Document:

ex1001.htm

    

      EXHIBIT
10.01

      

      SECURITIES
PURCHASE AGREEMENT

       

      Securities
Purchase Agreement dated as of December 13, 2007 (this “Agreement”) by and between
American Security Resources Corporation, a Nevada corporation, with principal
executive offices located at 9601 Katy Freeway, Suite 220, Houston, Texas 77024
(the “Company”), and
Golden Gate Investors, Inc. (“Holder”).

       

      WHEREAS,
Holder desires to purchase from the Company, and the Company desires to issue
and sell to Holder, upon the terms and subject to the conditions of this
Agreement, a Convertible Debenture of the Company in the aggregate principal
amount of $1,500,000 (the “Debenture”); and

       

      WHEREAS,
upon the terms and subject to the conditions set forth in the Debenture the
Debenture is convertible into shares of the Company’s Common Stock (the “Common Stock”).

       

      NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:

       

      
        	
                I.  

              	
                PURCHASE
      AND SALE OF DEBENTURE

              

      

       

      A. Transaction.  Holder
hereby agrees to purchase from the Company, and the Company has offered and
hereby agrees to issue and sell to Holder in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the “Securities
Act”), the Debenture.

       

      B. Purchase Price; Form of
Payment.  The purchase price for the Debenture to be purchased
by Holder hereunder shall be $1,500,000 (the “Purchase
Price”).  Simultaneously with the execution of this Agreement,
Holder shall pay the Purchase Price by wire transfer of $200,000 in immediately
available funds to the Company and delivery to the Company of a Secured
Promissory Note in the principal amount of $1,300,000, in the form attached
hereto as Exhibit
A (the “Promissory
Note”).  Simultaneously with the execution of this Agreement,
the Company shall deliver the Debenture (which shall have been duly authorized,
issued and executed I/N/O Holder or, if the Company otherwise has been notified,
I/N/O Holder’s nominee) to the Holder.

       

      C. Second
Debenture.  Provided that no Event of Default (as defined in
the Debenture) has occurred under the Debenture (provided that Holder may, in
its sole and absolute discretion waive the occurrence of such Event of Default
with respect to this Section), Holder shall, in Holder’s sole and absolute
discretion, select a date during the Second Debenture Period (as defined below)
(with such date as selected by Holder referred to herein as the “Second Debenture Date”) at
which the Company shall sell and the Holder shall purchase a debenture in the
principal amount of $1,500,000 in exchange for a purchase price of $1,500,000
(the “Second
Debenture”), with such purchase price paid via a cash payment of $200,000
and the issuance of a promissory note in the principal amount of $1,300,000 (the
“Second Promissory
Note”), with the form of and terms of the Second Debenture and the Second
Promissory Note and payment of the purchase price subject to the same terms and
conditions of this Agreement, the Debenture and the Promissory Note, as
applicable, and when the Second Debenture is issued, the term “Debenture” as
used in this Agreement shall be deemed to include the Second Debenture in all
respects and when the Second Promissory Note is issued, the term “Promissory
Note” as used in this Agreement shall be deemed to include the Second Promissory
Note in all respects. The closing of the purchase and sale of the Second
Debenture and the issuance of the Second Promissory Note shall occur within
thirty days of the Second Debenture Date.  For the purposes of this
Agreement, the “Second Debenture Period” shall mean the period that commences on
the date hereof and terminates upon the date that the remaining Principal Amount
of the Debenture is equal to an amount not greater than $250,000.

       

      D. Third
Debenture.  Provided that no Event of Default (as defined in
the Debenture) has occurred under the Debenture (provided that Holder may, in
its sole and absolute discretion waive the occurrence of such Event of Default
with respect to this Section), Holder shall, in Holder’s sole and absolute
discretion, select a date during the Third Debenture Period (as defined below)
(with such date as selected by Holder referred to herein as the “Third Debenture Date”) at
which the Company shall sell and the Holder shall purchase a debenture in the
principal amount of $1,500,000 in exchange for a purchase price of $1,500,000
(the “Third Debenture”),
with such purchase price paid via a cash payment of $200,000 and the issuance of
a promissory note in the principal amount of $1,300,000 (the “Third Promissory Note”), with
the form of and terms of the Third Debenture and the Third Promissory Note and
payment of the purchase price subject to the same terms and conditions of this
Agreement, the Debenture and the Promissory Note, as applicable, and when the
Third Debenture is issued, the term “Debenture” as used in this Agreement shall
be deemed to include the Third Debenture in all respects and when the Third
Promissory Note is issued, the term “Promissory Note” as used in this Agreement
shall be deemed to include the Third Promissory Note in all respects. The
closing of the purchase and sale of the Third Debenture and the issuance of the
Third Promissory Note shall occur within thirty days of the Third Debenture
Date.  For the purposes of this Agreement, the “Third Debenture
Period” shall mean the period that commences on the date of the issuance of the
Second Debenture to Holder and terminates upon the date that the remaining
Principal Amount of the Second Debenture is equal to an amount not greater than
$250,000.

       

      E. Fourth
Debenture.  Provided that no Event of Default (as defined in
the Debenture) has occurred under the Debenture (provided that Holder may, in
its sole and absolute discretion waive the occurrence of such Event of Default
with respect to this Section), Holder shall, in Holder’s sole and absolute
discretion, select a date during the Fourth Debenture Period (as defined below)
(with such date as selected by Holder referred to herein as the “Fourth Debenture Date”) at
which the Company shall sell and the Holder shall purchase a debenture in the
principal amount of $1,500,000 in exchange for a purchase price of $1,500,000
(the “Fourth
Debenture”), with such purchase price paid via a cash payment of $200,000
and the issuance of a promissory note in the principal amount of $1,300,000 (the
“Fourth Promissory
Note”), with the form of and terms of the Fourth Debenture and the Fourth
Promissory Note and payment of the purchase price subject to the same terms and
conditions of this Agreement, the Debenture and the Promissory Note, as
applicable, and when the Fourth Debenture is issued, the term “Debenture” as
used in this Agreement shall be deemed to include the Fourth Debenture in all
respects and when the Fourth Promissory Note is issued, the term “Promissory
Note” as used in this Agreement shall be deemed to include the Fourth Promissory
Note in all respects. The closing of the purchase and sale of the Fourth
Debenture and the issuance of the Fourth Promissory Note shall occur within
thirty days of the Fourth Debenture Date.  For the purposes of this
Agreement, the “Fourth Debenture Period” shall mean the period that commences on
the date of the issuance of the Third Debenture to Holder and terminates upon
the date that the remaining Principal Amount of the Third Debenture is equal to
an amount not greater than $250,000.

       

      F. Non-Funding
Penalty.  Notwithstanding the foregoing requirements of Holder
to purchase each of the Second Debenture, Third Debenture and Fourth Debenture
(each, an “Additional
Debenture” and collectively, the “Additional Debentures”), in
the event that Holder does not purchase any or all of the Additional Debentures
within 10 business days of the date that the delivery of funds associated with
such purchase would otherwise be due, upon 20 days’ prior written notice from
the Company of such failure to so purchase any or all of the Additional
Debentures, Holder shall pay an amount equal to $100,000 (the “Non-Funding Penalty”) to the
Company.  The amount payable by the Holder to the Company in
connection with any damages, losses, claims or other amounts in connection with
the failure of the Holder to purchase any or all of the Additional Debentures
shall not exceed $100,000 in the aggregate.  Upon the payment of the
Non-Funding Penalty to the Company, the Holder shall have no further obligations
or duties under this Agreement, the Debenture or any agreements or debentures
entered into in connection with any of the Additional Debentures, if any, with
respect to the purchase of any Additional Debenture or other duties to deliver
any additional funds to the Company, provided however, that other than with
respect to the removal of the requirement to enter into any Additional
Debenture, the Company and the Holder shall remain obligated and bound by the
remaining terms and conditions of this Agreement, the Debenture, the Promissory
Note and any agreements or debentures previously entered into in connection with
any Additional Debenture.  The Company’s sole and exclusive remedy in
the event that the Holder fails to purchase any or all of the Additional
Debentures shall be the right of the Company to receive the Non-Funding Penalty
from the Holder.

       

      G. Additional Promissory Note
Prepayment.  Provided that the Company duly and validly
increase its authorized number of shares of Common Stock to five hundred million
(500,000,000) shares through the appropriate consents of the Company’s board of
directors and stockholders and the filing of an amendment to the Company’s
charter and the taking of any other necessary or desirable corporate or other
action required by applicable laws or regulations, other than through a stock
split, dividend, or the like, during the term of the Debenture issued upon the
date hereof (December 13, 2007), then the Holder shall prepay within ten days of
its receipt of written notice of such increase to the Company’s authorized
number of shares of Common Stock an amount equal to Two Hundred Thousand Dollars
($200,000) (the “Capitalization
Prepayment”) of the outstanding principal amount of the Promissory Note
issued upon the date hereof, such that after the payment of the Capitalization
Prepayment the outstanding principal balance of the Promissory Note shall be
reduced by $200,000.  The Capitalization Prepayment and any
requirements created hereunder in connection with the Capitalization Prepayment
shall not apply to any of the Additional Debentures or impact any prepayment
obligations or create any additional obligations of Golden Gate Investors, Inc.
under any of the Second Promissory Note, Third Promissory Note, or Fourth
Promissory Note, if any.

       

      H. Company Termination of Additional
Debentures.  Notwithstanding the foregoing, within ten business
days of the Company’s issuance of the Second Debenture to the Holder, the
Company may elect to terminate the ability of the Holder to purchase and the
Company to sell each of the Third Debenture and Fourth Debenture (the “Additional Debenture
Termination”) through the delivery to Holder of written notice of such
termination and the payment in cash to Holder of an amount equal to $45,000,
each of which must be received by the Holder within ten business days of the
Company’s issuance of the Second Debenture.  Upon the valid exercise
by the Company of the Additional Debenture Termination, neither the Company nor
the Holder shall have any duty or obligation to enter into the Third Debenture
or the Fourth Debenture, or any agreements or obligations in connection
therewith, including without limitation the Third Promissory Note and the Fourth
Promissory Note, and the Holder shall have no obligation to pay any of the
Non-Funding Penalty in connection with the failure to so enter into the Third
Debenture or Fourth Debenture.

