Document:

Stock Exchange Agreement

     

     

    Exhibit 10.1

    

    STOCK
EXCHANGE AGREEMENT

    

    AND
PLAN OF REORGANIZATION

    

    STOCK EXCHANGE AGREEMENT AND PLAN OF
REORGANIZATION (the "Agreement ”) dated September 8,
2009,  by and among Ecolocap Solutions Inc., a Nevada corporation,
whose principal office is located at 740 Notre-Dame W., Suite 1525, Montreal,
Quebec, Canada (“ESI”); Micro Bubble Technologies Inc., a Nevada corporation
(“MBT”); and all of the shareholders of MBT set forth on Exhibit
A (the “MBT
SHAREHOLDERS”)

    

    R
E C I T A L S

    

                   
A.          MBT is dedicated
to exploit nanotechnology applications with two patented and trade secreted
technologies:

     

                                 
1) This technology is a new process that blends non-miscible liquids (oil and
water) on a submicron level.  This mixing of fuel oils and water
creates a new fuel product that is not an emulsified fuel which MBT calls
EM-Fuel.  MBT is actively selling this technology
worldwide.

     

                                  2)
The other technology is a Carbon Nano Tube battery.  MBT has
demonstrated that the CNT Battery possess greater energy output
and  faster recharge times as compared to what exists in the market
today.

     

    B.           MBT
SHAREHOLDERS owns the number of shares of common stock of MBT set forth on Exhibit
A.

    

    C.           ESI
is a publicly traded company engaged in the business of reducing carbon
emissions.  On the Closing Date (as defined herein), ESI will have
authorized capital of 100,000,000 shares of common stock, $0.001 par value per
share.

    

    D.           Prior
to the Closing Date of the Agreement, ESI will have 43,813,739 shares of Common
Stock issued and outstanding.

    

    E.           
ESI desires to acquire fifty five percent (55%) of the issued and outstanding
common stock of MBT, in consideration for which ESI shall issue to MBT’s
shareholders 54,000,000 restricted shares of its Common Stock.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    AGREEMENT

    

    NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows.

    

    ARTICLE
I

    

    ACQUISITION
OF MBT SHARES BY ESI

    

    1.1   Acquisition of MBT. In the
manner and subject to the terms and conditions set forth herein, ESI shall
acquire from MBT SHAREHOLDERS, not less than fifty five percent (55%) of the
issued and outstanding shares of MBT (the "MBT Shares").

    

    

    1.2           Effective Date. If all of the
conditions precedent to the obligations of each of the parties hereto as
hereinafter set forth shall have been satisfied or shall have been waived, the
transactions set forth herein (the "Exchange") shall become effective on the
Closing Date as defined herein.

    

    1.3           Consideration.

    

    (a)           In
connection with the acquisition of the MBT Shares, ESI shall issue to MBT
SHAREHOLDERS up to 54,000,000 restricted shares of ESI (the "ESI
Shares").

    

    (b)           If
the outstanding shares of ESI Common Stock are changed into a different number
or class of shares by reason of any stock split, division or subdivision of
shares, stock dividend, reverse stock split, consolidation of shares,
reclassification, recapitalization, or other similar transaction, then the
number of shares of Common Stock referenced in Section 1.3(a), above, shall be
appropriately adjusted.

    

    (c)           No
fractional shares of ESI Common Stock shall be issued in connection with this
Agreement, and no certificates or scrip for any such fractional shares shall be
issued.

     

    
                     
1.4           Effect of Stock Exchange. As
of the Closing Date, all of the following shall
occur:

    

    

                                   
(a)           The
Articles of Incorporation of MBT and ESI, as in effect on the Effective Date,
shall continue in effect without change or amendment.

    

    (b)           The
Bylaws of MBT and ESI, as in effect on the Closing Date, shall continue in
effect without change or amendment.

    

    (c)           Upon
the Closing Date, Michael Siegel will be appointed President and CEO of ESI, and
Robert Egger Jr. will be appointed COO.  Robert Egger Jr. will be appointed to the
Board of Directors of ESI, in accordance with the notice provisions of Rule
14f-1 of the United States Securities Exchange Act of 1934, as amended (the
“Exchange Act”) if so required.

     

     

    
      
         

      

      
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1.5           Disclosure Schedules.
Simultaneously with the execution of this Agreement: (a) ESI shall deliver a
schedule relating to ESI which, along with the reports of ESI filed with the
Securities and Exchange Commission, shall be referred to as the "ESI Disclosure
Schedule" , and (b) MBT SHAREHOLDERS and MBT shall deliver a schedule
relating to MBT SHAREHOLDERS and MBT (the "MBT Disclosure
Schedule" and collectively with the ESI Disclosure
Schedule, the "Disclosure
Schedules") setting forth the matters required to be set forth in the
Disclosure
Schedules as described elsewhere in this Agreement. The Disclosure
Schedules shall be deemed to be part of this Agreement. ESI’S Disclosure
Schedule shall include, but is not limited to, all publicly filed
documents of ESI.

    

    1.6           Further Action. From time to
time after the Closing, without further consideration, the parties shall execute
and deliver such instruments of conveyance and transfer and shall take such
other action as any party reasonably may request to more effectively transfer
the MBT Shares and ESI Shares.

    

    

    ARTICLE
II

    

    CONDUCT
OF BUSINESS PENDING CLOSING; STOCKHOLDER APPROVAL

    

    ESI, MBT SHAREHOLDERS and MBT covenant
that between the date hereof and the Closing Date (as hereinafter
defined):

    

    2.1           Access by MBT SHAREHOLDERS and MBT.
ESI shall afford to MBT SHAREHOLDERS, MBT, and their legal counsel,
accountants and other representatives, throughout the period prior to the
Closing Date, full access, during normal business hours, to (a) all of the
books, contracts and records of ESI, and shall furnish MBT SHAREHOLDERS and MBT,
during such period, with all information concerning ESI that MBT SHAREHOLDERS or
MBT may reasonably request and (b) the properties of ESI in order to conduct
inspections at MBT SHAREHOLDERS and MBT’s expense to determine that ESI is
operating in material compliance with all applicable federal, state and local
and foreign statutes, rules and regulations, and that ESI's assets are
substantially in the condition and of the capacities represented and warranted
in this Agreement. Any such investigation or inspection by MBT SHAREHOLDERS or
MBT shall not be deemed a waiver of, or otherwise limit, the representations,
warranties and covenants contained herein. MBT SHAREHOLDERS and MBT shall grant
identical access to ESI and its agents.

    

    2.2           Conduct of Business. During
the period from the date hereof to the Closing Date, the business of ESI and MBT
shall be operated by the respective entities in the usual and ordinary course of
such business and in material compliance with the terms of this Agreement.
Without limiting the generality of the foregoing:

     

     

    
      
         

      

      
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    (a)           ESI
and MBT, respectively, shall each use its reasonable efforts to (i) keep
available the services of the present agents of ESI and MBT; (ii) complete or
maintain all existing material arrangements; (iii) maintain the integrity of all
confidential information of ESI and MBT; and (iv) comply in all material
respects with all applicable laws; and (b) Except as contemplated by this
Agreement, ESI and MBT shall not (i) sell, lease, assign, transfer or otherwise
dispose of any of their material assets or property including cash; (ii) agree
to assume, guarantee, endorse or in any way become responsible or liable for,
directly or indirectly, any material contingent obligation; make any material
capital expenditures; (iii) enter into any transaction concerning a merger or
consolidation other than with the other party hereto or liquidate or dissolve
itself (or suffer any liquidation or dissolution) or convey, sell, lease,
transfer or otherwise dispose of, in one transaction or a series of related
transactions, all or a substantial part of its property, business, or assets, or
stock or securities convertible into stock of any subsidiary, or make any
material change in the present method of conducting business; (iv) declare or
pay any dividends or make any other distribution (whether in cash or property)
on any shares of its capital stock or purchase, redeem, retire or otherwise
acquire for value any shares of its capital stock or warrants or options whether
now or hereafter outstanding; (v) make or suffer to exist any advances or loans
to, or investments in any person, firm, corporation or other business entity not
a party to this Agreement; (vi) enter into any new material agreement or be or
become liable under any new material agreement, for the lease, hire or use of
any real or personal property; (vii) create, incur, assume or suffer to exist,
any mortgage, pledge, lien, charge, security interest or encumbrance of any kind
upon any of its property or assets, income or profits, whether now owned or
hereafter acquired; or (viii) agree to do any of the foregoing.

    

    2.3           Exclusivity to MBT SHAREHOLDERS and
MBT. ESI and its officers, directors, representatives and agents, from
the date hereof, until the Closing Date (unless this Agreement shall be earlier
terminated as hereinafter provided), shall not hold discussions with any person
or entity, other than MBT SHAREHOLDERS and MBT or their respective agents
concerning the Exchange, nor solicit, negotiate or entertain any inquiries,
proposals or offers to purchase the business of ESI, nor the shares of capital
stock of ESI from any person other than MBT SHAREHOLDERS and MBT, nor, except in
connection with the normal operation of ESI's respective business, or as
required by law, or as authorized in writing by MBT SHAREHOLDERS, disclose any
confidential information concerning ESI to any person other than MBT
SHAREHOLDERS, MBT and MBT SHAREHOLDERS and MBT’s representatives or agents. MBT
SHAREHOLDERS and MBT shall from the date hereof, and until the Closing Date, owe
the identical obligations of confidentiality and exclusivity to ESI concerning
the Exchange as stated in this Section.

    

    2.4           Board and Shareholder Approval.
The Board of Directors of ESI has determined that the Exchange is fair to
and in the best interests of its stockholders and has approved and adopted this
Agreement and the terms of the Exchange. This Agreement constitutes, and all
other agreements contemplated hereby will constitute, when executed and
delivered by ESI, the valid and binding obligation of ESI, enforceable in
accordance with their respective terms.

