Document:

Exhibit 10.8

                           PLEDGE AND ESCROW AGREEMENT

     THIS PLEDGE AND ESCROW AGREEMENT (the "Agreement") is made and entered into
as of August 10, 2005 (the "EFFECTIVE  DATE") by and among HIGHGATE HOUSE FUNDS,
LTD. (collectively,  the "PLEDGEE"), CITY NETWORK, INC., a corporation organized
and existing  under the laws of the State of Nevada (the  "PLEDGOR"),  and DAVID
GONZALEZ, ESQ., as escrow agent ("ESCROW AGENT").

                                    RECITALS:

     WHEREAS,  in order to secure the full and prompt  payment when due (whether
at the stated  maturity,  by  acceleration or otherwise) of all of the Company's
obligations (the  "OBLIGATIONS")  to the Pledgee or any successor to the Pledgee
under this Agreement,  the Securities  Purchase  Agreement of even date herewith
between the Pledgor and the Pledgee (the "SECURITIES PURCHASE  AGREEMENT"),  the
Convertible Debentures (the "CONVERTIBLE  DEBENTURES") issued or to be issued by
the Company to the  Pledgee,  either now or in the future,  up to a total of Two
Hundred Fifty  Thousand  Dollars  ($250,000)  of  principal,  plus any interest,
costs,  fees,  and other  amounts owed to the Pledgee  thereunder,  the Security
Agreement  of even date  herewith  between  the  Pledgor  and the  Pledgee  (the
"SECURITY AGREEMENT"),  and all other contracts entered into between the parties
hereto (collectively,  the "TRANSACTION  DOCUMENTS"),  the Pledgor has agreed to
irrevocably  pledge to the Pledgee Four Million Four Hundred Forty Five Thousand
Four  Hundred  Fifty Five  (4,445,455)  shares  (the  "PLEDGED  SHARES")  of the
Pledgor's common stock., and

     WHEREAS,  subject to the terms of the Convertible  Debentures,  the Pledgee
has the right to  convert at any time until  payment  in full,  the  Convertible
Debentures  into an aggregate of up to [INSERT  NUMBER OF SHARES]  shares of the
Pledgor's common stock (the "CONVERSION SHARES").

     NOW,  THEREFORE,  in  consideration  of the mutual  covenants,  agreements,
warranties,  and  representations  herein  contained,  and for  other  good  and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged, the parties hereto agree as follows:

                              TERMS AND CONDITIONS

     1. PLEDGE AND TRANSFER OF PLEDGED SHARES.

     1.1.  The  Pledgor  hereby  grants to  Pledgee a security  interest  in all
Pledged  Shares as security  for  Pledgor's  obligations  under the  Convertible
Debentures.  Simultaneously with the execution of the Transaction Documents, the
Pledgor shall deliver to the Escrow Agent stock  certificates  representing  the
Pledged  Shares,  together with duly executed stock powers or other  appropriate
transfer documents executed in blank by the Pledgor (the "TRANSFER  DOCUMENTS"),
and such stock  certificates and Transfer  Documents shall be held by the Escrow
Agent  until  the full  payment  of all  amounts  due to the  Pledgee  under the
Convertible Debentures and through repayment in accordance with the terms of the
Convertible Debentures, or the termination or expiration of this Agreement.
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     1.2. ADJUSTMENT TO PLEDGED SHARES. Upon each conversion by the Pledgee into
Conversion Shares, the Pledgor shall provide written notice to the Escrow Agent,
with a copy to the Pledgee,  of the number of  Conversion  Shares  issued to the
Pledgee pursuant to such conversion and the number of Pledged Shares pursuant to
this agreement  shall be reduced,  share for share,  by the number of Conversion
Shares issued to the Pledgee (if required by the  applicable  rules of principle
trading exchange or market of the Common Stock).

     2. RIGHTS  RELATING TO PLEDGED  SHARES.  Upon the occurrence of an Event of
Default (as defined  herein),  the Pledgee shall be entitled to vote the Pledged
Shares, to receive dividends and other distributions  thereon,  and to enjoy all
other rights and privileges incident to the ownership of the Pledged Shares.

     3. RELEASE OF PLEDGED  SHARES FROM PLEDGE.  Upon the payment of all amounts
due to the Pledgee under the  Convertible  Debentures by repayment in accordance
with the terms of the Note,  the parties hereto shall notify the Escrow Agent to
such effect in writing.  Upon receipt of such written  notice for payment of the
amounts due to the Pledgee under the  Convertible  Debentures,  the Escrow Agent
shall  return  to the  Pledgor  the  Transfer  Documents  and  the  certificates
representing  the  Pledged  Shares,   (collectively  the  "PLEDGED  MATERIALS"),
whereupon  any and all  rights of  Pledgee  in the  Pledged  Materials  shall be
terminated. Notwithstanding anything to the contrary contained herein, upon full
payment of all amounts due to the Pledgee under the Convertible  Debentures,  by
repayment in accordance with their terms, this Agreement and Pledgee's  security
interest and rights in and to the Pledged Shares shall terminate.

     4. EVENT OF DEFAULT. An "EVENT OF DEFAULT" shall be deemed to have occurred
under this Agreement upon an Event of Default under the Convertible Debentures.

