Unassociated Document


    


    THE
      SECURITIES REPRESENTED HEREBY HAVE
      NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
      (THE “ACT”) OR ANY STATE SECURITIES OR “BLUE SKY LAWS,” AND MAY NOT BE OFFERED,
      SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE
      REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED
      UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
      REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION
      IS NOT REQUIRED

    


    Original
      Issue Date: _______ ___, 2007

    Original
      Conversion Price (subject to adjustment herein):
$0.25

    


    $_______________

    


    


    9%
      SENIOR SECURED CONVERTIBLE  DEBENTURE

    DUE
      __________ ___, 20101

    


    THIS
      DEBENTURE is one of a series of duly authorized and issued 9% Senior Secured
      Convertible Debentures of Healthcare Providers Direct, Inc. a Nevada
      corporation, having a principal place of business at 3371 Route One, Suite
      200,
      Lawrenceville, New Jersey  08648 (the “Company”), designated as
      its 9% Senior Secured Convertible Debentures, due _________ ___, 2010 (the
      “Debenture(s)”).

    


    FOR
      VALUE
      RECEIVED, the Company promises to pay to ________________________ or its
      registered assigns (the “Holder”), the principal sum of $_______________
      on _________ ___, 2010 or such earlier date as the Debentures are 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 have the meanings given to such terms in the
      Subscription Agreement, and (b) the following terms shall have the following
      meanings:

    


    “Business
      Day” means any day except Saturday, Sunday and any day which shall be a
      federal legal holiday in the United States or a day on which banking
      institutions in the State of New York are authorized or required by law or
      other
      government action to close.

    


    
      
         

      

      
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    “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 33% of the
      voting securities of the Company, or (ii) 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 (iii) 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 66% of the aggregate voting power of the Company
      or
      the successor entity of such transaction,or (iv) any sale, transfer or other
      disposition of all or substantially all of the assets of the Company in one
      or a
      series of related transactions, 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 above in (i) through (v)
      above.

    


    “Common
      Stock” means the common stock, $0.001 par value, of the Company and stock of
      any other class into which such shares may hereafter have been reclassified
      or
      changed.

    


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

    


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

    


    “Conversion
      Shares” means the shares of Common Stock issuable upon conversion or
      redemption of Debentures in accordance with the terms hereof.

     

    “Effectiveness
      Period” shall have the meaning given to such term in the Subscription
      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 Notice of Conversions, if any, (ii) all
      liquidated damages and other amounts owing in respect of the Debentures shall
      have been paid; (iii) there is an effective Registration Statement pursuant
      to
      which the Holder is permitted to utilize the prospectus thereunder to resell
      all
      of the Registrable Securities (and the Company believes, in good faith, that
      such effectiveness will continue uninterrupted for the foreseeable future),
      (iv)
      the Common Stock is trading on the Trading Market and all of the Registrable
      Securities are listed for trading on a 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 Registrable Securities  issuable
      pursuant to the Transaction Documents, (vi) there is then existing no Event
      of
      Default or event which, with the passage of time or the giving of notice, would
      constitute an Event of Default, (vii) all of the Registrable Securities issued
      or issuable pursuant to the transaction proposed would not violate the
      limitations set forth in Section 4(c), and (viii) no public announcement of
      a
      pending or proposed Fundamental Transaction, Change of Control Transaction
      or
      acquisition transaction has occurred that has not been consummated.

    


    
      
         

      

      
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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.

     

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

      

    “Interest
      Conversion Rate” means the Conversion Price on the applicable interest
      payment date.

    


    “Issuance
      Date” shall mean the date on which the Debenture is issued to the
      Holder.

    


     “Mandatory
      Prepayment Amount” for any Debentures shall equal the sum of (i) the greater
      of: (A) 120% of the principal amount of Debentures to be prepaid, plus all
      accrued and unpaid interest thereon, or (B) the principal amount of Debentures
      to be prepaid, plus all other accrued and unpaid interest hereon, divided by
      the
      Conversion Price on (x) the date the Mandatory Prepayment Amount is demanded
      or
      otherwise due or (y) the date the Mandatory Prepayment Amount is paid in full,
      whichever is less, multiplied by the VWAP on (x) the date the Mandatory
      Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory
      Prepayment Amount is paid in full, whichever is greater, and (ii) all other
      amounts, costs, expenses and liquidated damages due in respect of such
      Debentures.

    


    “Monthly
      Conversion Period” shall have the meaning set forth in Section 6(a)
      hereof.

    


    “Monthly
      Conversion Price” shall have the meaning set forth in Section 6(a)
      hereof.

    


    “Monthly
      Redemption” shall mean the redemption of this Debenture pursuant to Section
      6(a) hereof.

    


    
      
         

      

      
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    “Monthly
      Redemption Amount” shall mean, as to a Monthly Redemption, $______2.

    


    “Monthly
      Redemption Date” means the 1st of
      each month,
      commencing on the 91st calendar
      day
      following the Original Issue Date and ending upon the full redemption of this
      Debenture.

    


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

    


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

    


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

    


    “Monthly
      Redemption Share Amount” shall have the meaning set forth in Section 6(a)
      hereof.

    


    “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(b).

    


    “Optional
      Redemption Amount” shall mean the sum of 110% of the principal amount of the
      Debenture then outstanding and all liquidated damages and other amounts due
      in
      respect of the Debenture.

    


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

    


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

    


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

    


    “Person”
      means a corporation, an association, a partnership, organization, a business,
      an
      individual, a government or political subdivision thereof or a governmental
      agency.

    


     

    
      
         

      

      
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               “Registrable
      Securities” shall have the meaning ascribed to such term in the Subscription
      Agreement.

     

     

    “Registration
      Statement” means a registration statement meeting the requirements set forth
      in the Subscription Agreement, covering among other things the resale of the
      Conversion Shares and naming the Holder as a “selling stockholder”
thereunder.

    


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

    


    “Subscription
      Agreement” means the Subscription Agreement, dated as of July __, 2007, to
      which the Company and the original Holder are parties, as amended, modified
      or
      supplemented from time to time in accordance with its terms.

     

    “Subsidiary”
      shall have the meaning given to such term in the Purchase
      Agreement.

    


    “Threshold
      Period” shall have the meaning given to such term in Section
      6(e).

     

    “Trading
      Day” means a day on which the Common Stock is traded on a Trading
      Market.

