exhibit_10-12.htm


    
      

    

    Exhibit
      10.12

     

    


    THIS
      SECURED DEBENTURE AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY,
      THE “SECURITIES”), HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
      SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
      STATE.  THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR
      FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE “ACT”).  THE SECURITIES ARE
“RESTRICTED” AND MAY NOT BE OFFERED OR SOLD UNLESS THE SECURITIES ARE
      REGISTERED UNDER THE ACT, OR ELIGIBLE TO BE OFFERED OR SOLD PURSUANT TO
      AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND THE
      COMPANY WILL BE PROVIDED WITH OPINION OF COUNSEL OR OTHER SUCH INFORMATION
      AS IT
      MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH EXEMPTIONS ARE
      AVAILABLE.  FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY
      NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.

     

    


     

    SECURED
      DEBENTURE

     

    C-MARK
      INTERNATIONAL, INC.

     

    Secured
      Convertible Debenture

     

    August
      2, 2007

     

    


    
      	
              No.  ___

            	
              US$400,000

            


    

    


    This
      Secured Debenture (the “Debenture”) is issued on August 2, 2007
      (the “Closing Date”) by C-Mark International, Inc., a South
      Carolina corporation (the “Company”), to Trafalgar Capital Specialized
      Investment Fund, Luxembourg (together with its permitted successors and assigns,
      the “Holder”) pursuant to exemptions from registration under the
      Securities Act of 1933, as amended.

     

     

    ARTICLE
      I.

     

    Section
      1.01    Principal
      and Interest.  For value received, the
      Company hereby promises to pay to the order of the Holder on August 2,
      2009 in lawful money of the United States of America and in immediately
      available funds the principal sum of Four Hundred Thousand U.S.
      Dollars (US$400,000) together with interest on the unpaid
      principal of this Debenture at the following rate:  (a) twelve percent
      (12%) per annum compounded monthly from the date hereof until the date the
      registration statement (the “Registration Statement”) is filed, pursuant
      to the Investor Registration Rights Agreement dated the date hereof, with the
      United States Securities and Exchange Commission (the “Filing Date” (b) ten
      percent (10%) per annum, compounded monthly from the Filing Date until the
      SEC
      declares the Registration Statement Effective and (c) eight percent (8%) per
      annum compounded monthly from the date the SEC declares the Registration
      Statement Effective until paid.  Interest shall be computed on the
      basis of a 365-day year and the actual days elapsed and the Holder shall deduct
      two (2) interest payments at each Closing (as defined in the Securities Purchase
      Agreement).  At the Company’s option, the entire principal amount and
      all accrued interest shall be either (a) paid to the Holder on the second
      (2nd) year
      anniversary from the date hereof or (b) converted in accordance with
      Section 1.02 herein provided, however, that in no event shall the Holder be
      entitled to convert this Debenture for a number of shares of Common Stock in
      excess of that number of shares of Common Stock which, upon giving effect to
      such conversion, would cause the aggregate number of shares of Common Stock
      beneficially owned by the Holder and its affiliates to exceed 4.99% of the
      outstanding shares of the Common Stock following such conversion.

     

    


    
      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

    


     

     

