Document:

Form of Subscription Agreement dated December 29, 2006

    

    SUBSCRIPTION
      AGREEMENT

    

    THIS
      SUBSCRIPTION AGREEMENT made as of this 29th day of December, 2006 between
      Symbollon Pharmaceuticals, Inc., a Delaware corporation with its principal
      offices at 37 Loring Drive, Framingham, MA 01702 (the "Company"), and the
      undersigned (the "Subscriber").

    

    WHEREAS,
      the Company desires to issue and sell in a private placement to accredited
      investors (the “Offering”) up to 937,500 units (“Units”), each consisting of
      four shares of Class A common stock, par value $.001 per share (the “Common
      Stock”) and three common stock purchase warrant (the “Warrant”). The Units are
      being offered at $3.20 per share, or for an aggregate purchase price of up
      to
      $3,000,000. Each Warrant entitles the holder to purchase one share of common
      stock at a price of $1.20 per share for a period of five years from the date
      of
      issuance, substantially in the form set forth as Attachment V to the
      Confidential Private Placement Memorandum, dated November 7, 2006, as it may
      be
      supplemented and amended (the “Memorandum”), relating to the Offering. The
      Offering is being conducted on a “best efforts” basis by the Company, and
      completion of the Offering is not subject to the purchase of a minimum number
      of
      shares. All funds will be deposited directly in the treasury of the Company.
      The
      shares sold in the Offering and Warrants are sometime hereinafter referred
      to as
      the “Securities”.

    

    NOW,
      THEREFORE, for and in consideration of the prem-ises and the mutual covenants
      hereinafter set forth, the parties hereto do hereby agree as
      fol-lows:

    

    I. SUBSCRIPTION
      FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER

    

    1.1 Subject
      to the terms and conditions hereinafter set forth, the Subscriber hereby
      subscribes for and agrees to purchase from the Company the number of Units
      set
      forth upon the signature page hereof at a price equal to $3.20 per Unit, and
      the
      Company agrees to sell such number of Units for said purchase price.
      Subscriptions will be accepted only for an even number of Units - no fractional
      Warrants will be issued. The purchase price is payable by (i) check made payable
      to Symbollon Pharmaceuticals, Inc., or (ii) wire transfer in accordance with
      the
      wire transfer instructions set forth above, contemporaneously with the execution
      and deliv-ery of this Sub-scription Agreement. The Subscriber understands
      however, that this pur-chase of Securities is contin-gent upon the Company
      acceptance of the subscription. This subscription is submitted to the Company
      in
      accordance with and subject to the terms and conditions described in this
      Agreement and the Memorandum.

    

    1.2 The
      Subscriber recognizes that the purchase of Securities involves a high degree
      of
      risk in that (i) the Company has had only limited operations, minimal revenues
      and requires sub-stantial funds in addition to the proceeds of this private
      place-ment, (ii) an investment in the Company is highly speculative and only
      inves-tors who can afford the loss of their entire investment should consider
      investing in the Company and the Securities, (iii) he may not be able to
      liquidate his investment; (iv) transferability of the Securities is extremely
      limited; and (v) in the event of a disposi-tion, an investor could sustain
      the
      loss of his entire investment.

    

    
      
        1

      

      
         

        
          

        

      

      
         

      

    

    1.3 The
      Subscriber represents that he is an "accredited investor" as such term is
      defined in Rule 501 of Regulation D promulgated under the United States
      Securities Act of 1933, as amended (the "Act"), as indicated by his responses
      to
      the Accredited Investor Ques-tion-naire, and that he is able to bear the
      economic risk of an investment in the Securities.

    

    1.4 The
      Subscriber acknowledges that he has prior investment experience, including
      investment in non-listed and non-registered securities, or he has employed
      the
      services of an investment advisor, attorney or accountant to read all of the
      documents furnished or made available by the Company both to him and to all
      other prospective investors in the Securities and to evalu-ate the merits and
      risks of such an investment on his behalf, and that he recognizes the highly
      specu-lative nature of this invest-ment.

    

    1.5 The
      Subscriber acknowledges receipt and careful review of the Memorandum (which
      includes certain Risks Factors relating to the Company and this Offer-ing),
      the
      Company's Annual Report on Form 10-KSB for the year ended December 31, 2005,
      the
      Quarterly Report on Form 10-QSB for the period ended June 30, 2006 and a Proxy
      State-ment for the 2006 annual meeting of stock-holders of the Company
      (collectively, the "Offering Documents"), and hereby rep-resents that he has
      been furnished by the Company during the course of this transaction with all
      information regarding the Company which he had requested or desired to know,
      that all docu-ments which could be reasonably provided have been made available
      for his inspec-tion and review; and that such information and docu-ments have,
      in his opinion, afforded the Subscriber with all of the same infor-ma-tion
      that
      would be provided him in a registra-tion statement filed under the Act; that
      he
      has been afforded the opportunity to ask questions of and receive answers from
      duly authorized offi-cers or other representatives of the Company con-cerning
      the terms and con-di-tions of the Offering, and any addi-tional information
      which he had requested.

    

    1.6 The
      Subscriber hereby acknowledges that this Offering has not been reviewed by
      the
      United States Securities and Exchange Commission ("SEC") because of the
      Com-pany's repre-sentations that this is intended to be a nonpublic offering
      pur-suant to Section 4(2) of the Act. The Sub-scriber repre-sents that the
      Securities are being purchased for his own account, for investment and not
      for
      distribution or resale to others. The Subscriber agrees that he will not sell
      or
      other-wise transfer such securi-ties unless they are registered under the Act
      or
      unless an exemp-tion from such registration is available.

    

    1.7 The
      Subscriber understands that the shares of Common Stock, the Warrants, and the
      shares of Common Stock issuable upon exercise of the Warrants (the shares of
      Common Stock sold in the Offering and the shares of Common Stock issuable upon
      exercise of the Warrants collectively shall be referred to as the “Shares”),
      have not been registered under the Act by reason of a claimed exemption under
      the provisions of the Act which depends, in part, upon his investment
      inten-tion. In this connection, the Subscriber under-stands that it is the
      position of the SEC that the statutory basis for such exemption would not be
      present if his repre-senta-tion merely meant that his present intention was
      to
      hold such securities for a short period, such as the capital gains period of
      tax
      statutes, for a deferred sale, for a market rise, assuming that a market
      develops, or for any other fixed period. The Sub-scriber realizes that, in
      the
      view of the SEC, a purchase now with an intent to resell would repre-sent a
      purchase with an intent inconsistent with his represen-ta-tion to the Company,
      and the SEC might regard such a sale or disposition as a deferred sale to which
      such exemptions are not available.

    

    
      
        2

      

      
         

        
          

        

      

      
         

      

    

    1.8 The
      Subscriber understands that Rule 144 (the "Rule") promul-gated under the Act
      requires, among other condi-tions, a one-year holding period prior to the resale
      (in limited amounts) of securities acquired in a non-public offer-ing without
      having to satisfy the registration requirements under the Act. The Subscriber
      understands that the Company makes no representa-tion or warranty regarding
      its
      fulfillment in the future of any reporting requirements under the Secu-rities
      Exchange Act of 1934, as amended, or its dissemination to the public of any
      current financial or other information concerning the Company, as is required
      by
      the Rule as one of the conditions of its availabil-ity. The Subscriber
      understands and hereby acknowledges that the Com-pany is under no obligation
      (and does not intend) to register the Warrants under the Act, and is under
      no
      obligation to register the Shares under the Act except as set forth in Article
      IV herein. The Subscriber consents that the Company may, if it desires, permit
      the transfer of the Shares out of his name only when his request for transfer
      is
      accompanied by an opinion of counsel reasonably satisfactory to the Company
      that
      neither the sale nor the proposed transfer results in a violation of the Act
      or
      any applicable state "blue sky" laws (collectively "Securities Laws"). The
      Sub-scriber agrees to hold the Company and its direc-tors, officers and
      con-trolling per-sons and their respec-tive heirs, representatives, suc-cessors
      and assigns harmless and to indemnify them against all liabili-ties, costs
      and
      expenses incurred by them as a result of any misrepresentation made by the
      Subscriber contained herein or in the Selling Securityholder Questionnaire
      and
      Accredited Investor Questionnaire or any sale or distribution by the undersigned
      Sub-scriber in violation of any Secu-ri-ties Laws.

