f8k0808ex10v_guangzhou.htm


    
                                                                                                                                                EXHIBIT
        A

      


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

      


      Original
        Issue Date:

      Original
        Conversion Price (subject to adjustment herein):
$0.82

      


      $_______________

      


      


      FORM
        OF 8% SENIOR SECURED CONVERTIBLE DEBENTURE

      


      


      THIS
        DEBENTURE is one of a series of
        duly authorized and validly issued 8% Senior Secured Convertible Debentures
        of
        Guangzhou Global Telecom, Inc., a Florida corporation (the “Company”),
        having its principal place of business at APT 29D, Block E, No.11 Hao Jing
        Street, Zhu Jiang Di Jing Yuan, YiZhou Road, HaiZhu District, Guangzhou China,
        510310, designated as its 8% Senior Secured Convertible Debenture (this
        debenture, the “Debenture” and, collectively with the other debentures of
        such series, the “Debentures”).

      


      FOR
        VALUE
        RECEIVED, the Company promises to pay to ________________________ or its
        registered assigns (the “Holder”), or shall have paid pursuant to the
        terms hereunder, the principal sum of $_______________ on July __, 2009 (the
        “Maturity Date”) or such earlier date as this Debenture is required or
        permitted to be repaid as provided hereunder, and to pay interest to the
        Holder
        on the aggregate unconverted and then outstanding principal amount of this
        Debenture in accordance with the provisions hereof.  This Debenture is
        subject to the following additional provisions:

      


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

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      
 

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

      


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

      


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

      


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

      


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

      


      “Change
        of Control Transaction” means the occurrence after the date hereof of any of
        (i) an acquisition after the date hereof by an individual or legal entity
        or
“group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
        effective control (whether through legal or beneficial ownership of capital
        stock of the Company, by contract or otherwise) of in excess of 33% of the
        voting securities of the Company (other than by means of conversion or exercise
        of the Debentures and the Securities issued together with the Debentures),
        or
        (ii) the Company merges into or consolidates with any other Person, or any
        Person merges into or consolidates with the Company and, after giving effect
        to
        such transaction, the stockholders of the Company immediately prior to such
        transaction own less than 66% of the aggregate voting power of the Company
        or
        the successor entity of such transaction, or (iii) the Company sells or
        transfers all or substantially all of its assets to another Person and the
        stockholders of the Company immediately prior to such transaction own less
        than
        66% of the aggregate voting power of the acquiring entity immediately after
        the
        transaction, or 

       

       

      
        
          
          

        

        
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      (iv)
        a
        replacement at one time or within a three year period of more than one-half
        of
        the members of the Company’s board of directors which is not approved by a
        majority of those individuals who are members of the board of directors on
        the
        date hereof (or by those individuals who are serving as members of the board
        of
        directors on any date whose nomination to the board of directors was approved
        by
        a majority of the members of the board of directors who are members on the
        date
        hereof), or (v) the execution by the Company of an agreement to which the
        Company  is a party or by which it is bound, providing for any of the
        events set forth in clauses (i) through (iv) above.

      


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

      


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

      


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

      


      “Debenture
        Register” shall have the meaning set forth in Section 2(c).

      


      “Dilutive
        Issuance” shall have the meaning set forth in Section 5(b).

      


      “Dilutive
        Issuance Notice” shall have the meaning set forth in Section
        5(b).

      


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

      


      “Equity
        Conditions” means, during
        the period in question,
(i) the Company shall have duly honored all conversions and redemptions
        scheduled to occur or occurring by virtue of one or more Notices of Conversion
        of the Holder, if any, (ii) the Company shall have paid all liquidated damages
        and other amounts owing to the Holder in respect of this Debenture, (iii) there is an effective
        Registration Statement pursuant to which the Holder is permitted to utilize
        the
        prospectus thereunder to resell all of the shares issuable pursuant to the
        Transaction Documents (and the Company believes, in good faith, that such
        effectiveness will continue uninterrupted for the foreseeable future), (iv)
        the
        Common Stock is trading on a Trading Market and all of the shares issuable
        pursuant to the Transaction Documents are listed or quoted for trading on
        such
        Trading Market (and the Company believes, in good faith, that trading of
        the
        Common Stock on a Trading Market will continue uninterrupted for the foreseeable
        future), (v) there is a sufficient number of authorized but unissued and
        otherwise unreserved shares of Common Stock for the issuance of all of the
        shares issuable pursuant to the Transaction Documents, (vi) there is no existing
        Event of Default or no existing event which, with the passage of time or
        the
        giving of notice, would constitute an Event of Default, (vii) the issuance
        of
        the shares in question (or, in the case of an Optional or Monthly Redemption,
        the shares issuable upon conversion in full of the Optional or Monthly
        Redemption Amount) to
        the Holder would not violate the
        limitations set forth in Section 4(c) herein, (viii) there has been no
        public announcement of a pending or proposed Fundamental Transaction or Change
        of Control Transaction that has not been consummated, (ix) the Holder is
        not in
        possession of any information provided by the Company that constitutes, or
        may
        constitute, material non-public information and (x) for each Trading Day
        in a
        period of 20 consecutive Trading Days prior to the applicable date in question,
        the daily trading volume for the Common Stock on the principal Trading Market
        exceeds $200,000 of shares (subject to adjustment for forward and reverse
        stock
        splits and the like) per Trading Day.

       

       

      
        
          
          

        

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

       

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

      


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

      


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

      


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

      


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

      


      “Interest
        Conversion Rate” means the lesser of (a) the Conversion Price or (b) 85% of
        the average of the VWAPs for the 10 consecutive Trading Days ending on the
        Trading Day that is immediately prior to the applicable Interest Payment
        Date.

      


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

      


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

      


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

      


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

      


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

      


      “Mandatory
        Default Amount”  means the sum of (i) the greater of (A) 130% of
        the outstanding principal amount of this Debenture, plus 100% of accrued
        and
        unpaid interest hereon, or (B) the outstanding principal amount of this
        Debenture, plus all accrued and unpaid interest hereon, divided by the
        Conversion Price on the date the Mandatory Default Amount is either (a) demanded
        (if demand or notice is required to create an Event of Default) or otherwise
        due
        or (b) paid in full, whichever has a lower Conversion Price, multiplied by
        the
        VWAP on the date the Mandatory Default Amount is either (x) demanded or
        otherwise due or (y) paid in full, whichever has a higher VWAP, and (ii)
        all
        other amounts, costs, expenses and liquidated damages due in respect of this
        Debenture.

