ANNEX I
TO
SECURITIES PURCHASE AGREEMENT
<PROTOTYPE FOR EACH ISSUANCE>

FORM OF DEBENTURE

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, 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 COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.

No. 08–  1-  2
US $__________3

AMERICAN SECURITY RESOURCES CORPORATION

7.75% CONVERTIBLE DEBENTURE SERIES 08-__4
DUE _______, 20__5

FOR VALUE RECEIVED, AMERICAN SECURITY RESOURCES CORPORATION, a corporation
organized and existing under the laws of the State of Nevada (the "Company"),
promises to pay to ___________________, the registered holder hereof (the
"Holder"), the principal sum of _____________________ and  00/100  Dollars (US
$_______)6 on ______, 20__7 (the “Maturity Date”) and to pay interest on the
principal sum outstanding from time to time in arrears at the rate of 7.75% per
annum, accruing from ______________, 200_,8 the date of initial issuance of this
Debenture (the “Issue Date”), on the date (each, an “Interest Payment Date”)
which is the earlier of (i) the next Conversion Date (as defined below), or (iii
the Maturity Date, as the case may be.  Interest shall accrue monthly (pro-rated
on a daily basis for any period longer or shorter than a month) from the later
of the Issue Date or the previous Interest Payment Date and shall be payable,
subject to the other provisions of this Debenture, in cash or in Common Stock.
If not paid in full on an Interest Payment Date, interest shall be fully
cumulative and shall accrue on a daily basis, based on a 365-day year, monthly
or until paid, whichever is earlier.  Additional provisions regarding the
payment of interest are provided in Section 4(D) below (the terms of which shall
govern as if this sentence were not included in this Debenture).

This Debenture is being issued pursuant to the terms of the Securities Purchase
Agreement, dated as of February ___, 2008 (the “Securities Purchase Agreement”),
to which the Company and the Holder (or the Holder’s predecessor in interest)
are parties.  Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Securities Purchase Agreement.

This Debenture is subject to the following additional provisions:

1.           The Debentures will initially be issued in denominations determined
by the Company, but are exchangeable for an equal aggregate principal amount of
Debentures of different denominations, as requested by the Holder surrendering
the same.  No service charge will be made for such registration or transfer or
exchange.

2.           The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.

3.           This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"), and other applicable state and foreign securities laws and the terms of
the Securities Purchase Agreement.  In the event of any proposed transfer of
this Debenture, the Company may require, prior to issuance of a new Debenture in
the name of such other person, that it receive reasonable transfer documentation
that is sufficient to evidence that such proposed transfer complies with the Act
and other applicable state and foreign securities laws and the terms of the
Securities Purchase Agreement.  Prior to due presentment for transfer of this
Debenture, 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.

4.           A.            (i)  At any time on or after the Issue Date and prior
to the time this Debenture is paid in full in accordance with its terms
(including, without limitation, after the occurrence of an Event of Default, as
defined below, or, if the Debenture is not fully paid or converted after the
Maturity Date), the Holder of this Debenture is entitled, at its option, subject
to the following provisions of this Section 4, to convert this Debenture at any
time into shares of Common Stock, $0.001 par value ("Common Stock"), of the
Company at the Conversion Price (as defined below).  Any such conversion is
referred to as a “Voluntary Conversion.”

(ii)  On the Maturity Date the Company shall pay the principal and accrued
interest (through the actual date of payment) of any portion of this Debenture
which is then outstanding.

(iii)  For purposes of this Debenture, the following terms shall have the
meanings indicated below:

“Conversion Price” means the (i) the VWAP for the three (3) Regular Trading Days
(which need not be consecutive) selected by the Holder  from  20 Trading Days
ending on the Trading Day immediately before the relevant Conversion Date,
multiplied by (ii) eighty percent (80%).

“Regular Trading Day,”  “Reporting Service,” “Trading Day,” and “VWAP” have the
meanings ascribed to them in the Securities Purchase Agreement.

