Exhibit
10.54


 


Issuance
Date: August 22, 2006


 


NEITHER
THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE 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.


 


	No.
  IVHG-2-2 WH	$567,200




 


COROWARE
INC.


 


Amended
and Restated Secured Convertible Debenture


 


Due:
August 22, 2009


 


This
Amended and Restated Secured Convertible Debenture (including all secured convertible debentures issued in exchange, transfer or replacement
hereof, this “Debenture”) was originally issued pursuant to that certain Securities Purchase Agreement (the “Securities
Purchase Agreement”) dated July 20, 2006 in the original principal amount of $575,000 by COROWARE, INC. (f/k/a INNOVA ROBOTICS
& AUTOMATION, INC., f/k/a INNOVA HOLDINGS, INC.), a Delaware corporation (the “Company”), to YA
GLOBAL INVESTMENTS, LTD. (f/k/a CORNELL CAPITAL PARTNERS, LP) (the “Former Holder”). As of January 12, 2010 the
Former Holder sold, transferred, and assigned to Westmount Holdings International Limited (the “Holder”) the Original
Debenture (as defined herein) representing the outstanding principal balance at such time of $567,200, along with the cmrnsponding accrued
and unpaid interest thereon of $317,510. This Debenture (No. IVHG-2-2 WH) is being re-issued and registered in the name of the Holder
to reflect the $567,200 of the outstanding principal balance, along with accrued and unpaid interest thereon of $317,510 that was sold
transferred, and assigned to the Holder.


 


FOR
VALUE RECEIVED, the Company hereby promises to pay to the Holder or its successors and assigns the principal sum of $567,200 together
with accrued but unpaid interest of $317,510 as of January 12,, 2010, plus interest accruing thereafter, in accordance with the following
terms:


 


Section
I. General Terms


 


(a) Obligations
Due and Payable. Notwithstanding anything contained herein to the contrary, the Company acknowledges that the obligations evidenced
by this Debenture matured as of Augusr 22, 2009 (the “Maturity Date”) and are currently due and payable in full.


 







    	 



     


    

 


(b)
Interest. Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to fourteen percent
(14%) per annum. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted
by applicable law. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee
in whose name this Debenture is registered on the records of the Company regarding registration and transfers of Debentures in cash or
in Common Stock (valued at the Closing Bid Price on the Trading Day immediately prior to the date paid) at the option of the Company.


 


(c)
Security. This Debenture is secured by, among other things, a Security Agreement (the “Security Agreement”)
dated November 2, 2007 granted by the Company and its subsidiaries. In connection therewith, and to secure the obligations owed pursuant
to this Debenture, the Company hereby grants to the Holder a security interest in all of its Pledged Property (as defined in the Security
Agreement).


 


Section
2. Events of Default.


 


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


 


(i)
Any default in the payment of the principal of, interest on or other charges in respect of this Debenture, free of any claim of subordination,
as and when the same shall become due and payable whether upon a Mandatory Redemption (as defined in Section 3(b)), an Optional
Redemption (as defined in Section 3(a)), or the Maturity Date or by acceleration or otherwise;


 


(ii)
The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the
Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or
any subsidiary of the Company commences any other proceeding under any reorganization, ainngement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company
or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency
or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any
subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial
part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any subsidiary of
the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay,
or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary
of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts;
or the Company or any subsidiary of the Company 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 the Company or any subsidiary of the Company for the purpose of
effecting any of the foregoing;


 




    	 



     


    

 


(iii)
The Company or any subsidiary of the Company 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 secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement
of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter
be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it
would otherwise become due and payable;


 


(iv)
The Common Stock shall cease to be quoted for trading or listing for trading on any of (a) the NYSE Amex, (b) New York Stock Exchange,
(c) the Nasdaq Stock Market, or (d) the OTC Bulletin Board (“OTC”) (each, a “Primary Market”) and
shall not again be quoted or listed for trading on any Primary Market within five (5) Trading Days of such delisting; Primary Market


 


(v)
The Company or any subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section 6);


 


(vi)
The Company shall fail to file the Underlying Shares Registration Statement (as defined in Section 6) with the Commission (as
defined in Section 6), or the Underlying Shares Registration Statement shall not have been declared effective by the Commission,
in each case within the time periods set forth in the Investor Registration Rights Agreement (“Registration Rights Agreement”)
dated July 20, 2006 between the Company and the Holder;


 