     5. REMEDIES.

     5.1.  Upon and anytime  after the  occurrence  of an Event of Default,  the
Pledgee shall have the right to provide  written notice of such Event of Default
(the "DEFAULT NOTICE") to the Escrow Agent, with a copy to the Pledgor.  As soon
as  practicable  after  receipt of the Default  Notice,  the Escrow  Agent shall
deliver to Pledgee the Pledged  Materials  held by the Escrow  Agent  hereunder.
Upon receipt of the Pledged  Materials,  the Pledgee shall have the right to (i)
sell the Pledged  Shares and to apply the  proceeds  of such  sales,  net of any
selling commissions, to the Obligations owed to the Pledgee by the Pledgor under
the Transaction Documents, including, without limitation, outstanding principal,
interest,  legal fees,  and any other amounts owed to the Pledgee,  and exercise
all other rights and (ii) any and all  remedies of a secured  party with respect
to such  property as may be available  under the Uniform  Commercial  Code as in
effect in the State of New Jersey.  To the extent that the net proceeds received
by the Pledgee are  insufficient to satisfy the Obligations in full, the Pledgee
shall be entitled to a deficiency  judgment against the Pledgor for such amount.
The  Pledgee  shall have the  absolute  right to sell or dispose of the  Pledged
Shares in any manner it sees fit and shall have no  liability  to the Pledgor or
any other party for selling or disposing  of such  Pledged  Shares even if other
methods of sales or  dispositions  would or  allegedly  would  result in greater
proceeds than the method actually used. The Escrow Agent shall have the absolute
right to  disburse  the  Pledged  Shares to the Pledgee in batches not to exceed
9.9% of the outstanding capital of the Pledgor (which limit may be waived by the
Pledgee  providing  not less than 65 days'  prior  written  notice to the Escrow

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Agent).  The Pledgee shall be entitled to keep any Pledged Shares released to it
and remaining after the Pledgee has applied the net proceeds to all amounts owed
to the Pledgee.

     5.2.  Each  right,  power and remedy of the  Pledgee  provided  for in this
Agreement or any other  Transaction  Document shall be cumulative and concurrent
and shall be in  addition  to every  other  such  right,  power or  remedy.  The
exercise or  beginning  of the exercise by the Pledgee of any one or more of the
rights,  powers  or  remedies  provided  for in  this  Agreement  or  any  other
Transaction  Document  or now or  hereafter  existing  at law or in equity or by
statute or otherwise  shall not preclude the  simultaneous  or later exercise by
the  Pledgee of all such other  rights,  powers or  remedies,  and no failure or
delay on the part of the  Pledgee to exercise  any such  right,  power or remedy
shall operate as a waiver thereof.  No notice to or demand on the Pledgor in any
case shall  entitle  it to any other or  further  notice or demand in similar or
other  circumstances  or constitute a waiver of any of the rights of the Pledgee
to any other further action in any circumstances  without demand or notice.  The
Pledgee  shall have the full power to enforce or to assign or contract is rights
under this Agreement to a third party.

     5.3.  DEMAND  REGISTRATION  RIGHTS.  In  addition  to  all  other  remedies
available to the Pledgee,  upon an Event of Default, the Pledgor shall promptly,
but in no event more than thirty (30) days after the date of the Default Notice,
file a  registration  statement  to register  with the  Securities  and Exchange
Commission the Pledged  Shares for the resale by the Pledgee.  The Pledgor shall
cause the  registration  statement  to remain in effect until all of the Pledged
Shares have been sold by the Pledgee.

     6. CONCERNING THE ESCROW AGENT.

     6.1.  The  Escrow  Agent  undertakes  to  perform  only such  duties as are
expressly set forth herein and no implied  duties or  obligations  shall be read
into this Agreement against the Escrow Agent.

     6.2. The Escrow Agent may act in reliance upon any writing or instrument or
signature  which it, in good  faith,  believes  to be  genuine,  may  assume the
validity and accuracy of any statement or assertion  contained in such a writing
or  instrument,  and may assume that any person  purporting to give any writing,
notice, advice or instructions in connection with the provisions hereof has been
duly authorized to do so. The Escrow Agent shall not be liable in any manner for
the sufficiency or correctness as to form, manner, and execution, or validity of
any instrument deposited in this escrow, nor as to the identity,  authority,  or
right of any  person  executing  the same;  and its  duties  hereunder  shall be
limited to the safekeeping of such certificates,  monies,  instruments, or other
document  received by it as such escrow holder,  and for the  disposition of the
same in accordance with the written instruments accepted by it in the escrow.

     6.3.  Pledgee and the Pledgor  hereby  agree,  to defend and  indemnify the
Escrow Agent and hold it harmless from any and all claims, liabilities,  losses,
actions, suits, or proceedings at law or in equity, or any other expenses, fees,
or charges of any character or nature which it may incur or with which it may be
threatened by reason of its acting as Escrow Agent under this Agreement;  and in
connection  therewith,  to  indemnify  the  Escrow  Agent  against  any  and all
expenses,  including attorneys' fees and costs of defending any action, suit, or
proceeding  or resisting  any claim (and any costs  incurred by the Escrow Agent
pursuant to Sections 6.4 or 6.5 hereof). The Escrow Agent shall be vested with a
lien on all property deposited hereunder, for indemnification of attorneys' fees
and court  costs  regarding  any suit,  proceeding  or  otherwise,  or any other

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expenses,  fees, or charges of any character or nature, which may be incurred by
the Escrow Agent by reason of disputes arising between the makers of this escrow
as to the correct interpretation of this Agreement and instructions given to the
Escrow  Agent  hereunder,  or  otherwise,  with the right of the  Escrow  Agent,
regardless of the instructions aforesaid, to hold said property until and unless
said  additional  expenses,  fees, and charges shall be fully paid. Any fees and
costs  charged by the Escrow  Agent for serving  hereunder  shall be paid by the
Pledgor.