“Conversion Date” means  the date on which the Holder faxes or otherwise
delivers a Notice of Conversion to the Company so that it is received by the
Company on or before such specified date.

“Conversion Shares” has the meaning ascribed to in Section 4(H) hereof.

B.           A Voluntary Conversion shall be effectuated by the Holder by faxing
a notice of conversion (“Notice of Conversion”) to the Company as provided in
this paragraph.  The Notice of Conversion shall be executed by the Holder of
this Debenture and shall evidence such Holder's intention to convert this
Debenture or a specified portion hereof in the form annexed hereto as Exhibit
A.  Delivery of the Notice of Conversion shall be accepted by the Company by
hand, mail or courier delivery at the address specified in said Exhibit A or at
the facsimile number specified in said Exhibit A (each of such address or
facsimile number may be changed by notice given to the Holder in the manner
provided in the Securities Purchase Agreement).  On the Issue Date, the Holder
issued a Purchase Note specifically designated as payment of the balance of the
purchase price for this specific Debenture (the “Specific Purchase
Note”).  Notwithstanding the foregoing, this Debenture  may be converted by way
of a Voluntary Conversion only after the Specific Purchase Note has been paid or
otherwise satisfied in full.

C.           Notwithstanding any other provision hereof or of any of the other
Transaction Agreements, in no event (except (i) as specifically provided herein
as an exception to this provision, or (ii) while there is outstanding a tender
offer for any or all of the shares of the Company’s Common Stock) shall the
Holder be entitled to convert any portion of this Debenture, or shall the
Company have the obligation to convert such Debenture (and the Company shall not
have the right to pay interest hereon in shares of Common Stock) to the extent
that, after such conversion or issuance of stock in payment of interest, the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures or other convertible securities or of the unexercised portion of
warrants or other rights to purchase Common Stock), and (2) the number of shares
of Common Stock issuable upon the conversion of the Debentures with respect to
which the determination of this proviso is being made, would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock (after taking into account the shares to be
issued to the Holder upon such conversion).  For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, except as otherwise provided in clause (1) of such sentence.  Nothing
herein shall preclude the Holder from disposing of a sufficient number of other
shares of Common Stock beneficially owned by the Holder so as to thereafter
permit the continued conversion of this Debenture.

D.           (i) Subject to the terms of Section 4(C) and to the other terms of
this Section 4(D),

(x) interest on the principal amount of this Debenture converted pursuant to a
Notice of Conversion, and

(y) any other amounts due to the Holder with respect to this Debenture or
pursuant to any other provision of any of the Transaction Agreements, including
but not necessarily limited to, costs of collection (collectively, “Other
Costs”),

shall be due and payable, at the option of the Holder, in cash or in shares of
Common Stock on the Interest Payment Date.

(ii)  If the interest payable in connection with a Voluntary Conversion or if
Other Costs are to be paid in cash, the Company shall make such payment within
three (3) Trading Days after the Interest Payment Date (for interest) or of the
demand for such Other Costs by the Holder, as the case may be.

(iii)  If interest or Other Costs are to be paid in Common Stock,  the number of
shares of Common Stock to be received shall be determined by dividing the dollar
amount of the interest by the Conversion Price in effect on the relevant
Interest Payment Date or on the date of demand for such Other Costs by the
Holder, as the case may be.  For such purposes, the date of a demand for Other
Costs by the Holder shall be treated (with respect to the amount of such Other
Costs) as an Interest Payment Date.

E.           Anything in the other provisions of this Debenture or any of the
other Transaction Agreements to the contrary notwithstanding, the Company shall
not have the right to prepay any or all of the outstanding principal of this
Debenture, without the prior written consent of the Holder in each instance
(which consent may be withheld for any reason or no reason, in the sole
discretion of the Holder).

