CONVERTIBLE DEBENTURE

Environmental Control Corporation,

a Nevada corporation

 

FOR VALUE RECEIVED, Environmental Control Corporation, a Nevada corporation
(“Borrower”), hereby promises to pay to Hickman Motors Limited (“Holder”), the
principal amount of Canadian dollars two hundred eleven thousand one hundred
seventy-nine and nineteen cents (CDN$211,179.19), on the terms and subject to
the conditions specified in this Convertible Debenture (“Debenture”).

THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION
TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION
S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933
ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE
OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED
HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN
EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION,
HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE 1933 ACT. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED
BY REGULATION S UNDER THE 1933 ACT.

 

ARTICLE ONE

INTEREST, TERMS OF PAYMENT AND SECURITY

 

1.1 Currency. All amounts specified by to the provisions of this Debenture are
in United States Dollars unless otherwise stated.

 

1.2 Interest. Interest shall commence to accrue on the unpaid principal amount
due and payable pursuant to the provisions of this Debenture commencing on the
date of this Debenture and shall continue thereafter at an annual rate equal to
the lesser of (i) ten percent (10%) or (ii) the maximum interest rate allowable
pursuant to applicable law. Interest shall be computed on the basis of a year of
three hundred sixty (360) days and actual days elapsed. Interest shall be due
and payable on that date which is exactly twenty-four (24) months after the
execution of this Debenture.

 

1.3 Principal. The entire principal amount evidenced by the provisions of this
Debenture shall be due and payable on that date which is exactly twenty-four
(24) months after the execution of this Debenture. The provisions of this
Debenture notwithstanding any partial pre-payment, when made, shall be credited
first to interest then due and payable. The remainder of each such prepayment
shall then be credited to the end paid principal indebtedness evidenced by the
provisions of this Debenture, and interest thereon shall cease to accrue on any
amount so credited to that unpaid principal. In the event that Borrower intends
to repay such indebtedness, then Borrower must provide at least seventy-six (76)
days prior written notice to Holder of Borrower’s intention to repay such
indebtedness. Upon receipt of such written notice from Borrower, Holder shall
have fifteen (15) days to elect to convert such indebtedness pursuant to the
provisions of Article Two. In the event that Holder elects to convert such
indebtedness, Holder

 

 

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shall provide written notice to the Borrower of its election to covert within
fifteen (15) days of Holder’s receipt of such written notice from Borrower that
Borrower intends to repay such indebtedness.

 

ARTICLE TWO

CONVERSION AND PURCHASE RIGHTS

 

2.1 Conversion or Purchase Right. Holder shall have the right from and after the
date of execution of this Debenture, and then at any time on or prior to
February 26, 2009, to convert all or any portion of the principal indebtedness
evidenced by the provisions of this Debenture into fully paid and nonassessable
shares of $.001 par value common stock of Borrower (“Common Stock”) on the terms
and subject to the conditions specified by the provisions of this Article Two of
this Debenture. Upon the surrender of this Debenture, accompanied by Holder’s
written request for conversion as provided for in Section 2.3 of this Debenture,
Borrower shall pay Holder within 30 days of that written request for conversion
all interest accrued on the unpaid principal indebtedness evidenced by the
provisions of this Debenture to the date of conversion and issue and deliver to
Holder certificates evidencing the appropriate number of shares of Common Stock
as determined in accordance with Section 2.3 of this Debenture. If a portion but
less than all of such principal is converted, Borrower shall deliver to Holder a
certificate for the proper number of shares of Common Stock for the portion of
that principal indebtedness converted and a new Debenture in the form hereof for
the unconverted balance of the principal indebtedness evidenced by the
provisions of this Debenture.

 

2.2 Conversion or Purchase Price. Subject to adjustment as specified by the
provisions of Section 2.4 of this Debenture, for that period commencing on the
date of execution of this Debenture, and continuing through and including
February 26, 2009, the conversion or purchase price of the Common Stock
indebtedness shall be CDN$0.10 per share (“Conversion Price”).