     

    “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 Nasdaq Capital
      Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq
      Global Market, the Nasdaq Global Select Market or the OTC Bulletin
      Board.

     

     “Transaction
      Documents” shall mean the Subscription Agreement, the Debentures, the PPM,
      the Warrants, the Escrow Agreement, the Security Agreement and any other
      ancillary documents contemplated by the transactions described in such
      Transaction Documents.

    


    “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 primary Trading Market on which
      the
      Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
      (based on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using
      the
      VAP function; (b) if the Common Stock is not then listed or quoted on the
      Trading Market and if prices for the Common Stock are then reported in the
“Pink
      Sheets” published by the 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 a nationally
      recognized-independent appraiser selected in good faith by Purchasers holding
      a
      majority of the principal amount of Debentures then outstanding.

     

    
      
         

      

      
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    Section
      2. Interest.

    


    a)  Payment
      of Interest in Cash or Common Stock. 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 semi-annually on June 30
      and
      December 31, beginning on the first such date after the Original Issue Date,
      on
      each Conversion Date (as to that principal amount then being converted) 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) and on each
      Monthly Redemption Date (as to that principal amount then being redeemed) (each
      such date, an “Interest Payment Date”), in cash or shares of registered
      Common Stock at the Interest Conversion Rate (such shares, the “Interest
      Shares”), or a combination thereof; provided, however, payment
      in Interest Shares may only occur if during the 20 Trading Days immediately
      prior to the applicable Interest Payment Date (i) the Company shall have given
      the Holder notice in accordance with the notice requirements set forth below
      (ii) such Interest Shares to be delivered on the Interest Payment Date are
      registered at the time of issuance, (iii) at the time of issuance there are
      a
      sufficient number of registered shares to cover all Conversion Shares issuable
      pursuant to the Transaction Documents and (iv) the Common Stock is trading
      on
      the Trading Market and the Registrable Securities are listed for trading on
      a
      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).

    


    b)  Company’s
      Election to Pay Interest in Common Stock.  Subject to the terms
      and conditions herein, the decision whether to pay interest hereunder in
      Interest Shares or cash shall be at the discretion of the
      Company.  Not less than 20 Trading Days prior to each Interest Payment
      Date, the Company shall provide the Holder with written notice of its election
      to pay interest hereunder either in cash or Interest Shares (the Company may
      indicate in such notice that the election contained in such notice shall
      continue for later periods until revised).  Within 20 Trading Days
      prior to an Interest Payment Date, 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.

    


    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 and
      other amounts which may become due hereunder, has been
      made.    Payment of interest in Interest Shares upon
      conversion of this Debenture shall otherwise occur pursuant to Section 4(d)(ii)
      and only for purposes of the payment of interest in shares upon conversion,
      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 in fact 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 Debentures (the “Debenture
      Register”). Except as otherwise provided herein, if at any time the Company
      pays interest partially in cash and partially in Interest Shares, then such
      payment shall be distributed ratably among the Holders based upon the principal
      amount of Debentures held by each Holder.

    


    
      
         

      

      
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    d)  Late
      Fee.  All overdue accrued and unpaid interest to be paid hereunder
      shall entail a late fee at the rate of 16% per annum (or such lower maximum
      amount of interest permitted to be charged under applicable law) (“Late
      Fee”) which will accrue daily, from the date such interest is due hereunder
      through and including the date of payment. Notwithstanding anything to the
      contrary contained herein, if on any Interest Payment Date the Company has
      elected to pay interest in Common Stock and is not able to pay accrued interest
      in the form of Common Stock because it does not then satisfy the conditions
      for
      payment in the form of Common Stock set forth above, then, the Company shall
      make a cash payment as required under this Section 2; provided, however, at
      the
      option of the Holder, the Company, in lieu of delivering either Interest Shares
      pursuant to this Section 2 or paying the regularly scheduled cash interest
      payment, shall deliver, within three Trading Days of each applicable Interest
      Payment Date, an amount in cash equal to the product of the number of Interest
      Shares otherwise deliverable to the Holder in connection with the payment of
      interest due on such Interest Payment Date and 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.

    


    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 made 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 to the Company for transfer
      of this Debenture, the Company and any agent of the Company may treat the Person
      in whose name this Debenture is duly registered on the 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 into shares of
      Common Stock at the option of the Holder, in whole or in part at any time and
      from time to time (subject to the limitations on conversion set forth in
      Section 4(c) hereof).  The Holder shall effect conversions by
      delivering to the Company the form of Notice of Conversion attached hereto
      as
Annex A (a “Notice of Conversion”), specifying therein the
      principal amount of Debentures to be converted and the date on which such
      conversion is to 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 provided
      hereunder.  To effect conversions hereunder, the Holder shall not be
      required to physically surrender Debentures 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 converted and the date of such
      conversions.  The Company shall deliver any objection to any Notice of
      Conversion within 1 Business Day of receipt of such notice.  In the
      event of any dispute or discrepancy, the records of the Holder shall be
      controlling and determinative in the absence of manifest error. 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 $0.25 subject to adjustment as provided
      herein (the “Conversion Price”).

    


    c)  Conversion
      Limitations; 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

     

     

    
      
         

      

      
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     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), beneficial ownership shall be
      calculated in accordance with Section 13(d) of the Exchange Act and the rules
      and regulations promulgated thereunder.  To the extent that the
      limitation contained in this Section 4(c) 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), 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) 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) 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) 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.

    i.  

    


    ii.  Delivery
      of Certificate Upon Conversion. Not later than three Trading Days after any
      Conversion Date, the Company will deliver to the Holder (A) a certificate or
      certificates representing the Conversion Shares which shall be free of
      restrictive legends and trading restrictions (other than those required by
      the
      Purchase Agreement) representing the number of shares of Common Stock being
      acquired upon the conversion of Debentures (including, if so timely elected
      by
      the Company, shares of Common Stock representing the payment of accrued
      interest) and (B) a bank check in the amount of accrued and unpaid interest
      (if
      the Company is required to pay accrued interest in cash). The Company shall,
      if
      available and if allowed under applicable securities laws, use its best efforts
      to deliver any certificate or certificates required to be delivered by the
      Company under this Section electronically through the Depository Trust
      Corporation 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 a Conversion Date,
      the
      Holder shall be entitled by written notice to the Company at any time on or
      before its receipt of such certificate or certificates thereafter, to rescind
      such conversion, in which event the Company shall immediately return the
      certificates representing the principal amount of Debentures tendered for
      conversion.

