision of the Plan, the Plan,
and any Award granted to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent permitted by applicable
law, the Plan shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. 

        12.11    Effect of Plan Upon Other Equity and Compensation Plans.    The adoption of the Plan shall not affect any
other equity- or cash-based compensation or incentive plans in effect for the Company from time to time. Nothing in the Plan shall be construed to limit the right of the Company
(i) to establish any other forms of incentives or compensation for employees of the Company, the Manager or the Advisor, or (ii) to grant or assume options or other rights or awards
otherwise than under the Plan in connection with any proper corporate purpose including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by
purchase, lease, merger, consolidation or otherwise of the business, stock or assets of any corporation, partnership, limited liability company, firm or association. 

15

 

        12.12    Section 83(b) Election Prohibited.    No Participant may make an election under
Section 83(b) of the Code with respect to any Award granted under the Plan without the Company's consent. 

        12.13    Compliance with Laws.    This Plan, the granting and vesting of Awards under the Plan, the issuance and
delivery of Shares, and the payment of money or other consideration allowable under the Plan or under Awards granted hereunder are subject to compliance with all applicable federal and state laws,
rules and regulations (including, but not limited to, state and federal securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as
may, in the opinion of counsel for the Board, the Compensation Committee or the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to
such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Board, the Compensation Committee or
the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations. 

        12.14    Titles.    Titles are provided herein for convenience only and are not to serve as a basis for interpretation
or construction of the Plan. 

        12.15    Governing Law.    This Plan and any agreements hereunder shall be administered, interpreted and enforced
under the internal laws of the State of Colorado without regard to conflicts of laws provisions thereof. 

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QuickLinks

DIVIDEND CAPITAL TOTAL REALTY TRUST INC. EQUITY INCENTIVE PLANPGZ Dowden Doc

Exhibit 10.15

SECURITIES PURCHASE AGREEMENT 

(CONVERTIBLE DEBENTURES)

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December 7, 2005, is entered into by and among Elgrande International, Inc, a Nevada corporation (the “Company”), having its address at 1450 Kootenay Street, Vancouver, British Columbia, Canada V5K 4R1, and each entity named on the signature page hereto as a buyer and the permitted assigns of such entity (each, a “Buyer”) (each agreement with a Buyer being deemed a separate and independent agreement between the Company and such Buyer, except that each Buyer acknowledges and consents to the rights granted to each other Buyer under this Agreement and the Transaction Documents (as defined below)).

W I T N E S S E T H:

WHEREAS, the Company and the Buyers are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded, inter alia, by Rule 506 under Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and/or Section 4(2) of the 1933 Act; and

WHEREAS, the Buyers severally, and not jointly, wish to purchase, upon the terms and subject to the conditions of this Agreement, a minimum aggregate amount of $250,000 and a maximum aggregate amount of $600,000 of convertible debentures of the Company (the “Debentures”), which will be convertible into shares of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”), upon the terms and subject to the conditions of the Debentures, and subject to acceptance of this Agreement by the Company;

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.

AGREEMENT TO PURCHASE; PURCHASE PRICE.

a.

Purchase.

(i)

The undersigned Buyers hereby severally agree to purchase the Debentures from the Company on the terms and conditions set forth below in this Agreement and the other Transaction Documents (as defined below).

(ii)

Subject to the terms and conditions of this Agreement and the other Transaction Documents the Buyers will purchase the Debentures at one or more closings (each, a “Closing”) to be held on the respective Closing Dates (as defined below).  

(iii)

The purchase price to be paid respectively by the Buyers shall equal 100% of the face amount of the Debentures being purchased on the Closing Date by each Buyer as set forth on the signature page to this Agreement.

b.

Certain Definitions.

  As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:

(i)

“Affiliate” means, with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled by or is under common control with such specified Person.

(ii)

“Certificates” means the relevant Debentures duly executed on behalf of the Company and issued in the name of the respective Buyer. 

(iii)

“Closing Date” means the respective dates on which the Closings referred to in this Agreement are held.

(iv)

“Conversion Shares” means the shares of Common Stock issuable upon conversion of the Debentures.

(v)

“Dollars” or “$” means United States Dollars.

(vi)

“Effective Date” means the effective date of the Registration Statement covering the Registrable Securities (as those terms are defined in the Registration Rights Agreement defined below) for the Debentures issued on the Closing Date.

(vii)

“Escrow” means the Divine Capital Markets LLC EYCI Special Escrow Account maintained at JP Morgan/Chase Manhattan Bank.

(viii)

“Final Closing Date” shall have the meaning ascribed to such term in Section 6(a).

(ix)

“Person” means any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust.

(x)

“Placement Agent” means Divine Capital Markets, LLC.

(xi)

“Purchase Price” means the purchase price for the Debentures.

(xii)

“Securities” means the Debentures and Conversion Shares.  

(xiii)

“Shares” means the Conversion Shares and the shares issued to the Placement Agent or any of its designees in connection with its services in connection with this offering of Debentures.

c.

Form of Payment; Delivery of Certificates.  

(i)

Each of the Buyers shall pay the Purchase Price for the Debentures to be purchased by such Buyer by delivering immediately available good funds in United States Dollars to the Escrow prior to the respective Closing on the applicable Closing Date, determined as provided in Section 6.

2

(ii)

Promptly following payment to the Company from the Escrow of the Purchase Price to be paid for the purchase of the Debentures being purchased by such Buyer, the Company shall deliver to the Buyers the Certificates purchased at such Closing. 

d.

Payment to the Escrow.  All payments to the Escrow for the purchase of the Debentures shall be made at or prior to the Closing by wire transfer of funds to the Escrow, as follows:

Beneficiary Account Name:

Divine Capital Markets LLC

EGDI Special Escrow Account

Beneficiary Account No.:

217-6343044-65

ABA/Transit No.:

021-000-021

Beneficiary Bank:

JP Morgan Chase Manhattan Bank

1 Chase Manhattan Plaza

New York, NY  10004

2.

BUYERS REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT INVESTIGATION.

Each Buyer represents and warrants to, and covenants and agrees with, the Company as follows:

a.

Without limiting any Buyer’s right to sell the Common Stock pursuant to the Registration Statement, each Buyer is purchasing the Debentures and will be acquiring the Conversion Shares for its own account for investment only and not with a view towards the public sale or distribution thereof and not with a view to or for sale in connection with any distribution thereof.

b.

Each Buyer is (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of Rule 501(a)(3), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and (iv) able to afford the entire loss of its investment in the Securities.

c.

All subsequent offers and sales of the Securities by each Buyer shall be made pursuant to registration of the Shares under the 1933 Act or pursuant to an exemption from registration and compliance with applicable states’ securities laws.

d.

Each Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the 

3

Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyers set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyers to acquire the Securities.

e.

Each Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer.  Each Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company and have received complete and satisfactory answers to any such inquiries.  Without limiting the generality of the foregoing, each Buyer has also had the opportunity to obtain and to review the Company’s (1) Annual Report on Form 10-KSB for the fiscal year ended May 31, 2005, filed August 29, 2005, (2) Amended Annual Report on Form 10-KSB/A for the fiscal year ended May 31, 2005, filed September 6, 2005; (3) Quarterly Report on Form 10-QSB for the period ended February 28, 2005, filed April 13, 2005, (4) Quarterly Report on Form 10-QSB for the period ended August 31, 2005, filed October 17, 2005 and (5) Registration Statement on Form S-8, filed July 28, 2005 (collectively, the “Company’s SEC Documents”).

f.

Each Buyer understands that its investment in the Securities involves a high degree of risk, including the risk of loss of the Buyer’s entire investment.

g.

Each Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities.

h.

Each Buyer is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.  This Agreement and the other Transaction Documents have been duly and validly authorized, executed and delivered on behalf of the Buyer and create a valid and binding agreement of the Buyer enforceable in accordance with its terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally.

i.

Such Buyer has not employed any broker or finder in connection with the transactions contemplated by this Agreement.

j.

The state in which any offer to purchase shares hereunder was made to or accepted by such Buyer is the state shown as the Buyer’s address on the signature page hereof.

k.

Each Buyer was not formed for the purpose of investing solely in the Securities which may be acquired hereunder.

l.

Each Buyer is able to bear the complete loss of such Buyer’s investment in the Securities.

m.

Each Buyer’s execution, delivery and performance under this Agreement will not breach the provisions of any agreement to which such Buyer is a party.

n.

Each Buyer hereby acknowledges that its involvement in the transactions contemplated hereby arose as a result of direct contact with the Placement Agent, with which 

4

such Buyer has a pre-existing relationship, and was not in connection with any form of general advertising, general solicitation or any other form of public offering.

3.

COMPANY REPRESENTATIONS, ETC.

  The Company represents and warrants to the Buyers that:

a.

Concerning the Debentures and the Shares.  There are no preemptive rights of any stockholder of the Company to acquire the Debentures or the Shares. 

b.

Reporting Company Status.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has the requisite corporate power to own its properties and to carry on its business as now being conducted.  The Company is duly qualified as a foreign corporation to do business and is in good standing in the British Columbia, Canada and in each other jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a material adverse effect on the business, operations or condition (financial or otherwise) or results of operation of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”).  The Company has registered its Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the Common Stock is listed and traded on the OTC Bulletin Board Market of the National Association of Securities Dealers, Inc. (trading symbol:  EGDI).  The Company has received no notice, either oral or written, with respect to the continued eligibility of the Common Stock for such listing, and the Company has maintained all requirements for the continuation of such listing.

c.

Authorized Shares.  The authorized capital stock of the Company consists of 500,000,000 shares of capital stock, all of which shares are designated as shares of Common Stock.  As of the date hereof, 30,612,479 shares of Common Stock are issued and outstanding, (excluding an additional approximately 13,500,000 shares of Common Stock underlying Common Stock equivalents that are currently issued and outstanding, as more specifically described in Schedule 3(c) hereto, which is hereby incorporated herein by reference).  All issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable.  The Company has sufficient authorized and unissued shares of Common Stock as may be necessary to effect the issuance of the Shares. The Shares have been duly authorized and, when issued upon conversion of, or as interest on, the Debentures will be duly and validly issued, fully paid and non-assessable and will not subject the holder thereof to personal liability by reason of being such holder.  At all times, the Issuer shall keep available and reserved for issuance to the holders of the Debentures Common Stock duly authorized for issuance against the Debentures.

d.