 

2.3 Mechanics of Conversion. No fractional shares of Common Stock shall be
issued upon any conversion of the principal indebtedness evidenced by the
provisions of this Debenture. In lieu of any fractional shares to which Holder
would otherwise be entitled, Borrower shall pay Holder cash in the amount equal
to the Conversion Price for such fractional shares. Before Holder shall be
entitled to convert the indebtedness evidenced by the provisions of this
Debenture into shares of Common Stock and to receive certificates therefor,
Holder shall surrender the original copy of this Debenture, duly endorsed and
cancelled, at the office of Borrower, and shall give at least seventy-six (76)
days written notice to Borrower at such office that Holder elects to so convert
the principal indebtedness evidenced by the provisions of this Debenture, which
date shall be the conversion date (“Conversion Date”); and provided, further,
however, that Borrower shall not be obligated to issue certificates evidencing
the shares of Common Stock issuable unless the original endorsed and cancelled
original copy of this Debenture is either delivered to Borrower, as specified
above, or Holder notifies Borrower that such original copy of this Debenture has
been lost, stolen or destroyed and executes an agreement to indemnify Borrower
from any loss incurred by Borrower in connection with such original copy of this
Debenture. Borrower shall, as soon as practicable after such delivery of an
original copy of this Debenture, or such agreement and indemnification, issue
and deliver or cause to be issued and delivered at such office to Holder, a
certificate or certificates for the number of shares of Common Stock to which
Holder shall be entitled and a check payable to Holder in the amount of any cash
amounts payable as a result of the conversion into fractional shares of Common
Stock. The person or persons entitled to receive the shares of Common Stock
issuable upon any such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.

 

2.4 Adjustment of Conversion Terms. The Conversion Price and number of shares of
Common Stock to be issued upon conversion or purchase shall be subject to
adjustment from time to time upon the

 

 

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happening of certain events while the conversion or purchase right specified by
the provisions of this Debenture remains outstanding, as follows:

 

 

A.

Merger, Sale of Assets, etc. If Borrower at any time shall consolidate with or
merge into or sell or convey all or substantially all its assets, the provisions
of this Debenture shall thereafter evidence the right to purchase such number
and type of securities and property as would have been issuable or distributable
on account of such consolidation, merger, sale or conveyance, upon or with
respect to the securities subject to the conversion or purchase right
immediately prior to such consolidation, merger, sale or conveyance, the
foregoing provision shall similarly apply to successive transactions of a
similar nature by any such successor or purchaser. Without limiting the
generality of the foregoing, the provisions of this Debenture shall apply to
such securities of such successor or purchaser after any such consolidation,
merger, sale or conveyance.

 

 

B.

Reclassification, etc. If Borrower at any time shall, by subdivision,
combination or reclassification of securities, or otherwise, change any of the
securities then purchasable upon the exercise of the conversion or purchase
right specified by the provisions of this Debenture into the same or a different
number of securities of any class or classes, the provisions of this Debenture
shall thereafter evidence the right to purchase such number and type of
securities as would have been issuable as the result of such change with respect
to the securities which were subject to such conversion or purchase right
immediately prior to such subdivision, combination, reclassification or other
change. If shares of Common Stock are subdivided or combined into a greater or
smaller number of shares of Common Stock, the Conversion Price shall be
proportionately decreased in case of subdivision of shares or proportionately
increased in the case of combination of shares, in both situations by the ratio
which the total number of shares of Common Stock to be outstanding immediately
after the occurrence of such event bears to the total number of shares of Common
Stock issued and outstanding immediately prior to the occurrence of such event.

 

2.5 Corporate Authority. Borrower’s issuance of this Debenture shall constitute
full authority to Borrower's officers who are charged with the duty of executing
stock certificates for shares of Common Stock pursuant to the exercise of this
Debenture by Holder. Borrower shall execute stock certificates for shares of
Borrower’s Common Stock no later than thirty (30) days after the Conversion Date
to convert the principal indebtedness evidenced by the provisions of this
Debenture or purchase of shares pursuant to the provisions of this Debenture.

 

ARTICLE THREE

REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants that:

 

3.1 Existence and Rights. Borrower is a corporation duly, organized and existing
pursuant to the laws of the State of Nevada without limit as to the duration of
its existence; Borrower has corporate powers and adequate authority, rights and
franchises to own its property and to carry on its business as now conducted,
and is duly qualified and in good standing in each jurisdiction in which the
character of the properties owned by it therein or the conduct of its business
makes such qualification necessary; and Borrower has the corporate power and
adequate authority to issue this Debenture.