F.           (i)  The following provisions apply to the issuances of Common
Stock in payment of the amounts due under this Debenture, whether as principal
or interest, as provided in the preceding provisions of this Section 4.

(ii)  No fractional shares of Common Stock or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share.

(iii)  All shares issuable with respect to a Conversion Date or Interest
Payments Date shall be deemed “Conversion Shares” for all purposes of this
Debenture and the other Transaction Agreements. Certificates representing the
relevant Conversion Shares (“Conversion Certificates”) will be delivered to the
Holder at the address specified in the relevant Notice of Conversion or demand
for payment of Other Costs (and if none, the Holder’s the Holder’s address for
notices as contemplated by the Securities Purchase Agreement, which address the
Holder may change from time to time in the manner provided therein), via express
courier, by electronic transfer or otherwise, within three (3) Trading Days
(such third Trading Day, the “Delivery Date”) after the relevant Conversion
Date.  The Holder shall be deemed to be the holder of the shares issuable to it
in accordance with the relevant provisions of this Debenture on the Conversion
Date or Interest Payment Date, as the case may be.

G.           Except as may specified in a specific provision of this Debenture,
any payments under this Debenture shall be applied in the following order of
priority: (i)  first to Other Costs, (ii) then to accrued but unpaid interest;
and (iii) then, to principal in the inverse order of maturity.

5.           Subject to the terms of the Securities Purchase Agreement, no
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Debenture at the time, place, and rate, and in the coin or currency or
where contemplated herein in shares of its Common Stock, as applicable, as
herein prescribed.  This Debenture and all other Debentures now or hereafter
issued of similar terms are direct obligations of the Company.

6.           A.           Each Pledgor (as defined in the Securities Purchase
Agreement)  is personally guarantying to the Holder the timely and full
fulfillment of all of the obligations of the Company under this Debenture on the
terms provided above and in (and as limited by) the Guarantee, which has been
executed by such Pledgor in favor of, and delivered to, the Holder.

B.           The obligations of the Company under this Debenture and of each
respective Pledgor under the Guarantee executed and delivered by such Pledgor
are secured under the terms of the Pledge Agreement, to which the Holder and the
Pledgor are parties (the "Pledge Agreement"), the terms of which are
incorporated herein by reference, by a pledge from each respective Pledgor of
the number of shares of the Company's Common Stock identified opposite such
Pledgor’s name on Schedule A to this Debenture, of which shares the relevant
Pledgor is the record and beneficial owner. If the Holder forecloses on any of
the Pledged Shares, the obligations of the Company will be reduced only to the
extent of the proceeds actually realized from such foreclosure, in the priority
specified in Section 4(I) hereof.

7.           Except as provided in Sections 5 and 6 above or in a separate
instrument signed by the party to be charged therewith, no recourse shall be had
for the payment of the principal of, or the interest on, this Debenture, or for
any claim based hereon, or otherwise in respect hereof (including, but not
limited to, a claim for Other Costs), against any incorporator, shareholder,
officer or director, as such, past, present or future, of the Company or any
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.

8.           All payments contemplated hereby to be made “in cash” shall be made
in immediately available good funds of United States of America currency by wire
transfer to an account designated in writing by the Holder to the Company (which
account may be changed by notice similarly given).  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  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 can designate, by notice to the Company, a
different delivery address for any one or more specific payments or deliveries.

9.           If, for as long as this Debenture remains outstanding, the Company
enters into a merger (other than where the Company is the surviving entity) or
consolidation with another corporation or other entity or a sale or transfer of
all or substantially all of the assets of the Company to another person
(collectively, a "Sale"), the Company will require, in the agreements reflecting
such transaction, that the surviving entity expressly assume the obligations of
the Company hereunder.  Notwithstanding the foregoing, if the Company enters
into a Sale 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 Sale, the Company and any such successor, purchaser or
transferee will agree that the 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 such proposed Sale, (i)
the Holder hereof 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, except that Section 4(C) shall not apply to such
conversion.