(vii)
If the effectiveness of the Underlying Shares Registration Statement lapses for any reason or the Holder shall not be permitted to resell
the shares of Common Stock underlying this Debenture under the Underlying Shares Registration Statement, in either case, for more than
five (5) consecutive Trading Days or an aggregate of eight Trading Days (which need not be consecutive Trading Days);


 


(viii)
The Company shall fail for any reason to deliver Common Stock certificates to a Holder prior to the fifth (5u’) Trading Day after
a Conversion Date or after a Redemption Date if the Company chose to settle a Mandatory Redemption in shares of Common Stock, or the
Company shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with
requests for conversions, or settlements of Mandatory Redemptions in shares of Common Stock, in accordance with the terms hereof;


 


(ix)
The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within three (3) days after
notice is claimed delivered hereunder;


 




    	 



     


    

 


(x)
The Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or
default of any provision of this Debenture (except as may be covered by Section 2(a)(i) through 2(a)(ix) hereof) or any Transaction
Document (as defined in Section 6) which is not cured within a period of ten (10) days after notice of snch breach has been sent
by the Holder to the Company;


 


(b)
During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full principal amount of
this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s
election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request)
payment of such amounts in Common Stock of the Company. If an Event of Default shall occur the Conversion Price shall be reduced to $0.02
(the “Default Conversion Price”). Furthermore, in addition to any other remedies, the Holder shall have the right
(but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion
Price then in-effect. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any
kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder
and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by Holder at any time prior
to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
Upon an Event of Default, notwithstanding any other provision of this Debenture or any Transaction Document, the Holder shall have no
obligation to comply with or adhere to any limitations, if any, on the conversion of this Debenture or the sale of the Underlying Shares.


 


Section
3. Redemptions.


 


(a)
Company’s Optional Cash Redemption. The Company at its option shall have the right to redeem (“Optional Redemption”)
a portion or all amounts outstanding under this Debenture prior to the Matmity Date provided that as of the date of the Holder’s
receipt of a Redemption Notice (as defined herein) (i) the Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP,
is less than the Conversion Price, (ii) the Underlying Share Registration Statement is effective, and (iii) no Event of Default has occurred.
The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium (“Redemption Premium”)
equal to ten percent (10%) of the principal amount being redeemed, and accrned interest, (collectively referred to as the “Redemption
Amount”). In order to make a redemption, the Company shall first provide wdtten notice to the Holder of its intention to make
a redemption (the “Redemption Notice”) setting forth the amount of principal it desires to redeem. After receipt of
the Redemption Notice the Holder shall have three (3) business days to elect to convert all or any portion of this Debenture, subject
to the limitations set forth in Section 4(b). On the fourth (4th) business day after the Redemption Notice, the Company
shall deliver to the Holder the Redemption Amount with respect to the principal amount redeemed after giving effect to conversions effected
during the three (3) business day period.


 




    	 



     


    

 


(b)
Mandatory Redemptions.


 


(i)
Holder’s Right. Beginning on the earlier of (A) the first Trading Day immediately following thirty days (30) after the date
in which the Underlying Shares Registration Statement is first declared effective or (B) January I, 2007, and continuing on the first
Trading Day of each calendar month thereafter (each, a “Redemption Date”), the Holder shall have the right to force
the Company to redeem (“Mandatory Redemptions”) up to $500,000 of the remaining principal amount of the Debenture
(the “Maximum Redemption Amount”) per calendar month by transmitting a copy of a Redemption Notice in the form attached
hereto as Exhibit A (the “Redemption Notice”) requiring the Company to redeem (as set forth below in Section
3(b)(ii) hereof) the principal amount set forth in the Redemption Notice (the “Mandatory Redemption Amount”).
The Company, in its sole discretion, may increase the Maximum Redemption Amount and, upon an Event of Default the Maximum Redemption
Amount shall be automatically increased to an amount up to the remaining principal amount of the Debenture.


 


Notwithstanding
the foregoing, if (A) the Closing Bid Price of the Common Stock exceeds the Conversion Price for each of the five consecutive Trading
Days immediately prior to the Redemption Date, (B) the Underlying Share Registration Statement has been declared effective and remains
effective on the Redemption Date, and (C) no Event of Default shall have occurred, then the Holder shall not be permitted to require
the Company to make a Mandatory Redemption in that month.