 

3.2 Debenture Authorized. The execution and delivery of this Debenture and the
performance of the

 

 

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provisions of this Debenture are not in contravention of or in conflict with any
law or regulation or any term or provision of Borrower’s Articles of
Incorporation or Bylaws and are duly authorized and do not require the consent
or approval of any governmental agency or other authority; and this Debenture is
the valid and legally enforceable obligation of Borrower in accordance with the
terms of this Debenture.

 

3.3 No Conflict. The execution, delivery and performance of this Debenture are
not in contravention of or conflict with any agreement, indenture or undertaking
to which Borrower is a party or by which Borrower or any of Borrower's property
may be bound or affected, and does not cause any lien, charge or other
encumbrance to be created or imposed upon any such property by reason thereof.

 

The Holder represents and warrants that:

 

3.5 Not a U.S. Person. The Holder is not a “U.S. Person” as the term is defined
in Regulation S under the Securities Act of 1933, and represents and warrants
that:

 

(a)

the Holder is not acquiring the Debenture or the Common Stock for the account or
benefit of, directly or indirectly, any U.S. Person;

 

(b)

the Holder is resident in the jurisdiction set out under the heading “Name and
Address of Holder” on the signature page of this Subscription Agreement;

 

(c)

the sale of the Debenture or the Common Stock to the Holder as contemplated in
this Subscription Agreement complies with or is exempt from the applicable
securities legislation of the jurisdiction of residence of the Holder;

 

(d)

the Holder is acquiring the Debenture or the Common Stock for investment only
and not with a view to resale or distribution and, in particular, it has no
intention to distribute either directly or indirectly any of the Debenture or
the Common Stock in the United States or to U.S. Persons;

 

(e)

the Holder is outside the United States when receiving and executing this
Subscription Agreement and is acquiring the Debenture or the Common Stock as
principal for the Holder’s own account, for investment purposes only, and not
with a view to, or for, resale, distribution or fractionalisation thereof, in
whole or in part, and no other person has a direct or indirect beneficial
interest in such Debenture or the Common Stock;

 

(f)

the Holder is not an underwriter of, or dealer in, the common shares of the
Company, nor is the Holder participating, pursuant to a contractual agreement or
otherwise, in the distribution of the Debenture or the Common Stock;

 

(g)

the Holder (i) is able to fend for him/her/itself in the Subscription; (ii) has
such knowledge and experience in business matters as to be capable of evaluating
the merits and risks of its prospective investment in the Debenture or the
Common Stock; and (iii) has the ability to bear the economic risks of its
prospective investment and can afford the complete loss of such investment;

 

(h)

the Holder acknowledges that the Holder has not acquired the Debenture or the
Common Stock as a result of, and will not itself engage in, any “directed
selling efforts” (as defined in Regulation S under the 1933 Act) in the United
States in respect of any of the Debenture or the Common Stock which would
include any activities undertaken for the purpose of, or that could reasonably
be expected to have the effect of, conditioning the

 

 

 

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market in the United States for the resale of any of the Debenture or the Common
Stock; provided, however, that the Holder may sell or otherwise dispose of any
of the Debenture or the Common Stock pursuant to registration of any of the
Debenture or the Common Stock pursuant to the 1933 Act and any applicable state
securities laws or under an exemption from such registration requirements and as
otherwise provided herein;

 

(i)

the Holder is not aware of any advertisement of any of the Debenture or the
Common Stock; and

 

(j)

no person has made to the Holder any written or oral representations:

 

(i)

that any person will resell or repurchase any of the Debenture or the Common
Stock;

 

(ii)

that any person will refund the purchase price of any of the Debenture or the
Common Stock;

 

(iii)

as to the future price or value of any of the Debenture or the Common Stock; or

 

(iv)

that any of the Debenture or the Common Stock will be listed and posted for
trading on any stock exchange or automated dealer quotation system or that
application has been made to list and post any of the Debenture or the Common
Stock of the Company on any stock exchange or automated dealer quotation system.

 

ARTICLE FOUR

BORROWER’S COVENANTS

 

Borrower agrees that until the indebtedness evidenced by the provisions of this
Debenture is paid in full, Borrower will:

 

4.1          Maintain Corporate Rights and Facilities. Maintain and preserve its
corporate existence and all rights, franchises and other authority adequate for
the conduct of its business; maintain its properties, equipment and facilities
in good order and repair and conduct its business in an orderly manner without
voluntary interruption.