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
 

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

      


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

      


      “Monthly
        Redemption” means the redemption of this Debenture pursuant to Section 6(b)
        hereof.

      


       “Monthly
        Redemption Amount” means, as to a Monthly Redemption, $______1, plus accrued but unpaid interest,
        liquidated
        damages and any other amounts then owing to the Holder in respect of this
        Debenture.

      


      “Monthly
        Redemption Date” means the 1st of each month, commencing on February 1, 2008
        and terminating upon the full redemption of this Debenture.

      


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

      


      “Optional
        Redemption Amount” means the sum of (i) 120% of the then outstanding
        principal amount of the Debenture, (ii) accrued but unpaid interest and (iii)
        all liquidated damages and other amounts due in respect of the
        Debenture.

      


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

      


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

      


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

      


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

      


      “Permitted
        Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b)
        the Indebtedness existing on the Original Issue Date and set forth on
Schedule 3.1(aa) attached to the Purchase Agreement, (c) lease
        obligations and purchase money indebtedness of up to $100,000, in the aggregate,
        incurred in connection with the acquisition of capital assets and lease
        obligations with respect to newly acquired or leased assets and (d) indebtedness
        that (i) is expressly subordinate to the Debentures pursuant to a written
        subordination agreement with the Purchasers that is acceptable to each Purchaser
        in its sole and absolute discretion and (ii) matures at a date later than
        the
        Maturity Date).

       

      
        ______________________________

        1           1/18th
          of the original
          Principal Amount.

      

       

      
        
          
          

        

        
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      “Permitted
        Lien” means the individual and collective reference to the following: (a)
        Liens for taxes, assessments and other governmental charges or levies not
        yet
        due or Liens for taxes, assessments and other governmental charges or levies
        being contested in good faith and by appropriate proceedings for which adequate
        reserves (in the good faith judgment of the management of the Company) have
        been
        established in accordance with GAAP; (b) Liens imposed by law which were
        incurred in the ordinary course of the Company’s business, such as carriers’,
        warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
        similar Liens arising in the ordinary course of the Company’s business, and
        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; (c) Liens
        incurred in connection with Permitted Indebtedness under clauses (a) and
        (b)
        thereunder; and (d) Liens incurred in connection with Permitted Indebtedness
        under clause (c) thereunder, provided that such Liens are not secured by
        assets
        of the Company or its Subsidiaries other than the assets so acquired or
        leased.

       

      “Pre-Redemption
        Conversion Shares” shall have the meaning set forth in Section 6(b)
        hereof.

      


      “Purchase
        Agreement” means the Securities Purchase Agreement, dated as of July 31,
        2007, among the Company and the original Holders, as amended, modified or
        supplemented from time to time in accordance with its terms.

      


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

      


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

      


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

      


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

       

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

       

       

      
        
          
          

        

        
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      “Threshold
        Period” shall have the meaning set forth in Section 6(d).

      


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

      


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

      


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

      


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

      


      Section
        2.                                Interest.

      


      a)  Payment
        of Interest in Cash or Kind. The Company shall pay interest to the Holder on
        the aggregate unconverted and then outstanding principal amount of this
        Debenture at the rate of 8% per annum, payable quarterly on November 1, February
        1, May 1 and August 1, beginning on the first such date after the Original
        Issue
        Date, on each Monthly Redemption Date (as to that principal amount then being
        redeemed), on each Conversion Date (as to that principal amount then being
        converted), on each Optional Redemption Date (as to that principal amount
        then
        being redeemed) and on the Maturity Date (each such date, an “Interest
        Payment Date”) (if any Interest Payment Date is not a Business Day, then the
        applicable payment shall be due on the next succeeding Business Day), in
        cash
        or, at the Company’s option, in duly authorized, validly issued, fully paid and
        non-assessable shares of Common Stock at the Interest Conversion Rate (the
        dollar amount to be paid in shares, the “Interest Share Amount”) or a
        combination thereof; provided, however, that payment in shares of
        Common Stock may only occur if 

       

       

      
        
          
          

        

        
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      (i)
        all
        of the Equity Conditions have been met (unless waived by the Holder in writing)
        during the 20 Trading Days immediately prior to the applicable Interest Payment
        Date  (the “Interest Notice Period”) and through and including
        the date such shares of Common Stock are actually issued to the Holder, (ii)
        the
        Company shall have given the Holder notice in accordance with the notice
        requirements set forth below and (iii) as to such Interest Payment Date,
        prior
        to such Interest Notice Period (but not more than 5 Trading Days prior to
        the
        commencement of such Interest Notice Period), the Company shall have delivered
        to the Holder’s account with The Depository Trust Company a number of shares of
        Common Stock to be applied against such Interest Share Amount equal to the
        quotient of (x) the applicable Interest Share Amount divided by (y) the then
        Conversion Price (the “Interest Conversion Shares”).

      


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

      


      c)  Interest
        Calculations. Interest shall be calculated on the basis of a 360-day year,
        consisting of twelve 30 calendar day periods, and shall accrue daily commencing
        on the Original Issue Date until payment in full of the outstanding principal,
        together with all accrued and unpaid interest, liquidated damages and other
        amounts which may become due hereunder, has been made.  Payment of
        interest in shares of Common Stock (other than the Interest Conversion Shares
        issued prior to an Interest Notice Period) shall otherwise occur pursuant
        to
        Section 4(d)(ii) herein and, solely for purposes of the payment of interest
        in
        shares, the Interest Payment Date shall be deemed the Conversion
        Date.  Interest shall cease to accrue with respect to any principal
        amount converted, provided that the Company actually delivers the Conversion
        Shares within the time period required by Section 4(d)(ii)
        herein.  Interest hereunder will be paid to the Person in whose name
        this Debenture is registered on the records of the Company regarding
        registration and transfers of this Debenture (the “Debenture Register”).
        Except as otherwise provided herein, if at any time the Company pays interest
        partially in cash and partially in shares of Common Stock to the holders
        of the
        Debentures, then such payment of cash shall be distributed ratably among
        the
        holders of the then-outstanding Debentures based on their (or their
        predecessor’s) initial purchases of Debentures pursuant to the Purchase
        Agreement.