 


(ii)
Company’s Settlement Options. The Company has the option, in its sole discretion, to settle Mandatory Redemptions by (A)
paying the Holder cash in an amount equal to the Mandatory Redemption Amount plus the Redemption Premium, or (B) issuing the Holder the
number of shares of Common Stock (the “Redemption Shares”) equal to the Mandatory Redemption Amount divided by a price
(the “Market Price”) equal to 95% of the lowest daily Volume Weighted Average Price of the Common Stock during the
thirty (30) trading days immediately preceding the date the Holder delivers the Redemption Notice as quoted by Bloomberg, LP provided
that in order for the Company to choose option B of this Section 3(b)(ii), (x) the Underlying Shares Registration Statement
shall have been declared effective and shall remain effective on the date of the Redemption Notice, and (Y) no Event of Default shall
have occurred.


 


(iii)
Redemption Notice Procedures.


 


(A)
On or prior to 5:00 pm New York City time on the Trading Day immediately following the Redemption Date, the Company shall return a copy
of the Redemption Notice via facsimile (or other delivery) to the Holder, which Redemption Notice shall note the Company’s choice
of settlement options with respect to such Redemption Notice and shall be signed by an officer of the Company.


 


(B)
The Company shall settle all Redemption Notices within 5 Trading Days of the Redemption Date.


 




    	 



     


    

 


(iv)
Settlement of Put Notice in shares of Common Stock. In the event that the Company chooses (if available) to settle a Redemption
Notice in shares of Common Stock pursuant to option (B) of Section 3(b)(ii), upon notice to the Holder of such selection, the
Redemption Notice shall effectively be treated the same as a Conversion Notice submitted by the Holder
and processed in accordance with the provisions for Conversion Notices set forth in Section 4. The limitations on Conversions
set forth in Section 4(b) hereof shall apply to any shares of Common Stock issued pursuant to this Section 3. In the event
that the Company fails to notify the Holder of its election of settlement options in accordance with Section 3(b)(iii) hereof,
then if applicable, the Company hereby designates all such Redemption Notices to automatically be settled in shares of Common Stock.


 


Section
4. Conversion.


 


(a)
Conversion at Option of Holder.


 


(i)
This Debenture shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time and from
time to time, after the Original Issue Date (as defined in Section 6) (subject to the limitations on conversion set forth in Section
4(b) hereof). The number of shares of Common Stock issuable upon a conversion hereunder equals the quotient obtained by dividing
(x) the outstanding amount of this Debenture to be converted by (y) the Conversion Price (as defined in Section 4(c)(i)). The
Company shall deliver Common Stock certificates to the Holder prior to the Fifth (5th) Trading Day after a Conversion Date.


 


(ii)
Notwithstanding anything to the contrary contained herein, if on any Conversion Date: (1) the number of shares of Common Stock at the
time authorized, unissued and unreserved for all purposes, or held as treasury stock, is insufficient to pay principal and interest hereunder
in shares of Common Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on a Primary Market; or (3) the Company
has failed to timely satisfy a conversion; then, at the option of the Holder, the Company, in lieu of delive1ing shares of Common Stock
pursuant to Section 4(a)(i), shall deliver, within three (3) Trading Days of each applicable Conversion Date, an amount in cash
equal to the product of the outstanding principal amount to be converted divided by the applicable Conversion Price, and multiplied by
the highest Closing Bid Price of the stock from date of the conversion notice till the date that such cash payment is made.


 


Further,
if the Company shall not have delivered any cash due in respect of conversion of this Debenture by the fifth (5th) Trading
Day after the Conversion Date, the Holder may, by notice to the Company, require the Company to issue shares of Common Stock pursuant
to Section 4(c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price
on the Conversion Date and the Conversion Price on the date of such Holder demand. Any such shares will be subject to the provisions
of this Section.


 


(iii)
The Holder shall effect conversions by delivering to the Company a completed notice in the form attached hereto as Exhibit B (a “Conversion
Notice”). The date on which a Conversion Notice is delivered is the “Conversion Date.” Unless the Holder
is converting the entire principal amount outstanding under this Debenture, the Holder is not required to physically sunender this Debenture
to the Company in order to effect conversions. Conversions hereunder shall have the effect of lowering the outstanding principal amount
of this Debenture plus all accrued and unpaid interest thereon in an amount equal to the applicable conversion. The Holder and the Company
shall maintain records showing the principal amount converted and the date of such conversions. In the event of any dispute or discrepancy,
the records of the Holder shall be controlling and determinative in the absence of manifest error.


