bancroft8k113007ex10-2.htm


    
      

      

    

    Exhibit
      10.2

    


    EXHIBIT
      A

    


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

    


    Original
      Issue Date: November ___, 2007

    Original
      Conversion Price (subject to adjustment herein):
$0.25

    


    $_______________

    


    


    8%
      ORIGINAL ISSUE DISCOUNT

    SECURED
      CONVERTIBLE DEBENTURE

    DUE
      NOVEMBER ___, 2009

    


    THIS
      DEBENTURE is one of a series of duly authorized and validly issued 8% Original
      Issue Discount Secured Convertible Debentures of Bancroft Uranium Inc., a Nevada
      corporation, (the “Company”), having its principal place of business at
      _____________________________, designated as its 8% Original Issue Discount
      Secured Convertible Debenture due November __, 2009 (this debenture, the
“Debenture” and, collectively with the other debentures of such series,
      the “Debentures”).

    


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

    


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

    


    


    
      
        
           

        

        
          1

          
            

          

        

        
           

        

      

    

    


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

    


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

    


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

    


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

    


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

    


    “Change
      of Control Transaction” means the occurrence after the date hereof of any of
      (i) an acquisition after the date hereof by an individual or legal entity or
      “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
      effective control (whether through legal or beneficial ownership of capital
      stock of the Company, by contract or otherwise) of in excess of 33% of the
      voting securities of the Company (other than by means of conversion or exercise
      of the Debentures and the Securities issued together with the Debentures),
      or
      (ii) the Company merges into or consolidates with any other Person, or any
      Person merges into or consolidates with the Company and, after giving effect
      to
      such transaction, the stockholders of the Company immediately prior to such
      transaction own less than 66% of the aggregate voting power of the Company
      or
      the successor entity of such transaction, or (iii) the Company sells or
      transfers all or substantially all of its assets to another Person and the
      stockholders of the Company immediately prior to such transaction own less
      than
      66% of the aggregate voting power of the acquiring entity immediately after
      the
      transaction, or (iv) a replacement at one time or within a three year period
      of
      more than one-half of the members of the Company’s board of directors which is
      not approved by a majority of those individuals who are members of the board
      of
      directors on the date hereof (or by those individuals who are serving as members
      of the board of directors on any date whose nomination to the board of directors
      was approved by a majority of the members of the board of directors who are
      members on the date hereof), or (v) the execution by the Company of an agreement
      to which the Company  is a party or by which it is bound, providing
      for any of the events set forth in clauses (i) through (iv)
      above.  Notwithstanding the foregoing, the resignation of
      Andrew  Hamilton within 10 Business Days of the Closing Date, and the
      designation of a member to the board of directors to replace
      Andrew  Hamilton by the remaining board members shall not be deemed a
      Change in Control Transaction.

    


    


    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

    


    “Closing
      Bid Price” means on any particular date (a) the last reported closing
      bid price per share of Common Stock on such date on the Trading Market (as
      reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there
      is no such price on such date, then the closing bid price on the Trading Market
      on the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15
      p.m. (New York City time)), or (c)  if the Common Stock is not then listed
      or quoted on a Trading Market and if prices for the Common Stock are then
      reported in the “pink sheets” published by Pink Sheets LLC (or a similar
      organization or agency succeeding to its functions of reporting prices), the
      most recent bid price per share of the Common Stock so reported, or (d) if
      the shares of Common Stock are not then publicly traded the fair market value
      of
      a share of Common Stock as determined by an independent appraiser selected
      in
      good faith by the Holder  and reasonably acceptable to the Company,
      the fees and expenses of which shall be paid by the Company.

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


    


    


    


    


    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

    


    “Equity
      Conditions” means, during the period in question, (i) the Company shall have
      duly honored
      all conversions and redemptions scheduled to occur or occurring by virtue of
      one
      or more Notices
      of Conversion of the Holder,
      if any, (ii) the Company shall have
      paid all liquidated damages
      and other amounts
      owing to the Holder
in
      respect of this Debenture, (iii)
      there is an effective
      Registration Statement pursuant to which the Holder is permitted to utilize
      the
      prospectus thereunder to resell all of the shares issuable pursuant to the
      Transaction Documents (and the Company believes, in good faith, that such
      effectiveness will continue uninterrupted for the foreseeable future), (iv)
      the
      Common Stock is trading on a Trading Market and all of the shares issuable
      pursuant to the Transaction Documents are listed or quoted for trading on such
      Trading Market (and the Company believes, in good faith, that trading of the
      Common Stock on a Trading Market will continue uninterrupted for the foreseeable
      future), (v) there is a sufficient number of authorized but unissued and
      otherwise unreserved shares of Common Stock for the issuance of all of the
      shares issuable pursuant to the Transaction Documents, (vi) there is no existing
      Event of Default or no existing event which, with the passage of time or the
      giving of notice, would constitute an Event of Default, (vii) the issuance
      of
      the shares in question (or, in the case of a Monthly Redemption, the shares
      issuable upon conversion in full of the Monthly Redemption Amount) to
      the Holder would not violate the limitations set forth in Section 4(c) herein,
      (viii) there
      has been no public announcement
      of a pending or
      proposed Fundamental Transaction or Change
      of Control Transaction
      that has not been
      consummated, (ix) the
      Holder is not in possession of any information provided by the Company that
      constitutes, or may constitute, material non-public information and (x) for
      each
      Trading Day in a period of 20 consecutive Trading Days prior to the applicable
      date in question, the
      average daily
dollar
trading
      volume for the Common Stock on
      the principal Trading
      Market exceeds (A) $100,000 per Trading
      Day in the case
      of a Monthly Redemption pursuant to Section 6(a) herein or (B) in all other
      cases, $250,000 per Trading
      Day.

