Document:

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: November   , 2011

Original
Conversion Price (subject to adjustment herein): $.50

 

$                           

 

12%
SUBORDINATED CONVERTIBLE DEBENTURE

DUE [one
year],  2011

 

THIS 12% SUBORDINATED CONVERTIBLE
DEBENTURE is one of a series of duly authorized and validly issued 12% Subordinated Convertible Debentures
of WASTE2ENERGY HOLDINGS, INC., a Delaware corporation, (the “Company”),
having its principal place of business at 1 Chick Springs Road, Suite 218,
Greenville, SC 29609, designated as its 12% Convertible Debenture due
    , 2011 (this debenture, the “Debenture” and,
collectively with the other debentures of such series, the “Debentures”).  This Debenture and all rights hereunder are
expressly subordinate to the Company’s 12% Senior Convertible Debentures.

 

FOR
VALUE RECEIVED, the Company promises to pay to
                                                
or its registered assigns (the “Holder”), or shall have paid pursuant to
the terms hereunder, the principal sum of
$                              
on [one year], 2011 (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

 

1

 

meanings set forth in the
Subscription Agreement and (b) the following terms shall have the
following meanings:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Change
of Control Transaction” means the occurrence after the date hereof of any
of (a) an acquisition after the date hereof by an individual or legal
entity or “group” (as described in Rule 13d-5(b)(1) promulgated under
the Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Company, by contract or otherwise) of in
excess of 33% of the voting securities of the Company 

 

2

 

(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.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options
to employees, officers or directors of the Company pursuant to any stock or
option plan duly adopted for such purpose, by a majority of the non-employee
members of the Board 

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Subscription
Agreement”  means the Subscription
Agreement between the Company and the Holder dated [                ], 2010.

 

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

 

5

 

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

 

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

 

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

 

Section 2.                                            Interest.

 

a)                          Payment of
Interest in Cash. The Company shall pay (or cause to be paid)
interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture at the rate of 12% per annum, payable quarterly
on October 1, January 1, April 1 and July 1, beginning on
the first such date after the Original Issue Date, on each Conversion Date (as
to that principal amount then being converted), and on the Maturity Date (each
such date, an “Interest Payment Date”) (if any Interest Payment Date is
not a Business Day, then the applicable payment shall be due on the next
succeeding Business Day), in cash.  The
Company, Charles Vista LLC and Sichenzia Ross Friedman Ference LLP (“SRFF”)
have entered into an escrow agreement (the 

 

6

 

“Escrow
Agreement”).  Pursuant to the Escrow
Agreement, at each closing for the Debentures, an amount equal to the interest
payable on the Debentures sold in that closing will be placed into escrow with
SRFF as escrow agent.  In accordance with
and subject to the terms of the Escrow Agreement SRFF will make interest
payments to the subscribers from the money deposited in escrow.

 

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

 

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

 

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

 

Section 3.                                            Registration of
Transfers and Exchanges.

 

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

 

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

 

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

 

7

 

Section 4.                                            Conversion.

 

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

 

b)                                     Conversion
Price.  The conversion price in effect
on any Conversion Date shall be equal to $.50 (the “Conversion
Price”).

 

c)                                      Holder’s
Restriction on Conversion. The Company shall not effect any conversion
of this Debenture, and a Holder shall not have the right to convert any portion
of this Debenture, to the extent that after giving effect to the conversion set
forth on the applicable Notice of Conversion, the Holder (together with the
Holder’s Affiliates, and any other person or entity acting as a group together
with the Holder or any of the Holder’s Affiliates) would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below).  For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Debenture with respect
to which such determination is being made, but shall exclude the number of
shares of Common Stock which are issuable upon (A) conversion of the
remaining, unconverted principal amount of this Debenture beneficially owned by
the Holder or any of its Affiliates and (B) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, any other Debentures or the
Warrants) beneficially owned by the Holder or any of its Affiliates. 
Except as set forth in the preceding sentence, for purposes of this Section 4(c),
beneficial 