Securities Purchase Agreement; Registration Rights Agreement.  This Agreement and the Registration Rights Agreement, between the Company and the Buyers, substantially in the form of Exhibit B annexed hereto (the “Registration Rights Agreement”), and the transactions contemplated thereby, have been duly and validly authorized by the Company, this Agreement has been duly executed and delivered by the Company.  Each of this Agreement, the Debentures and the Registration Rights Agreement, when executed and delivered by the Company, are and will be, valid, legal and binding agreements of the Company enforceable in 

5

accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors’ rights generally.

e.

Non-contravention.  The execution and delivery of this Agreement, the Debentures and the Registration Rights Agreement by the Company, the issuance of the Securities, and the consummation by the Company of the other transactions contemplated by this Agreement, the Registration Rights Agreement, and the Debentures do not and will not conflict with or result in a breach by the Company of any of the terms or provisions of, or constitute a default under (i) the articles of incorporation or by-laws of the Company, each as currently in effect, (ii) any indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company is a party or by which it or any of its properties or assets are bound, including any listing agreement for the Common Stock, except as herein set forth or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or of any of its subsidiaries or the triggering of any preemptive or anti-dilution rights or rights of first refusal or first offer on the part of holders of the Company’s securities, (iii) to its knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over the Company or any of its properties or assets, or (iv) the Company’s listing agreement for its Common Stock (if applicable), except such conflict, breach or default which would not have a Material Adverse Effect. 

f.

Approvals.  No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders of the Company is required to be obtained by the Company for the issuance and sale of the Securities to the Buyers as contemplated by this Agreement, except such authorizations, approvals and consents that have been obtained, or such authorizations, approvals and consents, the failure of which to obtain would not have a Material Adverse Affect.

g.

SEC Filings.  To the best of the Company's knowledge, none of the Company’s SEC Documents contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein in light of the circumstances under which they were made, not misleading. Except as set forth on Schedule 3(g) to this Agreement, the Company has since May 31, 2004 timely filed all requisite forms, reports and exhibits thereto with the SEC.  The Company is not aware of any event occurring on or prior to a Closing Date or the Delivery Date (other than the transactions effected hereby) that would require the filing of, or with respect to which the Company intends to file, a Form 8-K after such date.  

h.

Absence of Certain Changes.  Since May 31, 2005, there has been no material adverse change and no material adverse development in the business, properties, operations, condition (financial or otherwise), or results of operations of the Company or any of its subsidiaries, except as disclosed in the Company’s SEC Documents. Since May 31, 2005, except as provided in the Company’s SEC Documents, neither the Company nor any of its subsidiaries has (i) incurred or become subject to any material liabilities (absolute or contingent) except liabilities incurred in the ordinary course of business consistent with past practices; (ii) discharged or satisfied any material lien or encumbrance or paid any material obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of 

6

business consistent with past practices; (iii) declared or made any payment or distribution of cash or other property to stockholders with respect to its capital stock, or purchased or redeemed, or made any agreements to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business consistent with past practices; (v) suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of existing business; (vi) made any changes in employee compensation, except in the ordinary course of business consistent with past practices; or (vii) experienced any material problems with labor or management in connection with the terms and conditions of their employment.

i.

Full Disclosure.  There is no fact known to the Company (other than general economic conditions known to the public generally or as disclosed in the Company’s SEC Documents) that has not been disclosed in writing to the Buyers that (i) would reasonably be expected to have a Material Adverse Effect, (ii) would reasonably be expected to materially and adversely affect the ability of the Company to perform its obligations pursuant to this Agreement or any of the agreements contemplated hereby (collectively, including this Agreement, the “Transaction Documents”), or (iii) would reasonably be expected to materially and adversely affect the value of the rights granted to the Buyers in the Transaction Documents.

j.

Absence of Litigation.  There is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely affect the validity or enforceability of, or the authority or ability of the Company and its subsidiaries taken as a whole to perform its obligations under, any of the Transaction Documents.  Neither the Company nor any of its subsidiaries is a party to or subject to the provisions of, any order, writ, injunction, judgement or decree of any court or government agency or instrumentality which could reasonably be expected to have a Material Adverse Effect.  

k.

Absence of Events of Default.  Except as disclosed in the Company’s SEC Documents, no Event of Default (or its equivalent term), as defined in the respective agreement, indenture, mortgage, deed of trust or other instrument, to which the Company or any of its subsidiaries is a party, and no event which, with the giving of notice or the passage of time or both, would become an Event of Default (or its equivalent term) (as so defined in such document), has occurred and is continuing, which would have a Material Adverse Effect.  

l.

Prior Issues.  Except as set forth in the Company’s SEC Documents, during the twelve (12) months preceding the date hereof, the Company has not issued any convertible securities or any shares of Common Stock.  

m.

No Undisclosed Liabilities or Events.  The Company has no liabilities or obligations other than those disclosed in the Company’s SEC Documents or those incurred in the ordinary course of the Company’s business since May 31, 2005, and which individually or in the aggregate, do not or would not have a Material Adverse Effect.  No event or circumstances has occurred or exists with respect to the Company or its properties, business, condition (financial or otherwise), or results of operations, which, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not 

7

been so publicly announced or disclosed.  There are no proposals currently under consideration or currently anticipated to be under consideration by the Board of Directors or the executive officers of the Company which proposal would (x) change the articles of incorporation, by-laws or any other charter document of the Company, each as currently in effect, with or without shareholder approval, which change would reduce or otherwise adversely affect the rights and powers of the shareholders of the Common Stock or (y) materially or substantially change the business, assets or capital of the Company, including its interests in subsidiaries. 

n.

No Default.  Neither the Company nor any of its subsidiaries is in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any material indenture, mortgage, deed of trust or other material instrument or agreement to which it is a party or by which it or its property is bound.

o.

No Integrated Offering.  Neither the Company nor any of its affiliates nor any person acting on its or their behalf has, directly or indirectly, at any time since May 31, 2004 made any offer or sales of any security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption from registration under Rule 506 of Regulation D in connection with the offer and sale of the Securities as contemplated hereby.

p.

Dilution.  The number of Shares issuable upon conversion of the Debentures may increase substantially in certain circumstances, including, but not necessarily limited to, the circumstance wherein the market price of the Common Stock declines prior to the conversion of the Debentures.  The Company’s executive officers and directors have studied and fully understand the nature of the securities being sold hereby and recognize that they have a potential dilutive effect and further that the conversion of the Debentures and/or sale of the Conversion Shares may have an adverse effect on the market price of the Common Stock.  The board of directors of the Company has concluded, in its good faith business judgment, that such issuance is in the best interests of the Company.  The Company specifically acknowledges that its obligation to issue the Conversion Shares upon conversion of the Debentures is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company.

q.

Regulatory Permits.  The Company has all such permits, easements, consents, licenses, franchises and other governmental and regulatory authorizations from all appropriate federal, state, local or other public authorities (“Permits”) as are necessary to own and lease its properties and conduct its businesses in all material respects in the manner described in the Registration Statement and as currently being conducted.  All such Permits are in full force and effect and the Company has fulfilled and performed all of its material obligations with respect to such Permits, and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or will result in any other material impairment of the rights of the holder of any such Permit, subject in each case to such qualification as may be disclosed in the Prospectus.  Such Permits contain no restrictions that would materially impair the ability of the Company to conduct businesses in the manner consistent with its past practices.  The Company has not received notice or otherwise has knowledge of any proceeding or action relating to the revocation or modification of any such Permit.

8

r.

Hazardous Materials.  The Company is in compliance with all applicable Environmental Laws in all respects except where the failure to comply does not have and could not reasonably be expected to have a Material Adverse Effect.  For purposes of the foregoing: 

“Environmental Laws” means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other “Superfund” or “Superlien” law or any other applicable federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, the environment or any Hazardous Material. 

“Hazardous Material” means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law.

s.

Independent Public Accountants.  Williams & Webster PS, who has certified the consolidated financial statements of the Company, including the notes thereto, included in the Company’s Annual Reports on Forms 10-KSB and 10-KSB/A for the year ended May 31, 2005, is an independent public accountant with respect to the Company, as required by the 1934 Act and the 1934 Act, the 1933 Act and the rules and regulations promulgated thereunder.

t.

Internal Accounting Controls.  The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (1) transactions are executed in accordance with management’s general or specific authorization; (2) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (3) access to assets is permitted only in accordance with management’s general or specific authorization; and (4) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

u.

No Brokers.  The Company has not engaged any person to act on its behalf in connection with the purchase and sale of the Debentures to the Buyers hereunder other than Divine Capital Markets, LLC, and no person is entitled to receive any consideration from the Company or any Buyer arising from any finder’s agreement, brokerage agreement or other agreement to which the Company is a party.  

v.

No Public Offering.  The Company has effected the offering and sale of the Debentures to the Buyers hereunder using the services of the Placement Agent, which has certified to the Company that in connection therewith, the Placement Agent’s activities are limited to direct contact with the Buyers and other prospective purchasers of Debentures with which the Placement Agent has a pre-existing relationship, and was not in connection with any form of general advertising, general solicitation or any other form of public offering.

9

4.

CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

a.

Transfer Restrictions.  The Buyers acknowledge that (1) the Debentures have not been and are not being registered under the provisions of the 1933 Act and, except as provided in the Registration Rights Agreement, the Shares have not been and are not being registered under the 1933 Act, and may not be transferred unless (A) subsequently registered thereunder or (B) the Buyers shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; (2) any sale of the Securities made in reliance on Rule 144 promulgated under the 1933 Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such Securities under circumstances in which the seller, or the person through whom the sale is made, may be deemed to be an underwriter, as that term is used in the 1933 Act, may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder and (4) neither the Company nor any other person is under any obligation to register the Securities (other than pursuant to the Registration Rights Agreement) under the 1933 Act or to comply with the terms and conditions of any exemption thereunder.

b.

Restrictive Legend.  The Buyers acknowledge and agree that the Debentures , and, until such time as the Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement and sold in accordance with an effective Registration Statement, certificates and other instruments representing any of the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of any such Securities):

THESE SECURITIES (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

c.

Registration Rights Agreement.  The parties hereto agree to enter into the Registration Rights Agreement on or before the Closing Date. 

d.

Filings.  The Company undertakes and agrees to make all necessary filings in connection with the sale of the Securities to the Buyers required under any United States laws and regulations applicable to the Company (including without limitation state “blue sky” laws), or by any domestic securities exchange or trading market, and to provide a copy thereof to the Buyers promptly after such filing.

e.