       

       

      
        
          
          

        

        
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      d)  Late
        Fee.  All overdue accrued and unpaid interest to be paid hereunder
        shall entail a late fee at an interest rate equal to the lesser of 18% per
        annum
        or the maximum rate permitted by applicable law (“Late Fees”) which shall
        accrue daily from the date such interest is due hereunder through and including
        the date of actual payment in full. Notwithstanding anything to the contrary
        contained herein, if on any Interest Payment Date the Company has elected
        to pay
        accrued interest in the form of Common Stock but the Company is not permitted
        to
        pay accrued interest in Common Stock because it fails to satisfy the conditions
        for payment in Common Stock set forth in Section 2(a) herein, then, at the
        option of the Holder, the Company, in lieu of delivering either shares of
        Common
        Stock pursuant to this Section 2 or paying the regularly scheduled interest
        payment in cash, shall deliver, within three Trading Days of each applicable
        Interest Payment Date, an amount in cash equal to the product of (x) the
        number
        of shares of Common Stock otherwise deliverable to the Holder in connection
        with
        the payment of interest due on such Interest Payment Date multiplied by (y)
        the
        highest VWAP during the period commencing on the Interest Payment Date and
        ending on the Trading Day prior to the date such payment is actually
        made.  If any Interest Conversion Shares are issued to the Holder in
        connection with an Interest Payment Date and are not applied against an Interest
        Share Amount, then the Holder shall promptly return such excess shares to
        the
        Company.

      


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

      


      Section
        3.                      Registration
        of Transfers and Exchanges.

      


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

      


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

      


      c)  Reliance
        on Debenture Register. Prior to due presentment for transfer to the Company
        of this Debenture, the Company and any agent of the Company may treat the
        Person
        in whose name this Debenture is duly registered on the Debenture Register
        as the
        owner hereof for the purpose of receiving payment as herein provided and
        for all
        other purposes, whether or not this Debenture is overdue, and neither the
        Company nor any such agent shall be affected by notice to the
        contrary.

       

       

      
        
          
          

        

        
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      Section
        4.                      Conversion.

      


      a)  Voluntary
        Conversion. At any time after the Original Issue Date until this Debenture
        is no longer outstanding, this Debenture shall be convertible, in whole or
        in
        part, into shares of Common Stock at the option of the Holder, at any time
        and
        from time to time (subject to the conversion limitations set forth in
        Section 4(c) hereof).  The Holder shall effect conversions by
        delivering to the Company a Notice of Conversion, the form of which is attached
        hereto as Annex A (a “Notice of Conversion”), specifying therein
        the principal amount of this Debenture to be converted and the date on which
        such conversion shall be effected (such date, the “Conversion
        Date”).  If no Conversion Date is specified in a Notice of
        Conversion, the Conversion Date shall be the date that such Notice of Conversion
        is deemed delivered hereunder.  To effect conversions hereunder, the
        Holder shall not be required to physically surrender this Debenture to the
        Company unless the entire principal amount of this Debenture, plus all accrued
        and unpaid interest thereon, has been so converted. Conversions hereunder
        shall
        have the effect of lowering the outstanding principal amount of this Debenture
        in an amount equal to the applicable conversion.  The Holder and the
        Company shall maintain records showing the principal amount(s) converted
        and the
        date of such conversion(s).  The Company may deliver an objection to
        any Notice of Conversion within 1 Business Day of delivery of such Notice
        of
        Conversion.  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 $0.82, subject to adjustment herein (the
“Conversion Price”).

      


      c)  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, the Holder (together with the
        Holder’s Affiliates, and any other person or entity acting as a group together
        with the Holder or any of the 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 the Holder and its Affiliates shall include the number
        of
        shares of Common Stock issuable upon conversion of this Debenture with respect
        to which such determination is being made, but shall exclude the number of
        shares of Common Stock which are issuable upon (A) conversion of the remaining,
        unconverted principal amount of this Debenture beneficially owned by the
        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 the Holder or any of its Affiliates.  

       

       

       

      
        
          
          

        

        
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      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 the Holder together with any Affiliates) and of which
        principal amount of this Debenture is convertible shall be in the sole
        discretion of the Holder, and the submission of a Notice of Conversion shall
        be
        deemed to be the Holder’s determination of whether this Debenture may be
        converted (in relation to other securities owned by the Holder together with
        any
        Affiliates) and which principal amount of this Debenture is convertible,
        in each
        case subject to the Beneficial Ownership Limitation. To ensure compliance
        with
        this restriction, the 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, the 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 the 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 the 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 the Holder, at the election of the 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 the 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 Conversion Shares 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 each
        Conversion Date (the “Share Delivery Date”), the Company shall deliver,
        or cause to be delivered, to the Holder (A) a certificate or certificates
        representing the Conversion Shares which, on or after the Effective Date,
        shall
        be free of restrictive legends and trading restrictions (other than those
        which
        may then be required by the Purchase Agreement) representing the number of
        Conversion Shares being acquired upon the conversion of this Debenture
        (including, if the Company has given continuous notice pursuant to Section
        2(b)
        for payment of interest in shares of Common Stock at least 20 Trading Days
        prior
        to the date on which the Conversion Notice is delivered to the Company, shares
        of Common Stock representing the payment of accrued interest otherwise
        determined pursuant to Section 2(a) but assuming that the Interest Notice
        Period
        is the 20 Trading Days period immediately prior to the date on which the
        Conversion Notice is delivered to the Company and excluding for such issuance
        the condition that the Company deliver Interest Conversion Shares as to such
        interest payment) and (B) a bank check in the amount of accrued and unpaid
        interest (if the Company has elected or is required to pay accrued interest
        in
        cash). On or after the Effective Date, the Company shall use its best efforts
        to
        deliver any certificate or certificates required to be delivered by the Company
        under this Section 4 electronically through the Depository Trust Company
        or
        another established clearing corporation performing similar
        functions.