 

8

 

ownership
shall be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder.  To the extent that the limitation contained
in this Section 4(c) applies, the determination of whether this
Debenture is convertible (in relation to other securities owned by the Holder
together with any Affiliates) and of which principal amount of this Debenture
is convertible shall be in the sole discretion of the Holder, and the
submission of a Notice of Conversion shall be deemed to be the Holder’s
determination of whether this Debenture may be converted (in relation to other
securities owned by the Holder together with any Affiliates) and which
principal amount of this Debenture is convertible, in each case subject to the
Beneficial Ownership Limitation. To ensure compliance with this restriction, the
Holder will be deemed to represent to the Company each time it delivers a
Notice of Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Company shall have no
obligation to verify or confirm the accuracy of such determination.  In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 4(c), in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (A) the Company’s most recent periodic or annual
report, as the case may be; (B) a more recent public announcement by the
Company; or (C) a more recent notice by the Company or the Company’s
transfer agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
this Debenture, by the Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock issuable upon conversion of this Debenture held by the
Holder.  The Holder, upon not less than
61 days’ prior notice to the Company, may increase or decrease the Beneficial
Ownership Limitation provisions of this Section 4(c), provided that the
Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon conversion of this Debenture held by
the Holder and the Beneficial Ownership Limitation provisions of this Section 4(c) shall
continue to apply.  Any such increase or
decrease will not be effective until the 61st day after
such notice is delivered to the Company. 
The Beneficial Ownership Limitation provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict conformity
with the terms of this Section 4(c) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation contained herein or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder
of this Debenture.

 

9

 

d)                                     Mechanics of
Conversion.

 

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

 

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

 

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

 

iv.                                   Obligation
Absolute; Partial Liquidated Damages.  The Company’s obligations to issue and
deliver the Conversion Shares upon conversion of this Debenture in accordance
with the terms hereof are absolute and unconditional, irrespective of any
action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such Conversion
Shares; provided, however, that such delivery shall not operate
as a waiver by the Company of any such action the Company may have against the
Holder.  In the event the Holder of this
Debenture shall elect to convert any or all of the outstanding principal amount
hereof, the Company may not refuse conversion based on any claim that the
Holder or anyone associated or affiliated with the Holder has been engaged in
any violation of law, agreement or for any other reason, unless an injunction
from a court, on notice to Holder, restraining and or enjoining conversion of
all or part of this Debenture shall have been sought and obtained, and the
Company posts a surety bond for the benefit of the Holder in the amount of 150%
of the outstanding principal amount of this Debenture, which is subject to the
injunction, which bond shall remain in effect until the 

 

10

 

completion
of arbitration/litigation of the underlying dispute and the proceeds of which
shall be payable to the Holder to the extent it obtains judgment.  In the absence of such injunction, the
Company shall issue Conversion Shares or, if applicable, cash, upon a properly
noticed conversion.  If the Company fails
for any reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the third Trading Day after the
Conversion Date, the Company shall pay to the Holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of principal amount being
converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth
(5th) Trading Day after such liquidated damages begin to accrue) for each
Trading Day after such third (3th) Trading Day until such certificates are
delivered.  Nothing herein shall limit a
Holder’s right to pursue actual damages or declare an Event of Default pursuant
to Section 9 hereof for the Company’s failure to deliver Conversion Shares
within the period specified herein and the Holder shall have the right to
pursue all remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.  The exercise of any such rights
shall not prohibit the Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.

 

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 

 

11

 

$1,000.  The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In
and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of this
Debenture as required pursuant to the terms hereof.

 

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

 

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

 

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

 

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

 

12

 

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 

 

13

 

clarification,
whether or not the Company provides a Dilutive Issuance Notice pursuant to this
Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is
entitled to receive a number of Conversion Shares based upon the Base
Conversion Price on or after the date of such Dilutive Issuance, regardless of
whether the Holder accurately refers to the Base Conversion Price in the Notice
of Conversion.

