Filed by Bowne Pure Compliance





Exhibit 4.6




NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.



Original Issue Date:                     

Original Conversion Price (subject to adjustment herein): $3.00




$                    




9% CONVERTIBLE DEBENTURE

DUE BY                     




THIS CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued Secured
Convertible Debentures of Pure Earth, Inc., a Delaware corporation, having its principal place of
business at 6 North Baton Rouge Avenue, Ventnor, New Jersey 08406 (the “Company”),
designated as its 9% Secured Convertible Debenture, due                      (this debenture, the
“Debenture” and collectively with the other such series of debentures, the
“Debentures”).



FOR VALUE RECEIVED, the Company promises to pay to DD Growth Premium or its registered assigns
(the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of
$                     by                      or such earlier date as this Debenture is required or permitted to be
repaid as provided hereunder (the “Maturity Date”), and to pay interest to the Holder on
the aggregate unconverted and then outstanding principal amount of this Debenture in accordance
with the provisions hereof. This Debenture is subject to the following additional provisions:



Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein shall have
the
meanings set forth in the Purchase Agreement and (b) the following terms shall have the following
meanings:



“Alternate Consideration” shall have the meaning set forth in Section 5(e).



 


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“Bankruptcy Event” means any of the following events: (a) the Company or any
Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof
commences a case or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Company or any Significant Subsidiary thereof; (b) there
is commenced against the Company or any Significant Subsidiary thereof any such case or
proceeding that is not dismissed within 60 days after commencement; (c) the Company or any
Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered; (d) the Company or any
Significant Subsidiary thereof suffers any appointment of any custodian or the like for it
or any substantial part of its property that is not discharged or stayed within 60 calendar
days after such appointment; (e) the Company or any Significant Subsidiary thereof makes a
general assignment for the benefit of creditors; (f) the Company or any Significant
Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (g) the Company or any Significant Subsidiary
thereof, by any act or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action for the purpose
of effecting any of the foregoing.




“Base Conversion Price” shall have the meaning set forth in Section 5(b).




“Business Day” shall have the meaning set forth in the Purchase Agreement.




“Buy-In” shall have the meaning set forth in Section 4(d)(v).




“Change of Control Transaction” means the occurrence after the date hereof of
any of (i) an acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Company, by contract
or otherwise) of in excess of 50% of the voting securities of the Company (other than by
means of conversion or exercise of the Debentures and the Securities issued together with
the Debentures), or (ii) the Company merges into or consolidates with any other Person, or
any Person merges into or consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to such transaction own less
than 50% of the aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers all or substantially all of its assets
to another Person and the stockholders of the Company immediately prior to such transaction
own less than 50% of the aggregate voting power of the acquiring entity immediately after
the transaction,
or (iv) a replacement at one time or within a three year period of more than one-half of the
members of the Company’s board of directors which is not approved by a majority of those
individuals who are members of the board of directors on the date hereof (or by those
individuals who are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the members of the board
of directors who are members on the date hereof), or (v) the execution by the Company of an
agreement to which the Company is a party or by which it is bound, providing for any of the
events set forth in clauses (i) through (iv) above.



 


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“Common Stock” means the common stock, par value $.001 per share, of the
Company and stock of any other class of securities into which such securities may hereafter
be reclassified or changed into.




“Conversion Date” shall have the meaning set forth in Section 4(a).




“Conversion Price” shall have the meaning set forth in Section 4(b).




“Conversion Shares” means, collectively, the shares of Common Stock issuable
upon conversion of this Debenture in accordance with the terms hereof.




“Debenture Register” shall have the meaning set forth in Section 3(c).




“Effectiveness Period” shall have the meaning set forth in the Registration
Rights Agreement.




“Equity Conditions” shall mean, during the period in question, (i) the Company
shall have duly honored all conversions and redemptions scheduled to occur or occurring by
virtue of one or more Notices of Conversion of the Holder, if any, (ii) the Company shall
have paid all liquidated damages and other amounts owing to the Holder in respect of this
Debenture, (iii) there is an effective Registration Statement pursuant to which the Holder
is permitted to utilize the prospectus thereunder to resell all of the shares issuable
pursuant to the Transaction Documents (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future), (iv) the Common Stock
is trading on a Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed for trading on such Trading Market (and the Company believes, in good
faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for
the foreseeable future), (v) there is a sufficient number of authorized but unissued and
otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable
pursuant to the Transaction Documents, (vi) there is no existing Event of Default or no
existing event which, with the passage of time or the giving of notice, would constitute an
Event of Default, (vii) the issuance of the shares in question (or, in the case of an
Optional Redemption, the shares issuable upon conversion in full of the Optional Redemption
Amount) to the Holder would not violate the limitations set forth in Section 4(c) herein,
(viii) there has been no public announcement of a pending or proposed Fundamental
Transaction or Change of Control Transaction that
has not been consummated and (ix) the Holder is not in possession of any information
that constitutes, or may constitute, material non-public information.


 


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“Event of Default” shall have the meaning set forth in Section 8.




“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.




“Forced Conversion” shall have the meaning set forth in Section 6(c).




“Forced Conversion Date” shall have the meaning set forth in Section 6(c).