    


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

    


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

    


    “Interest
      Conversion Rate” means the
      lesser of (a) the Conversion Price or
      (b) 80% of the lesser
      of (i) the
      average of the 3 lowest Closing Bid Prices of the Common Stock for the 20
      consecutive Trading Days ending on the Trading Day that is immediately prior
      to
      the applicable Interest Payment Date or (ii) the average of the 3 lowest Closing
      Bid Prices of the Common Stock for the 20 consecutive Trading Days ending on
      the
      Trading Day that is immediately prior to the date the applicable Interest
      Conversion Shares are issued and delivered if such delivery is after the
      Interest Payment Date.

    


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

    


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

    


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

    


    


    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

    


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

    


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

    


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

    


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

    


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

    


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

    


    “Monthly
      Redemption Amount” means, as to a Monthly Redemption, $[_____1, plus
      accrued but
      unpaid interest, liquidated damages and any other amounts then owing to the
      Holder in respect of this Debenture.

    


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

    


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

    


    “New
      York Courts” shall have the meaning set forth in Section 9(d).

    


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

    


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

    

      

    

    
      1
        1/12th of the
        original
        principal amount of this Debenture.

    

    


    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

    


    “Optional
      Redemption Amount” means the sum of (i) the greater of (A) 125% of the
      outstanding principal amount of this Debenture, plus 100% of accrued and unpaid
      interest hereon, or (B) 125% of the outstanding principal amount of this
      Debenture, plus all accrued and unpaid interest hereon, divided by the
      Conversion Price on either the Optional Redemption Date or the date such
      Optional Redemption Amount is paid in full, whichever has a lower Conversion
      Price, multiplied by the VWAP on the date the Optional Redemption Amount is
      either (x) due or (y) paid in full, whichever has a higher VWAP, and (ii) all
      other amounts, costs, expenses and liquidated damages due in respect of this
      Debenture.

    


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

    


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

    


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

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

    


    “Permitted
      Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b)
      additional indebtedness owed to a federal or state regulated bank or nationally
      recognized commercial lending institution whose primary business is not
      investing in securities that (i) is expressly subordinate to the Debentures
      pursuant to a written subordination agreement with the Purchasers that is
      reasonably acceptable to each Purchaser and (ii) matures at a date later than
      the 91st day
      following the Maturity Date and (c) additional indebtedness that (i) is
      expressly subordinate to the Debentures pursuant to a written subordination
      agreement with the Purchasers that is acceptable to each Purchaser in its sole
      and absolute discretion and (ii) matures at a date later than the 91st day following
      the
      Maturity Date; provided, however, the total amount of additional indebtedness
      under clauses (b) and (c) shall not exceed an aggregate of
      $10,000,000.

    


    “Permitted
      Lien” means the individual and collective reference to the following: (a)
      Liens for taxes, assessments and other governmental charges or levies not yet
      due or Liens for taxes, assessments and other governmental charges or levies
      being contested in good faith and by appropriate proceedings for which adequate
      reserves (in the good faith judgment of the management of the Company) have
      been
      established in accordance with GAAP; (b) Liens imposed by law which were
      incurred in the ordinary course of the Company’s business, such as carriers’,
      warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
      similar Liens arising in the ordinary course of the Company’s business, and
      which (x) do not individually or in the aggregate materially detract from the
      value of such property or assets or materially impair the use thereof in the
      operation of the business of the Company and its consolidated Subsidiaries
      or
      (y) are being contested in good faith by appropriate proceedings, which
      proceedings have the effect of preventing for the foreseeable future the
      forfeiture or sale of the property or asset subject to such Lien; and (c) Liens
      incurred in connection with Permitted Indebtedness.

     

    


    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

    


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

    


    “Purchase
      Agreement” means the Securities Purchase Agreement, dated as of November 30,
      2007 among the Company and the original Holders, as amended, modified or
      supplemented from time to time in accordance with its terms.

    


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

    


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

    


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

    


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

    


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

    


    “Trading
      Day” means a day on which the New York Stock Exchange is open for
      business.

    


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

    


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

    


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

    


    


    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

    


    
      	
            	
              Section
                2.

            	
              Interest.

            


    

    


    a)         Payment
      of Interest in Cash or Kind. The Company shall pay interest to the Holder on
      the aggregate unconverted and then outstanding principal amount of this
      Debenture at the rate of 8% per annum, payable monthly on January 1, February
      1,
      March 1, April 1, May 1, June 1, July 1, August 1, September 1, October 1,
      November 1 and December 1, beginning on the first such date after the Original
      Issue Date, on each Monthly Redemption Date (as to that principal amount then
      being redeemed), on each Conversion Date (as to that principal amount then
      being
      converted), and on the Maturity Date (each such date, an “Interest Payment
      Date”) (if any Interest Payment Date is not a Business Day, then the
      applicable payment shall be due on the next succeeding Business Day), in cash
      or, at the Company’s option, in duly authorized, validly issued, fully paid and
      non-assessable shares of Common Stock at the Interest Conversion Rate (the
      dollar amount to be paid in shares, the “Interest Share Amount”) or a
      combination thereof; provided, however, that payment in shares of
      Common Stock may only occur if (i) all of the Equity Conditions have been met
      (unless waived by the Holder in writing) during the 20 Trading Days immediately
      prior to the applicable Interest Payment Date  (the “Interest
      Notice Period”) and through and including the date such shares of Common
      Stock are actually issued to the Holder, (ii) the Company shall have given
      the
      Holder notice in accordance with the notice requirements set forth below and
      (iii) as to such Interest Payment Date, prior to such Interest Notice Period
      (but not more than five (5) Trading Days prior to the commencement of such
      Interest Notice Period), the Company shall have delivered to the Holder’s
      account with The Depository Trust Company a number of shares of Common Stock
      to
      be applied against such Interest Share Amount equal to the quotient of (x)
      the
      applicable Interest Share Amount divided by (y) the then Conversion Price (the
      “Interest Conversion Shares”).