 




    	 



     


    

 


(b)
Certain Conversion Restrictions.


 


(i)
A Holder may not convert this Debenture or receive shares of Common Stock as payment of interest hereunder to the extent such conversion
or receipt of such interest payment would result in the Holder, together with any affiliate thereof, beneficially owning (as determined
in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the then issued and
outstanding shares of Common Stock, including shares issuable upon conversion of, and payment of interest on, this Debenture held by
such Holder after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of
Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares
of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially
owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction
contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of the principal amount of this Debenture is convertible shall
be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Debenture
that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess
of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal
amount permitted to be converted on such Conversion Date in accordance with the periods described in Section 4(a)(i) and, at the
option of the Holder, either retain any principal amount tendered for conversion in excess of the permitted amount hereunder for future
conversions or return such excess principal amount to the Holder. The provisions of this Section may be waived by a Holder (but only
as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company. Other Holders shall be unaffected by
any such waiver.


 


(c)
Conversion Price and Adjustments to Conversion Price.


 


(i)
The conversion price in effect on any Conversion Date shall be equal to the lower of $0.02 per share or eighty-five percent (85%) of
the lowest Volume Weighted Average Price in the thirty (30) Trading Days prior to the Conversion Date (the “Conversion Price”).
The Conversion Price may be adjusted pursuant to the terms of this Debenture.


 


(ii)
If the Company, at any time while this Debenture is outstanding, shall (a)
pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine
(including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant
to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or
re-classification.


 




    	 



     


    

 





(iii)
If the Company, at any time while this Debenture is outstanding, shall issue rights, options or wanants to all holders of Common Stock
(and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion
Price, then the Conversion Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) 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 (excluding treasury shares, if any) 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 would purchase at the Conversion Price. 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. However, upon the expiration of any such right, option or wairnnt
to purchase shares of the Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section,
if any such right, option or warrant shall expire and shall not have been exercised, the Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting
any other adjustments in the Conversion Price made pursuant to the provisions of this Section after the issuance of such rights or warrants)
had the adjustment of the Conversion Price made upon the issuance of such rights, options or warrants been made on the basis of offering
for subscription or purchase only that number of shares of the Common Stock actually purchased upon the exercise of such rights, options
or warrants actually exercised.


 


(iv)
If the Company or any subsidiary thereof, as applicable, at any time while this Debenture is outstanding, shall issue shares of Common
Stock or rights, warrants, options or other securities or debt that are convertible into or exchangeable for shares of Common Stock (“Common
Stock Equivalents”) entitling any Person to acquire shares of Common Stock, at a price per share less than the Conversion Price
(if the holder of the Common Stock or Common Stock Equivalent 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 shai·e
which is issued in connection with such issuance, be entitled to receive shares of Common Stock at a price per share which is less than
the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price), then, at the sole option of
the Holder, the Conversion Price shall be adjusted to mirror the conversion, exchange or purchase price for such Common Stock or Common
Stock Equivalents (including any reset provisions thereof) at issue. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued. The Company shall notify the Holder in writing, no later tlian one (1) business day following the issuance
of any Common Stock or Common Stock Equivalent subject to this Section, indicating therein the applicable issuance price, or of applicable
reset price, exchange price, conversion price and other pricing terms. No adjustment under this Section 4(c)( iv) shall be made
as a result of issuances of Excluded Securities.


 







    	 



     


    

 





(v)
If the Company, at any time while this Debenture is outstanding, shall distribute to all holders of Common Stock (and not to the Holder)
evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion
Price at which this Debenture shall thereafter be convertible shall be determined by multiplying the 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 Closing Bid Price determined as of the record date mentioned above, and of which the numerator shall be such Closing Bid
Price on such record date less the then fair market value at such record date.of the portion of such assets or evidence of indebtedness
so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either
case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution
is made and shall become effective immediately after the record date mentioned above.


 


(vi)
In case of any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holder shall have the right thereafter to, at its option, (A) convert the then outstanding
principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture
into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of the Conunon Stock
following such reclassification or share exchange, and the Holder of this Debenture shall be entitled upon such event to receive such
amount of securities, cash or property as the shares of the Common Stock of the Company into which the then outstanding principal amount,
together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture could have been
converted immediately prior to such reclassification or share exchange would have been entitled, or (B) require the Company to prepay
the outstanding principal amount of this Debenture, plus all interest and other amounts due and payable thereon. The entire prepayment
price shall be paid in cash. This provision shall similarly apply to successive reclassifications or share exchanges.