      


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

       

       

      
        
          
          

        

        
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      iv.  Obligation
        Absolute; Partial Liquidated Damages.  The Company’s obligations
        to issue and deliver the Conversion Shares upon conversion of this Debenture
        in
        accordance with the terms hereof are absolute and unconditional, irrespective
        of
        any action or inaction by the Holder to enforce the same, any waiver or consent
        with respect to any provision hereof, the recovery of any judgment against
        any
        Person or any action to enforce the same, or any setoff, counterclaim,
        recoupment, limitation or termination, or any breach or alleged breach by
        the
        Holder or any other Person of any obligation to the Company or any violation
        or
        alleged violation of law by the Holder or any other Person, and irrespective
        of
        any other circumstance which might otherwise limit such obligation of the
        Company to the Holder in connection with the issuance of such Conversion
        Shares;
provided, however, that such delivery shall not operate as a
        waiver by the Company of any such action the Company may have against the
        Holder.  In the event the Holder of this Debenture shall elect to
        convert any or all of the outstanding principal amount hereof, the Company
        may
        not refuse conversion based on any claim that the Holder or anyone associated
        or
        affiliated with the Holder has been engaged in any violation of law, agreement
        or for any other reason, unless an injunction from a court, on notice to
        Holder,
        restraining and or enjoining conversion of all or part of this Debenture
        shall
        have been sought and obtained, and the Company posts a surety bond for the
        benefit of the Holder in the amount of 150% of the outstanding principal
        amount
        of this Debenture, which is subject to the injunction, which bond shall remain
        in effect until the completion of arbitration/litigation of the underlying
        dispute and the proceeds of which shall be payable to the Holder to the extent
        it obtains judgment.  In the absence of such injunction, the Company
        shall issue Conversion Shares or, if applicable, cash, upon a properly noticed
        conversion.  If the Company fails for any reason to deliver to the
        Holder such certificate or certificates pursuant to Section 4(d) by the third
        Trading Day after the Conversion Date, the Company shall pay to the Holder,
        in
        cash, as liquidated damages and not as a penalty, for each $1000 of principal
        amount being converted, $10 per Trading Day (increasing to $20 per Trading
        Day
        on the fifth Trading Day after such liquidated damages begin to accrue) for
        each
        Trading Day after such third Trading Day until such certificates are
        delivered.    Nothing herein shall limit a Holder’s right to
        pursue actual damages or declare an Event of Default pursuant to Section
        8
        hereof for the Company’s failure to deliver Conversion Shares within the period
        specified herein and the Holder shall have the right to pursue all remedies
        available to it hereunder, at law or in equity including, without limitation,
        a
        decree of specific performance and/or injunctive relief.  The exercise
        of any such rights shall not prohibit the Holder from seeking to enforce
        damages
        pursuant to any other Section hereof or under applicable law.

      


      v.  Compensation
        for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In
        addition to any other rights available to the Holder, if the Company fails
        for
        any reason to deliver to the Holder such certificate or certificates by the
        Share Delivery Date pursuant to Section 4(d)(ii), and if after such Share
        Delivery Date the Holder is required by its brokerage firm to purchase (in
        an
        open market transaction or otherwise), or the Holder’s brokerage firm otherwise
        purchases, shares of Common Stock to deliver in satisfaction of a sale by
        the
        Holder of the Conversion Shares which the Holder was entitled to receive
        upon
        the conversion relating to such Share Delivery Date (a “Buy-In”), then
        the Company shall (A) pay in cash to the Holder (in addition to any other
        remedies available to or elected by the Holder) the amount by which (x) the
        Holder’s total purchase price (including any brokerage commissions) for the
        Common Stock so purchased exceeds (y) the product of (1) the aggregate number
        of
        shares of Common Stock that the Holder was entitled to receive from the
        conversion at issue multiplied by (2) the actual sale price at which the
        sell
        order giving rise to such purchase obligation was executed (including any
        brokerage commissions) and (B) at the option of the Holder, either reissue
        (if
        surrendered) this Debenture in a principal amount equal to the principal
        amount
        of the attempted conversion or deliver to the Holder the number of shares
        of
        Common Stock that would have been issued if the Company had timely complied
        with
        its delivery requirements under Section 4(d)(ii).  

       

       

       

      
        
          
          

        

        
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      For
        example, if the Holder purchases Common Stock having a total purchase price
        of
        $11,000 to cover a Buy-In with respect to an attempted conversion of this
        Debenture with respect to which the actual sale price of the Conversion Shares
        (including any brokerage commissions) giving rise to such purchase obligation
        was a total of $10,000 under clause (A) of the immediately preceding sentence,
        the Company shall be required to pay the Holder $1,000.  The Holder
        shall provide the Company written notice indicating the amounts payable to
        the
        Holder in respect of the Buy-In and, upon request of the Company, evidence
        of
        the amount of such loss.  Nothing herein shall limit a Holder’s right
        to pursue any other remedies available to it hereunder, at law or in equity
        including, without limitation, a decree of specific performance and/or
        injunctive relief with respect to the Company’s failure to timely deliver
        certificates representing shares of Common Stock upon conversion of this
        Debenture as required pursuant to the terms hereof.

      


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

      


      vii.  Fractional
        Shares. No fractional shares or scrip representing fractional shares shall
        be issued upon the conversion of this Debenture.  As to any fraction
        of a share which Holder would otherwise be entitled to purchase upon such
        conversion, the Company shall at its election, either pay a cash adjustment
        in
        respect of such final fraction in an amount equal to such fraction multiplied
        by
        the Conversion Price or round up to the next whole share.

       

       

      
        
          
          

        

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

      


      Section
        5.                                   Certain
        Adjustments.

      


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

      


      b)  Subsequent
        Equity Sales.  If, at any time while this Debenture is
        outstanding,  the Company or any Subsidiary, as applicable, sells or
        grants any option to purchase or sells or grants any right to reprice, or
        otherwise disposes of or issues (or announces any 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 that is lower than the then Conversion Price (such lower price, the
        “Base Conversion Price” and such issuances, collectively, a “Dilutive
        Issuance”) (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 are issued in connection
        with such issuance, be entitled to receive shares of Common Stock at an
        effective price per share that is lower 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
        equal
        the Base Conversion Price.  

