Exhibit 10.2
 
DEBENTURE
 
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND ARE
BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SUCH LAWS.  THE SECURITIES ARE SUBJECT TO RESTRICTIONS OF
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SUCH LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION
THEREFROM.  THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION” OR THE “SEC”) OR ANY
OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED
UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE
OFFERING MATERIALS.  ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
 

FACE AMOUNT:   $300,000 PRICE:  $250,000 DEBENTURE NUMBER:   October 2013 101
ISSUANCE DATE: October 17, 2013 MATURITY DATE: October 17, 2015

 
FOR VALUE RECEIVED, ITalk, Inc., a Nevada corporation (the “Company”), hereby
promises to pay DUTCHESS OPPORTUNITY FUND, II, LP (the “Holder”) by October 17,
2015 (the “Maturity Date”), the principal amount of Three Hundred Thousand U.S.
Dollars ($300,000), and to pay redemption on the principal amount thereof, and
any accrued penalties, in such amounts, at such times and on such terms and
conditions as are specified herein.

This Debenture (this “Debenture”) is subject to automatic conversion at the end
of twp (2) years from the date of issuance, at which time the Debenture
outstanding will be automatically converted based upon the formula set forth in
Article 3.2(c) hereof.
 
Article 1 Interest.
 
No interest shall accrue on the Debenture.

Article 2 Method of Payment.
 
Section 2.1 Repayment of Debenture.

(a) Commencing on December 1, 2013, the Company shall make monthly amortizing
payments to the Holder (the “Payments”) on the Face Amount (as defined in
Article 14 hereof), with such Payments to be paid on the first business day of
each month for so long as there is an outstanding balance on this Debenture, in
the amount of Twenty Thousand and 00/100 U.S. dollars ($20,000.00) (the “Payment
Amount”).

(b) Notwithstanding any provision to the contrary in this Debenture, the Company
may pay in full to the Holder the Face Amount, or any balance remaining thereon,
in readily available funds, at any time and from time to time without penalty.

(c) After the date (the “Effective Date”) on which United States Securities and
Exchange Commission (the “Commission” or the “SEC”) declares the registration
statement (the “Registration Statement") covering the shares underlying the
conversion of this Debenture (the “Conversion Shares”) effective, the Holder, at
its sole option, shall be entitled, on or before three business (3) days prior
written notice to the Payment Date, to either (i) request a Payment, from the
Company in the amounts set forth above; or (ii) elect to convert a portion of
this Debenture pursuant to Article 3 hereof in an amount equal to or greater
than the Payment Amount.  In the event the Holder is unable to convert that
portion of this Debenture equal to the Payment Amount during any calendar month,
the Holder shall send a notice to the Company within three (3) days of the date
on which such Payment is due (the “Payment Date”) with the total amount then due
and the Company shall make a payment in cash in an amount equal to the
difference between the amount converted by the Holder and the Payment Amount due
for that month.

(d) Nothing contained in this Article 2 shall limit the amount the Holder can
elect to convert during a calendar month except as defined in Section 3.2 (i)
hereof.  However, the Holder shall not be entitled to sell more than twenty
percent (20%) of the volume of Shares traded in a particular day.

 
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(e) All Payments made under this Article 2 shall be applied toward the total
Redemption Amount as outlined in Article 14 hereof.

(f) The Company may make additional payments toward Redemption (“Prepayments”)
without any penalties.

Article 3 Conversion.
 
Section 3.1 Conversion Privilege.

(a)      The Holder of this Debenture shall have the right to convert (a
“Conversion”) any and all amounts owing under this Debenture into shares of
common stock of the Company, par value $0.001 per share (the “Common Stock”), at
any time following the Closing Date (as such term is defined in that certain
Debenture Registration Rights Agreement, of even date herewith, by and between
the Company and the Holder (the “Debenture Registration Rights Agreement”)) but
which is before the close of business on the Maturity Date, except as set forth
in Section 3.2(c) hereof.  The number of shares of Common Stock issuable upon
the Conversion of this Debenture is determined pursuant to Section 3.2 hereof
and rounding the result up to the nearest whole share.

(b) This Debenture may not be converted, whether in whole or in part, except in
accordance with this Article 3.

(c) In the event all or any portion of this Debenture remains outstanding on the
Maturity Date, the unconverted portion of such Debenture shall automatically be
converted into shares of Common Stock on such date in the manner set forth in
Section 3.2 hereof.

Section 3.2 Conversion Procedure.