 


(vii)
Whenever the Conversion Price is adjusted pursuant to Section 4 hereof, the Company shall promptly mail to the Holder a notice
setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.


 




    	 



     


    

 





(viii)
If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval
of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory
share exchange whereby the Common Stock is converted into other securities, cash or property; 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 mailed to
the Holder at its last address as it shall appear upon the stock books of the Company, at least twenty (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 ofthe
Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close,
and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange, provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity
of the corporate action required to be specified in such notice. The Holder is entitled to convert this Debenture during the 20-day calendar
period commencing the date of such notice to the effective date of the event triggering such notice.


 


(ix)
In case of any (1) merger or consolidation of the Company or any subsidiary of the Company with or into another Person, or (2) sale
by the Company or any subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related
transactions, a Holder shall have the right to (A) exercise any rights under Section 2(b), (B) convert the aggregate amount
of this Debenture then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or
series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales
would have been entitled, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a
convertible Debenture with a principal amount equal to the aggregate principal amount of this Debenture then held by such Holder,
plus all accmed and unpaid interest and other amounts owing thereon, which such newly issued convertible Debenture shall have terms
identical (including with respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights and
privileges of the Holder of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued. In the
case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible
Debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such
transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive
the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision
shall similarly apply to successive such events.


 




    	 



     


    

 


(d)
Other Provisions.


 


(i)
Conversion at the Option of the Company. The Company shall have the right to force the Holder to convert this Debenture into shares
of Common Stock in accordance with this Section 3 hereof, in amounts not to exceed $200,000 in any thirty (30) day period, after
the Original Issue Date, subject to the limitations on conversions set forth in Section 3(b) hereof and provided that the following
conditions are satisfied: (a) the Closing Bid Price of the Common Stock is greater than 110% of the Conversion Price on each of the five
Trading Days immediately preceding the Conversion Date, (b) the average daily trading volume for the Common Stock on a Primary Market
shall have been greater than $200,000 over the five Trading Days prior to the Conversion Date, (c) the Underlying Shares Registration
Statement shall be effective and the Holder shall be permitted to resell the shares of Common Stock underlying this Debenture under the
Underlying Registration Statement, and (cl) no Event of Default has occurred.


 


(ii)
The Company shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock
issuable upon conversion of all outstanding amounts under this Debenture; and within three (3) Business Days following the receipt by
the Company of a Holder’s notice that such minimum number of Underlying Shares is not so reserved, the Company shall promptly reserve
a sufficient number of shares of Common Stock to comply with such requirement.


 


(iii)
All calculations under this Section 4 shall be rounded up to the nearest $0.0001 or whole share.


 


(iv)
The Company covenants that it will at all times reserve and keep available out of its authorized and unissuecl shares of Common Stock
solely for the 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, not less than such number
of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth
in this Debenture or in the Transaction Documents) be issuable (taking into account the adjustments and restrictions set forth herein)
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 tlmt shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable
and, if the Underlying Shares Registration Statement has been declared effective under the Securities Act, registered for public sale
in accordance with such Underlying Shares Registration Statement.


 


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


 


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


 




    	 



     


    

 


(vii)
Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2
herein for the Company ‘s failure to deliver certificates representing shares of Common Stock upon conversion within the period
specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. 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.


 


(viii)
In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 4(a)(i) by the fifth (5th) Trading Day after the Conversion Date, and if after such fifth (5”‘)
Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such
Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x)
the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product
of (I) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied
by (2) the market price of the Common Stock at the time of the sale giving rise to such purchase obligation and (B) at the option of
the Holder, either reissue a Debenture in the principal amount equal to the principal amount of the attempted conversion or deliver to
the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements
under Section 4(a)(i). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted conversion of Debentures with respect to which the market price of the Underlying Shares on the date of
conversion 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.


 




    	 



     


    

 


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


 


	If
  to the Company, to:	Coroware,
  Inc.