    

    1.9 Subject
      to the conditions set forth in Section 1.10 below and the indemnification set
      forth in Section 4.4 below, certificates evidencing the Shares shall not contain
      any legend (including the legends referenced below in Section 1.11), (i) while
      a
      registration statement (including the Registration Statement) covering the
      resale of such security is effective under the Act, or (ii) following any sale
      of such Shares pursuant to the Rule, or (iii) if such Shares are eligible for
      sale under Rule 144(k), or (iv) if such legend is not required under applicable
      requirements of the Securities Act (including judicial interpretations and
      pronouncements issued by the staff of the SEC). Subject to the conditions set
      forth in Section 1.10 below and the indemnification set forth in Section 4.4
      below, if all or any portion of a Warrant is exercised at a time when there
      is
      an effective registration statement to cover the resale of the Shares underlying
      such Warrant, such Shares shall be issued free of all legends. The Company
      agrees that following the effectiveness of the Registration Statement or at
      such
      time as such legend is no longer required under this Section 1, it will, no
      later than three Trading Days following the delivery by a Subscriber to the
      Company or the Company’s transfer agent of a certificate representing Shares, as
      the case may be, issued with a restrictive legend, deliver or cause to be
      delivered to such Subscriber a certificate representing such shares that is
      free
      from all restrictive and other legends. The Company may not make any notation
      on
      its records or give instructions to any transfer agent of the Company that
      enlarge the restrictions on transfer set forth in this Section. Certificates
      for
      Securities subject to legend removal hereunder shall be transmitted by the
      transfer agent of the Company to the Subscribers by crediting the account of
      the
      Subscriber’s prime broker with the Depository Trust Company System.

    

    
      
        3

      

      
         

        
          

        

      

      
         

      

    

    1.10 Each
      Subscriber, severally and not jointly with the other Subscribers, agrees that
      the removal of the restrictive legend from certificates representing Securities
      as set forth in this Section is predicated upon the Subscriber not being an
      Affiliate of the Company and the Company’s reliance that the Subscriber will
      sell any Securities pursuant to either the registration requirements of the
      Act,
      including any applicable prospectus delivery requirements, or an exemption
      therefrom, and that if Securities are sold pursuant to a Registration Statement,
      they will be sold in compliance with the plan of distribution set forth therein.
      Each Subscriber, severally and not jointly with the other Subscribers,
      acknowledges that the Company’s agreement hereunder to remove all legend from
      Shares contemplated under this Section 1 is not an affirmative statement or
      representation that such Shares are freely tradable.

    

    1.11 The
      Subscriber consents to the placement of a legend on any certificate or other
      document evidencing the Securities stating that they have not been regis-tered
      under the Act and setting forth or referring to the restrictions on
      transferability and sale thereof.

    

    1.12 The
      Subscriber understands that the Company will review this Subscription Agreement,
      the Selling Securityholder Questionnaire and Accredited Investor Questionnaire
      and is hereby given authority by the undersigned to call his bank or place
      of
      employment or otherwise review the financial standing of the Subscriber; and
      it
      is further agreed that the Company reserves the unrestricted right to reject
      or
      limit any sub-scription and to close the offer at any time.

    

    1.13 The
      Subscriber hereby represents that the address of Subscriber furnished by him
      at
      the end of this Subscription Agreement is the undersigned's principal residence
      if he is an individual or its principal business address if it is a corpora-tion
      or other entity.

    

    1.14 The
      Subscriber acknowledges that if he is a Regis-tered Repre-sentative of an NASD
      member firm, he must give such firm the notice required by the NASD's Rules
      of
      Fair Practice, receipt of which must be acknowledged by such firm on the
      signa-ture page hereof.

    

    1.15 The
      Subscriber hereby represents that, except as set forth in the Offering
      Documents, no representations or war-ranties have been made to the Subscriber
      by
      the Company or any agent (including, without limitation, any placement agent
      or
      syndicate participant), employee or affiliate of the Company and in entering
      into this transaction, the Sub-scriber is not relying on any informa-tion,
      other
      than that contained in the Offering Documents and the results of inde-pendent
      investigation by the Subscriber.

    

    1.16 If
      the
      Subscriber is a Georgia resident, the Sub-scriber hereby acknowledges that
      the
      Securities have been sold in reliance on Paragraph (13) of Code Section 10-5-9
      of the Georgia Securities Act of 1973.

    

    1.17 If
      the
      Subscriber is a Florida resident, the Subscriber may have the right, to the
      extent provided in Section 517.061(11)(a)(5) of the Florida Securities Act,
      to
      withdraw his subscription for the purchase and receive a full refund of all
      monies paid. Such right of withdrawal may be exercised prior to the expiration
      of three business days after the later to occur of (A) payment of the purchase
      has been made to Symbollon or its agent or (B) communication of the right of
      withdrawal to the Florida resident. Withdrawal will be without any further
      liability to any person. To accomplish this withdrawal, a Subscriber need only
      send a letter or telegram to Symbollon at our address set forth herein
      indicating his intention to withdraw. Such letter or telegram should be set
      and
      postmarked prior to the end of the aforementioned third business day. It is
      advisable to send such letter by certified mail, return receipt requested,
      to
      ensure that it is received and also to evidence the time it was mailed. If
      the
      request is made orally, in person or by telephone to an officer of Symbollon,
      a
      written confirmation that the request has been received should be
      requested.

     

    
      
        4

      

      
         

        
          

        

      

      
         

      

    

    1.18 The
      Company may pay brokerage commissions, finders’ fees and/or similar compensation
      to certain third parties (the “Placement Agents” or “Agents”) of up to a 8.0%
      cash compensation and Warrants equal to 20.0% of the shares of Common Stock
      issued (the “Placement Agent Warrants”). The Agents did not prepare any of the
      information to be delivered to prospective investors in connection with the
      Offering and do not make any representation or warranty concerning the accuracy
      or completeness of such information. Prospective investors are advised to
      conduct their own review of the business, properties and affairs of the Company
      before subscribing to purchase Securities.

    

    II. REPRESENTATIONS
      BY THE COMPANY

    

    Except
      as
      otherwise described in the SEC Documents (as defined below), including any
      documents incorporated by reference therein or exhibits referenced or attached
      thereto, the Company hereby represents and warrants to each of the Subscriber
      as
      follows immediately prior to the Closing:

     

    2.1 Incorporation.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware and
      is
      qualified to do business and is in good standing in each jurisdiction in which
      the character of its properties or the nature of its business requires such
      qualification, except where the failure to so qualify would not have a material
      adverse effect on the business, condition (financial or otherwise) or prospects
      of the Company ("Material
      Adverse Effect").
      The
      Company does not have any subsidiaries. Complete and correct copies of the
      certificate of incorporation (the "Certificate
      of Incorporation")
      and
      bylaws (the "Bylaws")
      of the
      Company as in effect on the Effective Date have been filed by the Company with
      the SEC. The Company has all requisite corporate power and authority to carry
      on
      its business as now conducted.