    


    iv.  Obligation
      Absolute; Partial Liquidated Damages.  If the Company fails for
      any reason to deliver to the Holder such certificate or certificates pursuant
      to
      Section 4(d)(ii) by the third 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 $1,000 of principal amount being converted, $10 per Trading Day
      (increasing to $20 per Trading Day after 5 Trading Days after such damages
      begin
      to accrue) for each Trading Day after such third Trading Day until such
      certificates are delivered.  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, such delivery shall not operate as a waiver by
      the Company of any such action the Company may have against the
      Holder.  Nothing herein shall limit a Holder’s right to pursue actual
      damages or declare an Event of Default pursuant to Section 8 herein 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 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 Holders from seeking to enforce damages pursuant to
      any
      other Section hereof or under applicable law.

    


    
      
         

      

      
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    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 pursuant
      to
      Section 4(d)(ii) by the third Trading Day after the Conversion Date, and if
      after such third Trading Day the Holder is required by its brokerage firm to
      purchase (in an open market transaction or otherwise) Common Stock to deliver
      in
      satisfaction of a sale by such Holder of the Conversion Shares which the Holder
      anticipated receiving upon such conversion (a “Buy-In”), then the Company
      shall (A) pay in cash to the Holder (in addition to any remedies available
      to or
      elected by the Holder) the amount by which (x) the Holder's total purchase
      price
      (including brokerage commissions, if any) for the Common Stock so purchased
      exceeds (y) the product of (1) the aggregate number of shares of Common Stock
      that such Holder anticipated receiving from the conversion at issue multiplied
      by (2) the actual sale price of the Common Stock at the time of the sale
      (including brokerage commissions, if any) giving rise to such purchase
      obligation and (B) at the option of the Holder, either reissue Debentures in
      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 had the Company 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 Debentures with respect to which the actual sale price
      of the Conversion Shares at the time of the sale (including brokerage
      commissions, if any) 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.  Notwithstanding anything contained herein to
      the contrary, if a Holder requires the Company to make payment in respect of
      a
      Buy-In for the failure to timely deliver certificates hereunder and the Company
      timely pays in full such payment, the Company shall not be required to pay
      such
      Holder liquidated damages under Section 4(d)(iv) in respect of the certificates
      resulting in such Buy-In.

    


    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 solely for the purpose of issuance upon conversion of the
      Debentures and payment of interest on the Debenture, each as herein provided,
      free from preemptive rights or any other actual contingent purchase rights
      of
      persons other than the Holders, not less than such number of shares of the
      Common Stock as shall (subject to any additional requirements of the Company
      as
      to reservation of such shares 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 the Debentures and payment
      of
      interest hereunder.  The Company covenants that all shares of Common
      Stock that shall be so issuable shall, upon issue, be duly and validly
      authorized, issued and fully paid, nonassessable and, if the Registration
      Statement is then effective under the Securities Act, registered for public
      sale
      in accordance with such Registration Statement.

    


    
      
         

      

      
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    vii.  Fractional
      Shares. Upon a conversion hereunder the Company shall not be required to
      issue stock certificates representing fractions of shares of the 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, one whole share
      of Common Stock.

    


    viii.  Transfer
      Taxes.  The issuance of certificates for shares of the Common
      Stock on conversion of the Debentures shall be made without charge to the
      Holders thereof for any documentary stamp or similar taxes that may be payable
      in respect of the issue or delivery of such certificate, 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 such Debentures 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.

    


    (e)           Forced
      Conversion. Notwithstanding anything herein to the contrary, if after the
      Effective Date (i) a Registration Statement is effective and available for
      use
      by the Holders on the date the conversion notice is given by the Company and
      (ii) the Closing Price of the Company’s Common Stock for any 20 consecutive
      Trading Days (such period commencing only after the Effective Price, such period
      the “Threshold Period”)) exceeds $1.00 (adjusted for any stock splits or
      similar capital adjustments occurring after the Original Issue Date) AND the
      average daily trading volume for such Threshold Period equals or exceeds 125,000
      shares of Common Stock, the Company may, within 2 Trading Days of the end of
      any
      such period, deliver a notice to the Holder (a “Forced Conversion Notice”
and the date such notice is received by the Holder, the “Forced Conversion
      Notice Date”) to cause the Holder to convert all or part of the then
      outstanding principal amount of Debentures pursuant to Section 4(a) within
      20
      days of the Forced Conversion Notice Date. The Company may only effect a Forced
      Conversion Notice if all of the Equity Conditions are met during the applicable
      Threshold Period and through the date of the applicable Forced
      Conversion.  Any Forced Conversion shall be applied ratably to all
      Holders based on their initial purchases of Debentures pursuant to the Purchase
      Agreement.

    


    
      
         

      

      
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    Section
      5.   Certain Adjustments.

    


    a)  Stock
      Dividends and Stock Splits.  If the Company, at any time while the
      Debentures are outstanding: (A) shall pay a stock dividend or otherwise make
      a
      distribution or distributions on shares of its Common Stock or any other equity
      or equity equivalent securities payable in shares of Common Stock (which, for
      avoidance of doubt, shall not include any shares of Common Stock issued by
      the
      Company pursuant to this Debenture, including as interest thereon), (B)
      subdivide outstanding shares of Common Stock into a larger number of shares,
      (C)
      combine (including by way of reverse stock split) outstanding shares of Common
      Stock into a smaller number of shares, or (D) issue by reclassification of
      shares of the Common Stock any shares of capital stock of the Company, then
      the
      Conversion Price shall be adjusted by multiplying the then current Conversion
      Price by a fraction of which the numerator shall be the number of shares of
      Common Stock (excluding treasury shares, if any) outstanding before such event
      and of which the denominator shall be the number of shares of Common Stock
      outstanding 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.

