Exhibit 10.2


     

    


    NON−CONVERTIBLE

    10%
      DEBENTURE

    


    
      	
              $2,700,000.00
                

            	
              March
                6, 2007

            


    

    


    


    FOR
      VALUE
      RECEIVED, Theater Xtreme Entertainment Group, Inc., a Florida corporation (the
      “Maker”), with its primary offices located at 250 Corporate Boulevard, Suites E
& F, Newark, Delaware 19702, promises to pay to the order of Kinzer
      Technology, LLC, or its registered assigns (the “Payee”), upon the terms set
      forth below, the principal sum of TWO MILLION SEVEN HUNDRED THOUSAND DOLLARS
      (U.S. $2,700,000.00) plus accrued interest on the unpaid principal sum
      outstanding at the rate of ten percent (10%) per annum (this “Debenture”).
      Capitalized terms used and not otherwise defined herein that are defined in
      the
      Securities Purchase Agreement, dated the date hereof (the “Purchase Agreement”)
      shall have the respective meanings given to such terms in the Purchase
      Agreement.

    


    1.  Payments.

     

    (a)  The
      full
      amount of principal and accrued interest under this Debenture shall be due
      on
      the earlier of (i) March 6, 2010 and (ii) the date that the Maker shall have
      received net proceeds, in the aggregate since the issue date of this Debenture
      and in one or more transactions during such period, from debt and/or equity
      financings, of at least Six Million Dollars ($6,000,000) (the “Maturity Date”),
      unless due earlier in accordance with the terms of this Debenture.

     

    (b)  The
      Maker
      shall pay interest to the Payee on the aggregate then outstanding principal
      amount of this Debenture at the rate of ten percent (10%) per annum, payable
      quarterly on April 1, July 1, October 1, and January 1, beginning on April
      1,
      2007, and on the Maturity Date.

     

    (c)  All
      overdue accrued and unpaid principal and interest to be paid hereunder shall
      entail a late fee at the rate of twenty-two percent (22%) per annum (or such
      lower maximum amount of interest permitted to be charged under applicable law)
      which will accrue daily, from the date such principal and/or interest is due
      hereunder through and including the date of payment. For the avoidance of doubt,
      payments will not be overdue if made within the grace period provided in Section
      2(a)(i).

     

    (d)  The
      Maker
      shall have the right to prepay this Debenture prior to the Maturity Date without
      penalty or premium.

     

    2.  Events
      of Default.

     

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

     

     

    
      
        
        

      

      
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    (i)
      any
      default in the payment of the principal of, or the interest on, this Debenture,
      as and when the same shall become due and payable or with a grace period of
      three (3) Trading Days thereafter in the case of interest payments;

     

    (ii)
      Maker shall fail to observe or perform any obligation or shall breach any term
      or provision of this Debenture and such failure or breach shall not have been
      remedied within ten (10) days after the date on which notice of such failure
      or
      breach shall have been delivered to Maker;

     

    (iii)
      Maker shall fail to observe or perform any of its obligations owed to Payee
      or
      any other covenant, agreement, representation or warranty contained in, or
      otherwise commit any breach hereunder or under any other agreement executed
      in
      connection herewith (expressly including the Purchase Agreement and the
      Warrant);

     

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

     

    (v)
      Maker
      shall default in any of its obligations under any other debenture or 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 or evidenced any indebtedness for borrowed money or money due under
      any
      long term leasing or factoring arrangement of Maker, whether such indebtedness
      now exists or shall hereafter be created and such default shall result in such
      indebtedness becoming or being declared due and payable prior to the date on
      which it would otherwise become due and payable; or

     

     

    
      
        
        

      

      
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    (vi)
      Maker shall (a) be a party to any Change of Control Transaction (as defined
      below), (b) agree to sell or dispose of more than of fifty percent (50%) of
      its
      assets in one or more transactions (whether or not such sale would constitute
      a
      Change of Control Transaction), (c) make any distribution or declare or pay
      any
      dividends (in cash or other property, other than common stock) on, or purchase,
      acquire, redeem, (not counting any such shares deemed to have been redeemed
      in a
      cashless exercise of employee stock options issued pursuant to the Maker’s Stock
      Option Plan or warrants) or retire any of Maker's capital stock, of any class,
      whether now or hereafter outstanding. “Change of Control Transaction” means the
      occurrence 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 Securities Exchange Act of 1934, as amended) of effective control (whether
      through legal or beneficial ownership of capital stock of Maker, by contract
      or
      otherwise) of in excess of fifty percent (50%) of the voting securities of
      Maker; (ii) a replacement at one time or over time of more than one-half of
      the
      members of Maker'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);
      (iii) the merger of Maker with or into another entity that is not wholly-owned
      by Maker; or (iv) the execution by Maker of an agreement to which Maker is
      a
      party or by which it is bound, providing for any of the events set forth above
      in (i), (ii) or (iii).