Reporting Status.  So long as any of the Buyers beneficially own any of the Securities, the Company shall timely file prior to or on the date when due, and without seeking an extension, all reports required to be filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports 

10

under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination.  Except as otherwise set forth in this Agreement and the Transaction Documents, the Company will take all reasonable action under its control to obtain and to continue the listing and trading of its Common Stock (including, without limitation, all Registrable Securities) on the OTC Bulletin Board Market of the National Association of Securities Dealers, Inc. and will comply in all material respects with the Company’s reporting, filing and other obligations under the by-laws or rules of the National Association of Securities Dealers, Inc. (“NASD”).

f.

Use of Proceeds.   The Company will use the proceeds from the sale of the Debentures (excluding amounts paid by the Company for legal fees in connection with the sale of the Debentures) for internal working capital purposes.

g.

Available Shares.  The Company shall have at all times authorized and reserved for issuance, free from preemptive rights, shares of Common Stock equal to three hundred percent (300%) of the number of shares of Common Stock issuable upon conversion of the then-outstanding Debentures (including accrued interest thereon) as may be required to satisfy the conversion rights of the Buyers pursuant to the terms and conditions of the Debentures.  If at any time, the Company does not have available an amount of authorized and non-issued Shares necessary to satisfy full Conversion of the then outstanding amount of the Debentures, the Company shall, without notice or demand by the Buyers, call within thirty (30) days of such occurrence and hold within sixty (60) days of such occurrence a special meeting of shareholders, for the sole purpose of increasing the number of shares authorized.  Management of the Company shall recommend to shareholders to vote in favor of increasing the number of Common Stock authorized.  Members of the Company’s Management shall also vote all of their own shares in favor of increasing the number of Common Stock authorized.  Alternatively, to the extent permitted by applicable law, the Company may procure the written consent of stockholders to increase the number of shares authorized, and provide the stockholders with notice thereof as may be required under applicable law (including without limitation Section 14(c) of the 1934 Act and Regulation 14C thereunder).  Upon obtaining stockholder approval as aforesaid, the Company shall cause the appropriate increase in its authorized shares of Common Stock within one business day or as soon thereafter as permitted by applicable law.

h.

Reimbursement.  If (i) any Buyer, other than by reason of its gross negligence, willful misconduct or breach of law, becomes a party defendant in any capacity in any action or proceeding brought by any stockholder of the Company, in connection with or as a result of the consummation of the transactions contemplated by the Transaction Documents, or if such Buyer is impleaded in any such action, proceeding or investigation by any Person, or (ii) any Buyer, other than by reason of its gross negligence, willful misconduct or breach of law, becomes a party defendant in any capacity in any action or proceeding brought by the SEC against or involving the Company or in connection with or as a result of the consummation of the transactions contemplated by the Transaction Documents, or if such Buyer is impleaded in any such action, proceeding or investigation by any Person, then in any such case, the Company will reimburse such Buyer for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliates of the Buyers who are actually named in such action, proceeding or investigation, and partners, 

11

directors, agents, employees and controlling persons (if any), as the case may be, of the Buyers and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the Buyers and any such Affiliate and any such Person.  Except as otherwise set forth in the Transaction Documents, the Company also agrees that neither any Buyer nor any such Affiliate, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any person asserting claims on behalf of or in right of the Company in connection with or as a result of the consummation of the Transaction Documents except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company result from the gross negligence or willful misconduct of such Buyer or  from a breach of the representations, covenants and conditions contained herein or from a breach of law.  

5.

TRANSFER AGENT INSTRUCTIONS.

a.

Promptly following the purchase by the Buyers of the Debentures in accordance with Section 1(c) hereof, the Company will irrevocably instruct its transfer agent in writing to (i) reserve that number of shares of Common Stock as is equal to three hundred percent (300%) of the number of shares of Common Stock issuable upon conversion of the then-outstanding Debentures (including accrued interest thereon) as may be required to satisfy the conversion rights of the Buyers pursuant to the terms and conditions of the Debentures, and (ii) issue Common Stock from time to time upon conversion of the Debentures in such amounts as specified from time to time by the Company to the transfer agent, bearing the restrictive legend specified in Section 4(b) of this Agreement prior to registration of the Shares under the 1933 Act, registered in the name of the respective Buyer or its permitted assigns and in such denominations to be specified by such Buyer in connection with each conversion of the Debentures.  The Company shall provide the Placement Agent with a copy of such written instructions to the Company’s transfer agent simultaneously with the issuance of such instructions to the transfer agent.  The Company warrants that if the Buyer is not in breach of the representations and warranties contained in this Agreement, no instruction other than such instructions referred to in this Section 5 and stop transfer instructions to give effect to Section 4(a) hereof prior to registration and sale of the Converted Shares under the 1933 Act will be given by the Company to the transfer agent and that the Converted Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement, the Registration Rights Agreement, and applicable law.  Nothing in this Section shall affect in any way the Buyers’ obligations and agreement to comply with all applicable securities laws upon resale of the Securities.  If any Buyer provides the Company with an opinion of counsel reasonably satisfactory to the Company that registration of a resale by such Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a) of this Agreement is not required under the 1933 Act, the Company shall (except as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer of the Securities and, in the case of the Converted Shares, instruct the Company’s transfer agent to issue one or more certificates for Common Stock without legend in such name and in such denominations as specified by the Buyer.

b.

(i)

The Company will permit the Buyers to exercise their rights to convert the Debentures by telecopying or delivering an executed and completed Notice of Conversion to the Company.  The Company will within two (2) Business Days respond with its endorsement so as to confirm the outstanding principal amount of any Debenture submitted for conversion or shall reconcile any difference with the Buyer promptly after receiving such Notice of Conversion.

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(ii)

The term “Conversion Date” means, with respect to any conversion elected by the holder of the Debentures, the date specified in the Notice of Conversion, provided the copy of the Notice of Conversion is given either via mail or facsimile to or otherwise delivered to the Company in accordance with the provisions hereof so that it is received by the Company on or before such specified date. 

(iii)

The Company will transmit the certificates representing the Converted Shares issuable upon conversion of any Debentures (together, unless otherwise instructed by the Buyer, with Debentures not being so converted) to the Buyer at the address specified in the Notice of Conversion (which may be the Buyer’s address for notices as contemplated by Section 12 hereof or a different address) via express courier, by electronic transfer or otherwise, within five (5) business days if the address for delivery is in the United States and within seven (7) business days if the address for delivery is outside the United States (such fifth business day or seventh business day, as the case may be, the “Delivery Date”) after (A) the business day on which the Company has received both of the Notice of Conversion (by facsimile or other delivery) and the original Debentures being converted (and if the same are not delivered to the Company on the same date, the date of delivery of the second of such items) or (B) the date an interest payment on the Debentures, which the Company has elected to pay by the issuance of Common Stock, as contemplated by the Debentures, was due.

c.

From and after the date on which the Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the failure to issue unrestricted, freely tradable Conversion Shares to the Buyers upon Conversion shall be considered an Event of Default, which if not cured after ten (10) days prior written notice, shall entitle the Buyers (or any of them) to demand that the Debentures held by them be immediately redeemed by a cash payment equal to 131% of the aggregate of the unpaid principal amount of and accrued interest on such Debentures (whether or not the terms of such Debentures expressly permit the redemption thereof).  The Company acknowledges that the failure to honor a Notice of Conversion shall cause definable financial hardship on the Buyers.

d.

The Company will authorize its transfer agent to give information to a Buyer or such Buyer’s representative relating to the transfer of the Company’s shares of Common Stock to the Buyer, upon the reasonable request of the Buyer or any such representative.  The Company will provide such Buyer with a copy of the authorization so given to the transfer agent.

e.

Each Buyer shall be entitled to exercise its conversion privilege with respect to the Debentures notwithstanding the commencement of any case under 11 U.S.C. §101 et seq. (the “Bankruptcy Code”).  In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of such Buyer’s conversion privilege.  The Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of the conversion of the Debentures.  The Company agrees, without cost or expense to such Buyer, to take or to consent to any and all action necessary to effectuate relief under 11 U.S.C. §362.

6.

CLOSING DATE.

a.

The purchases and sales of Debentures will occur at one or more closings under this Agreement, the first of which will occur after Buyers have deposited not less than 

13

$250,000 of the Purchase Price in the Escrow for the transactions contemplated under this Agreement, an a Closing Date determined by the Placement Agent, acting in its sole discretion.  Subsequent Closing(s) under this Agreement will occur after Buyers who will purchase the balance of the Debentures to be purchased and sold under this Agreement have deposited the full amount of their purchase prices in the Escrow, with the Closing Date(s) for such subsequent Closings to be determined by the Placement Agent, acting in its sole discretion.  The final Closing shall occur after the Buyers who will purchase the balance of the Debentures to be purchased and sold under this Agreement (which may be in any amount up to $600,000, in the aggregate) have deposited the full amount of their purchase prices in the Escrow, with the Closing Date of such final Closing (the “Final Closing Date”) to occur on the date determined by the Placement Agent, acting in its sole discretion; provided, that should no additional amounts be deposited into escrow, the Final Closing Date shall be a date determined by the Placement Agent, acting in its sole discretion.

b.

In the case of each Closing, the Closing Date shall occur on or after the date (as determined by the Placement Agent, acting in its sole discretion) after each of the conditions contemplated by Sections 7 and 8 hereof shall have either been satisfied or been waived by the party in whose favor such conditions run.

c.

In the case of each Closing, the Closing of the purchase and issuance of Debentures shall occur on the respective Closing Date at the offices of the Placement Agent’s counsel, McGuireWoods LLP, 1345 Avenue of the Americas, 7th Floor, New York, NY 10105 and shall take place no later than 3:00 P.M., New York time, on such day or such other time as is mutually agreed upon by the Company and the Buyers.

7.

CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

The Company’s obligation to sell the Debentures to the Buyer pursuant to this Agreement on each Closing Date is conditioned upon:

a.

Delivery from the Escrow to the Company of good funds as payment in full of an amount equal to the Purchase Price for the Debentures in accordance with this Agreement; 

b.

The accuracy on the Closing Date of the representations and warranties of the Buyers contained in this Agreement, each as if made on such date, and the performance by the Buyers on or before such date of all covenants and agreements of the Buyers required to be performed on or before such date; and

c.

There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.

8.

CONDITIONS TO THE BUYERS’ OBLIGATION TO PURCHASE.

The Buyer’s obligation of those Buyers who are purchasing Debentures at a particular closing to purchase the Debentures on the applicable Closing Date is conditioned upon:

a.

The execution and delivery of this Agreement and the Registration Rights Agreement by the Company;

14

b.

Delivery by the Company to the Buyers of the Debentures to be purchased in accordance with this Agreement;

c.

Delivery by the Company to the Buyers of an opinion of counsel to the Company, substantially in the form attached hereto as Exhibit C and dated as of the Closing Date; 

d.

The accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained in this Agreement, each as if made on such date, and the performance by the Company on or before such date of all covenants and agreements of the Company required to be performed on or before such date;

e.

There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained; and

f.

From and after the date hereof to and including the Closing Date, the trading of the Common Stock shall not have been suspended by the SEC or the NASD and trading in securities generally on the New York Stock Exchange or The NASDAQ/National Market System shall not have been suspended or limited, nor shall minimum prices been established for securities traded on The NASDAQ/National Market System, nor shall there be any outbreak or escalation of hostilities involving the United States or any material adverse change in any financial market that in either case in the reasonable judgment of the Buyers makes it impracticable or inadvisable to purchase the Debentures.

9.

GOVERNING LAW; MISCELLANEOUS.  

a.

This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws.  Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of New York or the state courts of the State of New York sitting in the City and County of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions.  To the extent determined by such court, the Company shall reimburse the Buyers for any reasonable legal fees and disbursements incurred by the Buyers in enforcement of or protection of any of its rights under any of the Transaction Documents.

b.

Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

c.

This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

d.

All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

15

e.

A facsimile transmission of this signed Agreement shall be legal and binding on all parties hereto.  

f.

This Agreement may be signed in one or more counterparts, each of which shall be deemed an original.  

g.

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

h.

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

i.

This Agreement may be amended only by the written consent of a majority in interest of the holders of the Debentures and an instrument in writing signed by the Company.

j.

This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.  

10.

NOTICES.

  Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of:

a.

the date delivered, if delivered by personal delivery as against written receipt therefor or by confirmed facsimile transmission,

b.

the seventh business day after deposit, postage prepaid, in the United States Postal Service by registered or certified mail, or 

c.

the third business day after mailing by next-day express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by ten (10) days’ advance written notice similarly given to each of the other parties hereto):

	COMPANY:    

	Elgrade International, Inc.

	 	Attn:  Michael F. Holloran

	 	1450 Kootenay Street

Vancouver, British Columbia

Canada  45 K 4R1

	 	Telecopier No. 604-689-0802

	 	 

16

	BUYERS:

	At the address set forth on the signature page of this Agreement.

	 	With copies to:

	 	Divine Capital Markets, LLC

ATTN:  Jason Goldstein

	 	39 Broadway

36th Floor

New York, NY  10006

	 	Telecopier No. 212-509-5867 

11.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company’s and the Buyers’ representations and warranties herein shall survive for a period of fifteen (15) months after the execution and delivery of this Agreement and shall inure to the benefit of the Buyers and the Company and their respective successors and assigns.

12.

FEES; EXPENSES.

a.

At each Closing, the Placement Agent shall receive cash compensation equal to thirteen percent (13%) of the gross proceeds of the Debentures (payable at each Closing), and in addition, at the first Closing under this Offering, the Company shall cause 4,000,000 shares of Common Stock (in the form of restricted securities and appropriately legended) to be issued to the Placement Agent or to such persons as the Placement Agent shall designate to the Company in writing.  The Company shall also reimburse the Placement Agent for expenses it incurs in connection with its services to the Company in its capacity as Placement Agent in accordance with the terms of the agreement, dated November 4, 2005 between the Company and the Placement Agent.  The cash compensation and expenses shall be deducted from the proceeds of the sale of the Debentures at each Closing.

b.

The Company will pay the legal fees of the Placement Agent in the amount of $10,000 and will pay the 100% of the disbursements actually incurred by counsel to the Placement Agent.  The Company will pay $10,000 to such counsel at the first Closing, and in that connection hereby authorizes the Placement Agent to deduct such amount from the proceeds of the first Closing and transmit same to the Placement Agent’s legal counsel.  The Company will pay disbursements of the Placement Agent’s legal counsel within ten (10) days of invoice therefor.  The $10,000 in respect of fees of the Placement Agent’s counsel shall include only those fees paid for services rendered up to the Final Closing Date, and any other reasonable legal fees incurred by the Placement Agent’s counsel in connection with the Transaction Documents (including enforcement of the Company’s obligations or the exercise of the Placement Agent’s or the Buyers’ remedies thereunder) or, if requested by the Placement Agent, review of the Registration Statement (as defined in the Registration Rights Agreement) (including review and comment on drafts thereof and advice concerning sales of Registrable Securities (as defined in the Registration Rights Agreement) shall be payable by the Company to such counsel within ten (10) days of the invoice therefor. 

[Signature page follows.]

IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyers and the Company as of the date set forth below.

Date:

December 7, 2005

	COMPANY:

	Elgrande International, Inc.

/s/ Michael F. Holloran

	By:   _______________________

	Name:  Michael F. Holloran

Title:    Chief Executive Officer

	 
	 
	BUYER:  

	Name:  

	By:    

	                       (Signature of Authorized Person)

	Printed Name: 

	Address:

	Telephone:

	Facsimile:

	Principal Amount of Debentures to be Purchased:

$_______________

	Tax ID No.  

18

Schedule 3(c)  COMMON STOCK EQUIVALENTS OUTSTANDING

Exhibit A

FORM OF DEBENTURE

Exhibit B

REGISTRATION RIGHTS AGREEMENT

Exhibit C

OPINION OF COUNSEL

19

SCHEDULE 3(c) – COMMON STOCK EQUIVALENTS OUTSTANDING

·

Total Options 2,521,000, at an average price of $0.83 per share

·

Total Warrants 2,008,766, at an average price of $0.100 per share

·

Total shares issuable on conversion of Debentures 9,000,000, at average price of $0.083 per share

EXHIBIT A

DEBENTURE

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION REQUIREMENTS THEREOF OR EXEMPTION THEREFROM. 

$_____________

ELGRANDE INTERNATIONAL, INC. 

CONVERTIBLE DEBENTURE DUE [__________ ____, 200_] 

[THIRD ANNIVERSARY OF FINAL CLOSING DATE]

Date of Issuance:  [__________ ____, 200_] [CLOSING DATE OF THIS BUYER’S FUNDING]

FOR VALUE RECEIVED, ELGRANDE INTERNATIONAL, INC., a corporation organized and existing under the laws of the State of Nevada (the "Company"), hereby promises to pay to [________________], having its address at [_________________________________________] or its assigns (the "Holder" and together with the other holders of Debentures issued pursuant to the Securities Purchase Agreement (as defined below), the "Holders"), the principal sum of [___________________] and 00/100 Dollars ($_______________) on [__________ ____, 200_] [THIRD ANNIVERSARY OF FINAL CLOSING DATE] (the "Maturity Date") and to pay simple interest on the principal sum outstanding from time to time in arrears (i) upon conversion as provided herein or (ii) on the Maturity Date, at the rate of six percent (6%) per annum (subject to adjustment pursuant to Section 10 hereof).  Interest shall commence to accrue on this Debenture on the first such business day to occur after the date hereof and shall continue on a daily basis until payment in full of the principal sum has been made or duly provided for or until the full outstanding amount of this Debenture has been converted in accordance with the provisions hereof.  The Company has the option to redeem this Debenture prior to the Maturity Date pursuant to Section 2(b).  All unpaid principal and interest due and payable on the Maturity Date shall be paid in the form of Common Stock of the Company, par value $0.001 per share ("Common Stock") pursuant to Section 3.  The Holder has the option to cause any outstanding principal and interest on this Debenture to be converted into Common Stock at any time prior to the Redemption Date (as defined below) or the Maturity Date pursuant to Section 2(a).

This Debenture is the Debenture referred to in the Securities Purchase Agreement (the "Securities Purchase Agreement") dated ________ ____, 200_, between the Company and 

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the Holder, is subject to the provisions of the Securities Purchase Agreement and further is subject to the following additional provisions:

1.

This Debenture has been issued subject to investment representations of the original purchaser hereof and may be transferred or exchanged only (a) with the Company’s prior written consent, which consent the Company may grant or withhold, in its sole discretion, and (b) in compliance with the Securities Act and other applicable state and foreign securities laws.  In the event of any proposed transfer of this Debenture to which the Company has granted its consent, the Company may require, prior to issuance of a new Debenture in the name of such other person, that it receive reasonable transfer documentation including legal opinions that the issuance of the Debenture in such other name does not and will not cause a violation of the Securities Act or any applicable state or foreign securities laws. Prior to due presentment for transfer of this Debenture to which the Company has consented, the Company and any agent of the Company may treat the person in whose name this Debenture is duly registered on the Company's Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture be overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

2.

Conversion at Holder’s Option; Redemption at Company’s Option.

a.

The Holder is entitled to, at any time or from time to time, on or after the date that is six (6) months from the Date of Issuance of this Debenture, convert the Conversion Amount into shares of Common Stock, at a conversion price for each share of Common Stock (the “Conversion Price") equal to 75% of the lowest closing bid price per share (as reported by Bloomberg, LP) of the Company's Common Stock for the fifteen (15) Trading Days immediately preceding the date of conversion.  Notwithstanding the foregoing, the Holder shall not be entitled to convert any part of this Debenture as to which the Company has previously issued to the Holder a Redemption Notice in accordance with Section 2(b).  The Conversion Price will be adjusted as provided in Section 6.  For purposes of this Debenture, the following terms have the meanings indicated below:

(i)

“Conversion Amount” shall mean the sum of (A) all or any portion of the outstanding principal amount of this Debenture, as designated by the Holder upon exercise of its right of conversion plus (B) all interest that has accrued on the portion of the principal amount that has been designated for payment pursuant to (A).

(ii)

“Market Price of the Common Stock” means (x) the closing bid price of the Common Stock for the period indicated in the relevant provision hereof (unless a different relevant period is specified in the relevant provision), as reported by Bloomberg, LP or, if not so reported, as reported on the over-the-counter market or (y) if the Common Stock is listed on a stock exchange, the closing price on such exchange, as reported in The Wall Street Journal.

(iii)

“Trading Day” shall mean any day on which the New York Stock Exchange is open for business.

Conversion shall be effectuated by delivering by facsimile or other delivery to the Company of the form of conversion notice attached hereto as Exhibit A, executed by the Holder of the Debenture evidencing such Holder's intention to convert this Debenture or a specified portion hereof.  No fractional shares of Common Stock or scrip representing fractions of shares will be 

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issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.  The date on which notice of conversion is given (the "Conversion Date") shall be deemed to be the date on which the Company receives by fax or by mail the conversion notice (“Notice of Conversion”), substantially in the form annexed hereto as Exhibit A, duly executed, to the Company.  Facsimile delivery of the Notice of Conversion shall be accepted by the Company at facsimile number 604-689-0802 ATTN: Corporate Secretary (or to such other facsimile number as the Company may hereafter advise the Holder in writing).  Except as otherwise provided, certificates representing Common Stock upon conversion will be delivered within five (5) business days from the date of delivery of the Notice of Conversion.

b.