(a) Conversion Procedures. The Holder may elect to convert the unpaid Face
Amount of this Debenture, in whole or in part, at any time following the Closing
Date.  Such Conversion shall be effectuated by the Holder sending to the Company
a facsimile or electronic mail version of the signed Notice of Conversion,
attached hereto as Exhibit A, which evidences the Holder’s intention to convert
the Debenture as indicated.  The date on which the Notice of Conversion is
delivered (the “Conversion Date”) shall be deemed to be the date on which the
Holder has delivered to the Company a facsimile or electronic mail of the signed
Notice of Conversion.  Notwithstanding the above, any Notice of Conversion
received by 5:00 P.M. Boston Time shall be deemed to have been received the
previous business day, with receipt being via a confirmation of time of
facsimile of the Holder.

(b) Common Stock to be Issued. Upon the Holder's Conversion of any Debenture,
the Company shall issue the number of shares of Common Stock equal to the
Conversion.  If, at the time of Conversion, the Registration Statement has been
declared effective, the Company shall instruct its transfer agent to issue stock
certificates without restrictive legend (other than a legend referring to such
Registration Statement and prospectus delivery requirements) or stop transfer
instructions.  If, at the time of the Holder's Conversion, the Registration
Statement has not been declared effective, the Company shall instruct the
transfer agent to issue the certificates with an appropriate legend.  The
Company shall act as Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to this Debenture. The Company
represents and warrants to the Holder that no instructions, other than these
instructions, have been given or will be given to the transfer agent and that
the Common Stock shall otherwise be freely resold, except as may be otherwise
set forth herein.

(c) Conversion Price.  The Holder is entitled to convert the unpaid Face Amount
of this Debenture, plus accrued interest, any time following a Closing Date, at
(i) ninety percent (90%) of the lowest volume weighted average price (“VWAP”) of
the Common Stock during the twenty (20) trading days immediately prior to a
Conversion Notice (the “Conversion Price”).  No fractional shares or scrip
representing fractions of shares will be issued upon Conversion, but the number
of shares issuable shall be rounded up, in the event of a partial share, to the
nearest whole share.  The Holder shall retain all rights of Conversion during
any partial trading days.

(d) Maximum Interest.  Nothing contained in this Debenture shall be deemed to
establish or require the Company to pay interest to the Holder at a rate in
excess of the maximum rate permitted by applicable law.  In the event that the
rate of interest required to be paid exceeds the maximum rate permitted by
applicable law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under applicable law and
such excess, if so ordered, shall be credited on any remaining balances due to
the Holder.  In the event that the interest rate on this Debenture is required
to be adjusted pursuant to this Section 3.2(d), then the parties hereto agree
that the terms of this Debenture shall remain in full force and effect except as
is necessary to make the interest rate comply with applicable law.

 
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(e) Opinion Letter.  It shall be the Company’s responsibility to take all
necessary actions and to bear all such costs to issue the Common Stock as
provided herein, including the responsibility and cost for delivery of an
opinion letter to the transfer agent, if so required.  The person or entity in
whose name the certificate of Common Stock is to be registered shall be treated
as a shareholder of record on and after the Conversion Date.  Upon surrender of
any Debentures that are to be converted in part, the Company shall issue to the
Holder a new Debenture equal to the unconverted amount.  The Company hereby
acknowledges that the date of consideration for this Debenture is the Issuance
Date and shall use all commercially reasonable best efforts to facilitate sales
under Rule 144 of the Securities Act.

(f) Delivery of Shares.
 
(i)   Within three (3) business days after receipt of the Notice of Conversion
(the “Delivery Deadline”), the Company shall deliver a certificate, in
accordance with Section 3.2(c) hereof for the number of shares of Common Stock
issuable upon a Conversion.  In the event the Company does not make delivery of
said certificate by the Certificate Deadline, the Company shall pay to Holder in
cash, as liquidated damages, an additional fee per day equal to three percent
(3%) of the dollar value of the Debentures being converted. In lieu of
delivering physical certificates representing the Common Stock and provided that
the Company's transfer agent then is participating in The Depository Trust
Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon
request of the Holder, the Company shall use all commercially reasonable efforts
to cause its transfer agent to electronically transmit the Securities by
crediting the account of the Holder's prime broker (as specified by the Holder
within a reasonable period in advance of the Holder's notice) with DTC through
its Deposit Withdrawal Agent Commission (“DWAC”) system.  If the Company is not
DWAC eligible at the time of a Conversion, there will be a $2,000 charge on each
Conversion Date to cover costs associated with, but not limited to: deposit
costs, legal review fees and wire fees.

(ii)   If the failure of the Company to deliver the Common Stock pursuant to
this Article 3.2(f) is due to the unavailability of a sufficient number of
authorized shares of Common Stock of the Company, then the provisions of this
Article 3.2(f) shall apply as well as the provisions of Article 3.2(k) hereof
shall apply.
 
