Document:

zurvita_8k-ex1002.htm

    Exhibit
10.2

     

    LICENSE
AND MARKETING AGREEMENT

    

    THIS LICENSE AND MARKETING
AGREEMENT ("Agreement”) is entered into as of October  9, 2009
(the "Effective Date") between OmniReliant Holdings, Inc. (“Licensor”) and Zurvita
Holdings, Inc (“Licensee”).

    

    WHEREAS, Licensor owns the
exclusive rights to the LocalAdLink Software, along with rights to the name,
trademark and source codes (the "Product");

    

    WHEREAS, Licensee was founded
to be a marketer and seller of certain products through the use of independent
sales representatives

    

    WHEREAS, Licensor and Licensee
now desire to enter into this Agreement, whereby Licensor will grant to Licensee
rights and licenses in and to the Product;

    

    WHEREAS, furthermore Licensor
will grant Licensee the right to market and sell the Product through the use of
its independent sales representatives

    

    NOW THEREFORE, in
consideration of the mutual covenants and agreements set forth in this
Agreement, the receipt, adequacy and legal sufficiency of which Licensor and
Licensee hereby acknowledge, the parties hereby agree as follows:

    

    1. LICENSE AND MARKETING
GRANT.

    

    
      	
              1.1.  

            	
              LICENSE
      GRANT. Subject to the terms and conditions of this Agreement, Licensor
      hereby grants to Licensee the perpetual right and license, under all
      intellectual property rights applicable to the Product, to access, use,
      execute, display, market, and sell the Product to the Customer (the
      “License”).  In consideration for this perpetual License,
      Licensee will pay to the Licensor, royalty payments of $2.00 per
      customer/user for a period of twenty four (24) months, commencing ninety
      (90) days from the date Licensee runs its first ad of the
      Product.  Notwithstanding the foregoing, the Licensee shall not
      pay commissions to Licensor in excess of an aggregate of Two Million
      Dollars ($2,000,000) during the first two (2) years of this
      Agreement

            

    

    

    
      	
              1.2  

            	
              MARKETING
      GRANT.  Licensee will market and sell the product through its
      independent sales representatives (the “Marketing Grant”).  As
      further consideration for the Marketing Grant, the Licensee shall issue
      and deliver to the Licensor, on the date hereof, a promissory note in the
      principal amount of Two Million Dollars ($2,000,000), payable three (3)
      years from the date of issuance.

            

    

    

    
      	
              1.3  

            	
              RESTRICTIONS.
      Except as expressly permitted under this Agreement, Licensee shall not,
      without the prior consent of Licensor, (a) use the Product to violate any
      law or regulation, or facilitate the violation of any law or regulation,
      (b) modify, decompile, disassemble or reverse engineer the Product, (c)
      sublicense the Product to any third party; (d) sell the Product to any
      third party or (e) make any representations, warranties or commitments
      that are, or purport to be, binding on the
  Licensor.

            

    

    

    
      	
              1.4  

            	
              OWNERSHIP.
      Licensor shall retain all right, title and interest (including copyright
      and other proprietary or intellectual property rights as well as URL
      rights) in and to the Product and any and all derivative works,
      modifications or enhancements thereto.  Without in any manner
      limiting the foregoing, Licensor shall retain all right, title and
      interest in and to the source code, development code/programming language,
      functions and features developed by Licensor that are now, or may in the
      future, be, integrated into the Product or may, in the future, be used to
      enhance the Product subsequent to the Effective Date or improve the
      management of processes associated with the
  Product..

            

    

    

    
      	
              1.5  

            	
              LIMITATION
      ON LICENSOR. Licensor acknowledges and agrees that the rights and license
      granted pursuant to Section 1.1 constitutes the only licenses with respect
      to the Product to be granted by Licensor, except as expressly permitted
      herein.

            

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	
              1.6   
        

            	
              ENHANCEMENTS,
      MODIFICATIONS AND CUSTOM DEVELOPMENT. From time to time, subsequent to the
      Effective Date, Licensor may in its discretion, make enhancements or
      modifications to or perform custom development of the Product, and
      Licensor shall make such enhancements, modifications and changes and
      undertake such development at its expense  Such enhancements,
      modifications, changes and developments shall remain the property of the
      Licensor.

            

    

    

    
      
        	
                1.7.  
       