     6.4.  If  any  of  the  parties   shall  be  in   disagreement   about  the
interpretation  of this Agreement,  or about the rights and obligations,  or the
propriety of any action  contemplated by the Escrow Agent hereunder,  the Escrow
Agent may, at its sole discretion  deposit the Pledged  Materials with the Clerk
of the United  States  District  Court of New  Jersey,  sitting  in Newark,  New
Jersey,  and, upon notifying all parties concerned of such action, all liability
on the part of the Escrow  Agent  shall fully  cease and  terminate.  The Escrow
Agent  shall be  indemnified  by the  Pledgor,  the  Company and Pledgee for all
costs,  including  reasonable  attorneys'  fees in connection with the aforesaid
proceeding,  and shall be fully  protected  in  suspending  all or a part of its
activities  under this Agreement  until a final decision or other  settlement in
the proceeding is received.

     6.5.  The Escrow  Agent may consult with counsel of its own choice (and the
costs of such  counsel  shall be paid by the Pledgor and Pledgee) and shall have
full and complete  authorization and protection for any action taken or suffered
by it  hereunder  in good  faith  and in  accordance  with the  opinion  of such
counsel.  The Escrow Agent shall not be liable for any mistakes of fact or error
of judgment,  or for any actions or omissions of any kind,  unless caused by its
willful misconduct or gross negligence.

     6.6. The Escrow Agent may resign upon ten (10) days' written  notice to the
parties in this Agreement.  If a successor  Escrow Agent is not appointed within
this ten (10) day period,  the Escrow  Agent may  petition a court of  competent
jurisdiction to name a successor.

     6.7 CONFLICT WAIVER. The Pledgor hereby  acknowledges that the Escrow Agent
is general  counsel to the  Pledgee,  a partner  in the  general  partner of the
Pledgee,  and  counsel  to the  Pledgee  in  connection  with  the  transactions
contemplated  and referred  herein.  The Pledgor agrees that in the event of any
dispute  arising in  connection  with this  Agreement or otherwise in connection
with any transaction or agreement  contemplated and referred herein,  the Escrow
Agent shall be permitted  to continue to  represent  the Pledgee and the Pledgor
will not seek to disqualify such counsel and waives any objection  Pledgor might
have with respect to the Escrow  Agent  acting as the Escrow  Agent  pursuant to
this Agreement.

     6.8  NOTICES.  Any  notices,  consents,  waivers,  or other  communications
required or permitted to be given under the terms of this  Agreement  must be in
writing  and will be  deemed  to have  been  delivered  (i) upon  receipt,  when
delivered  personally  or by a  nationally  recognized  overnight  or world wide
courier; (ii) upon confirmation of receipt, when sent by facsimile; or (iii) ten
(10) days after being sent by U.S. certified mail, return receipt requested,  in

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each case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:

If to the Pledgor, to:     City Network, Inc
                           6F-3, No.16, Jian Ba Road
                           Jhonghe City, Taipei County, 235
                           Taiwan, ROC F5 235
                           Attention: Mr Tiao-Tsan Lai

With a copy to:            Mitch Nussbaum, Esq.
                           Loeb & Loeb, LLP
                           345 Park Avenue
                           New York, NY 10154-0037
                           Telephone: (212) 407-4159
                           Facsimile: (212) 407.4990

If to the Pledgee:         Highgate House Funds, Ltd.
                           101 Hudson Street, Suite 3700
                           Jersey City, NJ 07302
                           Attention: Mark A. Angelo
                           Telephone: (201) 985-8300
                           Facsimile: (201) 985-8744

With copy to:              Troy Rillo, Esq.
                           101 Hudson Street, Suite 3700
                           Jersey City, NJ 07302
                           Telephone: (201) 985-8300
                           Facsimile: (201) 985-1964

     7. BINDING EFFECT.  All of the covenants and obligations  contained  herein
shall be binding upon and shall inure to the benefit of the respective  parties,
their successors and assigns.

     8. GOVERNING LAW; VENUE; SERVICE OF PROCESS.  The validity,  interpretation
and  performance  of this Agreement  shall be determined in accordance  with the
laws of the State of New Jersey applicable to contracts made and to be performed
wholly  within that state  except to the extent that  Federal law  applies.  The
parties hereto agree that any disputes, claims, disagreements, lawsuits, actions
or controversies of any type or nature whatsoever that,  directly or indirectly,
arise from or relate to this Agreement,  including,  without limitation,  claims
relating to the  inducement,  construction,  performance  or termination of this
Agreement,  shall be  brought  in the state  superior  courts  located in Hudson
County, New Jersey or Federal district courts located in Newark, New Jersey, and
the parties  hereto  agree not to challenge  the  selection of that venue in any
such proceeding for any reason,  including,  without limitation,  on the grounds
that such venue is an inconvenient  forum. The parties hereto specifically agree
that  service  of process  may be made,  and such  service  of process  shall be
effective if made, pursuant to Section 8 hereto.

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     9.  ENFORCEMENT  COSTS. If any legal action or other  proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default  or   misrepresentation  in  connection  with  any  provisions  of  this
Agreement,  the  successful or prevailing  party or parties shall be entitled to
recover  reasonable  attorneys'  fees,  court costs and all expenses even if not
taxable as court costs (including,  without limitation, all such fees, costs and
expenses  incident  to  appeals),  incurred  in that  action or  proceeding,  in
addition to any other relief to which such party or parties may be entitled.

     10.  REMEDIES  CUMULATIVE.  No remedy  herein  conferred  upon any party is
intended to be  exclusive  of any other  remedy,  and each and every such remedy
shall be  cumulative  and  shall be in  addition  to every  other  remedy  given
hereunder  or now or  hereafter  existing  at law,  in equity,  by  statute,  or
otherwise.  No single or partial  exercise  by any party of any right,  power or
remedy hereunder shall preclude any other or further exercise thereof.

