Unassociated Document


    EXHIBIT
      4.2

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE"ACT") OR APPLICABLE STATE
      SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
      THE
      ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID
      ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY
      SATISFACTORY TO COUNSEL TO THE BORROWER THAT REGISTRATION IS NOT REQUIRED UNDER
      SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

     

    Original
      Issue Date: June
      30, 2007

    Initial
      Conversion Price (subject to adjustment herein): $4.00

    


    FORM
      OF SENIOR SECURED CONVERTIBLE DEBENTURE 

    DUE
      JUNE 30, 2009

    


    FOR
      VALUE
      RECEIVED, ALTERNATIVE
      CONSTRUCTION COMPANY, INC.,
      a
      Florida corporation (hereinafter called the "BORROWER" or “COMPANY”), hereby
      promises to pay to the order of a
      Company
      or its registered assigns (the "HOLDER") the sum of (U.S. ______), on June
      30, 2009 (the "MATURITY DATE"), and to pay interest (“INTEREST”) on the unpaid
      principal balance hereof at the rate of ten percent (10%) per annum (the
“INTEREST RATE”) from the Original Issue Date until the same becomes due and
      payable, whether at maturity or upon acceleration or otherwise. Interest shall
      commence accruing on the Original Issue Date, shall be computed on the basis
      of
      a 365-day year and the actual number of days elapsed and shall be payable
      monthly (as further described below), in cash or, to the extent not yet paid,
      at
      maturity or upon acceleration in accordance with the terms hereof. Payments
      of
      Interest shall be due and payable monthly, in arrears, on the first Business
      Day
      of each month after the Original Issue Date, (ii) on each Conversion Date (as
      defined in Section 2(d))(as to that principal amount then being converted),
      (iii) on each Redemption Date (as defined in Section 1 below), and (iv) on
      the
      Maturity Date (as defined above) (each such date, an “INTEREST PAYMENT DATE”).
This
      Convertible Debenture (including all Convertible Debentures issued in exchange,
      transfer or replacement hereof, this "DEBENTURE") is
      one of
      an issue of Convertible Debentures
      issued
      pursuant to the Securities Purchase Agreement (as defined in Section 1 below)
      on
      the
      Closing Date (collectively, the "DEBENTURES" and such other Convertible
      Debentures, the "OTHER DEBENTURES"). 

    


    Except
      as
      otherwise expressly provided herein, this Debenture may not be prepaid by the
      Borrower. All payments due hereunder (to the extent not converted into Common
      Stock, no
      par
      value per share, of the Borrower (the "COMMON STOCK") in accordance with the
      terms hereof) shall be made in lawful money of the United States of America
      provided that, to the extent that any accrued Interest has not been paid when
      due, at the option of the Holder, in whole or in part, such accrued and unpaid
      Interest may, upon written notice to the Borrower, be added to the principal
      amount of this Debenture, in which event Interest shall accrue thereon in
      accordance with the terms of this Debenture and such additional principal amount
      shall be convertible into Common Stock in accordance with the terms of this
      Debenture. All payments shall be made at the
      address of the Holder as set forth in the Securities Purchase Agreement (as
      defined in Section 1 below) or at such
      address as the Holder shall hereafter give to the Borrower by written notice
      made in accordance with the provisions of this Debenture. Whenever any amount
      expressed to be due by the terms of this Debenture is due on any day which
      is
      not a Business Day (as defined below), the same shall instead be due on the
      next
      succeeding day which is a Business Day. 

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    


    The
      following terms shall apply to this Debenture:

    


    Section
      1. Certain
      Definitions.
      Capitalized terms used and not otherwise defined herein that are defined in
      that
      certain Securities Purchase Agreement, of date even herewith, pursuant to which
      the Debenture was originally issued (the "SECURITIES PURCHASE AGREEMENT" or
      the
“PURCHASE AGREEMENT”), shall have the meanings given such terms in the
      Securities Purchase Agreement. For the purposes hereof, the following terms
      shall have the following meanings:

     

    "BUSINESS
      DAY" shall mean any day other than a Saturday, Sunday or a day on which
      commercial banks in the City of New York, New York are authorized or required
      by
      law or executive order to remain closed. 

     

    “BUYER(S)”
      shall have the meaning ascribed to it in the Securities Purchase
      Agreement.

     

    “CAPITALIZED
      LEASE” means, with respect to any Person, any lease of real or personal property
      by such Person as lessee which is (i) required under GAAP to be capitalized
      on
      the balance sheet of such Person or (ii) a transaction of a type commonly known
      as a “synthetic lease” (i.e.,
      a lease
      transaction that is treated as an operating lease for accounting purposes but
      with respect to which payments of rent are intended to be treated as payments
      of
      principal and interest on a loan for Federal income tax purposes).

    


    “CAPITALIZED
      LEASE OBLIGATIONS” means, with respect to any Person, obligations of such Person
      and its Subsidiaries under Capitalized Leases, and, for purposes hereof, the
      amount of any such obligation shall be the capitalized amount thereof determined
      in accordance with GAAP.

    


    “CLOSING
      DATE” means the Trading Day when all of the Holder’s Transaction Documents have
      been executed and delivered by the applicable parties thereto, and all
      conditions precedent to (i) each Holder’s obligations to pay the Purchase Price
      (ii) the Company’s obligations to deliver the Securities have been satisfied or
      waived, and (iii) Holder shall have delivered the purchase price for the
      Debenture to the Company in accordance with the Securities Purchase
      Agreement.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    


    "CLOSING
      PRICE," as of any date, means the last sale price of the Common Stock on the
      PRINCIPAL MARKET as reported by Bloomberg or, if the PRINCIPAL MARKET is not
      the
      principal trading market for such security, the last sale price of such security
      on the principal securities exchange or trading market where such security
      is
      listed or traded as reported by Bloomberg, Inc., or if no last sale price of
      such security is available on the PRINCIPAL MARKET for such security or in
      any
      of the foregoing manners, the average of the bid prices of any market makers
      for
      such security that are listed in the "pink sheets" by the National Quotation
      Bureau, Inc. If the Closing Price cannot be calculated for such security on
      such
      date in the manner provided above, the Closing Price shall be the fair market
      value as mutually determined by the Company and the Holder.

    


    “COMMON
      STOCK EQUIVALENTS” shall have the meaning ascribed to it in the Securities
      Purchase Agreement.

    


    “CONSOLIDATED
      EBITDA” means, with respect to the Company and its Subsidiaries for any period,
      the Consolidated Net Income of such Person and its Subsidiaries for such period,
      plus (i) without duplication, the sum of the following amounts of such Person
      and its Subsidiaries for such period and to the extent deducted in determining
      Consolidated Net Income of such Person for such period: (A) Consolidated Net
      Interest Expense, (B) income tax expense, (C) depreciation expense, (D)
      amortization expense, (E) all rental expense determined on a consolidated basis
      in accordance with GAAP, less cash rents due under Operating Lease Obligations,
      minus (ii) the aggregate amount of cash lease payments paid or payable during
      such period in respect of the Capitalized Leases.

     

    “CONSOLIDATED
      NET INCOME” means, with respect to any Person for any period, the net income
      (loss) of such Person and its Subsidiaries for such period, determined on a
      consolidated basis and in accordance with GAAP, but excluding from the
      determination of Consolidated Net Income (without duplication) (a) any
      extraordinary or non recurring gains or losses or gains or losses from
      Dispositions, (b) restructuring charges, (c) any tax refunds, net operating
      losses or other net tax benefits and (d) effects of discontinued
      operations.

     

    “CONSOLIDATED
      NET INTEREST EXPENSE” means, with respect to any Person, for any period, gross
      interest expense of such Person and its Subsidiaries for such period determined
      on a consolidated basis and in accordance with GAAP (excluding the interest
      component of any Capitalized Lease Obligations), less interest income determined
      on a consolidated basis and in accordance with GAAP. 

    


    "CONVERTIBLE
      SECURITIES" means any stock or securities (other than Options) directly or
      indirectly convertible into or exercisable or exchangeable for Common
      Stock.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    


    "DEBENTURES"
      shall be deemed to refer to this Debenture, all other convertible debentures
      issued pursuant to the Securities Purchase Agreement and all convertible
      debentures issued in replacement hereof or thereof or otherwise with respect
      hereto or thereto.

    


    “EFFECTIVE
      DATE” shall mean the date that the Registration Statement that the Company is
      required to file pursuant to the Registration Rights Agreement has been declared
      effective by the Securities and Exchange Commission.

    


    "ELIGIBLE
      MARKET" shall have the meaning ascribed to it in the Securities Purchase
      Agreement by and between the Company and the Holder.

    


    “EQUITY
      PAYMENT CONDITIONS” shall mean, during each Trading Day of the period in
      question, (i)
      the
      Company shall have duly honored all Conversions scheduled to occur or occurring
      by virtue of one or more Notices of Conversion, if any, (ii) all Required Cash
      Payments (as defined in Section 7(a) below) shall have been paid; (iii) no
      Events of Default have occurred that have not been cured, (iv)
      there is an effective Registration Statement pursuant to which the Holder is
      permitted to utilize the prospectus thereunder to resell all of the Conversion
      Shares, Warrant Shares and other shares issued or issuable pursuant to the
      Transaction Documents (and the Company believes, in good faith, that such
      effectiveness will continue uninterrupted for the foreseeable future or such
      shares may be resold, without restriction, pursuant to Rule 144(k)), (v) the
      Common Stock is trading on an Eligible Market and all of the shares issuable
      pursuant to the Transaction Documents are listed for trading on an Eligible
      Market (and the Company believes, in good faith, that trading of the Common
      Stock on a Principal Market will continue uninterrupted for the foreseeable
      future), (vi) 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, (vii) there has been
      no
      public announcement of a pending or proposed Major Transaction or Change of
      Control Transaction that has not been consummated, (viii) all of the shares
      issued or issuable pursuant to the transaction proposed would not violate the
      Beneficial Ownership Limitation, and (ix) the daily trading volume of the Common
      Stock for each such Trading Day exceeds 100,000 shares and the daily trading
      dollar volume of the Common Stock for each such Trading Day exceeds
      $100,000.

    


    “FILING
      DEADLINE” shall have the meaning ascribed to it in the Registration Rights
      Agreement.

    


    “HIGHLY
      DILUTIVE EQUITY SECURITIES” shall have the meaning ascribed to it in the
      Securities Purchase Agreement.

    


    “HOLDERS”
      shall mean the Holder, and the holders of Other Debentures issued pursuant
      to
      the Securities Purchase Agreement.

    


    "HOLDER
      PRO RATA AMOUNT" means a fraction (i) the numerator of which is the Principal
      amount of this Note on the Closing Date and (ii) the denominator of which is
      the
      aggregate principal amount of all Notes issued to the initial purchasers
      pursuant to the Securities Purchase Agreement on the Closing Date.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    


    "INDEBTEDNESS"
      shall have the meaning ascribed to it in the Securities Purchase Agreement.
      

    


    “INDEBTEDNESS
      LOCK-UP EXCEPTIONS” means (a) Indebtedness evidenced by the Debentures or
      issuances to the Holders as contemplated by the Transaction Documents; (b)
      Indebtedness existing on the Closing Date, provided that the principal amount
      thereof is not increased or the terms thereof are not otherwise amended or
      modified after the Closing Date; and (c) Indebtedness to trade creditors
      incurred in the ordinary course of business. For purposes of clarification,
      it
      is expressly agreed and understood that, except for the exception to the
      Indebtedness Negative Covenant specified in Section 5(e)(i) hereof, the
      classification of Indebtedness as an “Indebtedness Lock-Up Exception” does
not
      cause
      such Indebtedness to be exempted from the Subsequent Issuance Adjustments (as
      defined in Section 3(e) below and as defined in the Warrants), the Capital
      Raising Limitations as to Highly Dilutive Equity Securities specified in Section
      4(e)(ii) of the Securities Purchase Agreement, the Buyer’s Rights of
      Participation (as defined in Section 4(e)(iii) of the Securities Purchase
      Agreement) or from any other provisions of the Transaction
      Documents.

    


    "MARKET
      PRICE," as of any date, means the Volume Weighted Average Price (as defined
      herein) of the Common Stock during the five (5) consecutive Trading Day period
      immediately preceding the date in question.

    


    "OPTIONS"
      means any rights, warrants or options to subscribe for or purchase Common Stock
      or Convertible Securities.

    


    “ORIGINAL
      ISSUE DATE” shall mean the date of the first issuance of any Debenture
      regardless of the number of transfers of any particular Debenture.

    


    "PARENT
      ENTITY" of a Person means an entity that, directly or indirectly, controls
      the
      applicable Person and whose common stock or equivalent equity security is quoted
      or listed on an Eligible Market, or, if there is more than one such Person
      or
      Parent Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

    


    “PERMITTED
      LIENS” shall have the meaning ascribed to it in the Securities Purchase
      Agreement.

    


    "PERSON"
      means an individual, a limited liability company, a partnership, a joint
      venture, a corporation, a trust, an unincorporated organization, any other
      entity and a government or any department or agency thereof.

    


    “PRINCIPAL
      MARKET” shall have the meaning ascribed to it in the Securities Purchase
      Agreement by and between the Company and the Holder.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    


    “PURCHASE
      PRICE” shall mean, as to each Buyer, the amount to be paid for the Debenture and
      accompanying Warrants purchased pursuant to the Securities Purchase Agreement,
      as specified in the Securities Purchase Agreement.

    


    “REDEMPTION”
      shall mean any redemption of the Debenture hereunder, including but not limited
      to a Redemption Upon Major Transaction, a Company Redemption, a Prepayment
      Redemption, a Mandatory Redemption, and an Automatic Redemption.

    


    “REDEMPTION
      DATE” shall mean the date of any Redemption of the Debenture
      hereunder.

    


    “REGISTRATION
      RIGHTS AGREEMENT” shall have the meaning ascribed to it in the Securities
      Purchase Agreement.

    


    “REGISTRATION
      STATEMENT(S)” shall have the meaning ascribed to it in the Registration Rights
      Agreement.

    


    “REQUIRED
      HOLDERS” shall mean Holders holding at least 75% of the then outstanding
      principal amount of Debentures.

    


    “SHARES”
      shall mean the shares of Common Stock issuable upon Conversion of the
      Debentures. 

    


    “SUBSIDIARIES”
      shall have the meaning ascribed to it in the Securities Purchase
      Agreement.

    


    "TRADING
      DAY" shall mean any day on which the Common Sock is traded for any period on
      the
      PRINCIPAL MARKET, or on the principal securities exchange or other securities
      market on which the Common Stock is then being traded. 

    


    “TRANSACTION
      DOCUMENTS” shall have the meaning ascribed to it in the Securities Purchase
      Agreement.

    


    The
      "VOLUME WEIGHTED AVERAGE PRICE" or “VWAP” for any security as of any date means
      the volume weighted average sale price on the Principal Market, as reported
      by,
      or as calculated based upon data reported by, Bloomberg Financial Markets or
      an
      equivalent, reliable reporting service mutually acceptable to and hereafter
      designated by holders of a majority in interest of the Debentures and the
      Company ("BLOOMBERG") or, if no volume weighted average sale price is reported
      for such security, then the last closing trade price of such security as
      reported by Bloomberg, or, if no last closing trade price is reported for such
      security by Bloomberg, the average of the closing trade prices of any market
      makers for such security that are listed in the "pink sheets" by the National
      Quotation Bureau, Inc. If the Volume Weighted Average Price is to be determined
      over a period of more than one Trading Day, then “VOLUME WEIGHTED AVERAGE PRICE”
for the period shall mean the volume weighted average of the daily Volume
      Weighted Average Prices, determined as set forth above, for each Business Day
      during the period. If the volume weighted average price cannot be calculated
      for
      such security on such date in the manner provided above, the volume weighted
      average price shall be the fair market value as mutually determined by the
      Company and the holders of a majority in interest of the Debentures being
      converted for which the calculation of the volume weighted average price is
      required in order to determine the Conversion Price of such Debentures.