       

      
        	
                II.  

              	
                HOLDER’S
      REPRESENTATIONS AND WARRANTIES

              

      

       

      Holder
represents and warrants to and covenants and agrees with the Company as
follows:

       

      1. Holder is
purchasing the Debenture and the Common Stock issuable upon conversion or
redemption of the Debenture (the “Conversion Shares” and,
collectively with the Debenture, the “Securities”) for its own
account, for investment purposes only and not with a view towards or in
connection with the public sale or distribution thereof in violation of the
Securities Act.

       

      2. Holder is
(i) an “accredited investor” within the meaning of Rule 501 of Regulation D
under the Securities Act, (ii) experienced in making investments of the kind
contemplated by this Agreement, (iii) capable, by reason of its business and
financial experience, of evaluating the relative merits and risks of an
investment in the Securities, and (iv) able to afford the loss of its investment
in the Securities.

       

      3. Holder
understands that the Securities are being offered and sold by the Company in
reliance on an exemption from the registration requirements of the Securities
Act and equivalent state securities and “blue sky” laws, and that the Company is
relying upon the accuracy of, and Holder’s compliance with, Holder’s
representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Holder to
purchase the Securities;

       

      4. Holder
understands that the Securities have not been approved or disapproved by the
Securities and Exchange Commission (the “Commission”) or any state or
provincial securities commission.

       

      5. This
Agreement has been duly and validly authorized, executed and delivered by Holder
and is a valid and binding agreement of Holder enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and except as rights to indemnity and
contribution may be limited by federal or state securities laws or the public
policy underlying such laws.

       

      
        	
                III.  

              	
                THE
      COMPANY’S REPRESENTATIONS

              

      

       

      The
Company represents and warrants as of the date hereof to the Holder that, except
as set forth on Schedule III attached hereto, the statements contained in this
Section 3 are complete and accurate as of the date of this
Agreement.  As used in this Section 3, the term “Knowledge” shall mean
the knowledge of the members of the board of directors of the Company and/or the
officers or employees of the Company after reasonable
investigation.

       

      A. Capitalization.

       

      1. The
authorized capital stock of the Company consists of 200,000,000 shares of Common
Stock and 1,000,000 shares of Series A Preferred Stock of which 176,000,000
shares and 0 shares, respectively, are issued and outstanding as of the date
hereof and are fully paid and nonassessable.  The amount, exercise,
conversion or subscription price and expiration date for each outstanding option
and other security or agreement to purchase shares of Common Stock is accurately
set forth on Schedule
III.A.1.

       

      2. The
Conversion Shares have been duly and validly authorized and reserved for
issuance by the Company, and, when issued by the Company upon conversion of the
Debenture, will be duly and validly issued, fully paid and nonassessable and
will not subject the holder thereof to personal liability by reason of being
such holder.

       

      3. Except as
disclosed on Schedule III.A.3.,
there are no preemptive, subscription, “call,” right of first refusal or other
similar rights to acquire any capital stock of the Company or other voting
securities of the Company that have been issued or granted to any person and no
other obligations of the Company to issue, grant, extend or enter into any
security, option, warrant, “call,” right, commitment, agreement, arrangement or
undertaking with respect to any of their respective capital stock.

       

      B. Organization;
Reporting Company Status.

       

      1. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the state or jurisdiction in which it is incorporated and is
duly qualified as a foreign corporation in all jurisdictions in which the
failure so to qualify would reasonably be expected to have a material adverse
effect on the business, properties, prospects, condition (financial or
otherwise) or results of operations of the Company or on the consummation of any
of the transactions contemplated by this Agreement (a “Material Adverse
Effect”).

       

      2. The
Company is subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”).  The
Common Stock is traded on the OTC Bulletin Board service of the National
Association of Securities Dealers, Inc. (“OTCBB”) and the Company has
not received any notice regarding, and to its Knowledge there is no threat of,
the termination or discontinuance of the eligibility of the Common Stock for
such trading.

       

      C. Authorization.  The
Company (i) has duly and validly authorized and reserved for issuance shares of
Common Stock, which is a number sufficient for the conversion of the Debenture
in full and (ii) at all times from and after the date hereof shall have a
sufficient number of shares of Common Stock duly and validly authorized and
reserved for issuance to satisfy the conversion of the Debenture in
full.  The Company understands and acknowledges the potentially
dilutive effect on the Common Stock of the issuance of the Conversion
Shares.  The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Debenture in accordance with this
Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company and notwithstanding the commencement of any case under 11 U.S.C.
§ 101 et
seq. (the “Bankruptcy
Code”).  In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. § 362 in respect of the
conversion of the Debenture.  The Company agrees, without cost or
expense to Holder, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. § 362.

       

      D. Authority; Validity and
Enforceability.  The Company has the requisite corporate power
and authority to enter into the Documents (as such term is hereinafter defined)
and to perform all of its obligations hereunder and thereunder (including the
issuance, sale and delivery to Holder of the Securities).  The
execution, delivery and performance by the Company of the Documents and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Debenture and the issuance
and reservation for issuance of the Conversion Shares) have been duly and
validly authorized by all necessary corporate action on the part of the Company
and no further filing, consent, or authorization is required by the Company, its
board of directors, or its stockholders.  Each of the Documents has
been duly and validly executed and delivered by the Company and each Document
constitutes a valid and binding obligation of the Company enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and except as rights to indemnity and
contribution may be limited by federal or state securities laws or the public
policy underlying such laws.  The Securities have been duly and
validly authorized for issuance by the Company and, when executed and delivered
by the Company, will be valid and binding obligations of the Company enforceable
against it in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally.  For
purposes of this Agreement, the term “Documents” means (i) this
Agreement; (ii) the Debenture; and (iii) the Promissory Note.

       

      E. Validity of Issuance of the
Securities.  The Debenture and the Conversion Shares upon their
issuance in accordance with the Debenture, will be validly issued and
outstanding, fully paid and nonassessable, and not subject to any preemptive
rights, rights of first refusal, tag-along rights, drag-along rights or other
similar rights.

       

      F. Non-contravention.  The
execution and delivery by the Company of the Documents, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated hereby and thereby do not, and compliance with the provisions of
this Agreement and other Documents will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a material benefit under, or result in the creation of
any Lien (as such term is hereinafter defined) upon any of the properties or
assets of the Company or any of its Subsidiaries under, or result in the
termination of, or require that any consent be obtained or any notice be given
with respect to (i) the Articles or Certificate of Incorporation or By-Laws of
the Company or the comparable charter or organizational documents of any of its
Subsidiaries, in each case as amended to the date of this Agreement, (ii) any
loan or credit agreement, debenture, bond, mortgage, indenture, lease, contract
or other agreement, instrument or permit applicable to the Company or any of its
Subsidiaries or their respective properties or assets or (iii) any statute, law,
rule or regulation applicable to, or any judgment, decree or order of any court
or government body having jurisdiction over, the Company or any of its
Subsidiaries or any of their respective properties or assets.  A
“Lien” means any
assignment, transfer, pledge, mortgage, security interest or other encumbrance
of any nature, or an agreement to do so, or the ownership or acquisition or
agreement to acquire any asset or property of any character subject to any of
the foregoing encumbrances (including any conditional sale contract or other
title retention agreement).

       

      G. Approvals.  No
authorization, approval or consent of any court or public or governmental
authority is required to be obtained by the Company for the issuance and sale of
the Securities to Holder as contemplated by this Agreement, except such
authorizations, approvals and consents as have been obtained by the Company
prior to the date hereof.

       

      H. Commission
Filings.  The Company has properly and timely filed with the
Commission all reports, proxy statements, forms and other documents required to
be filed with the Commission under the Securities Act and the Exchange Act since
becoming subject to such Acts (the “Commission
Filings”).  As of their respective dates, (i) the Commission
Filings complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission promulgated thereunder applicable to such
Commission Filings and (ii) none of the Commission Filings contained at the time
of its filing any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  The financial statements of the Company included in
the Commission Filings, as of the dates of such documents, were true and
complete in all material respects and complied with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, were prepared in accordance with generally accepted accounting
principles in the United States (“GAAP”) (except in the case of
unaudited statements permitted by Form 10-QSB under the Exchange Act) applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly presented the consolidated financial position of
the Company and its Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments that
in the aggregate are not material and to any other adjustment described
therein).

       

      I. Full
Disclosure.  There is no fact known to the Company (other than
general economic or industry conditions known to the public generally) that has
not been fully disclosed in the Commission Filings that (i) reasonably could be
expected to have a Material Adverse Effect or (ii) reasonably could be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to the Documents.

       

      J. Absence of Events of
Default.  No “Event of Default” (as defined
in any agreement or instrument to which the Company is a party) and no event
which, with notice, lapse of time or both, would constitute an Event of Default
(as so defined), has occurred and is continuing.

       

      K. Securities Law
Matters.  Assuming the accuracy of the representations and
warranties of Holder set forth in Article II, the offer and sale by the Company
of the Securities is exempt from (i) the registration and prospectus delivery
requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification provisions
of all applicable state and provincial securities and “blue sky”
laws.  The Company shall not directly or indirectly take, and shall
not permit any of its directors, officers or Affiliates directly or indirectly
to take, any action (including, without limitation, any offering or sale to any
person or entity of any security similar to the Debenture) which will make
unavailable the exemption from Securities Act registration being relied upon by
the Company for the offer and sale to Holder of the Debenture and the Conversion
Shares, as contemplated by this Agreement.  No form of general
solicitation or advertising has been used or authorized by the Company or any of
its officers, directors or Affiliates in connection with the offer or sale of
the Debenture (and the Conversion Shares), as contemplated by this Agreement or
any other agreement to which the Company is a party.  As used in the
Documents, “Affiliate”
has the meaning ascribed to such term in Rule 12b-2 under the Exchange
Act.

       

      L. Registration
Rights.  Except as set forth on Schedule III.L.,
no Person has, and as of the Closing (as such term is hereinafter defined), no
Person shall have, any demand, “piggy-back” or other rights to cause the Company
to file any registration statement under the Securities Act relating to any of
its securities or to participate in any such registration
statement.