    


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

    


    


    
      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

    


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

    


    d)         Late
      Fee.  All overdue accrued and unpaid interest to be paid hereunder
      shall entail a late fee at an interest rate equal to the lesser of 18% per
      annum
      or the maximum rate permitted by applicable law (“Late Fees”) which shall
      accrue daily from the date such interest is due hereunder through and including
      the date of actual payment in full. Notwithstanding anything to the contrary
      contained herein, if, on any Interest Payment Date the Company has elected
      to
      pay accrued interest in the form of Common Stock but the Company is not
      permitted to pay accrued interest in Common Stock because it fails to satisfy
      the conditions for payment in Common Stock set forth in Section 2(a) herein,
      then, at the option of the Holder,
      the Company, in lieu
      of
      delivering either
shares
      of Common Stock
      pursuant to this Section 2 or paying the regularly
      scheduled
      interest payment in cash, shall deliver, within three (3) Trading Days of each
      applicable Interest Payment Date, an amount in cash equal to the product of
      (x)
      the number of shares of Common Stock otherwise deliverable to the Holder in
      connection with the payment of interest due on such Interest Payment Date
      multiplied by (y) the highest VWAP during the period commencing on the Interest
      Payment Date and ending on the Trading Day prior to the date such payment is
      actually made.  If any Interest Conversion
      Shares are
      issued to the Holder in connection with an Interest Payment Date and are not
      applied against an Interest Share Amount, then the Holder shall promptly return
      such excess shares to the Company.

    


    


    
      
        
           

        

        
          9

          
            

          

        

        
           

        

      

    

    


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

    


    
      	
               

            	
              Section
                3.

            	
              Registration
                of Transfers and Exchanges.

            


    

    


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

    


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

    


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

    


    
      	
               

            	
              Section
                4.

            	
              Conversion.

            


    

    


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

    


    


    
      
        
           

        

        
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    b)         Conversion
      Price.  The conversion price in effect on any Conversion Date
      shall be equal to $0.25 subject to adjustment herein (the
“Conversion Price”).

    


    c)         Conversion
      Limitations.  The Company shall not effect any conversion of this
      Debenture, and a Holder shall not have the right to convert any portion of
      this
      Debenture, to the extent that after giving effect to the conversion set forth
      on
      the applicable Notice of Conversion, the Holder (together with the Holder’s
      Affiliates, and any other person or entity acting as a group together with
      the
      Holder or any of the Holder’s Affiliates) would beneficially own in excess of
      the Beneficial Ownership Limitation (as defined below).  For purposes of
      the foregoing sentence, the number of shares of Common Stock beneficially owned
      by the Holder and its Affiliates shall include the number of shares of Common
      Stock issuable upon conversion of this Debenture with respect to which such
      determination is being made, but shall exclude the number of shares of Common
      Stock which are issuable upon (A) conversion of the remaining, unconverted
      principal amount of this Debenture beneficially owned by the Holder or any
      of
      its Affiliates, and (B) exercise or conversion of the unexercised or unconverted
      portion of any other securities of the Company  subject to a
      limitation on conversion or exercise analogous to the limitation contained
      herein (including, without limitation, any other Debentures or the Warrants)
      beneficially owned by the Holder or any of its Affiliates.  Except as set
      forth in the preceding sentence, for purposes of this Section 4(c), beneficial
      ownership shall be calculated in accordance with Section 13(d) of the Exchange
      Act and the rules and regulations promulgated thereunder.  To the
      extent that the limitation contained in this Section 4(c) applies, the
      determination of whether this Debenture is convertible (in relation to other
      securities owned by the Holder together with any Affiliates) and of which
      principal amount of this Debenture is convertible shall be in the sole
      discretion of the Holder, and the submission of a Notice of Conversion shall
      be
      deemed to be the Holder’s determination of whether this Debenture may be
      converted (in relation to other securities owned by the Holder together with
      any
      Affiliates) and which principal amount of this Debenture is convertible, in
      each
      case subject to the Beneficial Ownership Limitation. To ensure compliance with
      this restriction, the Holder will be deemed to represent to the Company each
      time it delivers a Notice of Conversion that such Notice of Conversion has
      not
      violated the restrictions set forth in this paragraph and the Company shall
      have
      no obligation to verify or confirm the accuracy of such
      determination.  In addition, a determination as to any group status as
      contemplated above shall be determined in accordance with Section 13(d) of
      the
      Exchange Act and the rules and regulations promulgated
      thereunder.   For purposes of this Section 4(c), in determining
      the number of outstanding shares of Common Stock, the Holder may rely on the
      number of outstanding shares of Common Stock as stated in the most recent of
      the
      following: (A) the Company’s most recent periodic or annual report, as the case
      may be; (B) a more recent public announcement by the Company; or (C) a more
      recent notice by the Company or the Company’s transfer agent setting forth the
      number of shares of Common Stock outstanding.  Upon the written or oral
      request of a Holder, the Company shall within two Trading Days confirm orally
      and in writing to the Holder the number of shares of Common Stock then
      outstanding.  In any case, the number of outstanding shares of Common Stock
      shall be determined after giving effect to the conversion or exercise of
      securities of the Company, including this Debenture, by the Holder or its
      Affiliates since the date as of which such number of outstanding shares of
      Common Stock was reported. The “Beneficial Ownership Limitation” shall be
      4.99% of the number of shares of the Common Stock outstanding immediately after
      giving effect to the issuance of shares of Common Stock issuable upon conversion
      of this Debenture held by the Holder.  The Holder, upon not less than
      61 days’ prior notice to the Company, may increase or decrease the Beneficial
      Ownership Limitation provisions of this Section 4(c), provided that the
      Beneficial Ownership Limitation in no event exceeds 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.  Any such increase or decrease will not be effective until the
      61st day after
      such notice is delivered to the Company.  The
      provisions of this paragraph shall be construed and implemented in a manner
      otherwise than in strict conformity with the terms of this Section 4(c) to
      correct this paragraph (or any portion hereof) which may be defective or
      inconsistent with the intended Beneficial Ownership Limitation herein contained
      or to make changes or supplements necessary or desirable to properly give effect
      to such limitation. The limitations contained in this paragraph shall apply
      to a
      successor holder of this Debenture.