10.           If, at any time while any portion of this Debenture remains
outstanding, the Company spins off or otherwise divests itself of a part of its
business or operations or disposes of all or of a part of its assets in a
transaction (the “Spin Off”) in which the Company, in addition to or in lieu of
any other compensation received and retained by the Company for such business,
operations or assets, causes securities of another entity (the “Spin Off
Securities”) to be issued to security holders of the Company, the Company shall
cause (i) to be reserved Spin Off Securities equal to the number thereof which
would have been issued to the Holder had all of the Holder’s Debentures
outstanding on the record date (the “Record Date”) for determining the amount
and number of Spin Off Securities to be issued to security holders of the
Company (the “Outstanding Debentures”) been converted as of the close of
business on the Trading Day immediately before the Record Date (the “Reserved
Spin Off Shares”), and (ii) to be issued to the Holder on the conversion of all
or any of the Outstanding Debentures, such amount of the Reserved Spin Off
Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction,
of which (I) the numerator is the principal amount of the Outstanding Debentures
then being converted, and (II) the denominator is the principal amount of the
Outstanding Debentures.

11.           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, the prices used in determining the Conversion Price from dates
prior to such action or and any other fixed amounts calculated as contemplated
hereby or by any of the other Transaction Agreements shall be equitably adjusted
to reflect such action.

12.           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 under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.

13.           This Debenture shall be governed by and construed in accordance
with the laws of the State of Illinois 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 exclusive jurisdiction of
the federal courts whose districts encompass any part of the City of Chicago or
the state courts of the State of Illinois sitting in the City of Chicago in
connection with any dispute arising under this Debenture 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 any of
this Debenture.

13.           JURY TRIAL WAIVER.   The Company and the Holder hereby waive a
trial by jury in any action, proceeding or counterclaim brought by either of the
Parties hereto against the other in respect of any matter arising out of or in
connection with this Debenture.

14.           The term "Event of Default" means the occurrence of any one or
more of the following events:

 
a.
The Company shall default in the payment of principal or interest on this
Debenture or any other Debenture under the terms of the Securities Purchase
Agreement or any other amount due hereunder or thereunder (including payment of
a Redemption Amount, as defined below) when due and such default shall continue
for a period of five (5) Trading Days; or

 
b.
There is Cancellation Date; or

 
c.
Any of the representations or warranties made by the Company herein, in the
Securities Purchase Agreement or any of the other Transaction Agreements 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 in
any material respect at the time made; or

 
d.
Subject to the terms of the Securities Purchase Agreement, the Company fails (i)
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 (provided, however, that for purposes of this provision, such
failure to cause the Transfer Agent to issue such shares shall not be deemed to
occur until two (2) Trading Days after the Delivery Date), or (ii) 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 any other Transaction Agreement, and such transfer is
otherwise lawful, and such failure shall continue uncured for five (5) Trading
Days, or (iii) to remove any restrictive legend on any certificate or fails to
cause its Transfer Agent to remove such restricted legend, in each case where
such removal is lawful, as and when required by this Debenture, or any other
Transaction Agreement, and such failure shall continue uncured for five (5)
Trading Days; or

 
e.
The cumulative value of the shares of Common Stock of the Company traded on the
Principal Trading Market over any consecutive ten (10) Trading Days shall be
shall less than $100,000 and the same shall be true with respect to each of
the  five (5) Trading Days thereafter; or

 
f.
The Company shall fail to perform or observe, in any material respect, any other
covenant, term, provision, condition, agreement or obligation of any Debenture
issued under the Securities Purchase Agreement and such failure if capable of
being cured, shall continue uncured for a period of five (5) Trading Days after
the Company’s receipt written notice from the Holder of such failure  (but if
not capable of being cured, such five (5) Trading Day period shall be deemed
expired immediately upon the giving of such notice); or