    Section
      1.02    Optional
      Conversion.  The Holder is entitled, at
      its option, to convert, and sell on the same day or at any subsequent time,
      at
      any time and from time to time, until payment in full of this Debenture, all
      or
      any part of the principal amount of the Debenture, plus accrued interest, into
      shares (the “Conversion Shares”) of the Company’s common stock, par value
      US$.0001 per share (“Common Stock”), at the price per share (the
“Conversion Price”) equal to: (1) prior to the Common Stock being
      declared eligible for trading on the Over-The-Counter Bulletin Board, an amount
      equal to sixty percent (60%) of the Company’s lowest daily closing bid price for
      the five (5) trading days immediately prior to the First Closing or (2) after
      the Common Stock begins trading on the Over-The-Counter Bulletin
      Board,  the lesser of (a) an amount equal to one hundred twenty
      percent (120%) of the Volume Weighted Average Price (“VWAP”) as quoted by
      Bloomberg L.P. (the “Fixed Price”) as of the date hereof, or
      (b) an amount equal to eighty percent (80%) of the lowest daily
      closing bid price  of the Company’s Common Stock, as quoted by
      Bloomberg, LP, for the five (5)  trading days immediately preceding
      the Conversion Date (as defined herein).  Subparagraphs (a)
      and (b) above are individually referred to as a “Conversion
      Price”.  As used herein, “Principal Market” shall mean The
      National Association of Securities Dealers Inc.’s Over-The-Counter Bulletin
      Board, Nasdaq SmallCap Market, or American Stock Exchange.  If the
      Common Stock is not traded on a Principal Market, the Closing Bid Price and/or
      the VWAP shall mean, the reported Closing Bid Price or the VWAP for the Common
      Stock, as furnished by the National Association of Securities Dealers, Inc.,
      for
      the applicable periods.  No fraction of shares or scrip representing
      fractions of shares will be issued on conversion, but the number of shares
      issuable shall be rounded to the nearest whole share.  To convert this
      Debenture, the Holder hereof shall deliver written notice thereof, substantially
      in the form of Exhibit “A” to this Debenture, with appropriate insertions
      (the “Conversion Notice”), to the Company at its address as set forth
      herein.  The date upon which the conversion shall be effective (the
“Conversion Date”) shall be deemed to be the date set forth in the
      Conversion Notice.  Within three (3) days of receipt of a Conversion
      Notice from the Holder, the Company may redeem any conversion for cash in lieu
      of issuing the Conversion Shares using the Redemption Premium when the price
      of
      the common stock is below the Fixed Price.

     

    Section
      1.03    Reservation
      of Common Stock.  The Company shall
      reserve and keep available out of its authorized but unissued shares of Common
      Stock, solely for the purpose of effecting the conversion of this Debenture,
      such number of shares of Common Stock as shall from time to time be sufficient
      to effect such conversion, based upon the Conversion Price.  If at any
      time the Company does not have a sufficient number of Conversion Shares
      authorized and available, then the Company shall call and hold a special meeting
      of its stockholders within thirty (30) days of that time for the sole
      purpose of increasing the number of authorized shares of Common
      Stock.

     

    


    
      
        
          
          

        

        
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    Section
      1.04     Right of
      Redemption.  The Company at its option shall have the
      right to redeem, with three (3) business days advance written notice (the
“Redemption Notice”), a portion or all outstanding convertible
      debenture.  The redemption price shall be one hundred twenty percent
      (120%) of the amount redeemed including accrued interest (the “Redemption
      Amount”).  The Company shall deliver to the Holder the Redemption
      Amount on the third (3rd) business
      day
      after the Redemption Notice.

     

    Section
      1.05    Interest
      Payments.  The interest so payable will be paid monthly
      (the “Interest Payment Date”) to the person in whose name this Debenture is
      registered.  Holder shall deduct two (2) interest payments at each
      Closing on the then outstanding balance.  At the time such interest is
      payable, the Holder, in its sole discretion, may elect to receive the interest
      in cash (via wire transfer or certified funds) or in the form of Common
      Stock.  In the event of default, as described in Article III
      Section 3.01 hereunder, the Holder may elect that the interest be paid in
      cash (via wire transfer or certified funds) or in the form of Common
      Stock.  If paid in the form of Common Stock, the amount of stock to be
      issued will be calculated as follows: the value of the stock shall be the
      Closing Bid Price on:  (i) the date the interest payment is due;
      or (ii) if the interest payment is not made when due, the date the interest
      payment is made.  A number of shares of Common Stock with a value
      equal to the amount of interest due shall be issued.  No fractional
      shares will be issued; therefore, in the event that the value of the Common
      Stock per share does not equal the total interest due, the Company will pay
      the
      balance in cash.

     

    Section
      1.06    Paying
      Agent and Registrar.  Initially, the Company will act as
      paying agent and registrar.  The Company may change any paying agent,
      registrar, or Company-registrar by giving the Holder not less than ten (10)
      business days’ written notice of its election to do so, specifying the name,
      address, telephone number and facsimile number of the paying agent or
      registrar.  The Company may act in any such capacity.

