10% Secured Convertible Debenture


    EXHIBIT
      4.2

     

     

    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
      AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE
“SECURITIES 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 IS 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 AND THE SECURITIES
      EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE ACT”).

     

    BUCKEYE
      VENTURES, INC.

     

    10.0%
      Secured Convertible Debenture

     

    Due
      June 29, 2009

     

     

    
      	No. 1	
              US$1,500,000

            

 

    This
      10.0% Secured Convertible Debenture (the “Debenture”)
      is
      issued as of June 29, 2007 (the “Closing
      Date”)
      by
      Buckeye Ventures, Inc., a Michigan 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.

     

    ARTICLE
      I.

     

    Section
      1.01  Principal
      and Interest. For
      value
      received, the Company hereby promises to pay to the order of the Holder on
      June
      29, 2009 in lawful money of the United States of America and in immediately
      available funds the principal sum of One Million Five Hundred Thousand U.S.
      Dollars (US$1,500,000)
      together
      with interest on the unpaid principal of this Debenture accruing at the rate
      of
      ten percent (10%) per annum. Interest shall be computed on the basis of a
      360-day year and the actual days elapsed, and shall cease to accrue with respect
      to any principal amount that has been converted or otherwise paid, provided
      that
      in the case of a conversion the Company, in fact, delivers the Conversion Shares
      within the time period required by this Debenture. Notwithstanding anything
      to
      the contrary herein, in no event shall the Holder be entitled to convert this
      Debenture for that number of shares of the common stock, par value $0.00 1
      of
      the Company (the “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
      (as beneficial ownership is calculated under Section 13(d) of the Exchange
      Act
      and the rules promulgated thereunder) on such date to exceed 4.99% of the
      outstanding shares of the Common Stock following such conversion. To insure
      compliance with this restriction, the Holder will be deemed to represent to
      the
      Company each time it delivers a Conversion Notice (as defined below) that such
      Conversion Notice has not violated the restrictions set forth in this Section
      1.01 and the Company shall have no obligation to verify or confirm the accuracy
      of such determination.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      1.02  Optional
      Conversion. The
      Holder may convert this Debenture only if the Closing
      Bid Price (as defined below) or the VWAP (as defined below) for the Common
      Stock, as
      determined on the last trading day immediately preceding the Conversion Date
      (as
      defined below) is at or above the Fixed Price (as defined below). “Closing Bid
      Price” means the closing bid price of the Common Stock as quoted on the
      Principal Market (as defined below). Notwithstanding this limitation, in the
      event of an Event of Default by the Company, 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 the remaining outstanding
      principal balance of this Debenture, plus any interest, all or any part of
      the
      principal amount of the Debenture, plus accrued interest, into shares (the
      “Conversion
      Shares”)
      of
      Common Stock at the price per share equal to: the lesser of (a) twenty
      cents ($0.20)
      (the
“Fixed
      Price”),
      or (b)
      an amount equal to eighty-five percent (85%) of the lowest Volume Weighted
      Average Price (“VWAP”) as quoted by Bloomberg L.P. during the ten (10) trading
      days immediately preceding the Conversion Date (as defined herein) (the
“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. 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 converted and the
      date of such conversions.

     

    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  Mandatory
      Redemption. Following
      the three month anniversary of the issuance of this Debenture, the Company
      shall
      redeem this Debenture using a straight line amortization on a straight line
      basis over the life of this Debenture, adjusted for the Redemption Premium
      (as
      defined below), plus any accrued interest. The “Redemption Premium” applicable
      to each redemption payment to be made by the Company under this Section 1.04
      shall equal three percent (3%) for the first monthly redemption payment and
      shall increase by one percent (1%) each month thereafter until the Debenture
      is
      satisfied in full (for example, the Company’s redemption payment due in the
      sixth month would equal the amount determined by using the straight line
      amortization method, multiplied by 1.06). The Company, at its option, may fund
      any and all such redemptions in cash or in registered shares of the Company’s
      Common Stock valued at the Conversion Price determined as of the date of the
      redemption payment. Notwithstanding the foregoing, should the Closing Bid Price
      of the Company’s Common Stock be above the Fixed Price on the trading day
      immediately preceding the redemption due date, and the Company exercises its
      option to fund its redemption payments with shares, the Company shall be
      obligated to deliver such number of shares of Common Stock using the Fixed
      Price
      in its calculation for purposes of calculating its redemption payment. If agreed
      to by Holder, the Company may deliver shares of Common Stock used to fund its
      monthly redemption payment on a weekly basis during the month equal to
      twenty-five percent (25%) of the then outstanding redemption payment due. The
      value of the shares used to fund such weekly redemption payments shall be either
      the Fixed Price or the Conversion Price, as decided at the sole discretion
      of
      the Holder.

     

    Section
      1.05  Interest
      Payments.Upon
      the
      occurrence of an Event of Default (as defined in Section 3.01 below) by the
      Company, the Holder has the option to elect that the interest due and payable
      hereunder 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, that number of shares
      of
      Common Stock with a value equal to the amount of interest due shall be issued.
      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. 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  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 of this
      Debenture, provided that on the trading day immediately preceding the delivery
      of the Redemption Notice the Closing Bid Price is below the Fixed Price. The
      redemption price payable under this Section 1.06 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 delivery of the Redemption
      Notice.

     

    Section
      1.07  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.

     

    
      
        
        

      

      
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    Section
      1.08  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
      1.09  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.

     

    (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 1.09, 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
      1.09, 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 without the consent of the Holder. 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’s obligations to the Holder.

    


    
      
        
        

      

      
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    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, which such
      failure is not cured by the Company within ten (10) days after receipt of
      written notice thereof; (c) failure by the Company’s transfer agent to issue
      freely tradable 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 in accordance with the terms of the
      Irrevocable Transfer Agent Instructions.

     

    Section
      3.02  Failure
      to Issue Unrestricted Common Stock. As
      indicated in 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. Subject
      to the limitations set forth herein, 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 shall terminate on
      the date that is the second (2nd)
      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.

    


    
      
        
        

      

      
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    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.

     

    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:	
              Buckeye
                Ventures, Inc.

              4455
                Lamont Street, Suite 3

              San
                Diego, CA 92109

              Attention:

              Telephone:

              Facsimile:

            
	 	 
	With a copy to:	
              Neil
                W. Gurney, Esq.

              Ulmer
                & Berne LLP

              1660
                West Second St., Ste. 1100

              Cleveland,
                Ohio 44113-1448

              Telephone:
                (216) 583-7028

              Facsimile:
                (216) 583-7029

            
	 	 
	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 001-786-323-165 1

            
	 	 
	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

            


    

    
 

    
      
        
        

      

      
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      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 forum non conveniens
        to the
        bringing of any such proceeding in such jurisdictions.

       

      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.

    

     

    
      	 	
              BUCKEYE
                VENTURES, INC.

               

              By:
                ______________________________________

              Name:

              Title:

            


    

    
    

    
      
        
        

      

      
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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 Buckeye
      Ventures, 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:	____________________________________________ 


    

     

     

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