The Company may at its option call for redemption all or part of the Debentures prior to the Maturity Date, as follows:

(i)

The Debentures called for redemption shall be redeemable for an amount (the “Redemption Price”) equal to (x) if this Debenture is called for redemption prior to the date which is six months from the Issuance Date set forth on the first page of this Debenture (the “Issuance Date”), 120%, if this Debenture is called for redemption on or after the date that is six months after the Issuance Date but prior to the first anniversary of the issuance date, 125%, and if this Debenture is called for redemption on or after the date that is the first anniversary of the Issuance Date, 130%, in either case of the principal amount called for redemption, plus (y) interest accrued through the day immediately preceding the date of redemption (the “Redemption Date”).

(ii)

If fewer than all outstanding Debentures are to be redeemed, then all Debentures shall be partially redeemed on a pro rata basis.

(iii)

Prior to the Redemption Date, the Company shall deposit into escrow an amount sufficient for the payment of the aggregate Redemption Price of the Debentures being called for redemption and shall make such funds available on and after the Redemption Date for payment to the Holders who present their Debentures and otherwise comply with the Company’s instructions contained in the Redemption Notice (as defined below).

(iv)

On the Redemption Date, the Company shall cause the Holders whose Debentures have been presented for redemption to be issued payment of the Redemption Price.  In the case of a partial redemption, the Company shall also issue new Debentures to the Holders for the principal amount remaining outstanding after the Redemption Date promptly after the Holders’ presentation of the Debentures called for redemption.

(v)

Not less than ten (10) days prior to the Redemption Date, the Company shall issue a notice (the “Redemption Notice”) to each Holder setting forth the following:

1.

the Redemption Date;

2.

the Redemption Price;

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3.

the aggregate principal amount of the Debentures being called for redemption; 

4.

a statement instructing the Holders to surrender their Debentures for redemption and payment of the Redemption Price, including the name and address of the Company or, if applicable, the paying agent of the Company, where Debentures are to be surrendered for redemption;

5.

a statement advising the Holders that (x) interest will cease to accrue on the Debentures (or, in the case of a partial redemption, that portion of the Debentures being called for redemption) as of the Redemption Date, and (y) that the Debentures (or, in the case of a partial redemption, that portion of the Debentures being called for redemption) as of the Redemption Date will cease to be convertible into Common Stock as of the Redemption Date; and

6.

in the case of a partial redemption, a statement advising the Holders that after the Redemption Date a substitute Debenture will be issued by the Company after deduction the portion thereof called for redemption, at no cost to the Holder.

3.

Unless demand has otherwise been made in writing for payment in cash by the Holder, any Debentures not previously received for conversion as of the Maturity Date shall be deemed to have been surrendered for conversion, without further action of any kind by the Company or any of its agents, employees or representatives, as of the Maturity Date at the Conversion Price applicable on the Maturity Date (“Mandatory Conversion”).

4.

No provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional to Convert this Debenture into Common Stock, at the time, place, and rate herein prescribed.  This Debenture is a direct obligation of the Company.

5.

If the Company (a) merges or consolidates with another corporation or after business entity and the Company is not the surviving entity or (b) sells or transfers all or substantially all of its assets to another person and the holders of the Common Stock are entitled to receive stock, securities or property in respect of or in exchange for Common Stock, then as a condition of such merger, consolidation, sale or transfer, the Company and any such successor, purchaser or transferee will agree that this Debenture may thereafter be converted on the terms and subject to the conditions set forth above into the kind and amount of stock, securities or property receivable upon such merger, consolidation, sale or transfer by a holder of the number of shares of Common Stock into which this Debenture might have been converted immediately before such merger, consolidation, sale or transfer, subject to adjustments which shall be as nearly equivalent as may be practicable.  In the event of any (i) proposed merger or consolidation where the Company is not the surviving entity or (ii) sale or transfer of all or substantially all of the assets of the Company (in either such case, a "Sale"), the Holder shall have the right to convert by delivering a Notice of Conversion to the Company within fifteen (15) days of receipt of notice of such Sale from the Company.

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6.

If, at any time while any portion of this Debenture remains outstanding, the Company effectuates a stock split or reverse stock split of its Common Stock or issues a dividend on its Common Stock consisting of shares of Common Stock or otherwise recapitalizes its Common Stock, the Conversion Price shall be equitably adjusted to reflect such action.  By way of illustration, and not in limitation, of the foregoing (i) if the Company effectuates a 2:1 split of its Common Stock, thereafter, with respect to any conversion for which the Company issues the shares after the record date of such split, the Conversion Price shall be deemed to be one-half of what it had been calculated to be immediately prior to such split; (ii) if the Company effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect to any conversion for which the Company issues the shares after the record date of such reverse split, the Conversion Price shall be deemed to be the amount of such Conversion Price calculated immediately prior to the record date multiplied by 10; and (iii) if the Company declares a stock dividend of one share of Common Stock for every 10 shares outstanding, thereafter, with respect to any conversion for which the Company issues the shares after the record date of such dividend, the Conversion Price shall be deemed to be the amount of such Conversion Price calculated immediately prior to such record date multiplied by a fraction, of which the numerator is the number of shares for which a dividend share will be issued and the denominator is such number of shares plus the dividend share(s) issuable or issued thereon.

7.

All payments contemplated hereby to be made “in cash” shall be made by wire transfer of immediately available funds in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.  All payments of cash and each delivery of shares of Common Stock issuable to the Holder as contemplated hereby shall be made to the Holder to an account designated by the Holder to the Company and if the Holder has not designated any such accounts at the address last appearing on the Debenture Register of the Company as designated in writing by the Holder from time to time; except that the Holder may designate, by notice to the Company, a different delivery address for any one or more specific payments or deliveries.

8.

The Holder of the Debenture, by acceptance hereof, agrees that this Debenture is being acquired for investment and that such Holder will not offer, sell or otherwise dispose of this Debenture or the Shares of Common Stock issuable upon conversion thereof except in compliance with the terms of the Securities Purchase Agreement and the Registration Rights Agreement and under circumstances which will not result in a violation of the Securities Act or any applicable state Blue Sky or foreign laws or similar laws relating to the sale of securities.

9.

This Debenture shall be governed by and construed in accordance with the laws of the State of New York. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of New York or the state courts of the State of New York sitting in the City and County of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non coveniens, to the bringing of any such proceeding in such jurisdictions.  To the extent determined by such court, the Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the Holder in enforcement of or protection of any of its rights under this Debenture or the Securities Purchase Agreement.

10.

The following shall constitute an "Event of Default":

A-6

a.

The Company fails (i) in the payment of principal or interest on this Debenture as required to be paid in cash hereunder or (ii) in the issuance of shares of Common Stock upon Conversion within five (5) business days from the date of delivery of the Notice of Conversion as provided pursuant to Section 2, and payment shall not have been made or shares shall not have been delivered, as the case may be, for a period of five (5) business days following the payment due date or required share delivery date; or   

b.

Any of the representations or warranties made by the Company herein, in the Securities Purchase Agreement, the Registration Rights Agreement, dated as of __________ ____, 2005 between the Company and the Investors therein (the "Registration Rights Agreement"), or in any certificate or financial or other written statements heretofore or hereafter furnished by the Company in connection with the execution and delivery of this Debenture or the Securities Purchase Agreement shall be false or misleading (including without limitation by way of the misstatement of a material fact or the omission of a material fact) in any material respect at the time made; or  

c.

The Company fails to issue shares of Common Stock to the Holder or to cause its Transfer Agent to issue shares of Common Stock upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Debenture, fails to transfer or to cause its Transfer Agent to transfer any certificate for shares of Common Stock issued to the Holder upon conversion of this Debenture and when required by this Debenture or the Registration Rights Agreement, and such transfer is otherwise lawful, or fails to remove any restrictive legend or to cause its Transfer Agent to transfer any certificate or any shares of Common Stock issued to the Holder upon conversion of this Debenture as and when required by this Debenture, the Agreement or the Registration Rights Agreement and such legend removal is otherwise lawful, and any such failure shall continue uncured for five (5) business days after written notice from the Holder of such failure; or

d.

The Company shall fail to perform or observe, in any material respect, any other covenant, term, provision, condition, agreement or obligation of the Debenture and, except the case of Section 5, such failure shall continue uncured for a period of thirty (30) days after written notice from the holder of such failure.  The Company shall fail to perform or observe, in any material respect, any covenant, term, provision, condition, agreement or obligation of the Company under the Securities Purchase Agreement or the Registration Rights Agreement and such failure  shall continue uncured for a period of thirty (30) days after written notice from the Holder of such failure; or

e.

The Company shall (1) admit in writing its inability to pay its debts generally as they mature; (2) make an assignment for the benefit of creditors or commence proceedings for its dissolution; or (3) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; or

f.

A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or  

g.

Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any 

A-7

substantial portion of the properties or assets of the Company and shall not be dismissed within sixty (60) days thereafter; or

h.

Any final money judgment, writ or warrant of attachment, or similar process (including an arbitral determination), not subject to appeal, in excess of One-Hundred Thousand ($100,000) Dollars in the aggregate shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of sixty (60) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

i.

Bankruptcy, reorganization, insolvency or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company and, if instituted against the Company, shall not be dismissed within sixty (60) days after such institution or the Company shall by any action or answer approve of, consent to, or acquiesce in any such proceedings or admit the material allegations of, or default in answering a petition filed in any such proceeding; or

j.

The issuance of an order, ruling, finding or similar adverse determination by the Securities and Exchange Commission, the Secretary of State of the State of Nevada, the National Association of Securities Dealers, Inc. or any other securities regulatory body (whether in the United States, Canada or elsewhere) having proper jurisdiction that the Company and/or any of its past or present directors or officers have committed a material violation of applicable securities laws or regulations.

k.

The Company shall have its Common Stock suspended or delisted from an exchange for a period in excess of five (5) trading days.