    

    

    ARTICLE
III

    

    REPRESENTATIONS
AND WARRANTIES OF ESI

    

    Except as set forth in the ESI Disclosure
Schedule (which incorporates all the reports of ESI filed with the United
States Securities and Exchange Commission) ESI represents and warrants to MBT
SHAREHOLDERS and MBT as follows, with the knowledge and understanding that MBT
SHAREHOLDERS and MBT are relying materially upon such representations and
warranties.

    

    
      
         

      

      
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    3.1           Organization and Standing. ESI
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada. ESI has all requisite corporate power to carry on
its business as it is now being conducted and is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary under applicable law except where the failure to
qualify (individually or in the aggregate) will not have any material adverse
effect on the business or prospects of ESI. The copies of the Articles of
Incorporation and Bylaws of ESI, as amended to date and made available to MBT
SHAREHOLDERS and MBT, are true and complete copies of these documents as now in
effect.

     

    
                     
3.2           Capitalization.

    

     

    (a)           The
number of shares of capital stock which are issued and outstanding are set forth
in Recital D. All of such shares of capital stock that are issued and
outstanding are duly authorized, validly issued and outstanding, fully paid and
nonassessable, and were not issued in violation of the preemptive rights of any
person. Other than as set forth in the ESI Disclosure
Schedule and Recital D, there are no subscriptions, warrants, rights or
calls or other commitments or agreements to which ESI is a party or by which it
is bound, pursuant to which ESI is or may be required to issue or deliver
securities of any class. Other than as set forth in the ESI Disclosure
Schedule and Recital D, there are no outstanding securities convertible
or exchangeable, actually or contingently, into common stock or any other
securities of ESI.

    

    (b)           To
ESI’S knowledge, all outstanding shares of ESI capital stock have been issued
and granted in compliance with all applicable securities laws and other
applicable legal requirements.

    

    (c)           ESI
has good and marketable title to all of the ESI Shares, free and clear of all
liens, claims and encumbrances of any third persons.

    

    3.3           Subsidiaries. ESI owns one
subsidiary, Ecolocap Canada Ltd

    

    3.4           Authority. ESI’s Board of
Directors has determined that the Exchange is fair to and in the best interests
of ESI’s stockholders. The execution, delivery and performance by ESI of this
Agreement (including the contemplated issuance of up to 54,000,000 ESI Shares in
accordance with this Agreement) has been duly authorized by all necessary action
on the part of ESI. ESI has the absolute and unrestricted right, power and
authority to perform its obligations under this Agreement. This Agreement
constitutes, and all other agreements contemplated hereby will constitute, when
executed and delivered by ESI in accordance herewith, the valid and binding
obligations of ESI, enforceable in accordance with their respective
terms.

    

    3.5           Assets. Except as set forth in
the ESI Disclosure
Schedule, ESI has no material assets. ESI has good and marketable title
to all of the assets and properties listed on Schedule 3.5 and as reflected on
the balance sheet included in the ESI Financial Statements (as hereinafter
defined).

    

    3.6           Contracts and Other Commitments.
Except as set forth in the ESI Disclosure
Schedule, ESI is not a party to any contracts or agreements.

     

     

    
      
         

      

      
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    3.7           Litigation. There is no claim,
action, proceeding, or investigation pending or, to its knowledge, threatened
against or affecting ESI before or by any court, arbitrator or governmental
agency or authority which, in its reasonable judgment, could have a material
adverse effect on the operations or prospects of ESI. There are no decrees,
injunctions or orders of any court, governmental department, agency or
arbitration outstanding against ESI or asserted against ESI that has not been
paid.

    

    3.8           Taxes. For purposes of this
Agreement, (A) "Tax" (and, with correlative meaning, "Taxes") shall mean any
federal, state, local or foreign income, alternative or add- on minimum,
business, employment, franchise, occupancy, payroll, property, sales, transfer,
use, value added, withholding or other tax, levy, impost, fee, imposition,
assessment or similar charge together with any related addition to tax,
interest, penalty or fine thereon; and (B) "Returns" shall mean all returns
(including, without limitation, information returns and other material
information), reports and forms relating to Taxes.

    

    (a)           ESI
has duly filed all Returns required to be filed by it other than Returns
(individually and in the aggregate) where the failure to file would have no
material adverse effect on the business or prospects of ESI. All such Returns
were, when filed, and to the knowledge of ESI are, accurate and complete in all
material respects and were prepared in conformity with applicable laws and
regulations. ESI has paid or will pay in full or has adequately reserved against
all Taxes otherwise assessed against it through the Closing Date.

    

    (b)           ESI
is not a party to any pending action or proceeding by any governmental authority
for the assessment of any Tax, and, to the knowledge of ESI, no claim for
assessment or collection of any Tax related to ESI has been asserted against ESI
that has not been paid. There are no Tax liens upon the assets of ESI. There is
no valid basis, to ESI 's knowledge, for any assessment, deficiency, notice,
30-day letter or similar intention to assess any Tax to be issued to ESI by any
governmental authority.

    

    3.9           Compliance with Laws and Regulations.
ESI has complied and is presently complying, in all material respects,
with all laws, rules, regulations, orders and requirements (federal, state and
local and foreign) applicable to it in all jurisdictions where the business of
ESI is conducted or to which ESI is subject, including all requisite filings
with the SEC. ESI has not made any misrepresentation nor has omitted any
material facts in any of its SEC filings to date.

    

    3.10         Hazardous Materials. To the
knowledge of ESI, ESI has not violated, or received any written notice from any
governmental authority with respect to the violation of any law, rule,
regulation or ordinance pertaining to the use, maintenance, storage,
transportation or disposal of "Hazardous Materials." As used herein, the term
“Hazardous Materials” means any substance now or hereafter designated pursuant
to Section 307(a) and 311 (b)(2)(A) of the Federal Clean Water Act, 33 USC §§
1317(a), 1321(b)(2)(A), Section 112 of the Federal Clean Air Act, 42 USC § 3412,
Section 3001 of the Federal Resource Conservation and Recovery Act, 42 USC §
6921, Section 7 of the Federal Toxic Substances Control Act, 15 USC § 2606, or
Section 101(14) and Section 102 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 USC §§ 9601(14), 9602.

    

    
      
         

      

      
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    3.11          No Breaches. The making and
performance of this Agreement will not (i) conflict with or violate the Articles
of Incorporation or the Bylaws of ESI, (ii) violate any laws, ordinances, rules,
or regulations, or any order, writ, injunction or decree to which ESI is a party
or by which ESI or any of its businesses, or operations may be bound or affected
or (iii) result in any breach or termination of, or constitute a default under,
or constitute an event which, with notice or lapse of time, or both, would
become a default under, or result in the creation of any encumbrance upon any
material asset of ESI under, or create any rights of termination, cancellation
or acceleration in any person under, any contract.

    

    3.12         
Employees. ESI has no
employees that are represented by any labor union or collective bargaining unit.
Nor does ESI have any employment agreements or compensation plans which are in
effect with anyone.

    

    3.13          Financial Statements. Year end
audited financial statements and unaudited quarterly stub financial statements
are available online at www.sec.gov (collectively
the "Financial Statements"). The Financial Statements present fairly, in all
material respects, the financial position on the dates thereof and results of
operations of ESI for the periods indicated, prepared in accordance with
generally accepted accounting principles ("GAAP"), consistently applied. There
are no assets of ESI the value of which is materially overstated in said balance
sheets.

    

    3.14          Absence of Certain Changes or Events.
Except as set forth in the ESI Disclosure
Schedule, since June 30, 2009 (the "Balance Sheet Dates"), there has not
been:

    

    (a)           any
material adverse change in the financial condition, properties, assets,
liabilities or business of ESI;

    

    (b)           any
material damage, destruction or loss of any material properties of ESI, whether
or not covered by insurance;

    

    (c)           any
material adverse change in the manner in which the business of ESI and has been
conducted;

    

    (d)           any
material adverse change in the treatment and protection of trade secrets or
other confidential information of ESI; and

    

    (e)           any
occurrence not included in paragraphs (a) through (d) of this Section 3.14 which
has resulted, or which ESI has reason to believe, might be expected to result
in, a material adverse change in the business or prospects of ESI.

    

    3.15          Government Licenses, Permits,
Authorizations. ESI has all governmental licenses, permits,
authorizations and approvals necessary for the conduct of its business as
currently conducted ("Licenses and Permits"). All such Licenses and Permits are
in full force and effect, and no proceedings for the suspension or cancellation
of any thereof is pending or, to the knowledge of ESI, threatened.

    

    
      
         

      

      
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    3.16           Employee
Benefit Plans.

    

    (a)           ESI
has no bonus, material deferred compensation, material incentive compensation,
stock purchase, stock option, severance pay, termination pay, hospitalization,
medical, insurance, supplemental unemployment benefits, profit-sharing, pension
or retirement plan.

    

    (b)           ESI
has not maintained, sponsored or contributed to, any employee pension benefit
plan (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) or any similar pension benefit plan under the
laws of any foreign jurisdiction.

    

    (c)           Except
as set forth in the ESI Disclosure
Schedule, neither the execution, delivery or performance of this
Agreement, nor the consummation of the Exchange or any of the other transactions
contemplated by this Agreement, will result in any bonus, golden parachute,
severance or other payment or obligation to any current or former employee or
director of any of ESI, or result in any acceleration of the time of payment,
provision or vesting of any such benefits.

    

    3.17           Business Locations. Other than
as set forth in the ESI Disclosure
Schedule, ESI does not own or lease any real or personal property in any
state or country.

    

    3.18           Intellectual Property. ESI
owns no intellectual property of any kind. ESI is not currently in receipt of
any notice of any violation or infringements of, and is not knowingly violating
or infringing, or to the best of its knowledge has not violated or infringed the
rights of others in any trademark, trade name, service mark, copyright, patent,
trade secret, know-how or other intangible asset.