 

4.2          Records and Reports. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles.

 

4.3          Conduct of Business. Conduct the business of Borrower in accordance
with all applicable provisions of law.

 

ARTICLE FIVE

EVENTS OF DEFAULT

 

The occurrence of any of the following events of default shall, at the option of
Holder, make all sums of principal and interest payable pursuant to this
Debenture immediately due and payable, on demand:

 

5.1

Failure to Pay Principal or Interest. Failure to pay any installment of interest
evidenced by the

 

 

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provisions of this Debenture when due and continuance thereof for a period of
fifteen (15) days after written notice to Borrower from Holder. Failure to pay
the principal evidenced by the provisions of this Debenture when due and
continuance thereof for a period of thirty (30) days after written notice to
Borrower from Holder.

 

5.2          Insolvency, Receiver or Trustee. Borrower shall become insolvent or
admit in writing its inability to pay its debts as they mature; or make an
assignment for the benefit of creditors; or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee otherwise shall be
appointed.

 

5.3          Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief pursuant to any bankruptcy law or any
law for the relief of debtors shall be instituted by or against Borrower.

 

ARTICLE SIX

INVESTMENT

 

6.1          Investment Representation. Holder hereby represents and warrants
that Holder has acquired this Debenture for purpose of investment and with no
present intent to sell or distribute the same. In the event Holder exercises the
conversion or purchase right specified by the provisions of this Debenture, any
Securities of Borrower so acquired will be with the same investment intent.

 

ARTICLE SEVEN

LOST OR DESTROYED DEBENTURES

 

7.1          Lost or Destroyed Debentures. Upon receipt by Borrower at its
principal office of evidence satisfactory to Borrower of the loss, theft,
destruction or mutilation of this Debenture, and in the event of any such loss,
theft, or destruction, upon delivery of indemnity satisfactory to Borrower or,
in case of any such mutilation, upon surrender and cancellation of this
Debenture, Borrower will issue a new Debenture of similar tenor in lieu of this
Debenture with a notification thereon of the date from which interest has
accrued.

 

ARTICLE EIGHT

MAXIMUM INTEREST RATE

 

8.1 Maximum Interest Rate. The maximum total interest that Holder shall be
entitled to receive pursuant to this Debenture shall not exceed the maximum rate
permitted pursuant to applicable law. Borrower and Holder intend to comply at
all times with applicable usury laws. Notwithstanding any provision of this
Debenture, if at any time any applicable usury law would ever render usurious
any amounts contemplated by this Debenture, it is Borrower’s and Holder's
express intention that Borrower shall not be required to pay interest pursuant
to this Debenture at a rate in excess of the maximum lawful rate, that the
provisions of this Section 8.1 of this Article Eight shall control any other
inconsistent provisions of this Debenture, that such excess interest shall be
immediately credited pursuant to the principal balance of this Debenture (or, if
this Debenture has been fully paid, refunded by Holder to Borrower), and the
provisions hereof shall be immediately reformed and the amounts thereafter
collectible pursuant to this Debenture reduced, without the necessity of the
execution of any further documents, so as to comply with the then applicable
law, but so as to permit the recovery of the fullest amount otherwise called for
pursuant to this Debenture. Any such crediting or refund shall not cure or

 

 

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waive any default by Borrower pursuant to this Debenture. If at any time
following any reduction in the interest rate payable by Borrower there remains
unpaid any principal amount pursuant to this Debenture and the maximum interest
rate allowed by applicable law is increased or eliminated, then the interest
payable pursuant to this Debenture shall be readjusted, to the extent not
prohibited by applicable law, so that the total dollar amount of interest
payable pursuant to this Debenture shall be equal to the dollar amount of
interest which would have been paid by Borrower without giving effect to the
reduction in interest resulting from compliance with applicable usury laws. The
term “applicable law” as used in this Debenture shall mean the laws of the State
of Nevada, or federal law in the event that federal law preempts Nevada law.

 

ARTICLE NINE

CLOSING

 

9.1          Definition. The consummation of the transactions provided for
herein (“Closing”) shall take place at the offices of Borrower, at 1:00 p.m.
Pacific Standard Time, or at such other place and on such other date as shall be
agree upon in writing by Borrower and Holder.

 

9.2          Deliveries by Holder. At the Closing, and provided Borrower has
fully performed all its obligations pursuant to the provisions of this
Debenture, Holder will deliver to Borrower a check (or wire transfer to
Borrower’s account) made payable to the order of Borrower in the principal
amount specified in the preamble of this Debenture.