 

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

 

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

 

e)                                      Fundamental
Transaction. If, at any time while this Debenture is
outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one transaction or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to 

 

14

 

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)                                        RESERVED.

 

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

 

h)                                     Notice to the
Holder.

 

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

 

15

 

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.                                            Reserved.

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section
8.                                            Holder’s Right
to Accelerate.

 

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

 

Section
9.                                            Events of
Default.

 

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

 

17

 

of
any court, or any order, rule or regulation of any administrative or
governmental body):

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

18

 

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

 

Section
10.                                      Miscellaneous.  

 

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

 

b)                                     Absolute
Obligation. Except as expressly provided herein, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and 

 

19

 

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.

 

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

 

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

 

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

 

20

 

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

 

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

 

 

(Signature
Pages Follow)

 

21

 

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.

 

 

	
   

  	
  WASTE2ENERGY HOLDINGS, INC.  

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:
  Peter Bohan

  
	
   

  	
   

  	
  Title:
  Chief Executive Officer 

  

 

22

 

ANNEX A

 

NOTICE OF CONVERSION

 

The
undersigned hereby elects to convert principal under the 12% Subordinated Convertible Debenture due
       2011 of Waste2Energy Holdings, Inc., a Delaware corporation (the “Company”), into shares of common stock (the “Common
Stock”), of the Company according to the conditions hereof, as of the date
written below.  If shares of Common Stock
are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith.  No
fee will be charged to the holder for any conversion, except for such transfer
taxes, if any.

 

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

 

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

 

	
  Conversion calculations:

  	
   

  
	
   

  	
   

  
	
   

  	
  Date to Effect Conversion:

  
	
   

  	
   

  
	
   

  	
  Principal Amount of
  Debenture to be Converted:

  
	
   

  	
   

  
	
   

  	
  Number of shares of Common
  Stock to be issued:

  
	
   

  	
   

  
	
   

  	
  Signature:

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
   

  
	
   

  	
  Address for Delivery of
  Common Stock Certificates:

  
	
   

  	
   

  
	
   

  	
  Or

  
	
   

  	
   

  
	
   

  	
  DWAC Instructions:

  
	
   

  	
   

  
	
   

  	
  Broker No:

  
	
   

  	
  Account No:

  

 

23

 

Schedule 1

 

CONVERSION SCHEDULE

 

The 12% Subordinated Convertible Debentures due on
      , 2011 in the aggregate principal amount of
$                        
are issued by Waste2Energy Holdings,
Inc., a Delaware corporation.  This
Conversion Schedule reflects conversions made under Section 4 of the above
referenced Debenture.

 

Dated:

 

	
  Date of Conversion

  (or for first entry,

  Original Issue Date)

  	
   

  	
  Amount of

  Conversion

  	
   

  	
  Aggregate

  Principal

  Amount

  Remaining

  Subsequent to

  Conversion

  (or original

  Principal

  Amount)

  	
   

  	
  Company Attest

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

24Exhibit
4.2

 

NEITHER THIS SECURITY NOR ANY SECURITIES WHICH MAY BE ISSUED UPON
EXERCISE OF THIS SECURITY HAVE BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY U.S.
STATE OR OTHER JURISDICTION OR ANY EXCHANGE OR SELF-REGULATORY ORGANIZATION, IN
RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, AND SUCH OTHER LAWS AND REQUIREMENTS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD, EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR LISTING OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, SUCH REGISTRATION AND/OR LISTING
REQUIREMENTS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH WILL BE REASONABLY ACCEPTABLE TO THE
COMPANY.

 

WASTE2ENERGY HOLDINGS, INC.

 

COMMON STOCK WARRANT

 

	
  No.           