“Forced Conversion Notice” shall have the meaning set forth in Section 6(c).




“Forced Conversion Notice Date” shall have the meaning set forth in Section
6(c).




“Fundamental Transaction” shall have the meaning set forth in Section 5(e).




“Interest Conversion Rate” means the lesser of (a) the Conversion Price or (b)
90% of the lesser of (i) the average of the VWAPs for the 10 consecutive Trading Days ending
on the Trading Day that is immediately prior to the applicable Interest Payment Date or (ii)
the average of the VWAPs for the 10 consecutive Trading Days ending on the Trading Day that
is immediately prior to the date the applicable Interest Conversion Shares are issued and
delivered if after the Interest Payment Date.




“Interest Conversion Shares” shall have the meaning set forth in Section 2(a).




“Interest Notice Period” shall have the meaning set forth in Section 2(a).




“Interest Payment Date” shall have the meaning set forth in Section 2(a).




“Interest Share Amount” shall have the meaning set forth in Section 2(a).




“Late Fees” shall have the meaning set forth in Section 2(d).




“Mandatory Default Amount” means the sum of (i) the greater of (A) 115% of the
outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon,
or (B) the outstanding principal amount of this Debenture, plus all accrued and unpaid
interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is
either (a) demanded (if demand or notice is required to create an Event of Default) or
otherwise due or (b) paid in full, whichever has a lower Conversion Price, multiplied by the
VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y)
paid in full, whichever has a higher VWAP, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of this Debenture.


 


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“New York Courts” shall have the meaning set forth in Section 9(d).




“Notice of Conversion” shall have the meaning set forth in Section 4(a).




“Optional Redemption” shall have the meaning set forth in Section 6(a).




“Optional Redemption Amount” means the sum of (i) 100% of the principal amount
of the Debenture then outstanding, (ii) accrued but unpaid interest and (iii) all liquidated
damages and other amounts due in respect of the Debenture.




“Optional Redemption Date” shall have the meaning set forth in Section 6(a).




“Optional Redemption Notice” shall have the meaning set forth in Section 6(a).




“Optional Redemption Notice Date” shall have the meaning set forth in Section
6(a).




“Original Issue Date” means the date of the first issuance of the Debentures,
regardless of any transfers of any Debenture and regardless of the number of instruments
which may be issued to evidence such Debentures.




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




“Purchase Agreement” means the Securities Purchase Agreement among the Company
and the original Holders, dated as of June 30, 2006, as amended, modified or supplemented
from time to time in accordance with its terms.




“Registration Rights Agreement” means the Registration Rights Agreement among
the Company and the original Holders, dated as of the date of the Purchase Agreement, as
amended, modified or supplemented from time to time in accordance with its terms.




“Registration Statement” means a registration statement that registers the
resale of all Conversion Shares and Interest Conversion Shares of the Holder, who shall be
named as a “selling stockholder” therein, and meets the requirements of the Registration
Rights Agreement.




“Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.




“Share Delivery Date” shall have the meaning set forth in Section 4(d).




“Subsidiary” shall have the meaning set forth in the Purchase Agreement.


 


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“Trading Day” means a day on which the principal Trading Market is open for
business.




“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American Stock Exchange,
the Nasdaq Capital Market, the Nasdaq Global Market, the New York Stock Exchange or the OTC
Bulletin Board.




“Transaction Documents” shall have the meaning set forth in the Purchase
Agreement.




“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted for
trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time); (b) if the Common Stock is not then quoted for
trading on a Trading Market and if prices for the Common Stock are then reported in the
“Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of the Common
Stock so reported; or (c) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the Holder and
reasonably acceptable to the Company.



Section 2. Interest.




a) Payment of Interest in Cash or Kind. The Company shall pay interest to the
Holder on the aggregate unconverted and then outstanding principal amount of this Debenture
at the rate of 9% per annum, payable semiannually on April 1 and October 1, beginning on the
first such date after the Original Issue Date, on each Conversion Date (as to that principal
amount then being converted), on each Optional Redemption Date (as to that principal amount
then being redeemed) and on the Maturity Date (except that, if any such date is not a
Business Day, then such payment shall be due on the next succeeding Business Day) (each such
date, an “Interest Payment Date”), in cash or duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock at the Interest Conversion Rate (the amount
to be paid in shares, the “Interest Share Amount”), or a combination thereof;
provided, however, that (i) payment in shares of Common Stock may only occur
if during the 20 Trading Days immediately prior to the applicable Interest Payment Date
(the “Interest Notice Period”) and through and including the date such shares of
Common Stock are issued to the Holder all of the Equity


 


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Conditions have been met (unless
waived by the Holder in writing), (ii) the Company shall have given the Holder notice in
accordance with the notice requirements set forth below and (iii) as to such Interest
Payment Date, prior to such Interest Notice Period (but not more than 5 Trading Days prior
to the commencement of such Interest Notice Period), the Company shall have delivered to the Holder’s account with The Depository Trust Company a number
of shares of Common Stock to be applied against such Interest Share Amount equal to the
quotient of (x) the applicable Interest Share Amount divided by (y) the then Conversion
Price (the “Interest Conversion Shares”).