     

    2.2 Capitalization.
      The
      authorized capital stock of the Company consists of (i)  100,000,000 shares
      of Common Stock, of which 9,301,237 shares are outstanding on the date hereof.
      The outstanding shares of capital stock of the Company have been duly and
      validly issued and are fully paid and nonassessable, have been issued in
      material compliance with all federal and state securities laws, and were not
      issued in violation of any preemptive or similar rights to subscribe for or
      purchase securities. Except for (i) options to purchase up to 1,810,000 shares
      of Common Stock or other equity awards issued to employees and consultants
      of
      the Company pursuant to the employee benefits plans disclosed in the SEC
      Documents and (ii) warrants to purchase up to 2,031,506 shares of Common Stock,
      there are no existing options, warrants, calls, preemptive (or similar) rights,
      subscriptions or other rights, agreements, arrangements or commitments of any
      character obligating the Company to issue, transfer or sell, or cause to be
      issued, transferred or sold, any shares of the capital stock of the Company
      or
      other equity interests in the Company or any securities convertible into or
      exchangeable for such shares of capital stock or other equity interests, and
      there are no outstanding contractual obligations of the Company to repurchase,
      redeem or otherwise acquire any shares of its capital stock or other equity
      interests. There are no voting agreements or other similar arrangements with
      respect to the Common Stock to which the Company is a party. The Company has
      not
      adopted a stockholder rights plan or similar arrangement relating to
      accumulations of beneficial ownership of Common Stock or a change in control
      of
      the Company. The Company does not maintain any pension benefit plan, or other
      retirement plan, subject to the Employee Retirement Income Security
      Act.

     

    
      
        5

      

      
         

        
          

        

      

      
         

      

    

    2.3 Authorization.
      All
      corporate action on the part of the Company, its officers, directors and
      stockholders necessary for the authorization, execution, delivery and
      performance of this Subscription Agreement and the consummation of the
      transactions contemplated herein has been taken. When executed and delivered
      by
      the Company, this Subscription Agreement shall constitute the legal, valid
      and
      binding obligation of the Company, enforceable against the Company in accordance
      with its terms, except as such may be limited by bankruptcy, insolvency,
      reorganization or other laws affecting creditors' rights generally and by
      general equitable principles. The Company has all requisite corporate power
      to
      enter into this Subscription Agreement and to carry out and perform its
      obligations under the terms of this Subscription Agreement.

     

    2.4 Valid
      Issuance of the Shares.
      The
      Shares being purchased by the Subscribers hereunder and upon exercise of the
      Warrants will, upon issuance pursuant to the terms hereof and thereof, be duly
      authorized and validly issued, fully paid and nonassessable. No preemptive
      rights or other rights to subscribe for or purchase the Company's capital stock
      exist with respect to the issuance and sale of the Securities by the Company
      pursuant to this Subscription Agreement, except for any such right disclosed
      in
      the SEC Documents. No further approval or authority of the stockholders or
      the
      Board of Directors of the Company shall be required for the issuance and sale
      of
      the Securities by the Company, or the filing of the Registration Statement
      by
      the Company, as contemplated in this Subscription Agreement. The Shares and
      Warrants will, upon issuance pursuant to the terms hereof and thereof, be free
      and clear from any security interest, pledge, mortgage, lien (statutory or
      other), charge, option to purchase, lease or otherwise acquire any interest
      or
      any claim, restriction or covenant, title defect, hypothecation, assignment,
      deposit arrangement or other encumbrance of any kind or any preference, priority
      or other security agreement or preferential arrangement of any kind or nature
      whatsoever (including, without limitation, any conditional sale or other title
      retention agreement).

     

    2.5 Financial
      Statements.
      As of
      their respective dates, the financial statements of the Company included in
      the
      SEC Documents (as defined in Section 2.6 below) complied as to form in all
      material respects with applicable accounting requirements and the published
      rules and regulations of the SEC with respect thereto. Such financial statements
      have been prepared in accordance with generally accepted accounting principles,
      consistently applied, during the periods involved (except (i) as permitted
      pursuant to Regulation G promulgated under the Exchange Act, or (ii) in the
      case
      of unaudited interim financial statements, to the extent they may exclude
      footnotes or may be condensed or summary statements) and fairly present in
      all
      material respects the financial position of the Company as of the dates thereof
      and the results of its operations and cash flows for the periods then ended
      (subject, in the case of unaudited statements, to normal year end audit
      adjustments).

     

    
      
        6

      

      
         

        
          

        

      

      
         

      

    

    2.6 SEC
      Documents.
      The
      Company has filed all reports, schedules, forms, statements (collectively,
      and
      in each case including all exhibits, financial statements and schedules thereto
      and documents incorporated by reference therein and including all registration
      statements and prospectuses filed with the SEC) required to be filed by it
      with
      the SEC through the date of the Memorandum, and the Company will file, on a
      timely basis, all similar documents with the SEC during the period commencing
      on
      the date of the Memorandum and ending on the termination of the Offering (all
      of
      the foregoing being hereinafter referred to as the “SEC Documents”). As of their
      respective dates, the SEC Documents complied or will comply in all material
      respects with the requirements of the Securities Act, the Exchange Act and
      the
      rules and regulations of the SEC promulgated thereunder applicable to the SEC
      Documents, and none of the SEC Documents, contained or will contain any untrue
      statement of a material fact or omitted or will omit to state a material fact
      required to be stated therein or necessary in order to make the statements
      made
      therein, in light of the circumstances under which they were made, not
      misleading, as of their respective filing dates, except to the extent corrected
      by a subsequently filed SEC Document.

     

    2.7 Consents.
      All
      consents, approvals, orders and authorizations required on the part of the
      Company in connection with the execution, delivery or performance of this
      Subscription Agreement and the consummation of the transactions contemplated
      herein have been obtained and will be effective as of the Closing
      Date.

     

    2.8 No
      Conflict.
      The
      execution and delivery this Subscription Agreement by the Company and the
      consummation of the transactions contemplated hereby will not conflict with
      or
      result in any violation of or default (with or without notice or lapse of time,
      or both) under, or give rise to a right of termination, cancellation or
      acceleration of any obligation or to a loss of a material benefit under
      (i) any provision of the Certificate of Incorporation or Bylaws of the
      Company, (ii) any material bond, debenture, note or other evidence of
      indebtedness, or any material lease, contract, indenture, mortgage, deed of
      trust, loan agreement, joint venture, franchise, license or other agreement
      or
      instrument to which the Company is a party or by which it or its property is
      bound or (iii) any judgment, order, statute, law, ordinance, rule or
      regulations, applicable to the Company or its respective properties or
      assets.

     

    2.9 Nasdaq
      Stock Market.
      The
      Common Stock is registered pursuant to Section 12(g) of the Exchange Act and
      is
      quoted on the Nasdaq Stock Market Over-the-Counter Bulletin Board ("OTCBB")
      under
      the ticker symbol "SYMBA.OB." The Company has taken no action designed to
      remove, or which, to the Company's knowledge, is likely to have the effect
      of,
      suspending or terminating the quotation of the Common Stock on the OTCBB. The
      Company shall comply with all requirements, if any, of the National Association
      of Securities Dealers, Inc. (the "NASD")
      with
      respect to the issuance of the Shares and Conversion Stock and the quoting
      of
      the Shares and Conversion Stock (when issued) on the OTCBB.