       

      M. Interest.  The
timely payment of interest on the Debenture is not prohibited by the Articles or
Certificate of Incorporation or By-Laws of the Company, in each case as amended
to the date of this Agreement, or any agreement, contract, document or other
undertaking to which the Company is a party.

       

      N. No
Misrepresentation.  No representation or warranty of the
Company contained in this Agreement or any of the other Documents, any schedule,
annex or exhibit hereto or thereto or any agreement, instrument or certificate
furnished by the Company to Holder pursuant to this Agreement contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.

       

      O. Finder’s Fee.  There
is no finder’s fee, brokerage commission or like payment in connection with the
transactions contemplated by this Agreement for which Holder is liable or
responsible.

       

      P. Subsidiaries.  Other than the
Subsidiaries, the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, association, or other
business entity.  The Company is not a participant in any joint
venture, partnership, or similar arrangement.

       

      Q. Litigation.  Other than as
disclosed in the Commission Filings, there is no action, suit, proceeding or
investigation pending or, to the Company’s knowledge, currently threatened
against the Company or its Subsidiaries that questions the validity of this
Agreement, the Documents, or the right of the Company to enter into such
agreements, or to consummate the transactions contemplated hereby or thereby, or
that might result, either individually or in the aggregate, in any material
adverse changes in the business, assets or condition of the Company and its
Subsidiaries, taken as a whole, financially or otherwise, or any change in the
current equity ownership of the Company or its Subsidiaries.  Neither
the Company nor its Subsidiaries are parties or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality.  There is no action, suit, proceeding or
investigation by the Company or its Subsidiaries currently pending or that the
Company or its Subsidiaries intends to initiate.

       

      R. Agreements.  Except
for agreements explicitly contemplated hereby, or disclosed in the Commission
Filings, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, Affiliates, or any
affiliate thereof.

       

      S. Tax Returns.  The
Company and each of its Subsidiaries has made and filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.

       

      
        	
                IV.  

              	
                CERTAIN
      COVENANTS AND ACKNOWLEDGMENTS

              

      

       

      A. Filings.  The
Company shall make all necessary Commission Filings and “blue sky” filings
required to be made by the Company in connection with the sale of the Securities
to Holder as required by all applicable laws, and shall provide a copy thereof
to Holder promptly after such filing.

       

      B. Reporting
Status.  So long as Holder beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed by it
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act or
otherwise required by the Exchange Act.  On or before the fourth
Business Day following the date hereof, the Company shall file a Current Report
on Form 8-K describing the terms of the transactions contemplated by the
Documents in the form required by the Exchange Act and attaching the material
Documents (including, without limitation, this Agreement and the Debenture) as
exhibits to such filing.

       

      C. Listing.  Except to
the extent the Company lists its Common Stock on The New York Stock Exchange,
The American Stock Exchange or The Nasdaq Stock Market, the Company shall use
its best efforts to maintain its listing of the Common Stock on
OTCBB.  If the Common Stock is delisted from OTCBB, the Company will
use its best efforts to list the Common Stock on the most liquid national
securities exchange or quotation system that the Common Stock is qualified to be
listed on.

       

      D. Reserved Conversion Common
Stock.  The Company at all times from and after the date hereof
shall have such number of shares of Common Stock duly and validly authorized and
reserved for issuance as shall be sufficient for the conversion in full of the
Debenture.

       

      E. Information.  Each
of the parties hereto acknowledges and agrees that Holder shall not be provided
with, nor be given access to, any material non-public information relating to
the Company.

       

      F. Accounting and
Reserves.  The Company shall maintain a standard and uniform
system of accounting and shall keep proper books and records and accounts in
which full, true, and correct entries shall be made of its transactions, all in
accordance with GAAP applied on consistent basis through all periods, and shall
set aside on such books for each fiscal year all such reserves for depreciation,
obsolescence, amortization, bad debts and other purposes in connection with its
operations as are required by such principles so applied.

       

      G. Transactions with
Affiliates.  So long as the Debenture is outstanding, neither
the Company nor any of its Subsidiaries shall, directly or indirectly, enter
into any material transaction or agreement with any stockholder, officer,
director or Affiliate of the Company or family member of any officer, director
or Affiliate of the Company, unless the transaction or agreement is
(i) reviewed and approved by a majority of Disinterested Directors (as such
term is hereinafter defined) and (ii) on terms no less favorable to the
Company or the applicable Subsidiary than those obtainable from a nonaffiliated
person.  A “Subsidiary” means any entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are owned directly or indirectly by the Company.  A “Disinterested Director” shall
mean a director of the Company who is not and has not been an officer or
employee of the Company and who is not a member of the family of, controlled by
or under common control with, any such officer or employee.

       

      H. Certain
Restrictions.  So long as the Debenture is outstanding, no
dividends shall be declared or paid or set apart for payment nor shall any other
distribution be declared or made upon any capital stock of the Company, nor
shall any capital stock of the Company be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of shares of
Common Stock made for purposes of an employee incentive or benefit plan
(including a stock option plan) of the Company or pursuant to any of the
security agreements listed on Schedule IV.H) for
any consideration by the Company, directly or indirectly, nor shall any moneys
be paid to or made available for a sinking fund for the redemption of any Common
Stock.

       

      I.           Short
Selling.                                 So long as the Debenture
is outstanding, Holder agrees and covenants on its behalf and on behalf of its
affiliates that neither Holder nor its affiliates shall at any time engage in
any short sales with respect to the Company’s Common Stock, or sell put options
or similar instruments with respect to the Company’s Common Stock. The parties
acknowledge that Holder shall be entitled to sell the Common Stock from each
Debenture conversion immediately upon submission of the applicable Debenture
Conversion Notice, and payment of the purchase price, to the Company for such
Common Stock.

       

      
        	
                V.  

              	
                ISSUANCE
      OF COMMON STOCK

              

      

       

      A. The
Company undertakes and agrees that no instruction other than the instructions
referred to in this Article V shall be given to its transfer agent for the
Conversion Shares and that the Conversion Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and applicable law.  Nothing contained in
this Section V.A. shall affect in any way Holder’s obligations and agreement to
comply with all applicable securities laws upon resale of such Common
Stock.

       

      B. Holder
shall have the right to convert the Debenture by telecopying an executed and
completed Conversion Notice (as such term is defined in the Debenture) to the
Company.  Each date on which a Conversion Notice is telecopied to and
received by the Company in accordance with the provisions hereof shall be deemed
a Conversion Date (as such term is defined in the Debenture).  The
Company shall cause the transfer agent to transmit the certificates evidencing
the Common Stock issuable upon conversion of the Debenture (together with a new
debenture, if any, representing the principal amount of the Debenture not being
so converted) to Holder via express courier, or if a Registration Statement
covering the Common Stock has been declared effective by the SEC by electronic
transfer, within two (2) business days after receipt by the Company of the
Conversion Notice, as applicable (the “Delivery Date”).

       

      C. Upon the
conversion of the Debenture or respective part thereof, the Company shall, at
its own cost and expense, take all necessary action (including the issuance of
an opinion of counsel) to assure that the Company's transfer agent shall issue
stock certificates in the name of Holder (or its nominee) or such other persons
as designated by Holder and in such denominations to be specified at conversion
or exercise representing the number of shares of common stock issuable upon such
conversion or exercise. The Company warrants that the Conversion Shares will be
unlegended, free-trading, and freely transferable, and will not contain a legend
restricting the resale or transferability of the Company Common Stock provided
the Conversion Shares, as applicable, are being sold pursuant to an effective
registration statement covering the Common Stock to be sold or is otherwise
exempt from registration when sold.

       

      D. The
Company understands that a delay in the delivery of the Common Stock in the form
required pursuant to this section, or the Mandatory Redemption Amount described
in Section E hereof, beyond the Delivery Date or Mandatory Redemption Payment
Date (as hereinafter defined) could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Company agrees to pay late
payments to the Holder for late issuance of Common Stock in the form required
pursuant to Section E hereof upon Conversion of the Debenture or late payment of
the Mandatory Redemption Amount, in the amount of $100 per business day after
the Delivery Date or Mandatory Redemption Payment Date, as the case may be, for
each $10,000 of Debenture principal amount being converted or redeemed. The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any other remedies
which may be available to the Holder, in the event that the Company fails for
any reason to effect delivery of the Common Stock by the Delivery Date or make
payment by the Mandatory Redemption Payment Date, the Holder will be entitled to
revoke all or part of the relevant Notice of Conversion or rescind all or part
of the notice of Mandatory Redemption by delivery of a notice to such effect to
the Company whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to the delivery of such notice, except
that late payment charges described above shall be payable through the date
notice of revocation or rescission is given to the Company.

       

      E. Mandatory Redemption. In the
event the Company is prohibited from issuing Common Stock, or fails to timely
deliver Common Stock on a Delivery Date, or upon the occurrence of an Event of
Default (as defined in the Debenture) or for any reason other than pursuant to
the limitations set forth herein, then at the Holder's election, the Company
must pay to the Holder ten (10) business days after request by the Holder or on
the Delivery Date (if requested by the Holder) a sum of money determined by
multiplying up to the outstanding Principal Amount (as defined in the Debenture)
of the Debenture designated by the Holder by 150%, together with accrued but
unpaid interest thereon ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by the
Holder on the same date as the Company Common Stock otherwise deliverable or
within ten (10) business days after request, whichever is sooner ("Mandatory Redemption Payment
Date"). Upon receipt of the Mandatory Redemption Payment, the
corresponding Debenture principal and interest will be deemed paid and no longer
outstanding.

       

      F.           Buy-In. In addition to any
other rights available to the Holder, if the Company fails to deliver to the
Holder such Common Stock issuable upon conversion of a Debenture by the Delivery
Date and if ten (10) days after the Delivery Date the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Common Stock which the Holder
anticipated receiving upon such conversion (a "Buy-In"), then the Company
shall pay in cash to the Holder (in addition to any remedies available to or
elected by the Holder) the amount by which (A) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the
Debenture for which such conversion was not timely honored, together with
interest thereon at a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if the Holder purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of $10,000 of Debenture
principal, the Company shall be required to pay the Holder $1,000, plus
interest. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In.

       

      G. The
Securities shall be delivered by the Company to the Holder pursuant to Section
I.B. hereof on a “delivery-against-payment basis” at the Closing.