     11.   COUNTERPARTS.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute the same instrument.

     12. NO PENALTIES.  No provision of this Agreement is to be interpreted as a
penalty upon any party to this Agreement.

     13. JURY TRIAL.  EACH OF THE  PLEDGEE  AND THE  PLEDGOR  HEREBY  KNOWINGLY,
VOLUNTARILY AND  INTENTIONALLY  WAIVES THE RIGHT WHICH IT MAY HAVE TO A TRIAL BY
JURY OF ANY CLAIM,  DEMAND,  ACTION OR CAUSE OF ACTION BASED HEREON,  OR ARISING
OUT OF,  UNDER OR IN ANY WAY  CONNECTED  WITH THE DEALINGS  BETWEEN  PLEDGEE AND
PLEDGOR, THIS PLEDGE AND ESCROW AGREEMENT OR ANY DOCUMENT EXECUTED IN CONNECTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,  STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF ANY PARTY  HERETO OR THERETO IN EACH CASE  WHETHER NOW
EXISTING  OR  HEREAFTER  ARISING,  AND  WHETHER  IN  CONTRACT,  TORT,  EQUITY OR
OTHERWISE.

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     IN WITNESS  WHEREOF,  the parties hereto have duly executed this Pledge and
Escrow Agreement as of the date first above written.

                            HIGHGATE HOUSE FUNDS, LTD

                            By:  Yorkville Advisors, LLC
                            Its: General Partner

                            By: /s/ Mark Angelo
                               -----------------------------
                            Name:  Mark Angelo
                            Title: Portfolio Manager

                            CITY NETWORK, INC.

                            By: /s/ Tiao-Tsan Lai
                               -----------------------------
                            Name:  Mr Tiao-Tsan Lai
                            Title: Chief Executive Officer

                            ESCROW AGENT

                            By: /s/ David Gonzalez, Esq.
                               -----------------------------
                            Name: David Gonzalez, Esq.

                                       7Exhibit 10.9

                                                          DATED: AUGUST 17, 2005

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

No. HHF-1                                                               $125,000

                               CITY NETWORK, INC.

                          SECURED CONVERTIBLE DEBENTURE

                              DUE JANUARY 17, 2005

     This Secured  Convertible  Debenture  (the  "Debenture")  is issued by CITY
NETWORK,  INC., a Nevada  corporation (the "Obligor"),  to Highgate House Funds,
Ltd. (the "Holder"), pursuant to that certain Securities Purchase Agreement (the
"Securities Purchase Agreement") of even date herewith.

     FOR VALUE RECEIVED, the Obligor hereby promises to pay to the Holder or its
successors and assigns the principal sum of $125,000,  together with accrued but
unpaid interest on January 17, 2005 ("Maturity Date") on the following terms:

     PAYMENTS. Interest on the outstanding principal balance hereof shall be due
and payable on the Maturity  Date. The  outstanding  principal plus a redemption
premium equal to 20% ("Redemption  Premium") of the outstanding  principal shall
be due and  payable  on the  Maturity  Date.  All  payments  in  respect  of the
indebtedness  evidenced  hereby shall be made in collected  funds,  and shall be
applied to principal,  accrued  interest and charges and expenses owing under or
in connection  with this  Debenture in such order as the Holder  elects,  except
that  payments  shall  be  applied  to  accrued   interest   before   principal.
Notwithstanding the foregoing,  this Debenture,  at the Holders election,  shall
become due and immediately  payable,  including all accrued but unpaid interest,
pursuant to an Event of Default (as defined in SECTION 2 hereof).

     INTEREST. Interest shall accrue on the outstanding principal balance hereof
at an annual rate equal to 7%.  Interest  shall be  calculated on the basis of a
360-day year and the actual number of days elapsed,  to the extent  permitted by
applicable  law.  Interest  hereunder will be paid to the Holder or its assignee
(as  defined in SECTION 4) in whose name this  Debenture  is  registered  on the
records of the Obligor  regarding  registration and transfers of Debentures (the
"Debenture Register").

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     RIGHT OF REDEMPTION.  The Company at its option shall have the right,  with
three (3)  business  days  advance  written  notice,  to redeem a portion or all
amounts  outstanding  under  this  Debenture  prior to the  Maturity  Date.  The
Redemption Premium shall apply to any such early redemptions.

     SECURITY AGREEMENT.  This Debenture is secured by a Security Agreement (the
"Security Agreement") of even date herewith between the Obligor and the Holder.

     CONSENT OF HOLDER TO SELL CAPITAL STOCK OR GRANT SECURITY INTERESTS. Except
for the capital stock to be issued  pursuant to the Standby Equity  Distribution
Agreement  of even date  herewith  between the  Obligator  and  Cornell  Capital
Partners,  LP,  so long  as any of the  principal  amount  or  interest  on this
Debenture  remains unpaid and  unconverted,  the Obligor shall not,  without the
prior  consent of the Holder,  (i) issue or sell any common  stock or  preferred
stock with or without  consideration,  (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  with  or  without
consideration,  (iii) enter into any security  instrument  granting the holder a
security  interest  in any of the  assets  of the  Obligor,  or  (iv)  file  any
registration  statement on Form S-8 except to register up to 4,000,000 shares of
Common  Stock  to be  issued  to  employees  under a bona  fide  employee  stock
incentive plan..

     This Debenture is subject to the following additional provisions:

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

     SECTION 2. Events of Default.