     

    
      
        7

      

      
         

        
          

        

      

      
         

      

    

    2.10 Absence
      of Litigation.
      There
      is no action, suit or proceeding or, to the Company’s knowledge, any
      investigation, pending, or to the Company’s knowledge, threatened by or before
      any court, governmental body or regulatory agency against the Company that
      is
      required to be disclosed in the SEC Documents and is not so disclosed. The
      Company has not received any written or oral notification of, or request for
      information in connection with, any formal or informal inquiry, investigation
      or
      proceeding from the SEC or the NASD. The foregoing includes, without limitation,
      any such action, suit, proceeding or investigation that questions this
      Subscription Agreement or the right of the Company to execute, deliver and
      perform under same.

     

    2.11  Offering.
      The
      Company has not in the past nor will it hereafter take any action to sell,
      offer
      for sale or solicit offers to buy any securities of the Company which would
      require the offer, issuance or sale of the Securities, as contemplated by this
      Subscription Agreement, to be registered under Section 5 of the Securities
      Act.

     

    2.12 Investment
      Company.
      The
      Company is not and, after giving effect to the offering and sale of the Shares
      and the Warrants, will not be required to register as, an “investment company”
as such term is defined in the Investment Company Act of 1940, as
      amended.

     

    2.13 No
      Manipulation of Stock.
      The
      Company has not taken and will not, in violation of applicable law, take, any
      action designed to or that might reasonably be expected to cause or result
      in
      unlawful manipulation of the price of the Common Stock.

     

    2.14 No
      Violations.
      The
      Company is not in violation of its Certificate of Incorporation, Bylaws or
      other
      organizational documents, or in violation of any law, administrative regulation,
      ordinance or order of any court or governmental agency, arbitration panel or
      authority applicable to the Company, which violation, individually or in the
      aggregate, would be reasonably expected to have a Material Adverse Effect,
      or is
      not in default (and there exists no condition which, with the passage of time
      or
      otherwise, would constitute a default) in the performance of any material bond,
      debenture, note or any other evidence of indebtedness in any indenture,
      mortgage, deed of trust or any other material agreement or instrument to which
      the Company is a party or by which the Company is bound or by which the property
      of the Company is bound, which would be reasonably expected to have a Material
      Adverse Effect.

     

    2.15 Accountants.
      Vitale,
      Caturano & Company, Ltd., who issued their report with respect to the
      financial statements to be incorporated by reference from the Company's Annual
      Report on Form 10-KSB for the year ended December 31, 2005 into the Registration
      Statement and the prospectus which forms a part thereof, are an independent
      registered public accounting firm as required by the Securities
      Act.

     

    2.16 Internal
      Accounting Controls.
      The
      Company maintains a system of internal accounting controls (as such term is
      defined in Rule 13a-14 and 15d-14 under the Exchange Act) sufficient to provide
      reasonable assurance that (i) transactions are executed in accordance with
      management’s general or specific authorizations, (ii) transactions are recorded
      as necessary to permit preparation of financial statements in conformity with
      generally accepted accounting principles and to maintain asset accountability,
      (iii) access to assets is permitted only in accordance with management’s general
      or specific authorization and (iv) the recorded accountability for assets is
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any differences.

     

    
      
        8

      

      
         

        
          

        

      

      
         

      

    

    2.17 Disclosure
      Controls.
      The
      Company has established and maintains disclosure controls and procedures (as
      such term is defined in Rule 13a-14 and 15d-14 under the Exchange Act); such
      disclosure controls and procedures are designed to ensure that material
      information relating to the Company, including its consolidated subsidiaries,
      if
      any, is made known to the Company’s Chief Executive Officer and its Chief
      Financial Officer by others within those entities, and such disclosure controls
      and procedures are effective to perform the functions for which they were
      established; the Company’s auditors and the Audit Committee of the Board of
      Directors have been advised of: (i) any significant deficiencies in the design
      or operation of internal controls which could adversely affect the Company’s
      ability to record, process, summarize, and report financial data; and (ii)
      any
      fraud, whether or not material, that involves management or other employees
      who
      have a role in the Company’s internal controls; any material weaknesses in
      internal controls have been identified for the Company’s auditors; since the
      date of the most recent evaluation of such disclosure controls and procedures,
      there have been no significant changes in internal controls or in other factors
      that could significantly affect internal controls, including any corrective
      actions with regard to significant deficiencies and material weaknesses; the
      principal executive officers (or their equivalents) and principal financial
      officers (or their equivalents) of the Company have made all certifications
      required by the Sarbanes Oxley Act of 2002 (the “Sarbanes Oxley Act”) and any
      related rules and regulations promulgated by the Commission, and the statements
      contained in any such certification are complete and correct; and the Company
      is
      otherwise in compliance in all material respects with all applicable effective
      provisions of the Sarbanes Oxley Act.

     

    2.18 Disclosure.
      Neither
      this Subscription Agreement, any of the schedules or exhibits hereto, nor any
      other document or certificate provided by the Company to the Subscribers in
      connection herewith contains any untrue statement of a material fact or, when
      considered as a whole, omits a material fact necessary to make the statements
      contained herein, in light of the circumstances in which they were made, not
      misleading.

     

    

    III. TERMS
      OF
      SUBSCRIPTION

    

    3.1 The
      subscription period will begin on November 7, 2006 and will terminate upon
      the
      earlier to occur of (i) the sale of all of the Securities or (ii) 11:59 PM
      Eastern time on December 7, 2006 unless (in the sole discretion of the Company)
      extended by the Company for an additional period, not to exceed February 7,
      2007, or earlier terminated by the Company (the "Termina-tion Date"). The
      Securities are offered on a "best efforts" basis, and the acceptance of
      subscriptions is at the discretion of the Company. The mini-mum sub-scription
      per subscriber shall be 3,125 Units ($10,000); provided, however, that smaller
      investments may be accepted at the discre-tion of the Company.

    

    3.2 Placement
      of the Securities may be made by the Placement Agents, who will receive up
      to
      (i) a place-ment fee in the amount of 8% of the purchase price of the Securities
      placed by them and (ii) Placement Agent Warrants equal to 20.0% of the shares
      of
      Common Stock sold by them.

    

    
      
        9

      

      
         

        
          

        

      

      
         

      

    

    3.3 Pending
      the sale of the Securities, all funds paid hereunder shall be deposited by
      the
      Company in its bank account. If the Company, in its sole discretion, rejects
      this subscription for purchase of Securities, then this subscription shall
      be
      void and all funds paid hereunder by the Subscriber, without inter-est, shall
      be
      promptly returned to the Subscriber, subject to paragraph 3.5 hereof. Sale
      of
      the Securities shall occur in upon acceptance by the Company of such
      Subscriber’s subscription. Closings are not subject to the purchase of a minimum
      number of Securities.

    

    3.4 The
      Subscriber hereby authorizes and directs the Company to deliver the Securities
      to be issued to such Subscriber pursuant to this Subscription Agreement either
      to the residential or business address indicated in the Selling Securityholder
      Ques-tionnaire, or as instructed by the Placement Agents.

    

    3.5 The
      Subscriber hereby authorizes and directs the Company to return any funds for
      unaccepted subscriptions to the same account from which the funds were drawn,
      including any cus-tomer account maintained with the Place-ment
      Agents.

    

    IV. REGISTRATION
      RIGHTS

    

    4.1 Registration.
      The
      Company hereby agrees with the holders of the Securities, or their permitted
      transferees (collec-tively, the "Holders") who shall have agreed in writing
      with
      the Company to be bound by the provisions hereof applicable to the Holders,
      to
      use its best efforts to file within thirty (30) days following the final closing
      of this Offering a registra-tion statement under the Act covering the resale
      of
      the Shares included in the Offering and issuable upon exercise of the Warrants
      (the "Registrable Securities") by the Holders and to use its best efforts to
      have such registration statement declared effective within 90 days of the final
      closing of this Offering.