    


    b)  Subsequent
      Equity Sales.  If the Company or any Subsidiary thereof, as
      applicable, at any time while this Debenture is outstanding, shall offer, sell,
      grant any option to purchase or offer, sell or grant any right to reprice its
      securities, or otherwise dispose of or issue (or announce any offer, sale,
      grant
      or any option to purchase or other disposition) any Common Stock or Common
      Stock
      Equivalents entitling any Person to acquire shares of Common Stock, at an
      effective price per share less than the then Conversion Price (such lower price,
      the “Base Conversion Price” and such issuances collectively, a
“Dilutive Issuance”), as adjusted hereunder (if the holder of the Common
      Stock or Common Stock Equivalents so issued shall at any time, whether by
      operation of purchase price adjustments, reset provisions, floating conversion,
      exercise or exchange prices or otherwise, or due to warrants, options or rights
      per share which is issued in connection with such issuance, be entitled to
      receive shares of Common Stock at an effective price per share which is less
      than the Conversion Price, such issuance shall be deemed to have occurred for
      less than the Conversion Price on such date of the Dilutive Issuance), then
      the
      Conversion Price shall be reduced to the Base Conversion Price.  Such
      adjustment shall be made whenever such Common Stock or Common Stock Equivalents
      are issued.  Notwithstanding the foregoing, no adjustment will be made
      under this Section 5(b) in respect of an Excepted Issuance.  The
      Company shall notify the Holder in writing, no later than the Business Day
      following the issuance of any Common Stock or Common Stock Equivalents subject
      to this section, indicating therein the applicable issuance price, or of
      applicable reset price, exchange price, conversion price and other pricing
      terms
      (such notice the “Dilutive Issuance Notice”).  For purposes of
      clarification, whether or not the Company provides a Dilutive Issuance Notice
      pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance,
      after the date of such Dilutive Issuance the Holder is entitled to receive
      a
      number of Conversion Shares based upon the Base Conversion Price regardless
      of
      whether the Holder accurately refers to the Base Conversion Price in the Notice
      of Conversion.

    


    
      
         

      

      
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    c)  Pro
      Rata Distributions. If the Company, at any time while Debentures are
      outstanding, shall distribute to all holders of Common Stock (and not to
      Holders) evidences of its indebtedness or assets or rights or warrants to
      subscribe for or purchase any security, then in each such case the Conversion
      Price shall be determined by multiplying such Conversion Price in effect
      immediately prior to the record date fixed for determination of stockholders
      entitled to receive such distribution by a fraction of which the denominator
      shall be the VWAP determined as of the record date mentioned above, and of
      which
      the numerator shall be such VWAP on such record date less the then fair market
      value at such record date of the portion of such assets or evidence of
      indebtedness so distributed applicable to one outstanding share of the Common
      Stock as determined by the Board of Directors in good faith.  In
      either case the adjustments shall be described in a statement provided to the
      Holders of the portion of assets or evidences of indebtedness so distributed
      or
      such subscription rights applicable to one share of Common
      Stock.  Such adjustment shall be made whenever any such distribution
      is made and shall become effective immediately after the record date mentioned
      above.

    


    d)  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 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 one 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 one 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 paragraph (d) and insuring that this Debenture (or any
      such replacement security) will be similarly adjusted upon any subsequent
      transaction analogous to a Fundamental Transaction.

    


    
      
         

      

      
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    e)  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.  The number of shares
      of Common Stock outstanding at any given time shall not includes shares of
      Common Stock owned or held by or for the account of the Company, and the
      description of any such shares of Common Stock shall be considered on issue
      or
      sale of Common Stock.  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 treasury
      shares, if any) issued and outstanding.

    


    f)  Notice
      to Holders.

    


    i.  Adjustment
      to Conversion Price.  Whenever the Conversion Price is adjusted
      pursuant to any 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.

    


    ii.  Notice
      to Allow Conversion by Holder.  If (A) the Company shall declare a
      dividend (or any other distribution) 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 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; (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 the Debentures, and shall
      cause to be mailed to the Holders at their last addresses as they shall appear
      upon the  stock books of the Company, 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 mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice.  Holders are entitled to convert Debentures during the
      20-day period commencing the date of such notice to the effective date of the
      event triggering such notice.

    


    iii.  Exempt
      Issuance. Notwithstanding the foregoing, no adjustment will be made under
      this Section 5 in respect of an Excepted Issuances.

    


    
      
         

      

      
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    Section
      6.  Monthly Redemption

    


    a)  Monthly
      Redemption.  On each Monthly Redemption Date, the Company shall
      redeem the Monthly Redemption Amount plus the sum of all liquidated damages
      and
      any other amounts then owing to such Holder in respect of this Debenture (the
      “Monthly Redemption”).  The Monthly Redemption Amount due on
      each Monthly Redemption Date shall be paid in cash.  Additionally, as
      to any Monthly Redemption and upon prior written irrevocable notice, which
      notice shall be delivered no later than 2 calendar days immediately prior to
      the
      applicable Monthly Conversion Period (such notice, the “Monthly Redemption
      Notice”, the date of the Monthly Redemption Notice, the “Monthly
      Redemption Notice Date” and such period, the “Monthly Redemption Notice
      Period”), in lieu of a cash redemption payment the Company may elect to pay
      all or part of a Monthly Redemption Amount in Conversion Shares (such dollar
      amount to be paid on a Monthly Redemption Date in Conversion Shares, the
“Monthly Redemption Share Amount”) based on a conversion price equal to a
      25% discount to the VWAP of the Common Stock for the ten (10) trading days
      immediately preceding (but not including) the applicable Monthly Redemption
      Date
      (the price calculated during the 10 Trading Day period immediately prior to
      the
      Monthly Redemption Date, the “Monthly Conversion Price” and such 5 day
      period, the “Monthly Conversion Period”); provided,
however, that the Company may not pay the Monthly Redemption
      Amount in
      Conversion Shares unless the Equity Conditions are satisfied.  The
      Holder may convert, pursuant to Section 4(a), any principal amount of this
      Debenture subject to a Monthly Redemption at any time prior to the date that
      the
      Monthly Redemption Amount and all amounts owing thereon are due and paid in
      full.  Unless otherwise indicated by the Holder in the applicable
      Notice of Conversion, any principal amount of this Debenture converted during
      the applicable Monthly Redemption Notice Period until the date the Monthly
      Redemption Amount is paid in full shall be first applied to the principal amount
      subject to the Monthly Redemption Amount payable in cash and then to the Monthly
      Redemption Share Amount.  The Company’s determination to pay a Monthly
      Redemption in cash, shares of Common Stock or a combination thereof shall be
      applied ratably to all of the holders of the Debentures based on their (or
      their
      predecessor’s) initial purchases of Debentures pursuant to the Subscription
      Agreement.  Notwithstanding the foregoing, the Company’s right to
      prepay the Debentures in shares of Common Stock on each prepayment date is
      subject to the condition that the Registration Statement must be effective
      on
      such Mandatory Prepayment Date and available for use by the
      Investors.