b) Company’s Election to Pay Interest in Kind. Subject to the terms and
conditions herein, the decision whether to pay interest hereunder in cash or shares of
Common Stock shall be at the discretion of the Company. Prior to the commencement of any
Interest Notice Period, the Company shall deliver to the Holder a written notice of its
election to pay interest hereunder on the applicable Interest Payment Date either in cash,
 shares of Common Stock or a combination thereof and the Interest Share Amount as to the
applicable Interest Payment Date, provided that the Company may indicate in such notice that
the election contained in such notice shall apply to future Interest Payment Dates until
revised by a subsequent notice. During any Interest Notice Period, the Company’s election
(whether specific to an Interest Payment Date or continuous) shall be irrevocable as to such
Interest Payment Date. Subject to the aforementioned conditions, failure to timely provide
such written notice shall be deemed an election by the Company to pay the interest on such
Interest Payment Date in cash. At any time the Company delivers a notice to the Holder of
its election to pay the interest in shares of Common Stock, the Company shall timely file a
prospectus supplement pursuant to Rule 424 disclosing such election. The aggregate number
of shares of Common Stock otherwise issuable to the Holder on an Interest Payment Date shall
be reduced by the number of Interest Conversion Shares previously issued to the Holder in
connection with such Interest Payment Date.




c) Interest Calculations. Interest shall be calculated on the basis of a
360-day year and shall accrue daily commencing on the Original Issue Date until payment in
full of the principal sum, together with all accrued and unpaid interest, liquidated damages
and other amounts which may become due hereunder, has been made. Payment of interest in
 shares of Common Stock (other than the Interest Conversion Shares issued prior to an
Interest Notice Period) shall otherwise occur pursuant to Section 4(d)(ii) herein and,
solely for purposes of the payment of interest in shares, the Interest Payment Date shall be
deemed the Conversion Date. Interest shall cease to accrue with respect to any principal
amount converted, provided that the Company actually delivers the Conversion Shares within
the time period required by Section 4(d)(ii). Interest hereunder will be paid to the Person
in whose name this Debenture is registered on the records of the Company regarding
registration and transfers of this Debenture (the “Debenture Register”). Except as
otherwise provided herein, if at any time the Company pays interest partially in cash and
partially in shares of Common Stock to the holders of the Debentures, then such payment
shall be distributed ratably among the holders of the then-outstanding Debentures based on
their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase
Agreement.


 


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d) Late Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at an interest rate equal to the lesser of 15% per annum or the
maximum rate permitted by applicable law (“Late Fees”) which shall accrue daily
from the date such interest is due hereunder through and including the date of payment in
full. Notwithstanding anything to the contrary contained herein, if on any Interest Payment
Date the Company has elected to pay accrued interest in the form of Common Stock but the
Company is not able to pay accrued interest in Common Stock because it fails to satisfy the
conditions for payment in Common Stock set forth above, then, at the option of the Holder,
the Company, in lieu of delivering either shares of Common Stock pursuant to this Section 2
or paying the regularly scheduled interest payment in cash, shall deliver, within three
Trading Days of each applicable Interest Payment Date, an amount in cash equal to the
product of (x) the number of shares of Common Stock otherwise deliverable to the Holder in
connection with the payment of interest due on such Interest Payment Date multiplied by (y)
the highest VWAP during the period commencing on the Interest Payment Date and ending on the
Trading Day prior to the date such payment is made. If any Interest Conversion Shares are
issued to the Holder in connection with an Interest Payment Date and are not applied against
an Interest Share Amount, then the Holder shall promptly return such excess shares to the
Company.




e) Prepayment. Except as otherwise set forth in this Debenture, the Company
may not prepay any portion of the principal amount of this Debenture without the prior
written consent of the Holder.



Section 3. Registration of Transfers and Exchanges.




a) Different Denominations. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations, as requested
by the Holder surrendering the same. No service charge will be payable for such
registration of transfer or exchange.




b) Investment Representations. This Debenture has been issued subject to
certain investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable federal and state securities laws and regulations.




c) Reliance on Debenture Register. Prior to due presentment for transfer to the
Company 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 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 is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.


 


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Section 4. Conversion.




a) Voluntary Conversion. At any time after the Original Issue Date until this
Debenture is no longer outstanding, this Debenture shall be convertible, in whole or in
part, into shares of Common Stock at the option of the Holder, at any time and from time
to time (subject to the conversion limitations set forth in Section 4(c) hereof). The
Holder shall effect conversions by delivering to the Company a Notice of Conversion, the
form of which is attached hereto as Annex A (a “Notice of Conversion”),
specifying therein the principal amount of this Debenture to be converted and the date on
which such conversion shall be effected (a “Conversion Date”). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such
Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender this Debenture to the Company unless
the entire principal amount of this Debenture plus all accrued and unpaid interest thereon
has been so converted. Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Debenture in an amount equal to the applicable
conversion. The Holder and the Company shall maintain records showing the principal
amount(s) converted and the date of such conversion(s). The Company may deliver an
objection to any Notice of Conversion within 1 Business Day of delivery of such Notice of
Conversion. The Holder, and any assignee by acceptance of this Debenture, acknowledge and
agree that, by reason of the provisions of this paragraph, following conversion of a portion
of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less
than the amount stated on the face hereof.