    


    


    
      
        
           

        

        
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              d)

            	
              Mechanics
                of Conversion.

            


    

    


    i.           Conversion
      Shares Issuable Upon Conversion of Principal Amount.  The number
      of Conversion Shares issuable upon a conversion hereunder shall be determined
      by
      the quotient obtained by dividing (x) the outstanding principal amount of this
      Debenture to be converted by (y) the Conversion Price.

    


    ii.          Delivery
      of Certificate Upon Conversion. Not later than three Trading Days after each
      Conversion Date (the “Share Delivery Date”), the Company shall deliver,
      or cause to be delivered, to the Holder (A) a certificate or certificates
      representing the Conversion Shares which, on or after the Effective Date, shall
      be free of restrictive legends and trading restrictions (other than those which
      may then be required by the Purchase Agreement) representing the number of
      Conversion Shares being acquired upon the conversion of this Debenture
      (including, if the Company has given continuous notice pursuant to Section
      2(b)
      for payment of interest in shares of Common Stock at least 20 Trading Days
      prior
      to the date on which the Conversion Notice is delivered to the Company, shares
      of Common Stock representing the payment of accrued interest otherwise
      determined pursuant to Section 2(a) but assuming that the Interest Notice Period
      is the 20 Trading Days period immediately prior to the date on which the
      Conversion Notice is delivered to the Company and excluding for such issuance
      the condition that the Company deliver Interest Conversion Shares as to such
      interest payment) and (B) a bank check in the amount of accrued and unpaid
      interest (if the Company has elected or is required to pay accrued interest
      in
      cash). On or after the Effective Date, the Company shall use its best efforts
      to
      deliver any certificate or certificates required to be delivered by the Company
      under this Section 4 electronically through the Depository Trust Company or
      another established clearing corporation performing similar
      functions.

    


    


    


    


    


    


    


    


    
      
        
           

        

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

    


    iv.         Obligation
      Absolute; Partial Liquidated Damages.  The Company’s obligations
      to issue and deliver the Conversion Shares upon conversion of this Debenture
      in
      accordance with the terms hereof are absolute and unconditional, irrespective
      of
      any action or inaction by the Holder to enforce the same, any waiver or consent
      with respect to any provision hereof, the recovery of any judgment against
      any
      Person or any action to enforce the same, or any setoff, counterclaim,
      recoupment, limitation or termination, or any breach or alleged breach by the
      Holder or any other Person of any obligation to the Company or any violation
      or
      alleged violation of law by the Holder or any other Person, and irrespective
      of
      any other circumstance which might otherwise limit such obligation of the
      Company to the Holder in connection with the issuance of such Conversion Shares;
      provided, however, that such delivery shall not operate as a
      waiver by the Company of any such action the Company may have against the
      Holder.  In the event the Holder of this Debenture shall elect to
      convert any or all of the outstanding principal amount hereof, the Company
      may
      not refuse conversion based on any claim that the Holder or anyone associated
      or
      affiliated with the Holder has been engaged in any violation of law, agreement
      or for any other reason, unless an injunction from a court, on notice to Holder,
      restraining and or enjoining conversion of all or part of this Debenture shall
      have been sought and obtained, and the Company posts a surety bond for the
      benefit of the Holder in the amount of 150% of the outstanding principal amount
      of this Debenture, which is subject to the injunction, which bond shall remain
      in effect until the completion of arbitration/litigation of the underlying
      dispute and the proceeds of which shall be payable to the Holder to the extent
      it obtains judgment.  In the absence of such injunction, the Company
      shall issue Conversion Shares or, if applicable, cash, upon a properly noticed
      conversion.  If the Company fails for any reason to deliver to the
      Holder such certificate or certificates pursuant to Section 4(d)(ii) by the
      third Trading Day after the Conversion Date, the Company shall pay to the
      Holder, in cash, as liquidated damages and not as a penalty, for each $1,000
      of
      principal amount being converted, $10 per Trading Day (increasing to $20 per
      Trading Day on the fifth (5th) Trading
      Day after
      such liquidated damages begin to accrue) for each Trading Day after such third
      (3rd) Trading
      Day until such certificates are delivered.    Nothing herein
      shall limit a Holder’s right to pursue actual damages or declare an Event of
      Default pursuant to Section 8 hereof for the Company’s failure to deliver
      Conversion Shares within the period specified herein and the Holder shall have
      the right to pursue all remedies available to it hereunder, at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief.  The exercise of any such rights shall not prohibit
      the Holder from seeking to enforce damages pursuant to any other Section hereof
      or under applicable law.