       

       

      
        
          
          

        

        
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      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 Exempt Issuance.  If the
        Company enters into a Variable Rate Transaction, despite the prohibition
        set
        forth in the Purchase Agreement, the Company shall be deemed to have issued
        Common Stock or Common Stock Equivalents at the lowest possible conversion
        price
        at which such securities may be converted or exercised. The Company shall
        notify
        the Holder in writing, no later than 1 Business Day following the issuance
        of
        any Common Stock or Common Stock Equivalents subject to this Section 5(b),
        indicating therein the applicable issuance price, or 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, the Holder is
        entitled to receive a number of Conversion Shares based upon the Base Conversion
        Price on or after the date of such Dilutive Issuance, regardless of whether
        the
        Holder accurately refers to the Base Conversion Price in the Notice of
        Conversion.

       

      c)  Subsequent
        Rights Offerings.  If the Company, at any time while the Debenture
        is outstanding, shall issue rights, options or warrants to all holders of
        Common
        Stock (and not to Holders) entitling them to subscribe for or purchase shares
        of
        Common Stock at a price per share that is lower than the VWAP on the record
        date
        referenced below, then the Conversion Price shall be multiplied by a fraction
        of
        which the denominator shall be the number of shares of the Common Stock
        outstanding on the date of issuance of such rights or warrants plus the number
        of additional shares of Common Stock offered for subscription or purchase,
        and
        of which the numerator shall be the number of shares of the Common Stock
        outstanding on the date of issuance of such rights or warrants plus the number
        of shares which the aggregate offering price of the total number of shares
        so
        offered (assuming delivery to the Company in full of all consideration payable
        upon exercise of such rights, options or warrants) would purchase at such
        VWAP.  Such adjustment shall be made whenever such rights or warrants
        are issued, and shall become effective immediately after the record date
        for the
        determination of stockholders entitled to receive such rights, options or
        warrants.

      


      d)  Pro
        Rata Distributions. If the Company, at any time while this Debenture is
        outstanding, distributes to all holders of Common Stock (and not to the Holders)
        evidences of its indebtedness or assets (including cash and cash dividends)
        or
        rights or warrants to subscribe for or purchase any security (other than
        the
        Common Stock, which shall be subject to Section 5(b)), then in each such
        case
        the Conversion Price shall be adjusted 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 1 outstanding share of the Common
        Stock as determined by the Board of Directors of the Company in good
        faith.  

       

       

      
        
          
          

        

        
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      In
        either
        case the adjustments shall be described in a statement delivered to the Holder
        describing the portion of assets or evidences of indebtedness so distributed
        or
        such subscription rights applicable to 1 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.

      


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

       

       

      
        
          
          

        

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

      


      g)  Notice
        to the Holder.

      


      i.  Adjustment
        to Conversion Price.  Whenever the Conversion Price is adjusted
        pursuant to any provision of this Section 5, the Company shall promptly deliver
        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 in whatever form) on the Common Stock,
        (B)
        the Company shall declare a special nonrecurring cash dividend on or a
        redemption of the Common Stock, (C) the Company shall authorize the granting
        to
        all holders of the Common Stock of rights or warrants to subscribe for or
        purchase any shares of capital stock of any class or of any rights, (D) the
        approval of any stockholders of the Company shall be required in connection
        with
        any reclassification of the Common Stock, any consolidation or merger to
        which
        the Company is a party, any sale or transfer of all or substantially all
        of the
        assets of the Company, of any compulsory share exchange whereby the Common
        Stock
        is converted into other securities, cash or property or (E) the Company shall
        authorize the voluntary or involuntary dissolution, liquidation or winding
        up of
        the affairs of the Company, then, in each case, the Company shall cause to
        be
        filed at each office or agency maintained for the purpose of conversion of
        this
        Debenture, and shall cause to be delivered to the Holder at its last address
        as
        it shall appear upon the Debenture Register, at least 20 calendar days prior
        to
        the applicable record or effective date hereinafter specified, a notice stating
        (x) the date on which a record is to be taken for the purpose of such dividend,
        distribution, redemption, rights or warrants, or if a record is not to be
        taken,
        the date as of which the holders of the Common Stock of record to be entitled
        to
        such dividend, distributions, redemption, rights or warrants are to be
        determined or (y) the date on which such reclassification, consolidation,
        merger, sale, transfer or share exchange is expected to become effective
        or
        close, and the date as of which it is expected that holders of the Common
        Stock
        of record shall be entitled to exchange their shares of the Common Stock
        for
        securities, cash or other property deliverable upon such reclassification,
        consolidation, merger, sale, transfer or share exchange, provided that the
        failure to deliver such notice or any defect therein or in the delivery thereof
        shall not affect the validity of the corporate action required to be specified
        in such notice.  The Holder is entitled to convert this Debenture
        during the 20-day period commencing on the date of such notice through the
        effective date of the event triggering such notice.

       

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      
 

      Section
        6.                                   Redemption
        and Forced Conversion.

      


      a)  Optional
        Redemption at Election of Company.  Subject to the provisions of
        this Section 6, at any time after the Effective Date, the Company may deliver
        a
        notice to the Holder (an “Optional Redemption Notice” and the date such
        notice is deemed delivered hereunder, the “Optional Redemption Notice
        Date”) of its irrevocable election to redeem some or all of the then
        outstanding principal amount of this Debenture for cash in an amount equal
        to
        the Optional Redemption Amount on the 10th Trading
        Day
        following the Optional Redemption Notice Date (such date, the “Optional
        Redemption Date” and such redemption, the “Optional
        Redemption”).  The Optional Redemption Amount is payable in full
        on the Optional Redemption Date.  The Company may only effect an
        Optional Redemption if each of the Equity Conditions shall have been met
        (unless
        waived in writing by the Holder) on each Trading Day during the period
        commencing on the Optional Redemption Notice Date through to the Optional
        Redemption Date and through and including the date payment of the Optional
        Redemption Amount is actually made in full.  If any of the Equity
        Conditions shall cease to be satisfied at any time during the 10 Trading
        Day
        period, then the Holder may elect to nullify the Optional Redemption Notice
        by
        notice to the Company within 3 Trading Days after the first day on which
        any
        such Equity Condition has not been met (provided that if, by a provision
        of the
        Transaction Documents, the Company is obligated to notify the Holder of the
        non-existence of an Equity Condition, such notice period shall be extended
        to
        the third Trading Day after proper notice from the Company) in which case
        the
        Optional Redemption Notice shall be null and void,
ab initio.  The Company covenants and agrees that
        it will honor all Notices of Conversion tendered from the time of delivery
        of
        the Optional Redemption Notice through the date all amounts owing thereon
        are
        due and paid in full.