 

ARTICLE TEN

INDEMNIFICATION

 

10.1

Indemnification.

 

A. Borrower will indemnify and hold harmless Holder, each of its directors,
officers, shareholders, representatives, agents, accountants and attorneys,
against any losses, claims, damages or liabilities to which Borrower or any such
director, officer, shareholder, representative, agent, accountant or attorney
may become subject, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) result from or are based upon any action known or
unknown, which currently exists or may arise in the future as a direct or
indirect result of this Debenture; and will reimburse any legal or other
expenses reasonably incurred by Holder any such director, officer, shareholder,
representative, agent, accountant or attorney in connection with investigating
or defending any such loss, claim, damage, liability or action.

 

B. Promptly after receipt by Holder of notice of the commencement of any action,
Holder will, if a claim in respect thereof is to be made against Holder pursuant
to the provisions of this Section 10.1, notify Borrower of the commencement
thereof; but the omission so to notify Borrower will not relieve Borrower from
any liability which Borrower may have to Holder pursuant to the provisions of
this Section 10.1.

 

C. In the event that any such action is brought against Holder, and Holder
notifies Borrower of the commencement thereof, Borrower will be entitled to
participate in, and, to the extent that Borrower may desire, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to Holder. In the event Borrower gives notice to Holder of
Borrower's election so to assume the defense thereof, Borrower will not be
liable to Holder pursuant to the provisions of this subparagraph C for any legal
or other expenses subsequently incurred by Holder in connection with the

 

 

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defense thereof subsequent to the date of such notice, other than reasonable
costs of investigation.

 

ARTICLE ELEVEN

MISCELLANEOUS

 

11.1        Survival of Warranties. All agreements, representations and
warranties made herein shall survive the execution and delivery hereof.

 

11.2        Failure or Indulgence Not Waiver. No failure or delay on the part of
Holder hereof in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

 

11.3        Notices. All written notices or other written communications
required under this Agreement shall be deemed properly given when provided to
the parties entitled thereto by personal delivery (including delivery by
commercial services such as messengers and airfreight forwarders), by electronic
means (such as by electronic mail, telex or facsimile transmission) or by mail
sent registered or certified mail, postage prepaid at the following addresses
(or to such other address of a party designated in writing by such party to the
others):

 

 

 

If to Borrower:

Environmental Control Corporation

206-1338 Homer Street

Vancouver, BC V6B 6A7

Canada

 

 

 

If to Holder:

Hickman Motors Limited

85 Rennie’s Mill Road

St. John’s, Newfoundland A1C 3P9

Canada

 

All notices given by electronic means shall be confirmed by delivering to the
party entitled thereto a copy of said notice by certified or registered mail,
postage prepaid, return receipt requested. All written notices shall be deemed
delivered and properly received upon the earlier of two (2) days after mailing
the confirmation notice or upon actual receipt of the notice provided by
personal delivery or electronic means.

11.4        Amendment Provision. The term “Debenture” or “this Debenture” and
all reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed or if later amended or supplemented, then, as
so amended or supplemented. Holder and the Borrower agree that this Debenture
shall be modified only by a written agreement duly executed by persons
authorized to execute agreements on their behalf.

 

11.5        Assignability. This Debenture shall obligate Borrower, its
successors and assigns, and shall inure to the benefit of Holder, its successors
and assigns.

 

11.6.       Governing Law. This Debenture has been executed in and shall be
governed by the laws of the State of Nevada.

 

 

 

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11.7.       Entire Agreement. The Borrower and Holder acknowledge and agree that
this Debenture is the complete and exclusive statement of the mutual
understanding of the parties and that it supersedes and cancels all previous
written and oral agreements and communications relating to the subject matter of
this Debenture.

 

IN WITNESS WHEREOF, Borrower and Holder have caused this Debenture to be signed
in their names by their duly authorized representatives on the dates specified
opposite their signatures.

 

BORROWER:

 

Environmental Control Corporation

a Nevada corporation

 

By:

/s/ Albert Hickman                      

Dated: February 26, 2007

Albert Hickman

Its:

President

 

 

HOLDER:

 

Hickman Motors Limited

 

By:

/s/ Mike Abbott                            

Dated: February 26, 2007

Authorized Signatory

Mike Abbott

Controller

 

 

 

 

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