    


    b)  Redemption
      Procedure.  The payment of cash and/or issuance of Common Stock,
      as the case may be, pursuant to a Monthly Redemption shall be made on the
      Monthly Redemption Date.  If any portion of the cash payment for a
      Monthly Redemption shall not be paid by the Company by the respective due date,
      interest shall accrue thereon at the rate of 16% per annum (or the maximum
      rate
      permitted by applicable law, whichever is less) until the payment of the
      Quarterly Redemption Amount, plus all amounts owing thereon is paid in
      full.  Alternatively, if any portion of the Monthly Redemption Amount
      remains unpaid after such date, the Holders subject to such redemption may
      elect, by written notice to the Company given at any time thereafter,
      to invalidate abinitio such redemption, notwithstanding
      anything herein contained to the contrary.

    


    
      
         

      

      
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    Section
      7. Negative
      Covenants.

    


    (a)           So
      long as any portion of this Debenture is outstanding, the Company will not
      and
      will not permit any of its Subsidiaries to directly or indirectly:

     

    (i)   
pay
      dividends or other distributions on the Company’s equity
      securities;

     

    (ii)  amend
      its
      certificate of incorporation, bylaws or to her charter documents so as to
      adversely affect any rights of the Holder;

    


    (iii)  repay,
      repurchase or offer to repay, repurchase or otherwise acquire more than a de
      minimis number of shares of its Common Stock or other equity securities
      other than as to the Conversion Shares to the extent permitted or required
      under
      the Transaction Documents or as otherwise permitted by the Transaction
      Documents; or

    


    (iv)  enter
      into any agreement with respect to any of the foregoing.

    


    (b)           So
      long as at least an aggregate of $500,000 of the Debentures remain unconverted,
      without the prior written consent of the Subscriber:

    


    (i)
             The Company shall not and shall cause each Subsidiary
      not to create, incur, guarantee, issue, assume or in any manner become liable
      in
      respect of any Indebtedness, other than Permitted Indebtedness.

     

    (ii)
             The Company shall not and shall cause each Subsidiary
      not to create, incur, assume or suffer to exist any Liens upon any of its
      property, whether now owned or hereafter acquired other than (i) Liens created
      pursuant to the Security Agreement and (ii) Permitted Liens.  The Company
      shall not, and shall cause each Subsidiary not to, be bound by any agreement
      which limits the ability of the Company or any Subsidiary to grant
      Liens.

     

    (iii)
             The Company shall not and shall cause each Subsidiary
      not to, directly or indirectly, enter into or permit to exist any transaction
      or
      series of related transactions (including, without limitation, the purchase,
      sale, lease or exchange of any property or the rendering of any service (other
      than service as an employee)) with, or for the benefit of, any of its Affiliates
      other than a wholly owned Subsidiary, except for consulting arrangements with
      directors approved by the Board and except for transactions made on an
      arm’s-length basis that are expressly approved by a majority of the
      disinterested directors of the Company (even if less than a quorum otherwise
      required for board approval).

     

    
      
         

      

      
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    (iv)
             The Company shall not, and shall cause each of its
      Subsidiaries not to, directly or indirectly, declare or pay any dividends on
      account of any shares of any class or series of its capital stock now or
      hereafter outstanding, or set aside or otherwise deposit or invest any sums
      for
      such purpose, or redeem, retire, defease, purchase or otherwise acquire any
      shares of any class of its capital stock (or set aside or otherwise deposit
      or
      invest any sums for such purpose) for any consideration or apply or set apart
      any sum, or make any other distribution (by reduction of capital or otherwise)
      in respect of any such shares or pay any interest, premium if any, or principal
      of any Indebtedness or redeem, retire, defease, repurchase or otherwise acquire
      any Indebtedness (or set aside or otherwise deposit or invest any sums for
      such
      purpose) for any consideration or apply or set apart any sum, or make any other
      payment in respect thereof or agree to do any of the foregoing (each of the
      foregoing is herein called a “Restricted Payment”); provided, that (i) the
      Company may make payments of interest, premium if any, and principal of the
      Notes in accordance with the terms hereof, (ii), the Company and its
      Subsidiaries may make regularly scheduled payments of interest and principal
      of
      any Permitted Indebtedness, provided that no Event of Default or event which,
      with the giving of notice, the lapse of time or both would constitute an Event
      of Default has occurred and is continuing (iii) any Subsidiary directly or
      indirectly wholly owned by the Company may pay dividends on its capital stock
      and (iv) the Company may repurchase capital stock from a former employee in
      connection with the termination or other departure of such employee, strictly
      in
      accordance with the terms of any agreement entered into with such employee,
      provided that (A) such repurchase is approved by a majority of the Board, (B)
      payments permitted under this clause (iv) shall not exceed Five Hundred Thousand
      United States Dollars ($500,000) in the aggregate, and (C) no such payment
      may
      be made if an Event of Default or an event which, with the giving of notice,
      the
      lapse of time or both would constitute an Event of Default has occurred and
      is
      continuing or would result from such payment.

     

     (v)
             The Company shall not and shall cause each Subsidiary
      not to make or own any Investment in any Person, including without limitation
      any joint venture, other than (A) Permitted Investments, (B) operating deposit
      accounts with banks, (C) Hedging Agreements entered into in the ordinary course
      of the Company’s financial planning and not for speculative purposes, (D)
      investments in connection with any strategic alliance, acquisition or joint
      venture arrangement approved by the Company’s Board of Directors and (E)
      investments by the Company in the capital stock of any wholly owned
      Subsidiary.

     

     (vi)
             The Company shall not and shall cause each Subsidiary
      not to, directly or indirectly, become or remain liable as lessee or as a
      guarantor or other surety with respect to any lease of any property (whether
      real, personal or mixed), whether now owned or hereafter acquired, which the
      Company or any Subsidiary (a) has sold or transferred or is to sell or to
      transfer to any other Person, or (b) intends to use for substantially the same
      purpose as any other property which has been or is to be sold or transferred
      by
      the Company or any Subsidiary to any Person in connection with such
      lease."

    


     
                    “Hedging Agreement” means any
      interest rate swap, collar, cap, floor or forward rate agreement or other
      agreement regarding the hedging of interest rate risk exposure executed in
      connection with hedging the interest rate exposure of any Person and any
      confirming letter executed pursuant to such agreement, all as amended,
      supplemented, restated or otherwise modified from time to time.