    


    


    
      
        
           

        

        
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    v.          Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In
      addition to any other rights available to the Holder, if the Company fails
      for
      any reason to deliver to the Holder such certificate or certificates by the
      Share Delivery Date pursuant to Section 4(d)(ii), and if after such Share
      Delivery Date the Holder is required by its brokerage firm to purchase (in
      an
      open market transaction or otherwise), or the Holder’s brokerage firm otherwise
      purchases, shares of Common Stock to deliver in satisfaction of a sale by the
      Holder of the Conversion Shares which the Holder was entitled to receive upon
      the conversion relating to such Share Delivery Date (a “Buy-In”), then
      the Company shall (A) pay in cash to the Holder (in addition to any other
      remedies available to or elected by the Holder) the amount by which (x) the
      Holder’s total purchase price (including any brokerage commissions) for the
      Common Stock so purchased exceeds (y) the product of (1) the aggregate number
      of
      shares of Common Stock that the Holder was entitled to receive from the
      conversion at issue multiplied by (2) the actual sale price at which the sell
      order giving rise to such purchase obligation was executed (including any
      brokerage commissions) and (B) at the option of the Holder, either reissue
      (if
      surrendered) this Debenture in a principal amount equal to the principal amount
      of the attempted conversion or deliver to the Holder the number of shares of
      Common Stock that would have been issued if the Company had timely complied
      with
      its delivery requirements under Section 4(d)(ii).  For example, if the
      Holder purchases Common Stock having a total purchase price of $11,000 to cover
      a Buy-In with respect to an attempted conversion of this Debenture with respect
      to which the actual sale price of the Conversion Shares (including any brokerage
      commissions) giving rise to such purchase obligation was a total of $10,000
      under clause (A) of the immediately preceding sentence, the Company shall be
      required to pay the Holder $1,000.  The Holder shall provide the
      Company written notice indicating the amounts payable to the Holder in respect
      of the Buy-In and, upon request of the Company, evidence of the amount of such
      loss.  Nothing herein shall limit a Holder’s right to pursue any other
      remedies available to it hereunder, at law or in equity including, without
      limitation, a decree of specific performance and/or injunctive relief with
      respect to the Company’s failure to timely deliver certificates representing
      shares of Common Stock upon conversion of this Debenture as required pursuant
      to
      the terms hereof.

    


    


    


    


    
      
        
           

        

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

    


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

    


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

    


    
      	
            	
              Section
                5.

            	
              Certain
                Adjustments.

            


    

    


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

    


    


    
      
        
           

        

        
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    b)         Subsequent
      Equity Sales.  If, at any time while this Debenture is
      outstanding,  the Company or any Subsidiary, as applicable, sells or
      grants any option to purchase or sells or grants any right to reprice, or
      otherwise disposes of or issues (or announces any sale, grant or any option
      to
      purchase or other disposition), any Common Stock or Common Stock Equivalents
      entitling any Person to acquire shares of Common Stock at an effective price
      per
      share that is lower than the then Conversion Price (such lower price, the
“Base Conversion Price” and such issuances, collectively, a “Dilutive
      Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so
      issued shall at any time, whether by operation of purchase price adjustments,
      reset provisions, floating conversion, exercise or exchange prices or otherwise,
      or due to warrants, options or rights per share which are issued in connection
      with such issuance, be entitled to receive shares of Common Stock at an
      effective price per share that is lower than the Conversion Price, such issuance
      shall be deemed to have occurred for less than the Conversion Price on such
      date
      of the Dilutive Issuance), then the Conversion Price shall be reduced to equal
      the Base Conversion Price.  Such adjustment shall be made whenever
      such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing,
      no
      adjustment will be made under this Section 5(b) in respect of an Exempt
      Issuance.  If the Company enters into a Variable Rate
      Transaction, despite the prohibition set forth in the Purchase Agreement, the
      Company shall be deemed to have issued Common Stock or Common Stock Equivalents
      at the lowest possible conversion price at which such securities may be
      converted or exercised. The Company shall notify the Holder in writing, no
      later
      than 1 Business Day following the issuance of any Common Stock or Common Stock
      Equivalents subject to this Section 5(b), indicating therein the applicable
      issuance price, or applicable reset price, exchange price, conversion price
      and
      other pricing terms (such notice, the “Dilutive Issuance
      Notice”).  For purposes of clarification, whether or not the
      Company provides a Dilutive Issuance Notice pursuant to this Section 5(b),
      upon
      the occurrence of any Dilutive Issuance, the Holder is entitled to receive
      a
      number of Conversion Shares based upon the Base Conversion Price on or after
      the
      date of such Dilutive Issuance, regardless of whether the Holder accurately
      refers to the Base Conversion Price in the Notice of Conversion.