    

    3.19           Governmental Approvals. Except
as set forth in the ESI Disclosure
Schedule, no authorization, license, permit, franchise, approval, order
or consent of, and no registration, declaration or filing by ESI with, any
governmental authority, domestic or foreign, federal, state or local, is
required in connection with ESI’s execution, delivery and performance of this
Agreement. Except as set forth in the ESI Disclosure
Schedule, no consents of any other parties are required to be received by
or on the part of ESI to enable ESI to enter into and carry out this
Agreement.

    

    3.20           Transactions with Affiliates.
Except as set forth in the ESI Disclosure
Schedule, ESI is not indebted for money borrowed, either directly or
indirectly, from any of its officers, directors, or any Affiliate (as defined
below), in any amount whatsoever; nor are any of its officers, directors, or
Affiliates indebted for money borrowed from ESI; nor are there any transactions
of a continuing nature between ESI and any of its officers, directors, or
Affiliates not subject to cancellation which will continue beyond the Closing
Date, including, without limitation, use of the assets of ESI for personal
benefit with or without adequate compensation. For purposes of this Agreement,
the term "Affiliate" shall mean any person that, directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person specified. As used in the foregoing definition, the
term (i) "control” shall mean the power through the ownership of voting
securities, contract or otherwise to direct the affairs of another person and
(ii) "person" shall mean an individual, firm, trust, association, corporation,
partnership, government (whether federal, state, local or other political
subdivision, or any agency or bureau of any of them) or other
entity.

    

    
      
         

      

      
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    3.21           No Distributions. ESI has not
made nor has any intention of making any distribution or payment to any of its
shareholders with respect to any of its shares prior to the Closing
Date.

    

    3.22           Liabilities. ESI has no
material direct or indirect indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise ("Liabilities"), whether or not of a kind required by generally
accepted accounting principles to be set forth on a financial statement, other
than (i) Liabilities fully and adequately reflected or reserved against on the
ESI Balance Sheet, (ii) Liabilities incurred since the Balance Sheet Date in the
ordinary course of the business of ESI, or (iii) Liabilities otherwise disclosed
in this Agreement, including the exhibits hereto and ESI Disclosure
Schedule.

    

    3.23           Accounts Receivable. ESI has
no accounts receivable.

    

    3.24           Insurance. ESI has no
insurance policies in effect.

    

    3.25           No Omissions or Untrue Statements.
To the best of each party’s knowledge no representation or warranty made
by ESI to MBT SHAREHOLDERS and MBT in this Agreement, the ESI Disclosure
Schedule or in any certificate of an ESI officer required to be delivered
to MBT SHAREHOLDERS pursuant to the terms of this Agreement, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements contained herein or therein not
misleading as of the date hereof and as of the Closing Date.

    

    

    ARTICLE
IV

    

    REPRESENTATIONS
AND WARRANTIES OF MBT SHAREHOLDERS AND MBT

    

    Except as set forth in the MBT Disclosure
Schedule, MBT SHAREHOLDERS and MBT jointly and severally represent and
warrant to ESI as follows as of the date hereof and as of the Closing
Date:

    

    4.1           Organization and Standing of MBT.
MBT is a corporation duly organized, validly existing and in good
standing under the laws of the state of NEVADA and has the
corporate power to carry on its business as now conducted and to own its assets
and is duly qualified to transact business as a foreign corporation in each
state where such qualification is necessary except where the failure to qualify
will not have a material adverse effect on the business or prospects of MBT. The
copies of the Articles of Incorporation and Bylaws of MBT, as amended to date,
and made available to ESI, are true and complete copies of those documents as
now in effect.

    

    4.2           Authority. The Board of
Directors of MBT has determined that the Exchange is advisable and in the best
interests of the MBT SHAREHOLDERS and MBT. MBT has approved and adopted this
Agreement and the terms of the Exchange and has adopted a resolution
recommending approval and adoption of this Agreement and the Exchange by MBT’s
stockholders. This Agreement constitutes, and all other agreements contemplated
hereby will constitute, when executed and delivered by MBT in accordance
herewith, the valid and binding obligations of MBT, enforceable in accordance
with their respective terms.

     

     

    
      
         

      

      
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    4.3           No Conflict. The making and
performance of this Agreement will not (i) conflict with the Articles of
Incorporation or the Bylaws of MBT, (ii) violate any laws, ordinances, rules, or
regulations, or any order, writ, injunction or decree to which MBT is a party or
by which MBT or any of their material assets, business, or operations may be
bound or affected, or (iii) result in any breach or termination of, or
constitute a default under, or constitute an event which, with notice or lapse
of time, or both, would become a default under, or result in the creation of any
encumbrance upon any material asset of MBT, or create any rights of termination,
cancellation, or acceleration in any person under any material agreement,
arrangement, or commitment.

    

    4.4           Properties. Except as set
forth in the MBT
Disclosure Schedule, MBT SHAREHOLDERS has good and marketable title to
all of the MBT Shares, free and clear of all liens, claims and encumbrances of
third persons whatsoever, and MBT has good and marketable title to all of the
assets and properties which it purports to own as reflected on the balance sheet
included in the MBT Financial Statements (as hereinafter defined), or thereafter
acquired.

    

    4.5           Capitalization of MBT. The
authorized capital stock of MBT consists of   shares of
Common Stock, $0.01 par value per
share, of which 2,000 shares are
issued and outstanding.  There are no other classes of securities
authorized for issuance by MBT.   Such outstanding shares of
Common Stock are duly authorized, validly issued, fully paid, and
non-assessable. As of the date hereof, there were no outstanding options,
warrants or rights of conversion or other rights, agreements, arrangements or
commitments relating to the capital stock of MBT or obligating MBT to issue or
sell shares of Common Stock. To MBT’S knowledge, all outstanding shares of MBT
capital stock have been issued and granted in compliance with all applicable
legal requirements.

    

    4.6           Governmental Approval; Consents.
No authorization, license, permit, franchise, approval, order or consent
of, and no registration, declaration or filing by MBT SHAREHOLDERS or MBT with
any governmental authority, domestic or foreign, federal, state or local, is
required in connection with MBT SHAREHOLDERSS OR MBT’s execution, delivery and
performance of this Agreement. Except as set forth in the MBT Disclosure
Schedule, no consents of any other parties are required to be received by
or on the part of MBT SHAREHOLDERS or MBT to enable MBT SHAREHOLDERS and MBT to
enter into and carry out this Agreement.

    

    4.7           Adverse Developments. Since
May 31, 2009 there have been no material adverse changes in the assets,
liabilities, properties, operations or financial condition of MBT, and no event
has occurred other than in the ordinary and usual course of business or as set
forth in the MBT Financial Statements which could be reasonably expected to have
a materially adverse effect upon MBT.

    

    4.8           Taxes.  MBT
has duly filed all returns required to be filed. All such returns were, when
filed, and to MBT 's knowledge are, accurate and complete in all material
respects and were prepared in conformity with applicable laws and regulations.
MBT has paid in full all taxes through the Closing Date. MBT is not a party to
any pending action or proceeding by any governmental authority for the
assessment of any tax, and, to the knowledge of MBT, no claim for assessment or
collection of any tax has been asserted against MBT that have not been paid.
There are no tax liens upon the assets of MBT. There is no valid basis, to MBT
's knowledge, for any assessment, deficiency, notice, 30-day letter or similar
intention to assess any tax to be issued to MBT by any governmental
authority.

     

     

    
      
         

      

      
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    4.9            
Litigation. Except as
set forth on the MBT
Disclosure Schedule, there is no material claim, action, proceeding, or
investigation pending or, to their knowledge, threatened against or affecting
MBT SHAREHOLDERS or MBT before or by any court, arbitrator or governmental
agency or authority. There are no material decrees, injunctions or orders of any
court, governmental department, agency or arbitration outstanding against MBT
SHAREHOLDERS or MBT.

    

    4.10           Compliance with Laws and Regulations.
MBT has complied and is presently complying, in all material respects,
with all laws, rules, regulations, orders and requirements applicable to it in
all jurisdictions in which its operations are currently conducted or to which it
is currently subject.

    

    4.11           Governmental Licenses, Permits and
Authorizations. MBT has all governmental licenses, permits,
authorizations and approvals necessary for the conduct of its business as
currently conducted. All such licenses, permits, authorizations and approvals
are in full force and effect, and no proceedings for the suspension or
cancellation of any thereof is pending or threatened.

    

    4.12           Liabilities. MBT has no
material direct or indirect liabilities, as that term is defined in Section 3.22
("MBT Liabilities"), whether or not of a kind required by generally accepted
accounting principles to be set forth on a financial statement, other than (i)
MBT Liabilities fully and adequately reflected or reserved against on the MBT
Balance Sheet, (ii) MBT Liabilities incurred in the ordinary course of the
business of MBT, and (iii) MBT Liabilities otherwise disclosed in this
Agreement, including the Exhibits hereto.

    

    4.13           MBT
SHAREHOLDERS's Representations Regarding ESI Shares.

    

    (a)           MBT
SHAREHOLDERS acknowledge that ESI have very limited assets and business and that
the ESI Shares are speculative and involve a high degree of risk, including
among many other risks that the ESI Shares will be restricted as elsewhere
described in this Agreement and will not be transferable unless first registered
under the Securities Act of 1933, as amended ("Act"), or pursuant to an
exemption from the Act's registration requirements.

    

    (b)           MBT
SHAREHOLDERS acknowledge and agree that they have been furnished with copies of
the periodic reports of ESI filed with the United States Securities and Exchange
Commission including those on Forms 10-K and 10-Q since ESI’s inception. MBT
SHAREHOLDERS have had an opportunity to ask questions of and receive answers
from ESI regarding its business, assets, results of operations, financial
condition and plan of operation and the terms and conditions of the issuance of
the ESI Shares.

    

    (c)           MBT
SHAREHOLDERS are residents of the states of Illinois, Iowa and the country of
South Korea.