              	
                CUSTOMER
      LISTS. Notwithstanding anything to the contrary herein, all rights to any
      lists of customers of any kind developed as a result of any of Licensee's
      direct or indirect sales or marketing efforts, including customer support
      names and information and such lists maintained by Licensor, shall be and
      remain forever the property of Licensee and not Licensor and shall not be
      used by Licensor for any purpose without the prior consent of
      Licensee.  This Section 1.7 shall survive termination of this
      Agreement for any reason.

              

      

    

    

    
      	
              2  

            	
              REPRESENTATIONS,
      WARRANTIES AND COVENANTS.

            

    

    

    
      	
              2.2  

            	
              Licensor
      hereby represents, warrants and covenants to Licensee
  that:

            

    

    

    
      	
              (a)  

            	
              Licensor
      is an entity duly organized, validly existing and in good standing under
      the laws of the State of Florida and has all powers and all governmental
      licenses, authorizations, consents and approvals required to carry on its
      business as each is now being conducted.  The Licensor is duly
      qualified to do business and is in good standing in all jurisdictions in
      which the conduct of its business makes such qualification
      necessary.

            

    

    

    
      	
              (b)  

            	
              Licensor
      is the lawful owner, free of all debts, encumbrances and claims, of each
      of the assets, properties and rights licensed to Licensee hereunder, that
      it has the lawful right to license, sell and transfer the same, and that
      the same are not subject to any lien or
  encumbrance.

            

    

    

    
      	
              (c)  

            	
              Licensor
      is duly authorized to execute and deliver this Agreement, to comply with
      its terms, and to make the transfers and assignments provided for
      herein.

            

    

    

    
      	
              (d)  

            	
              No
      portion of the Product contains or will contain any protection feature
      designed to prevent its use. This includes, without limitation, any
      computer virus, worm, Trojan-horse routine, trap door, time bomb or any
      other codes or instructions that may be used to access, modify, delete or
      damage Licensee's Product, the Product or any user's computer
      system.

            

    

    

    
      	
              (e)  

            	
              Licensor
      has no contractual commitment that may prevent or interfere with the
      performance of Licensor's obligations under this
  Agreement.

            

    

    

    
      	
              (f)  

            	
              Licensor's
      development work anticipated to be performed pursuant to this Agreement
      will be original, Licensor (through its employees, officers and agents)
      will be the sole author thereof, and Licensor will not assign or pledge
      any rights thereto, except as otherwise provided or permitted in this
      Agreement.

            

    

    

    
      	
              (g)  

            	
              The
      Product and the development work performed and to be performed by Licensor
      pursuant to this Agreement will not contain any unlawful, libelous or
      defamatory matter.

            

    

    

    
      	
              (h)  

            	
              To
      the best of Licensor's knowledge and belief, the Products do not infringe
      upon or violate the rights, including patent and copyright, of any other
      person or entity.

            

    

    

    
      	
              2.3  

            	
              Licensee
      hereby represents, warrants and covenants to Licensor
  that:

            

    

    

    
      	
              (a)  

            	
              Licensee
      is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware and has all powers and all
      governmental licenses, authorizations, consents and approvals required to
      carry on its business as each is now being conducted.  The
      Licensee is duly qualified to do business and is in good standing in all
      jurisdictions in which the conduct of its business makes such
      qualification necessary.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	
              (b)  

            	
              The
      execution, delivery and performance of this Agreement is within the power
      and authority of Licensee and has been authorized by all necessary action,
      and requires no action by or in respect of, or filing with, any
      governmental authority.

            

    

    

    
      	
              (c)  

            	
              Licensee
      has no contractual commitment which may prevent or interfere with the
      performance of Licensor’s obligations under this
  Agreement.

            

    

    

    
      	
              3  

            	
              PAYMENTS

            

    

    

    In
exchange for the grant of the license and rights contemplated by this Agreement,
Licensee shall pay to the Licensor payments pursuant to the terms of Section 1.1
and Section 1.2.

    

    
      	
              4  

            	
              TERM
      AND TERMINATION.

            

    

    

    4.1.
TERM. The term of this Agreement shall commence on the Effective Date and shall
continue unless  earlier terminated in accordance with the terms of
this Article 4.