     

    


     

     

     

     

     

    
 

    


    


    


    
      
        
           

        

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

    


    d)         Pro
      Rata Distributions. If the Company, at any time while this Debenture is
      outstanding, distributes to all holders of Common Stock (and not to the Holders)
      evidences of its indebtedness or assets (including cash and cash dividends)
      or
      rights or warrants to subscribe for or purchase any security (other than the
      Common Stock, which shall be subject to Section 5(b)), then in each such case
      the Conversion Price shall be adjusted by multiplying such Conversion Price
      in
      effect immediately prior to the record date fixed for determination of
      stockholders entitled to receive such distribution by a fraction of which the
      denominator shall be the VWAP determined as of the record date mentioned above,
      and of which the numerator shall be such VWAP on such record date less the
      then
      fair market value at such record date of the portion of such assets or evidence
      of indebtedness so distributed applicable to 1 outstanding share of the Common
      Stock as determined by the Board of Directors of the Company in good
      faith.  In either case the adjustments shall be described in a
      statement delivered to the Holder describing the portion of assets or evidences
      of indebtedness so distributed or such subscription rights applicable to 1
      share
      of Common Stock.  Such adjustment shall be made whenever any such
      distribution is made and shall become effective immediately after the record
      date mentioned above.

    


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

    


    


    
      
        
           

        

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

    


    g)    
           Notice to the Holder.

    


    i.          Adjustment
      to Conversion Price.  Whenever the Conversion Price is adjusted
      pursuant to any provision of this Section 5, the Company shall promptly deliver
      to each Holder a notice setting forth the Conversion Price after such adjustment
      and setting forth a brief statement of the facts requiring such
      adjustment.

    


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

    


    


    
      
        
           

        

        
          18

          
            

          

        

        
           

        

      

    

    


    
      	
            	
              Section
                6.

            	
              Redemption.

            


    

    


    a)         Monthly
      Redemption.  On each Monthly Redemption Date, the Company shall
      redeem the Monthly Redemption Amount (the “Monthly Redemption”). The
      Monthly Redemption Amount payable on each Monthly Redemption Date shall be
      paid
      in cash; provided, however, as to any Monthly Redemption and upon
      30 Trading Days’ prior written irrevocable notice (the “Monthly Redemption
      Notice”), in lieu of a cash redemption payment the Company may elect to pay
      all or part of a Monthly Redemption Amount in Conversion Shares based on a
      conversion price equal to the lesser of (i) the then Conversion Price and (ii)
      80% of the average of the 3 lowest Closing Bid Prices for the 20 consecutive
      Trading Days ending on the Trading Day that is immediately prior to the
      applicable Monthly Redemption Date (subject to adjustment for any stock
      dividend, stock split, stock combination or other similar event affecting the
      Common Stock during such 20 Trading Day period) (the price calculated during
      the
      20 Trading Day period immediately prior to the Monthly Redemption Date, the
      “Monthly Conversion Price” and such 20 Trading Day period, the
“Monthly Conversion Period”); provided, further, that the
      Company may not pay the Monthly Redemption Amount in Conversion Shares unless
      (x) the aggregate Monthly Redemption Amount under all Debentures as to such
      Monthly Redemption is less than 20% of the total dollar trading volume of the
      Common Stock (as to Monthly Redemption Amounts payable with Conversion Shares)
      for the 20 Trading Days prior to the applicable Monthly Redemption Date, (y)
      from the date the Holder receives the duly delivered Monthly Redemption Notice
      through and until the date such Monthly Redemption is paid in full, the Equity
      Conditions have been satisfied, unless waived in writing by the Holder, and
      (z)
      as to such Monthly Redemption, prior to such Monthly Conversion Period (but
      not
      more than 5 Trading Days prior to the commencement of the Monthly Conversion
      Period), the Company shall have delivered to the Holder’s account with The
      Depository Trust Company a number of shares of Common Stock to be applied
      against such Monthly Redemption Amount equal to the quotient of (x) the
      applicable Monthly Redemption Amount divided by (y) the lesser of (A) the
      Conversion Price and (B) 80% of the average of the 3 lowest Closing Bid Prices
      during the 20 Trading Day period ending on the 3rd Trading
      Day
      immediately prior to the date of the Monthly Redemption Notice (the
“Pre-Redemption Conversion Shares”).  The Holder may convert,
      pursuant to Section 4(a), any principal amount of this Debenture subject to
      a
      Monthly Redemption at any time prior to the date that the Monthly Redemption
      Amount, plus accrued but unpaid interest, liquidated damages and any other
      amounts then owing to the Holder are due and paid in full.  Unless
      otherwise indicated by the Holder in the applicable Notice of Conversion, any
      principal amount of this Debenture converted during the applicable Monthly
      Conversion Period until the date the Monthly Redemption Amount is paid in full
      shall be first applied to the principal amount subject to the Monthly Redemption
      Amount payable in cash and then to the Monthly Redemption  Amount
      payable in Conversion Shares.  Any principal amount of this Debenture
      converted during the applicable Monthly Conversion Period in excess of the
      Monthly Redemption Amount shall be applied against the last principal amount
      of
      this Debenture scheduled to be redeemed hereunder, in reverse time order from
      the Maturity Date; provided, however, if any such conversion is
      applied against such Monthly Redemption Amount, the Pre-Redemption Conversion
      Shares, if any were issued in connection with such Monthly Redemption or were
      not already applied to such conversions, shall be first applied against such
      conversion.  The Company covenants and agrees that it will honor all
      Notice of Conversions tendered up until such amounts are paid in
      full.  The Company’s determination to pay a Monthly Redemption in
      cash, shares of Common Stock or a combination thereof shall be applied ratably
      to all of the holders of the then outstanding Debentures based on their (or
      their predecessor’s) initial purchases of Debentures pursuant to the Purchase
      Agreement.  At any time the Company delivers a notice to the Holder of
      its election to pay the Monthly Redemption Amount in shares of Common Stock,
      the
      Company shall file a prospectus supplement pursuant to Rule 424 disclosing
      such
      election.