     

    (d)           MBT
SHAREHOLDERS, acting with the assistance of counsel and other professional
advisers, possess such knowledge and experience in financial, tax and business
matters as to enable them to utilize the information made available by ESI, to
evaluate the merits and risks of acquiring the ESI Shares and to make an
informed investment decision with respect thereto.

    

    
      
         

      

      
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    (e)           MBT
SHAREHOLDERS were not solicited by ESI or anyone on ESI's behalf to enter into
any transaction whatsoever, by any form of general solicitation or general
advertising, as those terms are defined in Regulation D of the Securities Act of
1933.

    

    (f)           MBT
SHAREHOLDERS: (i) are all “accredited investors” as that term is defined in Rule
501 of Reg. D of the Securities Act of 1933; and, (ii) have a preexisting
relationship with ESI.

    

    4.14           Contracts and Other Commitments.
Schedule
4.14 of the MBT
Disclosure Schedule consists of a true and complete list of all material
contracts, agreements, commitments and other instruments (whether oral or
written) to which MBT is a party. MBT has made or will make available to ESI a
copy of each such contract. All such contracts are valid and binding upon MBT
and are in full force and effect and are enforceable in accordance with their
respective terms. No such contracts are in breach, and no event has occurred
which, with the lapse of time or action by a third party, could result in a
material default under the terms thereof. To MBT’S knowledge, no stockholder of
MBT has received any payment from any contracting party in connection with or as
an inducement for causing MBT to enter into any such contract.

    

    4.15           Absence of Certain Changes or Events.
Except as set forth in the MBT Disclosure
Schedule, since May 31, 2009 (the
"Balance Sheet Date"), there has not been:

    

    (a)           any
material adverse change in the financial condition, properties, assets,
liabilities or business of MBT;

    

    (b)           any
material damage, destruction or loss of any material properties of MBT, whether
or not covered by insurance;

    

    (c)           any
material adverse change in the manner in which the business of MBT and has been
conducted;

    

    

    (d)           any
material adverse change in the treatment and protection of trade secrets or
other confidential information of MBT; and

    

    (e)           any
occurrence not included in paragraphs (a) through (d) of this Section 4.15 which
has resulted, or which MBT has reason to believe, might be expected to result in
a material adverse change in the business or prospects of MBT.

    

    4.16           Financial Statements. The
MBT Disclosure
Schedule contains audited financial statements for the ten month period
ended May 31, 2009 (collectively the "MBT Financial Statements"). The MBT
Financial Statements present fairly, in all material respects, the financial
position on the dates thereof and results of operations of MBT for the periods
indicated, prepared in accordance with GAAP, consistently applied. There are no
assets of MBT the value of which is materially overstated in said balance
sheets.

    

    
      
         

      

      
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    4.17           MBT Intellectual Property.
Schedule
4.17 of the MBT
Disclosure Schedule sets forth a complete and correct list and summary
description of all intellectual property, including computer software,
trademarks, trade names, service marks, service names, brand names, copyrights
and patents, registrations thereof and applications therefore, applicable to or
used in the business of MBT, together with a complete list of all licenses
granted by or to MBT with respect to any of the above. Except as otherwise set
forth in Schedule
4.17 all such trademarks, trade names, service marks, service names,
brand names, copyrights and patents are owned by MBT, free and clear of all
liens, claims, security interests and encumbrances of any nature whatsoever. MBT
is not currently in receipt of any notice of any violation or infringements of,
and is not knowingly violating or infringing, the rights of others in any
trademark, trade name, service mark, copyright, patent, trade secret, know-how
or other intangible asset. MBT has not (i) licensed any of the material
proprietary assets to any person or entity on an exclusive basis, or (ii)
entered into any covenant not to compete or agreement limiting its ability to
exploit fully any proprietary asset or to transact business in any market or
geographical area or with any person or entity.

    

    4.18           Subsidiaries. Except as set
forth in Schedule
4.18 of the MBT
Disclosure Schedule, MBT owns no subsidiaries nor does it own or have an
interest in any other corporation, partnership, joint venture or other
entity.

    

    4.19           Hazardous Materials. To the
knowledge of MBT, MBT has not violated, or received any written notice from any
governmental authority with respect to the violation of any law, rule,
regulation or ordinance pertaining to the use, maintenance, storage,
transportation or disposal of "Hazardous Materials." As used herein, the term
“Hazardous Materials” means any substance now or hereafter designated which is
found to be toxic or harmful to humans or the environment when present in
certain amounts or quantities.

    

    4.20           Employees. MBT has no
employees that are represented by any labor union or collective bargaining
unit.

    

    4.21           Employee Benefit Plans. The
MBT Disclosure
Schedule identifies each salary, bonus, material deferred compensation,
material incentive compensation, stock purchase, stock option, severance pay,
termination pay, hospitalization, medical, insurance, supplemental unemployment
benefits, profit-sharing, pension or retirement plan, program or material
agreement.

    

    4.22           Business Locations. Other than
as set forth in the MBT Disclosure
Schedule, MBT does not own or lease any real or personal property in any
state or country.

    

    4.23           Insurance. Except as set forth
in Schedule
4.23 of the MBT
Disclosure Schedule, MBT has no insurance policies in
effect.

    

    4.24           No Omission or Untrue
Statement. To the best of each party’s knowledge, no representation or
warranty made by MBT SHAREHOLDERS or MBT to ESI in this Agreement, in the MBT Disclosure
Schedule or in any certificate of a MBT officer required to be delivered
to ESI pursuant to the terms of this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not misleading
as of the date hereof and as of the Closing Date.

     

     

    
      
         

      

      
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    ARTICLE
V

    

    CLOSING

    

    5.1           Closing. The Exchange shall be
completed on the first business day after the day on which the last of the
conditions contained in this Article V is fulfilled or waived (the “Closing
Date”); provided, however, that in no event shall the Closing occur later than
Sept 8, 2009, unless otherwise agreed to by the parties. The Closing shall take
place at the office of Claude Pellerin, Esquire, 300 St-Sacrement, suite 209,
Montreal, province of Quebec, Canada  or such other
place as the parties may agree. At the Closing, ESI, MBT SHAREHOLDERS and MBT
shall make the deliveries contemplated by this Agreement, and in accordance with
the terms of this Agreement.

    

    5.2           ESI’s Closing Deliveries. At
the Closing, in addition to documents referred elsewhere, ESI shall deliver, or
cause to be delivered, to MBT:

    

    (a)           a
certificate, dated as of the Closing Date, executed by the President or Chief
Executive Officer of ESI, to the effect that the representations and warranties
contained in this Agreement are true and correct in all material respects at and
as of the Closing Date and that ESI has complied with or performed in all
material respects all terms, covenants and conditions to be complied with or
performed by ESI on or prior to the Closing Date;

    

    (b)           certificates
representing the ESI Shares issuable upon consummation of

    the
Exchange;

    

    (c)           Certified
resolution of the Board of Directors and shareholders authorizing and approving
the transactions set forth herein;

     

    (d)           The
ESI Disclosure
Schedule;

    

    (e)           such
other documents as MBT SHAREHOLDERS, MBT, or their counsel may reasonably
require.

    

    5.3           MBT’s Closing Deliveries. At
the Closing, in addition to documents referred to elsewhere, MBT SHAREHOLDERS
and/or MBT shall deliver to ESI:

    

    (a)           a
certificate of MBT, dated as of the Closing Date, executed by the President or
Chief Executive Officer of MBT to the effect that the representations and
warranties of MBT SHAREHOLDERS contained in this Agreement are true and correct
in all material respects and that MBT has complied with or performed in all
material respects all terms, covenants, and conditions to be complied with or
performed by MBT on or prior to the Closing Date;

    

    (b)           certificates
representing MBT Shares owned by MBT SHAREHOLDERS, duly endorsed for transfer or
accompanied by a properly executed stock power;

    

    (c)           certified
resolutions of the Board of Directors and shareholders of MBT, authorizing and
approving the transactions set forth herein;

     

     

    
      
         

      

      
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    (d)           the
MBT Disclosure
Schedule;

    

    (e)           such
other documents as ESI or it's counsel may reasonably require.

    

    

    ARTICLE
VI

    

    CONDITIONS
TO OBLIGATIONS OF ESI

    

    The obligation of ESI to consummate the
Closing is subject to the following conditions, any of which may be waived by it
in its sole discretion.

    

    6.1           Compliance by MBT SHAREHOLDERS and
MBT. MBT SHAREHOLDERS and MBT shall have performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with in all material respects by MBT SHAREHOLDERS
and MBT prior to or on the Closing Date;

    

    6.2           Accuracy of MBT SHAREHOLDERS and
MBT's Representations. MBT SHAREHOLDERS and MBT’s representations and
warranties contained in this Agreement (including the Disclosure Schedule)
or any schedule, certificate, or other instrument delivered pursuant to the
provisions hereof or in connection with the transactions contemplated hereby
shall be true and correct in all material respects at and as of the Closing Date
(except for such changes permitted by this Agreement) and shall be deemed to be
made again as of the Closing Date.

    

    6.3           Documents. All documents and
instruments required hereunder to be delivered by MBT SHAREHOLDERS or MBT to ESI
at the Closing shall be delivered in form and substance reasonably satisfactory
to ESI and its counsel.

    

    6.4           Litigation. No litigation
seeking to enjoin the transactions contemplated by this Agreement or to obtain
damages on account hereof shall be pending or, to ESI’s knowledge, be
threatened.

    

    6.5           Material Adverse Change.
Except for operations in the ordinary course of business, no material adverse
change shall have occurred subsequent to June 30, 2009 in the financial
position, results of operations, assets, or liabilities of MBT, nor shall any
event or circumstance have occurred which would result in a material adverse
change in the financial position, results of operations, assets, or liabilities
of MBT.