  	
   

  	
  [        ],
  2010

  

 

Waste2Energy
Holdings, Inc. , a Delaware corporation (the “Company”),
hereby certifies that
                                              ,
its permissible transferees, designees, successors and assigns (collectively,
the “Holder”), for value received, is
entitled to purchase from the Company at any time and from time to time
commencing on the date first appearing above (the “Issuance
Date”), up to and through 12:01a.m. (EST) on the date three (3) years
from the Issuance Date (the “Termination Date”)
up to
              
shares (each, a “Share” and
collectively the “Shares”) of
the Company’s common stock, at an exercise price per Share equal to $.50 (the “Exercise Price”).  The number of Shares purchasable hereunder
and the Exercise Price are subject to adjustment as provided in Section 4
hereof.

 

1.            Method of
Exercise; Payment.

 

(a)           Cash
Exercise.  The purchase rights
represented by this Warrant may be exercised, for cash only, by the Holder, in
whole or in part, at any time, or from time to time, by the surrender of this
Warrant (with the notice of exercise form (the “Notice of
Exercise”) attached hereto as Exhibit A duly
executed) at the principal office of the Company, and by payment to the Company
of an amount equal to the Exercise Price multiplied by the number of the Shares
being purchased, which amount may be paid, at the election of the Holder, by
wire transfer or certified check payable to the order

 

1

 

of
the Company. The person or persons in whose name(s) any certificate(s) representing
Shares shall be issuable upon exercise of this Warrant shall be deemed to have
become the holder(s) of record of, and shall be treated for all purposes
as the record holder(s) of, the Shares represented thereby (and such
Shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised.

 

(b)           Stock Certificates.  In the event of any exercise of the rights
represented by this Warrant, as promptly as practicable after this Warrant is
surrendered and delivered to the Company along with all other appropriate
documentation on or after the date of exercise and in any event within ten (10) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of Shares issuable upon such exercise. 
In the event this Warrant is exercised in part, the Company at its
expense will execute and deliver a new Warrant of like tenor exercisable for
the number of Shares for which this Warrant may then be exercised.

 

(c)           Taxes.  The issuance of the Shares upon the exercise
of this Warrant, and the delivery of certificates or other instruments
representing such Shares, shall be made without charge to the Holder for any
tax or other charge in respect of such issuance.

 

2.            Warrant.

 

(a)           Exchange, Transfer and Replacement.  At any time prior to the exercise hereof,
this Warrant may be exchanged upon presentation and surrender to the Company,
alone or with other warrants of like tenor of different denominations
registered in the name of the same Holder, for another warrant or warrants of
like tenor in the name of such Holder exercisable for the aggregate number of
Shares as the warrant or warrants surrendered.

 

(b)           Replacement of Warrant.  Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction, or mutilation of this Warrant
and, in the case of any such loss, theft, or destruction, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company,
or, in the case of any such mutilation, upon surrender and cancellation of this
Warrant, the Company, at its expense, will execute and deliver in lieu thereof,
a new Warrant of like tenor.

 

(c)           Cancellation; Payment of Expenses.  Upon the surrender of this Warrant in connection
with any transfer, exchange or replacement as provided in this Section 2,
this Warrant shall be promptly canceled by the Company.  The Holder shall pay all taxes and all other
expenses (including legal expenses, if any, incurred by the Holder or transferees)
and charges payable in connection with the preparation, execution and delivery
of Warrants pursuant to this Section 2.

 

2

 

(d)           Warrant
Register.  The Company shall
maintain, at its principal executive offices (or at the offices of the transfer
agent for the Warrant or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant (the “Warrant Register”), in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.

 

3.            Rights and Obligations of Holders of this Warrant.  The Holder of this Warrant shall not, by
virtue hereof, be entitled to any rights of a stockholder in the Company,
either at law or in equity; provided, however, that in the event
any certificate representing shares of Common Stock or other securities is
issued to the holder hereof upon exercise of this Warrant, such holder shall,
for all purposes, be deemed to have become the holder of record of such Common
Stock on the date on which this Warrant, together with a duly executed Notice
of Exercise, was surrendered and payment of the aggregate Exercise Price was
made, irrespective of the date of delivery of such Common Stock certificate.