       

      
        	
                VI.  

              	
                CLOSING
      DATE

              

      

       

      The
“Closing” shall occur by
the delivery: (i) to the Holder of the documents evidencing the Debenture and
all other Documents, and (ii) to the Company the Purchase Price, including the
Promissory Note, and the date on which the Closing occurs shall be referred to
herein as the “Closing
Date”.

       

      
        	
                VII.  

              	
                CONDITIONS
      TO THE COMPANY’S OBLIGATIONS

              

      

       

      Holder
understands that the Company’s obligation to sell the Debenture on the Closing
Date to Holder pursuant to this Agreement is conditioned upon:

       

      A. Delivery
by Holder to the Company of the Purchase Price, including the Promissory Note
evidencing such applicable portion of the Purchase Price;

       

      B. The
accuracy on the Closing Date of the representations and warranties of Holder
contained in this Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms, speak as of and
relate to a specified date, in which case such accuracy shall be measured as of
such specified date) and the performance by Holder in all material respects on
or before the Closing Date of all covenants and agreements of Holder required to
be performed by it pursuant to this Agreement on or before the Closing Date;
and

       

      C. There
shall not be in effect any law or order, ruling, judgment or writ of any court
or public or governmental authority restraining, enjoining or otherwise
prohibiting any of the transactions contemplated by this Agreement.

       

      
        	
                VIII.  

              	
                CONDITIONS
      TO HOLDER’S OBLIGATIONS

              

      

       

      The
Company understands that Holder’s obligation to purchase the Securities on the
Closing Date pursuant to this Agreement is conditioned upon:

       

      A. Delivery
by the Company of the Debenture (I/N/O Holder or I/N/O Holder’s nominee) to
Holder;

       

      B. The
accuracy on the Closing Date of the representations and warranties of the
Company contained in this Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms, speak as of and
relate to a specified date, in which case such accuracy shall be measured as of
such specified date) and the performance by the Company in all respects on or
before the Closing Date of all covenants and agreements of the Company required
to be performed by it pursuant to this Agreement on or before the Closing Date,
all of which shall be confirmed to Holder by delivery of the certificate of the
chief executive officer of the Company to that effect;

       

      C. The
Company shall have delivered to the Holder a certificate of the Company executed
by an officer of the Company, dated as of the Closing, certifying
the resolutions adopted by the Company’s board of directors authorizing the
execution of the Documents, the issuance of the Securities, and the transactions
contemplated hereby, and copies of any required third party consents, approvals
and filings required in connection with the consummation of the transactions
contemplated by this Agreement;

       

      D. There not
having occurred (i) any general suspension of trading in, or limitation on
prices listed for, the Common Stock on the OTCBB/Pink Sheet, (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) the commencement of a war, armed hostilities
or other international or national calamity directly or indirectly involving the
United States or any of its territories, protectorates or possessions or
(iv) in the case of the foregoing existing at the date of this Agreement, a
material acceleration or worsening thereof;

       

      E. There not
having occurred any event or development, and there being in existence no
condition, having or which reasonably and foreseeably could have a Material
Adverse Effect;

       

      F. There
shall not be in effect any law, order, ruling, judgment or writ of any court or
public or governmental authority restraining, enjoining or otherwise prohibiting
any of the transactions contemplated by this Agreement;

       

      F.           The
Company shall have obtained all consents, approvals or waivers from governmental
authorities and third persons necessary for the execution, delivery and
performance of the Documents and the transactions contemplated thereby, all
without material cost to the Company;

       

      G. Holder
shall have received such additional documents, certificates, payment,
assignments, transfers and other deliveries as it or its legal counsel may
reasonably request and as are customary to effect a closing of the matters
herein contemplated;

      

      H.           Delivery
by the Company of an enforceability opinion with respect to this Agreement and
the transactions contemplated hereunder from its outside counsel in form and
substance satisfactory to Holder; and

      

      I.           Delivery
by the Company of a valid waiver of any preemptive rights held by the
individuals and/or parties listed on Schedule III.A.3 hereto in form and
substance satisfactory to Holder.

       

      
        	
                IX.  

              	
                SURVIVAL;
      INDEMNIFICATION

              

      

       

      A. The
representations, warranties and covenants made by each of the Company and Holder
in this Agreement, the annexes, schedules and exhibits hereto and in each
instrument, agreement and certificate entered into and delivered by them
pursuant to this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby.  In the event of a breach or
violation of any of such representations, warranties or covenants, the party to
whom such representations, warranties or covenants have been made shall have all
rights and remedies for such breach or violation available to it under the
provisions of this Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such party on or prior
to the Closing Date.

       

      B. The
Company hereby agrees to indemnify and hold harmless Holder, its affiliates and
their respective officers, directors, employees, consultants, partners, members
and attorneys (collectively, the “Holder Indemnitees”) from and
against any and all losses, claims, damages, judgments, penalties, liabilities
and deficiencies (collectively, “Losses”) and agrees to
reimburse Holder Indemnitees for all reasonable out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel), in each case
promptly as incurred by Holder Indemnitees and to the extent arising out of or
in connection with:

       

      1. any
misrepresentation, omission of fact or breach of any of the Company’s
representations or warranties contained in this Agreement or the other
Documents, or the annexes, schedules or exhibits hereto or thereto or any
instrument, agreement or certificate entered into or delivered by the Company
pursuant to this Agreement or the other Documents;

       

      2. any
failure by the Company to perform any of its covenants, agreements, undertakings
or obligations set forth in this Agreement or the other Documents or any
instrument, certificate or agreement entered into or delivered by the Company
pursuant to this Agreement or the other Documents;

       

      3. the
purchase of the Debenture, the conversion of the Debenture, the payment of
interest on the Debenture, the consummation of the transactions contemplated by
this Agreement and the other Documents, the use of any of the proceeds of the
Purchase Price by the Company, the purchase or ownership of any or all of the
Securities, the performance by the parties hereto of their respective
obligations hereunder and under the Documents or any claim, litigation,
investigation, proceedings or governmental action relating to any of the
foregoing, whether or not Holder is a party thereto; and/or

       

      4. resales
of the Common Stock by Holder in the manner and as contemplated by this
Agreement and the Documents.

       

      C. Promptly
after receipt by a party seeking indemnification pursuant to this
Article VIII (an “Indemnified Party”) of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a “Claim”), the Indemnified Party
promptly shall notify the Company against whom indemnification pursuant to this
Article VIII is being sought (the “Indemnifying Party”) of the
commencement thereof, but the omission so to notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights or defenses by reason of such
failure.  In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party
shall be entitled to assume the defense thereof.  Notwithstanding the
assumption of the defense of any Claim by the Indemnifying Party, the
Indemnified Party shall have the right to employ separate legal counsel and to
participate in the defense of such Claim, and the Indemnifying Party shall bear
the reasonable fees, out-of-pocket costs and expenses of such separate legal
counsel to the Indemnified Party if (and only if): (x) the Indemnifying
Party shall have agreed to pay such fees, out-of-pocket costs and expenses,
(y) the Indemnified Party and the Indemnifying Party reasonably shall have
concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim.  If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified
Party.  Except as provided above, the Indemnifying Party shall not, in
connection with any Claim in the same jurisdiction, be liable for the fees and
expenses of more than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel).  The Indemnifying Party
shall not, without the prior written consent of the Indemnified Party (which
consent shall not unreasonably be withheld), settle or compromise any Claim or
consent to the entry of any judgment that does not include an unconditional
release of the Indemnified Party from all liabilities with respect to such Claim
or judgment.

       

      D. In the
event one party hereunder should have a claim for indemnification that does not
involve a claim or demand being asserted by a third party, the Indemnified Party
promptly shall deliver notice of such claim to the Indemnifying
Party.  If the Indemnified Party disputes the claim, such dispute
shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration
Association.  Judgment upon any award rendered by any arbitrators may
be entered in any court having competent jurisdiction thereof.

       

      
        	
                X.  

              	
                GOVERNING
      LAW

              

      

       

      This
Agreement shall be governed by and interpreted in accordance with the laws of
the State of California, without regard to the conflicts of law principles of
such state.

       

      
        	
                XI.  

              	
                SUBMISSION
      TO JURISDICTION

              

      

       

      Each of
the parties hereto consents to the exclusive jurisdiction of the federal courts
whose districts encompass any part of the City of San Diego or the state courts
of the State of California sitting in the City of San Diego in connection with
any dispute arising under this Agreement and the other
Documents.  Each party hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may effectively do so, any defense of an
inconvenient forum or improper venue to the maintenance of such action or
proceeding in any such court and any right of jurisdiction on account of its
place of residence or domicile.  Each party hereto irrevocably and
unconditionally consents to the service of any and all process in any such
action or proceeding in such courts by the mailing of copies of such process by
registered or certified mail (return receipt requested), postage prepaid, at its
address specified in Article XVII.  Each party hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.

       

      
        	
                XII.  

              	
                WAIVER
      OF JURY TRIAL

              

      

       

      TO
THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS.  EACH PARTY
HERETO (i) CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR
ATTORNEYS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

       

      
        	
                XIII.  

              	
                COUNTERPARTS;
      EXECUTION

              

      

       

      This
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which counterparts shall together
constitute one and the same instrument.  A facsimile transmission of
this signed Agreement shall be legal and binding on both parties
hereto.

       

      
        	
                XIV.  

              	
                HEADINGS

              

      

       

      The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

       

      
        	
                XV.  

              	
                SEVERABILITY

              

      

       

      In the
event any one or more of the provisions contained in this Agreement or in the
other Documents should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein or therein shall not in any way be affected or impaired
thereby.  The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

       

      
        	
                XVI.  

              	
                ENTIRE
      AGREEMENT; REMEDIES, AMENDMENTS AND
WAIVERS

              

      

       

      This
Agreement and the Documents constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of such parties.  No supplement, modification or waiver of
this Agreement shall be binding unless executed in writing by both
parties.  No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.

       

      
        	
                XVII.  