b) Conversion Price. The conversion price in effect on any Conversion Date
shall be equal to $3.00 (subject to adjustment herein) (the “Conversion Price”).




c) Conversion Limitations.




i. Holder’s Restriction on Conversion. The Company shall not effect any
conversion of this Debenture, and a Holder shall not have the right to convert any
portion of this Debenture, to the extent that after giving effect to the conversion
set forth on the applicable Notice of Conversion, such Holder (together with such
Holder’s Affiliates, and any other person or entity acting as a group together with
such Holder or any of such Holder’s Affiliates) would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below).  For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by such
Holder and its Affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Debenture with respect to which such determination
is being made, but shall exclude the number of shares of Common Stock which are
issuable upon (A) conversion of the remaining, unconverted principal amount of this
Debenture beneficially owned by such Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company subject to a limitation on conversion or exercise
analogous to the limitation contained herein (including, without limitation, any
other Debentures or the Warrants) beneficially owned by such Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for purposes of this
Section 4(c)(i), beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.


 


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To the
extent that the limitation contained in this Section 4(c)(i) applies, the
determination of whether this Debenture is convertible (in relation to other
securities owned by such Holder together with any Affiliates) and of which principal
amount of this Debenture is convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be deemed to be such
Holder’s determination of whether this Debenture may be converted (in relation to
other securities owned by such Holder together with any Affiliates) and which
principal amount of this Debenture is convertible, in each case subject to such
aggregate percentage limitations. To ensure compliance with this restriction, each
Holder will be deemed to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as to any
group status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 4(c)(i), in determining the number of outstanding
 shares of Common Stock, a Holder may rely on the number of outstanding shares of
Common Stock as stated in the most recent of the following: (A) the Company’s most
recent Form 10-QSB or Form 10-KSB, as the case may be; (B) a more recent public
announcement by the Company; or (C) a more recent notice by the Company or the
Company’s transfer agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the Company shall within
two Trading Days confirm orally and in writing to such Holder the number of shares
of Common Stock then outstanding.  In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or exercise
of securities of the Company, including this Debenture, by such Holder or its
Affiliates since the date as of which such number of outstanding shares of Common
Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the
number of shares of the Common Stock outstanding immediately after giving effect to
the issuance of shares of Common Stock issuable upon conversion of this Debenture
held by the Holder. The Beneficial Ownership Limitation provisions of this Section
4(c)(i) may be waived by such Holder, at the election of such Holder, upon not less
than 61 days’ prior notice to the Company, to change the Beneficial Ownership
Limitation to 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock upon
conversion of this Debenture held by the Holder and the provisions of this Section
4(c)(i) shall continue to apply. Upon such a change by a Holder of the Beneficial
Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the
Beneficial Ownership Limitation may not be further waived by such Holder. The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 4(c)(i) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this paragraph
shall apply to a successor holder of this Debenture.


 


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d) Mechanics of Conversion.




i. Conversion Shares Issuable Upon Conversion of Principal Amount. The
number of shares of Common Stock issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal amount
of this Debenture to be converted by (y) the Conversion Price.




ii. Delivery of Certificate Upon Conversion. Not later than three
Trading Days after each Conversion Date (the “Share Delivery Date”), the
Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or
certificates representing the Conversion Shares which, on or after the Effective
Date, shall be free of restrictive legends and trading restrictions (other than
those which may then be required by the Purchase Agreement) representing the number
of shares of Common Stock being acquired upon the conversion of this Debenture
(including, if the Company has given continuous notice pursuant to Section 2(b) for
payment of interest in shares of Common Stock at least 20 Trading Days prior to the
date on which the Conversion Notice is delivered to the Company, shares of Common
Stock representing the payment of accrued interest otherwise determined pursuant to
Section 2(a) but assuming that the Interest Payment Period is the 20 Trading Days
period immediately prior to the date on which the Conversion Notice is delivered to
the Company and excluding for such issuance the condition that the Company deliver
Interest Conversion Shares as to such interest payment) and (B) a bank check in the
amount of accrued and unpaid interest (if the Company has elected or is required to
pay accrued interest in cash). On or after the Effective Date, the Company shall use
its best efforts to deliver any certificate or certificates required to be delivered
by the Company under this Section 4 electronically through the Depository Trust
Company or another established clearing corporation performing similar functions.




iii. Failure to Deliver Certificates. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed by
the applicable Holder by the third Trading Day after the Conversion Date, the Holder
shall be entitled to elect by written notice to the Company at any time on or before
its receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Debenture
delivered to the Company and the Holder shall promptly return the Common Stock
certificates representing the principal amount of this Debenture tendered for
conversion to the Company.