Then, or at any time thereafter, and in each and every such case, unless such Event of Default shall have been waived in writing by a majority in interest of the Holders of the Debentures (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of a majority in interest of the Holders and in the discretion of a majority in interest of the Holders, (i) the interest rate applicable to the Debentures shall be increased to the lesser of eighteen percent (18%) per annum and the maximum interest rate allowable under applicable law, and (ii) the Holder may at its option and discretion declare this Debenture, together with all accrued and unpaid interest (the “Acceleration Amount”), to be immediately due and payable, without presentment, demand, protest or notice of any kinds, all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding.  Notwithstanding the foregoing, in the case of a default under Section 10(a)(ii) arising from a Conversion at the option of the Holder under Section 2(a), the Acceleration Amount shall be equal to 130% of the principal plus accrued and unpaid interest.  The Company expressly acknowledges and agrees that the Acceleration Amount as so increased in the event of a default under Section 10(a)(ii) is reasonable and appropriate due to the inability to define the financial hardship that the Company’s default would impose on the Holders.  A majority in interest of the Holders may immediately enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law.  

11.

Nothing contained in this Debenture shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or receive notice as a shareholder in respect 

A-8

of any meeting of shareholders or any rights whatsoever as a shareholder of the Company, unless and to the extent converted in accordance with the terms hereof.

12.

This Debenture may be amended only by the written consent of the parties hereto. Notwithstanding the foregoing, the principal amount of this Debenture shall automatically be reduced by any and all Conversion Amounts (to the extent that the same relate to principal hereof).  In the absence of manifest error, the outstanding principal amount of the Debenture on the Company’s book and records shall be the correct amount.

13.

No waivers or consents in regard to any provision of this Debenture may be given other than by an instrument in writing signed by the Holder.

[Signature page follows.]

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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by an officer thereunto duly authorized.

ELGRANDE INTERNATIONAL, INC.

By:  _____________________________

       Michael F. Holloran

       Chief Executive Officer

EXHIBIT A

NOTICE OF CONVERSION

(To be Executed by the Registered Holder in order to Convert the Debenture)

The undersigned hereby irrevocably elects to convert $ ________________ of the principal amount of the above Debenture No. ___ into Shares of Class A Common Stock of ELGRANDE INTERNATIONAL, INC.  (the "Company") according to the conditions hereof, as of the date written below.  After giving effect to the conversion requested hereby, the outstanding principal amount of such debenture is $ ____________________ subject to confirmation by the Company endorsed below.

Conversion Date*

Applicable Conversion Price 

Signature

[Name]

Address:

 

  ___________________________________________________________________________

* This original Debenture must be received by the Company or its Transfer Agent by the fifth business date following the Conversion Date.

The Company hereby confirms that $ ___________ in principal amount is outstanding under the above Debenture after giving effect to the conversion requested hereby.

ELGRANDE INTERNATIONAL, INC.

By:_______________________________________

__________________________________________

(Print Name)

__________________________________________

(Title)

EXHIBIT B

REGISTRATION RIGHTS AGREEMENT

(CONVERTIBLE DEBENTURES)

THIS REGISTRATION RIGHTS AGREEMENT, dated as of (this "Agreement"), is made by and between EL GRANDE INTERNATIONAL, INC., a Nevada corporation, with headquarters located at 1450 Kootenay Street, Vancouver, British Columbia, Canada V5K 4R1 (the “Company”), and each entity named on the signature page hereto as “Investors” (each, an “Investor”).

W I T N E S S E T H:

WHEREAS, upon the terms and subject to the conditions of the Securities Purchase Agreement, dated as of __________ ____, between the Buyers listed therein and the Company (the "Securities Purchase Agreement"; terms not otherwise defined herein shall have the meanings ascribed to them in the Securities Purchase Agreement), the Company has agreed to issue and sell to the Investors one or more debentures of the Company, in a minimum aggregate principal amount of $250,000 and a maximum aggregate amount of $600,000 (the "Debentures"); and

WHEREAS, the Debentures are convertible into shares of Common Stock (the "Conversion Shares"; which term, for purposes of this Agreement, shall be 300% of that number of shares of Common Stock into which the Debentures, including without limitation all shares of Common Stock issuable by the Company in lieu of accrued interest on conversion as contemplated by the Debentures) upon the terms and subject to the conditions contained in the Debentures. 

WHEREAS, to induce the Investors to execute and deliver the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "Securities Act"), with respect to the Conversion Shares; 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investors hereby agree as follows:

1.

Definitions.

As used in this Agreement, the following terms shall have the following meanings:

a.

“Holders’ Representative” means the person appointed as the Holders’ Representative by the Investors pursuant to Section 11 hereof.

b.

"Investor" means an Investor and any permitted transferee or assignee who agrees to become bound by the provisions of this Agreement in accordance with Section 9 hereof and who holds Debentures or Registrable Securities.

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c.

"Potential Material Event" means any of the following: (i) the possession by the Company of material information not ripe for disclosure in a registration statement, which shall be evidenced by determinations in good faith by the Board of Directors of the Company that disclosure of such information in the registration statement would be detrimental to the business and affairs of the Company; or (ii) any material engagement or activity by the Company which would, in the good faith determination of the Board of Directors of the Company, be adversely affected by disclosure in a registration statement at such time, which determination shall be accompanied by a good faith determination by the Board of Directors of the Company that the registration statement would be materially misleading absent the inclusion of such information.

d.

"Register," "Registered," and "Registration" refer to a registration effected by preparing and filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis ("Rule 415"), and the declaration or ordering of effectiveness of such Registration Statement by the SEC. 

e.

"Registrable Securities" means the Conversion Shares and, to the extent applicable, any other shares of capital stock or other securities of the Company or any successor to the Company that are issued upon exchange of the Conversion Shares.

f.

"Registration Statement" means a registration statement of the Company under the Securities Act.

g.

“SEC” means the United States Securities and Exchange Commission.

2.

Piggy-back Registration.  From and after the date that is ninety (90) days after the date of this Agreement and until the fifth anniversary of the Closing Date, for so long as any of the Registrable Securities are outstanding and are not the subject of an effective registration statement, if the Company contemplates making an offering of Common Stock (or other equity securities convertible into or exchangeable for Common Stock) registered for sale under the Securities Act or proposes to file a Registration Statement covering any of its securities other than (i) a registration on Form S-8 or S-4, or any successor or similar forms; and (ii) a shelf registration under Rule 415 for the sole purpose of registering shares to be issued in connection with the acquisition of assets, the Company will at each such time give prompt written notice to the Holders’ Representative and the Investors of its intention to do so and of the Investor’s rights under this Agreement.  Upon the written request of any Investor made within thirty (30) days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such Holder and the intended method of disposition thereof), the Company will use its best efforts to effect the registration of all Registrable Securities which the Company has been so requested to register by the Investors, to the extent requisite to permit the disposition (in accordance with the intended methods of disposition) of the Registrable Securities by the Investors requesting registration, by inclusion of such Registrable Securities in the Registration Statement which covers the securities which the Company proposes to register; provided, that if the Company is unable to register the full amount of Registrable Securities in an “at the market offering” under Commission rules and regulations due to the high percentage of the Company’s Common Stock the Registrable Securities represents (giving effect to all other 

A-4

securities being registered in the Registration Statement), then the Company may reduce, on a pro rata basis, the amount of Registrable Securities subject to the Registration Statement to a lesser amount which equals the maximum number of Registrable Securities that the Company is permitted to register in an “at the market offering”; and provided, further, that if, at any time after giving written notice of its intention to register any Registrable Securities and prior to the effective date of the Registration Statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such Registrable Securities, the Company may, at its election, give written notice of such determination to the Holders’ Representative and the Investors requesting registration and, thereupon, (i) in the case of a determination not to register, the Company shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the expenses of registration in connection therewith), and (ii) in the case of a determination to delay registering such Registrable Securities, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities.

3.

Obligations of the Company.  In connection with the registration of the Registrable Securities, the Company shall do each of the following:

(a)

Prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement as set forth in Section 2 and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective at all times during the period through the earliest of (i) the date that is five (5) years after the last day of the calendar month following the month in which the Registration Statement so filed is declared effective by the SEC, (ii) the date when the Investors may sell all Registrable Securities under Rule 144, or (iii) the date the Investors no longer own any of the Registrable Securities (The “Registration Period”), Registration Period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in the Registration Statement;

(b)

The Company shall permit a single firm of legal counsel designated by the Holders’ Representative (the “Investors’ Counsel”) to review drafts of the Registration Statement and all amendments and supplements thereto a reasonable period of time (but not less than three (3) business days) prior to their filing with the SEC, and not file any document in a form to which such Investors’ Counsel reasonably objects.  If the Investors’ Counsel objects, the Company shall take under advisement such objections and shall endeavor to promptly make such revisions to the Registration Statement (or ancillary documents and/or SEC filings in connection therewith) as are necessary to satisfy the objections of the Investors’ Counsel;

(c)

Notify the Holders’ Representative and the Investors’ Counsel, and any managing underwriters immediately (and, in the case of (i)(A) below, not less than five (5) days prior to the contemplated date of such filing) and (if requested by any the Holders' Representative) confirm such notice in writing no later than one (1) business day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed; (B) whenever the SEC notifies the Company 

A-5

whether there will be a “review” of  Registration Statement; (C) whenever the Company receives (or a representative of the Company receives on its behalf) any oral or written comments from the SEC relating to a Registration Statement (copies or, in the case of oral comments, summaries of such comments shall be promptly furnished by the Company to the Holders’ Representative and the Investor’s Counsel); and (D) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the SEC or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) if at any time the Company has actual knowledge that any of the representations or warranties of the Company contained in any agreement (including any underwriting agreement) contemplated hereby ceases to be true and correct in all material respects; (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (vi) of the occurrence of any event that to the best knowledge of the Company makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  In addition, the Company shall respond to the SEC in writing to comments on the Registration Statement by the SEC within fifteen (15) business days of the Company’s receipt thereof, plus any additional time reasonably required by the Company’s independent auditors to respond to accounting comments and, if requested by the Holders' Representative and the Investors’ counsel, the Company shall furnish the Holders' Representative with copies of all intended written responses to the comments contemplated in clause (C) of this Section 3(c) not later than one (1) business day in advance of the filing of such responses with the SEC so that the Holders’ Representative and the Investors’ Counsel shall have the opportunity to comment thereon;  

(d)

Furnish to the Holders’ Representative and the Investors’ Counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one (1) copy of the Registration Statement, each preliminary Prospectus and Prospectus, and each amendment or supplement thereto, and (ii) if so requested by any Investor, such number of copies of a Prospectus, and all amendments and supplements thereto and such other documents, as such Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor;  

(e)

As promptly as practicable after becoming aware thereof, notify the Holders’ Representative of the happening of any event of which the Company has actual knowledge, as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and use its best efforts promptly to prepare a supplement or amendment to the Registration Statement or other appropriate filing with the SEC to correct 