 
g.
The Company shall fail to perform or observe, in any material respect, any
covenant, term, provision, condition, agreement or obligation of the Company
under any of the Transaction Agreements and such failure, if capable of being
cured, shall continue uncured for a period of five (5) Trading Days after the
Holder gives the Company written notice thereof (but if not capable of being
cured, such five (5) Trading Day period shall be deemed expired immediately upon
the giving of such notice); or

 
h.
The Company shall fail to maintain its status as a reporting company under the
federal securities laws; or

 
i.
The Company shall to timely file all reports required to be filed by it with the
SEC pursuant to Section 12 or 15(d) of the 1934 Act, or otherwise required by
the 1934 Act; or

 
j.
The Company shall have its Common Stock suspended from trading on the Principal
Trading Market for in excess of fifteen (15) Trading Days or if its Common Stock
is delisted from trading on the Principal Trading Market; or

 
k.
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

 
l.
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

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

 
n.
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

 
o.
Any money judgment, writ or warrant of attachment, or similar process in excess
of One Hundred Thousand Dollars ($100,000) 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 five (5) Trading
Days; or

 
p.
The Company is, by the end of any relevant grace period, in default in the
payment of principal or interest as and when due and payable under any one or
more debt obligations of the Company such that the aggregate amount of such
defaults is in excess of One Hundred Thousand Dollars ($100,000); or

 
q.
It becomes unlawful for the Company to perform its outstanding obligations under
this Debenture or any other Debenture issued pursuant to the Securities Purchase
Agreement.

(ii)           If an Event of Default shall have occurred and is continuing,
then,

(x) unless and until such Event of Default shall have been cured or waived in
writing by the Holder (which waiver shall not be deemed to be a waiver of any
subsequent default), at the option of the Holder and in the Holder’s sole
discretion, but without further notice from the Holder, the unpaid amount of
this Debenture, computed as of such date, will bear interest at the rate (the
“Default Rate”) equal to one and one-half percent (1.5%) per month or the
highest rate allowed by law, whichever is lower, from the date of the Event of
Default to until and including the date actually paid; and any partial payments
shall be applied as provided in Section 5 hereof; and

(y) at any time thereafter, and in each and every such case, unless such Event
of Default shall have been cured or waived in writing by the Holder (which
waiver shall not be deemed to be a waiver of any subsequent default), at the
option of the Holder and in the Holder's sole discretion, the Holder may elect
to redeem all or part of the Unconverted Debenture (as defined below) on the
terms provided in Section 15 hereof.

15.           A.           The Company acknowledges that if there is an Event of
Default, the Holder may require the Company to immediately redeem all or any
part of the outstanding portion of this Debenture for an amount equal to the
Redemption Amount (as defined below).  The Redemption Amount shall be paid in
cash by the Company to the Holder.  As of the Redemption Due Date or,
if  earlier Redemption Payment Date (as those terms are defined below), the
Redemption Amount shall be deemed automatically applied first to the any
outstanding balance due any Purchase Notes issued by the Holder to the Company
on the Issue Date, and the balance shall be paid in cash to the Holder in the
priority provided in Section 4(I) hereof.
B.           For purposes of this Debenture, the following terms shall have the
meanings indicated below:

“Unconverted Debenture” means the principal amount of this Debenture which has
not been converted as of the relevant date.

“Redemption Payment Date” means the date on which the Company actually pays the
Redemption Amount.

“Redemption Amount” means the amount equal to:

V
x
M
CP
   

where:

“V” means the principal of an Unconverted Debenture plus any accrued but unpaid
interest thereon;

“CP” means the Conversion Price in effect on the date (the “Redemption Notice
Date”) of the Redemption Notice (as defined below); provided, however, if the
Redemption Amount is not paid in full on or before the Redemption Due Date, “CP”
means the lower of (x) the Conversion Price in effect on the Redemption Notice
Date or (y) the lowest Conversion Price in effect during the period commencing
on the Redemption Due Date and ending on the Redemption Payment Date; and

“M” means the highest closing price per share of the Common Stock  during the
period beginning on the Redemption Notice Date and ending on the Redemption
Payment Date.