 


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iv. Obligation Absolute; Partial Liquidated Damages. The Company’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any waiver
or consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the Holder
or any other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of such Conversion Shares; provided,
however, that such delivery shall not operate as a waiver by the Company of
any such action the Company may have against the Holder. In the event the Holder of
this Debenture shall elect to convert any or all of the outstanding principal amount
hereof, the Company may not refuse conversion based on any claim that the Holder or
anyone associated or affiliated with the Holder has been engaged in any violation of
law, agreement or for any other reason, unless an injunction from a court, on notice
to Holder, restraining and or enjoining conversion of all or part of this Debenture
shall have been sought and obtained, and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the outstanding principal amount of
this Debenture, which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the underlying dispute and
the proceeds of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of such injunction, the Company shall issue Conversion
Shares or, if applicable, cash, upon a properly noticed conversion. If the Company
fails for any reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the fifth Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, for each $1000 of principal amount being converted, $5 per Trading Day
(increasing to $10 per Trading Day on the fifth Trading Day after such liquidated
damages begin to accrue) for each Trading Day after such third Trading Day until
such certificates are delivered. Nothing herein shall limit a Holder’s right to
pursue actual damages or declare an Event of Default pursuant to Section 8 hereof
for the Company’s failure to deliver Conversion Shares within the period specified
herein and such Holder shall have the right to pursue all remedies available to it
hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any other Section
hereof or under applicable law.


 


12









 






v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section 4(d)(ii), and if
after such Share Delivery Date the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Holder of the Conversion Shares which the
Holder was entitled to receive upon the conversion relating to such Share Delivery
Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in
addition to any other remedies available to or elected by the Holder) the amount by
which (x) the Holder’s total purchase price (including any brokerage commissions)
for the Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder was entitled to receive from the
conversion at issue multiplied by (2) the actual sale price at which the sell order
giving rise to such purchase obligation was executed (including any brokerage
commissions) and (B) at the option of the Holder, either reissue (if surrendered)
this Debenture in a principal amount equal to the principal amount of the attempted
conversion or deliver to the Holder the number of shares of Common Stock that would
have been issued if the Company had timely complied with its delivery requirements
under Section 4(d)(ii). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of this Debenture with respect to which the actual sale price of the
Conversion Shares (including any brokerage commissions) giving rise to such purchase
obligation was a total of $10,000 under clause (A) of the immediately preceding
sentence, the Company shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In and, upon request of the Company, evidence of the amount of
such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing shares of Common Stock
upon conversion of this Debenture as required pursuant to the terms hereof.




vi. Reservation of Shares Issuable Upon Conversion. The Company
covenants that it will at all times reserve and keep available out of its authorized
and unissued shares of Common Stock for the sole purpose of issuance upon conversion
of this Debenture and payment of interest on this Debenture, each as herein
provided, free from preemptive rights or any other actual contingent purchase rights
of Persons other than the Holder (and the other holders of the Debentures), not less
than such aggregate number of shares of the Common Stock as shall (subject to the
terms and conditions set forth in the Purchase Agreement) be issuable (taking into
account the adjustments and restrictions of Section 5) upon the conversion of the
outstanding principal amount of this Debenture and payment of interest hereunder.
The Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable
and, if the Registration Statement is
then effective under the Securities Act, shall be registered for public sale in
accordance with such Registration Statement.


 


13









 






vii. Fractional Shares. Upon a conversion hereunder the Company shall
not be required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the VWAP at such time. If the Company elects
not, or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, 1 whole share of Common Stock.




viii. Transfer Taxes. The issuance of certificates for shares of the
Common Stock on conversion of this Debenture shall be made without charge to the
Holder hereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificates, provided that the Company
shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in a
name other than that of the Holder of this Debenture so converted and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.



Section 5. Certain Adjustments.




a) Stock Dividends and Stock Splits. If the Company, at any time while this
Debenture is outstanding: (A) pays a stock dividend or otherwise makes a distribution or
distributions payable in shares of Common Stock on shares of Common Stock or any Common
Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company upon conversion of, or payment of interest on, this Debenture);
(B) subdivides outstanding shares of Common Stock into a larger number of shares; (C)
combines (including by way of a reverse stock split) outstanding shares of Common Stock into
a smaller number of shares; or (D) issues, in the event of a reclassification of shares of
the Common Stock, any shares of capital stock of the Company, then the Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding any treasury shares of the Company) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination or
re-classification.


 


14









 






b) Fundamental Transaction. If, at any time while this Debenture is
outstanding, (A) the Company effects any merger or consolidation of the Company with or into
another Person, (B) the Company effects any sale of all or substantially all of its assets
in one transaction or a series of related transactions, (C) any tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other securities, cash or
property, or (D) the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent conversion of this Debenture, the Holder shall
have the right to receive, for each Conversion Share that would have been issuable upon such
conversion immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of 1 share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of 1 share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price
among the Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common Stock are
given any choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Debenture following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any successor
to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder
a new debenture consistent with the foregoing provisions and evidencing the Holder’s right
to convert such debenture into Alternate Consideration. The terms of any agreement pursuant
to which a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 5(e) and
insuring that this Debenture (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.




c) Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding any treasury
 shares of the Company) issued and outstanding.