     (a) An "Event  of  Default",  wherever  used  herein,  means any one of the
following  events  (whatever  the reason and  whether it shall be  voluntary  or
involuntary or effected by operation of law or pursuant to any judgment,  decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body) provided that the Company does not cure such Event of Default
within ten (10) days of receipt of written  notice of the Event of Default  from
the Holder:

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

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

          (iii) The Obligor or any subsidiary of the Obligor shall commence,  or
there shall be commenced  against the Obligor or any  subsidiary  of the Obligor
under any applicable bankruptcy or insolvency laws as now or hereafter in effect

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

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

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

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

          (vii)  The  Obligor   shall  fail  to  file  the   Underlying   Shares
Registration Statement (as defined in SECTION 4) with the Commission (as defined
in SECTION 4), or the Underlying  Shares  Registration  Statement shall not have
been declared effective by the Commission,  in each case within the time periods
triggering an event of default as set forth in the Registration Rights Agreement
of even date herewith between the Obligor and the Holder;

                                       3
<PAGE>
          (viii) If the  effectiveness  of the  Underlying  Shares  Registration
Statement  lapses for any reason or the Holder  shall not be permitted to resell
the shares of Common Stock underlying this Debenture under the Underlying Shares
Registration  Statement,  in either  case,  for more  than five (5)  consecutive
Trading  Days  or an  aggregate  of  eight  Trading  Days  (which  need  not  be
consecutive Trading Days);

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

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

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

     SECTION 3. Conversion.

     (a) (i) Conversion at Option of Holder.

          (A) This Debenture shall be convertible into shares of Common Stock at
the option of the Holder, in whole or in part at any time and from time to time,
after the  Original  Issue  Date (as  defined  in  Section  4)  (subject  to the
limitations on conversion set forth in SECTION 3(A)(II)  hereof).  The number of
shares of Common Stock issuable upon a conversion  hereunder equals the quotient
obtained  by  dividing  (x)  the  outstanding  amount  of this  Debenture  to be
converted  by (y) the  Conversion  Price (as  defined in SECTION  3(C)(I)).  The
Obligor shall deliver Common Stock certificates to the Holder prior to the Fifth
(5th) Trading Day after a Conversion  Date. The Total  Transaction  Shares shall
not be equal to or greater than  5,500,000  shares,  until the holders of Common
Stock approve the issuance of the Total Transaction  Shares.  "Total Transaction
Shares"  shall mean, in the  aggregate,  any shares of Common Stock issued under
this Debenture to the Holder,  or its affiliates,  and  transferees,  subsequent
transferees, or any other party pursuant to the Securities Purchase Agreement of
even date  herewith  among the Company  and  Highgate  House  Funds,  Ltd.  (the
"Securities Purchase  Agreement"),  the Pledge and Escrow Agreement of even date
herewith  between  the Company and  Highgate  House  Funds,  Ltd.  (the  "Pledge
Agreement"),  and the Placement  Agent  Agreement dated as of even date herewith
between the Company and Monitor Capital,  Inc., together with the Warrant Shares
(as defined in the Securities Purchase Agreement), shares of Common Stock issued

                                       4
<PAGE>
as Liquidated Damages (as defined in the Investor  Registration Rights Agreement
dated as of the date  herewith  between  the Company  and the  Holder),  and the
Initial  Investor's  Shares  (as  defined  in the  Standby  Equity  Distribution
Agreement dated as of even date herewith  between Cornell Capital  Partners,  LP
and the Company).

          (B)  Notwithstanding  anything to the contrary contained herein, if on
any  Conversion  Date:  (1) the  number of  shares  of Common  Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is  insufficient  to pay principal in shares of Common Stock;  or (2) the Common
Stock is not eligible for trading on the OTC or on a Subsequent Market; then, at
the option of the Holder,  the Obligor,  in lieu of delivering  shares of Common
Stock pursuant to SECTION  3(A)(I)(A),  shall deliver,  within three (3) Trading
Days of each applicable  Conversion Date, an amount in cash equal to the product
of (x) the  outstanding  principal  amount to be  converted  divided  by (y) the
Conversion  Price multiplied by the highest closing price of the stock from date
of the conversion  notice until the date that such cash payment is made plus any
interest due therein.

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

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

          (ii) Certain Conversion Restrictions.

               (A) A Holder may not convert this  Debenture or receive shares of
Common Stock as payment of interest  hereunder to the extent such  conversion or
receipt of such interest  payment would result in the Holder,  together with any
affiliate thereof, beneficially owning (as determined in accordance with Section
13(d) of the Exchange  Act and the rules  promulgated  thereunder)  in excess of
4.9% of the then issued and outstanding shares of Common Stock, including shares
issuable upon  conversion of, and payment of interest on, this Debenture held by
such Holder  after  application  of this  Section.  Since the Holder will not be
obligated  to report to the Obligor the number of shares of Common  Stock it may
hold at the time of a conversion hereunder, unless the conversion at issue would
result in the  issuance of shares of Common  Stock in excess of 4.9% of the then

                                       5
<PAGE>
outstanding  shares of Common Stock without regard to any other shares which may
be beneficially  owned by the Holder or an affiliate  thereof,  the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that  the  Holder  determines  that the  limitation  contained  in this  Section
applies,  the  determination  of which portion of the  principal  amount of this
Debenture is  convertible  shall be the  responsibility  and  obligation  of the
Holder.  If the Holder has delivered a Conversion  Notice for a principal amount
of this  Debenture  that,  without regard to any other shares that the Holder or
its affiliates may  beneficially  own, would result in the issuance in excess of
the permitted amount hereunder, the Obligor shall notify the Holder of this fact
and shall honor the conversion for the maximum  principal amount permitted to be
converted on such Conversion  Date in accordance  with the periods  described in
SECTION 3(A)(I)(A) and, at the option of the Holder, either retain any principal
amount tendered for conversion in excess of the permitted  amount  hereunder for
future  conversions or return such excess  principal  amount to the Holder.  The
provisions  of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 65 days prior notice to the Obligor.
Other Holders shall be unaffected by any such waiver.

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

          (ii) In addition to any other rights  available to the Holder,  if the
Obligor fails to deliver to the Holder such certificate or certificates pursuant
to SECTION  3(A)(I)(A) by the fifth (5th) Trading Day after the Conversion Date,
and if after such fifth  (5th)  Trading  Day the  Holder  purchases  (in an open
market  transaction or otherwise)  Common Stock to deliver in  satisfaction of a
sale by such  Holder  of the  Underlying  Shares  which the  Holder  anticipated
receiving upon such  conversion (a "Buy-In"),  then the Obligor shall (A) pay in
cash to the Holder (in addition to any  remedies  available to or elected by the
Holder) the amount by which (x) the Holder's  total  purchase  price  (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the  aggregate  number of shares of Common Stock that such Holder
anticipated  receiving from the conversion at issue multiplied by (2) the market
price of the Common  Stock at the time of the sale giving rise to such  purchase
obligation  and (B) at the option of the Holder,  either  reissue a Debenture in
the principal amount equal to the principal  amount of the attempted  conversion
or deliver  to the  Holder the number of shares of Common  Stock that would have
been issued had the Obligor timely complied with its delivery requirements under
SECTION  3(A)(I)(A).  For example, if the Holder purchases Common Stock having a
total  purchase  price of $11,000 to cover a Buy-In with respect to an attempted
conversion  of  Debentures  with  respect  to  which  the  market  price  of the
Underlying  Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence,  the Obligor shall be required to pay
the  Holder  $1,000.  The  Holder  shall  provide  the  Obligor  written  notice
indicating the amounts payable to the Holder in respect of the Buy-In.

                                       6
<PAGE>
     (c) (i) The  conversion  price  (the  "Conversion  Price") in effect on any
Conversion Date shall be equal to $0.264,  which may be adjusted pursuant to the
other terms of this Debenture.

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

          (iii) If the Obligor, at any time while this Debenture is outstanding,
shall issue rights,  options or warrants to all holders of Common Stock (and not
to the Holder)  entitling  them to  subscribe  for or purchase  shares of Common
Stock at a price per share less than the  Closing  Bid Price at the record  date
mentioned 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
(excluding  treasury shares, if any) outstanding on the date of issuance of such
rights or warrants (plus the number of additional shares of Common Stock offered
for subscription or purchase), and of which the numerator shall be the number of
shares of the Common Stock (excluding  treasury  shares,  if any) outstanding on
the date of issuance of such rights or warrants, plus the number of shares which
the  aggregate  offering  price of the total  number of shares so offered  would
purchase at such Closing Bid Price.  Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective  immediately after the
record date for the  determination  of  stockholders  entitled  to receive  such
rights,  options or warrants.  However,  upon the  expiration of any such right,
option or warrant to purchase  shares of the Common  Stock the issuance of which
resulted in an adjustment in the Conversion  Price pursuant to this Section,  if
any such  right,  option  or  warrant  shall  expire  and  shall  not have  been
exercised,  the  Conversion  Price shall  immediately  upon such  expiration  be
recomputed and effective  immediately  upon such  expiration be increased to the
price  which it would have been (but  reflecting  any other  adjustments  in the
Conversion  Price made  pursuant to the  provisions  of this  Section  after the
issuance of such rights or warrants) had the adjustment of the Conversion  Price
made upon the  issuance of such  rights,  options or  warrants  been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock  actually  purchased  upon the exercise of such rights,  options or
warrants actually exercised.

          (iv) If the Obligor or any subsidiary  thereof,  as  applicable,  with
respect to Common Stock  Equivalents (as defined below),  at any time while this
Debenture  is  outstanding,  shall  issue  shares  of  Common  Stock or  rights,
warrants,  options  or other  securities  or debt that are  convertible  into or
exchangeable for shares of Common Stock ("Common Stock  Equivalents")  entitling

                                       7
<PAGE>
any Person to acquire shares of Common Stock, at a price per share less than the
Conversion  Price (if the holder of the Common Stock or Common Stock  Equivalent
so issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to  warrants,  options or rights per share which is issued in  connection
with such issuance, be entitled to receive shares of Common Stock at a price per
share which is less than the Conversion  Price, such issuance shall be deemed to
have occurred for less than the Conversion  Price),  then, at the sole option of
the Holder,  the  Conversion  Price shall be adjusted to mirror the  conversion,
exchange or purchase  price for such Common  Stock or Common  Stock  Equivalents
(including any reset provisions thereof) at issue. Such adjustment shall be made
whenever such Common Stock or Common Stock  Equivalents are issued.  The Obligor
shall notify the Holder in writing, no later than one (1) business day following
the  issuance of any Common  Stock or Common  Stock  Equivalent  subject to this
Section,  indicating  therein the applicable  issuance  price,  or of applicable
reset price,  exchange  price,  conversion  price and other  pricing  terms.  No
adjustment  under  this  Section  shall be made as a  result  of  issuances  and
exercises of options to purchase shares of Common Stock issued for  compensatory
purposes pursuant to any of the Obligor's stock option or stock purchase plans.

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

          (vi)  In case  of any  reclassification  of the  Common  Stock  or any
compulsory  share exchange  pursuant to which the Common Stock is converted into
other securities,  cash or property,  the Holder shall have the right thereafter
to, at its option, (A) convert the then outstanding  principal amount,  together
with all accrued but unpaid  interest and any other amounts then owing hereunder
in respect of this Debenture into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of the Common Stock
following  such  reclassification  or share  exchange,  and the  Holder  of this
Debenture  shall  be  entitled  upon  such  event  to  receive  such  amount  of
securities,  cash or property  as the shares of the Common  Stock of the Obligor
into which the then outstanding principal amount,  together with all accrued but
unpaid  interest and any other  amounts then owing  hereunder in respect of this
Debenture could have been converted  immediately prior to such  reclassification
or share exchange would have been entitled, or (B) require the Obligor to prepay
the outstanding principal amount of this Debenture,  plus all interest and other

                                       8
<PAGE>
amounts due and payable thereon, in which case the entire prepayment price shall
be  paid  in  cash.   This  provision   shall   similarly  apply  to  successive
reclassifications or share exchanges.