    

    4.2
TERMINATION RIGHT. This Agreement may be terminated for any reason at any time
by either party on 60 days’ prior notice to the other party.  On 30
days’ prior written notice to Licensee, Licensor has the right to terminate this
Agreement if Licensee shall breach any of the terms or provisions of this
Agreement and shall not correct or remedy such breach within 30 days of
notice.  Licensor may also terminate this Agreement at any time if
Licensee shall fail to remit any of the payments required under this
Agreement

    

    
      	
              5  

            	
              MISCELLANEOUS.

            

    

    

    5.1.
Restriction on Use of
Confidential Information: (a) None of the parties hereto shall, during
the term of this Agreement or at any time thereafter, communicate, divulge or
use for the benefit of any other person, persons, partnership, association,
corporation or entity any of another party’s confidential information, knowledge
or know-how, A party hereto shall divulge such information only to such of its
employees, financial advisors and legal representatives as must have access
thereto in order to satisfy its obligations hereunder. All parties shall take
all necessary precautions to ensure that their employees retain such information
in confidence,

    

    (b)            Any
and all information, knowledge or know-how concerning the operation, products.
services, procedures, policies, plans, strategies or customers of Licensor
and/or Licensee shall be deemed confidential for purposes of this Agreement:
provided. however, the parties shall not be required to treat any information as
confidential information under this section if such information: (i) was
publicly known at the time it was disclosed or becomes publicly known after
disclosure without breach hereof by the receiving party; (ii) was known by the
receiving party at the time of disclosure or becomes known to it from a part
other than tile disclosing party who has the apparent right to disclose such
information to the receiving party’s knowledge after due injury; (iii) is
independently developed by the receiving party without reliance on the disclosed
confidential information: (iv) is approved for disclosure by the disclosing
party with the disclosing party’s prior written consent; or (v) is disclosed by
the receiving party pursuant to judicial order, requirement of a governmental
agency or other operation of law, provided that the receiving party informs the
disclosing party promptly after receiving notice of its obligation to make such
disclosure. and takes reasonable steps to limit the scope

    

    5.2
INDEMNIFICATION. The Licensee agrees to indemnify Licensor forthwith on demand
and hold Licensor harmless against any and all expenses, damages and losses of
any kind (including reasonable legal fees and costs) incurred by Licensor
in connection with
any claims, actual or threatened, of any kind (including, without limitation,
breach of contract, any claim of trademark or copyright infringement, libel,
defamation, breach of confidentiality, false or misleading advertising or sates
practices) arising from the advertisement and/or any material of the Advertiser
to which users  are subjected too and any other contract entered into
for the purchase of the advertised goods or services,

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    5.3
GOVERNING LAW.  This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York without regard to
the choice of law principles thereof.  Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of the courts of the State of
New York, County of New York for the purpose of any suit, action, proceeding or
judgment relating to or arising out of this Agreement and the transactions
contemplated hereby.  Service of process in connection with any such
suit, action or proceeding may be served on each party hereto anywhere in the
world by the same methods as are specified for the giving of notices under this
Agreement.  Each of the parties hereto irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court.  Each party hereto irrevocably waives
any objection to the laying of venue of any such suit, action or proceeding
brought in such courts and irrevocably waives any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE
PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION
WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.

     

    5.4.
ASSIGNMENT. This Agreement shall bind and inure to the benefit of the parties
and their successors, legal representatives, heirs and permitted assigns. This
Agreement is assignable by the Licensor.  Except as permitted by this
Agreement, the Licensee may not assign or transfer any of its rights or
obligations hereunder without the prior consent of the Licensor, which consent
shall not be unreasonably withheld or delayed.

    

    5.5.
ENTIRE AGREEMENT. This Agreement and its exhibits constitute the entire
agreement between the parties hereto relating to the subject matter hereof and
supersede all prior oral and written understandings, discussions and agreements
regarding such subject matter. This Agreement may not be amended, modified or
cancelled except by a written instrument executed by the parties.

    

    5.6.
NOTICES. Any notices or other communications required or permitted to be given
or delivered under this Agreement shall, unless otherwise permitted, be in
writing and shall be delivered personally, by courier service, by e-mail, by
facsimile machine (with confirmation in writing to the addresses set forth
below) or by registered or certified mail, return receipt requested, postage
pre-paid, as follows:

    

    If
to Licensor:

    OmniReliant
Holdings, Inc.