 


15









 






d) Notice to the Holder.




i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5, the Company shall
promptly mail to each Holder a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. If the Company issues a variable rate security, despite the prohibition
thereon in the Purchase Agreement, the Company shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised in the case of a
Variable Rate Transaction (as defined in the Purchase Agreement).




ii. Notice to Allow Conversion by Holder. If (A) the Company shall
declare a dividend (or any other distribution in whatever form) on the Common Stock,
(B) the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to all
holders of the Common Stock of rights or warrants to subscribe for or purchase any
 shares of capital stock of any class or of any rights, (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the assets
of the Company, of any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property or (E) the Company shall authorize
the voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be filed at each
office or agency maintained for the purpose of conversion of this Debenture, and
shall cause to be delivered to the Holder at its last address as it shall appear
upon the Debenture Register, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of
which the holders of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale, transfer or share
exchange is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share exchange,
provided that the failure to deliver such notice or any defect therein or in the
delivery thereof shall not affect the validity of the corporate action required to
be specified in such notice. The Holder is entitled to convert this Debenture
during the 20-day period commencing on the date of such notice through the effective
date of the event triggering such notice.


 


16









 





Section 6. Redemption and Forced Conversion.




a) Optional Redemption at Election of the Holder. Subject to the provisions
of this Section 6(a), at any time after the date hereof, in the event of a Change of Control
Transaction that results in an non-Affiliated third party acquiring more than 50% of
the voting securities of the Company in one transaction or a series of related transactions,
in addition to any other rights hereunder, the Holder may deliver a notice to the Company
(an “Optional Redemption Notice” and the date such notice is deemed delivered
hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to
cause the Company to redeem some or all of the then outstanding amounts owed under this
Debenture, for an amount, in cash, or, subject to the conditions set forth below, at the
Company’s option, in shares of registered Common Stock, equal to the Optional Redemption
Amount on the 20th Trading Day following the Optional Redemption Notice Date
(such date, the “Optional Redemption Date” and such redemption, the “Optional
Redemption”). The Company shall deliver notice of its election to pay the Optional
Redemption Amount in shares of Common Stock within 2 Trading Days of its receipt of an
Optional Redemption Notice. Failure to so deliver a notice to pay an Option Redemption
Amount in shares of Common Stock within 2 Trading Days shall be deemed an election by the
Company to pay such amount in cash. The Optional Redemption Amount is due in full on the
Optional Redemption Date. If the Company elects to pay an Optional Redemption Amount in
 shares of Common Stock, such shares shall be based on a conversion price equal to the lesser
of (i) the then Conversion Price and (ii) 90% of the average of the VWAPs for the 10
consecutive Trading Days ending on the Trading Day that is immediately prior to the
applicable Optional Redemption Date. The Company may only elect to pay the Optional
Redemption Amount in shares of Common Stock if during the period commencing on the Optional
Redemption Notice Date through to the Optional Redemption Date and through and including the
date such shares of Common Stock are issued to the Holder, each of the Equity Conditions
shall have been met. If any of the Equity Conditions shall cease to be satisfied at any
time during the required period, then the Holder may elect to nullify the Optional
Redemption Notice by notice to the Company within 3 Trading Days after the first day on
which any such Equity Condition has not been met (provided that if, by a provision of the
Transaction Documents, the Company is obligated to notify the Holder of the non-existence of
an Equity Condition, such notice period shall be extended to the third Trading Day after
proper notice from the Company) in which case the Optional Redemption Notice shall be null
and void, ab initio or require the Company to pay such Optional Redemption Amount in cash.
The Company covenants and agrees that it will honor all Notices of Conversion tendered from
the time of delivery of the Optional Redemption Notice through the date all amounts owing
thereon are due and paid in full.




b) Redemption Procedure. The payment of cash pursuant to an Optional
Redemption shall be made on the Optional Redemption Date. If any portion of the cash
payment for an Optional Redemption shall not be paid by the Corporation by the respective
due date, interest shall accrue thereon at the rate of 15% per annum (or the maximum rate
permitted by applicable law, whichever is less) until the such payment, plus all amounts
owing thereon, is paid in full.


 


17









 






c) Forced Conversion. Notwithstanding anything herein to the contrary, if after
the Effective Date, the VWAPs for each of any 20 consecutive Trading Days, which period
shall have commenced only after the Effective Date, such period the “Threshold
Period”)) exceeds $6.00 (subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the Common Stock that
occur after the Original Issue Date) and daily trading volume for such Threshold Period,
which Threshold Period shall have commenced only after the Effective Date, exceeds 75,000
shares of Common Stock per Trading Day (subject to adjustment for forward and reverse stock
splits, recapitalizations, stock dividends and the like after the Initial Exercise Date),
the Company may, within 1 Trading Day after the end of any such Threshold Period, deliver a
written notice to the Holder (a “Forced Conversion Notice” and the date such notice
is delivered to the Holder, the “Forced Conversion Notice Date”) to cause the Holder
to convert all or part of the then outstanding principal amount of Debentures plus, if so
specified in the Forced Conversion Notice, accrued but unpaid interest, liquidated damages
and other amounts owing to the Holder pursuant to Section 4, it being agreed that the
“Conversion Date” for purposes of Section 4 shall be deemed to occur on the third Trading
Day following the Forced Conversion Notice Date (such third Trading Day, the “Forced
Conversion Date”). The Company may not deliver a Forced Conversion Notice, and any
Forced Conversion Notice delivered by the Company shall not be effective, unless all of the
Equity Conditions are met on each Trading Day occurring during the applicable Threshold
Period through and including the later of the Forced Conversion Date and the Trading Day
after the date such Conversion Shares pursuant to such conversion are delivered to the
Holder. Any Forced Conversion shall be applied ratably to all Holders based on their
initial purchases of Debentures pursuant to the Purchase Agreement, provided that any
voluntary conversions by a Holder shall be applied against such Holder’s pro-rata
allocation, thereby decreasing the aggregate amount forcibly converted hereunder if only a
portion of this Debenture is forcibly converted. For purposes of clarification, a Forced
Conversion shall be subject to all of the provisions of Section 4, including, without
limitation, the provision requiring payment of liquidated damages and limitations on
conversions.