A-6

such untrue statement or omission, and deliver a number of copies of such supplement or amendment to the Holders' Representative and each Investor as such Investor may reasonably request;

(f)

As promptly as practicable (and in any event not later than one (1) business day) after becoming aware thereof, notify the Holders’ Representative of the issuance by the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time;  

(g)

Notwithstanding the foregoing, if at any time or from time to time after the date of effectiveness of a Registration Statement, the Company notifies the Holders’ Representative in writing of the existence of a Potential Material Event, the Investors shall not offer or sell any Registrable Securities, or engage in any other transaction involving or relating to the Registrable Securities, from the time of the giving of notice with respect to a Potential Material Event until such Investor receives written notice from the Company that such Potential Material Event either has been disclosed to the public or no longer constitutes a Potential Material Event; provided, however, that the Company may not so suspend the right to such Holders of Registrable Securities for more than two twenty (20) business day periods in the aggregate during any 12-month period ("Suspension Period") with at least a ten (10) business day interval between such periods, during the periods the Registration Statement is required to be in effect;

(h)

Use its  reasonable efforts to secure and maintain the designation of all the Registrable Securities covered by the Registration Statement on the NASDAQ/National Market System or the "OTC Bulletin Board Market" or any successor thereto of the National Association of Securities Dealers Automated Quotations System ("NASDAQ") within the meaning of Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the quotation of the Registrable Securities on The NASDAQ National Market System; and further use its efforts to arrange for at least two market makers to register with the National Association of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable Securities;  

(i)

Provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities not later than one (1) business day after the effective date of the Registration Statement;

(j)

Cooperate with the Investors to facilitate the timely preparation and delivery of certificates for the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates for the Registrable Securities to be in such denominations or amounts as the case may be, as the Investors may reasonably request, and, within five (5) business days after a Registration Statement which includes Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel selected by the Company to deliver, to the transfer agent for the Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) an appropriate instruction and opinion of such counsel; 

A-7

(k)

Take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of the Registrable Securities pursuant to the Registration Statement; 

(l)

Not take, or omit to take, any actions that would preclude the filing or effectiveness of the Registration Statement or require the withdrawal of the Registration Statement;  

(m)

If the Registration Statement has been filed but has not been declared effective by the SEC, not complete any acquisitions or business combinations until the SEC has declared effective the Registration Statement that registers the Registrable Securities.

4.

Payments by the Company.  Unless the Company's performance is waived in writing by the Holders' Representative:

(i)

If the Company fails to satisfy its obligations under Sections 2 or 3, then the Company shall immediately pay to the Investors without demand therefor a cash amount equal to 2% per month of the outstanding principal amount of the Debentures and, until such time as all such obligations shall have been satisfied, the same amount shall accrue and become payable to the Investors within three days on each subsequent month until such obligations shall have been satisfied.  In light of the difficulty of ascertaining the amount of damage that the Investors will suffer as a result of the Company’s failure to comply with its obligations under Sections 2 or 3, all amounts payable under this Section 4 shall be payable as liquidated damages, and not as a penalty.  The Company shall keep the Registration Statement effective throughout the Registration Period.

(ii)

The parties acknowledge that the damages which may be incurred by the Investors if the Company fails to satisfy any of its obligations under Sections 2 or 3 may be difficult to ascertain.  The parties agree that the payments to be paid to the Investors under this Section 4 represent a reasonable estimate on the part of the parties, as of the date of this Agreement, of the amount of such damages.

5.

Obligations of the Investors.  In connection with the registration of the Registrable Securities, the Investors shall have the following obligations:

(a)

It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.  At least ten (10) business days prior to the first anticipated filing date of the Registration Statement, the Company shall notify each Investor of the information the Company requires from each such Investor (the "Requested Information") if such Investor elects to have any of such Investor's Registrable Securities included in the Registration Statement.  If at least two (2) business days prior to the filing date the Company has 

A-8

not received the Requested Information from an Investor (a "Non-Responsive Investor"), then the Company may file the Registration Statement without including Registrable Securities of such Non-Responsive Investor;

(b)

Each Investor, by such Investor's acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of the Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor's election to exclude all of such Investor's Registrable Securities from the Registration Statement; and

(c)

Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(d) or 3(e), above, such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Investor's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(d) or 3(e) and, if so directed by the Company, such Investor shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in such Investor's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

(d)

Each holder of Registrable Securities that sells Registrable Securities pursuant to a registration under this Agreement agrees that in connection with registration as follows:

(i)

Such seller shall cooperate as reasonably requested by the Company with the Company in connection with the preparation of the registration statement, and for as long as the Company is obligated to file and keep effective the registration statement, shall provide to the Company, in writing, for use in the registration statement, all such information regarding such seller and its plan of distribution of the Registrable Securities as may reasonably be necessary to enable the Company to prepare the registration statement and prospectus covering the Registrable Securities, to maintain the currency and effectiveness thereof and otherwise to comply with all applicable requirements of law in connection therewith; and  

(ii)

During such time as such seller may be engaged in a distribution of the Registrable Securities, such seller shall comply with Rules 10b-6 and 10b-7 promulgated under the Securities Exchange Act and pursuant thereto it shall, among other things; (x) not engage in any stabilization activity in connection with the securities of the Company in contravention of such rules; (y) distribute the Registrable Securities under the registration statement solely in the manner described in the registration statement; and (z) cease distribution of such Registrable Securities pursuant to such registration statement upon written notice from the Company that the prospectus covering the Registrable Securities contains any untrue statement of a material fact required to be stated therein or necessary to make the statements therein not misleading.

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6.

Expenses of Registration.  

(a)

All reasonable expenses (other than underwriting discounts and commissions of the Investors) incurred for the Registration Statement covering the Registrable Securities applicable to the Debentures shall be borne by the Company, up to an aggregate amount of $50,000 in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, a fee for the Investors’ Counsel of not more than $5,000 and including, without limitation, all registration, listing, and qualifications fees, printers, legal and accounting fees and the fees and disbursements of counsel for the Company.  

(b)

Neither the Company nor any of its subsidiaries has, as of the date hereof, nor shall the Company nor any of its subsidiaries, on or after the date of this Agreement, entered into any agreement with respect to its securities that is inconsistent with the rights granted to the Investors in this Agreement or otherwise conflicts with the provisions hereof.  Except as disclosed in the Securities Purchase Agreement or the other documents entered into simultaneously therewith, neither the Company nor any of its subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person except for the secured convertible promissory note issued to Thomas A. Simons dated December 23, 2004 with piggyback registration rights expiring one year from the date of the note and as provided in the subscription agreement dated October 11, 2004 between the Company and Walther-Glass Gmbh & Co KG.  Without limiting the generality of the foregoing, without the written consent of the Investors holding a majority of the Registrable Securities, the Company shall not grant to any person the right to request the Company to register any securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights in full of the Investors set forth herein, and are not otherwise in conflict or inconsistent with the provisions of this Agreement and the other Transaction Documents.

7.

Indemnification.  In the event any Registrable Securities are included in a Registration Statement under this Agreement:

(a)

To the extent permitted by law, the Company will indemnify and hold harmless the Holders’ Representative, the Investor’s Counsel and each Investor who holds such Registrable Securities, the directors, managers, partners, stockholders and members, if any, of the Holders’ Representative, the Investor’s Counsel or such Investor, the officers and employees, if any, of the Holders’ Representative, the Investor’s Counsel or such Investor, and each person, if any, who controls the Holders’ Representative, the Investors Counsel or any Investor within the meaning of the Securities Act or the Exchange Act (each, an "Indemnified Person" or "Indemnified Party"), against any losses, claims, damages, liabilities or expenses (joint or several) incurred (collectively, "Claims") to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any of the following statements, omissions or violations in the Registration Statement, or any post-effective amendment thereof, or any prospectus included therein: (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any post-effective amendment thereof or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as 

A-10

amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation under the Securities Act, the Exchange Act or any state securities law (the matters in the foregoing clauses (i) through (iii) being, collectively, "Violations").  Subject to clause (b) of this Section 7, the Company shall reimburse the Investors, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim.  Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 7(a) shall not (I) apply to a Claim arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(b) hereof;  (II) be available to the extent such Claim is based on a failure of the Investor to deliver or cause to be delivered the prospectus made available by the Company;  (III) apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld; or (IV) apply to any violation or alleged violation by an Indemnified Person of the Securities Act, the Exchange Act, any state securities laws or any rule or regulation under the Securities Act, the Exchange Act, or any state securities laws.   Each Investor will indemnify the Company and its officers, directors and agents (each, an "Indemnified Person" or "Indemnified Party") against any claims arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company, by or on behalf of such Investor, expressly for use in connection with the preparation of the Registration Statement, subject to such limitations and conditions as are applicable to the Indemnification provided by the Company to this Section 7.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors.

(b)

Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 7 of notice of the commencement of any action (including any governmental action), such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be.  In case any such action is brought against any Indemnified Person or Indemnified Party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such Indemnified Person or Indemnified Party of its election so to assume the defense thereof, the indemnifying party will not be liable to such Indemnified Person or Indemnified Party under this Section 7 for any legal or other reasonable out-of-pocket expenses subsequently incurred by such Indemnified Person or 

A-11

Indemnified Party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion.  The Indemnified Person or Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and reasonable out-of-pocket expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the Indemnified Person or Indemnified Party. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 7, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.  The indemnification required by this Section 7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable.

8.

Contribution.  To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 7 to the fullest extent permitted by law; provided, however, that (a) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 7; (b) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of such fraudulent misrepresentation; and (c) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.

9.

Reports under Exchange Act.  With a view to making available to the Investors the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration ("Rule 144"), the Company agrees to:

a.

make and keep public information available, as those terms are understood and defined in Rule 144; 

b.

file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act;  

c.

furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration; and  

d.   cause its counsel to deliver to its transfer agent such opinions of law as shall be required to remove restrictive legends on the shares to be sold in the standard form then employed for such purpose by such counsel or in such other form as is reasonably acceptable to 

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such transfer agent.

10.

Amendment of Registration Rights.  Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Investors who hold a fifty (50%) percent interest of the Registrable Securities.  Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company.

11.