     

    (b)  If
      any
      Event of Default occurs, the full principal amount of this Debenture, together
      with all accrued interest thereon, shall become, at the Payee's election,
      immediately due and payable in cash. Commencing five (5) days after the
      occurrence of any Event of Default that results in the acceleration of this
      Debenture, the interest rate on this Debenture shall accrue at the rate of
      eighteen percent (18%) per annum, or such lower maximum amount of interest
      permitted to be charged under applicable law. The Payee need not provide and
      Maker hereby waives any presentment, demand, protest or other notice of any
      kind, and the Payee 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 election may be rescinded and
      annulled by Payee at any time prior to payment hereunder. No such rescission
      or
      annulment shall affect any subsequent Event of Default or impair any right
      consequent thereon.

     

    3.  Negative
      Covenants.
      As long
      as any portion of this Debenture is outstanding, the Maker will not and will
      not
      permit any of its Subsidiaries to directly or indirectly:

     

     

    
      
        
        

      

      
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    (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;

     

    (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
      certificate of incorporation, bylaws or other charter documents so as to
      adversely affect any rights of the Payee;

     

    (d)  except
      as
      contractually required by the Maker as of the date of issuance of this
      Debenture, repay, repurchase or offer to repay, repurchase or otherwise acquire
      more than a de minimis number of securities;

     

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

     

    (f)  pay
      cash
      dividends or distributions on any equity securities of the Maker.

     

    “Permitted
      Indebtedness” shall mean (a) the indebtedness of the Maker existing on the date
      of issuance of this Debenture, (b) indebtedness incurred by the Maker that
      does
      not mature or require payments of principal prior to the Maturity Date of this
      Debenture and is made expressly subordinate in right of payment to the
      indebtedness evidenced by this Debenture, as reflected in a written agreement
      acceptable to the Payee and approved by the Payee in writing, and (c) up to
      One
      Million Dollars ($1,000,000), in the aggregate, of additional unsecured
      indebtedness incurred after the date of issuance of this Debenture.

    


    “Permitted
      Lien” shall mean 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 Maker) have been
      established in accordance with generally accepted accounting principles, (b)
      liens imposed by law which were incurred in the ordinary course of business,
      such as carriers’, warehousemen’s and mechanics’ liens, statutory landlords’
liens, and other similar liens arising in the ordinary course of business,
      and
      (c) purchase money security interests for equipment used in Maker’s business,
      and (x) which 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 Maker and its consolidated subsidiaries or
      (y)
      which are being contested in good faith by appropriate proceedings, which
      proceedings have the effect of preventing the forfeiture or sale of the property
      or asset subject to such lien.

    


    4.  No
      Waiver of Payee's Rights.
      All
      payments of principal and interest shall be made without setoff, deduction
      or
      counterclaim. No delay or failure on the part of the Payee in exercising any
      of
      its options, powers or rights, nor any partial or single exercise of its
      options, powers or rights shall constitute a waiver thereof or of any other
      option, power or right, and no waiver on the part of the Payee of any of its
      options, powers or rights shall constitute a waiver of any other option, power
      or right. Maker hereby waives presentment of payment, protest, and all notices
      or demands in connection with the delivery, acceptance, performance, default
      or
      endorsement of this Debenture. Acceptance by the Payee of less than the full
      amount due and payable hereunder shall in no way limit the right of the Payee
      to
      require full payment of all sums due and payable hereunder in accordance with
      the terms hereof.

     

     

    
      
        
        

      

      
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    5.  Modifications.
      No term
      or provision contained herein may be modified, amended or waived except by
      written agreement or consent signed by the party to be bound
      thereby.

     

    6.  Cumulative
      Rights and Remedies; Usury.
      The
      rights and remedies of Payee expressed herein are cumulative and not exclusive
      of any rights and remedies otherwise available under this Debenture, or
      applicable law (including at equity). The election of Payee to avail itself
      of
      any one or more remedies shall not be a bar to any other available remedies,
      which Maker agrees Payee may take from time to time. If it shall be found that
      any interest or other amount deemed interest due hereunder shall violate
      applicable laws governing usury, the applicable rate of interest due hereunder
      shall automatically be reduced to the maximum permitted rate of interest under
      such law.

     

    7.  Collection
      Expenses.
      If
      Payee shall commence and prevail in an action or proceeding to enforce this
      Debenture, then Maker shall reimburse Payee for its costs of collection and
      reasonable attorneys’ fees incurred with the investigation, preparation and
      prosecution of such action or proceeding. 

     

    8.  Severability.
      If any
      provision of this Debenture is declared by a court of competent jurisdiction
      to
      be in any way 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. 