(iii)   The Company shall make any payments required under this Article 3.2(f)
in immediately available funds by the Delivery Deadline.  Nothing herein shall
limit the Holder’s right, at the Holder's sole discretion, to pursue actual
damages or cancel the conversion for the Company’s failure to issue and deliver
the certificate by the Certificate Deadline.
 
(iv)   The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet Conversion of the full amount of the Debentures
then outstanding and due to the Holder, unless so waived by the Holder in
writing.  If, at any time, the Holder submits a Notice of Conversion and the
Company does not have sufficient authorized but unissued shares of Common Stock
(or alternative shares of Common Stock as may be contributed by Stockholders)
available to effect, in full, a Conversion of the Debentures (a “Conversion
Default”, the date of such default being referred to herein as the “Conversion
Default Date”), the Company shall issue to the Holder all of the shares of
Common Stock which are then currently available.  Any Debentures or any portion
thereof, which cannot be converted due to the Company's lack of sufficient
authorized common stock (the “Unconverted Debentures”), may be deemed null and
void upon written notice sent by the Holder to the Company.  The Company shall
provide notice of such Conversion Default (“Notice of Conversion Default”) to
the Holder, by facsimile, within one (1) business days of such default.
 
(v)   In the event of Conversion Default, the Company will pay to the Holder an
amount computed as follows (the “Conversion Default Rate”):
 
(N / 365) x (0.24) x (initial issuance price of outstanding and/or tendered but
not converted Debentures held by the Holder)

Where N is equal to the number of days from the Conversion Default Date to the
date that the Company authorizes a sufficient number of shares of Common Stock
to effect conversion of all remaining Debentures (the “Authorization Date”).
 
(vi)   The Company shall send notice to Holder of outstanding Debenture that
additional shares of Common Stock have been authorized, stating the
Authorization Date and the amount of Holder’s accrued Conversion Default
Payments (“Authorization Notice”).  The accrued Conversion Default shall be paid
in cash or shall be convertible into Common Stock at the Conversion Rate, upon
written notice sent by the Holder to the Company, as follows: (i) in the event
the Holder elects to take such payment in cash, cash payment shall be made to
the Holder  within five (5) business days, or (ii) in the event Holder elects to
take such payment in stock, the Holder may convert at  the Conversion Default
Rate within five (5) business days until the expiration of the Conversion
period.
 
 
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(vii)   The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
Conversion of the Debentures will cause the Holder to suffer irreparable harm,
and that damages will be difficult to ascertain.  Accordingly, the parties agree
that it is appropriate to include in this Debenture a provision for liquidated
damages.  The parties acknowledge and agree that the liquidated damages
provision set forth in this Section represents the parties’ good faith effort to
quantify such damages and, as such, agree that the form and amount of such
liquidated damages are reasonable and will not constitute a penalty.  The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Debenture.  Nothing
herein shall limit the Holder’s right to pursue actual damages for the Company’s
failure to maintain a sufficient number of authorized shares of Common Stock.
 
(viii)   If by the Certificate Deadline, any portion of the shares of the
Debentures have not been delivered to the Holder and the Holder purchases, in an
open market transaction or otherwise, shares of Common Stock necessary to make
delivery of shares which would have been delivered if the full amount of the
shares to be converted and delivered to the Holder by the Company (the “Covering
Shares”), then the Company shall pay to the Holder, in addition to any other
amounts due to the Holder pursuant to this Debenture, and not in lieu thereof,
the Buy-In Adjustment Amount (as defined below).  The “Buy In Adjustment Amount”
is the amount equal to the excess, if any, of (x) the Holder's total purchase
price (including brokerage commissions, if any) for the Covering Shares, minus
(y) the net proceeds (after brokerage commissions, if any) received by the
Holder from the sale of the sold shares.  The Company shall pay the Buy-In
Adjustment Amount to the Holder in immediately available funds within five (5)
business days of written demand by the Holder.  By way of illustration and not
in limitation of the foregoing, if the Holder purchases shares of Common Stock
having a total purchase price (including brokerage commissions) of $11,000 to
cover a Buy-In with respect to shares of Common Stock it sold for net proceeds
of $10,000, the Buy-In Adjustment Amount which the Company would be required to
pay to the Holder would be $1,000.
 
(g) Prospectus and Other Documents.  The Company shall furnish to the Holder one
(1) prospectus and any other documents incidental to the registration of the
Conversion Shares, including any amendment of or supplements thereto.  Any
filings submitted via EDGAR will constitute fulfillment of the Company's
obligation under this Section.