          (vii) The Obligor shall maintain a share reserve of not less than 100%
of the shares of Common Stock issuable upon  conversion of this  Debenture;  and
within  three (3)  Business  Days  following  the  receipt  by the  Obligor of a
Holder's  notice  that  such  minimum  number  of  Underlying  Shares  is not so
reserved,  the Obligor shall promptly  reserve a sufficient  number of shares of
Common Stock to comply with such requirement.

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

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

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

          (xi) In case of any (1) merger or  consolidation of the Obligor or any
subsidiary  of the  Obligor  with or into  another  Person,  or (2)  sale by the
Obligor or any  subsidiary  of the  Obligor of all or  substantially  all of the
assets of the Obligor in one or a series of related transactions, a Holder shall
have the right to (A) exercise any rights under  SECTION  2(B),  (B) convert the

                                       9
<PAGE>
aggregate amount of this Debenture then outstanding into the shares of stock and
other  securities,  cash and  property  receivable  upon or deemed to be held by
holders of Common Stock following such merger,  consolidation  or sale, and such
Holder shall be entitled upon such event or series of related  events to receive
such amount of securities,  cash and property as the shares of Common Stock into
which  such  aggregate  principal  amount  of this  Debenture  could  have  been
converted  immediately  prior to such merger,  consolidation or sales would have
been  entitled,  or (C) in the case of a merger or  consolidation,  require  the
surviving entity to issue to the Holder a convertible Debenture with a principal
amount equal to the aggregate  principal  amount of this  Debenture then held by
such  Holder,  plus all  accrued and unpaid  interest  and other  amounts  owing
thereon,  which  such  newly  issued  convertible  Debenture  shall  have  terms
identical (including with respect to conversion) to the terms of this Debenture,
and shall be entitled to all of the rights and  privileges of the Holder of this
Debenture set forth herein and the agreements  pursuant to which this Debentures
were issued.  In the case of clause (C), the conversion price applicable for the
newly issued shares of convertible  preferred  stock or  convertible  Debentures
shall be based upon the amount of securities,  cash and property that each share
of Common Stock would receive in such  transaction  and the Conversion  Price in
effect  immediately  prior  to  the  effectiveness  or  closing  date  for  such
transaction.  The terms of any such merger,  sale or consolidation shall include
such  terms so as to  continue  to give the  Holder  the  right to  receive  the
securities,  cash and property set forth in this Section upon any  conversion or
redemption  following  such  event.  This  provision  shall  similarly  apply to
successive such events.

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

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

     (f) The  issuance  of  certificates  for  shares  of the  Common  Stock  on
conversion of this Debenture  shall be made without charge to the Holder thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such  certificate,  provided  that the Obligor shall not be
required to pay any tax that may be payable in respect of any transfer  involved
in the issuance and delivery of any such  certificate  upon conversion in a name

                                       10
<PAGE>
other than that of the Holder of such  Debenture  so  converted  and the Obligor
shall not be required to issue or deliver such certificates  unless or until the
person or persons requesting the issuance thereof shall have paid to the Obligor
the  amount of such tax or shall have  established  to the  satisfaction  of the
Obligor that such tax has been paid.

     (g) Any notices,  consents,  waivers, or other  communications  required or
permitted to be given under the terms of this  Agreement  must be in writing and
will be  deemed  to  have  been  delivered  (i)  upon  receipt,  when  delivered
personally or by a nationally  recognized overnight or world wide courier;  (ii)
upon  confirmation  of receipt,  when sent by facsimile;  or (iii) ten (10) days
after being sent by U.S. certified mail, return receipt requested,  in each case
properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:

If to the Company, to:     City Network, Inc
                           6F-3, No.16, Jian Ba Road
                           Jhonghe City, Taipei County, 235
                           Taiwan, ROC F5 235
                           Attention: Mr Tiao-Tsan Lai
                           Telephone: 886-2-8226-5566
                           Facsimile: 886-2-8226-8585

With a copy to:            Loeb & Loeb, LLP
                           345 Park Avenue
                           New York, NY 10154-0037
                           Attention: Mitchell Nussbaum, Esq.
                           Telephone: (212) 407-4159
                           Facsimile: (212) 407.4990

If to the Holder:         Cornell Capital Partners, LP
                          101 Hudson Street, Suite 3700
                          Jersey City, NJ 07303
                          Attention: Mark Angelo
                          Telephone: (201) 985-8300

With a copy to:           David Gonzalez, Esq.
                          101 Hudson Street - Suite 3700
                          Jersey City, NJ 07302
                          Telephone: (201) 985-8300
                          Facsimile: (201) 985-8266

or at such other address and/or facsimile number and/or to the attention of such
other person as the  recipient  party has  specified by written  notice given to
each  other  party  five (5) days  prior to the  effectiveness  of such  change.
Written  confirmation  of receipt  (i) given by the  recipient  of such  notice,
consent,  waiver or other  communication,  (ii)  mechanically or  electronically
generated by the sender's facsimile machine containing the time, date, recipient

                                       11
<PAGE>
facsimile  number and an image of the first page of such  transmission  or (iii)
provided  by a  nationally  recognized  overnight  delivery  service,  shall  be
rebuttable evidence of personal service,  receipt by facsimile or receipt from a
nationally  recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.

     SECTION 4. DEFINITIONS.  For the purposes hereof, the following terms shall
have the following meanings:

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

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

     "COMMISSION" means the Securities and Exchange Commission.