    14375
Myerlake Circle

    Clearwater,
FL 33760

    Attn:
Paul Morrison

    

    If
to Licensee:

    Zurvita
Holdings, Inc.

    800
Gessner

    Houston,
TX 77024

    

    or to
such other address as a party may designate pursuant to this notice provision.
Any notice given shall be deemed to have been received on the date on which it
is delivered personally, by courier service or by facsimile, or, if mailed, on
the fifth business day following the mailing thereof.

    

    5.8.
SEVERABILITY. Should any provision hereof for any reason be declared invalid or
unenforceable by final and unappealable order of any court of competent
jurisdiction, the remaining portions of this Agreement shall remain in full
force and effect. The waiver of any breach of any term or condition of this
Agreement shall not be deemed a waiver of any other or subsequent breach,
whether of like or different nature.

    

    5.9.
COUNTERPARTS; FACSIMILE EXECUTION. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which
together shall constitute one and the same instrument. Execution and delivery of
this Agreement may be evidenced by facsimile transmission.

     

    5.10.
HEADINGS. The headings herein have been provided for convenience of reference
only and shall not affect the meaning or construction of any provision of this
Agreement.

    

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Effective Date.

     

     

    
      LICENSOR

       

      OmniReliant
Holdings, Inc.

       

      By:  /s/ Paul
Morrison          

            
Name: Paul Morrison

           
Title: Chief Executive Officer

       

       

      LICENSEE

       

      Zurvita
Holdings, Inc.

       

      By:  /s/ Jay
Shafer                   

      Name: Jay
Shafer

      Title:
Co-Chief Executive Officer

       

       

      
        
          
          

        

        
          5zurvita_8k-ex1003.htm

    Exhibit 10.3

     

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

    

    Original
Issue Date: October 9,
2009

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

     

    $2,000,000

     

    6%
CONVERTIBLE DEBENTURE

    DUE
OCTOBER 9, 2012

    

    THIS 6%
CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued
6% Convertible Debentures of ZURVITA HOLDINGS, INC., a
Delaware corporation, (the “Company”), having its
principal place of business at 800 Gessner, Houston, TZ 77024 designated as its
6% Convertible Debenture due October 9, 2012 (the “Debenture”).

     

    FOR VALUE
RECEIVED, the Company promises to pay to OmniReliant Holdings, Inc. or its
registered assigns (the “Holder”), or shall
have paid pursuant to the terms hereunder, the principal sum of $2,000,000 on
October 9, 2012 (the “Maturity Date”) or
such earlier date as this Debenture is required or permitted to be repaid as
provided hereunder, and to pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Debenture in
accordance with the provisions hereof.  This Debenture is subject to
the following additional provisions:

     

    Section 1.   Definitions.  For
the purposes hereof, in addition to the terms defined elsewhere in this
Debenture, the following terms shall have the following meanings:

    

    “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities Act.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

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

    

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

    

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

    

    “Beneficial Ownership
Limitation” shall have the meaning set forth in Section
4(c).

    

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

    

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

    

    “Change of Control
Transaction” means the occurrence after the date hereof of any of (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 Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company (other than by means of conversion of the
Debenture), (b) the Company merges into or consolidates with any other Person,
or any Person merges into or consolidates with the Company and, after giving
effect to such transaction, the stockholders of the Company immediately prior to
such transaction own less than 66% of the aggregate voting power of the Company
or the successor entity of such transaction, or (c) the Company sells or
transfers all or substantially all of its assets to another Person and the
stockholders of the Company immediately prior to such transaction own less than
66% of the aggregate voting power of the acquiring entity immediately after the
transaction, (d) a replacement at one time or within a three year period of more
than one-half of the members of the Board of Directors which is not approved by
a majority of those individuals who are members of the Board of Directors on the
date hereof (or by those individuals who are serving as members of the Board of
Directors on any date whose nomination to the Board of Directors was approved by
a majority of the members of the Board of Directors who are members on the date
hereof), or (e) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth in clauses (a) through (d) above.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Common Stock
Equivalents” means any securities of the Company or the subsidiaries of
the Company (“Subsidiaries”) which would entitle the holder thereof to acquire
at any time Common Stock, including, without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock

    

    “Conversion” shall
have the meaning ascribed to such term in Section 4.