    

    4.2 Registration
      Procedures.
      In
      connection with the registration of Registrable Securities under the Act
      pursuant to Section 4.1, the Company will use its commercially reasonable best
      efforts to:

    

    (a) prepare
      and file with the SEC a registration statement with respect to such securities,
      and cause such registration statement to become effective, and to cause the
      same
      to remain effec-tive for such period as may be reasonably necessary to effect
      the sale of such securities, provided
      that
      such period need not extend beyond the date that all the Reg-istrable
      Securi-ties are eligible for sale under Rule 144 under the Act (the
      "Registra-tion Termination Date").

    

    (b) prepare
      and file with the SEC such amendments to such registration statement and
      supplements to the prospectus contained therein as may be necessary to keep
      such
      registration statement effective for such period as may be reasonably neces-sary
      to effect the sale of such securities, but not beyond the Registration
      Termination Date.

    

    
      
        10

      

      
         

        
          

        

      

      
         

      

    

    (c) furnish
      to the security holders participating in such regis-tration such rea-sonable
      number of copies of the registration statement, preliminary prospectus, final
      pro-spectus and such other documents as they may reasonably request in order
      to
      facilitate the public offering of such securities;

    

    (d) register
      or qualify the securities covered by such registration statement under such
      state securities or blue sky laws of such jurisdictions as such participating
      holders may reasonably request in writ-ing within ten (10) days following the
      original filing of such registra-tion statement, except that the Company shall
      not for any purpose be required to execute a gen-eral consent to service of
      process or to qualify to do business as a foreign corpora-tion in any
      juris-diction wherein it is not so qualified;

    

    (e) notify
      the security holders participating in such registra-tion, promptly after it
      shall receive notice thereof, of the time when such registra-tion statement
      has
      become effective or a supplement to any prospectus forming a part of such
      registration statement has been filed;

    

    (f) notify
      such holders promptly of any request by the SEC for the amending or
      supplementing of such registration statement or prospectus or for additional
      infor-mation;

    

    (g) prepare
      and file with the SEC, promptly upon the request of any such holders, any
      amendments or supplements to such registration state-ment or prospectus which,
      in the opinion of counsel for such holders (and con-curred in by counsel for
      the
      Company), is required under the Act or the rules and regulations thereunder
      in
      connection with the distribution of Common Stock by such holder,

    

    (h) prepare
      and promptly file with the SEC and promptly notify such holders of the filing
      of
      such amendment or supplement to such regis-tration statement or pro-spectus
      as
      may be necessary to correct any statements or omissions if, at the time when
      a
      prospec-tus relating to such securities is required to be delivered under the
      Act, any event shall have occurred as the result of which any such prospectus
      or
      any other prospectus as then in effect would include an untrue statement of
      a
      material fact or omit to state any material fact necessary to make the
      statements therein, in the light of the circumstances in which they were made,
      not misleading; and

    

    (i) advise
      such holders, promptly after it shall receive notice or obtain knowledge
      thereof, of the issuance of any stop order by the SEC sus-pending the
      effectiveness of such registration statement or the initiation or threat-ening
      of any proceeding for that purpose and promptly use its best efforts to pre-vent
      the issuance of any stop order or to obtain its with-drawal if such stop order
      should be issued.

    

    4.3 Expenses.

    

    (a) With
      respect to the registration pursuant to Section 4.1 hereof, all fees, costs
      and
      expenses of and incidental to such registra-tion (as specified in paragraph
      (b)
      below) shall be borne by the Company, provided, however, that any security
      holders par-ticipating in such registration shall bear their pro rata share
      of
      any underwriting discount and com-missions and transfer taxes.

    

    
      
        11

      

      
         

        
          

        

      

      
         

      

    

    (b) The
      fees,
      costs and expenses of registration to be borne by the Company as provided in
      paragraph (a) above shall include, without limita-tion, all registration,
      filing, and NASD fees, printing expenses, fees and disburse-ments of counsel
      and
      accountants for the Company, and expenses of complying with state securities
      or
      blue sky laws of any juris-dictions in which the securities to be offered are
      to
      be registered and qualified, including blue sky legal fees and expenses of
      Company counsel. Fees and disbursements of counsel and accoun-tants for the
      selling security holders and any other expenses incurred by the selling security
      holders not expressly included above shall be borne by the selling security
      holders.

    

    4.4 Indemnification.

    

    (a) To
      the
      extent permitted by law, the Company will indemnify and hold harmless each
      holder of Registrable Securities which are included in a registration statement
      pur-suant to the provisions of Section 4.1, its directors and officers, and
      any
      under-writer (as defined in the Act) for such holder and each person, if any,
      who controls such holder or such underwriter within the meaning of the Act,
      from
      and against, and will reimburse such holder and each such underwriter and
      controlling person with respect to, any and all loss, damage, liability, cost
      and expense to which such holder or any such underwriter or controlling person
      may become subject under the Act or otherwise, insofar as such losses, damages,
      liabilities, costs or expenses are caused by any untrue statement or alleged
      untrue statement of any material fact contained in such registration statement,
      any prospectus contained therein or any amendment or supplement thereto, or
      arise out of or are based upon the omission or alleged omission to state therein
      a material fact required to be stated therein or necessary to make the
      statements therein, in light of the circumstances in which they were made,
      not
      misleading; provided, however, that the Company will not be liable in any such
      case to the extent that any such loss, damage, liability, cost or expenses
      arises out of or is based upon an untrue statement or alleged untrue statement
      or omission or alleged omission so made in conformity with informa-tion
      furnished by such holder, such underwriter or such control-ling person in
      writing specifically for use in the preparation thereof.

    

    (b) Each
      holder of Registrable Securities included in a regis-tration pursuant to the
      provisions of Section 4.1 hereof will indemnify and hold harmless the Company,
      its directors and officers, any controlling person and any under-writer and
      any
      person which controls such underwriter from and against, and will reimburse
      the
      Company, its directors and officers, any controlling person and any under-writer
      and any person which controls such underwriter with respect to, any and all
      loss, damage, liability, cost or expense to which the Company or any controlling
      person and/or any underwriter or controlling person thereof may become subject
      under the Act or otherwise, insofar as such losses, damages, liabilities, costs
      or expenses are caused by, arise out of or are based upon (i) any untrue
      statement (or alleged untrue statement) of a material fact contained in any
      such
      registration statement, prospectus, offering circular or other document, or
      any
      omission (or alleged omission) to state therein a material fact required to
      be
      stated therein or necessary to make the statements therein not misleading,
      but
      only to the extent, that such untrue statement or alleged untrue statement
      or
      omission or alleged omission was so made in reliance upon and in strict
      con-formity with written information fur-nished by or on behalf of such holder
      specifically for use in the preparation thereof (ii) such holder’s failure to
      sell the Registrable Securities only pursuant to and in the manner contemplated
      by the Registration Statement, including the Plan of Distribution section
      contained therein, and otherwise in compliance with the prospectus delivery
      requirements of such Act or (iii) violations of the Securities Act arising
      solely from the holder’s request to remove the legends from the Registrable
      Securities prior to a sale of the Registrable Securities pursuant to a
      Registration Statement, Rule 144 of the Securities Act, or any other exemption
      from registration under the Securities Act,.