 

4.            Adjustments.

 

(a)           Stock
Dividends, Reclassifications, Recapitalizations, Etc.  While this Warrant is outstanding, in the
event the Company:  (i) pays a dividend
in Common Stock or makes a distribution in Common Stock, (ii) subdivides
its outstanding Common Stock into a greater number of shares,
(iii) combines its outstanding Common Stock into a smaller number of
shares or (iv) increases or decreases the number of shares of Common Stock
outstanding by reclassification of its Common Stock (including a
recapitalization in connection with a consolidation or merger in which the
Company is the continuing corporation), then (1) the Exercise Price on the
record date of such division or distribution or the effective date of such
action shall be adjusted by multiplying such Exercise Price by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event, and
(2) the number of shares of Common Stock for which this Warrant may be
exercised immediately before such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the Exercise Price immediately
before such event and the denominator of which is the Exercise Price
immediately after such event.

 

(b)          Combination:
Liquidation.  While this Warrant is
outstanding, (i) In the event of a Combination (as defined below), each
Holder shall have the right to receive upon exercise of the Warrant the kind
and amount of shares of capital stock or other securities or property which
such Holder would have been entitled to receive upon or as a result of such
Combination had such Warrant been exercised immediately prior to such event
(subject to further adjustment in accordance with the terms hereof).  Unless paragraph (ii) is applicable
to a Combination, the Company shall provide that the surviving or acquiring
Person (as defined below) (the “Successor Company”)
in such Combination will assume by written instrument the obligations under
this Section 4 and the obligations to deliver to the Holder such
shares of stock, securities or assets as, in

 

3

 

accordance
with the foregoing provisions, the Holder may be entitled to acquire. “Combination” means an event in
which the Company consolidates with, mergers with or into, or sells all or
substantially all of its assets to another Person, where “Person”
means any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity; (ii) In the event of (x) a Combination where
consideration to the holders of Common Stock in exchange for their shares is
payable solely in cash or (y) the dissolution, liquidation or winding-up
of the Company, the Holders shall be entitled to receive, upon surrender of
their Warrant, distributions on an equal basis with the holders of Common Stock
or other securities issuable upon exercise of the Warrant, as if the Warrant
had been exercised immediately prior to such event, less the Exercise
Price.  In case of any Combination
described in this Section 4, the surviving or acquiring Person and,
in the event of any dissolution, liquidation or winding-up of the Company, the
Company, shall deposit promptly with an agent or trustee for the benefit of the
Holders of the funds, if any, necessary to pay to the Holders the amounts to
which they are entitled as described above. 
After such funds and the surrendered Warrant are received, the Company
is required to deliver a check in such amount as is appropriate (or, in the
case or consideration other than cash, such other consideration as is
appropriate) to such Person or Persons as it may be directed in writing by the
Holders surrendering such Warrant.

 

(c) Notice of Adjustment.  Whenever the Exercise Price or the number of
shares of Common Stock and other property, if any, issuable upon exercise of
the Warrant is adjusted, as provided in this Section 4, the Company
shall deliver to the holders of the Warrant in accordance with Section 10
a certificate of the Company’s Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which (i) the
Board of Directors determined the fair value of any evidences of indebtedness,
other securities or property or warrants, options or other subscription or
purchase rights and (ii) the Current Market Value (as defined below) of
the Common Stock was determined, if either of such determinations were
required), and specifying the Exercise Price and number of shares of Common
Stock issuable upon exercise of the Warrant after giving effect to such
adjustment.