    

    6.6           Approval by Board of
Directors. The Board of Directors  ESI shall have approved this
Agreement and the transactions contemplated hereby.

    

    6.7           Satisfaction with Due
Diligence. ESI shall have been satisfied with its due diligence review of
MBT, its subsidiaries and their operations.

    

    

    
      
         

      

      
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    6.8           Regulatory Compliance. ESI
shall have received any and all regulatory approvals and consents required to
complete the transactions contemplated hereby.

    

    

    ARTICLE
VII

    

    CONDITIONS
TO MBT SHAREHOLDERS AND MBT'S OBLIGATIONS

    

    MBT SHAREHOLDERS and MBT's obligation
to consummate the Closing is subject to the following conditions:

    

    7.1           Compliance by
ESI.  ESI shall have performed and complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by them prior to or on the Closing Date.

    

    7.2           Accuracy of Representations of ESI.
The representations and warranties of ESI contained in this Agreement
(including the exhibits hereto and the ESI Disclosure Schedule)
or any schedule, certificate, or other instrument delivered pursuant to the
provisions hereof or in connection with the transactions contemplated hereby
shall be true and correct in all material respects at and as of the Closing Date
(except for changes permitted by this Agreement) and shall be deemed to be made
again as of the Closing Date.

    

    7.3           Continuation as Publicly Traded
Company. ESI shares shall continue to trade on the FINRA Bulletin Board
System.

    

    7.4           Litigation. No litigation
seeking to enjoin the transactions contemplated by this Agreement or to obtain
damages on account hereof shall be pending or to MBT SHAREHOLDERS’ and MBT’s
knowledge, be threatened.

    

    7.5           Documents. All documents and
instruments required hereunder to be delivered by ESI to MBT SHAREHOLDERS and
MBT at the Closing shall be delivered in form and substance reasonably
satisfactory to MBT SHAREHOLDERS, MBT and their counsel.

    

    7.6           Balance Sheet. Except as set
forth in Section
7.6 of the ESI
Disclosure Schedule, ESI shall have no liabilities except as incurred in
the ordinary course of business, as reflected on ESI's most recent balance
sheet, or as otherwise approved by MBT SHAREHOLDERS.

    

    7.7           Approval by Board of Directors and
Shareholders. The Board of Directors and shareholders of MBT shall have
approved this Agreement and the transactions contemplated hereby.

    

    7.8           Satisfaction with Due
Diligence. MBT shall have been satisfied with its due diligence review of
ESI and its subsidiary and satisfied itself that ESI shares of common stock are
traded FINRA OTC Bulletin Board System.

    

    7.9           Regulatory Compliance. MBT
shall have received any and all regulatory approvals and consents required to
complete the transactions contemplated hereby.

     

     

    
      
         

      

      
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    7.10         Outstanding Shares. ESI
remains a publicly traded corporation and ESI shall have 43,813,739 shares of
ESI common stock issued and outstanding prior to the Closing.

    

    

    ARTICLE
VIII

    

    TERMINATION

    

    8.1           Termination
Prior to Closing.

    

    (a)           If
the Closing has not occurred by September 15, 2009, any party may terminate this
Agreement at any time thereafter by giving written notice of termination to the
other, provided, however, that no party may terminate this Agreement if such
party has breached any material terms or conditions of this Agreement and such
breach has prevented the timely closing of the Exchange. Notwithstanding the
above, such deadline may be extended one or more times, only by mutual written
consent of MBT SHAREHOLDERS, MBT, and ESI;

    

    (b)           Prior
to September 8, 2009, any party may terminate this Agreement following the
insolvency or bankruptcy of the other party hereto, or if any one or more of the
conditions to Closing set forth in Article VI or Article VII shall become
incapable of fulfillment or there shall have occurred a material breach of this
Agreement and either such condition of breach shall not have been waived by the
party for whose benefit the condition was established, then ESI (in the case of
a condition in Article VI) or MBT SHAREHOLDERS (in the case of a condition
specified in Article VII) may terminate this Agreement. In addition, either ESI
or MBT SHAREHOLDERS may terminate this Agreement upon written notice to the
other if it shall reasonably determine that the Exchange has become inadvisable
by reason of the institution or threat by any federal, state or municipal
governmental authorities of a formal investigation or of any action, suit or
proceeding of any kind against either or both parties.

    

    8.2           Consequences of Termination.
Upon termination of this Agreement pursuant to this Article VIII or any other
express right of termination provided elsewhere in this Agreement, the parties
shall be relieved of any further obligation under this Agreement except for the
obligations in Section 11.4; provided, however, that no termination of this
Agreement, pursuant to this Article VIII hereof or under any other express right
of termination provided elsewhere in this Agreement shall operate to release any
party from any liability to any other party incurred otherwise than under this
Agreement before the date of such termination, or from any liability resulting
from any willful misrepresentation of a material fact made in connection with
this Agreement or willful breach of any material provision hereof.

    

     

     

     

     

    
 

    
      
         

      

      
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    ARTICLE
IX

    

    ADDITIONAL
COVENANTS

    

    9.1           Mutual Cooperation. The
parties hereto will cooperate with each other, and will use all reasonable
efforts to cause the fulfillment of the conditions to the parties' obligations
hereunder and to obtain as promptly as possible all consents, authorizations,
orders or approvals from each and every third party, whether private or
governmental, required in connection with the transactions contemplated by this
Agreement.

    

    9.2           Changes in Representations and
Warranties of a Party. Between the date of this Agreement and the Closing
Date, no party shall directly or indirectly, enter into any transaction, take
any action, or by inaction permit an otherwise preventable event to occur, which
would result in any of the representations and warranties of such party herein
contained not being true and correct at and as of the Closing Date. Each party
shall promptly give written notice to the other parties upon becoming aware of
(A) any fact which, if known on the date hereof, would have been required to be
set forth or disclosed pursuant to this Agreement, and (B) any impending or
threatened breach in any material respect of any of the party's representations
and warranties contained in this Agreement and with respect to the latter shall
use all reasonable efforts to remedy same.

    

    9.3           Name Change. As soon as
practicable after the Closing, ESI shall change its name to MBT Inc, DBA Micro
Bubble Technologies USA (MBTI) " or other
similar name approved by ESI SHAREHOLDERS.

    

    9.4           Increase in Authorized Capital.
As soon as practicable after the Closing, ESI will increase its
authorized shares of common stock from 100,000,000 shares to
500,000,000.

    

    9.5           Shares Issued to Tri Vu
Truong.  At Closing, 750,000 restricted shares of common stock
will be issued to Tri Vu Truong as compensation for services rendered to the
ESI.

    

    9.6           SEC Filings. The parties agree
that the following filings shall be made with the Securities and Exchange
Commission ("Commission"): (a) an information statement prepared pursuant to the
requirements of Rule 14f-1 under the Exchange Act shall be filed with the
Commission; (b) a report on Form 8-K will be filed with the Commission
disclosing the consummation of the Exchange; and, (c) any and all other filings
necessary to comply with the Exchange Act.

    

    9.7           Conduct of Business. During
the period from the date of this Agreement until the earlier of the Closing Date
or the termination of this Agreement in accordance with its terms, MBT shall
continue to conduct its businesses and maintain its business relationships in
the ordinary and usual course consistent with past practice and will not,
without limitation, without the prior written consent of ESI:

    

    (a)           Sell,
lease, assign transfer or otherwise dispose of any of its material assets,
including cash;

    

    (b)           Agree
to, or assume guarantee, endorse or otherwise in any way be or become
responsible or liable for, directly or indirectly, any material contingent
obligation;

     

     

    
      
         

      

      
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    (c)           Make
any material capital expenditures;

    

    (d)           Enter
into any transaction concerning a merger or consolidation other than with the
other party hereto or liquidate or dissolve itself (or suffer any liquidation or
dissolution) or convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of related transactions, all or a substantial part of
its property, business, or assets, or stock or securities convertible into stock
of any subsidiary, or make any material change in the present method of
conducting business;

    

    (e)           Declare
or pay any dividends or make any other distribution (whether in cash or
property) on any shares of its capital stock or purchase, redeem, retire or
otherwise acquire for value any shares of its capital stock or warrants or
options whether now or hereafter outstanding;

    

    (f)           Make
or suffer to exist any advances or loans to, or investments in any person, firm,
corporation or other business entity not a party to this Agreement;

    

    (g)           Enter
into any new material agreement or be or become liable under any new material
agreement, for the lease, hire or use of any real or personal property;
or

    

    (h)           Create,
incur, assume or suffer to exist, any mortgage, pledge, lien, charge, security
interest or encumbrance of any kind upon any of its property or assets, income
or profits, whether now owned or hereafter acquired.

    

    

    ARTICLE
X

    

    SECURITIES

    

    10.1           ESI Shares Not Registered. MBT
SHAREHOLDERS have been advised that the ESI Shares have not been and when
issued, will not be registered under the Securities Act of 1933, the securities
laws of any state of the United States or the securities laws of any other
country and that in issuing and selling the ESI Shares to MBT SHAREHOLDERS
pursuant hereto, ESI is relying upon the exemption from registration contained
in Reg. D of the Securities Act of 1933 and will bear a restrictive legend
substantially in the following form:

    

    The
securities evidenced hereby have not been registered under the Securities Act of
1933, as amended, nor any other applicable securities act (the "Acts"), and may
not be sold, transferred, assigned, pledged or otherwise distributed, unless
there is an effective registration statement under such Acts covering such
securities or the Company receives an opinion of counsel for the holder of these
securities (concurred on by counsel for the Company) stating that such sale,
transfer, assignment, pledge or distribution is exempt from or in compliance
with the registration and prospectus delivery requirements of such
Acts.