    


    


    
      
        
           

        

        
          19

          
            

          

        

        
           

        

      

    

    


    b)         Optional
      Redemption at Election of Company.  Subject to the provisions
      of this
      Section 6, at any time
      after the Effective Date,
      the Company may deliver a notice to the Holder (an “Optional Redemption
      Notice” and the date
      such notice is deemed delivered hereunder, the “Optional Redemption
      Notice
      Date”) of its
      irrevocable election to redeem all (but not less than all) of the then
      outstanding principal amount of this Debenture for cash in an amount equal
      to
      the Optional Redemption Amount on the 30th
      Trading Day following the Optional
      Redemption Notice Date (such date, the “Optional Redemption
      Date” and such
      redemption, the “Optional Redemption”).  The
      Optional Redemption
      Amount is payable in full on the Optional Redemption Date.  The
      Company covenants and agrees that it will honor all Notices of Conversion
      tendered from the time of delivery of the Optional Redemption Notice through
      the
      date all amounts owing thereon are due and paid in full.  The
      Company’s determination to effect an Optional Redemption shall be applied
      ratably to all of the holders of the then outstanding Debentures based on their
      (or their predecessor’s) initial purchases of Debentures pursuant to the
      Purchase Agreement.

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
           

        

        
          20

          
            

          

        

        
           

        

      

    

    


    c)         Redemption
      Procedure.  The payment of cash or issuance of Common Stock, as
      applicable, pursuant to an Optional or Monthly Redemption shall be payable
      on
      the Optional or Monthly Redemption Date, as applicable.  If any
      portion of the payment pursuant to an Optional or Monthly Redemption shall
      not
      be paid by the Company by the applicable due date, interest shall accrue thereon
      at an interest rate equal to the lesser of 18% per annum or the maximum rate
      permitted by applicable law until such amount is paid in
      full.  Notwithstanding anything herein contained to the contrary, if
      any portion of the Optional or Monthly Redemption Amount remains unpaid after
      such date, the Holder may elect, by written notice to the Company given at
      any
      time thereafter, to invalidate such Optional or Monthly Redemption,
abinitio, and, with respect to the Company’s failure to honor the
      Optional Redemption, the Company shall have no further right to exercise such
      Optional Redemption.  Notwithstanding anything to the contrary in this
      Section 6, the Company’s determination to redeem in cash or its elections under
      Section 6(a) shall be applied ratably among the Holders of Debentures. The Holder may elect to convert
      the
      outstanding principal amount of the Debenture pursuant to Section 4 prior to
      actual payment in cash for any redemption under this Section 6 by the
delivery
      of a Notice of Conversion to
      the Company.

    


    Section
      7.         Negative
      Covenants. As long as any portion of this Debenture remains outstanding,
      unless the holders of at least 85% in principal amount of the then outstanding
      Debentures shall have otherwise given prior written consent, the Company shall
      not, and shall not permit any of its subsidiaries (whether or not a Subsidiary
      on the Original Issue Date) to, directly or indirectly:

    


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

    


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

    


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

    


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

    


    


    
      
        
           

        

        
          21

          
            

          

        

        
           

        

      

    

    


    e)         repay,
      repurchase or offer to repay,
      repurchase or otherwise acquire any Indebtedness, other than the Debentures
      if
      on a pro-rata basis, other than regularly scheduled principal and interest
      payments as such terms are in effect as of the Original Issue
      Date;

    


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

    


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

    


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

    


    
      	
            	
              Section
                8.

            	
              Events
                of Default.

            


    

    


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

    


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

    


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

    


    


    


    
      
        
           

        

        
          22

          
            

          

        

        
           

        

      

    

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


    


    
      
        
           

        

        
          23

          
            

          

        

        
           

        

      

    

    


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

    


    xii.        any
      Person shall breach any agreement delivered to the initial Holders pursuant
      to
      Section 2.2(a)(vi) of the Purchase Agreement; or

    


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

    


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

    


    
      	
            	
              Section
                9.

            	
              Miscellaneous.

            


    

    


     

    


    
      
        
           

        

        
          24

          
            

          

        

        
           

        

      

    

    


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

    


    b)         Absolute
      Obligation. Except as expressly provided herein, no provision of this
      Debenture shall alter or impair the obligation of the Company, which is absolute
      and unconditional, to pay the principal of, liquidated damages and accrued
      interest, as applicable, on this Debenture at the time, place, and rate, and
      in
      the coin or currency, herein prescribed.  This Debenture is a direct
      debt obligation of the Company.  This Debenture ranks
paripassu with all other Debentures now or hereafter issued under
      the terms set forth herein.

    


    c)         Lost
      or Mutilated Debenture.  If this Debenture shall be mutilated,
      lost, stolen or destroyed, the Company shall execute and deliver, in exchange
      and substitution for and upon cancellation of a mutilated Debenture, or in
      lieu
      of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
      for the principal amount of this Debenture so mutilated, lost, stolen or
      destroyed, but only upon receipt of evidence of such loss, theft or destruction
      of such Debenture, and of the ownership hereof, reasonably satisfactory to
      the
      Company.