              	
                NOTICES

              

      

       

      Except as
may be otherwise provided herein, any notice or other communication or delivery
required or permitted hereunder shall be in writing and shall be delivered
personally, or sent by telecopier machine or by a nationally recognized
overnight courier service, and shall be deemed given when so delivered
personally, or by telecopier machine or overnight courier service as
follows:

       

      
        

         

        A. If
to the Company, to:

         

        American Security Resources
Corporation

        9601
Katy Freeway, Suite 220

        Houston, Texas 77024

        Telephone:  713-465-1001

        Facsimile:  713-465-1080

        

         

      

      B. If to
Holder, to:

      
      

      
        Golden
Gate Investors, Inc.

        7817
Herschel Avenue, Suite 200

        La Jolla,
California 92037

        Telephone:  858-551-8789

        Facsimile:  858-551-8779

         

      

      The
Company or Holder may change the foregoing address by notice given pursuant to
this Article XVII.

       

      
        	
                XVIII.  

              	
                CONFIDENTIALITY

              

      

       

      Each of
the Company and Holder agrees to keep confidential and not to disclose to or use
for the benefit of any third party the terms of this Agreement or any other
information which at any time is communicated by the other party as being
confidential without the prior written approval of the other party; provide,
however, that this provision shall not apply to information which, at the time
of disclosure, is already part of the public domain (except by breach of this
Agreement) and information which is required to be disclosed by law (including,
without limitation, pursuant to Item 601(b)(10) of Regulation S-K under the
Securities Act and the Exchange Act).

       

      
        	
                XIX.  

              	
                MAXIMUM
      INTEREST RATE

              

      

       

      Notwithstanding
anything herein to the contrary, if at any time the applicable interest rate as
provided for herein shall exceed the maximum lawful rate which may be contracted
for, charged, taken or received by the Holder in accordance with any applicable
law (the “Maximum
Rate”), the rate of interest applicable to this Agreement shall be
limited to the Maximum Rate.  To the greatest extent permitted under
applicable law, the Company hereby waives and agrees not to allege or claim that
any provisions of this Agreement could give rise to or result in any actual or
potential violation of any applicable usury laws.

       

      
        	
                XX.  

              	
                ASSIGNMENT

              

      

       

      This
Agreement shall not be assignable by the Company without the prior written
consent of the Holder.  The Holder may assign this Agreement upon 10
days prior written notice to the Company.

      

      

      IN
WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be
executed and delivered on the date first above written.

       

       

      
        
          	
                  American
      Security Resources Corporation

                	
                  Golden
      Gate Investors, Inc.

                
	 
      	 
      
	 
      	 
      
	
                  By:
      __________________________

                	
                  By:
      __________________________

                
	 
      	 
      
	
                  Name:

                	
                  Name:

                
	 
      	 
      
	
                  Title:
      _________________________

                	
                  Title:
      _________________________ex1002.htm

    

      THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND IS BEING
OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND SUCH LAWS.  THIS SECURITY MAY NOT BE SOLD OR
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.

       

      7
1⁄4 % CONVERTIBLE DEBENTURE

       

      

      Company: American Security
Resources Corporation

      Company Address: 9601 Katy
Freeway, Suite 220, Houston, Texas 77024

      Closing Date: December 13,
2007

      Maturity Date: December 12,
2010

      Principal Amount:
$1,500,000

       

      American
Security Resources Corporation, a Nevada corporation, and any successor or
resulting corporation by way of merger, consolidation, sale or exchange of all
or substantially all of the assets or otherwise (the “Company”), for value
received, hereby promises to pay to the Holder (as such term is hereinafter
defined), or such other Person (as such term is hereinafter defined) upon order
of the Holder, on the Maturity Date (as such term is hereinafter defined), the
Principal Amount (as such term is hereinafter defined), as such sum may be
adjusted pursuant to Article 3, and to pay interest thereon with such interest
commencing to accrue as of the date hereof and payable monthly beginning on the
date hereof and such interest shall be paid within three days of the beginning
of each month that such interest is due, and on the Maturity Date (except that,
if any such date is not a Business Day, then such payment shall be due on the
next succeeding Business Day), at the rate of seven and one-quarter percent (7 1⁄4
%) per annum (the “Debenture
Interest Rate”). All interest payable on the Principal Amount of this
Debenture shall be calculated on the basis of a 360-day year for the actual
number of days elapsed.  Payment of interest on this Debenture shall
be in cash or, at the option of the Holder, in shares of Common Stock of the
Company valued at the then applicable Conversion Price (as defined
herein).  This Debenture may not be prepaid without the written
consent of the Holder.

       

      ARTICLE
1

      DEFINITIONS

       

      SECTION
1.1 Definitions.  The
terms defined in this Article whenever used in this Debenture have the following
respective meanings:

       

      (i) “Affiliate” has the meaning
ascribed to such term in Rule 12b-2 under the Securities Exchange Act of 1934,
as amended.

       

      (ii) “Bankruptcy Code” means the
United States Bankruptcy Code of 1986, as amended (11 U.S.C. §§ 101 et. seq.).

       

      (iii) “Business Day” means a day
other than Saturday, Sunday or any day on which banks located in the State of
California are authorized or obligated to close.

       

      (iv) “Capital Shares” means the
Common Stock and any other shares of any other class or series of capital stock,
whether now or hereafter authorized and however designated, which have the right
to participate in the distribution of earnings and assets (upon dissolution,
liquidation or winding-up) of the Company.

       

      (v) “Closing Date” means the
closing date set forth in the first paragraph of this Debenture.

       

      (vi) “Common Shares” or “Common Stock” means shares of
the Company’s Common Stock.

       

      (vii) “Common Stock Issued at
Conversion”, when used with reference to the securities deliverable upon
conversion of this Debenture, means all Common Shares now or hereafter
Outstanding and securities of any other class or series into which this
Debenture hereafter shall have been changed or substituted, whether now or
hereafter created and however designated.

       

      (viii) “Conversion” or “conversion” means the
repayment by the Company of the Principal Amount of this Debenture (and, to the
extent the Holder elects as permitted by Section 3.1, accrued and unpaid
interest thereon) by the delivery of Common Stock on the terms provided in
Section 3.2, and “convert,” “converted,” “convertible” and like words
shall have a corresponding meaning.

       

      (ix) “Conversion Date” means any
day on which all or any portion of the Principal Amount of this Debenture is
converted in accordance with the provisions hereof.

       

      (x) “Conversion Notice” means a
written notice of conversion substantially in the form annexed hereto as Exhibit
A.

       

      (xi) “Conversion Price” on any date
of determination means the applicable price for the conversion of this Debenture
into Common Shares on such day as set forth in Section 3.1(a).

       

      (xii) “Current Market Price” on any
date of determination means the closing price of a Common Share on such day as
reported in the “pink sheets” through the Interdealer Trading Quotation System;
provided, if such security is not traded on the over the counter market via the
pink sheets, then the closing price on the NASDAQ OTCBB Exchange; provided further,
that, if such security is not listed or admitted to trading on the NASDAQ OTCBB,
as reported on the principal national security exchange or quotation system on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the closing bid price of such security on the over-the-counter
market on the day in question as reported by Bloomberg LP or a similar generally
accepted reporting service, as the case may be.

       

      (xiii) “Debenture” or “Debentures” means this
Convertible Debenture of the Company or such other convertible debenture(s)
exchanged therefor as provided in Section 2.1.

       

      (xiv) “Discount Multiplier” has the meaning set
forth in Section 3.1(a).

       

      (xv) “Event of Default” has the
meaning set forth in Section 6.1.

       

      (xvi) “Holder” means Golden Gate
Investors, Inc., any successor thereto, or any Person to whom this Debenture is
subsequently transferred in accordance with the provisions hereof.

       

      (xvii) “Interest Payment Due Date”
has the meaning set forth in the opening paragraph of this
Debenture.

       

      (xviii) “Market Disruption Event”
means any event that results in a material suspension or limitation of trading
of the Common Shares.

       

      (xix) “Maturity Date” means the
maturity date set forth in the first paragraph of this Debenture.

       

      (xx) “Maximum Rate” has the meaning
set forth in Section 6.4.

       

      (xxi) “Outstanding” when used with
reference to Common Shares or Capital Shares (collectively, “Shares”) means, on any date
of determination, all issued and outstanding Shares, and includes all such
Shares issuable in respect of outstanding scrip or any certificates representing
fractional interests in such Shares; provided, however, that any
such Shares directly or indirectly owned or held by or for the account of the
Company or any Subsidiary of the Company shall not be deemed “Outstanding” for purposes
hereof.

       

      (xxii) “Person” means an individual,
a corporation, a partnership, an association, a limited liability company, an
unincorporated business organization, a trust or other entity or organization,
and any government or political subdivision or any agency or instrumentality
thereof.

       

      (xxiii) “Principal Amount” means, for
any date of calculation, the principal sum set forth in the first paragraph of
this Debenture (but only such principal amount as to which the Holder has (a)
actually advanced, and (b) not theretofore furnished a Conversion Notice in
compliance with Section 3.2).

       

      (xxiv) “SEC” means the United States
Securities and Exchange Commission.

       

      (xxv) “Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations of the SEC
thereunder, all as in effect at the time.

       

      (xxvi) “Securities Purchase
Agreement” means that certain Securities Purchase Agreement of even date
herewith by and among the Company and Holder, as the same may be amended from
time to time.

       

      (xxvii) “Subsidiary” means any entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are owned directly or indirectly by the Company.

       

      (xxviii) “Trading Day” means any day on
which (i) purchases and sales of securities on the principal national security
exchange or quotation system on which the Common Shares are traded are reported
thereon, or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, as reported by Bloomberg LP or a
similar generally accepted reporting service, as the case may be, (ii) at least
one bid for the trading of Common Shares is reported and (iii) no Market
Disruption Event occurs.

       

      (xxix) “Volume Weighted Average
Price”                                                                           per
Common Share means the volume weighted average price of the Common Shares during
any Trading Day as reported in the “pink sheets” through the Interdealer Trading
Quotation System; provided, if such security is not traded on the over the
counter market via the pink sheets, then the volume weighted average price on
the NASDAQ OTCBB; provided further,
that, if such security is not listed or admitted to trading on the NASDAQ OTCBB,
as reported on the principal national security exchange or quotation system on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the volume weighted average price of the Common Shares during
any Trading Day on the over-the-counter market as reported by Bloomberg LP or a
similar generally accepted reporting service, as the case may be.