1410
Market Street, Suite 200


Kirkland,
WA 98033


	Attention: 	Lloyd Spencer
	Telephone:	(425)818-8990
	Facsimile:	(800)
  641-2676




 


	With
  a copy to: 	Sichenzia
  Ross Friedman Ference LLP




1065
Avenue of the Americas


New
York, NY 10018


	Attention:	Gregory
  Sichenzia
	Telephone:	(212)
  930-9700
	Facsimile:	(212)930-9725
		




 


	If
  to the Holder:	Westmount
  International Holdings Limited




433
Plaza Real, Suite 275


Boca
Raton, FL 33432


Att:
Chris Alf


(561)
417-3004


 


or
at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written
notice given to each other party three (3) business days prior to the effectiveness of such change. Written confirmation of receipt (i)
given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s
facsimile machine containing the time, date, recipient facsimile number and an image of the first page of snch transmission or (iii)
provided by a nationally recognized overnight delivery service, shall be rebnttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.


 


Section
6. Definitions. For the purposes hereof, the following terms shall have the following meanings:


 


“Approved
Stock Plan” means a stock option plan that has been approved by the Board of Directors of the Company prior to the date of
the Securities Purchase Agreement, pursuant to which the Company’s securities may be issued only to any employee, officer or director
for services provided to the Company.


 


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


 




    	 



     


    

 





“Change
of Control Transaction” means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity or
“group” (as described in Rule 13d-5(b)(l) 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 fifty percent (50%) of the voting
securities of the Company (except that the acquisition of voting securities by the Holder shall not constitute a Change of Control Transaction
for purposes hereof), (b) a replacement at one time or over time of more than one-half of the members of the board of directors of the
Company 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), (c) the merger, consolidation or sale of
fifty percent (50%) or more of the assets of the Company or any subsidiary of the Company in one or a series of related transactions
with or into another entity, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (a), (b) or (c).


 


“Closing
Bid Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange
which the Common Stock is then listed as quoted by Bloomberg, LP.


 


“Commission”
means the Securities and Exchange Commission.


 


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


 


“Conversion
Date” shall mean the date upon which the Holder gives the Company notice of their intention to effectuate a conversion of this
Debenture into shares of the Company’s Common Stock as outlined herein.


 


“Exchange
Act” means the Securities Exchange Act of 1934, as amended.


 


“Excluded
Securities” means, (a) shares issued or deemed to have been issued by the Company pursuant to an Approved Stock Plan (b) shares
of Common Stock issued or deemed to be issued by the Company upon the conversion, exchange or exercise of any right, option, obligation
or security outstanding on the date prior to date of the Securities Purchase Agreement, provided that the terms of such right, option,
obligation or security are not amended or otherwise modified on or after the date of the Securities Purchase Agreement, and provided
that the conversion price, exchange price, exercise price or other purchase price is not reduced, adjusted or otherwise modified and
the number of shares of Common Stock issued or issuable is not increased (whether by operation of, or in accordance with, the relevant
governing documents or otherwise) on or after the date of the Securities Purchase Agreement, and (c) the shares of Common Stock issued
or deemed to be issued by the Company upon conversion of this Debenture.


 


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


 


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


 




    	 



     


    

 


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


 


“Trading
Day” means a day on which the shares of Common Stock are quoted on the OTC or quoted or traded on such Primary Market on which
the shares of Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are not listed or quoted,
then Trading Day shall mean a Business Day.


 


“Transaction
Documents” means the Securities Purchase Agreement or any other agreement delivered in connection with the Securities Purchase
Agreement, including, without limitation, the Security Agreement, the Subsidiary Security Agreement, the Irrevocable Transfer Agent Instructions,
and the Registration Rights Agreement.


 


“Underlying
Shares” means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance
with the terms hereof.


 


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


 


Section
7. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Company,
which are absolute and unconditional, to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place,
and rate, and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the Company. This Debenture ranks
pari passu with all other Debentures now or hereafter issued under the terms set forth herein.


 


Section
8. This Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation,
the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders
or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms
hereof.


 


Section
9. If this Debenture is mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of the mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new
Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Company.


 


Section
10. No indebtedness of the Company is senior to this Debenture in right of payment, whether with respect to interest, damages
or upon liquidation or dissolution or otherwise.


 


Section
11. This Debenture shall be governed by and construed in accordance with the laws of tl1e State of New Jersey, without giving
effect to conflicts of laws thereof. Each of the parties consents to the jurisdiction of the Superior Courts of the State of New Jersey
sitting in Hudson County, New Jersey and the U.S. District Court for the District of New Jersey sitting in Newark, New Jersey in connection
with any dispute arising under this Debenture and hereby waives, to the maximum extent permitted by law, any objection, including any
objection based on fornm non conveniens to the bringing of any such proceeding in such jurisdictions.