(h) Limitation on Issuance of Shares. If the Company’s Common Stock becomes
listed on the Nasdaq SmallCap Market after the issuance of this Debenture, the
Company may be limited in the number of shares of Common Stock it may issue by
virtue of (A) the number of authorized shares or (B) the applicable rules and
regulations of the principal securities market on which the Common Stock is
listed or traded, including, but not necessarily limited to, NASDAQ Rule
4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable (collectively, the
“Cap Regulations”).  Without limiting the other provisions thereof: (i) the
Company will take all steps necessary to issue the Conversion Shares without
violating the Cap Regulations, and (ii) if, despite taking such steps, the
Company cannot issue such Conversion Shares without violating the Cap
Regulations or the Holder cannot convert as a result of the Cap Regulations
(each such Debenture, an “Unconverted Debenture”) the Holder shall have the
right to elect either of the following options:
 
(i) if permitted by the Cap Regulations, require the Company to issue shares of
Common Stock in accordance with the Holder's Notice of Conversion at a
conversion purchase price equal to the average of the closing bid price per
share of Common Stock for any five (5) consecutive Trading Days (subject to
certain equitable adjustments for certain events occurring during such period)
during the sixty (60) Trading Days immediately preceding the Conversion Date; or
 
(ii) require the Company to redeem each Unconverted Debenture for an amount (the
“Redemption Amount”), payable in cash, equal to the sum of (i) one hundred
thirty-three percent (133%) of the principal of an Unconverted Debenture, plus
(ii) any accrued but unpaid interest thereon through and including the date on
which the Redemption Amount is paid to the holder (the “Redemption Date”).
 
(iii) The Holder may elect, without limitation, one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture.  The Unconverted
Debenture shall contain provisions substantially consistent with the above
terms, with such additional provisions as may be consented to by the
Holder.  The provisions of this Section are not intended to limit the scope of
the provisions otherwise included in the Unconverted Debenture.

(i) Limitation on Amount of Conversion and Ownership.  Notwithstanding anything
to the contrary in this Debenture, in no event shall the Holder be entitled to
convert that amount of Debenture, and in no event shall the Company permit that
amount of conversion, into that number of shares, which when added to the sum of
the number of shares of Common Stock beneficially owned, (as such term is
defined under Section 13(d) and Rule 13d-3 of the Securities Exchange Act of
1934, as may be amended, (the “Exchange Act”)), by the Holder, would exceed four
and ninety-nine one hundredths percent (4.99%) of the number of shares of Common
Stock outstanding on the Conversion Date, as determined in accordance with Rule
13d-1(j) of the Exchange Act.  In the event that the number of shares of Common
Stock outstanding as determined in accordance with Section 13(d) of the Exchange
Act is different on any Conversion Date than it was on the Closing Date, then
the number of shares of Common Stock outstanding on such Conversion Date shall
govern for purposes of determining whether the Holder would be acquiring
beneficial ownership of more than four and ninety-nine one hundredths percent
(4.99%) of the number of shares of Common Stock outstanding on such Conversion
Date.  However, nothing in this Section 3.2(i) shall be read to reduce the
amount of principal, Interest or penalties, if any, due to the Holder.

 
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(j) Legend.  The Holder acknowledges that each certificate representing the
Debentures, and the Common Stock unless registered pursuant to the Debenture
Registration Rights Agreement, shall be stamped or otherwise imprinted with a
legend substantially in the following form:

THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR
ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR
(iii) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT.

(k) Prior to Conversion of this Debenture, if at any time the Conversion of all
the Debentures would result in an insufficient number of authorized shares of
Common Stock being available to cover all the Conversions, then in such event,
the Company will move to call and hold a shareholder’s meeting or have
shareholder action with written consent of the proper number of shareholders
within thirty (30) days of such event, or such greater period of time if
statutorily required or reasonably necessary as regards standard brokerage house
and/or SEC requirements and/or procedures, for the purpose of authorizing
additional shares of Common Stock such as necessary to facilitate the Holder's
Conversions.  In such an event, management of the Company shall recommend to all
shareholders to vote their shares in favor of increasing the authorized number
of shares of Common Stock.  Management of the Company shall vote all of its
shares of Common Stock in favor of increasing the number of shares of authorized
Common Stock to an amount equal to three hundred percent (300%) of the remaining
balance on this Debenture.  The Company represents and warrants that under no
circumstances will it deny or prevent the Holder’s right to convert the
Debentures as permitted under the terms of any of the Transaction Documents (as
such term is defined in that certain Debenture Registration Rights Agreement, of
even date herewith, by and between the Company and the Holder).  Nothing in this
Section shall limit the obligation of the Company to make the payments set forth
in this Article 3.  The Holder, at its sole option, may request the company to
authorize and issue additional shares if the Holder feels it is necessary for
Conversions in the future.  In the event the Company’s shareholder’s meeting
does not result in the necessary authorization, the Company shall redeem the
outstanding Debentures for an amount equal to the sum of the principal of the
outstanding Debentures plus accrued interest thereon multiplied by one hundred
thirty-three percent (133%).
 