    

    
      
        12

      

      
         

        
          

        

      

      
         

      

    

    (c) Promptly
      after receipt by an indemnified party pursuant to the provisions of paragraph
      (a) or (b) of this Section 4.4 of notice of the com-mencement of any action
      involving the subject matter of the foregoing indemnity provisions such
      indemnified party will, if a claim thereof is to be made against the
      indemnifying party pursuant to the provisions of said para-graph (a) or (b),
      promptly notify the indemnifying party of the commencement thereof; but the
      omission to so notify the indemni-fying party will not relieve it from any
      liability which it may have to any indemnified party otherwise than hereunder.
      In case such action is brought against any indemnified party and it noti-fies
      the indemnifying party of the commencement thereof, the indem-nifying party
      shall have the right to participate in, and, to the extent that it may wish,
      jointly with any other indemnify-ing party similarly notified, to assume the
      defense thereof, with counsel reasonably satisfactory to such indemnified party,
      provided, how-ever, if the defendants in any action include both the
      indemni-fied party and the indemnifying party and the indemnified party shall
      have rea-sonably concluded that there may be legal defenses available to it
      and/or other indemnified parties which are dif-ferent from or in addition to
      those available to the indemnifying party, or if there is a conflict of interest
      which would prevent counsel for the indemnifying party from also representing
      the indemnified party, the indemnified party or parties have the right to select
      separate counsel to partici-pate in the defense of such action on behalf of
      such
      indemnified party or parties. After notice from the indemnifying party to such
      indemnified party of its election so to assume the defense thereof, the
      indemnifying party will not be liable to such indemnified party pursuant to
      the
      provisions of said paragraph (a) or (b) for any legal or other expense
      subsequently incurred by such indemnified party in connec-tion with the defense
      thereof other than reasonable costs of investigation, unless (i) the indemnified
      party shall have employed counsel in accordance with the provi-sions of the
      preced-ing sentence, (ii) the indemnifying party shall not have employed counsel
      reasonably satisfactory to the indemnified party to represent the indemnified
      party within a reasonable time after the notice of the commencement of the
      action or (iii) the indemnifying party has authorized the employment of counsel
      for the indemnified party at the expense of the indemnifying party.

    

    4.5 Additional
      Provisions.

    

    (a) Each
      Holder agrees that, upon receipt of any notice from the Company of the happening
      of any event requiring the preparation of a supplement or amendment to a
      prospectus relating to Registrable Securities so that, as thereafter delivered
      to the Holders, such prospectus will not contain an untrue statement of a
      material fact or omit to state any material fact required to be stated therein
      or necessary to make the statements therein not misleading, each Holder will
      forthwith discontinue disposition of Registrable Securities pursuant to a
      registration statement contemplated by Section 4.1 until its receipt of copies
      of the supplemented or amended prospectus from the Company and, if so directed
      by the Company, each Holder shall deliver to the Company all copies, other
      than
      permanent file copies then in such Holder’s possession, of the prospectus
      covering such Registrable Securities current at the time of receipt of such
      notice. The Company agrees to use its best efforts to promptly prepare and
      file
      any such supplemented or amended prospectus that may be required.

    

    
      
        13

      

      
         

        
          

        

      

      
         

      

    

    (b) Each
      Holder agrees to suspend, upon request of the Company, any disposition of
      Registrable Securities pursuant to the Registration Statement and prospectus
      contemplated by Section 4.1 during (A) any period not to exceed two 30-day
      periods within any one 12-month period the Company requires in connection with
      a
      primary underwritten offering of equity securities and (B) any period, not
      to
      exceed one 60-day period per circumstance or development, when the Company
      determines in good faith that offers and sales pursuant thereto should not
      be
      made by reason of the presence of material undisclosed circumstances or
      developments with respect to which the disclosure that would be required in
      such
      a prospectus is premature, would have an adverse effect on the Company or is
      otherwise inadvisable.

    

    (c) As
      a
      condition to the inclusion of its Registrable Securities, each Holder shall
      furnish to the Company such information regarding such Holder and the
      distribution proposed by such Holder as the Company may request in writing
      or as
      shall be required in connection with any registration, qualification or
      compliance referred to in this Article IV.

    

    (d) Each
      Holder hereby covenants with the Company (1) not to make any sale of the
      Registrable Securities without effectively causing the prospectus delivery
      requirements under the Act to be satisfied, and (2) if such Registrable
      Securities are to be sold by any method or in any transaction other than on
      a
      national securities exchange, in the over-the-counter market, in privately
      negotiated transactions, or in a combination of such methods, to notify the
      Company at least five (5) business days prior to the date on which the Holder
      first offers to sell any such Registrable Securities.

    

    (e) Each
      Holder acknowledges and agrees that the unregistered Registrable Securities
      sold
      pursuant to the Registration Statement described in this Article V are not
      transferable on the books of the Company unless the stock certificate submitted
      to the transfer agent evidencing such unregistered Registrable Securities is
      accompanied by a certificate reasonably satisfactory to the Company to the
      effect that (A) the unregistered Registrable Securities have been sold in
      accordance with such Registration Statement and (B) the requirement of
      delivering a current prospectus has been satisfied.

    

    (f) Each
      Holder agrees not to take any action with respect to any distribution deemed
      to
      be made pursuant to such Registration Statement, that constitutes a violation
      of
      Regulation M under the Exchange Act or any other applicable rule, regulation
      or
      law.

    

    (g) At
      the
      end of the period during which the Company is obligated to keep the Registration
      Statement current and effective as described above, the Holders of Registrable
      Securities included in the Registration Statement shall discontinue sales of
      shares pursuant to such Registration Statement upon receipt of notice from
      the
      Company of its intention to remove from registration the shares covered by
      such
      Registration Statement which remain unsold, and such Holders shall notify the
      Company of the number of shares registered which remain unsold immediately
      upon
      receipt of such notice from the Company.

    

    
      
        14

      

      
         

        
          

        

      

      
         

      

    

    V. MISCELLANEOUS

    

    5.1 Any
      notice or other communication given hereunder shall be deemed sufficient if
      in
      writing and sent by registered or certified mail, return receipt requested,
      addressed to the Company, at its address set forth on the first page hereof,
      Attention: Paul C. Desjourdy, Pres-ident and to the Subscriber at his address
      indicated on the last page of this Subscription Agreement. Notices shall be
      deemed to have been given on the date of mailing, except notices of change
      of
      address, which shall be deemed to have been given when received.

    

    5.2 This
      Subscription Agreement shall not be changed, modified or amended except by
      a
      writing signed by the parties to be charged, and this Sub-scription Agreement
      may not be discharged except by performance in accordance with its terms or
      by a
      writ-ing signed by the party to be charged.

    

    5.3 This
      Subscription Agreement shall be binding upon and inure to the benefit of the
      parties hereto and to their respective heirs, legal representatives, successors
      and assigns. This Subscription Agreement sets forth the entire agree-ment and
      understanding between the parties as to the subject matter thereof and merges
      and supersedes all prior discussions, agree-ments and understandings of any
      and
      every nature among them.

    

    5.4  Notwithstanding
      the place where this Subscription Agreement may be executed by any of the
      parties hereto, the par-ties expressly agree that all the terms and provisions
      hereof shall be construed in accordance with and gov-erned by the laws of The
      Commonwealth of Massachusetts. The parties hereby agree that any dispute which
      may arise between them arising out of or in connection with this Subscription
      Agreement shall be adjudicated before a court located in Boston, Massachusetts
      and they hereby submit to the exclusive jurisdiction of the courts of The
      Commonwealth of Massachusetts located in Boston, Massachusetts and of the
      federal courts in the District of Massachusetts with respect to any action
      or
      legal proceed-ing com-menced by any party, and irrevocably waive any objection
      they now or hereafter may have respecting the venue of any such action or
      proceeding brought in such a court or respecting the fact that such court is
      an
      inconvenient forum, relating to or arising out of this Subscription Agreement
      or
      any acts or omis-sions relating to the sale of the securities hereunder, and
      con-sent to the service of process in any such action or legal pro-ceeding
      by
      means of registered or certified mail, return receipt requested, in care of
      the
      address set forth below or such other address as the undersigned shall furnish
      in writing to the other.