    

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

    

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

    

    “Conversion Schedule”
means the Conversion Schedule in the form of Schedule 1 attached
hereto.

    

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

    

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

    

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

    

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

    

    “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of the Debentures or Warrants and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person which is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company and in which
the Company receives benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    “Event of Default”
shall have the meaning set forth in Section 9(a).

    

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

    

    “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.

     

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

    

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

    

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

    

    “New York Courts”
shall have the meaning set forth in Section 10(d).

    

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

    

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

     

    “Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b)
indebtedness that exists as of the date hereof, (c) lease obligations and
purchase money indebtedness of up to $1,000,000, in the aggregate, incurred in
connection with the acquisition of capital assets and lease obligations with
respect to newly acquired or leased assets;  and (d) indebtedness that
is expressly subordinate to the Debentures.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

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

     

    “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

     

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

    

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

    

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

    

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

    

    “Variable Rate
Transaction” means a transaction in which the Company (i) issues or sells
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive, additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon, and/or varies with, the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance
of such debt or equity securities or (B) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the initial
issuance of such debt or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock or (ii) enters into any agreement, including,
but not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price.

     

    
      
        
        

      

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

     

    Section 2.   Interest.

    

    a)  Payment of Interest in
Cash. The Company shall pay (or cause to be paid) interest to the Holder
on the aggregate unconverted and then outstanding principal amount of this
Debenture at the rate of 6% per annum, payable quarterly on January 9 , April 9,
July 9 and October 9, beginning on the first such date after the Original Issue
Date, on each Conversion Date (as to that principal amount then being
converted), and on the Maturity Date (each such date, an “Interest Payment
Date”) (if any Interest Payment Date is not a Business Day, then the
applicable payment shall be due on the next succeeding Business Day), in
cash.  Notwithstanding the foregoing, the Company may elect to defer
payment of all or any portion of an interest payment, as calculated pursuant to
this Section 2, and accrue such interest payment into the principal balance of
this Note.  Should the Company choose to defer such payment, the
Company must provide written notice to the Holder five (5) business days prior
to the respective Interest Payment Date.

     

    b)  Interest
Calculations. Interest shall be calculated on the basis of a 360-day
year, consisting of twelve 30 calendar day periods, and shall accrue daily
commencing on the Original Issue Date until payment in full of the outstanding
principal, together with all accrued and unpaid interest, liquidated damages and
other amounts which may become due hereunder, has been made.  Interest
shall cease to accrue with respect to any principal amount converted, provided
that, the Company actually delivers the Conversion Shares within the time period
required by Section 4(d)(ii) herein.  Interest hereunder will be paid
to the Person in whose name this Debenture is registered on the records of the
Company regarding registration and transfers of this Debenture (the “Debenture
Register”).

     

    
      
        
        

      

      
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    c)  Late
Fee.  All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 17%
per annum or the maximum rate permitted by applicable law (the “Late Fees”) which
shall accrue daily from the date such interest is due hereunder through and
including the date of actual payment in full.

     

    d)  Prepayment.  The
Company may prepay any portion of the principal amount of this Debenture without
the prior written consent of the Holder.

    

    Section 3.   Registration of Transfers
and Exchanges.

     

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

     

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

     

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

    

    Section 4.   Conversion.

     

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

     

    
      
        
        

      

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

     