     "COMMON STOCK" means the common stock, par value $0.001, of the Obligor and
stock of any other  class  into which such  shares may  hereafter  be changed or
reclassified.

     "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

     "FUNDING  EVENT" means any  transaction  or series of  transactions  closed
after the Original  Issue Date in which the Obligor  raises  $2,000,000  or more
through  the  sale of their  equity  securities  or  securities  exercisable  or
convertible into equity securities.

     "ORIGINAL  ISSUE  DATE"  shall mean the date of the first  issuance of this
Debenture  regardless of the number of transfers and regardless of the number of
instruments, which may be issued to evidence such Debenture.

     "CLOSING BID PRICE" means the price per share in the last reported trade of
the Common  Stock on the OTC or on the  exchange  which the Common Stock is then
listed as quoted by Bloomberg, LP.

                                       12
<PAGE>
     "PERSON" means a corporation, an association, a partnership,  organization,
a business,  an individual,  a government or political  subdivision thereof or a
governmental agency.

      "SECURITIES  ACT" means the  Securities  Act of 1933, as amended,  and the
rules and regulations promulgated thereunder.

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

     "TRANSACTION  DOCUMENTS"  means the  Securities  Purchase  Agreement or any
other agreement  delivered in connection with the Securities Purchase Agreement,
including,  without limitation,  the Security  Agreement,  the Pledge and Escrow
Agreement, and the Investor Registration Rights Agreement.

     "UNDERLYING  SHARES"  means  the  shares  of  Common  Stock  issuable  upon
conversion of this  Debenture or as payment of interest in  accordance  with the
terms hereof.

     "UNDERLYING SHARES REGISTRATION  STATEMENT" means a registration  statement
meeting  the  requirements  set  forth  in the  Registration  Rights  Agreement,
covering among other things the resale of the  Underlying  Shares and naming the
Holder as a "selling stockholder" thereunder.

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

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

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

                                       13
<PAGE>
     SECTION 8. No  indebtedness  of the Obligor is senior to this  Debenture in
right of payment, whether with respect to interest,  damages or upon liquidation
or dissolution or otherwise.  Without the Holder's consent, the Obligor will not
and will not permit any of their subsidiaries to, directly or indirectly,  enter
into, create,  incur, assume or suffer to exist any indebtedness of any kind, on
or with respect to any of its property or assets now owned or hereafter acquired
or any  interest  therein or any income or profits  there from that is senior in
any respect to the obligations of the Obligor under this Debenture.

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

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

     SECTION 11. Any waiver by the Holder of a breach of any  provision  of this
Debenture  shall  not  operate  as or be  construed  to be a waiver of any other
breach  of such  provision  or of any  breach  of any  other  provision  of this
Debenture. The failure of the Holder to insist upon strict adherence to any term
of this Debenture on one or more  occasions  shall not be considered a waiver or
deprive that party of the right  thereafter  to insist upon strict  adherence to
that term or any other term of this Debenture. Any waiver must be in writing.

     SECTION 12. If any  provision  of this  Debenture  is  invalid,  illegal or
unenforceable,  the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain applicable to all other persons and  circumstances.  If it shall be found
that any interest or other amount deemed  interest due  hereunder  shall violate
applicable laws governing  usury,  the applicable rate of interest due hereunder
shall  automatically be lowered to equal the maximum permitted rate of interest.
The Obligor  covenants  (to the extent that it may lawfully do so) that it shall
not at any time insist upon,  plead, or in any manner  whatsoever  claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would  prohibit  or forgive  the  Obligor  from paying all or any portion of the
principal of or interest on this  Debenture  as  contemplated  herein,  wherever
enacted,  now or at any time  hereafter  in  force,  or  which  may  affect  the
covenants or the performance of this  indenture,  and the Obligor (to the extent
it may lawfully do so) hereby  expressly waives all benefits or advantage of any
such law,  and  covenants  that it will not, by resort to any such law,  hinder,
delay or impeded the  execution of any power herein  granted to the Holder,  but

                                       14
<PAGE>
will  suffer and permit  the  execution  of every such as though no such law has
been enacted.

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

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

                   [REMAINDER OF PAGE INTENTIONLLY LEFT BLANK]

                                       15
<PAGE>
     IN WITNESS  WHEREOF,  the  Obligor  has  caused  this  Secured  Convertible
Debenture to be duly  executed by a duly  authorized  officer as of the date set
forth above.

                                     CITY NETWORK, INC.

                                     By:  /s/ Tiao-Tsan Lai
                                          --------------------------
                                     Name:  Mr Tiao-Tsan Lai
                                     Title: Chief Executive Officer

                                       16
<PAGE>
                                   EXHIBIT "A"

                              NOTICE OF CONVERSION

        (TO BE EXECUTED BY THE HOLDER IN ORDER TO CONVERT THE DEBENTURE)

TO:

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

Conversion Date:
                                       -----------------------------------------
Applicable Conversion Price:
                                       -----------------------------------------
Signature:
                                       -----------------------------------------
Name:
                                       -----------------------------------------
Address:
                                       -----------------------------------------
Amount to be converted:                $
                                       -----------------------------------------
Amount of Debenture unconverted:       $
                                       -----------------------------------------
Conversion Price per share:            $
                                       -----------------------------------------
Number of shares of Common Stock
to be issued:
                                       -----------------------------------------
Please issue the shares of Common
Stock in the following name and to
the following address:
                                       -----------------------------------------
Issue to:
                                       -----------------------------------------
Authorized Signature:
                                       -----------------------------------------
Name:
                                       -----------------------------------------
Title:
                                       -----------------------------------------
Phone Number:
                                       -----------------------------------------
Broker DTC Participant Code:
                                       -----------------------------------------
Account Number:
                                       -----------------------------------------

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