    

    

    
      
         

      

      
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    10.2           Indemnification by ESI. ESI
shall indemnify MBT SHAREHOLDERS and MBT in respect of, and hold MBT
SHAREHOLDERS and MBT harmless against, any and all debts, obligations and other
liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), monetary
damages, fines fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation attorneys fees and litigation costs)
incurred or suffered by MBT SHAREHOLDERS and MBT:

    

    

    (a)           resulting
from any misrepresentation, breach of warranty or failure to perform any
covenant or agreement of ESI contained in this Agreement; and

    

    (b)           resulting
from any liability of ESI incurred or resulting from activities that took place
prior to the Closing not disclosed on the ESI Financial Statements.

    

    

    10.3           Indemnification by MBT SHAREHOLDERS
and MBT. MBT SHAREHOLDERS and MBT shall jointly and severally indemnify
ESI in respect of, and hold ESI harmless against, any and all debts, obligations
and other liabilities (whether absolute, accrued, contingent, fixed or
otherwise, or whether known or unknown, or due or to become due or otherwise),
monetary damages, fines fees, penalties, interest obligations, deficiencies,
losses and expenses (including without limitation attorneys fees and litigation
costs) incurred or suffered by ESI:

    

    (a)           resulting
from any misrepresentation, breach of warranty or failure to perform any
covenant or agreement of MBT SHAREHOLDERS or MBT contained in this Agreement;
and,

    

    (b)           resulting
from any liability of MBT SHAREHOLDERS or MBT incurred or resulting from
activities that took place prior to the Closing not disclosed on the MBT
Financial Statements.

    

    ARTICLE
XI

    

    MISCELLANEOUS

    

    11.1           Expenses. Each party shall
each pay its own expenses incident to the negotiation, preparation, and carrying
out of this Agreement, including legal and accounting and audit
fees.

    

    11.2           Survival of Representations,
Warranties and Covenants. All statements contained in this Agreement or
in any certificate delivered by or on behalf of ESI or MBT SHAREHOLDERS or MBT
pursuant hereto, or in connection with the actions contemplated hereby shall be
deemed representations, warranties and covenants by MBT SHAREHOLDERS, MBT and
ESI as the case may be, hereunder. All representations, warranties, and
covenants made by ESI, or MBT SHAREHOLDERS or MBT in this Agreement, or pursuant
hereto, shall survive the Closing in a period of two (2) years.

    

    
      
         

      

      
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    11.3           Publicity. MBT SHAREHOLDERS,
MBT, and ESI shall not issue any press release or make any other public
statement, in each case, relating to, in connection with or arising out of this
Agreement or the transactions contemplated hereby, without obtaining the prior
approval of the other, which shall not be unreasonably withheld or delayed,
except that prior approval shall not be required if, in the reasonable judgment
of ESI prior approval by MBT SHAREHOLDERS or MBT would prevent the timely
dissemination of such release or statement in violation of applicable federal
securities laws, rules or regulations or policies of the Bulletin
Board.

     

    11.4           Non Disclosure. A disclosing
party will not at any time after the date of this Agreement, without the
recipient’s consent, except in the ordinary operation of its business or as
required by law, divulge, furnish to or make accessible to anyone any knowledge
or information with respect to confidential or secret processes, inventions,
discoveries, improvements, formulae, plans, material, devices or ideas or
know-how, whether patentable or not, with respect to any confidential or secret
aspects of such party (including, without limitation, customer lists, supplier
lists and pricing arrangements with customers or suppliers) ("Confidential
Information"). The parties will not at any time after the date of this Agreement
and prior to the Exchange use, divulge, furnish to or make accessible to anyone
any Confidential Information (other than to its representatives as part of its
due diligence or corporate investigation). Any information, which
(i)  at or prior to the time of disclosure bythe disclosing party was
generally available to the public through no breach of this covenant, (ii) was
available to the public on a non-confidential basis prior to its disclosure by
the disclosing party, or (iii) was made available to the public from a third
party provided that such third party did not obtain or disseminate such
information in breach of any legal obligation of the disclosing party, shall not
be deemed Confidential Information for purposes hereof, and the undertakings in
this covenant with respect to Confidential Information shall not apply thereto.
The undertakings of the parties set forth above in this Section 11.4 shall
terminate upon consummation of the Closing. If this Agreement is terminated
pursuant to the provisions of Article VIII or any other express right of
termination set forth in this Agreement, the recipient shall return to the
disclosing party all copies of all Confidential Information previously furnished
to it by the disclosing party.

    

    11.5           Succession and Assignments and Third
Party Beneficiaries. This Agreement may not be assigned (either
voluntarily or involuntarily) by any party hereto without the express written
consent of the other parties. Any attempted assignment in violation of this
Section shall be void and ineffective for all purposes. In the event of an
assignment permitted by this Section, this Agreement shall be binding upon the
heirs, successors and assigns of the parties hereto. There shall be no third
party beneficiaries of this Agreement except as expressly set forth herein to
the contrary.

    

    11.6           Notices. All notices,
requests, demands, or other communications with respect to this Agreement shall
be in writing and shall be (i) sent by facsimile transmission, (ii) sent by the
United States Postal Service or the PRC Postal Service, as the case may be,
registered or certified mail, return receipt requested, or (iii) personally
delivered by a nationally recognized express overnight courier service, charges
prepaid, to the following addresses (or such other addresses as the parties may
specify from time to time in accordance with this Section)

     

     

    
      
         

      

      
        -21-

        
          

        

      

      
         

      

    

     
                               
(a)           To MBT
SHAREHOLDERS:
    1250 S. Grove Ave, Suite 308,
Barrington Il 60010

    (b)           To
MBT:

               
1250 S. Grove Ave, Suite
308, Barrington Il 60010

    (c)           To
ESI:

    740 Notre-Dame W. Suite 1525, Montreal
(Quebec)

    

    Any such notice shall, when sent in
accordance with the preceding sentence, be deemed to have been given and
received on the earliest of (i) the day delivered to such address or sent by
facsimile transmission, (ii) the tenth business day following the date deposited
with the United States Postal Service, or (iii) 72 hours after shipment by such
courier service.

    

    11.7           Construction. This Agreement
shall be construed and enforced in accordance with the internal laws of the
State of Nevada without giving effect to the principles of conflicts of law
thereof. All parties hereby irrevocably submit to the exclusive jurisdiction of
the any state or federal court sitting in the state of Nevada for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waive, and agree not to assert in any suit, action or proceeding, any claim that
he/she/it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper.

    

    11.8           Counterparts. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which shall together constitute one and the same
Agreement.

    

    11.9           No Implied Waiver; Remedies.
No failure or delay on the part of the parties hereto to exercise any right,
power, or privilege hereunder or under any instrument executed pursuant hereto
shall operate as a waiver nor shall any single or partial exercise of any right,
power, or privilege preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. All rights, powers, and
privileges granted herein shall be in addition to other rights and remedies to
which the parties may be entitled at law or in equity.

    

    11.10         Entire Agreement. This
Agreement, including the Exhibits and Disclosure Schedules
attached hereto, sets forth the entire understandings of the parties with
respect to the subject matter hereof, and it incorporates and merges any and all
previous communications, understandings, oral or written as to the subject
matter hereof, and cannot be amended or changed except in writing, signed by the
parties.

    

    11.11         Headings. The headings of the
Sections of this Agreement, where employed, are

    for the
convenience of reference only and do not form a part hereof and in no way
modify,

    interpret
or construe the meanings of the parties.

    

    11.12         Severability. To the extent
that any provision of this Agreement shall be invalid or unenforceable, it shall
be considered deleted hereof and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full force and
effect.

     

     

    
      
         

      

      
        -22-

        
          

        

      

      
         

      

    

     

     

    11.13         Attorneys Fees. In the event
any legal action is brought to interpret or enforce this Agreement, the party
prevailing in such action shall be entitled to recover its attorney’s fees and
costs in addition to any other relief that it is entitled.

    

    11.14         Consultants. Each party
represents to the others that there is no broker or finder entitled to a fee or
other compensation for bringing the parties together to effect the
Exchange.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
         

      

      
        -23-

        
          

        

      

      
         

      

    

     

     

    IN WITNESS WHEREOF, the
parties hereto have executed this Agreement the day and year first above
written.

    

    

    
      
        	
                ESI:

              	
                ECOLOCAP
      SOLUTIONS INC.

                a
      Nevada Corporation

              
	 
      	 
      
	 
      
	 
      	 
      	
                By

              	
                TRI VU TRUONG

                Tri
      Vu Truong, President

              
	 
      	 
      	 
      	 
      

      

    

    

    

    

    
      
        	
                MBT:

              	
                MICRO BUBBLE TECHNOLOGIES,
      INC., a

                Nevada
      corporation

              
	 
      
	 
      	
                By:
      MICHAEL
      SIEGEL

              
	 
      	
                       Michael
      Siegel, President

              
	 
      	 
      

      

    

    

    

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                MBT
      SHAREHOLDERS:

                              	 
      	
                                 

                                SIGNATURE

                              
	 
      	 
      	 
      
	
                                Jeung
      Y. Kwak

                              	
                                JEUNG Y. KWAK

                              
	 
      	 
      	 
      
	
                                Michael
      Siegel

                              	 
      	
                                MICHAEL SIEGEL

                              
	 
      	 
      	 
      
	
                                Rob
      Egger

                              	 
      	
                                ROB EGGER

                              
	 
      	 
      	 
      
	
                                Bradley
      Snower

                              	 
      	
                                BRADLEY SNOWER

                              
	 
      	 
      	 
      
	
                                Young
      Yeal Kwak

                              	 
      	
                                YOUNG YEAL KWAK

                              
	 
      	 
      	 
      
	
                                Han
      Jung Kim

                              	 
      	
                                HAN JUNG KIM

                              
	 
      	 
      	 
      
	
                                Chi
      Woo Nam

                              	 
      	
                                CHI WOO NAM

                              
	 
      	 
      	 
      
	
                                Joong
      Haeng Lee

                              	 
      	
                                JOONG HAENG LEE

                              
	 
      	 
      	 
      
	
                                Hyeong
      Woo Choi

                              	 
      	
                                HYEONG WOO CHOI

                              
	 
      	 
      	 
      

                      

                    

                  

                

              

            

          

        

      

    

    

     

    
      
         

      

      
        -24-

        
          

        

      

      
         

      

    

    

    

    

     

    EXHIBIT
A

    

    MBT
SHAREHOLDERS

     

     

    
      

      

      
        	
                NAME

              	
                No.
      of Shares

              	
                Percentage
      Ownership

              
	 
      	 
      	 
      
	
                Jeung
      Kwak

              	
                800

              	
                40%

              
	
                Michael
      Siegel

              	
                660

              	
                33%

              
	
                Robert
      Egger Jr.