 

(d)  Notice of Certain Transactions.  While this Warrant is outstanding, in the
event that the Company shall propose (a) to pay any dividend payable in
securities of any class to the holders of its Common Stock or to make any other
non-cash dividend or distribution to the holders of its Common Stock,
(b) to offer the holders of its Common Stock rights to subscribe for or to
purchase any securities convertible into shares of Common Stock or shares of
stock of any class or any other securities, rights or options, (c) to
effect any capital reorganization, reclassification, consolidation or merger
affecting the class of Common Stock, as a whole, or (d) to effect the
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
the Company shall, within the time limits specified below, send to each Holder
a notice of such proposed action or offer. 
Such notice shall be mailed to the Holders at their addresses as they
appear in the Warrant Register, which shall specify the record date for the
purposes of such dividend,

 

4

 

distribution
or rights, or the date such issuance or event is to take place and the date of
participation therein by the holders of Common Stock, if any such date is to be
fixed, and shall briefly indicate the effect of such action on the Common Stock
and on the number and kind of any other shares of stock and on other property,
if any, and the number of shares of Common Stock and other property, if any,
issuable upon exercise of each Warrant and the Exercise Price after giving
effect to any adjustment pursuant to Section 4 which will be
required as a result of such action. 
Such notice shall be given as promptly as possible and (x) in the
case of any action covered by clause (a) or (b) above, at least ten (10) days
prior to the record date for determining holders of the Common Stock for
purposes of such action or (y) in the case of any other such action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of Common Stock, whichever
shall be the earlier.

 

(e)  Current Market Value.  The “Current Market Value”
per share of Common Stock or any other security at any date means (i) if
the security is not registered under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and/or traded
on a national securities exchange, quotation system or bulletin board, (a) the
value of the security, determined in good faith by the Board of Directors of
the Company and certified in a board resolution, based on the most recently
completed arm’s-length transaction between the Company and a Person other than
an affiliate of the Company or between any two such Persons and the closing of
which occurs on such date or shall have occurred within the six-month period
preceding such date, or (b) if no such transaction shall have occurred
within the six-month period, the value of the security as determined by an
independent financial expert or an agreed upon financial valuation model or (ii) if
the security is registered under the Exchange Act and/or traded on a national
securities exchange, quotation system or bulletin board, the average of the
daily closing bid prices (or the equivalent in an over-the-counter market) for
each day on which the Common Stock is traded for any period on the principal
securities exchange or other securities market on which the common Stock is
being traded (each, a “Trading Day”)
during the period commencing thirty (30) days before such date and ending on
the date one (1) day prior to such date.

 

5.            Reserved.

 

6.            Fractional Shares. 
In lieu of issuance of a fractional share upon any exercise hereunder,
the Company will issue an additional whole share in lieu of that fractional
share, calculated on the basis of the Exercise Price.

 

7.            Legends. 
Prior to issuance of the shares of Common Stock underlying this Warrant,
all such certificates representing such shares shall bear a restrictive legend
to the effect that the Shares represented by such certificate have not been
registered under the Securities Act of 1933, as amended (the “Securities Act”), and that the
Shares may not be sold or transferred in the absence of such registration or an
exemption therefrom, such legend to be substantially in the form of the
bold-face language appearing at the top of Page 1 of this Warrant.

 

5

 

8.            Disposition of Warrants or Shares.  The Holder of this Warrant, each transferee
hereof and any holder and transferee of any Shares, by his or its acceptance
thereof, agrees that no public distribution of Warrants or Shares will be made
in violation of the provisions of the Securities Act.  Furthermore, it shall be a condition to the
transfer of this Warrant that any transferee thereof deliver to the Company his
or its written agreement to accept and be bound by all of the terms and
conditions contained in this Warrant.

 

9.            Merger or Consolidation.  The Company will not merge or consolidate
with or into any other corporation, or sell or otherwise transfer its property,
assets and business substantially as an entirety to another corporation, unless
the corporation resulting from such merger or consolidation (if not the
Company), or such transferee corporation, as the case may be, shall expressly
assume, by supplemental agreement reasonably satisfactory in form and substance
to the Holder, the due and punctual performance and observance of each and
every covenant and condition of this Warrant to be performed and observed by
the Company.

 

10.          Notices. 
Except as otherwise specified herein to the contrary, all notices,
requests, demands and other communications required or desired to be given
hereunder shall only be effective if given in writing by certified or
registered U.S. mail with return receipt requested and postage prepaid; by
private overnight delivery service (e.g. Federal Express); by facsimile
transmission (if no original documents or instruments must accompany the
notice); or by personal delivery.  Any
such notice shall be deemed to have been given (a) on the business day
immediately following the mailing thereof, if mailed by certified or registered
U.S. mail as specified above; (b) on the business day immediately
following deposit with a private overnight delivery service if sent by said
service; (c) upon receipt of confirmation of transmission if sent by
facsimile transmission; or (d) upon personal delivery of the notice.  All such notices shall be sent to the
following addresses (or to such other address or addresses as a party may have
advised the other in the manner provided in this Section 10):

 

	
  if to the Company:

  	
   

  	
  Waste2Energy
  Holdings, Inc.

  
	
   

  	
   

  	
  1
  Chick Springs Road, Suite 218

  
	
   

  	
   

  	
  Greenville,
  SC 29609

  
	
   

  	
   

  	
  Attention:
  Peter Bohan, CEO

  
	
   

  	
   

  	
  Facsimile:
  864-679-1627

  
	
   

  	
   

  	
   

  
	
  with copy to:

  	
   

  	
  Sichenzia
  Ross Friedman Ference LLP

  
	
   

  	
   

  	
  61
  Broadway, 32nd Floor

  
	
   

  	
   

  	
  New
  York, NY 10006

  
	
   

  	
   

  	
  Attention: Thomas A. Rose, Esq.

  
	
   

  	
   

  	
  Facsimile: (212) 930-9725

  

 

Notwithstanding
the time of effectiveness of notices set forth in this Section 10,
a Notice of Exercise shall not be deemed effectively given until it has been
duly completed and

 

6

 

submitted
to the Company together with this original Warrant and payment of the Exercise
Price in a manner set forth in this Section 10.

 

11.          Limitation on
Exercise. Notwithstanding anything to the contrary contained herein, the
number of shares of Common Stock that may be acquired by the Holder upon
any exercise of this Warrant (or otherwise in respect hereof) shall be limited to
the extent necessary to insure that, following such exercise (or other
issuance), the total number of shares of Common Stock then beneficially owned
by such Holder and its affiliates and any other persons whose beneficial
ownership of Common Stock would be aggregated with the Holder’s for purposes of
Section 13(d) of the Exchange Act, does not exceed 4.99% of the total
number of issued and outstanding shares of Common Stock (including for such
purpose the shares of Common Stock issuable upon such exercise). For such
purposes, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. The holder may waive the restriction in whole or in
part upon and effective after 61 days prior written notice to the Company. This
provision shall not restrict the number of shares of Common Stock which a
Holder may receive or beneficially own in order to determine the amount of
securities or other consideration that such Holder may receive in the
event of a merger or other business combination or reclassification involving
the Company.

 

12.          Governing Law. 
This Agreement shall be governed by and construed solely and exclusively
in accordance with and pursuant to the internal laws of the State of New York
without regard to the conflicts of laws principles thereof. The parties hereto
hereby expressly and irrevocably agree that any suit or proceeding arising
directly and/or indirectly pursuant to or under this Agreement shall be brought
solely in a federal or state court located in the City, County and State of New
York. By its execution hereof, the parties hereby covenant and irrevocably
submit to the in personam jurisdiction of the federal and
state courts located in the City, County and State of New York and agree that
any process in any such action may be served upon any of them personally, or by
certified mail or registered mail upon them or their agent, return receipt
requested, with the same full force and effect as if personally served upon
them in New York City. The parties hereto expressly and irrevocably waive any
claim that any such jurisdiction is not a convenient forum for any such suit or
proceeding and any defense or lack of in  personam jurisdiction
with respect thereto. In the event of any such action or proceeding, the party
prevailing therein shall be entitled to payment from the other party hereto of
all of its reasonable counsel fees and disbursements.