    c)  Holder’s Restriction on
Conversion. The Company shall not effect any conversion of this
Debenture, and a Holder shall not have the right to convert any portion of this
Debenture, to the extent that after giving effect to the conversion set forth on
the applicable Notice of Conversion, the Holder (together with the Holder’s
Affiliates, and any other person or entity acting as a group together with the
Holder or any of the Holder’s Affiliates) would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below).  For purposes of
the foregoing sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates shall include the number of shares of Common
Stock issuable upon conversion of this Debenture with respect to which such
determination is being made, but shall exclude the number of shares of Common
Stock which are issuable upon (A) conversion of the remaining, unconverted
principal amount of this Debenture beneficially owned by the Holder or any of
its Affiliates and (B) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company  subject to a
limitation on conversion or exercise analogous to the limitation contained
herein (including, without limitation, any other Debentures or the Warrants)
beneficially owned by the Holder or any of its Affiliates.  Except as set
forth in the preceding sentence, for purposes of this Section 4(c), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder.  To the
extent that the limitation contained in this Section 4(c) applies, the
determination of whether this Debenture is convertible (in relation to other
securities owned by the Holder together with any Affiliates) and of which
principal amount of this Debenture is convertible shall be in the sole
discretion of the Holder, and the submission of a Notice of Conversion shall be
deemed to be the Holder’s determination of whether this Debenture may be
converted (in relation to other securities owned by the Holder together with any
Affiliates) and which principal amount of this Debenture is convertible, in each
case subject to the Beneficial Ownership Limitation. To ensure compliance with
this restriction, the Holder will be deemed to represent to the Company each
time it delivers a Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and the Company shall have
no obligation to verify or confirm the accuracy of such
determination.  In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 4(c), in determining the
number of outstanding shares of Common Stock, the Holder may rely on the number
of outstanding shares of Common Stock as stated in the most recent of the
following: (A) the Company’s most recent periodic or annual report, as the case
may be; (B) a more recent public announcement by the Company; or (C) a more
recent notice by the Company or the Company’s transfer agent setting forth the
number of shares of Common Stock outstanding.  Upon the written or oral
request of a Holder, the Company shall within two Trading Days confirm orally
and in writing to the Holder
the number of shares of Common Stock then outstanding.  In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
this Debenture, by the Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Debenture held by the
Holder.  The Holder, upon not less than 61 days’ prior notice to the
Company,
may increase or decrease the Beneficial Ownership Limitation provisions of this
Section 4(c), provided that the Beneficial Ownership Limitation in no event
exceeds 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock upon
conversion of this Debenture held by the Holder and the Beneficial Ownership
Limitation provisions of this Section 4(c) shall continue to
apply.  Any such increase or decrease will not be effective until the
61st day
after such notice is delivered to the Company.  The
Beneficial Ownership Limitation provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms
of this Section 4(c) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Debenture.

     

    d)  Mechanics of
Conversion.

     

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

     

    
      
        
        

      

      
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    ii.   Delivery of Certificate Upon
Conversion. Not later than five Trading Days after each Conversion Date
(the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the
Holder (A) a certificate or certificates representing the Conversion Shares
representing the number of Conversion Shares being acquired upon the conversion
of this Debenture and (B) a bank check in the amount of accrued and unpaid
interest.

     

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

     

    iv.   Obligation Absolute; Partial
Liquidated Damages.  The Company’s obligations to issue and
deliver the Conversion Shares upon conversion of this Debenture in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any
other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of such Conversion Shares; provided, however, that such
delivery shall not operate as a waiver by the Company of any such action the
Company may have against the Holder.  In the event the Holder of this
Debenture shall elect to convert any or all of the outstanding principal amount
hereof, the Company may not refuse conversion based on any claim that the Holder
or anyone associated or affiliated with the Holder has been engaged in any
violation of law, agreement or for any other reason, unless an injunction from a
court, on notice to Holder, restraining and or enjoining conversion of all or
part of this Debenture shall have been sought and obtained, and the Company
posts a surety bond for the benefit of the Holder in the amount of 150% of the
outstanding principal amount of this Debenture, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to the Holder to the extent it obtains judgment.  In the
absence of such injunction, the Company shall issue Conversion Shares or, if
applicable, cash, upon a properly noticed conversion.  If the Company
fails for any reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the third  Trading Day after the
Conversion Date, the Company shall pay to the Holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of principal amount being
converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth
(5th) Trading Day after such liquidated damages begin to accrue) for each
Trading Day after such third (3th)
Trading Day until such certificates are delivered.  Nothing herein
shall limit a Holder’s right to pursue actual damages or declare an Event of
Default pursuant to Section 9 hereof for the Company’s failure to deliver
Conversion Shares within the period specified herein and the Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.  The exercise of any such rights shall not prohibit
the Holder from seeking to enforce damages pursuant to any other Section hereof
or under applicable law.

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

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

     

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

    

    (e)  No Mandatory
Conversion.  Other than as specifically set forth herein, the
Company may not compel the Holder to convert this Debenture.

    

    Section 5.   Certain
Adjustments.

     

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

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    f)  RESERVED.

     

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

     

    h)  Notice to the
Holder.

    

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

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    Section
6.   Reserved.