              	
                100

              	
                5%

              
	
                Bradley
      Snower

              	
                200

              	
                10%

              
	
                Young
      Yeal Kwak

              	
                150

              	
                7.5%

              
	
                Han
      Joong Kim

              	
                30

              	
                1.5%

              
	
                Chi
      Woo Nam

              	
                30

              	
                1.5%

              
	
                Joong
      Haeng Lee

              	
                15

              	
                .75%

              
	
                Hyong
      Woo Choi

              	
                15

              	
                .75%

              
	
                Total:

              	
                2000

              	
                100%

              

      

      
 

    

     

    
 

    
      
         

      

      
        -25-

        
          

        

      

      
         

      

    

    

    ESI Disclosure
Schedule

    

    The
Company has executed a lease for its Montreal office, at a minimum annual rent
of approximately $64,000 per year.

    The term
of the Montreal Lease is February 15, 2014.

    A
provision have been taken in the financial to cover the monthly lease of
$6,001.20 including taxes ($5,316.68 before taxes), for a period of 6 months =
$36,007.20 (or $31,900.08 before taxes), that covers Company’s default, after
vacating the premises.

    Office
Equipment: Balance at June 30, 2009     Net Book
Value   $16,440

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
         

      

      
        -26-

        
          

        

      

      
         

      

    

    

    

    MBT Disclosure
Schedule

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    

    
      
         

      

      
        -27-ex41.htm

Exhibit 4.1

 

 

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:

Original Conversion Price (subject to adjustment herein): $0.70

$_______

ORIGINAL ISSUE DISCOUNT SECURED CONVERTIBLE DEBENTURE

DUE ______

 THIS ORIGINAL ISSUE DISCOUNT SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued Original Issue Discount Secured Convertible Debentures of Beyond Commerce, Inc., a Nevada corporation, (the “ Company ”), having its principal
place of business at 9029 South Pecos, Suite 2800, Henderson, NV 89074, designated as its Original Issue Discount Secured Convertible Debenture due _______ (this debenture, the “ Debenture ” and, collectively with the other debentures of such series, the “ Debentures ”).

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 ______ on _____ (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, (a) capitalized
terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

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

 

 

 

 

  

1

  

 

 

“ 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) 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)(ii).

“ 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 or exercise of the Debentures and the Securities issued together with the Debentures), (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

  

 

 

“ 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(c).

“ 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).

“ Equity Conditions ” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have
paid all liquidated damages and other amounts owing to the Holder in respect of this Debenture, (c)(i) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction
Documents (and shares issuable in lieu of cash payments of interest) may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions or current public information requirements as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the Holder, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such
Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the Transaction Documents, (f) except for the Company’s default the secured note issued to ST. George Investments, LLC on June 4, 2009, there is no existing Event of Default
or no existing event which, with the passage of time or the giving of notice, would constitute an Event of Default, (g) the issuance of the shares in question (or, in the case of a Monthly Redemption, the shares issuable upon conversion in full of the  Monthly Redemption Amount)   to the Holder would not violate the limitations set forth in Section 4(c)(i) and Section 4(c)(ii) herein, (h) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control
Transaction that has not been consummated, (i) the Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material non-public information and (j) for each Trading Day in a period of 20 consecutive Trading Days prior to the applicable date in question, the daily trading volume for the Common Stock on the principal Trading Market exceeds (i) 173,821shares (subject to adjustment for forward and reverse stock splits and the like) per Trading Day.

 

 

 

  

3

  

 

 

“ Event of Default ” shall have the meaning set forth in Section 8(a).

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

 

“ Interest Conversion Rate ” means the lesser of (a) the Conversion Price or (b) 90% of the lesser of (i) the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable Interest Payment Date
or (ii) the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the date the applicable Interest Conversion Shares are issued and delivered if such delivery is after the Interest Payment Date.

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

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

 

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

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

“ Issuable Maximum ” shall have the meaning set forth in Section 4(c)(i).

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

“ Mandatory Default Amount ”  means the sum of (a) the greater of (i) 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, or (ii) 100% of the outstanding principal amount of this Debenture, plus 100% of accrued and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this
Debenture.

 

  

4

  

 

 

“ Monthly Conversion Period ” shall have the meaning set forth in Section 6(b) hereof.

 

“ Monthly Conversion Price ” shall have the meaning set forth in Section 6(b) hereof.

 

“ Monthly Redemption ” means the redemption of this Debenture pursuant to Section 6(b) hereof.

 

“ Monthly Redemption Amount ” means, as to a Monthly Redemption, $______, plus accrued but unpaid interest, liquidated damages and any other amounts then owing to the Holder in respect of this Debenture.

“ Monthly Redemption Date ” means the 1 st of each month, commencing six months from the original issue date and terminating upon the full redemption of this Debenture.

“ Monthly Redemption Notice ” shall have the meaning set forth in Section 6(b) hereof.

 

 “ New York Courts ” shall have the meaning set forth in Section 9(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) the Indebtedness existing on the Original Issue Date and set forth on Schedule 3.1(aa) attached to the Purchase
Agreement, (c) lease obligations and purchase money indebtedness of up to $200,000, 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 (i) is expressly subordinate to the Debentures (d) under the definition of Exempt Issuance (as defined in the Purchase Agreement).

“ 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) thereunder; 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.

 

 

 

  

5

  

 

 

“ Pre-Redemption Conversion Shares ” shall have the meaning set forth in Section 6(b) hereof.

“ Purchase Agreement ” means the Amended and Restated Securities Purchase Agreement, dated as of July 30, 2009 among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

“ 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).

“ Subsidiary ” shall have the meaning set forth in the Purchase Agreement.

“ Threshold Period ” shall have the meaning set forth in Section 6(d).

“ 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 American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
the New York Stock Exchange or the OTC Bulletin Board.

“ Transaction Documents ” shall have the meaning set forth in the Purchase Agreement.

“ 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 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 Holder and reasonably acceptable to the Company.

 

 

 

 

  

6

  

 

 

Section 2 .       Interest .

a)   Payment of Interest in Cash or Kind . The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 10% per annum, payable on each Monthly Redemption Date (as to that principal
amount then being redeemed), 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 or, at the Company’s option, in duly authorized, validly issued, fully paid and non-assessable shares of Common Stock
at the Interest Conversion Rate (the dollar amount to be paid in shares, the “ Interest Share Amount ”) or a combination thereof; provided , however , that payment in shares of Common Stock may only occur if (i) all of the Equity Conditions have been met (unless waived by the Holder in writing) during the
20 Trading Days immediately prior to the applicable Interest Payment Date  (the “ Interest Notice Period ”) and through and including the date such shares of Common Stock are actually issued to the Holder, (ii) the Company shall have given the Holder notice in accordance with the notice requirements set forth below and (iii) as to such Interest Payment Date, prior to such Interest Notice Period (but not more than five (5) Trading
Days prior to the commencement of such Interest Notice Period), the Company shall have delivered to the Holder’s account with The Depository Trust Company a number of shares of Common Stock to be applied against such Interest Share Amount equal to the quotient of (x) the applicable Interest Share Amount divided by (y) the lesser of the (i) then Conversion Price and (ii) the Interest Conversion Rate assuming for such purposes that the Interest Payment Date is the Trading Day immediately prior to the commencement
of the Interest Notice Period (the “ Interest Conversion Shares ”).

 

b)   Company’s Election to Pay Interest in Cash or Shares of Common Stock .  Subject to the terms and conditions herein, the decision whether to pay interest hereunder in cash, shares of Common Stock or a combination thereof shall be at the sole discretion
of the Company.  Prior to the commencement of any Interest Notice Period, the Company shall deliver to the Holder a written notice of its election to pay interest hereunder on the applicable Interest Payment Date either in cash, shares of Common Stock or a combination thereof and the Interest Share Amount as to the applicable Interest Payment Date, provided that the Company may indicate in such notice that the election contained in such notice shall apply to future Interest Payment Dates until revised
by a subsequent notice.  During any Interest Notice Period, the Company’s election (whether specific to an Interest Payment Date or continuous) shall be irrevocable as to such Interest Payment Date.  Subject to the aforementioned conditions, failure to timely deliver such written notice to the Holder shall be deemed an election by the Company to pay the interest on such Interest Payment Date in cash.  At any time the Company delivers a notice to the Holder of its election to
pay the interest in shares of Common Stock, the Company shall timely file a prospectus supplement pursuant to Rule 424 disclosing such election.  The aggregate number of shares of Common Stock otherwise issuable to the Holder on an Interest Payment Date shall be reduced by the number of Interest Conversion Shares previously issued to the Holder in connection with such Interest Payment Date.