 

13.          Successors and Assigns.  This Warrant shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.

 

14.          Headings.  The
headings of various sections of this Warrant have been inserted for reference
only and shall not affect the meaning or construction of any of the provisions
hereof.

 

7

 

15.          Severability. If any provision of this Warrant is
held to be unenforceable under applicable law, such provision shall be excluded
from this Warrant, and the balance hereof shall be interpreted as if such
provision were so excluded.

 

16.          Modification and Waiver.  This Warrant and any provision hereof may be
amended, waived, discharged or terminated only by an instrument in writing
signed by the Company and the Holder.

 

17.          Specific Enforcement.  The Company and the Holder acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Warrant were not performed in accordance with their specific
terms or were otherwise breached.  It is
accordingly agreed that the parties shall be entitled to an injunction or injunctions
to prevent or cure breaches of the provisions of this Warrant and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which either of them may be entitled by law or equity.

 

18.          Assignment. 
This Warrant may be transferred or assigned, in whole or in part, at any
time and from time to time by the then Holder by submitting this Warrant to the
Company together with a duly executed Assignment in substantially the form and
substance of the Form of Assignment which accompanies this Warrant as Exhibit B hereto, and, upon
the Company’s receipt thereof, and in any event, within five (5) business
days thereafter, the Company shall issue a Warrant to the Holder to evidence
that portion of this Warrant, if any as shall not have been so transferred or
assigned.

 

(Signature Page Immediately Follows)

 

8

 

IN WITNESS WHEREOF, the Company has caused
this Warrant to be duly executed, manually or by facsimile, by one of its
officers thereunto duly authorized.

 

	
   

  	
  WASTE2ENERGY HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  By:

  	
   

  
	
   

  	
  Name:
  Peter Bohan

  
	
   

  	
  Title:
  Chief Executive Officer

  

 

9

 

EXHIBIT A

TO

WARRANT

 

NOTICE OF EXERCISE

 

To
Be Executed by the Holder

in Order to Exercise the Warrant

 

The
undersigned Holder hereby elects to purchase
              
Shares pursuant to the attached Warrant, and requests that certificates for
securities be issued in the name of:

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Please type or print name and address)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Social Security or Tax Identification Number)

  	
   

  

 

	
  and delivered

  
	
  to:

  	
   

  	
   

  
	
   

  	
  .

  

 

(Please type or print name and address if different from above)

 

If
such number of Shares being purchased hereby shall not be all the Shares that
may be purchased pursuant to the attached Warrant, a new Warrant for the
balance of such Shares shall be registered in the name of, and delivered to,
the Holder at the address set forth below.

 

In
full payment of the purchase price with respect to the Shares purchased and
transfer taxes, if any, the undersigned hereby tenders payment of
$                    
by check, money order or wire transfer payable in United States currency to the
order of
[                                ].

 

	
   

  	
  HOLDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
					

 

10

 

EXHIBIT B

TO

WARRANT

 

FORM OF ASSIGNMENT

(To be signed only on transfer of Warrant)

 

For
value received, the undersigned hereby sells, assigns, and transfers unto
                          
the right represented by the within Warrant to purchase
             shares
of Common Stock of Waste2Energy Holdings, Inc., a Delaware corporation, to
which the within Warrant relates, and appoints
                                        
Attorney to transfer such right on the books of Waste2Energy Holdings, Inc.,
a Delaware corporation, with full power of substitution of premises.

 

 

	
  Dated:

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
  (signature
  must conform to name of holder as specified on the fact of the Warrant)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   Address:

  

 

 

Signed
in the presence of :

 

 

Dated:

 

11

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