     

     Section
7.        Negative Covenants.
As long as any portion of this Debenture remains outstanding, unless the holders
of at least 51% in principal amount of the then outstanding Debentures shall
have otherwise given prior written consent, the Company shall not, and shall not
permit any of its subsidiaries (whether or not a Subsidiary on the Original
Issue Date) to, directly or indirectly:

    

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

     

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

     

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

     

    d)  repay,
repurchase or offer to repay, repurchase or otherwise acquire any of its
outstanding shares of its Common Stock or Common Stock Equivalents other than as
permitted or required under the Debenture or Warrant;

     

    e)  repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness,
other than Permitted Indebtedness and/or the Debentures if on a pro-rata basis,
other than regularly scheduled principal and interest payments as such terms are
in effect as of the Original Issue Date, provided that such payments shall not
be permitted if, at such time, or after giving effect to such payment, any Event
of Default exist or occur;

     

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

     

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

     

    h)  sell any
of its assets other than in the ordinary course of its business unless the
proceeds from such sale are used to repay the amount of any outstanding
Debentures, including all interest due thereon or

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

       Section 8.   Holder’s Right to
Accelerate.

    

    Upon the
occurrence of a (i) Change of Control Transaction or (ii) Fundamental
Transaction, the Holder shall have the right, for a period of 90 days, at its
option, to declare the outstanding principal amount, together with unpaid
interest thereon, due and payable.

     

    Section 9.   Events of
Default.

    

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

    

    i.   any
default in the payment of (A) the principal amount of any Debenture or (B)
interest, liquidated damages and other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise) which
default, solely in the case of an interest payment or other default under
clauses (A) and (B) above, is not cured within 7 days;

     

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

     

    iii.   a default
or event of default (subject to any grace or cure period provided in the
applicable agreement, document or instrument) shall occur under  the
Subscription Agreement;

     

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

     

    v.   the
Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w)
of Regulation S-X) shall be subject to a Bankruptcy Event;

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

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

     

    b)  Remedies Upon Event of
Default. If any Event of Default occurs, the outstanding principal amount
of this Debenture, plus accrued but unpaid interest, liquidated damages and
other amounts owing in respect thereof through the date of acceleration, shall
become, at the Holder’s election, immediately due and payable in cash at the
Mandatory Default Amount.  Commencing 5 days after the occurrence of
any Event of Default that results in the eventual acceleration of this
Debenture, the interest rate on this Debenture shall accrue at an interest rate
equal to the lesser of 17% per annum or the maximum rate permitted under
applicable law.  Upon the payment in full of the Mandatory Default
Amount, the Holder shall promptly surrender this Debenture to or as directed by
the Company.  In connection with such acceleration described herein,
the Holder need not provide, and the Company hereby waives, any presentment,
demand, protest or other notice of any kind, and the Holder may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable
law.  Such acceleration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder
of the Debenture until such time, if any, as the Holder receives full payment
pursuant to this Section 9(b).  No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.

    

    Section 10.   Miscellaneous.

     

    a)  Notices.  Any
and all notices or other communications or deliveries to be provided by the
Holder hereunder, including, without limitation, any Notice of Conversion, shall
be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Company, at the address
set forth above, or such other facsimile number or address as the Company may
specify for such purpose by notice to the Holder delivered in accordance with
this Section 10(a).  Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of
the Holder appearing on the books of the Company, or if no such facsimile number
or address appears, at the principal place of business of the
Holder.  Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified on the signature page prior to 5:30 p.m. (New York
City time), (ii) the date immediately following the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature page between 5:30 p.m. (New York City time) and 11:59
p.m. (New York City time) on any date, (iii) the second Business Day following
the date of mailing, if sent by nationally recognized overnight courier service
or (iv) upon actual receipt by the party to whom such notice is required to be
given.

     

    b)  Absolute Obligation.
Except as expressly provided herein, no provision of this Debenture shall alter
or impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, liquidated damages and accrued interest, as applicable, on
this Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed.  This Debenture is a direct debt obligation of the
Company.  