Section 3.3 Fractional Shares.  The Company shall not issue fractional shares of
Common Stock, or scrip representing fractions of such shares, upon the
conversion of this Debenture.  Instead, the Company shall round up, to the
nearest whole share.

Section 3.4 Taxes on Conversion.  The Company shall pay any documentary, stamp
or similar issue or transfer tax due on the issue of shares of Common Stock upon
the conversion of this Debenture.  However, the Holder shall pay any such tax
which is due because the shares are issued in a name other than its name.

Section 3.5 Company to Reserve Stock. The Company shall reserve and maintain the
number of shares of Common Stock required pursuant to and upon the terms set
forth in the Transaction Documents to permit the Conversion of this
Debenture.  All Conversion Shares shall, upon issuance by the Company, be
validly issued, fully paid and nonassessable and free and clear from all taxes,
liens, charges and encumbrances with respect to the issuance thereof.

Section 3.6 Restrictions on Sale. This Debenture has not been registered under
the Securities Act and is being issued under Section 4(2) of Securities Act and
Rule 506 of Regulation D promulgated under the Securities Act.  This Debenture
and the Conversion Shares may only be sold pursuant to registration under or an
exemption from the Securities Act.

Section 3.7 Stock Splits, Combinations and Dividends.  If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares of
Common Stock, or if a dividend is paid on the Common Stock in shares of Common
Stock, the Conversion Price shall be proportionately reduced in the case of a
subdivision of shares or stock dividend, or proportionately increased in the
case of combination of shares, in each such case, by the ratio that the total
number of shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately prior to
such event.

Article 4 Mergers.
 
The Company shall not consolidate or merge into, or transfer any or all of its
assets to, any person, unless such person assumes in writing the obligations of
the Company under this Debenture and immediately after such transaction no Event
of Default (as defined below) exists.  Any reference herein to the Company shall
refer to such surviving or transferee corporation and the obligations of the
Company shall terminate only upon such written assumption of the Company's
obligation.  In the event of a merger, or other consolidation, the Company shall
give notice to the Holder simultaneously with the announcement to the public
markets.

 
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Article 5 Security.

This Debenture is unsecured.

Article 6 Defaults and Remedies.

Section 6.1 Events of Default. An “Event of Default” occurs if any one of the
following occur:

(a) the Company does not make timely payment or Conversion, in whole or in part,
necessary to cover the principal, interest or other sum due on the Maturity
Date, Conversion Date, upon redemption, or otherwise described herein;

(b) the Company does not make a Payment in cash for a period of three (3)
business days when due as described in this Debenture; or,

(c) any of the Company’s representations or warranties contained in the
Transaction Documents or this Debenture were false when made or the Company
fails to comply with any of its other agreements in the Transaction Documents
and such failure continues for a period of five (5) business days; or,

(d) the Company pursuant to or within the meaning of any Bankruptcy Law: (i)
commences a voluntary case; (ii) consents to the entry of an order for relief
against it in an involuntary case; (iii) consents to the appointment of a
Custodian (as defined below) of it or for all or substantially all of its
property or (iv) makes a general assignment for the benefit of its creditors or
(v) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that  (A) is for relief against the Company in an involuntary
case; (B) appoints a Custodian of the Company for all or substantially all of
its property or (C) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for sixty (60) calendar days; or,

(e) the Company’s Common Stock is suspended or no longer listed on any
recognized exchange including electronic over-the-counter bulletin board
(“Principal Market”) for in excess of three (3) consecutive Trading
Days.  Failure to comply with the requirements for continued listing on a
Principal Market for a period of five (5) trading days; or notification from a
Principal Market that the Company is not in compliance with the conditions for
such continued listing on such Principal Market; or,

(f) the Company breaches any covenant or condition of the Transaction Documents,
and such breach, if subject to cure, continues for a period of three (3)
business days; or,

(g) the Registration Statement is not declared effective by the SEC within six
(6) months of the Issuance Date; or,

(h) the Company’s failure to pay any taxes when due unless such taxes are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been provided on the Company’s books; provided, however,
that in the event that such failure is curable, the Company shall have ten (10)
business days to cure such failure; or,