C.           The Holder of an Unconverted Debenture may elect to redeem a
portion of such Unconverted Debenture without electing to redeem the balance of
the Unconverted Debenture.  The Holder’s option to redeem all or part of the
Unconverted Debenture shall be exercised by the Holder giving written  notice of
the exercise of this provision by the Holder (a “Redemption Notice”) at any time
after a relevant Event of Default has occurred but before such Event of Default
is cured..  The Redemption Notice shall specify (a) the date (the “Redemption
Due Date”) on which the Redemption Amount shall be paid, which date shall be at
least five (5) Trading Days after the date (a “Redemption Notice Date”) on which
the Holder Redemption Notice is given, and (b) the wire instructions for the
account to which the Redemption Amount is to be paid; provided, however, that
the Company shall have the right to accelerate the date of such payment.

D.           If all of the Unconverted Debentures are being redeemed pursuant to
this Section 5, then, upon payment in full of the Redemption Amount for all of
the Unconverted Debentures in accordance with the  provisions of this Section 5,
the Holder shall deliver the Debenture to the Company marked “paid in full”.

E.           If the Redemption Amount is not timely paid by the Company, the
Redemption Amount shall accrue interest at the Default Rate and the Holder may
declare the Redemption Amount, together with such interest, due under this
Debenture 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,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law,
including, but not necessarily limited to, the equitable remedy of specific
performance and injunctive relief.

16.           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 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.

17.           Any notice required or permitted hereunder shall be given in
manner provided in the Section headed "NOTICES" in the Securities Purchase
Agreement, the terms of which are incorporated herein by reference.

       18.           In the event for any reason, any payment by or act of the
Company or the Holder shall result in payment of interest which would exceed the
limit authorized by or be in violation of the law of the jurisdiction applicable
to this Debenture, then ipso facto the obligation of the Company to pay interest
or perform such act or requirement shall be reduced to the limit authorized
under such law, so that in no event shall the Company be obligated to pay any
such interest, perform any such act or be bound by any requirement which would
result in the payment of interest in excess of the limit so authorized.  In the
event any payment by or act of the Company shall result in the extraction of a
rate of interest in excess of a sum which is lawfully collectible as interest,
then such amount (to the extent of such excess not returned to the Company)
shall, without further agreement or notice between or by the Company or the
Holder, be deemed applied to the payment of principal, if any, hereunder
immediately upon receipt of such excess funds by the Holder, with the same force
and effect as though the Company had specifically designated such sums to be so
applied to principal and the Holder had agreed to accept such sums as an
interest-free prepayment of this Debenture.  If any part of such excess remains
after the principal has been paid in full, whether by the provisions of the
preceding sentences of this Section or otherwise, such excess shall be deemed to
be an interest-free loan from the Company to the Holder, which loan shall be
payable immediately upon demand by the Company.  The provisions of this Section
shall control every other provision of this Debenture.
 
 

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1Insert unique series letter no. (e.g., A, B, C, etc.) for Debentures issued at
each closing.
 
2Insert unique Debenture number for each Debenture in a series.
 
3Amount to be determined by Buyer; aggregate principal of all Debentures issued
on a Closing Date shall equal the Purchase Price for that Closing Date.
 
4See fn 1.
 
5Insert date which is fourth anniversary of relevant Closing Date.
 
6See fn 3.
 
7See fn 5.
 
8Insert the relevant Closing Date.
 