     

    Section
      1.07    Secured
      Nature of Debenture.  This Debenture is secured by all of
      the assets and property of the Company as set forth on Exhibit A to the Security
      Agreement dated the date hereof between the Company and the Holder (the
“Security Agreement”).  As set forth in the Security Agreement,
      Holder’s security interest shall terminate upon the occurrence of an Expiration
      Event as defined in the Security Agreement.

     

    Section
      1.08    Currency
      Exchange Rate Protections.

     

    (a)    “Closing
      Date
      Exchange Rate” means the Euro to US dollar spot exchange rate as quoted in the
      London edition of the Financial Times on the Closing Date.

     

    (b)
                 “Repayment
      Exchange Rate” means in relation to each date of a
      Conversion Notice or date of a Redemption Notice, the Euro
      to US dollar spot exchange rate as quoted by in the London edition of the
      Financial Times on such date.

     

     

     

    


    
      
        
          
          

        

        
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    (c)           If
      on the date of any Conversion Notice or Redemption Notice, the Repayment
      Exchange Rate is less than the Closing Date Exchange Rate then the number of
      Shares to be issued shall be increased by the same percentage as results from
      dividing the Closing Date Exchange Rate by the relevant Repayment Exchange
      Rate.  By way of example, if the number of Shares to be issued in
      respect of a particular Conversion Notice or Redemption Notice would, but for
      this Section 1.08, be 1,000 and if the Closing Date Exchange Rate is 1.80 and
      the relevant Repayment Exchange Rate is 1.75, then 1,029 Shares will be issued
      in relation to that Conversion Notice or Redemption Notice, as the case may
      be.

     

    (d)           If
      on the Repayment Date or any Interest Repayment Date, the Cash Payment Date
      Exchange Rate, as defined below is less than the Closing Date Exchange Rate
      then
      the amount of cash required to satisfy the amounts due at such time shall be
      increased by the same percentage as results from dividing the Closing Date
      Exchange Rate by the relevant Cash Payment Date Exchange Rate. “Cash Payment
      Date Exchange Rate” means in
      relation to each Repayment Date or Interest Repayment Date
      the Euro to US dollar spot exchange
      rate as quoted in the London edition of the Financial Times on such
      date.  By way of example, if the amount of cash required to repay all
      amounts due on such date would, but for this Section 1.08, be $1,000 and if
      the
      Closing Date Exchange Rate is 1.80 and the relevant Repayment Date Exchange
      Rate
      is 1.75 then the amount of cash from the Cash Payment required to repay all
      amounts due on such date will be $1,028.57.

    


     

    ARTICLE
      II.

     

    Section
      2.01    Amendments
      and Waiver of Default.  The Debenture
      may not be amended.  Notwithstanding the above, without the consent of
      the Holder, the Debenture may be amended to cure any ambiguity, defect or
      inconsistency, or to provide for assumption of the Company obligations to the
      Holder.

     

     

    ARTICLE
      III.

     

    Section
      3.01    Events of
      Default.  An Event of Default is defined
      as follows: (a) failure by the Company to pay amounts due hereunder within
      fifteen (15) days of the date of maturity of this Debenture;
      (b) failure by the Company to comply with the terms of the Irrevocable
      Transfer Agent Instructions attached to the Securities Purchase Agreement;
      (c)
      failure by the Company’s transfer agent to issue freely tradeable Common Stock
      to the Holder within five (5) days of the Company’s receipt of the attached
      Notice of Conversion from Holder; (d) failure by the Company for
      ten (10) days after notice to it to comply with any of its other agreements
      in the Debenture; (e) events of bankruptcy or insolvency; (f) a breach
      by the Company of its obligations under the Securities Purchase Agreement which
      is not cured by the Company within ten (10) days after receipt of written notice
      thereof.  Upon the occurrence of an Event of Default, the Holder may,
      in its sole discretion, accelerate full repayment of all debentures outstanding
      and accrued interest thereon or may, notwithstanding any limitations contained
      in this Debenture and/or the Securities Purchase Agreement dated the date hereof
      between the Company and Trafalgar Capital Specialized Investment Fund,
      Luxembourg (the “Securities Purchase Agreement”), convert all debentures
      outstanding and accrued interest thereon into shares of Common Stock pursuant
      to
      Section 1.02 herein.