(i) an attachment or levy is made upon the Company’s assets having an aggregate
value in excess of twenty-five thousand dollars ($25,000) or a judgment is
rendered against the Company or the Company’s property involving a liability of
more than twenty-five thousand dollars ($25,000) which shall not have been
vacated, discharged, stayed or bonded pending appeal within ninety (90) days
from the entry hereof; or,

(j) any change in the Company’s condition or affairs (financial or otherwise)
which in the Holder’s reasonable, good faith opinion, would have a Material
Adverse Effect; provided, however, that in the event that such failure is
curable, the Company shall have ten (10) business days to cure such failure; or,

(k) any Lien, except for Permitted Liens, created hereunder or under any of the
Transaction Documents for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest; or,

 
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(l) the indictment or threatened indictment of the Company, any officer of the
Company under any criminal statute, or commencement or threatened commencement
of criminal or civil proceeding against the Company or any officer of the
Company pursuant to which statute or proceeding penalties or remedies sought or
available include forfeiture of any of the property of the company.
 
Section 6.2 Remedies.

(a) In the Event of Default, the Holder may elect to secure a portion of the
Company's assets in Pledged Collateral (as defined in the Security
Agreement).  The Holder may also elect to garnish revenue from the Company in an
amount that will repay the Holder on the schedules outlined in this Debenture.

(b) In the Event of Default, as outlined in this Debenture, the Holder can
exercise its right to increase the Face Amount of the Debenture by ten percent
(10%) as an initial penalty, and by ten percent (10%) for each subsequent Event
of Default.  In addition, the Holder may elect to increase the Face Amount by
two and one-half percent (2.5%) per month (pro-rata for partial periods) paid as
liquated damages (“Liquidated Damages”), compounded daily.  It is the intention
and acknowledgement of both parties that the Liquidated Damages not be deemed as
interest or a penalty under the terms of this Debenture.

(c) In the event of Default, under Section 6.1(g) hereof, the Holder may elect
to switch the Conversion Price of the Debenture as outlined in Section 3.2(c)
above (“Default Conversion Price”).  The Default Conversion Price shall be equal
to the lesser of (i) the Conversion Price or (ii) seventy percent (70%) of the
lowest closing bid price of the Common Stock during the fifteen (15) trading
days prior to conversion.  Upon written notice being sent to the Company by the
Holder of Default under Section 6.1(g), and the Holder's election to exercise
the remedy to switch the conversion price to the Default Conversion Price, the
Company shall immediately withdraw the Registration Statement.  Further, the
Company agrees that the date of consideration for the Debenture shall remain the
Issuance Date stated herein.  The Company shall provide an opinion letter from
counsel within two (2) business days of written request by the Holder stating
that the date of consideration for the Debenture is the Issuance Date and
submission of proper Rule 144 support documentation consisting of a Form 144, a
broker's representation letter and a seller's representation letter.  In the
event the Company does not deliver the opinion letter within two business days,
the Default Conversion Price shall immediately decrease by two percent (2%) for
each business day an opinion letter fails to be delivered.  In the event that
counsel to the Company fails or refuses to render an opinion as required to
issue the Shares in accordance with this paragraph (either with or without
restrictive legends, as applicable), then the Company irrevocably and expressly
authorizes counsel to the Holder to render such opinion and shall authorize the
Transfer Agent to accept and  to rely on such opinion for the purposes of
issuing the Shares (which is attached as Exhibit E to that certain Subscription
Agreement, of even date herewith, by and between the Company and the
Holder).  Any costs incurred by Holder for such opinion letter shall be added to
the Face Amount of the Debenture.

Section 6.3 Acceleration.  If an Event of Default occurs, the Holder by notice
to the Company may declare the remaining principal amount of this Debenture,
together with all accrued interest and any liquidated damages, to be immediately
due and payable in full.

Section 6.4 Seniority. The Company warrants that no indebtedness of the Company
is senior to this Debenture in right of payment, whether with respect to
interest, damages or upon liquidation or dissolution or otherwise.  The Company
warrants that it has taken all necessary steps to subordinate its other
obligations to the rights of the Holder hereunder.

Section 6.5 Cost of Collections.  If an Event of Default occurs, the Company
shall pay the Holder's reasonable costs of collection, including reasonable
attorney's fees and costs of arbitration.

Article 7 Registered Debentures.