       

      All
references to “cash” or “$” herein means currency of the United States of
America.

       

      ARTICLE
2

      EXCHANGES,
TRANSFER AND REPAYMENT

       

      SECTION
2.1 Registration of Transfer of
Debentures. This Debenture, when presented for registration of transfer,
shall (if so required by the Company) be duly endorsed, or be accompanied by a
written instrument of transfer in form reasonably satisfactory to the Company
duly executed, by the Holder duly authorized in writing.

       

      SECTION
2.2 Loss, Theft, Destruction of
Debenture.  Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Debenture and, in
the case of any such loss, theft or destruction, upon receipt of indemnity or
security reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Debenture, the Company shall
make, issue and deliver, in lieu of such lost, stolen, destroyed or mutilated
Debenture, a new Debenture of like tenor and unpaid Principal Amount dated as of
the date hereof (which shall accrue interest from the most recent Interest
Payment Due Date on which an interest payment was made in full).  This
Debenture shall be held and owned upon the express condition that the provisions
of this Section 2.2 are exclusive with respect to the replacement of a
mutilated, destroyed, lost or stolen Debenture and shall preclude any and all
other rights and remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without the surrender thereof.

       

      SECTION
2.3 Who Deemed Absolute
Owner.  The Company may deem the Person in whose name this
Debenture shall be registered upon the registry books of the Company to be, and
may treat it as, the absolute owner of this Debenture (whether or not this
Debenture shall be overdue) for the purpose of receiving payment of or on
account of the Principal Amount of this Debenture, for the conversion of this
Debenture and for all other purposes, and the Company shall not be affected by
any notice to the contrary.  All such payments and such conversions
shall be valid and effectual to satisfy and discharge the liability upon this
Debenture to the extent of the sum or sums so paid or the conversion or
conversions so made.

       

      SECTION
2.4 Repayment at
Maturity.  At the Maturity Date, the Company shall repay the
outstanding Principal Amount of this Debenture in whole in cash, together with
all accrued and unpaid interest thereon, in cash, to the Maturity
Date.

       

      ARTICLE
3

      CONVERSION
OF DEBENTURE

       

      SECTION
3.1 Conversion; Conversion
Price; Valuation Event.

       

      At the
option of the Holder, this Debenture may be converted, either in whole or in
part, up to the full Principal Amount hereof into Common Shares (calculated as
to each such conversion to the nearest 1/100th of a share), at any time and from
time to time on any Business Day, subject to compliance with Section 3.2. The
number of Common Shares into which this Debenture may be converted is equal to
the dollar amount of the Debenture being converted divided by the Conversion
Price. The “Conversion
Price” shall be equal to the lesser of (i) $0.25, or (ii) 80% of the
average of the 5 lowest Volume Weighted Average Prices during the 20 Trading
Days prior to Holder’s election to convert (the percentage figure being a “Discount Multiplier”). The
Company reserves the right to increase the number of Trading Days in clause (ii)
above, as it deems appropriate.

       

      If the
Holder elects to convert a portion of the Debenture and, on the day that the
election is made, the Volume Weighted Average Price is below $0.01, the Company
shall have the right to prepay that portion of the Debenture that Holder elected
to convert, plus any accrued and unpaid interest, at 150% of such amount. In the
event that the Company elects to prepay that portion of the Debenture, Holder
shall have the right to withdraw its Conversion Notice.

       

      SECTION
3.2 Exercise of Conversion
Privilege.  (a) Conversion of this Debenture may be exercised
on any Business Day by the Holder by telecopying an executed and completed
Conversion Notice to the Company.  Each date on which a Conversion
Notice is telecopied to the Company in accordance with the provisions of this
Section 3.2 shall constitute a Conversion Date.  The Company shall
convert this Debenture and issue the Common Stock Issued at Conversion in the
manner provided below in this Section 3.2, and all voting and other rights
associated with the beneficial ownership of the Common Stock Issued at
Conversion shall vest with the Holder, effective as of the Conversion Date at
the time specified in the Conversion Notice.  The Conversion Notice
also shall state the name or names (with addresses) of the persons who are to
become the holders of the Common Stock Issued at Conversion in connection with
such conversion. As promptly as practicable after the receipt of the Conversion
Notice as aforesaid, but in any event not more than two (2) Business Days after
the Company’s receipt of such Conversion Notice, the Company shall (i) issue the
Common Stock Issued at Conversion in accordance with the provisions of this
Article 3 and (ii) cause to be mailed for delivery by overnight courier (x) a
certificate or certificate(s) representing the number of Common Shares to which
the Holder is entitled by virtue of such conversion and (y) cash, as provided in
Section 3.3, in respect of any fraction of a Common Share deliverable upon such
conversion.  Such conversion shall be deemed to have been effected at
the time at which the Conversion Notice indicates, and at such time the rights
of the Holder of this Debenture, as such (except if and to the extent that any
Principal Amount thereof remains unconverted), shall cease and the Person and
Persons in whose name or names the Common Stock Issued at Conversion shall be
issuable shall be deemed to have become the holder or holders of record of the
Common Shares represented thereby, and all voting and other rights associated
with the beneficial ownership of such Common Shares shall at such time vest with
such Person or Persons.  The Conversion Notice shall constitute a
contract between the Holder and the Company, whereby the Holder shall be deemed
to subscribe for the number of Common Shares which it will be entitled to
receive upon such conversion and, in payment and satisfaction of such
subscription (and for any cash adjustment to which it is entitled pursuant to
Section 3.4), to surrender this Debenture and to release the Company from all
liability thereon (except if and to the extent that any Principal Amount thereof
remains unconverted).  No cash payment aggregating less than $1.00
shall be required to be given unless specifically requested by the
Holder.

       

      (b) If, at
any time after the date of this Debenture, (i) the Company challenges, disputes
or denies the right of the Holder hereof to effect the conversion of this
Debenture into Common Shares or otherwise dishonors or rejects any Conversion
Notice delivered in accordance with this Section 3.2 or (ii) any third party who
is not and has never been an Affiliate of the Holder commences any lawsuit or
legal proceeding or otherwise asserts any claim before any court or public or
governmental authority which seeks to challenge, deny, enjoin, limit, modify,
delay or dispute the right of the Holder hereof to effect the conversion of this
Debenture into Common Shares, then the Holder shall have the right, but not the
obligation, by written notice to the Company, to require the Company to promptly
redeem this Debenture for cash at one hundred fifty percent (150%) of the
Principal Amount thereof, together with all accrued and unpaid interest thereon
to the date of redemption.  Under any of the circumstances set forth
above, the Company shall be responsible for the payment of all costs and
expenses of the Holder, including reasonable legal fees and expenses, as and
when incurred in defending itself in any such action or pursuing its rights
hereunder (in addition to any other rights of the Holder).

       

      (c) The
Holder shall be entitled to exercise its conversion privilege notwithstanding
the commencement of any case under the Bankruptcy Code.  In the event
the Company is a debtor under the Bankruptcy Code, the Company hereby waives to
the fullest extent permitted any rights to relief it may have under 11 U.S.C. §
362 in respect of the Holder’s conversion privilege.  The Company
hereby waives to the fullest extent permitted any rights to relief it may have
under 11 U.S.C. § 362 in respect of the conversion of this
Debenture.  The Company agrees, without cost or expense to the Holder,
to take or consent to any and all action necessary to effectuate relief under 11
U.S.C. § 362.

       

      SECTION
3.3 Fractional
Shares.  No fractional Common Shares or scrip representing
fractional Common Shares shall be delivered upon conversion of this
Debenture.  Instead of any fractional Common Shares which otherwise
would be delivered upon conversion of this Debenture, the Company shall pay a
cash adjustment in respect of such fraction in an amount equal to the same
fraction multiplied by the Current Market Price on the Conversion
Date.  No cash payment of less than $1.00 shall be required to be
given unless specifically requested by the Holder.

       

      SECTION
3.4 Adjustments.  The
Conversion Price and the number of shares deliverable upon conversion of this
Debenture are subject to adjustment from time to time as follows:

       

      (i) Reclassification,
Etc.  In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another Person
(where the Company is not the survivor or where there is a change in or
distribution with respect to the Common Stock of the Company), sell, convey,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another Person, or effectuate a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of the
Company is disposed of (each, a “Fundamental Corporate
Change”) and, pursuant to the terms of such Fundamental Corporate Change,
shares of common stock of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation (“Other Property”) are to be
received by or distributed to the holders of Common Stock of the Company, then
the Holder of this Debenture shall have the right thereafter, at its sole
option, to (x) require the Company to prepay this Debenture for cash at one
hundred fifty percent (150%) of the Principal Amount thereof, together with all
accrued and unpaid interest thereon to the date of prepayment, (y) receive
the number of shares of common stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and Other Property as is
receivable upon or as a result of such Fundamental
Corporate Change by a holder of the number of shares of Common Stock into which
the outstanding portion of this Debenture may be converted at the Conversion
Price applicable immediately prior to such Fundamental Corporate Change or
(z) require the Company, or such successor, resulting or purchasing
corporation, as the case may be, to, without benefit of any additional
consideration therefor, execute and deliver to the Holder a debenture with
substantial identical rights, privileges, powers, restrictions and other terms
as this Debenture in an amount equal to the amount outstanding under this
Debenture immediately prior to such Fundamental Corporate Change.  For
purposes hereof, “common stock
of the successor or acquiring corporation” shall include stock of such
corporation of any class which is not preferred as to dividends or assets over
any other class of stock of such corporation and which is not subject to
prepayment and shall also include any evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock.  The foregoing provisions shall similarly
apply to successive Fundamental Corporate Changes.

       

      SECTION
3.5 Certain Conversion
Limits.