Section 7. Negative Covenants. As long as any portion of this Debenture
remains outstanding, the Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:




a) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares of its Common Stock or Common Stock Equivalents
other than as to (a) the Conversion Shares or Warrant Shares as permitted or required under
the Transaction Documents and (b) repurchases of Common Stock or Common Stock Equivalents of
departing officers and directors of the Company, provided that such repurchases shall not
exceed an aggregate of $100,000 for all officers and directors during the term of this
Debenture);




b) enter into any agreement with respect to any of the foregoing; or


 


18









 






c) pay cash dividends or distributions on any equity securities of the Company.



Section 8. Events of Default.




a) “Event of Default” means, wherever used herein, any of the following events
(whatever the reason for such event and whether such event shall be voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree or order of any court,
or any order, rule or regulation of any administrative or governmental body):




i. any default in the payment of (A) the principal amount of any Debenture or
(B) interest, liquidated damages and other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise) which default,
solely in the case of an interest payment or other default under clause (B) above,
is not cured within 3 Trading Days;




ii. the Company shall fail to observe or perform any other covenant or
agreement contained in the Debentures (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion, which
breach is addressed in clause (xi) below) which failure is not cured, if possible to
cure, within the earlier to occur of (A) 7 Trading Days after notice of such failure
sent by the Holder or by any other Holder and (B) 12 Trading Days after the Company
has become or should have become aware of such failure;




iii. a default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall occur under (A)
any of the Transaction Documents or (B) any other material agreement, lease,
document or instrument to which the Company or any Subsidiary is obligated (and not
covered by clause (vi) below);




iv. any representation or warranty made in this Debenture, any other
Transaction Documents, any written statement pursuant hereto or thereto or any other
report, financial statement or certificate made or delivered to the Holder or any
other Holder shall be untrue or incorrect in any material respect as of the date
when made or deemed made;




v. the Company or any Significant Subsidiary shall be subject to a Bankruptcy
Event;


 


19









 






vi. the Company or any Subsidiary shall default on any of its obligations under
any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced, any indebtedness for borrowed
money or money due under any long term leasing or factoring arrangement (but not
including accounts payable being contested by the Company in good faith) that (a)
involves an obligation greater than $250,000, whether such indebtedness now exists
or shall hereafter be created, and (b) results in such indebtedness becoming or
being declared due and payable prior to the date on which it would otherwise become
due and payable;




vii. after the Effective Date, the Common Stock shall not be eligible for
listing or quotation for trading on a Trading Market and shall not be eligible to
resume listing or quotation for trading thereon within seven Trading Days;




viii. the Company shall be a party to any Change of Control Transaction or
Fundamental Transaction or shall agree to sell or dispose of all or in excess of 40%
of its assets in one transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);




ix. the Company shall fail for any reason to deliver certificates to a Holder
prior to the fifth Trading Day after a Conversion Date or any Forced Conversion Date
pursuant to Section 4(d) or the Company shall provide at any time notice to the
Holder, including by way of public announcement, of the Company’s intention to not
honor requests for conversions of any Debentures in accordance with the terms
hereof; or




x. any monetary judgment, writ or similar final process shall be entered or
filed against the Company, any Subsidiary or any of their respective property or
other assets for more than $500,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.




b) Remedies Upon Event of Default. If any Event of Default occurs, the
outstanding principal amount of this Debenture, plus accrued but unpaid interest, liquidated
damages and other amounts owing in respect thereof through the date of acceleration, shall
become, at the Holder’s election, immediately due and payable in cash at the Mandatory
Default Amount. Commencing 5 days after the occurrence of any Event of Default that results
in the eventual acceleration of this Debenture, the interest rate on this Debenture shall
accrue at an interest rate equal to the lesser of 15% per annum or the maximum rate
permitted under applicable law. Upon the payment in full of the Mandatory Default Amount,
the Holder shall promptly surrender this Debenture to or as directed by the Company. In
connection with such acceleration described herein, the Holder need not provide, and the
Company hereby waives, any presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder
and all other remedies available to it under applicable law.
Such acceleration may be
rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall
have all rights as a holder of the Debenture until such time, if any, as the Holder receives
full payment pursuant to this Section 8(b). No such rescission or annulment shall affect
any subsequent Event of Default or impair any right consequent thereon.

 


20









 






Section 9. Miscellaneous.




a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Company, at the address set forth
above, facsimile number (215) 639-8756, Attn: Chief Financial Officer or such other
facsimile number or address as the Company may specify for such purpose by notice to the
Holder delivered in accordance with this Section 9. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile number or address of such Holder appearing
on the books of the Company, or if no such facsimile number or address appears, at the
principal place of business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section 9 prior to 5:30 p.m. (New York City time), (ii) the date
immediately following the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number specified in this Section 9 between 5:30 p.m. (New
York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business
Day following the date of mailing, if sent by nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is required to be
given.




b) Absolute Obligation. Except as expressly provided herein, no provision of
this Debenture shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, liquidated damages and accrued interest, as
applicable, on this Debenture at the time, place, and rate, and in the coin or currency,
herein prescribed. This Debenture is a direct debt obligation of the Company. This
Debenture ranks pari passu with all other Debentures now or hereafter issued
under the terms set forth herein.




c) Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for
and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost,
stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed, but only upon receipt of evidence of
such loss, theft or destruction of such Debenture, customary indemnity and of the
ownership hereof, reasonably satisfactory to the Company.


 


21









 






d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without regard to
the principles of conflict of laws thereof. Each party agrees that all legal proceedings
concerning the interpretation, enforcement and defense of the transactions contemplated by
any of the Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York, Borough of Manhattan (the
“New York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such New York Courts, or such New
York Courts are improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Debenture and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by applicable
law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding arising out of or
relating to this Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture, then the
prevailing party in such action or proceeding shall be reimbursed by the other party for its
attorneys fees and other costs and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.




e) Waiver. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Debenture. The
failure of the Company or the Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver by the Company or the Holder must be in writing.




f) Severability. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all
other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to equal the
maximum rate of interest permitted under applicable law.
The Company covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law which 

 


22









 






would
prohibit or forgive the Company from paying all or any
portion of the principal of or interest on this Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefits or advantage of any such law, and covenants that it will not,
by resort to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as though no
such law has been enacted.




g) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the next succeeding
Business Day.




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




i) Assumption.  Any successor to the Company or any surviving entity in a
Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction, all of the
obligations of the Company under this Debenture and the other Transaction Documents pursuant
to written agreements in form and substance satisfactory to the Holder (such approval not to
be unreasonably withheld or delayed) and (ii) issue to the Holder a new debenture of such
successor entity evidenced by a written instrument substantially similar in form and
substance to this Debenture, including, without limitation, having a principal amount and
interest rate equal to the principal amount and the interest rate of this Debenture and
having similar ranking to this Debenture, which shall be satisfactory to the Holder (any
such approval not to be unreasonably withheld or delayed).  The provisions of this Section
9(i) shall apply similarly and equally to successive Fundamental Transactions and shall be
applied without regard to any limitations of this Debenture.



*********************




 


23









 







IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly
authorized officer as of the date first above indicated.



	 	 	 	 	 
	 	PURE EARTH, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 


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ANNEX A




NOTICE OF CONVERSION





The undersigned hereby elects to convert principal under the 9% Convertible Debenture of Pure
Earth, Inc., a Delaware corporation (the “Company”), due on                    , into shares of
common stock, par value $.001 per share (the “Common Stock”), of the Company according to
the conditions hereof, as of the date written below. If shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably requested by the
Company in accordance therewith. No fee will be charged to the holder for any conversion, except
for such transfer taxes, if any.



By the delivery of this Notice of Conversion the undersigned represents and warrants to the
Company that its ownership of the Common Stock does not exceed the amounts determined in accordance
with Section 13(d) of the Exchange Act, specified under Section 4 of this Debenture.



The undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.



Conversion calculations:



	 	 	 	 	 
	 	 	Date to Effect Conversion:
	 
	 	 	 	 
	 	 	Principal Amount of Debenture to be Converted:
	 
	 	 	 	 
	 	 	Payment of Interest in Common Stock __ yes __ no
	 

	 	 	 	If yes, $                     of Interest Accrued on Account of
Conversion at Issue.
	 
	 	 	 	 
	 	 	Number of shares of Common Stock to be issued:
	 
	 	 	 	 
	 	 	Signature:
	 
	 		 	

	 	 	Name:
	 
	 	 	 	

	 	 	Address:
	 
	 	 	 	






 


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Schedule 1




CONVERSION SCHEDULE




The 9% Convertible Debentures due on                     , in the aggregate principal amount of $                    
issued by Pure Earth, Inc. This Conversion Schedule reflects conversions made under Section 4 of
the above referenced Debenture.



Dated:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Aggregate	 	 	 	 
	 	 	 	 	 	 	Principal	 	 	 	 
	 	 	 	 	 	 	Amount	 	 	 	 
	 	 	 	 	 	 	Remaining	 	 	 	 
	 	 	 	 	 	 	Subsequent to	 	 	 	 
	 	 	 	 	 	 	Conversion	 	 	 	 
	Date of Conversion	 	 	 	 	 	(or original	 	 	 	 
	(or for first entry,	 	Amount of	 	 	Principal	 	 	 	 
	Original Issue Date)	 	Conversion	 	 	Amount)	 	 	Company Attest	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 







 


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