    


    d)         Governing
      Law.  All questions concerning the construction, validity,
      enforcement and interpretation of this Debenture shall be governed by and
      construed and enforced in accordance with the internal laws of the State of
      New
      York, without regard to the principles of conflict of laws
      thereof.  Each party agrees that all legal proceedings concerning the
      interpretation, enforcement and defense of the transactions contemplated by
      any
      of the Transaction Documents (whether brought against a party hereto or its
      respective Affiliates, directors, officers, shareholders, employees or agents)
      shall be commenced in the state and federal courts sitting in the City of New
      York, Borough of Manhattan (the “New York Courts”).  Each party
      hereto hereby irrevocably submits to the exclusive jurisdiction of the New
      York
      Courts for the adjudication of any dispute hereunder or in connection herewith
      or with any transaction contemplated hereby or discussed herein (including
      with
      respect to the enforcement of any of the Transaction Documents), and hereby
      irrevocably waives, and agrees not to assert in any suit, action or proceeding,
      any claim that it is not personally subject to the jurisdiction of such New
      York
      Courts, or such New York Courts are improper or inconvenient venue for such
      proceeding.  Each party hereby irrevocably waives personal service of
      process and consents to process being served in any such suit, action or
      proceeding by mailing a copy thereof via registered or certified mail or
      overnight delivery (with evidence of delivery) to such party at the address
      in
      effect for notices to it under this Debenture and agrees that such service
      shall
      constitute good and sufficient service of process and notice
      thereof.  Nothing contained herein shall be deemed to limit in any way
      any right to serve process in any other manner permitted by applicable law.
      Each
      party hereto hereby irrevocably waives, to the fullest extent permitted by
      applicable law, any and all right to trial by jury in any legal proceeding
      arising out of or relating to this Debenture or the transactions contemplated
      hereby. If either party shall commence an action or proceeding to enforce any
      provisions of this Debenture, then the prevailing party in such action or
      proceeding shall be reimbursed by the other party for its attorneys fees and
      other costs and expenses incurred in the investigation, preparation and
      prosecution of such action or proceeding.

    


    


    
      
        
           

        

        
          25

          
            

          

        

        
           

        

      

    

    


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

    


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

    


    


    


    


    


    


    


    


    


    


    
      
        
           

        

        
          26

          
            

          

        

        
           

        

      

    

    


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

    


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

    


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

    


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

    


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

    


    


    


    


    


    


    


    


    


    


    
      
        
           

        

        
          27

          
            

          

        

        
           

        

      

    

    


    IN
      WITNESS WHEREOF, the Company has caused this Debenture to be duly executed
      by a
      duly authorized officer as of the date first above indicated.

    


    


    
      	 	
              BANCROFT
                URANIUM INC.

               

               

            
	 	
              By:_________________________________________

              Name:

              Title:

              Facsimile
                No. for delivery of Notices:  ______________

            
	 	 
	 	 


    

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
           

        

        
          28

          
            

          

        

        
           

        

      

    

    


    ANNEX
      A

    


    NOTICE
      OF CONVERSION

    


    


    The
      undersigned hereby elects to
      convert principal under the 8% Original Issue Discount Secured Convertible
      Debenture due November ___, 2009 of Bancroft Uranium Inc., a
      Nevada  corporation (the “Company”), into shares of common
      stock (the “Common Stock”), of the Company according to the conditions
      hereof, as of the date written below.  If shares of Common Stock are
      to be issued in the name of a person other than the undersigned, the undersigned
      will pay all transfer taxes payable with respect thereto and is delivering
      herewith such certificates and opinions as reasonably requested by the Company
      in accordance therewith.  No fee will be charged to the holder for any
      conversion, except for such transfer taxes, if any.

    


    By
      the delivery of this Notice of
      Conversion the undersigned represents and warrants to the Company that its
      ownership of the Common Stock does not exceed the amounts specified under
      Section 4 of this Debenture, as determined in accordance with Section 13(d)
      of
      the Exchange Act.

    


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

    


    Conversion
      calculations:

    
      	 	
              Date
                to Effect Conversion:

            
	 	 
	 	
              Principal
                Amount of Debenture to be Converted:

            
	 	 
	 	
              Payment
                of Interest in Common Stock __ yes  __ no

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

            
	 	 
	 	
              Number
                of shares of Common Stock to be issued:

            
	 	 
	 	 
	 	
              Signature:

            
	 	 
	 	
              Name:

            
	 	 
	 	
              Address
                for Delivery of Common Stock Certificates:

            
	 	 
	 	
              Or

            
	 	 
	 	
              DWAC
                Instructions:

            
	 	 
	 	
              Broker
                No:  _______________

            
	 	
              Account
                No:_______________

            


    

    


    


    


    
      
        
           

        

        
          29

          
            

          

        

        
           

        

      

    

    


    


    Schedule
      1

    


    CONVERSION
      SCHEDULE

    


    The
      8%
      Original Issue Discount Secured Convertible Debentures due on November ___,
      2009
      in the aggregate principal amount of $____________ are issued by Bancroft
      Uranium Inc.  This Conversion Schedule reflects conversions made under
      Section 4 of the above referenced Debenture.

    


    Dated:

    

      
        	
                Date
                  of Conversion

                (or
                  for first entry, Original Issue Date)

              	
                Amount
                  of Conversion

              	
                 

                Aggregate
                  Principal Amount Remaining Subsequent to Conversion

                (or
                  original Principal Amount)

                 

              	
                Company
                  Attest

              
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 


      




    


     

    


    


     

     

     

     

    30