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

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

     

    d)  Jurisdiction.   This
Debenture and all issues arising out of this Debenture  will be
governed by and construed solely and exclusively under and pursuant to the laws
of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within
New York.  Each of the parties hereto expressly and irrevocably
(1) agrees that any legal suit, action or proceeding arising out of or relating
to this Agreement will be instituted exclusively in New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York, (2) waives any objection which Company
may have now or hereafter to the venue of any such suit, action or proceeding,
and (3)  consents to the jurisdiction of either the New York State
Supreme Court, County of New York, or the United States District Court for
the Southern District of New York in any such suit, action or
proceeding.  Each of the parties hereto further agrees to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the New York State Supreme Court, County of
New York, or in the United States District Court for the Southern District
of New York and agree that service of process upon it mailed by certified
mail to its address will be deemed in every respect effective service of process
upon it, in any such suit, action or proceeding. THE PARTIES HERETO AGREE TO
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS SUBSCRIPTION AGREEMENT OR ANY DOCUMENT OR
AGREEMENT CONTEMPLATED HEREBY.  THE PARTY PREVAILING THEREIN SHALL BE
ENTITLED TO PAYMENT FROM THE OTHER PARTY HERETO OF ALL OF ITS REASONABLE COUNSEL
FEES AND DISBURSEMENTS.

     

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

     

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

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    i)  Assumption.  Any
successor to the Company or any surviving entity in a Fundamental Transaction
shall (i) assume, prior to such Fundamental Transaction, all of the obligations
of the Company under this Debenture and the Subscription Agreement pursuant to
written agreements in form and substance satisfactory to the Holder (such
approval not to be unreasonably withheld or delayed) and (ii) issue to the
Holder a new debenture of such successor entity evidenced by a written
instrument substantially similar in form and substance to this Debenture,
including, without limitation, having a principal amount and interest rate equal
to the principal amount and the interest rate of this Debenture and having
similar ranking to this Debenture, which shall be satisfactory to the Holder
(any such approval not to be unreasonably withheld or delayed).  The
provisions of this Section 10(i) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.

    

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

     

    (Signature
Pages Follow)

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

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

     

    
    

    
      
        	 	ZURVITA HOLDINGS,
      INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/
      Jay Shafer 	 
	 	 	Name:
      Jay Shafer	 
	 	 	Title:
      Co-Chief Executive Officer	 
	 	 	 	 

      

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    

    ANNEX
A

     

    NOTICE
OF CONVERSION

     

    The undersigned hereby elects to
convert principal under the 6% Convertible Debenture due October 9, 2012 of
Zurvita Holdings, Inc., a Delaware corporation (the “Company”), into
shares of common stock (the “Common Stock”), of
the Company according to the conditions hereof, as of the date written
below.  If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance
therewith.  No fee will be charged to the holder for any conversion,
except for such transfer taxes, if any.

     

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

     

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

     

    
    

     

    
      	Conversion
      calculations: 	

              Date
      to Effect Conversion:

              

              Principal
      Amount of Debenture to be Converted:

              

              Number
      of shares of Common Stock to be issued:

              

              Signature:

              

              Name:

              

              Address
      for Delivery of Common Stock Certificates:

              

              Or

              

              DWAC
      Instructions:

              

              Broker
      No:__________________

              Account
      No:________________

            

    

     

    
 

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    Schedule
1

     

    CONVERSION
SCHEDULE

    

    The 6%
Convertible Debentures due on October 9, 2012 in the aggregate principal amount
of $2,000,000 are issued by Zurvita Holdings, Inc., a Delaware
corporation.  This Conversion Schedule reflects conversions made under
Section 4 of the above referenced Debenture.

     

     

    
      	 	Dated: 

    

     

    
      	 	 	 	 
	
               

              Date
      of Conversion

              (or
      for first entry, 

              Original
      Issue Date)

            	
               

              Amount
      of 

              Conversion

            	
               

              Aggregate
      

              Principal
      

              Amount
      

              Remaining
      

              Subsequent
      to 

              Conversion

              (or
      original 

              Principal
      

              Amount)

            	
               

              Company
      Attest

            
	
               
      

               

            	 
      	 
      	 
      
	
               

               
      

            	 
      	 
      	 
      
	
               

               

            	 
      	 
      	 
      
	
               

               
      

            	 
      	 
      	 
      
	
               

               
      

            	 
      	 
      	 
      
	
               

               
      

            	 
      	 
      	 
      
	
               

               
      

            	 
      	 
      	 
      
	
               

               
      

            	 
      	 
      	 
      
	
               

               
      

            	 
      	 
      	 
      

    

    

    

    

    
      
        
        

      

      
        22

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