Appointment and Indemnification of Holders’ Representative.  Each of the Investors hereby appoints as the Holders’ Representative Divine Capital Markets, LLC to so act until such time as all Registrable Securities have become Registered and there shall be no Debentures issued and outstanding, or such time as a successor to the then-acting Holders’ Representative is appointed in writing signed by the Investors representing greater than 50% of the then-outstanding Debentures and Registrable Securities.  The Holders’ Representative shall have full discretion and authority, without consultation with the Holders, to accept and give notices on behalf of the Holders, to communicate with the Holders at such times and in such manner as the Holders’ Representative in its discretion determines is appropriate and to grant extensions of deadlines or waive any payment obligations set forth in Sections 2 and 3 hereof.  The Holders' Representative shall not have discretion or authority to exercise any investment discretion over the Debentures, including causing the conversion of any Debentures, absent a Holder's express written authority.  Notwithstanding any provision to the contrary contained elsewhere herein or in the Securities Purchase Agreement or the Debentures, the Holders’ Representative shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Holders’ Representative have or be deemed to have any fiduciary relationship with any Holder, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the Securities Purchase Agreement or Debentures or otherwise exist against the Holders’ Representative.  The Holders shall indemnify upon demand the Holders’ Representative (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so under Section 7 hereof or under any other agreement or applicable law), pro rata, and hold harmless the Holders’ Representative from and against any and all against any losses, claims, damages, liabilities or expenses (joint or several) incurred (collectively, "Holders’ Representative’s Claims") incurred by it; provided, however, that no Holder shall be liable for the payment to the Holders’ Representative of any portion of such Holders’ Representative’s Claims to the extent determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from the Holders’ Representative’s own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Holders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 11.  Without limitation of the foregoing, each Holder shall reimburse the Holders’ Representative upon demand for its ratable share of any costs or out-of-pocket expenses incurred by the Holders’ Representative in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, the Securities Purchase Agreement, the Debentures, or any document contemplated by or referred to herein, to the extent that the Holders’ Representative is not reimbursed for such expenses by or on behalf of the Company.

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12.

Miscellaneous.

a.

A person or entity is deemed to be a holder of Registrable Securities whenever such person or entity owns of record such Registrable Securities.  If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.

b.

Notices required or permitted to be given hereunder shall be given in the manner contemplated by the Securities Purchase Agreement, (i) if to the Company or to the Investors, to their respective address contemplated by the Securities Purchase Agreement, and (iii) if to any other Investor, at such address as such Investor shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 12(b).

c.

Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

d.

This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws.  Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of New York or the state courts of the State of New York sitting in the City of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non coveniens, to the bringing of any such proceeding in such jurisdictions.  To the extent determined by such court, the Company shall reimburse the Buyer for any reasonable legal fees and disbursements incurred by the Buyer in enforcement of or protection of any of its rights under this Agreement.

e.

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

f.

Subject to the requirements of Section 9 hereof, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

g.

All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

h.

The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning thereof.

i.

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.  This Agreement, once executed by a party, may be delivered to the other party hereto by telephone 

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line facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

j.

The Company acknowledges that any failure by the Company to perform its obligations under Sections 2 or 3 or any delay in such performance could result in loss to the Investors, and the Company agrees that, in addition to any other liability the Company may have by reason of such failure or delay, the Company shall be liable for all direct damages caused by any such failure or delay, unless the same is the result of force majeure.  Neither party shall be liable for consequential damages.

k.

This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein.  This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement may be amended only by an instrument in writing signed by the party to be charged with enforcement thereof. 

[Signature page follows.]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.

	COMPANY:

	ELGRANDE INTERNATIONAL, INC.

	By:   _____________________________

	       Name:  Michael F. Holloran

	 	Title:

Chief Executive Officer

	INVESTOR: 

 

	 
	Print Name of Investor Above

	By:

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 EXHIBIT C

[Letterhead of Company Counsel]

[__________ ____, 200_]

TO THE BUYERS

NAMED ON SCHEDULE I

Re:

Securities Purchase Agreement

Ladies and Gentlemen:

We have acted as counsel for Elgrande International, Inc. (the "Company"), a Nevada corporation, in connection with the transactions under (i) the Securities Purchase Agreement by and among each entity named therein as a “Buyer” (each, a “Buyer”) and the Company, dated as of __________ ____, 2005 (the "Securities Purchase Agreement"), (ii) the Registration Rights Agreement between the Investors and the Company, dated as of __________ ____, 2005 (the “Registration Rights Agreement”) and (iii) the Company’s Convertible Debenture due 2008 (the "Debentures," and, together with the Securities Purchase Agreement, the Registration Rights Agreement, the "Transaction Documents").  This opinion is furnished to you pursuant to Section 8 of the Securities Purchase Agreement.  All capitalized terms used herein have the meanings defined for them in the Securities Purchase Agreement unless otherwise defined herein.

As counsel to the Company, we have examined originals or copies of such corporate records of the Company, certificates of public officials and such other documents as we have deemed necessary for the purpose of rendering this opinion letter.  

In rendering the opinions expressed below, we have assumed (i) the valid existence in the jurisdiction of its organization of each party to the Transaction Documents other than the Company, (ii) the due authorization, execution and delivery of the Transaction Documents by the parties thereto other than the Company, (iii) the power and authority of each party to the Transaction Documents, other than the Company, to execute, deliver and perform the same without violating its certificate of incorporation or bylaws or any other organizational or governing documents or any law or governmental rule or regulation applicable to it, (iv) that the execution, delivery and performance of the Transaction Documents by each party thereto, other than the Company, will not conflict with, constitute a default under or result in a breach of any requirement of law or any contractual obligation of any such party, (v) the genuineness of all signatures and the authority of all persons signing each of the Transaction Documents on behalf of the parties thereto other than the Company, and (iv) the authenticity of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such copies.  

As to certain factual matters, we have, to the extent deemed appropriate by us, relied upon certificates of officers of the Company and the Buyers (including, without limitation, all certificates delivered by them in connection with the Securities Purchase Agreement) and the 

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representations and warranties of the Company and the Buyers contained in the Transaction Documents (including the Schedules and Exhibits thereto), and we have not independently verified the information contained in such certificates or the Transaction Documents.  

As used herein, "to our knowledge" means the conscious awareness (without any independent investigation) of facts or other information by any lawyer in our Firm actively involved in the negotiation of the transactions described herein. The term "to our knowledge" specifically excludes all factual matters that would be known to us by constructive, implied or imputed knowledge.  

Based upon the foregoing and subject to the qualifications hereinafter set forth, we are of the opinion that:

1.

The Company is a corporation organized and existing under the laws of the State of Nevada and its status is active.  The Company has the corporate power to conduct its business and, to our knowledge, is qualified as a foreign corporation to do business and is in good standing in British Columbia and each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not have a Material Adverse Effect.

2.

The Company has the corporate power to perform its obligations under the Transaction Documents and to sell, issue and deliver the Debentures. The execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been authorized by all necessary corporate action. Each of the Transaction Documents has been executed and delivered by the Company, and each of the Transaction Documents constitutes valid and binding obligations of the Company enforceable against the Company under the law of New York and the federal law of the United States.

3.

The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby, including, without limitation, the sale, issuance and delivery of the Debentures, do not to our knowledge (i) result in a violation of the Company's Articles of Incorporation, as amended (the "Articles”) or By-Laws; (ii) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture, instrument or any "lock-up" or similar provision of any underwriting or similar agreement to which the Company is a party; or (iii) result in a violation of any federal or state law, rule or regulation applicable to the Company or by which any property or asset of the Company is bound or affected, except for such violations as would not, individually or in the aggregate, have a Material Adverse Effect.

4.

Assuming the accuracy of the Buyers’ representations and warranties under Section 2 of the Securities Purchase Agreement, the purchase and sale of the Debentures pursuant to the Transaction Documents is exempt from registration under the Securities Act of 1933 (as amended), pursuant to Section 4(2) thereof.

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5.

To our knowledge, there are no claims, actions, suits, proceedings or investigations that are pending against the Company which could reasonably be expected to have a Material Adverse Effect.

6.

Upon conversion of the Debenture in accordance with the terms therein, the Common Stock to be issued thereunder will be authorized, issued and fully paid in non-assessable shares of the Company.

7.

The authorized capital stock of the Company consists of 500,000,000 shares of capital stock of which 500,000,000 shares are shares of Common Stock, par value $0.001 per share, of which [_________________] shares are issued and outstanding as of the date hereof.

Our opinions expressed herein are qualified as follows:

A.

The opinions expressed herein are qualified to the extent that the validity, binding effect and enforceability against the Company of its obligations under the Transaction Documents may be limited or otherwise afforded by the unenforceability, under certain circumstances, of provisions indemnifying, or prospectively releasing, a party against liability for its own wrongful or negligent acts or where a release or indemnification provision is contrary to public policy.  

B.

Our opinions concerning the validity, binding effect and enforceability against the Company of its obligations under the Transaction Documents mean that (i) the Transaction Documents constitute an effective contract under applicable law, (ii) the Transaction Documents are not invalid in their entirety because of a specific statutory prohibition or public policy and are not subject in their entirety to a contractual defense, and (iii) some remedy is available if the Company is in material default under the Transaction Documents.  Our opinions herein on the enforceability of the Company's obligations under the Transaction Documents are qualified to the extent that: (iv) the availability of any specific remedy provided therein and any other equitable remedies, including without limitation specific performance, is subject to the exercise of judicial discretion in accordance with general principles of equity and public policy (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (v) the enforceability of any agreement or obligation of the Company may be limited by (x) bankruptcy, rehabilitation, liquidation, conservation, dissolution, insolvency, reorganization, moratorium, fraudulent conveyance, receivership or other similar laws now or hereafter in effect relating to creditors' rights generally and (y) the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), including without limitation, (1) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (2) concepts of materiality, commercial reasonableness, conscionability, good faith and fair dealing.

C.

We express no opinion herein as to (i) the applicability to the obligations of the Company (or the enforceability thereof) of Section 548 of the U.S. Bankruptcy Code or any other provision of law relating to fraudulent transfers, conveyances and obligations, and (ii) the "blue sky" laws of any State.

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We express no opinion herein as to laws of any jurisdiction other than the law of the State of New York, the corporate law of the State of Nevada and the Federal law of the United States.  In rendering this opinion, we assume that the law of New York is identical to the law of Nevada in all respects.

The opinions contained herein are limited to those matters expressly covered by numbered paragraphs (1) through (6) above; no opinion is to be implied in respect of any other matter.  The opinions set forth in numbered paragraphs (1) through (6) are as of the date hereof and we disclaim any undertaking to update this letter or otherwise advise you as to any changes of law or fact which may hereafter be brought to our attention.  

This letter and the opinions contained herein are furnished by us as counsel to the Company in connection with the transactions described above and are solely for your benefit and are not to be made available to or relied upon in any manner by any other person, firm, or entity or for any other purpose without our prior written consent.

Very truly yours,

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SCHEDULE I TO COMPANY COUNSEL LEGAL OPINION

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