       

      

        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, as set forth on the applicable Conversion
Notice, such Holder (together with such Holder’s Affiliates, and any other
person or entity acting as a group together with such Holder or any of such
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
such 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 such 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 warrants to purchase shares of the
Company’s Common Stock) beneficially owned by such Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for
purposes of this Section 3.5, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder.  To the extent that the limitation contained
in this Section 3.5 applies, the determination of whether this Debenture is
convertible (in relation to other securities owned by such Holder together with
any Affiliates) and of which principal amount of this Debenture is convertible
shall be in the sole discretion of such Holder, and the submission of a
Conversion Notice shall be deemed to be such Holder’s determination of whether
this Debenture may be converted (in relation to other securities owned by such
Holder together with any Affiliates) and which principal amount of this
Debenture is convertible, in each case subject to such aggregate percentage
limitations.  To ensure compliance with this restriction, each Holder
will be deemed to represent to the Company each time it delivers a Conversion
Notice that such Conversion Notice 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 3.5, in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock provided to the Holder in writing by the
Company after Holder makes such request or in the event that the Company files,
any of the following with the Securities and Exchange Commission, the most
recent of the following: (A) the Company's most recent Form 10-QSB or Form
10-KSB, 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 such
Holder the number of shares of Common Stock then outstanding on the records of
the Company as of the date of the request.  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 such 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 Beneficial Ownership Limitation provisions of this
Section 3.5 may be waived by such Holder, at the election of such Holder, upon
not less than 61 days’ prior notice to the Company, to, at the sole discretion
of the Holder, either change the Beneficial Ownership Limitation to (i) 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 the
Debenture held by the Holder and the provisions of this Section 3.5 shall
continue to apply, or (ii) remove any Beneficial Ownership Limitation under this
Debenture.  The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of
this Section 3.5 to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation.  If any court of competent
jurisdiction shall determine that the foregoing limitation is ineffective to
prevent a Holder from being deemed the beneficial owner of more than 9.99% of
the then outstanding shares of Common Stock, then the Company shall prepay such
portion of this Debenture as shall cause such Holder not to be deemed the
beneficial owner of more than 9.99% of the then outstanding shares of Common
Stock.  Upon such determination by a court of competent jurisdiction,
the Holder shall have no interest in or rights under such portion of the
Debenture.  Any and all interest paid on or prior to the date of such
determination shall be deemed interest paid on the remaining portion of this
Debenture held by the Holder.  Such prepayment shall be for cash at a
prepayment price of one hundred fifty percent (150%) of the Principal Amount
thereof, together with all accrued and unpaid interest thereon to the date of
prepayment.  The limitations contained in this paragraph shall apply
to a successor holder of this Debenture.

      

       

       

      SECTION
3.6 Surrender of
Debentures.  Upon any redemption of this Debenture pursuant to
Sections 3.2, 3.5 or 6.2, or upon maturity pursuant to Section 2.4, the Holder
shall either deliver this Debenture by hand to the Company at its principal
executive offices or surrender the same to the Company at such address by
nationally recognized overnight courier.  Payment of the redemption
price or the amount due on maturity specified in Section 2.4, shall be made by
the Company to the Holder against receipt of this Debenture (as provided in this
Section 3.5) by wire transfer of immediately available funds to such account(s)
as the Holder shall specify by written notice to the Company.  If
payment of such redemption price is not made in full by the redemption date, or
the amount due on maturity is not paid in full by the Maturity Date, the Holder
shall again have the right to convert this Debenture as provided in Article 3
hereof or to declare an Event of Default.

       

      ARTICLE
4

      STATUS;
RESTRICTIONS ON TRANSFER

       

      SECTION
4.1 Status of
Debenture.  This Debenture constitutes a legal, valid and
binding obligation of the Company, enforceable in accordance with its terms
subject, as to enforceability, to general principles of equity and to principles
of bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors’ rights and remedies
generally.

       

      SECTION
4.2 Restrictions on
Transfer.  This Debenture, and any Common Shares deliverable
upon the conversion hereof, have not been registered under the Securities
Act.  The Holder by accepting this Debenture agrees that this
Debenture and the shares of Common Stock to be acquired as interest on and upon
conversion of this Debenture may not be assigned or otherwise transferred unless
and until (i) the Company has received the opinion of counsel for the Holder
that this Debenture or such shares may be sold pursuant to an exemption from
registration under the Securities Act, provided that the Company will not
require opinions of counsel for transactions involving transfers to Affiliates
of the Holder or pursuant to Rule 144 promulgated by the SEC under the
Securities Act, except in unusual circumstances, or (ii) a registration
statement relating to this Debenture or such shares has been filed by the
Company and declared effective by the SEC.

       

      Each
certificate for shares of Common Stock deliverable hereunder shall bear a legend
as follows unless and until such securities have been sold pursuant to an
effective registration statement under the Securities Act:

       

      “The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the “Securities Act”).  The
securities may not be offered for sale, sold or otherwise transferred except (i)
pursuant to an effective registration statement under the Securities Act or (ii)
pursuant to an exemption from registration under the Securities Act in respect
of which the issuer of this certificate has received an opinion of counsel
satisfactory to the issuer of this certificate to such effect.  Copies
of the agreement covering both the purchase of the securities and restrictions
on their transfer may be obtained at no cost by written request made by the
holder of record of this certificate to the Secretary of the issuer of this
certificate at the principal executive offices of the issuer of this
certificate.”

       

      ARTICLE
5

      COVENANTS

       

      SECTION
5.1 Conversion.  The
Company shall cause the transfer agent, not later than two (2) Business Days
after the Company’s receipt of a Conversion Notice, to issue and deliver to the
Holder the requisite shares of Common Stock Issued at Conversion.

       

      SECTION
5.2 Notice of
Default.  If any one or more events occur which constitute or
which, with notice, lapse of time, or both, would constitute an Event of
Default, the Company shall forthwith give notice to the Holder, specifying the
nature and status of the Event of Default or such other event(s), as the case
may be.

       

      SECTION
5.3 Payment of
Obligations.  So long as this Debenture shall be outstanding,
the Company shall pay, extend, or discharge at or before maturity, all its
respective material obligations and liabilities, including, without limitation,
tax liabilities, except where the same may be contested in good faith by
appropriate proceedings.

       

      SECTION
5.4 Compliance with
Laws.  So long as this Debenture shall be outstanding, the
Company shall comply with all applicable laws, ordinances, rules, regulations
and requirements of governmental authorities, except for such noncompliance
which would not have a material adverse effect on the business, properties,
prospects, condition (financial or otherwise) or results of operations of the
Company and the Subsidiaries.

       

      SECTION
5.5 Inspection of Property,
Books and Records.  So long as this Debenture shall be
outstanding, the Company shall keep proper books of record and account in which
full, true and correct entries shall be made of all material dealings and
transactions in relation to its business and activities and shall permit
representatives of the Holder at the Holder’s expense to visit and inspect any
of its respective properties, to examine and make abstracts from any of its
respective books and records, not reasonably deemed confidential by the Company,
and to discuss its respective affairs, finances and accounts with its respective
officers and independent public accountants, all at such reasonable times and as
often as may reasonably be desired.

       

      SECTION
5.6 Reservation of Stock
Issuable Upon Conversion.  The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of this Debenture,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of this Debenture; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of this Debenture, in addition to such other remedies
as shall be available to the holder of this Debenture, the Company will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite shareholder approval to file an
amendment to the charter of the Company.

       

      SECTION
5.7 Right of First Refusal on
Other
Financing.                                                                                                In
the event that the Company obtains a commitment for any other financing (either
debt, equity, or a combination thereof) which is to close during the term of
this Debenture, Holder shall be entitled to a right of first refusal to enable
it to, at Holder’s option, either: (i) match the terms of the other financing,
or (ii) add additional principal to this Debenture, in the amount of such other
financing, on the same terms and conditions as this Debenture. The Company shall
deliver to Holder, at least 10 days prior to the proposed closing date of such
transaction, written notice describing the proposed transaction, including the
terms and conditions thereof, and providing Holder an option during the 10 day
period following delivery of such notice to either provide the financing being
offered in such transaction on the same terms as contemplated by such
transaction, or to add additional principal to this Debenture, in the amount of
such other financing, on the same terms and conditions as this
Debenture.  Notwithstanding the foregoing, if the Company seeks to
consummate such financing on terms less favorable to the Company than those
terms that were provided to Holder, such financing shall be subject to Holder’s
right of first refusal set forth in this Section 5.7.

       

      ARTICLE
6

      EVENTS
OF DEFAULT; REMEDIES

       

      SECTION
6.1 Events of
Default.  “Event of Default” wherever
used herein means any one of the following events:

       

      (i) the
Company shall default in the payment of principal of or interest on this
Debenture as and when the same shall be due and payable and, in the case of an
interest payment default, such default shall continue for five (5) Business Days
after the date such interest payment was due, or the Company shall fail to
perform or observe any other covenant, agreement, term, provision, undertaking
or commitment under this Debenture or the Securities Purchase Agreement and such
default shall continue for a period of ten (10) Business Days after the delivery
to the Company of written notice that the Company is in default hereunder or
thereunder;

       

      (ii) any of
the representations, warranties, or covenants made by the Company herein, in the
Securities Purchase Agreement or in any certificate or financial or other
written statements heretofore or hereafter furnished by or on behalf of the
Company in connection with the execution and delivery of this Debenture or the
Securities Purchase Agreement shall be false or misleading in a material respect
on the Closing Date;

       

      (iii) under the
laws of any jurisdiction not otherwise covered by clauses (iv) and (v) below,
the Company or any Subsidiary (A) becomes insolvent or generally not able to pay
its debts as they become due, (B) admits in writing its inability to pay its
debts generally or makes a general assignment for the benefit of creditors, (C)
institutes or has instituted against it any proceeding seeking (x) to adjudicate
it a bankrupt or insolvent, (y) liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency, reorganization or relief of
debtors including any plan of compromise or arrangement or other corporate
proceeding involving or affecting its creditors or (z) the entry of an order for
relief or the appointment of a receiver, trustee or other similar person for it
or for any substantial part of its properties and assets, and in the case of any
such official proceeding instituted against it (but not instituted by it),
either the proceeding remains undismissed or unstayed for a period of sixty (60)
calendar days, or any of the actions sought in such proceeding (including the
entry of an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its properties and assets) occurs or (D) takes any corporate action to
authorize any of the above actions;

       

      (iv) the entry
of a decree or order by a court having jurisdiction in the premises adjudging
the Company or any Subsidiary a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under the Bankruptcy Code or any other
applicable Federal or state law, or appointing a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of the Company or of any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs, and any such decree or order continues and is unstayed and in
effect for a period of sixty (60) calendar days;

       