    

    5.5 This
      Subscription Agreement may be executed in counterparts. Upon the execution
      and
      delivery of this Subscrip-tion Agreement by the Subscriber, this Subscription
      Agree-ment shall become a binding obligation of the Subscriber with respect
      to
      the purchase of Securities as herein provided; subject, however, to the right
      hereby reserved to the Company to enter into the same agreements with other
      subscribers and to add and/or to delete other persons as
      subscribers.

    

    
      
        15

      

      
         

        
          

        

      

      
         

      

    

    5.6 The
      holding of any provision of this Subscription Agreement to be invalid or
      unenforceable by a court of competent jurisdiction shall not affect any other
      provision of this Sub-scription Agreement, which shall remain in full force
      and
      effect.

    

    5.7 It
      is
      agreed that a waiver by either party of a breach of any provision of this
      Subscription Agreement shall not operate, or be construed, as a waiver of any
      subsequent breach by that same party.

    

    5.8 The
      parties agree to execute and deliver all such further docu-ments, agreements
      and
      instruments and take such other and further action as may be necessary or
      appro-priate to carry out the purposes and intent of this Subscrip-tion
      Agreement.

    

    [Next
      Page is the Signature Page]

    
      
        16

        

         

      

      
         

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the parties have executed this Subscrip-tion Agree-ment as
      of
      the day and year first written above.

    

    
      	
               

              ______________________________

              Signature
                of Subscriber(s)

            	
               

              ______________________________

            
	
               

               

              ______________________________

              Name
                of Subscriber(s)

              [please
                print]

            	
               

               

              ______________________________

            
	
               

               

              ______________________________

              Address
                of Subscriber(s)

            	
               

               

              ______________________________

            
	
               

               

              ______________________________

              Social
                Security of Taxpayer

              Identification
                Number of Sub-scriber(s)

            	
               

               

              ______________________________

            
	
               

               

              ______________________________

              Number
                of Units Sub-scribed For

            	 

    

    

    

    *
      If
      Subscriber is a Registered Representative with an NASD member firm, have the
      following acknowledgment signed by the appropriate party:

    The
      undersigned NASD member firm acknowledges receipt of the notice required by
      Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.

    

    _________________________________

    Name
      of
      NASD Member Firm

    

    _________________________________

    By:
      Authorized Officer

    Subscription
      Accepted:

    

    SYMBOLLON
      PHARMACEUTICALS, INC.

    

    

    By:______________________________________

    Paul
      C.
      Desjourdy,

    Presi-dent
      and Chief Executive Offi-cer

    

    Date:
      December 29, 2006

    
17Exhibit 4.6 Debenture

    
      

    

    Dated:
      January
       ,
      2007

     

    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.
      MMGP-3-2                                                                                            $625,000

     

    MM2
      GROUP, INC.

     

    Secured
      Convertible Debenture

     

    Due
      January 1, 2009

     

    This
      Secured Convertible Debenture (the “Debenture”)
      is
      issued by MM2
      GROUP, INC., a
      New
      Jersey corporation (the “Obligor”),
      to
CORNELL
      CAPITAL PARTNERS, LP
      (the
“Holder”),
      pursuant to that certain Amended and Restated Securities Purchase Agreement
      (the
“Securities
      Purchase Agreement”)
      dated
      July 20, 2006, as amended. 

    

     

    FOR
      VALUE RECEIVED on
      January  ,
      2007,
      the Obligor hereby promises to pay to the Holder or its successors and assigns
      the principal sum of Six Hundred Twenty-Five Thousand Dollars (625,000) together
      with accrued but unpaid interest on or before January 1, 2009 (the “Maturity
      Date”)
      in
      accordance with the following terms:

     

    Interest.
      Interest shall accrue on the outstanding principal balance hereof at an annual
      rate equal to ten percent (10%). Interest shall be calculated on the basis
      of a
      365-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
      5)
      in
      whose name this Debenture is registered on the records of the Obligor regarding
      registration and transfers of Debentures (the “Debenture
      Register”).

     

    Right
      of Redemption.
      The
      Obligor at its option shall have the right, with three (3) business days advance
      written notice (the “Redemption
      Notice”),
      to
      redeem a portion or all amounts outstanding under this Debenture prior to the
      Maturity Date provided that the Closing Bid Price of the of the Obligor’s Common
      Stock, as reported by Bloomberg, LP, is less than the Fixed Conversion Price
      at
      the time of the Redemption Notice. The Obligor shall pay an amount equal to
      the
      principal amount being redeemed plus a redemption premium (“Redemption
      Premium”)
      equal
      to twenty percent (20%) of the principal amount being redeemed, and accrued
      interest, (collectively referred to as the “Redemption
      Amount”).
      The
      Obligor shall deliver to the Holder the Redemption Amount on the third
      (3rd)
      business day after the Redemption Notice. 

     

     

    
      
        1

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    Security
      Agreements.
      This
      Debenture is secured by an Amended and Restated Security Agreement (the
“Security
      Agreement”)
      dated
      as of July 20, 2006 between the Obligor and the Holder.

     

    Consent
      of Holder to Sell Capital Stock or Grant Security Interests.
      So
      long
      as any of the principal amount or interest on this Debenture remains unpaid
      and
      unconverted, the Obligor shall not, without the prior written consent of the
      Holder, (i) issue or sell shares of Common Stock or Preferred Stock without
      consideration or for a consideration per share less than the bid price of the
      Common Stock determined immediately prior to its issuance, except for the
      issuance of an equity security pursuant to an agreement to acquire another
      entity, the assets of another entity or merge with another entity into the
      Obligor or a subsidiary of the Obligor whereby (provided the Holder is given
      at
      least ten (10) days written notice of the same): (A) the shareholders of the
      Obligor immediately prior to the consummation of the contemplated transaction
      continue to hold a majority of the outstanding Common Stock shares of the
      Obligor immediately subsequent to the consummation of the transaction or (B)
      the
      Obligor holds a majority of the outstanding Common Stock shares of the
      subsidiary Obligor immediately subsequent to the consummation of the
      transaction, (ii) issue any preferred stock, warrant, option, right, contract,
      call, or other security or instrument granting the holder thereof the right
      to
      acquire Common Stock without consideration or for a consideration less than
      such
      Common Stock’s Bid Price determined immediately prior to its issuance, (iii)
      enter into any security instrument granting the holder a security interest
      in
      any and all assets of the Obligor, or (iv) file any registration statement
      on
      Form S-8, except
      for the registration of the iVoice,
      Inc. 2005 Stock Incentive Plan.
      Notwithstanding anything to the contrary, the Obligor may issue Common Stock
      issuable pursuant to the Obligor’s obligations upon the conversion of stock
      options, convertible debt or Class B Common Stock or the payment of legal fees
      to Lawrence A. Muenz, Esq.