      


      b)  Monthly
        Redemption.  On each Monthly Redemption Date, the Company shall
        redeem the Monthly Redemption Amount (the “Monthly Redemption”). The
        Monthly Redemption Amount payable on each Monthly Redemption Date shall be
        paid
        in cash; provided, however, as to any Monthly Redemption and upon
        10 Trading Days’ prior written irrevocable notice (the “Monthly Redemption
        Notice”), in lieu of a cash redemption payment the Company may elect to pay
        all or part of a Monthly Redemption Amount in Conversion Shares based on
        a
        conversion price equal to the lesser of (i) the then Conversion Price and
        (ii)
        85% of the average of the VWAPs for the 10 consecutive Trading Days ending
        on
        the Trading Day that is immediately prior to the applicable Monthly Redemption
        Date (subject to adjustment for any stock dividend, stock split, stock
        combination or other similar event affecting the Common Stock during such
        10
        Trading Day period) (the price calculated during the 10 Trading Day period
        immediately prior to the Monthly Redemption Date, the “Monthly Conversion
        Price” and such 10 Trading Day period, the “Monthly Conversion
        Period”); provided, further, that the Company may not pay the
        Monthly Redemption Amount in Conversion Shares unless (y) from the date the
        Holder receives the duly delivered Monthly Redemption Notice through and
        until
        the date such Monthly Redemption is paid in full, the Equity Conditions have
        been satisfied, unless waived in writing by the Holder, and (z) as to such
        Monthly Redemption, prior to such Monthly Conversion Period (but not more
        than 5
        Trading Days prior to the commencement of the Monthly Conversion Period),
        the
        Company shall have delivered to the Holder’s account with The Depository Trust
        Company a number of shares of Common Stock to be applied against such Monthly
        Redemption Amount equal to the quotient of (x) the applicable Monthly Redemption
        Amount divided by (y) Monthly Conversion Price assuming for such purposes
        that
        the Monthly Conversion Period ended 5 Trading Days prior to the actual Monthly
        Conversion Period for such Monthly Conversion (the “Pre-Redemption Conversion
        Shares”).  

       

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

       

      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, plus accrued but unpaid interest, liquidated damages
        and any other amounts then owing to the Holder 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 Conversion 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  Amount payable in Conversion Shares.  Any
        principal amount of this Debenture converted during the applicable Monthly
        Conversion Period in excess of the Monthly Redemption Amount shall be applied
        against the last principal amount of this Debenture scheduled to be redeemed
        hereunder, in reverse time order from the Maturity Date; provided,
however, if any such conversion is applied against such Monthly
        Redemption Amount, the Pre-Redemption Conversion Shares, if any were issued
        in
        connection with such Monthly Redemption or were not already applied to such
        conversions, shall be first applied against such conversion.  The
        Company covenants and agrees that it will honor all Notice of Conversions
        tendered up until such amounts are paid in full.  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
        then
        outstanding Debentures based on their (or their predecessor’s) initial purchases
        of Debentures pursuant to the Purchase Agreement.  At any time the
        Company delivers a notice to the Holder of its election to pay the Monthly
        Redemption Amount in shares of Common Stock, the Company shall file a prospectus
        supplement pursuant to Rule 424 disclosing such election.

      


      c)  Redemption
        Procedure.  The payment of cash or issuance of Common Stock, as
        applicable, pursuant to an Optional or Monthly Redemption shall be payable
        on
        the Optional or Monthly Redemption Date.  If any portion of the
        payment pursuant to an Optional or Monthly Redemption shall not be paid by
        the
        Company by the applicable due date, interest shall accrue thereon at an interest
        rate equal to the lesser of 18% per annum or the maximum rate permitted by
        applicable law until such amount is paid in full.  Notwithstanding
        anything herein contained to the contrary, if any portion of the Optional
        or
        Monthly Redemption Amount remains unpaid after such date, the Holder may
        elect,
        by written notice to the Company given at any time thereafter,
        to invalidate such Optional or Monthly Redemption, abinitio,
        and, with respect to the Company’s failure to honor the Optional Redemption, the
        Company shall have no further right to exercise such Optional
        Redemption.  

       

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

       

      Notwithstanding
        anything to the contrary in this Section 6, the Company’s determination to
        redeem in cash or its elections under Section 6(b) shall be applied ratably
        among the Holders of Debentures. The Holder may elect to convert the outstanding
        principal amount of the Debenture pursuant to Section 4 prior to actual payment
        in cash for any redemption under this Section 6 by the delivery of a Notice
        of
        Conversion to the Company.

      