     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    


    Section
      2. Conversion.
      

    


    (a)
      Conversion
      Right.

     

    (i)  Conversion
      Timing and Amount. Subject
      to the limitations on Conversion contained herein, the record Holder of this
      Debenture shall have the right (a “CONVERSION RIGHT”) from time to time, and at
      any time on or after the Original Issue Date hereof to convert any of all of
      the
      Debentures (plus
      any
      accrued and unpaid Interest, Failure Payments (as defined in Section 6(b))
      and
      other Required Cash Payments)
      into
      fully paid and non-assessable shares of Common Stock, or any shares of capital
      stock or other securities of the Company into which such Common Stock shall
      hereafter be changed or reclassified, at the Conversion Price (as defined in
      Section 2(b) below, subject to adjustment as provided herein) determined as
      provided herein (a "CONVERSION"). The Conversion Rights set forth in this
      Section 2 shall remain in full force and effect immediately from the Original
      Issue Date until the Debenture is paid in full regardless of the occurrence
      of
      an Event of Default.

     

    (ii) 
      Limitation On Conversion. Notwithstanding
      the above, in no event shall the Holder be entitled to convert any portion
      of
      this Debenture in excess of that portion of this Debenture upon Conversion
      of
      which the sum of (1) the number of shares of Common Stock beneficially owned
      by
      the Holder and any applicable affiliates (other than shares of Common Stock
      which may be deemed beneficially owned through the ownership of the unconverted
      portion of the Debenture, the unexercised Warrants or the unexercised or
      unconverted portion of any other security of the Company subject to a limitation
      on Conversion or exercise analogous to the limitations contained herein)(the
      “BENEFICIALLY OWNED SHARES”) and (2) the number of shares of Common Stock
      issuable upon the Conversion of the portion of the Debenture with respect to
      which the determination of this proviso is being made, would result in
      beneficial ownership by the Holder and its affiliates of more than 4.99% (the
      “MAXIMUM PERCENTAGE”) 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”). For purposes of the proviso to the immediately preceding
      sentence, beneficial ownership shall be determined by the Holder in accordance
      with Section 13(d) of the Exchange Act and Regulations 13D-G thereunder, except
      as otherwise provided in clause (1) of such proviso in the immediately preceding
      sentence, and PROVIDED THAT the Beneficial Ownership Limitation shall be
      conclusively satisfied if the applicable Notice of Conversion includes a signed
      representation by the Holder, if requested by the Company, that the issuance
      of
      the shares in such Notice of Conversion will not violate the Beneficial
      Ownership Limitation, and the Company shall not be entitled to require
      additional documentation of such satisfaction. 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    


    The
      parties agree that, in the event that the Company receives any tender offer
      or
      any offer to enter into a merger with another entity whereby the Company shall
      not be the surviving entity (an “OFFER”) or in the event that Default Shares are
      being issued to the Holder pursuant to Section 8 hereof, then the Maximum
      Percentage shall be automatically increased immediately after such Offer to
      read
“9.99%” each place that “4.99%” occurs in the first paragraph of this Section
      2(a)(ii) above. Notwithstanding the above, Holder shall retain the option to
      either exercise or not exercise its option(s) to acquire Common Stock pursuant
      to the terms hereof after an Offer. The Beneficial Ownership Limitation
      provisions of this Section 2(a)(ii) may be waived by such Holder, at the
      election of such Holder, upon not less than 61 days’ prior notice to the
      Company, to change the Beneficial Ownership Limitation to 9.99% of the number
      of
      shares of the Common Stock outstanding immediately after giving effect to the
      issuance of shares of Common Stock upon conversion of this Debenture held by
      the
      Holder and the provisions of this Section 4(c) shall continue to apply. Upon
      such a change by a Holder of the Beneficial Ownership Limitation from such
      4.99%
      limitation to such 9.99% limitation, the Beneficial Ownership Limitation may
      not
      be further waived by such Holder. The provisions of this paragraph shall be
      construed and implemented in a manner otherwise than in strict conformity with
      the terms of this Section 2(ii) 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. 

     

    (iii)  Maximum
      Exercise of Rights.
      In the
      event the Holder notifies the Company that the exercise of the rights described
      in this Section 2 or the issuance of Interim Conversion Shares (as defined
      in
      Section 3(e)(iii) hereof), Payment Shares (as defined in the Securities Purchase
      Agreement) or other shares of Common Stock issuable to the Holder under the
      terms of the Transaction Documents (collectively, “ISSUABLE SHARES”) would
      result in the issuance of an amount of Common Stock that would exceed the
      maximum amount that may be issued to a Holder calculated in the manner described
      in Section 2(a)(ii) of this Agreement, then the issuance of such additional
      shares of Common Stock to such Holder will be deferred in whole or in part
      until
      such time as such Holder is able to beneficially own such Common Stock without
      exceeding the maximum amount set forth calculated in the manner described in
      Section 2(a)(ii) of this Agreement. The determination of when such Common Stock
      may be issued without violating the Beneficial Ownership Limitations shall
      be
      made by each Holder as to only such Holder.

     

    (iv)  Calculation
      of Conversion Amount.
      The
      number of shares of Common Stock to be issued upon each Conversion of this
      Debenture shall be determined by dividing the Conversion Amount (as defined
      herein) by the applicable Conversion Price. The term "CONVERSION AMOUNT" means,
      with respect to any Conversion of the Debenture, the sum of (1) the principal
      amount of the Debenture to be converted in such Conversion, PLUS (2) all accrued
      and unpaid Interest thereon for the period beginning on the Original Issue
      Date
      and ending on the Conversion Date (as defined in Section 2(d) hereof), PLUS
      (3)
      at the Holder's option, any Failure Payments and other Required Cash Payment
      owed to the Holder. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    


    (b) Conversion
      Price.

    


    (i) Initial
      Conversion Price.
      The
      "CONVERSION PRICE" shall initially equal $4.00
      (the
      "INITIAL CONVERSION PRICE") (subject to resets and adjustments pursuant to
      the
      terms of this Debenture and subject to equitable adjustments for stock splits,
      stock dividends or rights offerings by the Company relating to the Company's
      securities or the securities of any Subsidiary of the Company, combinations,
      recapitalization, reclassifications, extraordinary distributions and similar
      events).

    


    (ii)
      Dispute
      Resolution.
      In the
      case of a dispute as to the determination of the Closing Price or the Volume
      Weighted Average Price or the arithmetic calculation of the Conversion Price,
      Conversion Price Adjustment, Failure Payment Amount, Required Cash Payment
      amount, Interest or dividend calculation, or any redemption price, redemption
      amount, Default Amount or similar calculation, or the determination of whether
      or not a Dilutive Issuance, a Milestone Failure or an issuance of Highly
      Dilutive Equity Securities (as defined in the Securities Purchase Agreement)
      has
      occurred, the Company shall submit the disputed determinations or arithmetic
      calculations via facsimile within two (2) Business Days of receipt, or deemed
      receipt, of the Conversion Notice, any redemption notice, Default Notice or
      other event giving rise to such dispute, as the case may be, to the Holder.
      If
      the Holder and the Company are unable to agree upon such determination or
      calculation within two (2) Business Days of such disputed determination or
      arithmetic calculation being submitted to the Holder, then the Company shall,
      within two (2) Business Days submit via facsimile (a) the disputed determination
      of the Closing Price or the Volume Weighted Average Price to an independent,
      reputable investment bank selected by the Company and approved by the Holder,
      which approval shall not be unreasonably withheld, (b) the disputed arithmetic
      calculation of the Conversion Price, Conversion Price Adjustment or any
      redemption price, redemption amount or Default Amount to the Company’s
      independent, outside accountant or (c) the disputed facts regarding the
      occurrence of a Dilutive Issuance, Milestone Failure or issuance of Highly
      Dilutive Equity Securities to an expert attorney from a nationally recognized
      outside law firm (having at least 100 attorneys and having with no prior
      relationship with the Company) selected by the Company and approved by the
      Lead
      Investor (as defined in the Securities Purchase Agreement). The Company, at
      the
      Company’s expense, shall cause the investment bank, the accountant, the law
      firm, or other expert, as the case may be, to perform the determinations or
      calculations and notify the Company and the Holder of the results no later
      than
      five (5) Business Days from the time it receives the disputed determinations
      or
      calculations. Such investment bank’s or accountant’s determination or
      calculation, as the case may be, shall be binding upon all parties absent
      demonstrable error (collectively, the “DISPUTE RESOLUTION
      PROCEDURES”).

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    (c)
      Reservation
      of Shares.
      

    


    (i)
      Increase
      and Maintenance of Authorized and Reserved Amount. The
      Company represents that the aggregate number of its authorized shares of Common
      Stock is at least 100,000,000
      shares
      and covenants that it will initially reserve (the “INITIAL SHARE RESERVATION”)
      from its authorized and unissued Common Stock a number of shares of Common
      Stock
      equal to at least 150%
      of the
      initial principal amount of this Debenture, divided by the Conversion Price
      in
      effect on the Original Issue Date of this Debenture, free from preemptive
      rights, to provide for the issuance of Common Stock upon the Conversion of
      this
      Debenture. Company further covenants that, beginning on the Original Issue
      Date
      hereof, and continuing until all of the Debentures have been converted, redeemed
      or otherwise satisfied in accordance with their terms, the Company will reserve
      from its authorized and unissued Common Stock a sufficient number of shares
      (the
“RESERVED AMOUNT”), free from preemptive rights, to provide for the issuance of
      Common Stock upon the full Conversion of this Debenture. The Reserved Amount
      shall be increased from time to time in accordance with the Company's
      obligations pursuant to Section 4(h) of the Securities Purchase Agreement.
      The
      Company represents that upon issuance, such Shares will be duly and validly
      issued, fully paid and non-assessable. In addition, if the Company shall issue
      any securities or make any change to its capital structure which would change
      the number of shares of Common Stock into which the Debenture shall be
      convertible at the then applicable Conversion Price, the Company shall at the
      same time make proper provision so that thereafter there shall be a sufficient
      number of shares of Common Stock authorized and reserved, free from preemptive
      rights, for Conversion of the outstanding portion of this
      Debenture.

    


    (ii)
      Conversion
      Failure. If,
      at
      any time a Holder of this Debenture submits a Notice of Conversion, and the
      Company does not have sufficient authorized but unissued shares of Common Stock
      available to effect such Conversion in accordance with the provisions of this
      Section 2 (a "CONVERSION FAILURE"), the Company shall issue to the Holder all
      of
      the shares of Common Stock which are then available to effect such Conversion.
      The portion of the Debenture which the Holder included in its Notice of
      Conversion and which exceeds the amount which is then convertible into available
      shares of Common Stock (the "EXCESS AMOUNT") shall, notwithstanding anything
      to
      the contrary contained herein, not be convertible into Common Stock in
      accordance with the terms hereof until (and at the Holder's option at any time
      after) the date additional shares of Common Stock are authorized and duly
      reserved for issuance by the Company to permit such Conversion. 

    


    The
      Company shall use its best efforts to authorize and reserve a sufficient number
      of shares of Common Stock as soon as practicable following the earlier of (i)
      such time that the Holder notifies the Company or that the Company otherwise
      becomes aware that there are or likely will be insufficient authorized, reserved
      and unissued shares to allow full Conversion of the outstanding amount of the
      Debenture, based upon the Holder’s Pro Rata Reserved Amount (as defined below)
      and (ii) a Conversion Failure. The Company shall send notice to the Holder
      of
      the authorization of additional shares of Common Stock, the Authorization Date
      and the amount of the Holder's accrued Failure Payments. 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    


    The
      Reserved Amount shall be allocated pro rata among the Holders of Debentures
      based on the original Principal Amount of the Debenture initially issued to
      each
      Holder divided by the aggregate principal amount of all Debentures issued to
      all
      Buyers in the Offering (where the “OFFERING” shall mean the offering of
      debentures pursuant to the Securities Purchase Agreement)(the “PRO RATA RESERVED
      AMOUNT”). In the event a holder shall sell or otherwise transfer such Holder’s
      Debenture, each transferee shall immediately be allocated a pro rata portion
      of
      such transferor’s Reserved Amount. Any portion of the Reserved Amount which
      remains allocated to any Person or entity which does not hold any Debenture
      shall be allocated to the remaining holders of Debentures, pro rata based on
      the
      Holder’s Fully Diluted Holdings at the time of such allocation. 

    


    (d)
      Method
      of Conversion.

    


    (i)
      Mechanics
      of Conversion.
      Subject
      to Section 2(a) and the other provisions of this Debenture, this Debenture
      may
      be converted into Common Stock by the Holder in whole or in part at any time
      and
      from time to time after the Original Issue Date, by (A) submitting to the
      Company a duly executed notice of Conversion in the form attached hereto as
      Exhibit
      A
      ("NOTICE
      OF CONVERSION") by facsimile dispatched prior to Midnight, New York City time
      (the "CONVERSION NOTICE DEADLINE") on the date specified therein as the
      Conversion Date (as defined herein) (or by other means resulting in written
      notice to the Company on the date specified therein as the Conversion Date)
      to
      the office of the Company; which notice shall specify the principal amount
      of
      this Debenture to be converted (plus the dollar amount of any accrued but unpaid
      Interest, Failure Payments, and other Required Cash Payments that the Holder
      elects to convert into Common Stock), the applicable Conversion Price, and
      the
      number of shares of Common Stock issuable upon such Conversion; and (B) subject
      to Section 2(d)(vi), surrendering the certificate (“DEBENTURE CERTIFICATE”)
      representing a share Debenture at the principal office of the
      Company.

    


    (ii)
      Conversion Date.
      The
      "CONVERSION DATE" shall be the date specified in the Notice of Conversion,
      provided that the Notice of Conversion is submitted by facsimile (or by other
      means resulting in, or reasonably expected to result in, written notice) to
      the
      Company or its transfer agent (“TRANSFER AGENT”) before Midnight, New York City
      time, on the date so specified, otherwise the Conversion Date shall be the
      date
      that the Notice of Conversion (or a facsimile thereof) is first received by
      the
      Company or its Transfer Agent. The Person or Persons entitled to receive the
      shares of Common Stock issuable upon Conversion shall be treated for all
      purposes as the record holder or holders of such securities as of the Conversion
      Date.

    


    (iii)
      Delivery
      of Common Stock Upon Conversion. Upon
      submission of a Notice of Conversion, the Company shall, by no later than the
      third (3rd) Business Day after the Conversion Date (the "CONVERSION SHARES
      DELIVERY DEADLINE"), issue and deliver (or cause its Transfer Agent so to issue
      and deliver) in accordance with the terms hereof and the Securities Purchase
      Agreement to or upon the order of the Holder that number of shares of Common
      Stock (“CONVERSION SHARES”) for the principal amount of this Debenture (plus the
      dollar amount of any accrued but unpaid Interest, Failure Payments, and other
      Required Cash Payments that the Holder elects to convert into Common Stock)
      converted as shall be determined in accordance herewith. Upon the Conversion
      of
      this Debenture, the Company shall, at its own cost and expense, take all
      necessary action, including obtaining and delivering an opinion of counsel
      to
      assure that the Company's Transfer Agent shall issue stock certificates in
      the
      name of Holder (or its nominee) or such other Persons as designated by Holder
      and in such denominations to be specified at Conversion representing the number
      of shares of Common Stock issuable upon such Conversion. The Company warrants
      that no instructions other than these instructions have been or will be given
      to
      the Transfer Agent of the Common Stock and that the Shares will be free-trading,
      and freely transferable, and will not contain a legend restricting the resale
      or
      transferability of the Shares provided the Shares are being sold pursuant to
      an
      effective registration statement covering the Shares or are otherwise exempt
      from registration.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    


    (iv)
      Delivery
      Failure. In
      addition to any other remedies which may be available to the Holder, in the
      event that the Company fails for any reason to effect delivery of the Conversion
      Shares by the Conversion Share Delivery Deadline, or fails to effect delivery
      of
      Default Shares by the Default Share Delivery Deadline (as defined in Section
      8
      hereof) (each, a “DELIVERY FAILURE”), the Holder, at its option, will be
      entitled to revoke all or part of the relevant Notice of Conversion (a
“CONVERSION REVOCATION”) or rescind all or part of the notice of Mandatory
      Redemption (a “REDEMPTION REVOCATION”), as applicable, by delivery of a notice
      to such effect to the Company whereupon the Holder shall regain the rights
      of a
      Holder of this Debenture with respect to such unconverted portions of this
      Debenture and the Company and the Holder shall each be restored to their
      respective positions immediately prior to the delivery of such notice, except
      that the liquidated damages described herein shall be payable through the date
      notice of revocation or rescission is given to the Company. 

    


    (v)
      Obligation
      of Company to Deliver Common Stock. Upon
      receipt by the Company of a Notice of Conversion, the Holder shall be deemed
      to
      be the holder of record of the Common Stock issuable upon such Conversion,
      and,
      except as otherwise provided in this Debenture, unless the Company defaults
      on
      its obligations hereunder, all rights with respect to the portion of this
      Debenture being so converted shall forthwith terminate except the right to
      receive the Common Stock or other securities, cash or other assets, as herein
      provided, on such Conversion. If the Holder shall have given a Notice of
      Conversion as provided herein, the Company's obligation to issue and deliver
      the
      certificates for Common Stock shall be absolute and unconditional, irrespective
      of the absence of any action by the Holder to enforce the same, any waiver
      or
      consent with respect to any provision thereof, the recovery of any judgment
      against any Person or any action to enforce the same, any failure or delay
      in
      the enforcement of any other obligation of the Company to the holder of record,
      or any setoff, counterclaim, recoupment, limitation or termination, or any
      breach or alleged breach by the Holder of any obligation to the Company, and
      irrespective of any other circumstance which might otherwise limit such
      obligation of the Company to the Holder in connection with such Conversion.
      The
      provisions of this subsection are subject to the provisions of Section 2(d)(iv)
      hereof. 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    


    (vi)
      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
      Conversion Shares Deliver Deadline pursuant to Section 2(d)(iii), and if after
      such Conversion Shares Deliver Deadline 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 such Holder of the Conversion Shares which the Holder
      was entitled to receive upon the conversion relating to such Conversion Shares
      Deliver Deadline (a “Buy-In”), then the Company shall (A) pay in cash to the
      Holder (in addition to any other remedies available to or elected by the Holder)
      the amount by which (x) the Holder’s total purchase price (including any
      brokerage commissions) for the Common Stock so purchased exceeds (y) the product
      of (1) the aggregate number of shares of Common Stock that such Holder was
      entitled to receive from the conversion at issue multiplied by (2) the actual
      sale price at which the sell order giving rise to such purchase obligation
      was
      executed (including any brokerage commissions) and (B) at the option of the
      Holder, either reissue (if surrendered) Preferred Stock in a Stated Value equal
      to the Stated Value of the attempted conversion or deliver to the Holder the
      number of shares of Common Stock that would have been issued if the Company
      had
      timely complied with its delivery requirements under Section 4(d)(ii). For
      example, if the Holder purchases Common Stock having a total purchase price
      of
      $11,000 to cover a Buy-In with respect to an attempted conversion of Preferred
      Stock 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 Preferred Stock as required pursuant
      to the terms hereof.

    


    (vii) Surrender
      of Debenture Certificates Upon Conversion; Book-Entry.
      Notwithstanding anything to the contrary set forth herein, upon Conversion
      of
      this Debenture in accordance with the terms hereof, the Holder shall not be
      required to physically surrender the Debenture Certificate to the Company unless
      all of this Debenture is converted, in which case such Holder shall deliver
      the
      Debenture Certificate being converted to the Company promptly following the
      Conversion Date at issue. The Holder and the Company shall maintain records
      showing the amount of this Debenture that is so converted and the dates of
      such
      Conversions or shall use such other method, reasonably satisfactory to the
      Holder and the Company, so as not to require physical surrender of this
      Debenture Certificate upon each such Conversion. In the event of any dispute
      or
      discrepancy, such records of the Company shall be controlling and determinative
      in the absence of manifest error. 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    


    (viii)
      No
      Fractional Shares.
      If any
      Conversion of this Debenture would result in a fractional share of Common Stock
      or the right to acquire a fractional share of Common Stock, such fractional
      share shall be disregarded and the number of shares of Common Stock issuable
      upon Conversion of this Debenture shall be the next higher number of
      shares.

    


    (ix)
      Lost
      or Stolen Debenture Certificates. Upon
      receipt by the Company of evidence of the loss, theft, destruction or mutilation
      of a Debenture Certificate, and (in the case of loss, theft or destruction)
      of
      indemnity reasonably satisfactory to the Company, and upon surrender and
      cancellation of the Debenture Certificate, if mutilated, the Company shall
      execute and deliver a new Debenture Certificate of like tenor and
      date.

    


    (e)
       Legends.
      The
      Holder understands that the Debenture Certificates and, until such time as
      Conversion Shares and any other Issued Common Shares (as defined in the
      Securities Purchase Agreement) have been registered under the 1933 Act as
      contemplated by the Registration Rights Agreement or otherwise may be sold
      pursuant to Rule 144 without any restriction as to the number of securities
      as
      of a particular date that can then be immediately sold, the Conversion Shares
      and any other Issued Common Shares may bear a restrictive legend in
      substantially the following form (and a stop-transfer order may be placed
      against transfer of the certificates for such Securities):

    


    "The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended, or applicable state securities laws. The
      securities may not be sold, transferred or assigned in the absence of an
      effective registration statement for the securities under said Act, or an
      opinion of counsel, in form, substance and scope reasonably satisfactory to
      counsel to the Company, that registration is not required under said Act or
      unless sold pursuant to Rule 144 under said Act."

    


    (i)
      Removal
      of Legends. The
      Company will issue and deliver the Conversion Shares without restrictive legends
      (including the legend set forth above in this Section 2(e)), and will remove
      any
      restrictive legends on any Conversion Shares that contain restrictive legends
      (including the legend set forth above in this Section 2(e)), in each case when
      and as required under Section 6(a) of the Securities Purchase Agreement. The
      Holder agrees to sell all Securities, including those represented by a
      certificate(s) from which the legend has been removed, in compliance with
      applicable prospectus delivery requirements, if any. 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    


    (ii)
       DTC
      Delivery. In
      lieu
      of delivering physical certificates representing the unlegended shares of Common
      Stock (the “UNLEGENDED SHARES”), provided the Holder’s Transfer Agent is
      participating in the Depository Trust Company ("DTC") Fast Automated Securities
      Transfer ("FAST") program, upon request of the Holder, so long as the
      certificates therefor do not bear a legend and the Holder is not obligated
      to
      return such certificate for the placement of a legend thereon, the Company
      shall
      cause its Transfer Agent to electronically transmit the Unlegended Shares to
      the
      Holder by crediting the account of the Holder's prime broker with DTC through
      its Deposit Withdrawal Agent Commission ("DWAC") system. The time periods for
      delivery and penalties described herein shall likewise apply to the electronic
      transmittals described herein. 

    


    (f)
      Status
      as Shareholder.
      Upon
      submission of a Notice of Conversion by a Holder, (i) the shares covered thereby
      (other than the shares, if any, which cannot be issued because their issuance
      would exceed such Holder's allocated portion of the Reserved Amount) shall
      be
      deemed converted into shares of Common Stock and (ii) the Holder's rights as
      a
      Holder of such converted portion of this Debenture shall cease and terminate,
      excepting only the right to receive certificates for such shares of Common
      Stock
      and to any remedies provided herein or in the Transaction Documents or otherwise
      available at law or in equity to such Holder because of a failure by the Company
      to comply with the terms of this Debenture, including but not limited to the
      remedies provided in Section 2(d)(iv), Section 6 and Section 8 hereof.
      Notwithstanding the foregoing, if a Holder initiates a Conversion Revocation
      or
      a Redemption Revocation pursuant to Section 2(d)(iv) hereof, the Holder shall
      regain the rights of a Holder of this Debenture with respect to such unconverted
      portion of this Debenture as specified in Section 2(d)(iv) and the Company
      shall, as soon as practicable, return such unconverted portion of this Debenture
      to the Holder or, if the Debenture Certificate has not been surrendered, adjust
      its records to reflect that such portion of the Debenture has not been
      converted. In all cases, the Holder shall retain all of its rights and remedies
      (including, without limitation, the right to receive Failure Payments pursuant
      to Section 6 to the extent required thereby for such Event of Failure and any
      subsequent Event of Failure and the right to receive the Default Amount pursuant
      to Section 8 to the extent required thereby) for the Company's failure to
      convert this Debenture.

    


    (g)
       [Intentionally
      Left Blank]. 

     

    Section
      3. Effect
      of Certain Events.

    


    (a) Rights
      Upon Major Transaction or Change of Control Transaction. 

    


    (i)
      Major
      Transaction.
      In the
      event that a Major Transaction (as defined below) occurs, the Holder, at its
      option, may require the Company to redeem the Debenture in accordance with
      Section 3(a)(iii) below. Otherwise, a Change of Control Transaction shall be
      treated as an Assumption (as defined below) in accordance with Section 3(a)(ii)
      below. 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    


    For
      purposes hereof, “MAJOR
      TRANSACTION” means the
      occurrence after the date hereof of any of 

    


    (A)
      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 40% 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


    


    (B)
      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 

    


    (C)
      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 

    


    (D)
      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

    


    (E)
      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 

     

    (F)
      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 (A)
      through (E) above.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    


    (ii) Assumption.
      For
      purposes hereof, each of the following shall constitute a “CHANGE OF CONTROL
      TRANSACTION”: (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. The
      Company shall not, at
      any
      time while this Debenture is outstanding,
      enter
      into or be party to a Change of Control Transaction unless (i) any Person
      purchasing the Company’s assets or Common Stock, or any successor entity
      resulting from such Change of Control Transaction (in each case, an “SUCCESSOR
      ENTITY”), assumes (an “ASSUMPTION”) in writing all of the obligations of the
      Company under this Debenture and the other Transaction Documents in accordance
      with the provisions of this Section 3(a)(ii) pursuant to written agreements
      in
      form and substance satisfactory to the Required Holders and approved by the
      Required Holders prior to such Change of Control Transaction, including
      agreements to deliver to each holder of Debentures in exchange for such
      Debentures a security of the Successor Entity evidenced by a written instrument
      substantially similar in form and substance to the Debentures, including,
      without limitation, having a principal amount and interest rate equal to the
      principal amounts and the interest rates of the Debentures held by such holder,
      having similar conversion rights as the Debentures (including but not limited
      to
      a similar Conversion Price and similar Conversion Price adjustment provisions)
      and having similar ranking to the Debentures, and satisfactory to the Required
      Holders and (ii) the Successor Entity (including its Parent Entity) is a
      publicly traded corporation whose common stock is quoted on or listed for
      trading on an Eligible Market. Upon the occurrence of any Change of Control
      Transaction, the Successor Entity shall succeed to, and be substituted for
      (so
      that from and after the date of such Change of Control Transaction, the
      provisions of this Debenture referring to the "Company" shall refer instead
      to
      the Successor Entity), and may exercise every right and power of the Company
      and
      shall assume all of the obligations of the Company under this Debenture with
      the
      same effect as if such Successor Entity had been named as the Company herein.
      Upon consummation of the Change of Control Transaction, the Successor Entity
      shall deliver to the Holder confirmation that there shall be issued upon
      conversion or redemption of this Debenture at any time after the consummation
      of
      the Change of Control Transaction, in lieu of the shares of Common Stock (or
      other securities, cash, assets or other property) issuable upon the conversion
      of the Debentures prior to such Change of Control Transaction, such shares
      of
      publicly traded common stock (or their equivalent) of the Successor Entity,
      as
      adjusted in accordance with the provisions of this Debenture. The provisions
      of
      this Section shall apply similarly and equally to successive Change of Control
      Transactions and shall be applied without regard to any limitations on the
      conversion of this Debenture. The requirements of this Section 3(a)(ii) are
      referred to herein as the “ASSUMPTION REQUIREMENTS.”

    


    (iii) Notice;
      Redemption Right Upon Major Transaction.
      At least
      thirty (30) days prior to the consummation of a Major Transaction, but not
      prior
      to the public announcement of such Major Transaction, the Company shall deliver
      written notice thereof via facsimile and overnight courier to the Holder (a
      "MAJOR TRANSACTION NOTICE"). At
      any
      time during the period beginning after the Holder's receipt of a Major
      Transaction Notice and ending on the fifth (5th)
      Trading
      Day immediately prior to the consummation of such Major Transaction,
the
      Holder may require the Company to redeem (a “REDEMPTION UPON MAJOR TRANSACTION”)
      all or any portion of this Debenture by delivering written notice thereof
      ("MAJOR TRANSACTION REDEMPTION NOTICE") to the Company, which Major Transaction
      Redemption Notice shall indicate the portion of the principal amount (the
“REDEMPTION PRINCIPAL AMOUNT”) of the Debenture that the Holder is electing to
      be redeemed. The portion of this Debenture subject to redemption pursuant to
      this Section 3(a)(iii) shall be redeemed by the Company in cash at a price
      equal
      to the greater of:

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    


    (A)
      the
      product of (1) the sum of the Redemption Principal Amount being redeemed and
      any
      accrued and unpaid Interest with respect to such Redemption Principal Amount,
      and any accrued and unpaid Failure Payments and other Required Cash Payments
      (such amounts in addition to the Redemption Principal Amount are referred to
      herein as the “SUPPLEMENTARY AMOUNTS”), and (2) the quotient determined by
      dividing (x) the greater of (I) the Closing Price of the Common Stock
      immediately following the public announcement of such proposed Major Transaction
      and (II) the Closing Price on the date that the Major Transaction Redemption
      Price is paid to the Holder, by (y) the Conversion Price, 

    


    and
      

    


    (B)
      the
      sum of the Redemption Principal Amount being redeemed plus the Supplementary
      Amounts.

    


    (The
      greater of (A) and (B) immediately above is referred to as the "MAJOR
      TRANSACTION REDEMPTION PRICE").

    


    (iv)
      Escrow;
      Payment of Major Transaction Redemption Price.
      Following the receipt of a Major Transaction Redemption Notice from the Holder,
      the Company shall not effect a Major Transaction unless it shall first place
      into an escrow account with an independent escrow agent, at least three (3)
      Business Days prior to the closing date of the Major Transaction (the “Major
      Transaction Escrow Deadline”), an amount equal to the Major Transaction
      Redemption Price. Concurrently upon closing of any Major Transaction, the
      Company shall pay or shall instruct the escrow agent to pay the Major
      Transaction Redemption Price to the Holder, which payment shall constitute
      a
      Redemption Upon Major Transaction of the Debenture. 

    


    (v)
      Injunction.
      Following the receipt of a Major Transaction Redemption Notice from the Holder,
      in the event that the Company attempts to consummate a Major Transaction without
      placing the Major Transaction Redemption Price in escrow in accordance with
      subsection (iv) above or without payment of the Major Transaction Redemption
      Price to the Holder upon consummation of such Major Transaction, the Buyer
      shall
      have the right to apply for an injunction in any state or federal courts sitting
      in the City of New York, borough of Manhattan to prevent the closing of such
      Major Transaction until the Major Transaction Redemption Price is paid to the
      Holder, in full.

    


    Redemptions
      required by this Section 3 shall be made in accordance with the provisions
      of
      Section 10 and shall have priority to payments to shareholders in connection
      with a Major Transaction. To the extent redemptions required by this Section
      3(a)(iii) are deemed or determined by a court of competent jurisdiction to
      be
      prepayments of the Debenture by the Company, such redemptions shall be deemed
      to
      be voluntary prepayments. Notwithstanding anything to the contrary in this
      Section 3, until the Major Transaction Redemption Price (together with any
      Supplementary Amounts thereon) is paid in full, the Redemption Principal Amount
      submitted for redemption under this Section and the Supplementary Amounts may
      be
      converted, in whole or in part, by the Holder into shares of Common Stock,
      or in
      the event the Conversion Date is after the consummation of a Change of Control
      Transaction, into shares of publicly traded common stock (or their equivalent)
      of the Successor Entity pursuant to Section 3(a). Unless otherwise indicated
      by
      the Holder in the applicable Notice of Conversion, any principal amount of
      this
      Debenture converted during the period from the date of the Major Transaction
      Redemption Notice until the date the Major Transaction Redemption Price is
      paid
      in full shall be considered to be a conversion (instead of a Redemption) of
      a
      portion of the Debenture that would have been subject to such Redemption, and
      any amounts of this Debenture converted from time to time during such period
      shall converted in full into Common Stock at the Conversion Price then in
      effect, and the dollar amount so converted into Common Stock shall be deducted
      from the Redemption Principal Amount (as defined above) and any Supplementary
      Amounts that are subject to such redemption. The parties hereto agree that
      in
      the event of the Company's redemption of any portion of the Debenture under
      this
      Section 3(a)(iii), the Holder's damages would be uncertain and difficult to
      estimate because of the parties' inability to predict future interest rates
      and
      the uncertainty of the availability of a suitable substitute investment
      opportunity for the Holder. Accordingly, any redemption premium due under this
      Section 3(a)(iii) is intended by the parties to be, and shall be deemed, a
      reasonable estimate of the Holder's actual loss of its investment opportunity
      and not as a penalty.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    


    (b)
      Participation.
      The
      Holder, as the holder of the Debenture, shall be entitled to receive such
      dividends paid and distributions made to the holders of Common Stock to the
      same
      extent as if the Holder had completely converted the Debenture into Common
      Stock
      (without regard to any limitations on Conversion herein or elsewhere and without
      regard to whether or not a sufficient number of shares are authorized and
      reserved to effect any such exercise and issuance) and had held such shares
      of
      Common Stock on the record date for such dividends and distributions. Payments
      under the preceding sentence shall be made concurrently with the dividend or
      distribution to the holders of Common Stock. 

    


    (c)
      Voting Rights.
      The
      Holder shall obtain common shareholder voting rights with respect to the number
      of shares of Common Stock held by the Holder plus the number of shares of Common
      Stock issuable pursuant to Conversions of the Debenture at any given time
      (subject to the Beneficial Ownership Limitations).

    


    (d)
      Rights
      Upon Issuance of Purchase Rights. If
      at any
      time the Company grants, issues or sells any Options, Convertible Securities
      or
      rights to purchase shares, warrants, securities or other property pro rata
      to
      the record holders of any class of Common Shares (the “PURCHASE RIGHTS”),
      then the Holders will be entitled to acquire, upon the terms applicable to
      such
      Purchase Rights, the aggregate Purchase Rights which such Holder could have
      acquired if such Holder had held the number of Common Shares acquirable upon
      complete Conversion of the Debenture (without taking into account any
      limitations or restrictions on the convertibility of the Debenture) immediately
      before the date on which a record is taken for the grant, issuance or sale
      of
      such Purchase Rights, or, if no such record is taken, the date as of which
      the
      record holders of Common Shares are to be determined for the grant, issue or
      sale of such Purchase Rights.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    


    (e)
      Additional
      Adjustments to Conversion Price.
      The
      Conversion Price shall be subject to adjustment from time to time as provided
      in
      this Section 3(e) (in the singular, a “SUBSEQUENT ISSUANCE ADJUSTMENT,” and
      collectively, the “SUBSEQUENT ISSUANCE ADJUSTMENTS”). 

    


    (i) Adjustment
      of Conversion Price upon Issuance of Common Stock, Options, Convertible
      Securities, Etc. (MFN Adjustment).
      If at
      any time after the Closing Date, the Company issues or sells, or in accordance
      with this Section 3(e) is deemed to have issued or sold, any shares of Common
      Stock (including but not limited to shares of Common Stock deemed to have been
      issued upon the issuance of Common Stock Equivalents or upon a change to the
      conversion or exercise price thereof, and including but not limited to the
      issuance or sale of shares of Common Stock owned or held by or for the account
      of the Company, but excluding shares of Common Stock deemed to have been issued
      or sold by the Company in
      respect of an Exempt Issuance (as defined in the Securities Purchase
      Agreement)),
      for a
      consideration per share (the "NEW ISSUANCE PRICE") less than a price (the
      "APPLICABLE PRICE") equal to the Conversion Price in effect immediately prior
      to
      such issue or sale (the foregoing a "DILUTIVE ISSUANCE"), then immediately
      after
      such Dilutive Issuance, the Conversion Price then in effect shall be reduced
      to
      the New Issuance Price. For purposes of determining the adjusted Conversion
      Price under this Section 3(e)(i), the following shall be
      applicable:

    


    (A) Issuance
      of Options.
      If the
      Company in any manner grants or sells any Options and the lowest price per
      share
      for which one share of Common Stock is issuable upon the exercise of any such
      Option or upon conversion or exchange or exercise of any Convertible Securities
      issuable upon exercise of such Option is less than the Applicable Price, then
      such share of Common Stock shall be deemed to be outstanding and to have been
      issued and sold by the Company at the time of the granting or sale of such
      Option for such price per share. For purposes of this Section 3(e)(i)(A), the
      "lowest price per share for which one share of Common Stock is issuable upon
      the
      exercise of any such Option or upon conversion or exchange or exercise of any
      Convertible Securities issuable upon exercise of such Option" shall be equal
      to
      the sum of the lowest amounts of consideration (if any) received or receivable
      by the Company with respect to any one share of Common Stock upon granting
      or
      sale of the Option, upon exercise of the Option and upon conversion or exchange
      or exercise of any Convertible Security issuable upon exercise of such Option.
      No
      adjustment shall be made hereunder if such adjustment would result in an
      increase of the Conversion Price then in effect.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    


    (B) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities and the lowest
      price per share for which one share of Common Stock is issuable upon such
      conversion or exchange or exercise thereof is less than the Applicable Price,
      then such share of Common Stock shall be deemed to be outstanding and to have
      been issued and sold by the Company at the time of the issuance or sale of
      such
      Convertible Securities for such price per share. For the purposes of this
      Section 3(e)(i)(B), the "lowest price per share for which one share of Common
      Stock is issuable upon such conversion or exchange or exercise" shall be equal
      to the sum of the lowest amounts of consideration (if any) received or
      receivable by the Company with respect to any one share of Common Stock upon
      the
      issuance or sale of the Convertible Security and upon the conversion or exchange
      or exercise of such Convertible Security. No
      adjustment shall be made hereunder if such adjustment would result in an
      increase of the Conversion Price then in effect.

    


    (C) Change
      in Option Price or Rate of Conversion.
      If the
      purchase price provided for in any Options, the additional consideration, if
      any, payable upon the issue, conversion, exchange or exercise of any Convertible
      Securities, or the rate at which any Convertible Securities are convertible
      into
      or exchangeable or exercisable for Common Stock changes at any time, the
      Conversion Price in effect at the time of such change shall be adjusted to
      the
      Conversion Price which would have been in effect at such time had such Options
      or Convertible Securities provided for such changed purchase price, additional
      consideration or changed conversion rate, as the case may be, at the time
      initially granted, issued or sold. For purposes of this Section 3(e)(i)(C),
      if
      the terms of any Option or Convertible Security that was outstanding as of
      the
      Subscription Date are changed in the manner described in the immediately
      preceding sentence, then such Option or Convertible Security and the Common
      Stock deemed issuable upon exercise, conversion or exchange thereof shall be
      deemed to have been issued as of the date of such change. No
      adjustment shall be made hereunder if such adjustment would result in an
      increase of the Conversion Price then in effect.

    


    (D) Calculation
      of Consideration Received.
      In case
      any Option is issued in connection with the issue or sale of other securities
      of
      the Company, together comprising one integrated transaction in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for such consideration as determined in
      good
      faith by the Board of Directors of the Company. If any Common Stock, Options
      or
      Convertible Securities are issued or sold or deemed to have been issued or
      sold
      for cash, the consideration received therefor will be deemed to be the net
      amount received by the Company therefor. If any Common Stock, Options or
      Convertible Securities are issued or sold for a consideration other than cash,
      the amount of the consideration other than cash received by the Company will
      be
      the fair value of such consideration as determined in good faith by the Board
      of
      Directors of the Company, except where such consideration consists of
      securities, in which case the amount of consideration received by the Company
      will be the Closing Price of such securities on the date of receipt. If any
      Common Stock, Options or Convertible Securities are issued to the owners of
      the
      non-surviving entity in connection with any merger in which the Company is
      the
      surviving entity, the amount of consideration therefor will be deemed to be
      the
      fair value of such portion of the net assets and business of the non-surviving
      entity as is attributable to such Common Stock, Options or Convertible
      Securities, as the case may be. The fair value of any consideration other than
      cash or securities will be determined jointly by the Company and the Required
      Holders. If such parties are unable to reach agreement within ten (10) days
      after the occurrence of an event requiring valuation (the "VALUATION EVENT"),
      the fair value of such consideration will be determined within five (5) Business
      Days after the tenth day following the Valuation Event by an independent,
      reputable appraiser jointly selected by the Company and the Required Holders.
      The determination of such appraiser shall be deemed binding upon all parties
      absent manifest error and the fees and expenses of such appraiser shall be
      borne
      by the Company.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    


    (E) Record
      Date.
      If the
      Company takes a record of the holders of Common Stock for the purpose of
      entitling them (1) to receive a dividend or other distribution payable in Common
      Stock, Options or in Convertible Securities or (2) to subscribe for or purchase
      Common Stock, Options or Convertible Securities, then such record date will
      be
      deemed to be the date of the issue or sale of the Common Stock deemed to have
      been issued or sold upon the declaration of such dividend or the making of
      such
      other distribution or the date of the granting of such right of subscription
      or
      purchase, as the case may be.

    


    (F) Other
      Events.
      If any
      event occurs of the type contemplated by the provisions of this Section 3(e)
      but
      not expressly provided for by such provisions (including, without limitation,
      the granting of stock appreciation rights, phantom stock rights or other rights
      with equity features), then the Company's Board of Directors will make an
      appropriate adjustment in the Conversion Price so as to protect the rights
      of
      the Holder under this Debenture; provided that no such adjustment will increase
      the Conversion Price as otherwise determined pursuant to this Section
      3(e).

    


    (ii)
      Subsequent
      Rights Offerings.
      If the
      Company, at any time prior to the date that all of the Debentures have been
      converted, redeemed or otherwise satisfied in accordance with their terms,
      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 (the “BASE RIGHTS OFFERING PRICE”) that is lower than the
      Conversion Price then in effect, then the Conversion Price shall be reduced
      (but
      not increased) to the Base Rights Offering 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. No adjustment shall be made
      hereunder if such adjustment would result in an increase of the Conversion
      Price
      then in effect.

    


    (iii) Milestone Adjustments.
      If the
      Company shall have failed (each a “MILESTONE FAILURE”) to meet or exceed any of
      the milestone events (“MILESTONE EVENTS”) that are set forth on SCHEDULE
      3(e)(iii) annexed hereto for any one or more of the following periods (each
      a
“MILESTONE PERIOD”) (i) the one year period ending December 31, 2007, and (ii)
      the one year period ending June 30, 2008 (each a “MILESTONE DATE”), in each case
      as reported in the Company’s Form 10-QSB (or Form 10-KSB, if applicable) for
      such fiscal quarter, then the Conversion Price shall be reduced (but not
      increased) (each, a “MILESTONE ADJUSTMENT”) to equal the lesser of (a) the
      Conversion Price then in effect, (b) the Market Price as determined on the
      applicable Milestone Date, or (c) the Market Price as determined on the date
      (each, a “MILESTONE ADJUSTMENT DATE”) that is ten (10) Trading Days after the
      date that Company files its next Form 10-QSB (or Form 10-KSB, if applicable)
      with the Commission following the end of the applicable Milestone Period (the
      “MILESTONE ADJUSTMENT PRICE”). For purposes of determining milestone goals, the
      costs and expenses of this transaction will not be counted.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    


    Each
      such
      adjustment shall be effective as of the first day following each Milestone
      Date
      (by way of example, if the Milestone Goals are not met for the Milestone Period
      ending December 31, 2007, the reduction is effective immediately on January
      1,
      2008). As to any Conversions by the Holder that occurred following the end
      of a
      Milestone Period but prior to the date the Company’s periodic report was filed
      (“INTERIM PERIOD”), the Company shall retroactively send the Holder additional
      Conversion Shares (“INTERIM CONVERSION SHARES”) within 3 Trading Days of the
      date of the applicable filing if an adjustment is required hereunder (provided
      that to the extent any such shares would cause the Beneficial Ownership
      Limitation to be exceeded, such excess shares shall not be issued and delivered
      until such time as such shares may be so issued without exceeding the Beneficial
      Ownership Limitation). The number of additional Conversion Shares issued shall
      be equal to the number of Conversion Shares receivable from such Conversions
      based on the adjusted Conversion Price less any Conversion Shares previously
      received on account of such Conversions. Any subsequent restatements of the
      Company’s financials shall require similar retroactive issuances if the
      aforementioned events are subsequently deemed to have occurred. The Company
      shall provide written notice to the Holder no later than 1 Business Day
      following the Company’s filing of the applicable periodic report with the
      Commission, indicating therein the new Conversion Price and the revenue for
      the
      applicable quarter. In the event that there is an adjustment to the Conversion
      Price pursuant to any other provision under this Debenture during the Interim
      Period, the Conversion Price shall be the lower of (i) the Conversion Price
      as
      adjusted pursuant to the other provisions of this Debenture and (ii) the new
      Conversion Price as determined hereunder. Notwithstanding anything herein to
      the
      contrary, (i) the provision shall only have the effect of reducing the
      Conversion Price and (ii) each adjustment shall be permanent notwithstanding
      future Revenue or the achievement of any other milestones and cumulative with
      any other adjustments hereunder.

    


    (iv) Adjustments
      to Conversion Price During Major Announcements. Notwithstanding
      anything contained in this Debenture to the contrary, in the event the Company
      makes any public announcement (the date of such announcement is hereinafter
      referred to as the “Announcement Date”) anytime during the period beginning five
      (5) Business Days before any Milestone Adjustment Date and ending five (5)
      Business Days after such Milestone Adjustment Date (the “Protected Period”),
      then the “Milestone Adjustment Price” for such Milestone Adjustment shall equal
      the lesser of (X) the Milestone Adjustment Price as determined pursuant to
      Section 3(e)(iii) above, (Y) the Market Price as determined on the Trading
      Day
      immediately preceding the Announcement Date and (Z) the Market Price as
      determined on the date that is ten (10) Trading Days after the Announcement
      Date. 

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    


    (v)
      Pro
      Rata Distributions.
      If the
      Company, at any time prior to the date that all of the Debentures have been
      converted, redeemed or otherwise satisfied in accordance with their terms,
      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.
      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.

    


    (vi)
      Subdivision or Combination of Common Stock.
      If the
      Company at any time subdivides (by any stock split, stock dividend,
      recapitalization, reorganization, reclassification or otherwise) the shares
      of
      Common Stock acquirable hereunder into a greater number of shares, then, after
      the date of record for effecting such subdivision, the Conversion Price in
      effect immediately prior to such subdivision will be proportionately reduced.
      If
      the Company at any time combines (by reverse stock split, recapitalization,
      reorganization, reclassification or otherwise) the shares of Common Stock
      acquirable hereunder into a smaller number of shares, then, after the date
      of
      record for effecting such combination, the Conversion Price in effect
      immediately prior to such combination will be proportionately
      increased.

    


    (vii)
      Notice
      of Dilutive Issuances and Adjustments. The
      Company shall notify the Holder in writing, no later than one (1) Business
      Day
      following the issuance of any Common Stock or Common Stock Equivalents subject
      to this Section 3(e), indicating therein the applicable issuance price, or
      applicable reset price, exchange price, conversion price and other pricing
      terms
      (such notice, the “DILUTIVE ISSUANCE NOTICE”). The Company shall notify the
      Holder in writing, no later than one (1) Business Day following any Milestone
      Adjustment Date, indicating therein the applicable Milestone Adjustment Price
      (such notice, a “MILESTONE ADJUSTMENT NOTICE”). For purposes of clarification,
      whether or not the Company provides a Dilutive Issuance Notice or a Milestone
      Adjustment Notice pursuant to this Section 3(e), upon the occurrence of any
      Dilutive Issuance or Milestone Adjustment, the Holder is entitled to receive
      a
      number of Conversion Shares based upon the Conversion Price (as adjusted) on
      or
      after the date of such Dilutive Issuance or Milestone Adjustment, as applicable,
      regardless of whether the Holder accurately refers to the Conversion Price
      (as
      adjusted) in the Notice of Conversion. Whenever the Conversion Price is adjusted
      pursuant to this Section 3 or otherwise, the Company shall promptly mail to
      the
      Holder a notice (a “CONVERSION PRICE ADJUSTMENT NOTICE”) setting forth the
      Conversion Price after such adjustment and setting forth a statement of the
      facts requiring such adjustment. For purposes of clarification, whether or
      not
      the Company provides a Conversion Price Adjustment Notice pursuant to this
      Section 3(e), upon the occurrence of any event that leads to an adjustment
      of
      the Conversion Price, the Holders are entitled to receive a number of Conversion
      Shares based upon the new Conversion Price, as adjusted, for Conversions
      occurring on or after the date of such adjustment, regardless of whether a
      Holder accurately refers to the adjusted Conversion Price in the Notice of
      Conversion. 

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    


    Section
      4. Company’s
      Right to Redeem.
      Anytime
      after the Effective Date, if (i) the Equity Payment Conditions have all been
      met
      for each of the prior three (3) Trading Days, and (ii) the Market Price of
      the
      Common Stock for each of the prior three (3) Trading Days exceeds 300%
      of the
      Initial Conversion Price for this Debenture, then the Company may provide to
      the
      Holders a fifteen (15) Trading Day advance notice (an “ADVANCE COMPANY
      REDEMPTION NOTICE”) stating that the Company has elected to Redeem all or any
      portion (the “TARGET REDEMPTION AMOUNT”) of the outstanding Debenture on the
      date that is fifteen (15) Trading Days after the date of such notice (the
“TARGET REDEMPTION DATE”), and certifying that the Company has set aside
      available cash in the amount of the aggregate projected Company Redemption
      Amount (as defined below) for use in effecting the redemption. If the Equity
      Payment Conditions are met during each Trading Day of the fifteen (15)
      consecutive Trading Day period immediately preceding the Target Redemption
      Date
      (the “THRESHOLD
      PERIOD”)
      and
      the daily VWAP for the Common Stock exceeds 300% of the Initial Conversion
      Price
      of this Debenture during each Trading Day of such Threshold Period, then the
      Company shall, within five (5) Trading Days after such Threshold Period, deliver
      the Company Redemption Amount (as defined below) to each Holder (a “COMPANY
      REDEMPTION”). If any one or more of the Equity Payment Conditions are not met on
      any Trading Day during the Threshold Period, then the Company shall not be
      entitled to redeem the portion of the Debenture described in the Advance Company
      Redemption Notice. Any Company Redemption shall be applied ratably to all of
      the
      Holders in proportion to each Holder’s initial purchase of its Debenture under
      the Securities Purchase Agreement, provided that any voluntary Conversions
      by a
      Holder during the Threshold Period shall be applied against such Holder’s
      pro-rata allocation thereby decreasing the aggregate amount forcibly converted
      hereunder. The Holder, at its option, may continue to convert all or any portion
      of its Debenture (including but not limited to the portion that is the subject
      of the Company Redemption) in accordance with the terms hereof after the receipt
      of an Advance Company Redemption Notice until the Holder receives payment of
      the
      Company Redemption Amount, and the amount of this Debenture to be redeemed
      shall
      not exceed the amount which remains outstanding as of the date of Payment of
      the
      Company Redemption Amount. Unless otherwise indicated by the Holder in the
      applicable Notice of Conversion, any principal amount of this Debenture
      converted during the period from the date of the Advance Company Redemption
      Notice until the date the Company Redemption Amount (as defined below) is paid
      in full shall be considered to be a conversion (instead of a Redemption) of
      a
      portion of the Debenture that would have been subject to such Company
      Redemption, and any amounts of this Debenture converted from time to time during
      such period shall converted in full into Common Stock at the Conversion Price
      then in effect, and the dollar amount so converted into Common Stock shall
      be
      deducted from the Target Redemption Amount (as defined above) that is subject
      to
      such redemption. Once the Company delivers an Advance Company Redemption Notice,
      the Company may not deliver another such notice for at least twenty (20) Trading
      Days. The “COMPANY REDEMPTION AMOUNT” shall equal one hundred and ten percent
      (110%) of the outstanding principal amount of the Debenture being redeemed,
      plus
      all accrued and unpaid Interest, Failure Payments and other Required Cash
      Payments. 

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    


    The
      Holder’s Warrants (as defined in the Securities Purchase Agreement) are
      detachable from this Debenture. A Redemption of the Debenture shall not have
      any
      effect on the Holder’s Warrants. Notwithstanding any Redemption of the
      Debenture, the Holder shall retain all of the outstanding Warrants which it
      received upon Closing, or otherwise.

    


    Section
      5. Certain
      Covenants; Misc.

    


    (a)
      Distributions
      on Capital Stock.
      Until
      all of the Debentures have been converted, redeemed or otherwise satisfied
      in
      accordance with their terms, the Company shall not, without the Holder's written
      consent, (i) pay, declare or set apart for such payment, any dividend or other
      distribution (whether in cash, property or other securities) on shares of
      capital stock other than dividends on shares of Common Stock solely in the
      form
      of additional shares of Common Stock or (ii) directly or indirectly or through
      any Subsidiary of the Company make any other payment or distribution in respect
      of its capital stock.

    


    (b)
      Restriction
      on Stock Repurchases. Until
      all
      of the Debentures have been converted, redeemed or otherwise satisfied in
      accordance with their terms, the Company shall not, without the Holder's written
      consent, redeem, repurchase or otherwise acquire (whether for cash or in
      exchange for property or other securities or otherwise) in any one transaction
      or series of related transactions any shares of capital stock of the Company
      or
      any warrants, rights or options to purchase or acquire any such
      shares.

    


    (c)
      Noncircumvention.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Certificate of Incorporation or through any reorganization, transfer of
      assets, consolidation, merger, dissolution, issue or sale of securities, or
      any
      other voluntary action, avoid or seek to avoid the observance or performance
      of
      any of the terms of this Debenture, and will at all times in good faith carry
      out all of the provisions of this Debenture and take all action as may be
      required to protect the rights of the Holder of this Debenture.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    


    (d)
      Senior
      Securities; Priority.
      The
      Debentures shall constitute senior debt of the Company. There is no debt
      currently outstanding that is senior to the Debentures except as otherwise
      set
      forth on SCHEDULE 5(D). All future debt issued by the Company or any Subsidiary
      shall be subordinated and junior to the Debentures. Neither the Company nor
      any
      Subsidiary shall, without the written permission of the Holder, issue any other
      debt that is senior to, or pari passu with, the Debentures. From the Original
      Issue Date of the Debentures through the date that all of the Debentures have
      been paid in full or converted in full, before entering into, or permitting
      any
      Subsidiary to enter into, any future debt with a third party, the Company shall
      first obtain a subordination agreement, satisfactory to Holder, from the
      proposed debt holder. 

    


    (e)
      Negative
      Covenants.
      As long
      as any portion of this Debenture remains outstanding, without the prior written
      consent of the Required Holders, the Company shall not, and shall not permit
      any
      of its Subsidiaries to, directly or indirectly:

     

    (i)
      other
      than securities issued in connection with an Indebtedness Lock-Up Exception
      (as
      defined herein) and issuances to the Holders as contemplated by the Transaction
      Documents, 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;
      other than any existing indebtedness (the “Indebtedness Negative Covenant”);


    


    (ii)
      other than Permitted Liens, enter into, create, incur, assume or suffer to
      exist
      any
      mortgage, lien, pledge, charge, security interest or other encumbrance upon
      or
      in any property or assets (including accounts and contract rights) owned by
      the
      Company or any of its Subsidiaries (collectively, "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;

    


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

    


    (iv)
      repay, repurchase or offer to repay, repurchase or otherwise acquire more than
      a
      de minimis number of shares of Common Stock or Common Stock Equivalents other
      than as to the Conversion Shares or Warrant Shares as permitted or required
      under the Transaction Documents.

    


    (v)
      other
      than those required under the terms of this Debenture, pay cash dividends or
      distributions on any equity securities of the Company;

    


    (vi)
      enter into any transaction with any Affiliate of the Company which would be
      required to be disclosed in any public filing with the Commission, except with
      respect to standard employment arrangements with officers and directors and
      employees of the Company; or

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    


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

    


    (f)
      [Intentionally
      Left Blank]. 

    


    (g)
      Secured
      Obligation.
      The
      obligations of the Company under this Debenture are secured by all assets of
      the
      Company and certain of the Subsidiaries pursuant to the Security Agreement
      (“SECURITY AGREEMENT”) of date even herewith, between the Company, certain of
      the Subsidiaries of the Company and the Secured Parties (as defined
      therein).

    


    (h) Restricted
      Payments. The
      Company shall not, and the Company shall not permit any of its Subsidiaries
      to,
      directly or indirectly, redeem, defease, repurchase, repay or make any payments
      in respect of, by the payment of cash or cash equivalents (in whole or in part,
      whether by way of open market purchases, tender offers, private transactions
      or
      otherwise), all or any portion of any existing Indebtedness, whether by way
      of
      payment in respect of principal of (or premium, if any) or interest on, such
      Indebtedness if at the time such payment is due, an Event of Default has
      occurred and is continuing.

    


    (i)
      Construction;
      Headings. This
      Debenture shall be deemed to be jointly drafted by the Company and all the
      Purchasers and shall not be construed against any person as the drafter hereof.
       The headings of this Debenture are for convenience of reference and shall
      not form part of, or affect the interpretation of, this Debenture.

    


    Section
      6. Events
      of Failure.
      

    


    (a)
      Definitions.

    


    Each
      of
      the following shall be considered to be an “EVENT OF FAILURE”:

    


    (i)
      A
      Conversion Failure as defined in Section 2(c)(ii) hereof; 

    


    (ii)
      A
      Registration Failure as defined in Section 7(c) hereof;

    


    (iii)
      A
      Delisting Event as defined in Section 7(i) hereof;

    


    (iv)
      A
      Share Authorization Failure as defined in Section 7(k) hereof;

    


    (v)
      A
      Stop Trade Failure as defined in Section 7(l) hereof;

    


    (vi)
      A
      Delivery Failure pursuant to Section 2(d)(iv) hereof or a failure by the Company
      to timely deliver Common Stock to the Holder pursuant to and in the form
      required by this Debenture, the Securities Purchase Agreement or the Warrant,
      or, if requested by Holder, a replacement Debenture Certificate; 

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    


    (vii)
      A
      Cross Default as defined in Section 7(n) hereof; 

    


    (viii)
      A
      Legend Removal Failure as defined in Section 7(p); or

    


    (ix)
      Breach of any provision of Section 4(e) of the Securities Purchase
      Agreement.

    


    (x)
      A
      Payment Failure as defined in Section 7(a) hereof.

    


    (b)
      Failure
      Payments. The
      Company understands that any Event of Failure (as defined above) could result
      in
      economic loss to the Holder. In the event that any Event of Failure occurs,
      as
      compensation to the Holder for such loss, the Company agrees to pay (as
      liquidated damages and not as a penalty) to the Holder the amount equal to
      eighteen percent (18%) per annum (“FAILURE PAYMENTS”) of the aggregate
      outstanding principal amount of the Holder’s Debenture on such day (or the
      maximum rate allowed under applicable law, whichever is less) after the date
      of
      the Event of Failure until the Event of Failure is cured, accruing daily and
      compounded monthly. For purposes of clarification, it is agreed and understood
      that Failure Payments shall continue to accrue following any Event of Default
      until the applicable Default Amount is paid in full. The Company shall pay
      any
      payments incurred under this Section in immediately available funds upon demand.
      Failure Payments are in addition to Interest Payments and in addition to any
      Shares that the Holder is entitled to upon Conversion of this Debenture.
      Notwithstanding anything to the contrary herein, to the extent that any Failure
      Payments accrue solely as a result of a Registration Failure for failure to
      obtain timely initial effectiveness of the Registration Statement (“INITIAL
      EFFECTIVENESS FAILURE PAYMENTS”), such Initial Effectiveness Failure Payments
      shall cease to accrue at any time when the Holder is eligible, in the Company’s
      reasonable opinion, to resell the shares that would be issuable upon Conversion
      of its Debenture, pursuant to Rule 144(k), without volume limitations.
      Notwithstanding the above, in the event that (i) the Company has, by the Filing
      Deadline (as defined the Registration Rights Agreement) filed a Registration
      Statement (as defined in the Registration Rights Agreement) covering the number
      of shares required by the Registration Rights Agreement, (ii) the Registration
      Statement has been declared effective by the Registration Deadline (as defined
      in the Registration Rights Agreement) and (iii) the Holder’s Pro Rata Share (as
      defined in the Registration Rights Agreement) of the shares covered by the
      effective Registration Statement, after it is declared effective, covers less
      (a
“REGISTRATION SHORTFALL”) than the number of shares issuable upon full
      conversion of the Holder’s Debenture plus accrued and unpaid interest (the
“FULLY DILUTED CONVERSION AMOUNT”), then such event shall constitute an Event of
      Failure, provided that if such Registration Shortfall is the direct result
      of an
      SEC Share Reduction (as defined in the Registration Rights Agreement), then
      in
      lieu of the Failure Payment specified above, the “Failure Payment” for such
      failure shall equal twelve percent (12%) per annum of the Illiquid Amount (as
      defined below) of the Holder’s Debenture on such day (or the maximum rate
      allowed under applicable law, whichever is less) after the date of the Event
      of
      Failure until the Event of Failure is cured, accruing daily and compounded
      monthly, until such time as the Illiquid Principal Amount is reduced to zero.
      

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    


    For
      purposes hereof, the “ILLIQUID AMOUNT” shall mean the outstanding principal
      amount of the Holder’s Debenture plus accrued and unpaid interest (the “TOTAL
      AMOUNT”), less the Liquid Amount, where “LIQUID AMOUNT” shall mean that portion
      of the Total Amount that could then be converted into shares of Common Stock
      that (i) are covered by an effective Registration Statement or (ii) may be
      sold
      within the immediately following twenty (20) Trading Days under the applicable
      volume limitations of Rule 144. The Liquid Amount shall be re-calculated every
      ninety (90) days and upon the effectiveness of a Registration Statement covering
      the Registrable Securities issuable upon conversion of the Debenture.


    


    (c)
      Payment
      of Accrued Failure Payments. The
      accrued Failure Payments for each Event of Failure shall be paid in cash on
      or
      before the fifth (5th) day of each month following a month in which Failure
      Payments accrued, PROVIDED that, at the option of the Holder (by written notice
      to the Company), if such payments are not paid within the time period specified,
      such payments shall be added to the outstanding principal amount of this
      Debenture, in which event interest shall accrue thereon in accordance with
      the
      terms of this Debenture and such additional principal amount shall be
      convertible into Common Stock at the applicable Conversion Price in accordance
      with the terms of this Debenture. Nothing herein shall limit the Holder's right
      to pursue actual damages (to the extent in excess of the Failure Payments)
      for
      the Company's Event of Failure, and the Holder shall have the right to pursue
      all remedies available at law or in equity (including a decree of specific
      performance and/or injunctive relief). Any shares of Common Stock issued upon
      Conversion of such amounts shall be Registrable Securities (as defined in the
      Registration Rights Agreement). 

     

    (d)
      Maximum
      Rate of Interest.
      Nothing
      contained herein or in any document referred to herein or delivered in
      connection herewith shall be deemed to establish or require the payment of
      a
      rate of interest or other charges in excess of the maximum permitted by
      applicable law. In the event that the rate of interest or dividends required
      to
      be paid or other charges hereunder exceed the maximum permitted by such law,
      any
      payments in excess of such maximum shall be credited against amounts owed by
      the
      Company to the Holder and thus refunded to the Company.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    


    (e)
      Liquidated
      Damages.
      The
      parties hereto acknowledge and agree that the sums payable as Failure Payments,
      pursuant to a Redemption Upon Major Transaction or pursuant to a Mandatory
      Redemption shall give rise to liquidated damages and not penalties. The parties
      further acknowledge that (i) the amount of loss or damages likely to be incurred
      by the Holder is incapable or is difficult to precisely estimate, (ii) the
      amounts specified bear a reasonable proportion and are not plainly or grossly
      disproportionate to the probable loss likely to be incurred by the Holder,
      and
      (iii) the parties are sophisticated business parties and have been represented
      by sophisticated and able legal and financial counsel and negotiated this
      Agreement at arm’s length.

    


    Section
      7. Events
      of Default.

    


    Each
      of
      the following events shall be considered to be an "EVENT OF DEFAULT": 

    


    (a)
      Failure
      to Make Cash Payments. The
      Company fails to pay (each, a “PAYMENT FAILURE”) any cash payments due to the
      Holder under the terms of this Debenture when due under this Debenture, whether
      on an interest or dividend payment due date, at maturity, upon mandatory
      prepayment, upon acceleration, upon an Event of Failure, or upon any Redemption
      or otherwise or fails to pay any liquidated damages that are due and owing
      under
      this Debenture, the Securities Purchase Agreement, a Warrant or any other
      Transaction Document when due, including but not limited to all accrued and
      unpaid Interest, Failure Payments and accrued and unpaid Interest thereon (each
      cash payment referred to above is referred to as a “REQUIRED CASH PAYMENT”), and
      such Payment Failure continues for a period of ten (10) days after the
      applicable due date with respect to Required Cash Payments in excess of $50,000
      or continues for a period of thirty (30) days after the applicable due date
      with
      respect to Required Cash Payments that are $50,000 or less; or

    


    (b)
      Conversion
      and Delivery of the Shares.
      The
      Company (i) fails to issue and deliver shares of Common Stock to the Holder
      upon
      exercise by the Holder of the Conversion Rights of the Holder in accordance
      with
      the terms of this Debenture (for a period of at least sixty (60) days, if such
      failure is a Conversion Failure solely as a result of a shortage of authorized
      shares and the Company is using its best efforts to authorize a sufficient
      number of shares of Common Stock as soon as practicable or for a period of
      at
      least twenty (20) days if such failure is a Delivery Failure under Section
      2(d)(iv) and is not as a result of a shortage of authorized shares), (ii) at
      any
      time, the Company announces or states in writing that it will not honor its
      obligations to issue shares of Common Stock to the Holder upon exercise by
      the
      Holder of the conversion rights of the Holder in accordance with the terms
      of
      this Debenture, (iii) fails for a period of twenty (20) days to transfer or
      cause its Transfer Agent to transfer (electronically or in certificated form)
      any certificate for shares of Common Stock issued or issuable to the Holder
      upon
      Conversion of the Debenture as and when required by the terms of this Debenture
      or the Registration Rights Agreement, or (iv) fails for a period of twenty
      (20)
      days to remove any restrictive legend (or to withdraw any stop transfer
      instructions in respect thereof) on any certificate for any shares of Common
      Stock issued to the Holder upon Conversion of this Debenture as and when
      required by the Debenture, the Securities Purchase Agreement or the Registration
      Rights Agreement (or makes any announcement or written statement that it does
      not intend to honor the obligations described in this paragraph);
      or

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    


    (c)
      Failure
      to Effect Registration. 
      A
      Registration Default occurs, where “REGISTRATION DEFAULT” shall mean a
      Registration Failure (as defined below) that occurs and remains uncured for
      a
      period of more than ninety (90) days.

    


    For
      purposes hereof, “REGISTRATION FAILURE” means that (A) the Company fails to file
      with the Securities and Exchange Commission on or before the Filing Deadline
      the
      Registration Statement(s) required to be filed pursuant to Section 2(a) of
      the
      Registration Rights Agreement, or (B) the Company fails to obtain effectiveness
      with the Securities and Exchange Commission, prior to the Registration Deadline
      (as defined in the Registration Rights Agreement), of the Registration
      Statement(s) (as defined in the Registration Rights Agreement) that are required
      to be filed pursuant to Section 2(a) of the Registration Rights Agreement,
      or
      fails to keep such Registration Statements current and effective as required
      in
      Section 3 of the Registration Rights Agreement, or (C) the Company fails to
      file
      any amendment to the Registration Statement, or any additional Registration
      Statement required to be filed pursuant to Section 3(b) of the Registration
      Rights Agreement within twenty (20) days of the applicable Registration Trigger
      Date (as defined in the Registration Rights Agreement), or fails to cause such
      amendment and/or new Registration Statement to become effective within sixty
      (60) days of the applicable Registration Trigger Date (as defined in the
      Registration Rights Agreement), or (iv) any Registration Statement required
      to
      be filed under the Registration Rights Agreement, after its initial
      effectiveness and during the Registration Period (as defined in the Registration
      Rights Agreement), lapses in effect or sales of all of the Registrable
      Securities (as defined in the Registration Rights Agreement) cannot otherwise
      be
      made thereunder (whether by reason of the Company's failure to amend or
      supplement the prospectus included therein in accordance with the Registration
      Rights Agreement, the Company's failure to file and obtain effectiveness with
      the SEC of an additional Registration Statement or amended Registration
      Statement required pursuant to Section 3 of the Registration Rights Agreement
      or
      otherwise). A Registration Default shall also be deemed to have occurred if,
      at
      any time, the Company fails to provide a commercially reasonable written
      response to any comments (“SEC COMMENTS”) to a Registration Statement submitted
      by the SEC within twenty (20) days of the date that such SEC comments are
      received by the Company (a “COMPANY SEC COMMENT RESPONSE FAILURE”); or


    


    (d) Breach
      of Covenants. 
      The
      Company breaches any covenant or other term or condition of this Debenture,
      or
      any of the other Transaction Documents in any material respect, for which a
      default period is not already specified, and such breach, if subject to cure,
      continues for a period of twenty (20) days after written notice to the Company
      from the Holder; or

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    


    (e)
      Breach
      of Representations and Warranties. 
      Any
      representation or warranty of the Company made herein, in any of the Transaction
      Documents or in any agreement, statement or certificate given in writing
      pursuant hereto (including, without limitation, pursuant to the Securities
      Purchase Agreement, the Registration Rights Agreement and the Warrants), shall
      be false or misleading in any material respect when made and the breach of
      which
      has a Material Adverse Effect on the rights of the Holder with respect to this
      Debenture, the Securities Purchase Agreement, the Registration Rights Agreement
      or the Warrants; or

    


    (f)
      Receiver
      or Trustee. 
      The
      Company or any “Significant Subsidiary” (as defined below) of the Company shall
      make an assignment for the benefit of creditors, or apply for or consent to
      the
      appointment of a receiver or trustee for it or for a substantial part of its
      property or business, or such a receiver or trustee shall otherwise be
      appointed; or

    


    (g)
      Judgments. 
      Any
      money judgment, writ or similar process shall be entered or filed by a court
      against the Company or any Subsidiary of the Company or any of its property
      or
      other assets for more than $1,000,000, and shall remain unvacated, unbonded
      or
      unstayed for a period of twenty (20) days unless otherwise consented to by
      the
      Holder, which consent will not be unreasonably withheld; or

    


    (h)
      Bankruptcy.
      Bankruptcy, insolvency, reorganization or liquidation proceedings or other
      proceedings for relief under any bankruptcy law or any law for the relief of
      debtors shall be instituted by or against the Company or any "significant
      Subsidiary" (as defined in Rule 1-02(w) of Regulation S-X promulgated under
      the
      1933 Act) of the Company; or

    


    (i) Delisting
      of Common Stock.
      A
      Delisting Event (as defined below) occurs and remains uncured for a period
      of
      thirty (30) days, where a “DELISTING EVENT” means delisting of the Common Stock
      from the Principal Market; failure to comply with the requirements for continued
      listing on the Principal Market or an Eligible Market for a period of seven
      (7)
      consecutive Trading Days; or notification from the Principal Market that the
      Company is not in compliance with the conditions for such continued listing
      on
      the Principal Market; or

    


    (j)
      Default
      Under Other Debentures or Warrants.  An
      Event
      of Default has occurred and is continuing with respect to any Debenture issued
      pursuant to the Securities Purchase Agreement and held by other holders or
      under
      any of the warrants issued to other holders pursuant to the other purchase
      agreements relating to the Debenture; or

    


    (k)
      Failure to Authorize and Reserve Common Stock. A
      Share
      Authorization Failure (as defined below) occurs and remains uncured for a period
      of sixty (60) days, where a “SHARE AUTHORIZATION FAILURE” means that the Company
      shall fail to authorize and reserve, and maintain authorized and reserved,
      shares of Common Stock as required under Section 2(c) hereof; or 

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    


     (l)
      Stop
      Trade.
      A Stop
      Trade Default occurs, where a “STOP TRADE DEFAULT” means a Stop Trade Failure
      (as defined below) that occurs and remains uncured for a period of thirty (30)
      days, where a “STOP TRADE FAILURE” means an SEC or judicial stop trade order or
      Principal Market trading suspension with respect to Common Stock. A “STOP TRADE
      DEFAULT” shall immediately occur in the event of a Stop Trade Failure, where a
      contributing cause to such trade stoppage is a failure by the Company to make
      any required filings within the time required by the applicable laws or
      regulations (a “COMPANY FILING FAILURE”); or

    


    (m)
      Reverse
      Splits.
      The
      Company effectuates a reverse split of its Common
      Stock without the prior written consent of the Holder;

    


    (n)
      Cross
      Default.
      An Event
      of Default in any other Debenture issued by the Company to the Holder pursuant
      to the Securities Purchase Agreement or any other agreement between the parties
      currently existing or in the future shall constitute an Event of Default
      hereunder. In addition, a Cross Default (as defined below) that occurs and
      remains uncured for a period of twenty (20) days shall constitute an Event
      of
      Default, where a “CROSS DEFAULT” means a breach or default by the Company of a
      material term, covenant, warranty or undertaking of any of the Transaction
      Documents (as that term is defined in the Securities Purchase Agreement) or
      other agreement to which the Company and Holder are parties, including but
      not
      limited to the Debentures, the Warrants issued pursuant to the Securities
      Purchase Agreement and the Warrants issued pursuant to other securities purchase
      agreements related to the sale of Debentures, or the occurrence of a material
      event of default under any such other agreement which is not cured after any
      required notice and/or cure period; or 

    


    (o)
      Failure
      to Make Timely 1934 Act Filings.  An
      SEC
      Filing Failure (as defined below) occurs and remains uncured for a period of
      thirty (30) days, where an “SEC FILING FAILURE” means that the Company shall
      fail to make timely filings of all reports required to be filed with the SEC
      pursuant to the Securities Act of 1934 (the “1934 Act”) or the Company shall
      cease to be a “Reporting Issuer” under the 1934 Act; or

    


    (p)
      Legend
      Removal Failure. A
      Legend
      Removal Failure (as defined below) occurs and remains uncured for a period
      of
      twenty (20) days, where “LEGEND REMOVAL FAILURE” means a failure by the Company
      to issue Conversion Shares or Payment Shares without restrictive legends or
      to
      remove restrictive legends from Conversion Shares or Payment Shares when so
      required, in each case pursuant to Section 2(e) hereof or otherwise pursuant
      to
      the Transaction Documents; or

    


    (q)
      Corporate
      Existence; Major
      Transaction.
      The
      Company has effected a Major Transaction without paying the Major Transaction
      Redemption Price to the Holder pursuant to Section 3(a)(iii) or, if the Holder
      did not elect a Redemption Upon Major Transaction (if applicable), the Company
      has failed to meet the Assumption Requirements of Section 3(a)(ii) prior to
      effecting a Change of Control Transaction; or

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    


    (r)
      Breach
      of Capital Raising Limitations, Limited Issuances or Rights of
      Participation.
      A breach
      of any of Section 4(e)(i - v) of the Securities Purchase Agreement occurs;
      or

    


    (s)
      (i)
      the indictment or conviction of any of the named executive officers (as defined
      in Item 402(a)(3) of Regulation S-K) or any of the directors of the Company
      of a
      violation of federal or state securities laws or (ii) the settlement in an
      amount over $100,000 by any such officer or director of an action relating
      to
      such officer's violation of federal or state securities laws, breach of
      fiduciary duties or self-dealing; or

    


    (t)
      any
      default under, redemption of or acceleration prior to maturity of any
      Indebtedness in excess of $100,000, in the aggregate, of the Company or any
      of
      its Subsidiaries (as defined in the Securities Purchase Agreement);
      or

    


    (u)
      any
      breach or failure in any respect to comply with any of the Potential Partner
      Conditions, where "POTENTIAL PARTNER CONDITIONS" means at any time while more
      than 20% of the principal amount of the Debentures remain outstanding, there
      shall be no disclosure that any executive officer of such Person has (i)
      exhibited dishonesty in the performance of his or her duties, which is
      independently verified and is materially and demonstrably injurious to the
      Company;
      or (ii) been convicted of (x) a felony under the laws of the United States
      or
      any state thereof or (y) a misdemeanor involving moral turpitude, in each case,
      which is materially and demonstrably injurious to the Company;
      or

    


    (v)
      the
      Company has failed to comply in good faith with the Dispute Resolution
      Procedures (as defined herein) or has failed to adjust the Conversion Price
      as
      required hereunder following a Dilutive Issuance, a Milestone Event, or
      otherwise (after any applicable Dispute Resolution Procedure required herein);
      or

    


    (w)
      the
      Company's written notice to any holder of Debentures, including by way of public
      announcement, at any time, of its inability to comply or its intention not
      to
      comply with proper requests for conversion of any Debentures into shares of
      Common Stock; or

    


    (x)
      following the effectiveness of the Registration Statement, the Company files
      a
      Form 15 with the Securities and Exchange Commission with respect to or otherwise
      deregisters its shares of Common Stock and as a result such shares of Common
      Stock are no longer publicly tradeable or quotable; or

    


    (y)
      following the effectiveness of the Registration Statement, the Company
      consummates a “going private” transaction, which is not consented to by the
      Holder and as a result the Common Stock is no longer registered under Sections
      12(b) or 12(g) of the Securities Exchange Act of 1934, as amended.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    


    Section
      8. Mandatory
      Redemption; Posting of Bond.


    


    (a)
      Mandatory
      Redemption. If
      any
      Events of Default shall occur then, upon the occurrence and during the
      continuation of any Event of Default, at the option of the Holder, such option
      exercisable through the delivery of written notice to the Company by such
      Holders (the "DEFAULT NOTICE"), the Debenture shall become immediately due
      and
      payable and the Company shall pay to the Holder (a “MANDATORY REDEMPTION”), in
      full satisfaction of its obligations hereunder, an amount equal to the greater
      of (i) and (ii) immediately below, referred to herein as the "DEFAULT AMOUNT"
      or
      the “MANDATORY REDEMPTION AMOUNT”):

    


    (i)
      the
      Mandatory Redemption Premium, multiplied by the SUM of 

    


    (x)
      the
      aggregate outstanding principal amount of this Debenture, PLUS 

    


    (y)
      all
      accrued and unpaid Interest thereon for the period beginning on the Original
      Issue Date and ending on the date of payment of the Default Amount (the "DEFAULT
      PAYMENT DATE"), PLUS 

    


    (z)
      accrued and unpaid Failure Payments and other Required Cash Payments, if
      any

     

    (the
      then
      outstanding principal amount of this Debenture to the date of payment PLUS
      the
      amounts referred to in clauses (y) and (z) shall collectively be known as the
      "DEFAULT SUM"), 

    


    or
      

    


    (ii)
      the
      Conversion Value of the Default Sum to be prepaid, where ”CONVERSION VALUE”
means 

    


    (a)
      the
      number of shares of Common Stock that would be issuable upon conversion of
      such
      Default Sum in accordance with Section 2
      (without giving any effect to any limitation on Conversion of this Debenture
      contained herein, including but not limited to the Beneficial
      Ownership Limitation)
      on the date that the Holder delivers a Default Notice to the Company or the
      date
      that the Company pays the Default Amount, whichever yields the greatest number
      of shares (the “DEFAULT NOTICE DATE”) calculated as follows: the Default Sum
      divided by the lesser of (1) the Conversion Price in effect on the Default
      Notice Date or (2) the Conversion Price in effect on the date that the Company
      pays the Default Amount. 

    


    MULTIPLIED
      BY 



    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

    


    (b)
      the
      greater of (i) the Closing Price (as defined herein) for the Common Stock on
      the
      Default Notice Date or (ii) the Closing Price on the date that the Company
      pays
      the Default Amount. 

    


    For
      purposes hereof, the “MANDATORY REDEMPTION PREMIUM” shall mean 125% for the
      first twelve (12) months after the Closing Date (based upon the date of the
      Default Notice), and shall mean 115% thereafter. After an Event of Default
      occurs, the Conversion Price shall be permanently decreased (but not increased)
      on the first Trading Day of each calendar month thereafter (each a “DEFAULT
      ADJUSTMENT DATE”) until the Default Amount is paid in full, to a price equal to
      the lesser of (i) the Conversion Price then in effect, or (ii) the lowest Market
      Price that has occurred on any Default Adjustment Date since the date that
      the
      Event of Default began. Notwithstanding the occurrence of an Event of Default,
      Failure Payments and any other Required Cash Payments shall continue to accrue.
      Five Business Days after the Company’s receipt of the Holder’s Default Notice,
      the Default Amount, together with all other amounts payable hereunder, shall
      immediately become due and payable, all without demand, presentment or notice,
      all of which hereby are expressly waived, together with all costs, including,
      without limitation, legal fees and expenses, of collection, and the Holder
      shall
      be entitled to exercise all other rights and remedies available at law or in
      equity. 

    


    If
      the
      Company fails to pay the Default Amount within ten (10) Business Days of written
      notice that such amount is due and payable (the “DEFAULT AMOUNT DUE DATE”), then
      interest shall accrue thereon at a rate of eighteen percent (18%) per annum,
      compounded monthly (or the maximum amount allowed by applicable law, whichever
      is less), and the Holder shall have the right at any time, so long as the
      Company remains in default (and so long and to the extent that there are
      sufficient authorized shares), to require the Company, upon written notice
      (“DEFAULT CONVERSION NOTICE”) (which may be given one or more times, from time
      to time anytime after the Default Amount Due Date), to immediately issue, in
      lieu of all or any specified portion (the “SPECIFIED PORTION”) of the unpaid
      portion (the “UNPAID PORTION”) of the Default Amount, a number of shares (the
“DEFAULT SHARES”) of Common Stock, subject to the Beneficial Ownership
      Limitation, equal to the Specified Portion of the Default Amount divided by
      the
      Conversion Price in effect on the date such shares are issued to the Holder,
      PROVIDED THAT, the Holder may require that such payment of shares be made in
      one
      or more installments at such time and in such amounts as Holder chooses. The
      Default shares are due within five (5) Business Days of the date that the Holder
      delivers a Default Conversion Notice to the Company (the “DEFAULT SHARE DELIVERY
      DEADLINE”).

    


    To
      the
      extent redemptions required by this Section 8 are deemed or determined by a
      court of competent jurisdiction to be prepayments of the Debenture by the
      Company, such redemptions shall be deemed to be voluntary prepayments. If the
      Company is unable to redeem all of the Debenture submitted for redemption,
      the
      Company shall redeem a pro rata amount from each Holder based on the
      principal amount of the Debenture submitted for redemption by such Holder
      relative to the total principal amount of Debentures submitted for redemption
      by
      all Holders. 

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

    


    The
      Holder shall not be entitled to receive Default Shares on a given date if and
      to
      the extent that such issuance would cause the Beneficial Ownership Limitation
      then in effect to be exceeded. If and to the extent that the issuance of Default
      Shares with respect to a given Specified Portion would result in the a violation
      of the Beneficial Ownership Limitation, then that particular Specified Portion
      shall be automatically reduced to a value that would cause the number of Default
      Shares to be issued to equal the Maximum Percentage, and the amount of such
      reduction shall be added back to the Unpaid Portion of the Default
      Amount.

    


    (b)
      Posting
      of Bond. In
      the
      event that any Event of Default occurs hereunder or any Event of Default occurs
      under any of the Transaction Documents (as defined in the Securities Purchase
      Agreement), then the Company may not raise as a legal defense (in any Lawsuit,
      as defined below, or otherwise) or justification to such Event of Default any
      claim that such Holder or anyone associated or affiliated with such Holder
      has
      been engaged in any violation of law, unless the Company has posted a surety
      bond (a “SURETY BOND”) for the benefit of such Holder in an amount equal to the
      aggregate Surety Bond Value (as defined below) of all of the Holder’s Debenture
      and Warrants (the “BOND AMOUNT”), which Surety Bond shall remain in effect until
      the completion of litigation of the dispute and the proceeds of which shall
      be
      payable to such Holder to the extent Holder obtains judgment. 

    


    For
      purposes hereof, a “LAWSUIT” shall mean any lawsuit, arbitration or other
      dispute resolution filed by either party herein pertaining to any of the
      Transaction Documents (as defined in the Securities Purchase
      Agreement).

    


    “DEBENTURE
      MARKET VALUE” shall mean the outstanding principal amount of this Debenture,
      plus any accrued and unpaid Interest, Failure Payments and other Required Cash
      Payments, divided by the lowest Conversion Price in effect at any time during
      the period between the applicable Event of Default and the filing of the Surety
      Bond required by this subsection (the “SURETY BOND PRICING PERIOD”), all
      multiplied by the highest Closing Price during the Surety Bond Pricing
      Period.

    


    “SURETY
      BOND VALUE,” for each Debenture, shall mean 130% of the highest Debenture Market
      Value (as defined above) of each of the Holder’s Debenture and for each Warrant,
      shall mean 130% of the highest Black Scholes value (as defined in Section 10(b)
      of the Warrants) of each of the Holder’s Warrants (where, in each case, such
      highest market value represents the highest value determined during the period
      from the date of the subject Event of Default through the Trading Day preceding
      the date that such Surety Bond goes into effect).

    


    (c)
       Injunction
      and Posting of Bond.
      In the
      event that the Event of Default referred to in subsection 8(b) above pertains
      to
      the Company’s failure to deliver unlegended shares of Common Stock to the Holder
      pursuant to a Debenture Conversion, Warrant Exercise, legend removal request,
      or
      otherwise, the Company may not refuse such unlegended share delivery based
      on
      any claim that such Holder or any one associated or affiliated with such Holder
      has been engaged in any violation of law, unless an injunction from a court,
      on
      prior notice to Holder, restraining and or enjoining Conversion of all or part
      of said Debenture shall have been sought and obtained by the Company and the
      Company has posted a Surety Bond for the benefit of such Holder in the amount
      of
      the Bond Amount (as described above), which bond shall remain in effect until
      the completion of litigation of the dispute and the proceeds of which shall
      be
      payable to such Holder to the extent Holder obtains judgment. 

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

    


     (d) Redemption
      by Other Holders.
      Upon the
      Company's receipt of notice from any of the holders of the Other Debentures
      for
      redemption or repayment as a result of an event or occurrence of an Event of
      Default or a Major Transaction (each, an "OTHER REDEMPTION NOTICE"), the Company
      shall immediately, but no later than one (1) Business Day of its receipt
      thereof, forward to the Holder by facsimile a copy of such notice. If the
      Company receives a Redemption Notice and one or more Other Redemption Notices,
      during the seven (7) Business Day period beginning on and including the date
      which is three (3) Business Days prior to the Company's receipt of the Holder's
      Redemption Notice and ending on and including the date which is three (3)
      Business Days after the Company's receipt of the Holder's Redemption Notice
      and
      the Company is unable to redeem all principal, interest and other amounts
      designated in such Redemption Notice and such Other Redemption Notices received
      during such seven (7) Business Day period, then the Company shall redeem a
      pro
      rata amount from each holder of the Debentures (including the Holder) based
      on
      the principal amount of the Debentures submitted for redemption pursuant to
      such
      Redemption Notice and such Other Redemption Notices received by the Company
      during such seven (7) Business Day period.

    


    Section
      9. Principal
      Payments; Prepayment Option; Automatic Redemption. 

    


    (a)
      Principal
      Payments. In
      addition to any other payments required hereunder, the Company shall make
      monthly payments (each, a “REQUIRED PRINCIPAL PAYMENT”) against the outstanding
      principal of this Debenture, in cash, on the first Business Day of each month
      beginning on July 1, 2008 (each, a “REQUIRED PRINCIPAL PAYMENT DATE”). Each
      Required Principal Payment shall equal one twenty-fourth (1/24th)
      of the
      Original Principal Amount of this Debenture, with a balloon payment due on
      the
      Maturity Date (in conjunction with an Automatic Redemption, as described below).
      Provided that, as of the Required Principal Payment Date, (i) the Market Price
      of the Common Stock exceeds the 110% of the Conversion Price, and (ii) the
      Equity Payment Conditions have been met for each of the immediately preceding
      ten (10) consecutive Trading Days (the “DEFERRAL CONDITIONS”), the Company, at
      its option, upon written notice to Holder given at least five (5) Business
      Days
      prior to the Required Principal Payment Date, may defer any Required Principal
      Payment until no later than next the Required Principal Payment Date that occurs
      after the Deferral Conditions are no longer met (the “DEFERRAL ENDING DATE”).
      The Company shall notify that Holder, in writing, no later than two Business
      Days after any date that the Deferral Conditions are not met during any period
      while any Principal Payments are being deferred. 

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

    


    (b)
      Prepayment
      Option. The
      Company, at its option, upon twenty (20) Trading Days advance notice
      (“PREPAYMENT REDEMPTION NOTICE”) given anytime after Closing, may redeem any or
      all of the outstanding amount of this Debenture (a “PREPAYMENT REDEMPTION”), at
      any time that the Equity Payment Conditions (excluding Equity Condition number
      “ix”) are in effect, for an amount (the “PREPAYMENT REDEMPTION AMOUNT”) equal to
      100% of the outstanding principal amount of the Debenture which is being
      redeemed, plus all accrued and unpaid Interest, Failure Payments or and other
      Required Cash Payments, provided that, in conjunction with any Prepayment
      Redemption, the Company shall issue to the Holder a Prepayment Redemption
      Warrant (as defined in the Securities Purchase Agreement). Unless otherwise
      indicated by the Holder in the applicable Notice of Conversion, any principal
      amount of this Debenture converted during the period from the date of the
      Prepayment Redemption Notice until the date the Prepayment Redemption Amount
      is
      paid in full shall be considered to be a Conversion (instead of a Redemption)
      of
      a portion of the Debenture that would have been subject to such Prepayment
      Redemption, and any amounts of this Debenture converted from time to time during
      such period shall converted in full into Common Stock at the Conversion Price
      then in effect, and the dollar amount so converted into Common Stock shall
      be
      deducted from the amount of such redemption.

    


     (c)
      Automatic Redemption at End of Term. Any
      Debenture that has not been submitted for Conversion into Common Stock and
      has
      not been subjected to a Default Notice by midnight, New York City time, on
      the
      Maturity Date (the “AUTOMATIC REDEMPTION DATE”), shall be automatically redeemed
(“AUTOMATIC
      REDEMPTION”) for a redemption price, in cash, equal to the outstanding principal
      amount of this Debenture, plus all accrued and unpaid Interest, Failure Payments
      and other Required Cash Payments (the “AUTOMATIC REDEMPTION AMOUNT”). The
      Automatic Redemption Amount shall be due and payable within 5 Trading Days
      of
      the Automatic Redemption Date. 

     

    Section
      10. Holder’s
      Redemptions. 

    


    (a)
      Mechanics
      of Holder’s Redemptions.
      In the
      event that the Holder has sent a Default Notice or a Major Transaction
      Redemption Notice to the Company pursuant to Section 3(a) or a Default Notice
      pursuant to Section 8(a), respectively (each, a “Redemption Notice”), the Holder
      shall promptly submit this Debenture to the Company. If the Holder has submitted
      a Major Transaction Redemption Notice in accordance with Section 3(a)(iii),
      the
      Company shall deliver the applicable Major Transaction Redemption Price to
      the
      Holder concurrently with the consummation of such Major Transaction if such
      notice is received prior to the consummation of such Major Transaction and
      within five (5) Business Days after the Company's receipt of such notice
      otherwise. In the event of a redemption of less than all of the outstanding
      principal amount of this Debenture, the Company shall promptly cause to be
      issued and delivered to the Holder a new Debenture representing the outstanding
      principal amount which has not been redeemed. In the event that the Company
      does
      not pay the applicable Redemption Price to the Holder within the time period
      required, at any time thereafter and until the Company pays such unpaid
      Redemption Price in full, the Holder shall have the option, in lieu of
      redemption, to require the Company to promptly return to the Holder all or
      any
      portion of this Debenture representing Redemption Principal Amount (and any
      Supplemental Amounts) that were submitted for redemption and for which the
      applicable Major Transaction Redemption Price (together with any late charges
      thereon) has not been paid. Upon the Company's receipt of such notice, (x)
      the
      applicable Redemption Notice shall be null and void with respect to such
      Redemption Principal Amount, (y) the Company shall immediately return this
      Debenture, or issue a new Debenture to the Holder representing the sum of such
      Redemption Principal Amount to be redeemed together with all Supplemental
      Amounts with respect to such Redemption Principal Amount and (z) the Conversion
      Price of this Debenture or such new Debentures shall be adjusted to the lesser
      of (A) the Conversion Price as in effect on the date on which the applicable
      Redemption Notice is voided and (B) the lowest Closing Price during the period
      beginning on and including the date on which the applicable Redemption Notice
      is
      delivered to the Company and ending on and including the date on which the
      applicable Redemption Notice is voided. The Holder's delivery of a notice
      voiding a Redemption Notice and exercise of its rights following such notice
      shall not affect the Company's obligations to make any payments of Supplemental
      Amounts which have accrued prior to the date of such notice with respect to
      the
      Redemption Principal Amount subject to such notice.

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

    


    (b)
      Warrants Detachable. The
      Warrants constitute a separate, detachable security from the Debentures. In
      the
      event of any redemption or exchange of the Debentures, in whole or in part,
      by
      the Company, the Holder shall retain any of its Warrants that have not been
      exercised or redeemed in accordance with their terms.

    


    Section
      11.  Miscellaneous.

    


    (a)
      Failure
      or Indulgence Not Waiver. 
      No
      failure or delay on the part of the Holder in the exercise of any power, right
      or privilege hereunder shall operate as a waiver thereof, nor shall any single
      or partial exercise of any such power, right or privilege preclude other or
      further exercise thereof or of any other right, power or privileges. All rights
      and remedies existing hereunder are cumulative to, and not exclusive of, any
      rights or remedies otherwise available.

    


    (b)
      Notices. 
      Any
      notice herein required or permitted to be given shall be in writing and may
      be
      personally served or delivered by courier or sent by United States mail and
      shall be deemed to have been given upon receipt if personally served (which
      shall include telephone line facsimile transmission) or sent by courier or
      five
      (5) days after being deposited in the United States mail, certified, with
      postage pre-paid and properly addressed, if sent by mail. For the purposes
      hereof, the address of the Holder shall be as shown on the records of the
      Company; and the address of the Company shall be  Alternative
      Construction Company, Inc.;
      2910
      Bush Drive, Melbourne, FL 32935; Telephone: (321) 421-6349; Fax: (321) 421-6616
      Both the Holder and the Company may change the address for service by service
      of
      written notice to the other as herein provided. The
      Company shall provide the Holder with prompt written notice of all actions
      taken
      pursuant to this Debenture, including in reasonable detail a description of
      such
      action and the reason therefore.  Without limiting the generality of the
      foregoing, the Company will give written notice to the Holder (i) immediately
      upon any adjustment of the Conversion Price, setting forth in reasonable detail,
      and certifying, the calculation of such adjustment and (ii) at least twenty
       (20) days prior to the date on which the Company closes its books or takes
      a record (A) with respect to any dividend or distribution upon the Common Stock,
      (B) with respect to any pro rata subscription offer to holders of Common Stock
      or (C) for determining rights to vote with respect to any Major Transaction,
      dissolution or liquidation, provided in each case that such information shall
      be
      made known to the public prior to or in conjunction with such notice being
      provided to the Holder.

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

    


    (c) Payments.
       Whenever any payment of cash is to be made by the Company to any Person
      pursuant to this Debenture, such payment shall be made in lawful money of the
      United States of America by a check drawn on the account of the Company and
      sent
      via overnight courier service to such Person at such address as previously
      provided to the Company in writing (which address, in the case of each of the
      Buyers, shall initially be as set forth on the Schedule of Buyers attached
      to
      the Securities Purchase Agreement); provided that the Holder may elect to
      receive a payment of cash via wire transfer of immediately available funds
      by
      providing the Company with prior written notice setting out such request and
      the
      Holder's wire transfer instructions.  Whenever any amount expressed to be
      due by the terms of this Debenture is due on any day which is not a Business
      Day, the same shall instead be due on the next succeeding day which is a
      Business Day and, in the case of any Interest Payment Date which is not the
      date
      on which
      this
      Debenture is paid in full, the extension of the due date thereof shall not
      be
      taken into account for purposes of determining the amount of Interest due on
      such date.  

    


    (d)
      Amendments.
      Except
      as otherwise expressly provided herein, the Debentures and any provision hereof
      may only be amended by an instrument in writing signed by the Company and the
      Holder. The term "DEBENTURE" and all reference thereto, as used throughout
      this
      instrument, shall mean this instrument as originally executed, or if later
      amended or supplemented, then as so amended or supplemented.

    


    (e)
      Assignability.
      This
      Debenture shall be binding upon the Company and its successors and assigns,
      and
      shall inure to be the benefit of the Holder and its successors and
      assigns.

    


    (f)
      Payment
      of Collection, Enforcement and Other Costs. If
      (i) this Debenture is placed in the hands of an attorney for collection or
      enforcement or is collected or enforced through any legal proceeding or the
      Holder otherwise takes action to collect amounts due under this Debenture or
      to
      enforce the provisions of this Debenture or (ii) there occurs any bankruptcy,
      reorganization, receivership of the Company or other proceedings affecting
      Company creditors' rights and involving a claim under this Debenture, then
      the
      Company shall pay the costs incurred by the Holder for such collection,
      enforcement or action or in connection with such bankruptcy, reorganization,
      receivership or other proceeding, including, but not limited to, attorneys'
      fees
      and disbursements.

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

    


    (g)
      Governing
      Law; Equitable Relief.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Debenture or the Transaction Documents shall be governed by and
      construed and enforced in accordance with the internal laws of the State of
      New
      York, without regard to the principles of conflicts of law thereof. Each party
      agrees that all legal proceedings concerning the interpretations, enforcement
      and defense of the transactions contemplated by this Agreement and any other
      Transaction Documents (whether brought against a party hereto or its respective
      affiliates, directors, officers, shareholders, employees or agents) shall be
      commenced exclusively in the state and federal courts sitting in the City of
      New
      York. Each party hereby irrevocably submits to the exclusive jurisdiction of
      the
      state and federal courts sitting in the City of New York, borough of Manhattan
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein (including with respect
      to the enforcement of any of the Transaction Documents), and hereby irrevocably
      waives, and agrees not to assert in any suit, action or proceeding, any claim
      that it is not personally subject to the jurisdiction of any such court, that
      such suit, action or proceeding is improper or is an 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 Agreement 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 law. The parties hereby waive all rights to a trial by
      jury.
      If either party shall commence an action or proceeding to enforce any provisions
      of the Transaction Documents, then the prevailing party in such action or
      proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
      and prosecution of such action or proceeding.

    


    (h)
      Certain
      Amounts. Whenever
      pursuant to this Debenture the Company is required to pay an amount in excess
      of
      the principal amount of the outstanding Debenture (or the portion thereof
      required to be paid at that time) plus accrued and unpaid Interest, plus Failure
      Payments on such amounts, plus any other Required Cash Payments, the Company
      and
      the Holder agree that the actual damages to the Holder from the receipt of
      cash
      payment on this Debenture may be difficult to determine and the amount to be
      so
      paid by the Company represents stipulated damages and not a penalty and is
      intended to compensate the Holder in part for loss of the opportunity to convert
      this Debenture and to earn a return from the sale of shares of Common Stock
      acquired upon Conversion of this Debenture at a price in excess of the price
      paid for such Shares pursuant to this Debenture. The Company and the Holder
      hereby agree that such amount of stipulated damages is not plainly
      disproportionate to the possible loss to the Holder from the receipt of a cash
      payment without the opportunity to convert this Debenture into shares of Common
      Stock.

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

    


    (i)
      Allocations
      of Reserved Amount.
      The
      Reserved Amount shall be allocated pro rata among the holders of Debentures
      based on the original principal amount of Debentures issued to the Holder.
      Each
      increase to the Reserved Amount shall be allocated pro rata among the holders
      of
      Debentures based on the aggregate number of Shares into which all of the
      Holder’s outstanding Debenture would be convertible and into which all of
      Holder’s outstanding Warrants would be exercisable at the time of the increase
      (collectively, the “FULLY DILUTED HOLDINGS”). In the event a Holder shall sell
      or otherwise transfer any of such Holder's Debenture, each transferee shall
      be
      allocated a pro rata portion of such transferor's Reserved Amount. Any portion
      of the Reserved Amount which remains allocated to any Person or entity which
      does not hold any Debentures shall be allocated to the remaining Holders of
      Debentures, pro rata based on the Holder’s Fully Diluted Holdings at the time of
      such allocation.

     

    (j)
      Rule
      144 Hold Period. For
      purposes of Rule 144, it is intended, understood and acknowledged that the
      Common Stock issuable upon Conversion of this Debenture shall be deemed to
      have
      been acquired at the time the Debenture was issued. Moreover, it is intended,
      understood and acknowledged that the holding period for the Common Stock
      issuable upon Conversion of this Debenture shall be deemed to have commenced
      on
      the date this Debenture was issued. 

    


    (k)
      Purchase
      Agreement.
      By its
      acceptance of the Debenture, the Holder agrees to be bound by the applicable
      terms of the Securities Purchase Agreement.

    


    (l)
      Notice
      of Corporate Events. 
      Except
      as otherwise provided in this Debenture, the Holder of this Debenture shall
      have
      no rights as a Holder of Common Stock unless and only to the extent that it
      converts this Debenture into Common Stock. The Company shall provide the Holder
      with prior notification of any meeting of the Company's shareholders (and copies
      of proxy materials and other information sent to shareholders). In the event
      the
      Company takes a record of its shareholders for the purpose of determining
      shareholders who are entitled to receive payment of any dividend or other
      distribution, any right to subscribe for, purchase or otherwise acquire
      (including by way of merger, consolidation, reclassification or
      recapitalization) any share of any class or any other securities or property,
      or
      to receive any other right, or for the purpose of determining shareholders
      who
      are entitled to vote in connection with any proposed sale, lease or conveyance
      of all or substantially all of the assets of the Company or any proposed
      liquidation, dissolution or winding up of the Company, the Company shall mail
      a
      notice to the Holder, at least twenty (20) days prior to the record date
      specified therein (or thirty (30) days prior to the consummation of the
      transaction or event, whichever is earlier), of the date on which any such
      record is to be taken for the purpose of such dividend, distribution, right
      or
      other event, and a brief statement regarding the amount and character of such
      dividend, distribution, right or other event to the extent known at such time.
      The Company shall make a public announcement of any event requiring notification
      to the Holder hereunder substantially simultaneously with the notification
      to
      the Holder in accordance with the terms of this Section 10(k).

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

    


    (m)
      Remedies. The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to the Holder, by vitiating the intent and purpose of the
      transaction contemplated hereby. Accordingly, the Company acknowledges that
      the
      remedy at law for a breach of its obligations under this Debenture will be
      inadequate and agrees, in the event of a breach or threatened breach by the
      Company of the provisions of this Debenture or the other Transaction Documents,
      that the Holder shall be entitled, in addition to all other available remedies
      at law or in equity, to an injunction or injunctions restraining, preventing
      or
      curing any breach of the Debenture and the other Transaction Documents and
      to
      enforce specifically the terms and provisions thereof, without the necessity
      of
      showing economic loss and without any bond or other security being
      required.

    


    IN
      WITNESS WHEREOF, Company has caused the Debenture to be signed in its name
      by
      its duly authorized officer this 30th
      day of
      June, 2007.

     

    
      
        	 	 	 
	 	
                COMPANY:
                  

                ALTERNATIVE
                  CONSTRUCTION COMPANY, INC.

              
	 
 	 
 	 
 
	
              	By:  
	 	
                
                  

                

                Print
                  Name:

              
	 	
                
                  

                

                Title:

              
	 	
                
                  

                

              


      

       

    

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

    


    NOTICE
      OF CONVERSION

    


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

    


    The
      undersigned hereby irrevocably elects to convert $__________ in principal amount
      of the Debenture (defined herein) into shares of Common Stock, no par value
      per
      share ("COMMON STOCK"), of ALTERNATIVE
      CONSTRUCTION COMPANY, INC. (the
      "COMPANY"), plus:

     

    -
      $_________ in accrued and unpaid Interest Payments, 

    -
      $_________ in accrued and unpaid Failure Payments, plus

    -
      $_________ in other Required Cash Payments (specify): _____________

    ______________________________________________________.

    


    all
      according to the conditions of the convertible Debenture of the Company dated
      as
      of June 30, 2007 (the "DEBENTURE"), as of the date written below. If securities
      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. No fee will be charged to the Holder
      for
      any Conversion, except for transfer taxes, if any. By submitting this Notice
      of
      Conversion, the Holder certifies that the issuance of the number of shares
      of
      Common Stock requested hereby will not result in a violation of the Beneficial
      Ownership Limitation.

    


    The
      Company shall electronically transmit the Common Stock issuable pursuant to
      this
      Notice of Conversion to the account of the undersigned or its nominee with
      DTC
      through its Deposit Withdrawal Agent Commission system ("DWAC
      TRANSFER").

    


    Name
      of
      DTC Prime Broker:______________________________

    Account
      Number:________________________________________

    


    In
      lieu
      of receiving shares of Common Stock issuable pursuant to this Notice
      of
      Conversion by way of a DWAC Transfer, the undersigned hereby requests
      that the Company issue a certificate or certificates for the number
      of
      shares of Common Stock set forth above (which numbers are based
      on
      the Holder's calculation attached hereto) in the name(s) specified
      immediately below or, if additional space is necessary, on an attachment
      hereto:

    


    Name:
      _________________________________________________

    


    Address:
      _______________________________________________

    


    The
      undersigned represents and warrants that all offers and sales by the undersigned
      of the securities issuable to the undersigned upon Conversion of the Debenture
      shall be made pursuant to registration of the securities under the Securities
      Act of 1933, as amended (the "ACT"), or pursuant to an exemption from
      registration under the Act.

     

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

    


    (i)
      Date
      of Conversion:_______________________________

    Applicable
      Conversion Price:________________________

    Number
      of
      Shares of Common ______________________

    Stock
      to
      be Issued Pursuant to (i): ____________________

    Conversion
      of the Debenture:_______________________

    


    (ii)
      Conversion of accrued and unpaid Interest Payments, in accrued and unpaid
      Failure Payments, and/or other Required Cash Payments:
      ______________________________________________________________.

    


    Signature:
      ______________________________________________________

    Name:
      _________________________________________________________

    Address:
      _______________________________________________________

    


    The
      Company is not required to issue shares of Common Stock until the original
      Debenture(s) (or evidence of loss, theft or destruction thereof) to be converted
      are received by the Company or its Transfer Agent, if such delivery is required
      under the terms of the Debenture. The Company shall issue and deliver shares
      of
      Common Stock to an overnight courier not later than two Business Days following
      receipt of the original Debenture(s) to be converted, and shall make payments
      pursuant to the Debenture for the number of Business Days such issuance and
      delivery is late.

    



    
      
        
        

      

      
        47