    


     
                    “Indebtedness” means any
      liability or obligation (i) for borrowed money, other than trade payables
      incurred in the ordinary course of business, (ii) evidenced by bonds,
      debentures, notes, or other similar instruments, (iii) in respect of letters
      of
      credit or other similar instruments (or reimbursement obligations with respect
      thereto), except letters of credit or other similar instruments issued to secure
      payment of trade payables or obligations in respect of workers’ compensation,
      unemployment insurance and other social security laws or regulation, all arising
      in the ordinary course of business consistent with past practices, (iv) to
      pay
      the deferred purchase price of property or services, except trade payables
      arising in the ordinary course of business consistent with past practices,
      (v)
      as lessee under capitalized leases, (vi) secured by a Lien on any asset of
      the
      Company or a Subsidiary, whether or not such obligation is assumed by the
      Company or such Subsidiary.

    


    
      
         

      

      
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                    “Investment” means, for any
      Person: (a) the acquisition (whether for cash, property, services or securities
      or otherwise) of capital stock, bonds, notes, debentures, partnership or other
      ownership interests or other securities of any other Person or any agreement
      to
      make any such acquisition (including, without limitation, any “short sale” or
      any sale of any securities at a time when such securities are not owned by
      the
      Person entering into such sale); (b) the making of any deposit with, or advance,
      loan or other extension of credit to, any other Person (including the purchase
      of property from another Person subject to an understanding or agreement,
      contingent or otherwise, to resell such property to such Person), but excluding
      any such advance, loan or extension of credit having a term not exceeding 90
      days arising in connection with the sale of inventory or supplies by such Person
      in the ordinary course of business; (c) the entering into of any guarantee
      of,
      or other contingent obligation with respect to, Indebtedness or other liability
      of any other Person and (without duplication) any amount committed to be
      advanced, lent or extended to such Person; or (d) the entering into of any
      Hedging Agreement.

    


     
                    “Lien” means any lien,
      mortgage, deed of trust, pledge, security interest, charge or encumbrance of
      any
      kind (including any conditional sale or other title retention agreement, any
      lease in the nature thereof and any agreement to give any of the
      foregoing).

    


     
                    “Permitted Indebtedness”
means:

    


    (a)
             Unsecured Indebtedness existing on the Closing Date
      and refinancings, renewals and extensions of any such Indebtedness if (i) the
      average life to maturity thereof is greater than or equal to that of the
      Indebtedness being refinanced or extended (ii) the principal amount thereof
      or
      interest payable thereon is not increased, and (iii) the terms thereof are
      not
      less favorable to the Company or the Subsidiary incurring such Indebtedness
      than
      the Indebtedness being refinanced, renewed or extended;

     

    (b)
             Guaranties by any Subsidiary of any “Permitted
      Indebtedness” of the Company or another Subsidiary;

     

    (c)
             Indebtedness representing the deferred purchase price
      of property and capital lease obligations which collectively does not exceed
      $1,000,000 in aggregate principal amount; and

     

    (d)
             Indebtedness of the Company to any wholly owned
      Subsidiary and Indebtedness of any wholly owned Subsidiary to the Company or
      another wholly owned Subsidiary which constitutes “Permitted
      Indebtedness.”

     

    
      
         

      

      
        A-19

        
          

        

      

      
         

      

    

     
                    “Permitted Investments”
means:

    


     
                    (a)      
 direct obligations of the United States of America, or of any agency
      thereof, or obligations guaranteed as to principal and interest by the United
      States of America, or of any agency thereof, in either case maturing not more
      than 180 days from the date of acquisition thereof;

    


     
                    (b)      
 certificates of deposit issued by any bank or trust company organized
      under the laws of the United States of America or any State thereof and having
      capital, surplus and undivided profits of at least $500,000,000, maturing not
      more than 180 days from the date of acquisition thereof;

    


     
                    (c)      
 commercial paper rated A�1 or better or P�1 by Standard & Poor’s
      Ratings Services or Moody’s Investors Services, Inc., respectively, maturing not
      more than 180 days from the date of acquisition thereof; in each case so long
      as
      the same (x) provide for the payment of principal and interest (and not
      principal alone or interest alone) and (y) are not subject to any contingency
      regarding the payment of principal or interest.

    


     
                    “Permitted Liens”
means:

    


    (a)
             Liens imposed by law for taxes that are not yet due
      or are being contested in good faith and for which adequate reserves have been
      established on the Company’s books and records in accordance with U.S. generally
      accepted accounting principles, consistently applied;

     

    (b)
             carriers’, warehousemen’s, mechanics’, materialmen’s,
      repairmen’s and other like Liens imposed by law, arising in the ordinary course
      of business and securing obligations that (x) individually or in the aggregate
      do not materially detract from the value of such property or assets or
      materially impair the use thereof in the operation of the business of the
      Company and its consolidated Subsidiaries (y) are not overdue by more than
      30
      days or (z) that are being contested in good faith and by appropriate
      proceedings;

    


    (c)
             pledges and deposits made in the ordinary course of
      business in compliance with workers’ compensation, unemployment insurance and
      other social security laws or regulations;

     

    (d)
             deposits to secure the performance of bids, trade
      contracts, leases, statutory obligations, surety and appeal bonds, performance
      bonds and other obligations of a like nature, in each case in the ordinary
      course of business which (x) do not individually or in the aggregate materially
      detract from the value of such property or assets or materially impair the
      use
      thereof in the operation of the business of the Company and its consolidated
      Subsidiaries or (y) are being contested in good faith by appropriate
      proceedings, which proceedings have the effect of preventing for the foreseeable
      future the forfeiture or sale of the property or asset subject to such
      Lien;

    


    
      
         

      

      
        A-20

        
          

        

      

      
         

      

    

    (e)
             easements, zoning restrictions, rights-of-way and
      similar encumbrances on real property imposed by law or arising in the ordinary
      course of business that do not secure any monetary obligations and do not
      materially detract from the value of the affected property or interfere with
      the
      ordinary conduct of business of the Company or any of its Subsidiaries;
      and

     

    (f)
             Liens granted to secure the obligations of the
      Company or any Subsidiary under any Indebtedness permitted under clause (c)
      of
      the definition of “Permitted Indebtedness” provided the Lien is limited to the
      property acquired or so financed (and any accessions thereto and proceeds
      thereof).

    


     
                    “Person” means an individual,
      corporation, partnership, limited liability company, trust, business trust,
      association, joint stock company, joint venture, sole proprietorship,
      unincorporated organization, governmental authority or any other form of entity
      not specifically listed herein.

    


     
                    “Security Documents” means the
      collective reference to the Security Agreement and each other agreement or
      writing pursuant to which the Company purports to pledge or grant a security
      interest in any property or assets securing the Company’s obligations or any
      such Person purports to guaranty the payment and/or performance of the Company’s
      obligations, in each case, as amended, restated, supplemented or otherwise
      modified from time to time.

    


    Section
      8.  Events
      of Default.

    


    a)  “Event
      of Default”, wherever used herein, means any one of the following events
      (whatever the reason and whether it 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 of amount of any Debenture, or
      (B)
      interest (including Late Fees) on, or liquidated damages in respect of, any
      Debenture, in each case free of any claim of subordination, 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 following receipt of written notice thereof by the
      Company;

    


    ii.  the
      Company shall fail to observe or perform any other covenant or agreement
      contained in this Debenture or any of the other Transaction Documents not
      addressed elsewhere in this Section 8(a) which failure is not cured, if possible
      to cure, within the earlier to occur of (A) 10 Trading Days after notice of
      such
      default sent by the Holder or by any other Holder and (B) 20 Trading Days after
      the Company shall become or should have become aware of such
      failure;

    


    
      
         

      

      
        A-21

        
          

        

      

      
         

      

    

    iii.  a
      default
      or event of default (subject to any grace or cure period provided for in the
      applicable agreement, document or instrument) not addressed elsewhere in this
      Section 8(a), shall occur under any of the Transaction Documents other than
      the
      Debentures

    


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

    


    v.  (i)
      the
      Company or any of its Subsidiaries shall commence, or there shall be commenced
      against the Company or any such Subsidiary, a case under any applicable
      bankruptcy or insolvency laws as now or hereafter in effect or any successor
      thereto, or the Company or any Subsidiary commences any other proceeding under
      any reorganization, arrangement, adjustment of debt, relief of debtors,
      dissolution, insolvency or liquidation or similar law of any jurisdiction
      whether now or hereafter in effect relating to the Company or any Subsidiary
      thereof or (ii) there is commenced against the Company or any Subsidiary thereof
      any such bankruptcy, insolvency or other proceeding which remains undismissed
      for a period of 60 days; or (iii) the Company or any Subsidiary thereof is
      adjudicated by a court of competent jurisdiction insolvent or bankrupt; or
      any
      order of relief or other order approving any such case or proceeding is entered;
      or (iv) the Company or any Subsidiary thereof suffers any appointment of any
      custodian or the like for it or any substantial part of its property which
      continues undischarged or unstayed for a period of 60 days; or (v) the Company
      or any Subsidiary thereof makes a general assignment for the benefit of
      creditors; or (vi) the Company shall fail to pay, or shall state that it is
      unable to pay, or shall be unable to pay, its debts generally as they become
      due; or (vii) the Company or any Subsidiary thereof shall call a meeting of
      its
      creditors with a view to arranging a composition, adjustment or restructuring
      of
      its debts; or (viii) the Company or any Subsidiary thereof shall by any act
      or
      failure to act expressly indicate its consent to, approval of or acquiescence
      in
      any of the foregoing; or (ix) any corporate or other action is taken by the
      Company or any Subsidiary thereof for the purpose of effecting any of the
      foregoing;

    


    vi.  the
      Company or any Subsidiary shall default in 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 of the Company in an amount
      exceeding $200,000, whether such indebtedness now exists or shall hereafter
      be
      created and such default shall result in such indebtedness becoming or being
      declared due and payable prior to the date on which it would otherwise become
      due and payable;

    


    
      
         

      

      
        A-22

        
          

        

      

      
         

      

    

    vii.  the
      Common Stock shall not be eligible for quotation on or quoted for trading on
      a
      Trading Market and shall not again be eligible for and quoted or listed for
      trading thereon within five Trading Days;

    


    viii.  the
      Company shall be a party to any Change of Control Transaction or Fundamental
      Transaction, shall agree to sell or dispose of all or in excess of 33% of its
      assets in one or more transactions (whether or not such sale would constitute
      a
      Change of Control Transaction) or shall redeem or repurchase more than a de
      minimis number of its outstanding shares of Common Stock or other equity
      securities of the Company (other than redemptions of Conversion Shares and
      repurchases of shares of Common Stock or other equity securities of departing
      officers and directors of the Company; provided such repurchases shall not
      exceed $100,000, in the aggregate, for all officers and directors during the
      term of this Debenture) and the Company has entered into such transaction
      without the consent of the Holders holding a majority of outstanding
      Debentures;

    


    ix.  any
      Liens
      created by the Security Documents shall at any time not constitute a valid
      and
      perfected first priority Lien on the collateral intended to be covered thereby
      (to the extent perfection by filing, registration, recordation or possession
      is
      required herein or therein) in favor of the Holders, free and clear of all
      other
      Liens (other than Permitted Liens), or any of the security interests granted
      pursuant to the Security Documents shall be determined to be void, voidable,
      invalid or unperfected, are subordinated or are ineffective to provide the
      Holder with a perfected, first priority security interest in the collateral
      covered by the Security Documents, free and clear of all other Liens (other
      than
      Permitted Liens) or, except for expiration or termination in accordance with
      their terms, the Security Agreement shall for whatever reason be terminated
      or
      cease to be in full force and effect, or the enforceability thereof or any
      other
      Transaction Documents shall be contested by the Company

    


    b)  Remedies
      Upon Event of Default. If any Event of Default occurs, the full principal
      amount of this Debenture, together with interest and other amounts owing in
      respect thereof, to the date of acceleration shall become, at the Holder’s
      election, immediately due and payable in cash.  If an Event of Default
      described in section 8(a)(v) occurs then the full principal amount of the
      Debenture, together with interest and other amounts owing in respect thereof,
      to
      the date of acceleration, shall automatically become due and payable in
      cash.   The aggregate amount payable upon an Event of Default
      shall be equal to the Mandatory Prepayment 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 the rate of 16% per annum, or such lower maximum amount of interest permitted
      to be charged under applicable law.  All Debentures for which the full
      Mandatory Prepayment Amount hereunder shall have been paid in accordance
      herewith shall promptly be surrendered to or as directed by the
      Company.  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 declaration may be rescinded and annulled by
      Holder at any time prior to payment hereunder and the Holder shall have all
      rights as a Debenture holder until such time, if any, as the full payment under
      this Section shall have been received by it.  No such rescission or
      annulment shall affect any subsequent Event of Default or impair any right
      consequent thereon.