      d)  Forced
        Conversion. Notwithstanding anything herein to the contrary, if after the
        Effective Date, the VWAP for each of any 20 out of any 30 consecutive Trading
        Days, which period shall have commenced only after the Effective Date (such
        period the “Threshold Period”), exceeds $____2 (subject to adjustment
        for reverse and forward
        stock splits, stock dividends, stock combinations and other similar transactions
        of the Common Stock that occur after the Original Issue Date), the Company
        may,
        within 1 Trading Day after the end of any such Threshold Period, deliver
        a
        written notice to the Holder (a “Forced Conversion Notice” and the date
        such notice is delivered to the Holder, the “Forced Conversion Notice
        Date”) to cause the Holder to convert all or part of the then outstanding
        principal amount of this Debenture plus, if so specified in the Forced
        Conversion Notice, accrued but unpaid interest, liquidated damages and other
        amounts owing to the Holder under this Debenture, it being agreed that the
        “Conversion Date” for purposes of Section 4 shall be deemed to occur on the
        third Trading Day following the Forced Conversion Notice Date (such third
        Trading Day, the “Forced Conversion Date”).  The Company may
        not deliver a Forced Conversion Notice, and any Forced Conversion Notice
        delivered by the Company shall not be effective, unless all of the Equity
        Conditions are met (unless waived in writing by the Holder) on each Trading
        Day
        occurring during the applicable Threshold Period through and including the
        later
        of the Forced Conversion Date and the Trading Day after the date such Conversion
        Shares pursuant to such conversion are delivered to the Holder.  Any
        Forced Conversion shall be applied ratably to all Holders based on their
        initial
        purchases of Debentures pursuant to the Purchase Agreement, provided that
        any
        voluntary conversions by a Holder shall be applied against the Holder’s pro rata
        allocation, thereby decreasing the aggregate amount forcibly converted hereunder
        if only a portion of this Debenture is forcibly converted.  For
        purposes of clarification, a Forced Conversion shall be subject to all of
        the
        provisions of Section 4, including, without limitation, the provision requiring
        payment of liquidated damages and limitations on conversions.

      


      Section
        7.                                   Negative
        Covenants. As long as any portion of this Debenture remains outstanding,
        unless the holders of at least 75% in principal amount of the then outstanding
        Debentures shall have otherwise given prior written consent, the Company
        shall
        not, and shall not permit any of its subsidiaries (whether or not a Subsidiary
        on the Original Issue Date) to, directly or indirectly:

      


      a)  other
        than Permitted Indebtedness, enter into, create, incur, assume, guarantee
        or
        suffer to exist any indebtedness for borrowed money of any kind, including
        but
        not limited to, a guarantee, on or with respect to any of its property or
        assets
        now owned or hereafter acquired or any interest therein or any income or
        profits
        therefrom;

       

      
        ____________________________________

        2           250%
          of the Conversion Price on the Initial Issue Date.

      

       

      
 

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

       

       

      b)  other
        than Permitted Liens, enter into, create, incur, assume or suffer to exist
        any
        Liens of any kind, on or with respect to any of its property or assets now
        owned
        or hereafter acquired or any interest therein or any income or profits
        therefrom;

      


      c)  amend
        its
        charter documents, including, without limitation, its certificate of
        incorporation and bylaws, in any manner that materially and adversely affects
        any rights of the Holder;

      


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

      


      e)  pay
        cash
        dividends or distributions on any equity securities of the Company;

      


      f)  enter
        into any transaction with any Affiliate of the Company which would be required
        to be disclosed in any public filing with the Commission, unless such
        transaction is made on an arm’s-length basis and expressly approved by a
        majority of the disinterested directors of the Company (even if less than
        a
        quorum otherwise required for board approval); or

      


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

      


      Section
        8.                          Events
        of Default.

      


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

      


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

       

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      
 

      ii.  the
        Company shall fail to observe or perform any other covenant or agreement
        contained in the Debentures (other than a breach by the Company of its
        obligations to deliver shares of Common Stock to the Holder upon conversion,
        which breach is addressed in clause (xi) below) which failure is not cured,
        if
        possible to cure, within the earlier to occur of (A) 5 Trading Days after
        notice
        of such failure sent by the Holder or by any other Holder and (B) 10 Trading
        Days after the Company has become or should have become aware of such
        failure;

      


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

      


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

      


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

      


      vi.  the
        Company or any Subsidiary shall default on any of its obligations under any
        mortgage, credit agreement or other facility, indenture agreement, factoring
        agreement or other instrument under which there may be issued, or by which
        there
        may be secured or evidenced, any indebtedness for borrowed money or money
        due
        under any long term leasing or factoring arrangement that (a) involves an
        obligation greater than $150,000, whether such indebtedness now exists or
        shall
        hereafter be created, and (b) results in such indebtedness becoming or being
        declared due and payable prior to the date on which it would otherwise become
        due and payable;

      


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

      


      viii.  the
        Company shall be a party to any Change of Control Transaction or Fundamental
        Transaction or shall agree to sell or dispose of all or in excess of 33%
        of its
        assets in one transaction or a series of related transactions (whether or
        not
        such sale would constitute a Change of Control Transaction);

      


      ix.  the
        Initial Registration Statement (as defined in the Registration Rights Agreement)
        shall not have been declared effective by the Commission on or prior to the
        180th calendar
        day
        after the Closing Date;

       

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      
 

      x.  if,
        during the Effectiveness Period (as defined in the Registration Rights
        Agreement), either (a) the effectiveness of the Registration Statement lapses
        for any reason or (b) the Holder shall not be permitted to resell Registrable
        Securities (as defined in the Registration Rights Agreement) under the
        Registration Statement for a period of more than 20 consecutive Trading Days
        or
        30 non-consecutive Trading Days during any 12 month period; provided,
however, that if the Company is negotiating a merger, consolidation,
        acquisition or sale of all or substantially all of its assets or a similar
        transaction and, in the written opinion of counsel to the Company, the
        Registration Statement would be required to be amended to include information
        concerning such pending transaction(s) or the parties thereto which information
        is not available or may not be publicly disclosed at the time, the Company
        shall
        be permitted an additional 10 consecutive Trading Days during any 12 month
        period pursuant to this Section 8(a)(x);

      


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

      


      xii.  any
        monetary judgment, writ or similar final process shall be entered or filed
        against the Company, any subsidiary or any of their respective property or
        other
        assets for more than $50,000, and such judgment, writ or similar final process
        shall remain unvacated, unbonded or unstayed for a period of 45 calendar
        days.