     

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

     

    This
      Debenture is subject to the following additional provisions:

     

     

    
      
        2

      

      
         

        
          

        

      

      
         

      

    

     

    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):

     

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

     

    (ii)    The
      Obligor shall fail to observe or perform any other covenant, agreement or
      warranty contained in, or otherwise commit any breach or default of any
      provision of this Debenture (except as may be covered by Section
      2(a)(i)
      hereof)
      or any Transaction Document (as defined in Section
      5)
      which
      is not cured with in the time prescribed;

     

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

     

    (iv)   The
      Obligor or any subsidiary of the Obligor shall default in any of its obligations
      under any other debenture or any mortgage, credit agreement or other facility,
      indenture agreement, factoring agreement or other instrument under which there
      may be issued, or by which there may be secured or evidenced any indebtedness
      for borrowed money or money due under any long term leasing or factoring
      arrangement of the Obligor or any subsidiary of the Obligor in an amount
      exceeding $100,000, whether such indebtedness now exists or shall 

     

    
      
        3

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    (vi)   The
      Obligor or any subsidiary of the Obligor shall be a party to any Change of
      Control Transaction (as defined in Section
      5);
      

     

    (vii)        
      The
      Obligor shall fail to file the Underlying Shares Registration Statement (as
      defined in Section
      5)
      with
      the Commission (as defined in Section
      5),
      or the
      Underlying Shares Registration Statement shall not have been declared effective
      by the Commission, in each case within the time periods set forth in the Amended
      and Restated Investor Registration Rights Agreement (“Registration
      Rights Agreement”)
      of
      even date herewith between the Obligor and the Holder;

     

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

     

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

     

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

     

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

     

     

    
      
        4

      

      
         

        
          

        

      

      
         

      

    

     

     

     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)    Conversion
      at Option of Holder.

     

    (i)    
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
      5)
      (subject to the limitations on conversion set forth in Section
      3(b)
      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.

     

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

     

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

     

    (iii)   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.

     

     

    
      
        5

      

      
         

        
          

        

      

      
         

      

    

     

    (b)    Certain
      Conversion Restrictions.

     

    (i)    
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 4.99% 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 4.99% of the then
      outstanding shares of Common Stock without regard to any other shares which
      may
      be beneficially owned by the Holder or an affiliate thereof, the Holder shall
      have the authority and obligation to determine whether the restriction contained
      in this Section will limit any particular conversion hereunder and to the extent
      that the Holder determines that the limitation contained in this Section
      applies, the determination of which portion of the principal amount of this
      Debenture is convertible shall be the responsibility and obligation of the
      Holder. If the Holder has delivered a Conversion Notice for a principal amount
      of this Debenture that, without regard to any other shares that the Holder
      or
      its affiliates may beneficially own, would result in the issuance in excess
      of
      the permitted amount hereunder, the Obligor shall notify the Holder of this
      fact
      and shall honor the conversion for the maximum principal amount permitted to
      be
      converted on such Conversion Date in accordance with the periods described
      in
Section
      3(a)(i)
      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. 

     

    (c)    Conversion
      Price and Adjustments to Conversion Price.

     

    (i)    
The
      conversion price (the “Conversion
      Price”)
      in
      effect on any Conversion Date shall be equal to ninety percent (90%) of the
      lowest Closing Bid Price of the Common Stock during the thirty (30) days trading
      days immediately preceding the Conversion Date.

     

     (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) outstanding before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding after
      such
      event. Any adjustment made pursuant to this Section shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution and shall become effective immediately
      after the effective date in the case of a subdivision, combination or
      re-classification.

     

     

    
      
        6

      

      
         

        
          

        

      

      
         

      

    

     

     

    (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 Conversion Price, 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 the Conversion Price. Such adjustment shall
      be made whenever such rights or warrants are issued, and shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such rights, options or warrants. However, upon the expiration of
      any
      such right, option or warrant to purchase shares of the Common Stock the
      issuance of which resulted in an adjustment in the 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, at any time while this
      Debenture is outstanding, shall issue shares of Common Stock or rights,
      warrants, options or other securities or debt that are convertible into or
      exchangeable for shares of Common Stock (“Common
      Stock Equivalents”)
      entitling any Person to acquire shares of Common Stock, at a price per share
      less than the 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 

     

     

    
      
        7

      

      
         

        
          

        

      

      
         

      

    

     

     

    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 amounts due
      and
      payable thereon. The entire prepayment price shall be paid in cash. This
      provision shall similarly apply to successive reclassifications or share
      exchanges.

     

    (vii)        
      The
      Obligor shall at all times reserve and keep available out of its authorized
      Common Stock the full number of shares of Common Stock issuable upon conversion
      of all outstanding amounts under 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 or whole 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

     

     

    
      
        8

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    (d)    Other
      Provisions.

     

     

    
      
        9

      

      
         

        
          

        

      

      
         

      

    

     

     

    (i)    
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.

     

    (ii)    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.

     

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

     

    (iv)   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. 

     

    (v)    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) 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 

     

     

    
      
        10

      

      
         

        
          

        

      

      
         

      

    

     

    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).
      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.

     

    Section
      4. 
       Notices.
       
Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms hereof must be in writing and will be deemed to have
      been
      delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
      when
      sent by facsimile (provided confirmation of transmission is mechanically or
      electronically generated and kept on file by the sending party); or (iii) one
      (1) trading day after deposit with a nationally recognized overnight delivery
      service, in each case properly addressed to the party to receive the same.
      The
      addresses and facsimile numbers for such communications shall be:

    

    

    
      	
              If
                to the Obligor, to:

            	
              MM2
                GROUP, INC.

            
	 	
              750
                Route 34

            
	 	
              Matawan,
                NJ 07747

            
	 	
              Attention:
                Mark Meller, Esquire

            
	 	
              Telephone:
                (973) 758-6108

            
	 	
              Facsimile:
                (973) 758-9449

            
	 	 
	
              With
                a copy to: 

            	
              Meritz
                & Muenz LLP

            
	 	
              2021
                O Street, NW

            
	 	
              Washington,
                DC 20036

            
	 	
              Attention:
                Lawrence A. Muenz, Esq. 

            
	 	
              Telephone:
                (202) 728-2909

            
	 	
              Facsimile:
                (202) 728-2910

            
	 	 
	
              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

            
	 	 

    

    
 

    
      
        11

      

      
         

        
          

        

      

      
         

      

       

    

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

     

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

     

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

     

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

     

    “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.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock, no par value, of the Obligor and stock of any other class
      into
      which such shares may hereafter be changed or reclassified.

     

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

     

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

     

     

    
      
        12

      

      
         

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

    “Transaction
      Documents”
means
      the Securities Purchase Agreement or any other agreement delivered in connection
      with the Securities Purchase Agreement, including, without limitation, the
      Irrevocable Transfer Agent Instructions, and the Amended and Restated
      Registration Rights Agreement, each dated July 20, 2006.

     

    “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
      6.    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
      7.    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
      8.    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 

     

     

    
      
        13

      

      
         

        
          

        

      

      
         

      

    

     

    Debenture
      for the principal amount of this Debenture so mutilated, lost, stolen or
      destroyed but only upon receipt of evidence of such loss, theft or destruction
      of such Debenture, and of the ownership hereof, and indemnity, if requested,
      all
      reasonably satisfactory to the Obligor.

     

    Section
      9.    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
      10.        
      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
      11.         
      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
      12.        
      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
      13.    
          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

     

     

    
      
        14

      

      
         

        
          

        

      

      
         

      

    

     

    expressly
      waives all benefits or advantage of any such law, and covenants that it will
      not, by resort to any such law, hinder, delay or impeded the execution of any
      power herein granted to the Holder, but will suffer and permit the execution
      of
      every such as though no such law has been enacted.

     

    Section
      14.        
      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
      15.        
      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

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

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

     

    
      	 	
              MM2
                GROUP, INC. 

            
	 	 
	 	
              By:___________________      

            
	 	
              Name: Mark
                Meller 

            
	 	
              Title: President
                & CEO

            

    

    

    

    
      
        
          16

          

        

         

      

      
         

        
          

        

      

      
         

        
        

      

    

     

    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 MM2
GROUP, 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:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}]]