    


    
      
         

      

      
        A-23

        
          

        

      

      
         

      

    

    Section
      9.    Optional Redemption
      Right.  Commencing from the Closing Date and notwithstanding
      anything to the contrary contained in this Debenture, so long as the Equity
      Conditions are met, the Company shall have the right, exercisable on not less
      than ten (10) Trading Days prior written notice to the Holder of the Debentures,
      to prepay in part or in full the Debenture in accordance with this Section
      9.  Any notice of prepayment hereunder (an “Optional
      Prepayment”) shall be delivered to the Holders of the Debentures and shall
      state (1) that the Company is exercising its right to prepay the Debentures
      issued on the Original Issue Date and (2) the date of prepayment (the
“Optional Prepayment Notice”).  On the date fixed for
      prepayment (the “Optional Prepayment Date”), the Company shall make
      payment of the Optional Prepayment Amount to the Holder an amount in cash equal
      to 110% multiplied by the sum of the then outstanding Principal Amount of this
      Debenture plus any amounts owed to the Holder (“Optional Prepayment
      Amounts”).  Notwithstanding notice of an Optional Prepayment, the
      Holder shall at all times prior to the Optional Prepayment Date maintain the
      right to convert all or any portion of the Debenture and any portion of
      Debenture so converted so converted after receipt of an Optional Prepayment
      Notice and prior to the Optional Prepayment Date set forth in such notice and
      payment of the aggregate Optional Prepayment Amount shall be deducted from
      the
      Principal Amount of Debenture which are otherwise subject to prepayment pursuant
      to such notice.  If the Company delivers an Optional Prepayment Notice
      and fails to pay the Optional Prepayment Amount due to the Holder of the
      Debenture on the Optional Prepayment Date, then the Company shall forfeit its
      right to prepay the Debenture pursuant to such Optional Prepayment Notice and
      shall thereafter forfeit their right to Optional Prepayment.

     

    Section
      10.   Security Interest.  The obligations of
      the Company under this Debenture and the other Debentures are secured by the
      grant of a security interest in all of the assets of the Company pursuant to
      the
      terms of a certain Security Agreement of even date herewith (the “Security
      Agreement”), by the Company in favor of Axiom Capital Management, Inc., as
      collateral agent (the “Agent”) of the Holders.

     

    
      
         

      

      
        A-24

        
          

        

      

      
         

      

    

    Section
      11.   Miscellaneous.

    


    a)  Notices.  Any
      and all notices or other communications or deliveries to be provided by the
      Holders hereunder, including, without limitation, any Notice of Conversion,
      shall be in writing and delivered personally, by facsimile, sent by a nationally
      recognized overnight courier service, addressed to the Company, at the address
      set forth above, facsimile number  ______________, Attn:
      Norman Proulx or such other address or facsimile number as the Company
      may specify for such purposes by notice to the Holders delivered in accordance
      with this Section.  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, sent by a nationally recognized overnight
      courier service addressed to each Holder at the facsimile telephone number
      or
      address of such Holder appearing on the books of the Company, or if no such
      facsimile telephone 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 telephone number specified in this Section prior
      to
      5:30 p.m. (New York City time), (ii) the date after the date of transmission,
      if
      such notice or communication is delivered via facsimile at the facsimile
      telephone number specified in this Section later than 5:30 p.m. (New York City
      time) on any date and earlier than 11:59 p.m. (New York City time) on such
      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, interest and liquidated damages
      (if
      any) 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
paripassu 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, and of the ownership hereof, and indemnity, if requested,
      all
      reasonably satisfactory to the Company.

    


    d)  Intentionally
      Left Blank.

    


    
      
         

      

      
        A-25

        
          

        

      

      
         

      

    

    e)  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 conflicts of law
      thereof.  Each party agrees that all legal proceedings concerning the
      interpretations, 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 any such
      court, 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 manner permitted by 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 with the investigation, preparation and prosecution of such
      action or proceeding.

    


    f)  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 must be in writing.

    


    g)  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
      applicable laws governing usury, the applicable rate of interest due hereunder
      shall automatically be lowered to equal the maximum permitted rate of interest.
      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
      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.

    


    
      
         

      

      
        A-26

        
          

        

      

      
         

      

    

    h)  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.

    


    i)  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.

    


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

    
 

    
      
         

      

      
        A-27

        
          

        

      

      
         

      

    

    

    

    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.

    


    
      	 	 	 
	 	
              HEALTHCARE
                PROVIDERS DIRECT, INC.

            
	 
 	 
 	 
 
	
            	By:  	/s/ 
	 	
              
Name:
              Title:

            
	 	 


    

    
 

    
      
         

      

      
        A-28

        
          

        

      

      
         

      

    

    ANNEX
      A

     

    NOTICE
      OF CONVERSION

    


    


    The
      undersigned hereby elects to convert principal under the 9% Senior Secured
      Convertible Debenture of Healthcare Providers Direct, Inc., a Nevada corporation
      (the “Company”), due on ______ ___, 2010, into shares of common stock, no
      par value (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 Debentures 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:

    


    
      
         

      

      
        A-29

        
          

        

      

      
         

      

    

    


    Schedule
      1

    


    CONVERSION
      SCHEDULE

    


    The
      8%
      Convertible Debentures due on ________ ___, 2010, in the aggregate principal
      amount of $____________ issued by Healthcare Providers Direct, Inc., a Nevada
      corporation.  This Conversion Schedule reflects conversions made under
      Section 4 of the above referenced Debenture.

    


    Dated:

    


    


    
      	 

              Date
                of Conversion

              (or
                for first entry, Original Issue Date)

            	 

              Amount
                of Conversion

            	 

              Aggregate
                Principal Amount Remaining Subsequent to Conversion

              (or
                original Principal Amount)

            	 

              Company
                Attest

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 


    

    


    


    
      
         

      

      
        A-30

        
          

        

      

      
         

      

    

    

      


      
        	 

                Date
                  of Conversion

                (or
                  for first entry, Original Issue Date)

              	 

                Amount
                  of Conversion

              	 

                Aggregate
                  Principal Amount Remaining Subsequent to Conversion

                (or
                  original Principal Amount)

              	 

                Company
                  Attest