 




    	 



     


    

 


Section
12. If the Company fails to strictly comply with the terms of this Debenture, then the Company shall reimburse the Holder promptly
for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action
in connection with this Debenture, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in
connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which
become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the
protection, preservation or enforcement of any rights or remedies of the Holder.


 


Section
13. Any waiver by 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 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 tliat term or any other term of this Debenture. Any waiver must be in writing.


 


Section
14. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of tl1is 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 shall violate applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company
from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it
may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any
such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution
of every such as though no such law has been enacted.


 


Section
15. 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.


 


Section
16. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations
but with the same terms and conditions, as requested by the Holder surrendering the same. No service charge will be made for such registration
of transfer or exchange.


 








Section
17. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.


 


Section
18. Amended and Restated Debenture. This Debenture shall amend and restate that certain Secured Convertible Debenture dated as
of August 22, 2006 issued by the Company in favor of the Holder in the original principal amount of $575,000 (the “Original
Debenture”). This Debenture is not in any way intended to constitute a novation of the obligations and liabilities existing
under the Original Debenture or evidence payment of all or any portion of such obligations and liabilities.


 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]


 




    	 



     


    

 





IN
WITNESS WHEREOF, the Company has caused this Amended and Restated Secured Convertible Debenture to be duly executed by a duly authorized
officer as of the date set forth above.


 


	 	COMPANY:
	 	 
	 	COROWARE,I
	 	 	 
	 	By:
    	/s/
    Lloy T. Spencer
	 	Name:	Lloy
    T. Spencer
	 	Title:	Chief
    Executive Of icer


 




    	 



     


    

 














EXHIBIT
A





 


REDEMPTION
NOTICE


 


	Redemption
  Date: __________________________	Mandatory
  Redemption Amount: ______________




 


Settlement
in Common Stock


D
All Conditions to Company’s option to settle in Common Stock (Section 3(b)) are satisfied


	Mandatory
  Redemption Amount:	$_____________________________________________________
	Redemption
  Conversion Price:	$_____________________________________________________
	Number
  of shares of Common	
	Stock
  to be issued:	______________________________________________________




 


Please
issue the shares of Common Stock in the following name ancl to the following acldress:


 


	Issue
  to:	Westmount
  International Holdings Limited




433
Plaza Real, Suite 275


Boca
Raton, FL 33432


Att:
Chris Alf


(561)
417-3004


 


Broker
DTC Participant Cocle:


 


Account
Number:


 


Settlement
in Cash


	Manclatory
  Reclemption Amount: 	$,_________________________________________________
	Redemption
  Premimn:	$,_________________________________________________
	Total
  Cash Settlement:	$._________________________________________________




 


Notification
of Settlement Option


	D
  Settlement in Common Stock	Settlement
  inCash




 





	__________________________	 
	Coroware,
    Inc.	 
	By:	                                          	 
	Its:	 	 











 


**THIS
REDEMPTION NOTICE MUST BE SIGNED & RETURNED VIA FACSIMILE TO THE HOLDER AT (201) 946-0851 NO LATER THAN 5:00 N.Y.C, TIME ON THE DAY
FOLLOWING THE REDEMPTION DATE**


 







    	 



     


    

 





EXHIBITB


 


CONVERSION
NOTICE


 


(To
be executed by the Holder in order to Convert the Debenture)


 


TO:


 


The
undersigned hereby irrevocably elects to convert$____________________________of
the principal amount of the above Debenture into Shares of Common Stock of COROWARE, INC., according to the conditions stated
therein, as of the Conversion Date written below.


 





	Conversion
    Date:	____________________________________________________
	Amount
    to be converted:	$___________________________________________________
	Conversion
    Price:	$___________________________________________________
	Number
    of shares of Common	 
	Stock
    to be issued:	____________________________________________________
	Amount
    of Debenture	 
	Unconverted:	$___________________________________________________





 


Please
issue the shares of Common Stock in the following name and to the following address:


 


	Issue
  to:	Westmount
  International Holdings Limited




433
Plaza Real, Suite 275


Boca
Raton, FL 33432


Att:
Chris Alf


(561)
417-3004


 





		
	Authorized
Signature:	_____________________________________________________
	Name:	_____________________________________________________
	Title:	_____________________________________________________
	Broker DTC Participant
Code:	 
	Account
Nmnber: