**Exhibit 10.5**

 

**Dated: February 13, 2006**

 

**NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE            IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE            SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION            UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE            “****SECURITIES            ACT****”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR            SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR            PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE            REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE            SECURITIES LAWS.**

 
| No. MEP-2 | $600,000 |
|-----------|----------|

**CARGO CONNECTION LOGISTICS HOLDING, INC.**

 

**Secured Convertible Debenture**

             

**Due: February 12, 2008**

 

This Secured Convertible Debenture (the            “Debenture”) is issued            by**CARGO CONNECTION LOGISTICS HOLDING,            INC.**, a Florida corporation (the            “Obligor”), to**MONTGOMERY EQUITY PARTNERS, LTD.**(the            “Holder”), pursuant to            that certain Securities Purchase Agreement (the            “Securities Purchase            Agreement”) dated December 28, 2005.

 

**FOR VALUE RECEIVED**, the Obligor hereby            promises to pay to the Holder or its successors and assigns the principal sum of Six            Hundred Thousand Dollars ($600,000) together with accrued but unpaid interest on or            before February 12, 2008 (the “Maturity            Date”) in accordance with the following            terms:

 

*Interest**.*Interest shall accrue on the outstanding principal balance hereof at an            annual rate equal to ten percent (10%). Interest shall be calculated on the basis of a            360-day year and the actual number of days elapsed, to the extent permitted by            applicable law. Interest hereunder will be paid to the Holder or its assignee (as            defined in*Section*4) in whose name            this Debenture is registered on the records of the Obligor regarding registration and            transfers of Debentures (the “Debenture            Register”).

 

*Right of Redemption**.*The Obligor at its option shall have the right, with three (3) business            days advance written notice (the “Redemption            Notice”), to redeem a portion or all amounts            outstanding under this Debenture prior to the Maturity Date. The Obligor shall pay an            amount equal to the principal amount being redeemed plus a redemption premium            (“Redemption Premium”)            equal to twenty five percent (125%) of the principal amount being redeemed, and accrued            interest, (collectively referred to as the “Redemption            Amount”). The Obligor shall

 

 

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deliver to the Holder the Redemption Amount on the third (3rd) business            day after the Redemption Notice.

             

Notwithstanding the foregoing in the event that the Obligor has elected            to redeem a portion of the outstanding principal amount and accrued interest under this            Debenture the Holder shall be permitted to convert all or any portion of this Debenture            during such three business day period.

 

*Security Agreements.*This Debenture            is secured by a Security Agreement (the “Security            Agreement”) dated December 28, 2005 between the Obligor            and the Holder and by a Subsidiary Security Agreement (the            “Subsidiary Security            Agreement”) dated December 28, 2005 among the Cargo            Connection Logistics, Corp., Mid-Coast Management, Inc., and the Holder.

 

*Consent of Holder to Sell Capital Stock or Grant Security            Interests**.*So long as any of            the principal amount or interest on this Debenture remains unpaid and unconverted, the            Obligor shall not, without the prior consent of the Holder, (i) issue or sell any            shares of Common Stock or preferred stock without consideration or for consideration            per share less than the Closing Bid Price of the Common Stock determined immediately            prior to its issuance, (ii) issue or sell any preferred stock, warrant, option, right,            contract, call, or other security or instrument granting the holder thereof the right            to acquire Common Stock without consideration or for consideration per share less than            the Closing Bid Price of the Common Stock determined immediately prior to its issuance,            (iii) enter into any security instrument granting the holder a security interest in any            of the assets of the Obligor, or (iv) file any registration statements on Form S-8.            Notwithstanding the forgoing the Company may issue up to 250,000,000 shares of Common            Stock per calendar year provided that (i) such issuances are made in accordance with            the Company’s Stock Incentive Plan and (ii) such issuances are approved by the            Company’s Board of Directors.

             

*Rights of First            Refusal**.*So long as any            portion of this Debenture is outstanding (including principal or accrued interest), if            the Obligor intends to raise additional capital by the issuance or sale of capital            Stock of the Obligor, including without limitation shares of any class of Common Stock,            any class of preferred stock, options, warrants or any other securities convertible or            exercisable into shares of Common Stock (whether the offering is conducted by the            Obligor, underwriter, placement agent or any third party) the Obligor shall be            obligated to offer to the Holder such issuance or sale of capital stock, by providing            in writing the principal amount of capital it intends to raise and outline of the            material terms of such capital raise, prior to the offering such issuance or sale of            capital stock to any third parties including, but not limited to, current or former            officers or directors, current or former shareholders and/or investors of the obligor,            underwriters, brokers, agents or other third parties. The Holder shall have ten (10)            business days from receipt of such notice of the sale or issuance of capital stock to            accept or reject all or a portion of such capital raising offer.

 

This Debenture is subject to the following additional            provisions:

 

*Section*1.           This Debenture is exchangeable for an equal aggregate principal amount            of Debentures of different authorized denominations, as requested by the Holder            surrendering the same. No service charge will be made for such registration of transfer            or exchange.

             

 

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*Section            2*.         Events of Default.

             

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

 

(i)           Any default in the payment of the principal of, interest on or other            charges in respect of this Debenture, free of any claim of subordination, as and when            the same shall become due and payable (whether on a Conversion Date or the Maturity            Date or by acceleration or otherwise);

 

(ii)         The Obligor shall fail to observe or perform any other covenant,            agreement or warranty contained in, or otherwise commit any breach or default of any            provision of this Debenture (except as may be covered by*Section 2(a)(i)*hereof) or any Transaction            Document (as defined in*Section 4*)            which is not cured with in the time prescribed;

 

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

 

(iv)        The Obligor or any subsidiary of the Obligor shall default in any of its            obligations under any other debenture or any mortgage, credit agreement or other            facility, indenture agreement, factoring agreement or other instrument under which            there may be issued, or by which there may be secured or evidenced any indebtedness for            borrowed money or money due under any long term leasing or factoring arrangement of the            Obligor or any subsidiary of the Obligor in an amount exceeding $100,000, whether such            indebtedness now exists or shall hereafter be created and such default shall result in            such indebtedness becoming or being declared due and payable prior to the date on which            it would otherwise become due and payable;

 

 

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(v)          The Common Stock shall cease to be quoted for trading or listed for            trading on either the Nasdaq OTC Bulletin Board            (“OTC”), Nasdaq SmallCap            Market, New York Stock Exchange, American Stock Exchange or the Nasdaq National Market            (each, a “Subsequent            Market”) and shall not again be quoted or listed for            trading thereon within five (5) Trading Days of such delisting;

 

(vi)        The Obligor or any subsidiary of the Obligor shall be a party to any            Change of Control Transaction (as defined in*Section            4);*

 

(vii)       The Obligor shall fail to file the Underlying Shares Registration            Statement (as defined in*Section 4*)            with the Commission (as defined in*Section            4*), or the Underlying Shares Registration Statement shall not            have been declared effective by the Commission, in each case within the time periods            set forth in the Investor Registration Rights Agreement            (“Registration Rights            Agreement”) dated December 28, 2005 between the Obligor            and the Holder;

 

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

 

(ix)        The Obligor shall fail for any reason to deliver Common Stock            certificates to a Holder prior to the fifth (5th) Trading Day after a Conversion Date            or the Obligor shall provide notice to the Holder, including by way of public            announcement, at any time, of its intention not to comply with requests for conversions            of this Debenture in accordance with the terms hereof;

 

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

 

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

 

 

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Transaction Document, the Holder shall have no obligation to comply with            or adhere to any limitations, if any, on the conversion of this Debenture or the sale            of the Underlying Shares.

             
|   | *Section 3*. | Conversion. |
|--------|--------------|-------------|

             
|   | (a) | (i) | Conversion of Option of                        Holder. |
|--------|-----|-----|--------------------------------------------------------|

             

(A)        This Debenture shall be convertible into shares of Common Stock at the            option of the Holder, in whole or in part at any time and from time to time, after the            Original Issue Date (as defined in Section 4) (subject to the limitations on conversion            set forth in*Section 3(a)(ii)*hereof). The number of shares of Common Stock issuable upon a conversion            hereunder equals the quotient obtained by dividing (x) the outstanding amount of this            Debenture to be converted by (y) the Conversion Price (as defined in*Section 3(c)(i)).*The Obligor shall deliver            Common Stock certificates to the Holder prior to the Fifth (5th) Trading Day after a            Conversion Date.

 

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

 

Further, if the Obligor shall not have delivered any cash due in respect            of conversion of this Debenture or as payment of interest thereon by the fifth (5th)            Trading Day after the Conversion Date, the Holder may, by notice to the Obligor,            require the Obligor to issue shares of Common Stock pursuant to*Section 3(c),*except that for such purpose            the Conversion Price applicable thereto shall be the lesser of the Conversion Price on            the Conversion Date and the Conversion Price on the date of such Holder demand. Any            such shares will be subject to the provisions of this Section.

 

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

 

 

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(ii)    Certain Conversion Restrictions.

 

(A)         A Holder may not convert this Debenture or receive shares of Common            Stock as payment of interest hereunder to the extent such conversion or receipt of such            interest payment would result in the Holder, together with any affiliate thereof,            beneficially owning (as determined in accordance with Section B(d) of the Exchange Act            and the rules promulgated thereunder) in excess of 4.9% of the then issued and            outstanding shares of Common Stock, including shares issuable upon conversion of, and            payment of interest on, this Debenture held by such Holder after application of this            Section. Since the Holder will not be obligated to report to the Obligor the number of            shares of Common Stock it may hold at the time of a conversion hereunder, unless the            conversion at issue would result in the issuance of shares of Common Stock in excess of            4.9% of the then outstanding shares of Common Stock without regard to any other shares            which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall            have the authority and obligation to determine whether the restriction contained in            this Section will limit any particular conversion hereunder and to the extent that the            Holder determines that the limitation contained in this Section applies, the            determination of which portion of the principal amount of this Debenture is convertible            shall be the responsibility and obligation of the Holder. If the Holder has delivered a            Conversion Notice for a principal amount of this Debenture that, without regard to any            other shares that the Holder or its affiliates may beneficially own, would result in            the issuance in excess of the permitted amount hereunder, the Obligor shall notify the            Holder of this fact and shall honor the conversion for the maximum principal amount            permitted to be converted on such Conversion Date in accordance with the periods            described in*Section*3*(a)(i)(A)*and, at            the option of the Holder, either retain any principal amount tendered for conversion in            excess of the permitted amount hereunder for future conversions or return such excess            principal amount to the Holder. The provisions of this Section may be waived by a            Holder (but only as to itself and not to any other Holder) upon not less than 65 days            prior notice to the Obligor. Other Holders shall be unaffected by any such            waiver.

 

(b)          (i)          Nothing herein shall limit a Holder’s right to pursue actual            damages or declare an Event of Default pursuant to*Section            2*herein for the Obligor’s failure to deliver            certificates representing shares of Common Stock upon conversion within the period            specified herein and such Holder shall have the right to pursue all remedies available            to it at law or in equity including, without limitation, a decree of specific            performance and/or injunctive relief, in each case without the need to post a bond or            provide other security. The exercise of any such rights shall not prohibit the Holder            from seeking to enforce damages pursuant to any other Section hereof or under            applicable law.

 

(ii)         In addition to any other rights available to the Holder, if the Obligor            fails to deliver to the Holder such certificate or certificates pursuant to*Section 3(a)(i)(A)*by the fifth (5th)            Trading Day after the Conversion Date, and if after such fifth (5th) Trading Day the            Holder purchases (in an open market transaction or otherwise) Common Stock to deliver            in satisfaction of a sale by such Holder of the Underlying Shares which the Holder            anticipated receiving upon such conversion (a            “Buy-In”), then the            Obligor shall (A) pay in cash to the Holder (in addition to any remedies available to            or elected by the Holder) the amount by which (x) the Holder’s total purchase            price (including brokerage commissions, if any) for the Common Stock so purchased            exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such            Holder anticipated receiving from the conversion at issue multiplied by (2) the market            price of

 

 

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the            Common Stock at the time of the sale giving rise to such purchase obligation and (B) at            the option of the Holder, either reissue a Debenture in the principal amount equal to            the principal amount of the attempted conversion or deliver to the Holder the number of            shares of Common Stock that would have been issued had the Obligor timely complied with            its delivery requirements under*Section*3*(a)(i)(A).*For            example, if the Holder purchases Common Stock having a total purchase price of $11,000            to cover a Buy-In with respect to an attempted conversion of Debentures with respect to            which the market price of the Underlying Shares on the date of conversion was a total            of $10,000 under clause (A) of the immediately preceding sentence, the Obligor shall be            required to pay the Holder $1,000. The Holder shall provide the Obligor written notice            indicating the amounts payable to the Holder in respect of the Buy-In.

             

(c)          (i)          The conversion price (the “Conversion            Price”) in effect on any Conversion Date shall be equal            to the lesser of (a) $0.0025 (the “Fixed Conversion            Price”) or (b) seventy five percent (75%) of the lowest            Closing Bid Price of the Common Stock, as quoted by Bloomberg, LP, of the ten (10)            trading days immediately preceding the Conversion Date. The Conversion Price may be            adjusted pursuant to the other terms of this Debenture.

             

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

 

(iii)        If the Obligor, at any time while this Debenture is outstanding, shall            issue rights, options or warrants to all holders of Common Stock (and not to the            Holder) entitling them to subscribe for or purchase shares of Common Stock at a price            per share less than the Fixed Conversion Price, then the Fixed Conversion Price shall            be multiplied by a fraction, of which the denominator shall be the number of shares of            the Common Stock (excluding treasury shares, if any) outstanding on the date of            issuance of such rights or warrants (plus the number of additional shares of Common            Stock offered for subscription or purchase), and of which the numerator shall be the            number of shares of the Common Stock (excluding treasury shares, if any) outstanding on            the date of issuance of such rights or warrants, plus the number of shares which the            aggregate offering price of the total number of shares so offered would purchase at the            Fixed Conversion Price. Such adjustment shall be made whenever such rights or warrants            are issued, and shall become effective immediately after the record date for the            determination of stockholders entitled to receive such rights, options or warrants.            However, upon the expiration of any such right, option or warrant to purchase shares of            the Common Stock the issuance of which resulted in an adjustment in the Fixed            Conversion Price pursuant to this Section, if any such right, option or warrant shall            expire and shall not have been exercised, the Fixed Conversion Price shall

 

 

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immediately upon such expiration be recomputed and effective immediately            upon such expiration be increased to the price which it would have been (but reflecting            any other adjustments in the Fixed Conversion Price made pursuant to the provisions of            this Section after the issuance of such rights or warrants) had the adjustment of the            Fixed Conversion Price made upon the issuance of such rights, options or warrants been            made on the basis of offering for subscription or purchase only that number of shares            of the Common Stock actually purchased upon the exercise of such rights, options or            warrants actually exercised.

             

(iv)        If the Obligor or any subsidiary thereof, as applicable, at any time            while this Debenture is outstanding, shall issue shares of Common Stock or rights,            warrants, options or other securities or debt that are convertible into or exchangeable            for shares of Common Stock (“Common Stock            Equivalents”) entitling any Person to acquire shares of            Common Stock, at a price per share less than the Fixed Conversion Price (if the holder            of the Common Stock or Common Stock Equivalent so issued shall at any time, whether by            operation of purchase price adjustments, reset provisions, floating conversion,            exercise or exchange prices or otherwise, or due to warrants, options or rights per            share which is issued in connection with such issuance, be entitled to receive shares            of Common Stock at a price per share which is less than the Fixed Conversion Price,            such issuance shall be deemed to have occurred for less than the Fixed Conversion            Price), then, at the sole option of the Holder, the Fixed Conversion Price shall be            adjusted to mirror the conversion, exchange or purchase price for such Common Stock or            Common Stock Equivalents (including any reset provisions thereof) at issue. Such            adjustment shall be made whenever such Common Stock or Common Stock Equivalents are            issued. The Obligor shall notify the Holder in writing, no later than one (1) business            day following the issuance of any Common Stock or Common Stock Equivalent subject to            this Section, indicating therein the applicable issuance price, or of applicable reset            price, exchange price, Fixed Conversion Price and other pricing terms. No adjustment            under this Section shall be made as a result of issuances and exercises of options to            purchase shares of Common Stock issued for compensatory purposes pursuant to any of the            Obligor’s stock option or stock purchase plans.

 

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

 

(vi)        In case of any reclassification of the Common Stock or any compulsory            share exchange pursuant to which the Common Stock is converted into other securities,            cash or

 

 

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

             

(vii)       The Obligor shall maintain a share reserve at all times of not less than            five times the number of shares of Common Stock issuable upon conversion of this            Debenture at the applicable Fixed Conversion Price; and within three (3) Business Days            following the receipt by the Obligor of a Holder’s notice that such minimum            number of Underlying Shares is not so reserved, the Obligor shall promptly reserve a            sufficient number of shares of Common Stock to comply with such requirement.

 

(viii)      All            calculations under this*Section 3*shall be rounded up to the nearest $0.001 of a share.

 

(ix)        Whenever the Fixed Conversion Price is adjusted pursuant to*Section 3*hereof, the Obligor shall            promptly mail to the Holder a notice setting forth the Fixed Conversion Price after            such adjustment and setting forth a brief statement of the facts requiring such            adjustment.

 

(x)          If (A) the Obligor shall declare a dividend (or any other distribution)            on the Common Stock; (B) the Obligor shall declare a special nonrecurring cash dividend            on or a redemption of the Common Stock; (C) the Obligor shall authorize the granting to            all holders of the Common Stock rights or warrants to subscribe for or purchase any            shares of capital stock of any class or of any rights; (D) the approval of any            stockholders of the Obligor shall be required in connection with any reclassification            of the Common Stock, any consolidation or merger to which the Obligor is a party, any            sale or transfer of all or substantially all of the assets of the Obligor, of any            compulsory share exchange whereby the Common Stock is converted into other securities,            cash or property; or (E) the Obligor shall authorize the voluntary or involuntary            dissolution, liquidation or winding up of the affairs of the Obligor; then, in each            case, the Obligor shall cause to be filed at each office or agency maintained for the            purpose of conversion of this Debenture, and shall cause to be mailed to the Holder at            its last address as it shall appear upon the stock books of the Obligor, at least            twenty (20) calendar days prior to the applicable record or effective date hereinafter            specified, a notice stating (x) the date on which a record is to be taken for the            purpose of such dividend, distribution, redemption, rights or warrants, or if a record            is not to be taken, the date as of which the holders of the Common Stock of record to            be entitled to such dividend, distributions, redemption, rights or warrants are to be            determined or (y) the date on which such reclassification, consolidation, merger, sale,            transfer or share exchange is

 

 

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expected to become effective or close, and the date as of which it is            expected that holders of the Common Stock of record shall be entitled to exchange their            shares of the Common Stock for securities, cash or other property deliverable upon such            reclassification, consolidation, merger, sale, transfer or share exchange, provided,            that the failure to mail such notice or any defect therein or in the mailing thereof            shall not affect the validity of the corporate action required to be specified in such            notice. The Holder is entitled to convert this Debenture during the 20-day calendar            period commencing the date of such notice to the effective date of the event triggering            such notice.

             

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

             

(d)         The Obligor covenants that it will at all times reserve and keep            available out of its authorized and unissued shares of Common Stock solely for the            purpose of issuance upon conversion of this Debenture and payment of interest on this            Debenture, each as herein provided, free from preemptive rights or any other actual            contingent purchase rights of persons other than the Holder, not less than such number            of shares of the Common Stock as shall (subject to any additional requirements of the            Obligor as to reservation of such shares set forth in this Debenture) be issuable            (taking into account the adjustments and restrictions of*Sections 2(b) and 3(c)*upon the conversion            of the outstanding principal amount of this Debenture and payment of interest            hereunder. The Obligor covenants that all shares of Common Stock that shall be so            issuable shall, upon issue, be duly and validly authorized, issued and fully paid,            nonassessable and, if the Underlying Shares Registration Statement has been declared            effective under the Securities Act, registered for public sale in accordance with such            Underlying Shares Registration Statement.

 

 

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

 

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

 

(g)          Any notices, consents, waivers or other communications required or            permitted to be given under the terms hereof must be in writing and will be deemed to            have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,            when sent by facsimile (provided confirmation of transmission is mechanically or            electronically generated and kept on file by the sending party); or (iii) one (1)            trading day after deposit with a nationally recognized overnight delivery service, in            each case properly addressed to the party to receive the same. The addresses and            facsimile numbers for such communications shall be:

             
| If to the Company, to: | Cargo Connection Logistics Holding, Inc. |
|------------------------|------------------------------------------|

600 Bayview Avenue

Inwood, NY 11096

Attention: Jesse Dobrinsky

Telephone: (516) 239-7000

Facsimile: (516) 239-2508

 
| With a copy to: | Gregg E. Jaclin, Esq. |
|-----------------|-----------------------|

Anslow & Jaclin, LLP

195 Route 9 South, Suite 204

Manalapan, NJ 07725

Telephone: (732) 409-1212

Facsimile: (732) 577-1188

 
| If to the Holder: | Montgomery Equity Partners, Ltd. |
|-------------------|----------------------------------|

101 Hudson Street, Suite 3700

Jersey City, NJ 07303

Attention: Mark Angelo

Telephone: (201) 985-8300

 

 

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| With a copy to: | David Gonzalez, Esq. |
|-----------------|----------------------|

101 Hudson Street – Suite 3700

Jersey City, NJ 07302

Telephone: (201) 985-8300

Facsimile: (201) 985-8266

 

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

 

*Section            4**.*          Definitions. For the purposes hereof, the            following terms shall have the following meanings:

 

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

 

“Change of Control            Transaction” means the occurrence of (a) an acquisition            after the date hereof by an individual or legal entity or “group” (as            described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control            (whether through legal or beneficial ownership of capital stock of the Obligor, by            contract or otherwise) of in excess of fifty percent (50%) of the voting securities of            the Obligor (except that the acquisition of voting securities by the Holder shall not            constitute a Change of Control Transaction for purposes hereof), (b) a replacement at            one time or over time of more than one-half of the members of the board of directors of            the Obligor which is not approved by a majority of those individuals who are members of            the board of directors on the date hereof (or by those individuals who are serving as            members of the board of directors on any date whose nomination to the board of            directors was approved by a majority of the members of the board of directors who are            members on the date hereof), (c) the merger, consolidation or sale of fifty percent            (50%) or more of the assets of the Obligor or any subsidiary of the Obligor in one or a            series of related transactions with or into another entity, or (d) the execution by the            Obligor of an agreement to which the Obligor is a party or by which it is bound,            providing for any of the events set forth above in (a), (b) or (c).

 

“Commission”            means the Securities and Exchange Commission.

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

*Section*5.        Except as expressly provided herein, no provision of this Debenture            shall alter or impair the obligations of the Obligor, which are absolute and            unconditional, to pay the principal of, interest and other charges (if any) on, this            Debenture at the time, place, and rate, and in the coin or currency, herein prescribed.            This Debenture is a direct obligation of the Obligor. This Debenture ranks pari passu            with all other Debentures now or hereafter issued under the terms set forth herein. As            long as this Debenture is outstanding, the Obligor shall not and shall cause their            subsidiaries not to, without the consent of the Holder, (i) amend its certificate of            incorporation, bylaws or other charter documents so as to adversely affect any rights            of the Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise            acquire shares of its Common Stock or other equity securities other than as to the            Underlying Shares to the extent

 

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permitted or required under the Transaction Documents; or (iii) enter            into any agreement with respect to any of the foregoing.

             

*Section*6.            This Debenture shall not entitle the Holder to any of the rights of a stockholder of            the Obligor, including without limitation, the right to vote, to receive dividends and            other distributions, or to receive any notice of, or to attend, meetings of            stockholders or any other proceedings of the Obligor, unless and to the extent            converted into shares of Common Stock in accordance with the terms hereof.

 

*Section*7. If            this Debenture is mutilated, lost, stolen or destroyed, the Obligor shall execute and            deliver, in exchange and substitution for and upon cancellation of the mutilated            Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture,            a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen            or destroyed but only upon receipt of evidence of such loss, theft or destruction of            such Debenture, and of the ownership hereof, and indemnity, if requested, all            reasonably satisfactory to the Obligor.

 

*Section*8.          No indebtedness of the Obligor is senior to this Debenture in right of            payment, whether with respect to interest, damages or upon liquidation or dissolution            or otherwise. Without the Holder’s consent, the Obligor will not and will not            permit any of their subsidiaries to, directly or indirectly, enter into, create, incur,            assume or suffer to exist any indebtedness 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 there from that is senior in any respect to the obligations of the            Obligor under this Debenture.

 

*Section*9.          This Debenture shall be governed by and construed in accordance with the            laws of the State of New Jersey, without giving effect to conflicts of laws thereof.            Each of the parties consents to the jurisdiction of the Superior Courts of the State of            New Jersey sitting in Hudson County, New Jersey and the U.S. District Court for the            District of New Jersey sitting in Newark, New Jersey in connection with any dispute            arising under this Debenture and hereby waives, to the maximum extent permitted by law,            any objection, including any objection based onforumnonconveniensto the bringing of any such            proceeding in such jurisdictions.

 

*Section            10**.*        If the Obligor fails to strictly comply with the terms of this            Debenture, then the Obligor shall reimburse the Holder promptly for all fees, costs and            expenses, including, without limitation, attorneys’ fees and expenses incurred by            the Holder in any action in connection with this Debenture, including, without            limitation, those incurred: (i) during any workout, attempted workout, and/or in            connection with the rendering of legal advice as to the Holder’s rights, remedies            and obligations, (ii) collecting any sums which become due to the Holder, (iii)            defending or prosecuting any proceeding or any counterclaim to any proceeding or            appeal; or (iv) the protection, preservation or enforcement of any rights or remedies            of the Holder.

 

*Section*11.        Any waiver by the Holder of a breach of any provision of this Debenture            shall not operate as or be construed to be a waiver of any other breach of such            provision or of any breach of any other provision of this Debenture. The failure of the            Holder to insist upon strict adherence to any term of this Debenture on one or more            occasions shall not be considered a

 

 

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waiver or deprive that party of the right thereafter to insist upon            strict adherence to that term or any other term of this Debenture. Any waiver must be            in writing.