 
 

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

Dated: _________________, 20___

 
AMERICAN SECURITY RESOURCES CORPORATION
         
By:_______________________________________
         
__________________________________________
   
(Print Name)
   
__________________________________________
   
(Title)
 

 
 
 
 

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EXHIBIT A

AMERICAN SECURITY RESOURCES CORPORATION

NOTICE OF CONVERSION
OF
7.75% CONVERTIBLE DEBENTURE SERIES 08-__-__ DUE __________, 20__

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

TO:           American Security Resources Corporation                 VIA
FAX:  (____) ___-____
9601 Katy Freeway, Suite 220
Houston, TX 77024
Attn: President

FROM: _________________________________________________________ (“Holder”)

DATE: _______________________________________________ (the “Conversion Date”)

RE:           Conversion of $_________________ principal amount (the “Converted
Debenture”) of the 7.75% Convertible Debenture Series 08-__ Due __________,
20___, No. 08-__-__  (the “Debenture”) of AMERICAN SECURITY RESOURCES
CORPORATION (the “Company”) into ______________________ shares (the “Principal
Conversion Shares”) of Common Stock (defined below)

    The captioned Holder hereby gives notice to the Company, pursuant to the
Debenture of AMERICAN SECURITY RESOURCES CORPORATION that the Holder elects to
convert the Converted Debenture into fully paid and non-assessable shares of
Common Stock, $0.001 par value (the “Common Stock”), of the Company as of the
Conversion Date specified above.  Said conversion shall be based on Conversion
Price of $________________ (equal to 70% of the VWAP for the five (5) Trading
Days ending on the Trading Day immediately before the date of this Notice).

 
 

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As contemplated by the Debenture, the Company should also pay all accrued but
unpaid interest on the Converted Debenture to the Holder.  The Holder elects
that such accrued but unpaid interest should be paid

            
    n  in ______________ shares of Common Stock (“Interest Conversion Shares”),
representing such interest amount converted at the Conversion Price indicated
above, which Interest Conversion Shares should be delivered together with the
Principal Conversion Shares, or
 
         n  in cash, which should be paid as provided in the Debenture by wire
transfer as follows:9
 

 
___________________________________

___________________________________

___________________________________

Based on this Conversion Price, the number of Principal Conversion Shares plus
Interest Conversion Shares (collectively, “Conversion Shares”) indicated above
should be issued in the following name(s):

Name and Record
Address                                                                                     Conversion
Shares
_______________________________                                                              _______________
_______________________________                                                              _______________
_______________________________                                                              _______________

It is the intention of the Holder to comply with the provisions of Section 4(C)
of the Debenture regarding certain limits on the Holder's right to convert
thereunder. The Holder believe this conversion complies with the provisions of
said Section 4(C).  Nonetheless, to the extent that, pursuant to the conversion
effected hereby, the Holder would have more shares than permitted under said
Section, this notice should be amended and revised, ab initio, to refer to the
conversion which would result in the issuance of shares consistent with such
provision. Any conversion above such amount is hereby deemed void and revoked.

As contemplated by the Debenture, this Notice of Conversion is being sent by
facsimile to the telecopier number and officer indicated above.

If this Notice of Conversion represents the full conversion of the outstanding
balance of the Converted Debenture, the Holder either (1) has previously
surrendered the Converted Debenture to the Company or (2) will surrender (or
cause to be surrendered) the Converted Debenture to the Company at the address
indicated above by express courier within five (5) Trading Days after delivery
or facsimile transmission of this Notice of Conversion.

The certificates representing the Conversion Shares should be transmitted by the
Company to the Holder

           via express courier, or

           by electronic transfer

within the time contemplated by the Debenture after receipt of this Notice of
Conversion (by facsimile transmission or otherwise) to:

_____________________________________
_____________________________________
_____________________________________

_____________________________________
                                             (Print name of Holder)

By: _________________________________
                                               (Signature of Authorized Person)

______________________________________
(Printed Name and Title)

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9Information should include the following:

All Wires:
(1) Bank Name
(2) Bank Address (including street, city, state)
(3) ABA or Wire Routing No.
(4) Account Name
(5) Account Number

If Wire is going to International (Non-US) Bank, all of the above plus:
(6) SWIFT Number