 

 

 

 

  

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c)   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.  Payment of interest in shares of Common Stock (other than the Interest Conversion Shares issued prior to an Interest Notice Period) shall otherwise occur pursuant to Section 4(d)(ii) herein and, solely for purposes of the payment of interest in shares, the Interest Payment Date shall be deemed the Conversion Date.  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 ”). Except as otherwise provided herein, if at any time the Company pays interest partially
in cash and partially in shares of Common Stock to the holders of the Debentures, then such payment of cash shall be distributed ratably among the holders of the then-outstanding Debentures based on their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement.

d)   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 18% 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. Notwithstanding anything to the contrary contained herein, if, on any Interest Payment Date the Company has elected to pay accrued interest in the form of Common Stock but the Company is not permitted to pay accrued interest in Common Stock because it fails to satisfy the conditions for payment in Common Stock set forth in Section 2(a) herein, then, at the option
of the Holder, the Company, in lieu of delivering either shares of Common Stock pursuant to this Section 2 or paying the regularly scheduled interest payment in cash, shall deliver, within three (3) Trading Days of each applicable Interest Payment Date, an amount in cash equal to the product of (x) the number of shares of Common Stock otherwise deliverable to the Holder in connection with the payment of interest due on such Interest Payment Date multiplied by (y) the highest VWAP during the period commencing
on the Interest Payment Date and ending on the Trading Day prior to the date such payment is actually made.  If any Interest Conversion Shares are issued to the Holder in connection with an Interest Payment Date and are not applied against an Interest Share Amount, then the Holder shall promptly return such excess shares to the Company.

 

 

 

 

  

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e)   Prepayment .  Except as otherwise set forth in this Debenture, the Company may not 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 Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase 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 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 $0.70, subject to adjustment herein (the “ Conversion
Price ”).

c)   Adjustment.   If  (i) the Company does not repay this Note in full on or before January 30, 2010 or (ii) upon an “Event of Default”, the Conversion Price shall be reset to equal to 80% of the lowest closing bid price for three days prior
to the Conversion Date.

d)   Conversion Limitations .

i.   Reserved .

ii.   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)(ii), 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)(ii) 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)(ii), 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)(ii), 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)(ii) shall continue to apply.  Any such increase or decrease will not be effective until the 61 st 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)(ii) 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.

 

 

 

 

  

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e)  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.

 

ii.   Delivery of Certificate Upon Conversion . Not later than three 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 which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Debenture (including, if the Company has given continuous notice pursuant to Section 2(b)
for payment of interest in shares of Common Stock at least 20 Trading Days prior to the date on which the Notice of Conversion is delivered to the Company, shares of Common Stock representing the payment of accrued interest otherwise determined pursuant to Section 2(a) but assuming that the Interest Notice Period is the 20 Trading Days period immediately prior to the date on which the Notice of Conversion is delivered to the Company and excluding for such issuance the condition that the Company deliver Interest
Conversion Shares as to such interest payment) and (B) a bank check in the amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash). On or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, the Company shall use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this Section 4(d) electronically through the Depository Trust Company or another established
clearing corporation performing similar functions.

 

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, ,  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 (5 th ) Trading Day after such liquidated damages begin to accrue) for each Trading Day after such third (3 rd ) 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 8 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.

 

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.

 

 

 

  

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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 and
payment of interest hereunder.  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 and, if the Registration Statement is then effective under the Securities Act, shall be registered for public sale in accordance with such Registration Statement.

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.

 

 

 

  

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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.

 

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.

 

 

 

 

  

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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.

 

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.

 

 

 

 

  

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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.

f)   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.

g)   Notice to the Holder .

 

 

  

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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.

 

Section 6 .       Redemption and Forced Conversion .

a)   Reserved

b)   Monthly Redemption .  On each Monthly Redemption Date, the Company shall redeem the Monthly Redemption Amount (the “ Monthly Redemption ”). The Monthly Redemption Amount payable
on each Monthly Redemption Date shall be paid in cash at the rate of 110% of the Monthly Redemption Amount; provided , however , as to any Monthly Redemption and upon 30 Trading Days’ prior written irrevocable notice (the “ Monthly Redemption Notice ”), in lieu of a cash redemption payment the Company
may elect to pay all or part of a Monthly Redemption Amount in Conversion Shares based on a conversion price equal to the lesser of (i) the then Conversion Price and (ii) 80% of the average of the VWAPs for the 5 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable Monthly Redemption Date (subject to adjustment for any stock dividend, stock split, stock combination or other similar event affecting the Common Stock during such 5 Trading Day period) (the price calculated
during the 5 Trading Day period immediately prior to the Monthly Redemption Date, the “ Monthly Conversion Price ” and such 5 Trading Day period, the “ Monthly Conversion Period ”); provided , further , that the Company may not pay
the Monthly Redemption Amount in Conversion Shares unless (y) from the date the Holder receives the duly delivered Monthly Redemption Notice through and until the date such Monthly Redemption is paid in full, the Equity Conditions have been satisfied, unless waived in writing by the Holder, and (z) as to such Monthly Redemption, prior to such Monthly Conversion Period (but not more than 5 Trading Days prior to the commencement of the Monthly Conversion Period), the Company shall have delivered to the Holder’s
account with The Depository Trust Company a number of shares of Common Stock to be applied against such Monthly Redemption Amount equal to the quotient of (x) the applicable Monthly Redemption Amount divided by (y) the lesser of (A) the Conversion Price and (B) 80% of the average of the 5 VWAPs during the period ending on the 3 rd Trading Day immediately prior to the date of the Monthly Redemption Notice (the “ Pre-Redemption
Conversion Shares ”).  The Holder may convert, pursuant to Section 4(a), any principal amount of this Debenture subject to a Monthly Redemption at any time prior to the date that the Monthly Redemption Amount, plus accrued but unpaid interest, liquidated damages and any other amounts then owing to the Holder are due and paid in full.  Unless otherwise indicated by the Holder in the applicable Notice of Conversion, any principal amount of this Debenture converted during the applicable
Monthly Conversion Period until the date the Monthly Redemption Amount is paid in full shall be first applied to the principal amount subject to the Monthly Redemption Amount payable in cash and then to the Monthly Redemption Amount payable in Conversion Shares.  Any principal amount of this Debenture converted during the applicable Monthly Conversion Period in excess of the Monthly Redemption Amount shall be applied against the last principal amount of this Debenture scheduled to be redeemed hereunder,
in reverse time order from the Maturity Date; provided , however , if any such conversion is applied against such Monthly Redemption Amount, the Pre-Redemption Conversion Shares, if any were issued in connection with such Monthly Redemption or were not already applied to such conversions, shall be first applied against such conversion.  The Company covenants and agrees that
it will honor all Notices of Conversion tendered up until such amounts are paid in full.  The Company’s determination to pay a Monthly Redemption in cash, shares of Common Stock or a combination thereof shall be applied ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement.  At any time the Company delivers a notice to the Holder of its election to pay the Monthly
Redemption Amount in shares of Common Stock, the Company shall file a prospectus supplement pursuant to Rule 424 disclosing such election.

 

 

 

  

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c)   Redemption Procedure .  The payment of cash or issuance of Common Stock, as applicable, pursuant to a Monthly Redemption shall be payable on the Monthly Redemption Date.  If any portion of the payment pursuant to an Monthly Redemption shall
not be paid by the Company by the applicable due date, interest shall accrue thereon at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law until such amount is paid in full.  Notwithstanding anything herein contained to the contrary, if any portion of the Monthly Redemption Amount remains unpaid after such date, the Holder may elect, by written notice to the Company given at any time thereafter, to invalidate such Monthly Redemption, ab initio ,
and, with respect to the Company’s failure to honor the Optional Redemption, the Company shall have no further right to exercise such Optional Redemption.  Notwithstanding anything to the contrary in this Section 6, the Company’s determination to redeem in cash or its elections under Section 6(b) shall be applied ratably among the Holders of Debentures. The Holder may elect to convert the outstanding principal amount of the Debenture pursuant to Section 4 prior to actual payment in cash
for any redemption under this Section 6 by the delivery of a Notice of Conversion to the Company.

 

d)   Reserved .

Section 7 .     Negative Covenants . As long as any portion of this Debenture remains outstanding, 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 more than a de minimis number of shares of its Common Stock or Common Stock Equivalents other than as to (i) the Conversion Shares
or Warrant Shares as permitted or required under the Transaction Documents and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors during the term of this Debenture;

 

 

  

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e)   repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than 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 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); or

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

 

Section 8 .     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 clause (B) above, is not cured within 3 Trading 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 (xi) 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 (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which the Company or any Subsidiary is obligated (and not covered by
clause (vi) below);

 

 

 

  

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iv.   any representation or warranty made in this Debenture, any other Transaction Documents, 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 Company or any Subsidiary shall default on any of its obligations under 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 that (a) involves an obligation greater than $150,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

vii.   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;

viii.   the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);

ix.   Reserved;

x.   Reserved;

xi.   the Company shall fail for any reason to deliver certificates to a Holder prior to the fifth 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;

xii.   any Person shall breach any agreement delivered to the Holder pursuant to Section 2.2 of the Purchase Agreement; or

 

 

 

  

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xiii.   any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than $50,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days.

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 18% 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 8(b).  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 9 .     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 9(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.

 

 

 

  

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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.  This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.

 

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)   Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “ New
York Courts ”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such
New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient service of process
and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Debenture or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Debenture, then
the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

 

 

 

  

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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.

 

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 other Transaction Documents 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 9(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)

 

 

 

 

  

22

  

 

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.

 

	  	
BEYOND COMMERCE, INC.
	  
	  	  	  	  
	  	
By:
	/s/ 	  
	  	  	
Name: Robert McNulty

Title: Chief Executive Officer
	  
	  	  	  	  
	  	  	  	  

 

 

 

 

  

23

  

 

ANNEX A

NOTICE OF CONVERSION

 The undersigned hereby elects to convert principal under the [___ % [Original Issue Discount [Senior [Secured Convertible Debenture due [________ of [____________, a [____________ 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:

Payment of Interest in Common Stock __ yes  __ no

If yes, $_____ of Interest Accrued on Account of Conversion at Issue.

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:___________________                                           

 

 

 

  

 

  

 

Schedule 1

CONVERSION SCHEDULE

The [____ % [Original Issue Discount [Senior [Secured Convertible Debentures due on [________ in the aggregate principal amount of $____________ are issued by [____________, a [________ 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

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