Section 7.1 Record Ownership.  The Company or its attorney shall maintain a
register of the Holder of the Debentures (the “Register”) showing their names
and addresses and the serial numbers and principal amounts of Debentures issued
to them.  The Register may be maintained in electronic, magnetic or other
computerized form.  The Company may treat the person named as the Holder of this
Debenture in the Register as the sole owner of this Debenture.   The Holder of
this Debenture is exclusively entitled to receive payments of interest on this
Debenture, receive notifications with respect to this Debenture, convert it into
Common Stock and otherwise exercise all of the rights and powers as the absolute
owner hereof.

Section 7.2 Worn or Lost Debentures.  If this Debenture becomes worn, defaced or
mutilated but is still substantially intact and recognizable, the Company or its
agent may issue a new Debenture in lieu hereof upon its surrender.  Where the
Holder of this Debenture claims that the Debenture has been lost, destroyed or
wrongfully taken, the Company shall issue a new Debenture in place of the
Debenture if the Holder so requests by written notice to the Company.

 
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Article 8 Notice.
 
Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Debenture must be in writing and will be deemed
to have been delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided a confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same.  The addresses and facsimile numbers for such communications shall be:

If to the Company:                               ITalk,  Inc.
2400 W. Cypress Creek Road; #111
Fort Lauderdale, Florida 33309
Telephone: (877) 652-3834
Facsimile:______________

If to the Secured Party:                       Dutchess Capital Management, II,
LLC
50 Commonwealth Ave, Suite 2
Boston, MA  02116
Attention: Douglas Leighton
Telephone: (617) 301-4700
Facsimile: (617) 249-0947

           Each party hereto shall provide five (5) business days prior notice
to the other party hereto of any change in address, phone number or facsimile
number.

Article 9 Time.
 
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a holiday on
which the United States Stock Markets (“US Markets”) are closed (a “Holiday”),
such payment shall be made or condition or obligation performed on the last
business day preceding such Saturday, Sunday or Holiday.  A “business day” shall
mean a day on which the US Markets are open for a full day or half day of
trading.

Article 10 No Assignment.
 
This Debenture and the obligations of the Company hereunder shall not be
assignable by the Company.

Article 11 Rules of Construction.
 
In this Debenture, unless the context otherwise requires, words in the singular
number include the plural, and in the plural include the singular, and words of
the masculine gender include the feminine and the neuter, and when the tense so
indicates, words of the neuter gender may refer to any gender.  The numbers and
titles of sections contained in the Debenture are inserted for convenience of
reference only, and they neither form a part of this Debenture nor are they to
be used in the construction or interpretation hereof.  Wherever, in this
Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.  Any capitalized term used but not
defined in this Debenture shall have the meaning ascribed to it in the
Transaction Documents.

 
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Article 12 Governing Law.
 
The validity, terms, performance and enforcement of this Debenture shall be
governed and construed by the provisions hereof and in accordance with the laws
of the Commonwealth of Massachusetts applicable to agreements that are
negotiated, executed, delivered and performed solely in the Commonwealth of
Massachusetts.

Article 13 Disputes Under Debenture.

All disputes arising under this Debenture shall be governed by and interpreted
in accordance with the laws of the Commonwealth of Massachusetts, without regard
to principles of conflict of laws.  The parties to this Debenture shall submit
all disputes arising under this Debenture to arbitration in Boston,
Massachusetts before a single arbitrator of the American Arbitration Association
(the “AAA”).  The arbitrator shall be selected by application of the rules of
the AAA, or by mutual agreement of the parties, except that such arbitrator
shall be an attorney admitted to practice law in the Commonwealth of
Massachusetts.  No party hereto will challenge the jurisdiction or venue
provisions as provided in this section.  Nothing in this section shall limit the
Holder's right to obtain an injunction for a breach of this Debenture from a
court of law.  Any injunction obtained shall remain in full force and effect
until the arbitrator, as set forth in Article 13, fully adjudicates the dispute.

Article 14 Redemption.

The Company shall have the right to redeem the Holder, in cash, the Debenture,
in whole or in part (“Redemption Amount”), at a price equal the Face Amount of
the Debenture, including penalties, if applicable. Any Payments, as defined in
Article 2 hereof, shall apply to the Redemption Amount.  Any portion of the
Redemption Amount not converted shall be paid in cash to the Holder under the
terms described in this Article 14.

Article 15 Commitment Shares/Closing Costs.

As an additional inducement to the Holder entering into the Transaction
Documents, the Company shall issue to the Holder Commitment Shares equal to one
million (1,000,000) shares of its Common Stock. The Commitment Shares shall be
included in the Registration Statement.  In the event the Company repays the
Face Amount by November 30, 2013, and no further obligation exists for filing of
the Registration Statement, the Commitment Shares shall carry piggyback
registration rights and shall be filed with the immediately subsequent
registration statement filed by the Company.  The terms and provisions of
Section 3.2 (e) shall apply to the Commitment Shares and shall survive past the
payment of the Face Amount and the default provisions under Event of Default
shall still apply.  The Company shall pay fifteen thousand dollars ($15,000)
from the proceeds to the Holder or a designee of the Holder.

Article 16 Waiver.

The Holder's delay or failure at any time or times hereafter to require strict
performance by the Company of any undertakings, agreements or covenants shall
not waive, affect, or diminish any right of the Holder under this Debenture to
demand strict compliance and performance herewith.  Any waiver by the Holder of
any Event of Default shall not waive or affect any other Event of Default,
whether such Event of Default is prior or subsequent thereto and whether of the
same or a different type.  None of the undertakings, agreements and covenants of
the Company contained in this Debenture, and no Event of Default, shall be
deemed to have been waived by the Holder, nor may this Debenture be amended,
changed or modified, unless such waiver, amendment, change or modification is
evidenced by an instrument in writing specifying such waiver, amendment, change
or modification and signed by the Holder.

Article 17 Integration.

This Debenture is the final definitive agreement between the Company and the
Holder with respect to the terms and conditions set forth herein, and, the terms
of this Debenture may not be contradicted by evidence of prior, contemporaneous,
or subsequent oral agreements of the parties hereto.  The execution and delivery
of this Debenture is done in conjunction with the execution of the other
Transaction Documents.

 
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Article 18 Failure To Meet Obligations by the Company.
 
The Company acknowledges that its failure to timely meet any of its obligations
hereunder, including, but without limitation, its obligations to make payments,
deliver shares and, as necessary, to register and maintain sufficient number of
shares, will cause the Holder to suffer irreparable harm and that the actual
damage to the Holder will be difficult to ascertain.  Accordingly, the parties
hereto agree that it is appropriate to include in this Debenture a provision for
liquidated damages.  The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties’ good faith
effort to quantify such damages and, as such, agree that the form and amount of
such liquidated damages are reasonable and do not constitute a penalty.  The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Debenture.

Article 19 Representations and Warranties of the Company.

The Company hereby represent and warrants to the Holder that: (i) it is
voluntarily issuing this Debenture of its own freewill, (ii) it is not issuing
this Debenture under economic duress, (iii) the terms of this debenture are
reasonable and fair to the Company, and (iv) the Company has had independent
legal counsel of its own choosing review this Debenture, advise the Company with
respect to this Debenture, and represent the Company in connection with its
issuance of this Debenture.

Article 20 Acknowledgements of the Parties.

Notwithstanding anything in this Debenture to the contrary, the parties hereto
hereby acknowledge and agree to the following: (i) the Holder makes no
representations or covenants that it will not engage in trading in the
securities of the Company; (ii) the Company shall, by 8:30 a.m. Boston Time on
the trading day following the date hereof, file a current report on Form 8-K
disclosing the material terms of the transactions contemplated hereby and in the
other Transaction Documents; (iii) the Company has not and shall not provide
material non-public information to the Holder unless prior thereto the Holder
shall have executed a written agreement regarding the confidentiality and use of
such information; and (iv) the Company understands and confirms that the Holder
will be relying on the acknowledgements set forth in clauses (i) through (iii)
above if the Holder effects any transactions in the securities of the Company.
 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Debenture to be duly
executed on the day and year first above written.

 
ITALK,  INC.
         
 
By:
        Name: David Levy       Title: Chief Executive Officer            
By:
       
Name: Steven Fromm
     
Title: Chief Operating Office
           
DUTCHESS OPPORTUNITY FUND, II, LP
           
By:
        Name: Douglas H. Leighton      
Title: Director
 

 

 
 
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EXHIBIT A

NOTICE OF CONVERSION

ITalk,  Inc.

Re: Notice of Conversion

Gentlemen:

The undersigned hereby irrevocably elects, as of ________________, to convert
$________________ of its convertible debenture (the “Debenture”) into Common
Stock of  ITalk,  Inc. (the “Company”) according to the conditions set forth in
the Debenture issued by the Company.

Date of Conversion_______________________________________________

Applicable Conversion Price________________________________________

Number of Shares Issuable upon this Conversion____________________

Name:  Dutchess Opportunity Fund, II, LP.

Address: 50 Commonwealth Ave, Boston, MA 02116

Phone: 617-301-4700                                                    Fax:
617-249-0947

DUTCHESS OPPORTUNITY FUND, II, LP.

By: _______________________________________
Name: Douglas H. Leighton
Title: Director
 
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