     

    


    
      
        
          
          

        

        
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    Section
      3.02     Failure to
      Issue Unrestricted Common Stock. As indicated in
      Article III Section 3.01, a breach by the Company of its obligations
      under the Securities Purchase Agreement shall be deemed an Event of Default,
      which if not cured within ten (10) days, shall entitle the Holder to
      accelerate full repayment of all debentures outstanding and accrued interest
      thereon or, notwithstanding any limitations contained in this Debenture and/or
      the Securities Purchase Agreement, to convert all debentures outstanding and
      accrued interest thereon into shares of Common Stock pursuant to Section 1.02
      herein.  The Company acknowledges that failure to honor a Notice of
      Conversion shall cause irreparable harm to the Holder.

     

     

    ARTICLE
      IV.

     

    Section
      4.01    Rights and
      Terms of Conversion.  This Debenture, in
      whole or in part, may be converted at any time following the Closing Date,
      into
      shares of Common Stock at a price equal to the Conversion Price as described
      in
      Section 1.02 above.

     

    Section
      4.02     Re-issuance
      of Debenture.  When the Holder elects to
      convert a part of the Debenture, then the Company shall reissue a new Debenture
      in the same form as this Debenture to reflect the new principal
      amount.

     

    Section
      4.03    Termination
      of Conversion Rights.  The Holder’s
      right to convert the Debenture into the Common Stock in accordance with
      paragraph 4.01 shall terminate on the date that is the third (3rd) year anniversary
      from the date hereof and this Debenture shall be automatically converted on
      that
      date in accordance with the formula set forth in Section 4.01 hereof, and
      the appropriate shares of Common Stock and amount of interest shall be issued
      to
      the Holder.

     

     

    ARTICLE
      V.

     

    Section
      5.01    Anti-dilution.  In
      the event that the Company shall at any time subdivide the outstanding shares
      of
      Common Stock, or shall issue a stock dividend on the outstanding Common Stock,
      the Conversion Price in effect immediately prior to such subdivision or the
      issuance of such dividend shall be proportionately decreased, and in the event
      that the Company shall at any time combine the outstanding shares of Common
      Stock, the Conversion Price in effect immediately prior to such combination
      shall be proportionately increased, effective at the close of business on the
      date of such subdivision, dividend or combination as the case may
      be.

     

    Section
      5.02    Consent  of
      Holder to Sell Capital Stock or Grant Security
      Interests.  Except for the Securities
      Purchase Agreement dated the date hereof between the Company and Trafalgar
      Capital Specialized Investment Fund, Luxembourg, so long as any of the principal
      of or interest on this Debenture remains unpaid and unconverted, the Company
      shall not, without the prior consent of the Holder, issue or sell (i) any
      Common Stock or Preferred Stock without consideration or for a consideration
      per
      share less than its fair market value determined immediately prior to its
      issuance, (ii) issue or sell any Preferred Stock, warrant, option, right,
      contract, call, or other security or instrument granting the holder thereof
      the
      right to acquire Common Stock without consideration or for a consideration
      per
      share less than such Common Stock’s
      fair market value determined immediately prior to its issuance, (iii) enter
      into
      any security instrument granting the holder a security interest in any of the
      assets of the Company, or (iv) file any registration statement on Form
      S-8.

     

    


    
      
        
          
          

        

        
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    ARTICLE
      VI.

     

    Section
      6.01    Notice.  Notices
      regarding this Debenture shall be sent to the parties at the following
      addresses, unless a party notifies the other parties, in writing, of a change
      of
      address:

     

    
      	
              If
                to the Company, to:

            	
              C-Mark
                International, Inc..

            
	 	
              4130
                E. Van Buren, Suite 325

            
	 	
              Phoenix,
                AZ 85008

            
	 	
              Attn:
                Mr. Charles Jones, CEO

            
	 	
              Telephone:
                (602) 443-8640

            
	 	
              Facsimile:
                (602) 443-8646

            
	 	 
	
              With
                a copy to:

            	
              The
                O’Neal Law Firm, P.C.

            
	 	
              17100
                E. Shea Blvd., Suite 400-D

            
	 	
              Fountain
                Hills, AZ  85268

            
	 	
              Attention:  William
                D. O’Neal, Esq.

            
	 	
              Telephone:
                (480) 812-5058

            
	 	
              Facsimile:
                (480) 816-9241

            
	 	 
	
              If
                to the Holder:

            	
              Trafalgar
                Capital Specialized Investment Fund

            
	 	
              8-10
                Rue Mathias Hardt

            
	 	
              BP
                3023

            
	 	
              L-1030
                Luxembourg

            
	 	
              Attention:    
                Andrew Garai, Chairman of the Board of

            
	 	
              Facsimile:      011-44-207-405-0161
                and

                                      001-786-323-1651

            
	 	 
	 	 
	
              With
                a copy to:

            	
              James
                G. Dodrill II, P.A.

            
	 	
              5800
                Hamilton Way

            
	 	
              Boca
                Raton, FL  33496

            
	 	
              Attention:  James
                Dodrill, Esq.

            
	 	
              Telephone: (561)
                862-0529

            
	 	
              Facsimile:    (561)
                892-7787

            
	 	 


    

    


    Section
      6.02    Governing
      Law.  This Debenture shall be deemed to
      be made under and shall be construed in accordance with the laws of the State
      of
      Florida without giving effect to the principals of conflict of laws
      thereof.  Each of the parties consents to the jurisdiction of the
      U.S. District Court sitting in the Southern District of the State of
      Florida or the state courts of the State of Florida sitting in Broward County,
      Florida in connection with any dispute arising under this Debenture and hereby
      waives, to the maximum extent permitted by law, any objection, including any
      objection based on forumnonconveniens to the bringing of
      any such proceeding in such jurisdictions.

     

    


    
      
        
          
          

        

        
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    Section
      6.03    Severability.  The
      invalidity of any of the provisions of this Debenture shall not invalidate
      or
      otherwise affect any of the other provisions of this Debenture, which shall
      remain in full force and effect.

     

    Section
      6.04    Entire
      Agreement and Amendments.  This
      Debenture represents the entire agreement between the parties hereto with
      respect to the subject matter hereof and there are no representations,
      warranties or commitments, except as set forth herein.  This Debenture
      may be amended only by an instrument in writing executed by the parties
      hereto.

     

    Section
      6.05    Counterparts.  This
      Debenture may be executed in multiple counterparts, each of which shall be
      an
      original, but all of which shall be deemed to constitute on
      instrument.

     

    IN
      WITNESS WHEREOF, with the intent to be legally bound hereby, the
      Company as executed this Debenture as of the date first written
      above.

     

    
      	 	
              CMARK
                INTERNATIONAL, INC.

            
	 	 
	 	
              By: /s/
                Charles W. Jones,
                Jr.                                                          

            
	 	
              Name:
                Charles W. Jones, Jr.     

            
	 	
              Title: President

            


    

    


    


    


    


    
      
        
          
          

        

        
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    EXHIBIT
      “A”

     

     

    NOTICE
      OF CONVERSION

     

     

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

     

    


    
      	
              TO:

            	 


    

    


    The
      undersigned hereby irrevocably elects to convert US$ of the principal amount
      of
      the above Debenture into Shares of Common Stock of C-Mark International, Inc.,
      according to the conditions stated therein, as of the Conversion Date written
      below.

     

    
      	
              Conversion
                Date:

            	 
	
              Applicable
                Conversion Price:

            	 
	
              Signature:

            	 
	
              Name:

            	 
	
              Address:

            	 
	
              Amount
                to be converted:

            	
              US$                                                                                      

            
	
              Amount
                of Debenture unconverted:

            	
              US$                                                                                      

            
	
              Conversion
                Price per share:

            	
              US$                                                                                      

            
	
              Number
                of shares of Common Stock to be issued:

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

            	 
	
              Issue
                to:

            	 
	
              Authorized
                Signature:

            	 
	
              Name:

            	 
	
              Title:

            	 
	
              Phone
                Number:

            	 
	
              Broker
                DTC Participant Code:

            	 
	
              Account
                Number:

            	 


    

    


     

     A-1