             

*Section*12.        If any provision of this Debenture is invalid, illegal or unenforceable,            the balance of this Debenture shall remain in effect, and if any provision is            inapplicable to any person or circumstance, it shall nevertheless remain applicable to            all other persons and circumstances. If it shall be found that any interest or other            amount deemed interest due hereunder shall violate applicable laws governing usury, the            applicable rate of interest due hereunder shall automatically be lowered to equal the            maximum permitted rate of interest. The Obligor covenants (to the extent that it may            lawfully do so) that it shall not at any time insist upon, plead, or in any manner            whatsoever claim or take the benefit or advantage of, any stay, extension or usury law            or other law which would prohibit or forgive the Obligor from paying all or any portion            of the principal of or interest on this Debenture as contemplated herein, wherever            enacted, now or at any time hereafter in force, or which may affect the covenants or            the performance of this indenture, and the Obligor (to the extent it may lawfully do            so) hereby expressly waives all benefits or advantage of any such law, and covenants            that it will not, by resort to any such law, hinder, delay or impeded the execution of            any power herein granted to the Holder, but will suffer and permit the execution of            every such as though no such law has been enacted.

 

*Section*13.        Whenever any payment or other obligation hereunder shall be due on a day            other than a Business Day, such payment shall be made on the next succeeding Business            Day.

 

*Section*14.     THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE            RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON            OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION            DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR            WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE            PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

 

**[REMAINDER OF PAGE lNTENTIONLLY LEFT BLANK]**

 

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IN**WITNESS WHEREOF,**the Obligor has caused this Secured Convertible Debenture to be dilly            executed by a duly authorized officer as of the date set forth above.

 

 
|   |   | **CARGO CONNECTION LOGISTICS HOLDING, INC.** |
|--------|--------|----------------------------------------------|
|        |   | By:                                          | /s/ Jesse Dobrinsky   Pres. |
|   |   | Name: Jesse Dobrinsky                        |
|   |   | Title: President                             |

 

 

 

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**EXHIBIT “A”**

 

**NOTICE OF CONVERSION**

 

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

 

**TO:**

 

The undersigned hereby irrevocably elects to convert            $                                        of the principal amount of the above Debenture into Shares of Common            Stock of Cargo Connection Logistics Holding, Inc., according to the conditions stated            therein, as of the Conversion Date written below.

 
| **Conversion Date:** | **__________________________________________** |
|----------------------|------------------------------------------------|

             
| **Applicable Conversion Price:** | **__________________________________________** |
|----------------------------------|------------------------------------------------|

             
| **Signature:** | **__________________________________________** |
|----------------|------------------------------------------------|

             
| **Name:** | **__________________________________________** |
|-----------|------------------------------------------------|

             
| **Address:** | **__________________________________________** |
|--------------|------------------------------------------------|

             
| **Amount to be converted:** | **$_________________________________________** |
|-----------------------------|------------------------------------------------|

             

**Amount of Debenture**
| **unconverted** | **$_________________________________________** |
|-----------------|------------------------------------------------|

             
| **Conversion Price Per share:** | **$_________________________________________** |
|---------------------------------|------------------------------------------------|

             

**Number of shares of Common**
| **Stock to be issued:** | **__________________________________________** |
|-------------------------|------------------------------------------------|

             

**Please issue the shares of**

**Common Stock in the following**

**name and to the following**
| **address:** | **__________________________________________** |
|--------------|------------------------------------------------|

             
| **Issue to:** | **__________________________________________** |
|---------------|------------------------------------------------|

             
| **Authorized Signature:** | **__________________________________________** |
|---------------------------|------------------------------------------------|

             
| **Name:** | **__________________________________________** |
|-----------|------------------------------------------------|

             
| **Title:** | **__________________________________________** |
|------------|------------------------------------------------|

             
| **Phone Number:** | **__________________________________________** |
|-------------------|------------------------------------------------|

             
| **Broker DTC Participant Code:** | **__________________________________________** |
|----------------------------------|------------------------------------------------|

             
| **Account Number:** | **__________________________________________** |
|---------------------|------------------------------------------------|