      


      b)  Remedies
        Upon Event of Default. If any Event of Default occurs, the outstanding
        principal amount of this Debenture, plus accrued but unpaid interest, liquidated
        damages and other amounts owing in respect thereof through the date of
        acceleration, shall become, at the Holder’s election, immediately due and
        payable in cash at the Mandatory Default Amount.  Commencing 5 days
        after the occurrence of any Event of Default that results in the eventual
        acceleration of this Debenture, the interest rate on this Debenture shall
        accrue
        at an interest rate equal to the lesser of 18% per annum or the maximum rate
        permitted under applicable law.  Upon the payment in full of the
        Mandatory Default Amount, the Holder shall promptly surrender this Debenture
        to
        or as directed by the Company.  In connection with such acceleration
        described herein, the Holder need not provide, and the Company hereby waives,
        any presentment, demand, protest or other notice of any kind, and the Holder
        may
        immediately and without expiration of any grace period enforce any and all
        of
        its rights and remedies hereunder and all other remedies available to it
        under
        applicable law.  Such acceleration may be rescinded and annulled by
        Holder at any time prior to payment hereunder and the Holder shall have all
        rights as a holder of the Debenture until such time, if any, as the Holder
        receives full payment pursuant to this Section 8(b).  No such
        rescission or annulment shall affect any subsequent Event of Default or impair
        any right consequent thereon.

       

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      
 

      Section
        9.                         Miscellaneous.

      


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

      


      b)  Absolute
        Obligation. Except as expressly provided herein, no provision of this
        Debenture shall alter or impair the obligation of the Company, which is absolute
        and unconditional, to pay the principal of, liquidated damages and accrued
        interest, as applicable, on this Debenture at the time, place, and rate,
        and in
        the coin or currency, herein prescribed.  This Debenture is a direct
        debt obligation of the Company.  This Debenture ranks
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, reasonably satisfactory to
        the
        Company.

      


      d)  Governing
        Law.  All questions concerning the construction, validity,
        enforcement and interpretation of this Debenture shall be governed by and
        construed and enforced in accordance with the internal laws of the State
        of New
        York, without regard to the principles of conflict of laws
        thereof.  Each party agrees that all legal proceedings concerning the
        interpretation, enforcement and defense of the transactions contemplated
        by any
        of the Transaction Documents (whether brought against a party hereto or its
        respective Affiliates, directors, officers, shareholders, employees or agents)
        shall be commenced in the state and federal courts sitting in the City of
        New
        York, Borough of Manhattan (the “New York
        Courts”).  

       

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

       

      Each
        party hereto hereby irrevocably submits to the exclusive jurisdiction of
        the New
        York Courts for the adjudication of any dispute hereunder or in connection
        herewith or with any transaction contemplated hereby or discussed herein
        (including with respect to the enforcement of any of the Transaction Documents),
        and hereby irrevocably waives, and agrees not to assert in any suit, action
        or
        proceeding, any claim that it is not personally subject to the jurisdiction
        of
        such New York Courts, or such New York Courts are improper or inconvenient
        venue
        for such proceeding.  Each party hereby irrevocably waives personal
        service of process and consents to process being served in any such suit,
        action
        or proceeding by mailing a copy thereof via registered or certified mail
        or
        overnight delivery (with evidence of delivery) to such party at the address
        in
        effect for notices to it under this Debenture and agrees that such service
        shall
        constitute good and sufficient service of process and notice
        thereof.  Nothing contained herein shall be deemed to limit in any way
        any right to serve process in any other manner permitted by applicable law.
        Each
        party hereto hereby irrevocably waives, to the fullest extent permitted by
        applicable law, any and all right to trial by jury in any legal proceeding
        arising out of or relating to this Debenture or the transactions contemplated
        hereby. If either party shall commence an action or proceeding to enforce
        any
        provisions of this Debenture, then the prevailing party in such action or
        proceeding shall be reimbursed by the other party for its attorneys fees
        and
        other costs and expenses incurred in the investigation, preparation and
        prosecution of such action or proceeding.

      


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

      


      f)  Severability.  If
        any provision of this Debenture is invalid, illegal or unenforceable, the
        balance of this Debenture shall remain in effect, and if any provision is
        inapplicable to any Person or circumstance, it shall nevertheless remain
        applicable to all other Persons and circumstances.  If it shall be
        found that any interest or other amount deemed interest due hereunder violates
        the applicable law governing usury, the applicable rate of interest due
        hereunder shall automatically be lowered to equal the maximum rate of interest
        permitted under applicable law. 

       

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

       

      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.

      


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

      


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

      


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

      


      j)  Secured
        Obligation.  The obligations of the Company under this Debenture
        are secured by all assets of the Company and each Subsidiary pursuant to
        the
        Security Agreement, dated as of July __, 2007, between the Company, the
        Subsidiaries of the Company and the Secured Parties (as defined
        therein).

      


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

       

       

      
        
          
          

        

        
          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.

      


      


      
        	
                GUANGZHOU
                  GLOBAL TELECOM, INC.

                 

                 

              
	
                By 
                  /s/  Li Yankuan            

                     Name:
                  Li Yankuan

                     Title:
                  Chief Executive Officer

                Facsimile
                  No. for delivery of Notices: (732) 577-1188 c/o Richard I. Anslow
                  Esq.,
                  Anslow & Jaclin, LLP

              
	 
	 


      

       

       

      
 

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      ANNEX
        A

       

      NOTICE
        OF CONVERSION

      


      


      The
        undersigned hereby elects to
        convert principal under the 8% Senior Secured Convertible Debentures of
        Guangzhou Global Telecom, Inc., a Florida corporation (the “Company”),
        into shares of common stock (the “Common Stock”), of the Company
        according to the conditions hereof, as of the date written below.  If
        shares of Common Stock 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 specified under
        Section 4 of this Debenture, as determined in accordance with Section 13(d)
        of
        the Exchange Act.

      


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

      


      Conversion
        calculations:

      Date
        to
        Effect Conversion:

      


      Principal
        Amount of Debenture to be Converted:

      


      Payment
        of Interest in Common Stock __ yes  __ no

      If
        yes,
        $_____ of Interest Accrued on Account of Conversion at Issue.

      


      Number
        of
        shares of Common Stock to be issued:

      


      


      Signature:

      


      Name:

      


      Address
        for Delivery of Common Stock Certificates:

      


      Or

      


      DWAC
        Instructions:

      


      Broker
        No:      _____________________________________                                                

      Account
        No:  _____________________________________

       

       

       

      
        
          
          

        

        
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      Schedule
        1

       

      CONVERSION
        SCHEDULE

      


      The
        8%
        Senior Secured Convertible Debentures of Guangzhou Global Telecom, Inc.,
        a
        Florida corporation, in the aggregate principal amount of
        $____________.  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