     

    9.  Successors
      and Assigns.
      This
      Debenture shall be binding upon Maker and its successors and shall inure to
      the
      benefit of the Payee and its successors and assigns. The term "Payee" as used
      herein, shall also include any endorsee, assignee or other holder of this
      Debenture.

     

    10.  Lost
      or Stolen Debenture.
      If this
      Debenture is lost, stolen, mutilated or otherwise destroyed, Maker shall execute
      and deliver to the Payee a new Debenture containing the same terms, and in
      the
      same form, as this Debenture. In such event, Maker may require the Payee to
      deliver to Maker an affidavit of lost instrument and customary indemnity in
      respect thereof as a condition to the delivery of any such new
      Debenture.

     

    11.  Due
      Authorization.
      This
      Debenture has been duly authorized, executed and delivered by Maker and is
      the
      legal obligation of Maker, enforceable against Maker in accordance with its
      terms. No consent of any other party and no consent, license, approval or
      authorization of, or registration or declaration with, any governmental
      authority, bureau or agency is required in connection with the execution,
      delivery or performance by the Maker, or the validity or enforceability of
      this
      Debenture other than such as have been met or obtained. The execution, delivery
      and performance of this Debenture and all other agreements and instruments
      executed and delivered or to be executed and delivered pursuant hereto or
      thereto will not violate any provision of any existing law or regulation or
      any
      order or decree of any court, regulatory body or administrative agency or the
      certificate of incorporation or by-laws of the Maker or any mortgage, indenture,
      contract or other agreement to which the Maker is a party or by which the Maker
      or any property or assets of the Maker may be bound except for those certain
      debentures made by Maker dated October 23, 2006 in the face amount of Two
      Hundred Fifty Thousand Dollars ($250,000) which shall be repaid by Maker on
      the
      date hereof (including all accrued but unpaid interest thereunder).

     

     

    
      
        
        

      

      
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    12.  Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Debenture shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each of Maker and Payee agrees that
      all
      legal proceedings concerning the interpretations, enforcement and defense of
      this Debenture shall be commenced in the state and federal courts sitting in
      Albany, New York (the "Albany Courts"). Each of Maker and Payee hereby
      irrevocably submits to the exclusive jurisdiction of the Albany Courts for
      the
      adjudication of any dispute hereunder (including with respect to the enforcement
      of this Debenture), and hereby irrevocably waives, and agrees not to assert
      in
      any suit, action or proceeding, any claim that it is not personally subject
      to
      the jurisdiction of any such court, or that such suit, action or proceeding
      is
      improper. Each of Maker and Payee 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 the other at the address
      in
      effect for notices to it under this Debenture and agrees that such service
      shall
      constitute good and sufficient service of process and notice thereof. Nothing
      contained herein shall be deemed to limit in any way any right to serve process
      in any manner permitted by law. Each of Maker and Payee 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.

     

    13.  Notice.
      Any and
      all notices or other communications or deliveries to be provided by the Payee
      hereunder, shall be in writing and delivered personally, by facsimile, sent
      by a
      nationally recognized overnight courier service or sent by certified or
      registered mail, postage prepaid, addressed to the Maker, at the address set
      forth in the first paragraph of this Debenture or such other address or
      facsimile number as the Maker may specify for such purposes by notice to the
      Payee delivered in accordance with this paragraph. Any and all notices or other
      communications or deliveries to be provided by the Maker hereunder shall be
      in
      writing and delivered personally, by facsimile, sent by a nationally recognized
      overnight courier service or sent by certified or registered mail, postage
      prepaid, addressed to the Payee at the address of the Payee appearing on the
      books of the Maker, or if no such address appears, at the principal place of
      business of the Payee. Any notice or other communication or deliveries hereunder
      shall be deemed given and effective on the earliest of (i) the date of
      transmission if delivered by hand or by telecopy that has been confirmed as
      received by 5:00 P.M. on a business day, (ii) one business day after being
      sent
      by nationally recognized overnight courier or received by telecopy after 5:00
      P.M. on any day, or (iii) five (5) business days after being sent by certified
      or registered mail, postage and charges prepaid, return receipt
      requested.

     

    14.  Required
      Notice to Payee.
      The
      Payee is to be immediately notified by the Maker, in accordance with Section
      13,
      of the existence or occurrence, of any Event of Default.

     

     

    
      
        
        

      

      
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    The
      undersigned signs this Debenture as a maker and not as a surety or guarantor
      or
      in any other capacity.

    


    


    THEATER
      XTREME ENTERTAINMENT GROUP, INC.

    


    


    By: /s/
      Scott R. Oglum

    Name:
      Scott R. Oglum

    Title:
      Chairman and CEO

    


    
 

     

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