      (v) the
institution by the Company or any Subsidiary of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under the Bankruptcy Code or any
other applicable federal or state law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator, assignee, trustee
or sequestrator (or other similar official) of the Company or of any substantial
part of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as and when they become due, or the taking of corporate action by the
Company in furtherance of any such action;

       

      (vi) a final
judgment or final judgments for the payment of money shall have been entered by
any court or courts of competent jurisdiction against the Company and remains
undischarged for a period (during which execution shall be effectively stayed)
of thirty (30) days, provided that the
aggregate amount of all such judgments at any time outstanding (to the extent
not paid or to be paid, as evidenced by a written communication to that effect
from the applicable insurer, by insurance) exceeds One Hundred Thousand Dollars
($100,000);

       

      (vii) it
becomes unlawful for the Company to perform or comply with its obligations under
this Debenture or the Securities Purchase Agreement in any respect;

       

      (viii) the
Common Shares shall no longer be traded in the over the counter market via the
“pink sheets” or not otherwise be listed for trading on  the NASDAQ
OTCBB (the “Trading
Market” or, to the extent the Company becomes eligible to list its Common
Stock on any other national security exchange or quotation system, upon official
notice of listing on any such exchange or system, as the case may be, it shall
be the “Trading Market”) or suspended from trading on the Trading Market, and
shall not be reinstated, relisted or such suspension lifted, as the case may be,
within five (5) days;

       

      (ix) the
Company shall fail to timely file all reports required to be filed by it with
the Commission (as defined in the Securities Purchase Agreement) pursuant to
Section 13 or 15(d) of the Exchange Act (as defined in the Securities Purchase
Agreement), or otherwise required by the Exchange Act;

       

      (x) the
Company shall default (giving effect to any applicable grace period) in the
payment of principal or interest as and when the same shall become due and
payable, under any indebtedness, individually or in the aggregate, of more than
One Hundred Thousand Dollars ($100,000); or

       

      (xi) the
Common Stock shall trade on the Trading Market at a price per share that is
$0.01 per share or lower at any time during the term of this Debenture (as
adjusted for any stock splits, stock dividends, combinations, subdivisions,
recapitalizations or the like).

       

      SECTION
6.2 Acceleration of Maturity;
Rescission and Annulment.  If an Event of Default occurs and is
continuing, provided however, that once an Event of Default occurs as described
in clause (xi) of Section 6.1, such Event of Default will not be cured by the
subsequent trading of the Common Stock at a price greater than that specified in
such clause, then and in every such case the Holder may, in Holder’s sole and
absolute discretion, by a notice in writing to the Company, rescind any
outstanding Conversion Notice and declare that any or all amounts owing or
otherwise outstanding under this Debenture are immediately due and payable and
upon any such declaration this Debenture or such portion thereof, as applicable,
shall become immediately due and payable in cash at a price of one hundred fifty
percent (150%) of the Principal Amount thereof, together with all accrued and
unpaid interest thereon to the date of payment; provided, however, in the case
of any Event of Default described in clause (xi) of Section 6.1 such amount
shall become immediately due and payable in cash at a price of one hundred ten
percent (110%) of the Principal Amount thereof, together with all accrued and
unpaid interest thereon to the date of payment; provided further, in
the case of any Event of Default described in clauses (iii), (iv), (v) or (vii)
of Section 6.1, all amounts owing or otherwise outstanding under this Debenture
automatically shall become immediately due and payable without the necessity of
any notice or declaration as aforesaid.  In the event that the Company
is obligated to pay any amount to the Holder in connection with an acceleration
of the maturity of this Debenture as set forth herein, the Company shall first
apply against such amount an amount equal to the outstanding amount owed by the
Holder to the Company under the Promissory Note, if any, and the amount
otherwise owed by the Company to the Holder in connection with an acceleration
of the maturity of this Debenture shall be reduced by the outstanding amount
owed by the Holder to the Company under the Promissory Note, with the Promissory
Note deemed paid by Holder to the extent of and with respect to such amount, and
if the amount due from the Company to the Holder in connection with an
acceleration of the maturity of this Debenture is equal to or greater than the
outstanding amount owed under the Promissory Note, the Company shall cancel and
deem the Promissory Note as paid in full in connection with the application of
the amount owed by the Holder to the Company under Promissory Note against the
amount otherwise owed by the Company to the Holder hereunder.  The
Company shall immediately pay in cash to the Holder any remaining amount owed by
the Company to the Holder in connection with the acceleration of the maturity of
this Debenture as described herein, after the application of the outstanding
amount owed under the Promissory Note, if any, to such obligation.

       

      SECTION
6.3 Late Payment
Penalty.  If any portion of the principal of or interest on
this Debenture shall not be paid within ten (10) days of when it is due, the
Discount Multiplier under this Debenture shall decrease by one percentage point
(1%) for all conversions of this Debenture thereafter.

       

      SECTION
6.4 Maximum Interest
Rate.  Notwithstanding anything herein to the contrary, if at
any time the applicable interest rate as provided for herein shall exceed the
maximum lawful rate which may be contracted for, charged, taken or received by
the Holder in accordance with any applicable law (the “Maximum Rate”), the rate of
interest applicable to this Debenture shall be limited to the Maximum
Rate.  To the greatest extent permitted under applicable law, the
Company hereby waives and agrees not to allege or claim that any provisions of
this Debenture could give rise to or result in any actual or potential violation
of any applicable usury laws.

       

      SECTION
6.5 Remedies Not
Waived.  No course of dealing between the Company and the
Holder or any delay in exercising any rights hereunder shall operate as a waiver
by the Holder.

       

      SECTION
6.6                                Remedies.                                The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Debenture will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Debenture, that the Holder shall be entitled
to all other available remedies at law or in equity, and in addition to the
penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Debenture and to enforce specifically
the terms and provisions thereof, without the necessity of showing economic loss
and without any bond or other security being required.

       

      SECTION
6.7                                Payment of Certain
Amounts.                                                                Whenever
pursuant to this Debenture the Company is required to pay an amount in excess of
the Principal Amount plus accrued and unpaid interest, the Company and the
Holder agree that the actual damages to the Holder from the receipt of cash
payment on this Debenture may be difficult to determine and the amount to be so
paid by the Company represents stipulated damages and not a penalty and is
intended to compensate the Holder in part for loss of the opportunity to convert
this Debenture and to earn a return from the sale of shares of Common Stock
acquired upon conversion of this Debenture at a price in excess of that price
paid for such shares pursuant to this Debenture. The Company and the Holder
hereby agree that such amount of stipulated damages is not disproportionate to
the possible loss to the Holder from the receipt of a cash payment without the
opportunity to convert this Debenture into shares of Common Stock.

       

      ARTICLE
7

      MISCELLANEOUS

       

      SECTION
7.1 Notice of Certain
Events.  In the case of the occurrence of any event described
in Section 3.4 of this Debenture, the Company shall cause to be mailed to the
Holder of this Debenture at its last address as it appears in the Company’s
security registry, at least twenty (20) days prior to the applicable record,
effective or expiration date hereinafter specified (or, if such twenty (20)
days’ notice is not possible, at the earliest possible date prior to any such
record, effective or expiration date), a notice thereof, including, if
applicable, a statement of (y) the date on which a record is to be taken for the
purpose of such dividend, distribution, issuance or granting of rights, options
or warrants, or if a record is not to be taken, the date as of which the holders
of record of Common Stock to be entitled to such dividend, distribution,
issuance or granting of rights, options or warrants are to be determined or (z)
the date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective, and the
date as of which it is expected that holders of record of Common Stock will be
entitled to exchange their shares for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale transfer,
dissolution, liquidation or winding-up.

       

      SECTION
7.2 Register.  The
Company shall keep at its principal office a register in which the Company shall
provide for the registration of this Debenture.  Upon any transfer of
this Debenture in accordance with Articles 2 and 4 hereof, the Company shall
register such transfer on the Debenture register.

       

      SECTION
7.3 Withholding.  To
the extent required by applicable law, the Company may withhold amounts for or
on account of any taxes imposed or levied by or on behalf of any taxing
authority in the United States having jurisdiction over the Company from any
payments made pursuant to this Debenture.

       

      SECTION
7.4 Transmittal of
Notices.  Except as may be otherwise provided herein, any
notice or other communication or delivery required or permitted hereunder shall
be in writing and shall be delivered personally, or sent by telecopier machine
or by a nationally recognized overnight courier service, and shall be deemed
given when so delivered personally, or by telecopier machine or overnight
courier service as follows:

       

      
        

        (1)           If
to the Company, to:

        

        American
Security Resources Corporation

        9601 Katy
Freeway, Suite 220

        Houston,
Texas 77024

        Telephone:
713-465-1001

        Facsimile:
713-465-1001

        

        (2)           If
to the Holder, to:

        Golden
Gate Investors, Inc.

        7817
Herschel Avenue, Suite 200

        La Jolla,
California 92037

        Telephone:
858-551-8789

        Facsimile:
858-551-8779

         

      

      Each of
the Holder or the Company may change the foregoing address by notice given
pursuant to this Section 7.4.

       

      SECTION
7.5 Attorneys’
Fees.  Should any party hereto employ an attorney for the
purpose of enforcing or construing this Debenture, or any judgment based on this
Debenture, in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto reimbursement for
all reasonable attorneys' fees and all reasonable costs, including but not
limited to service of process, filing fees, court and court reporter costs,
investigative costs, expert witness fees, and the cost of any bonds, whether
taxable or not, and that such reimbursement shall be included in any judgment or
final order issued in that proceeding.  The "prevailing party" means
the party determined by the court to most nearly prevail and not necessarily the
one in whose favor a judgment is rendered.

       

      SECTION
7.6 Governing
Law.  This Debenture shall be governed by, and construed in
accordance with, the laws of the State of California (without giving effect to
conflicts of laws principles).  With respect to any suit, action or
proceedings relating to this Debenture, the Company irrevocably submits to the
exclusive jurisdiction of the courts of the State of California sitting in San
Diego and the United States District Court located in the City of San Diego and
hereby waives, to the fullest extent permitted by applicable law, any claim that
any such suit, action or proceeding has been brought in an inconvenient
forum.  Subject to applicable law, the Company agrees that final
judgment against it in any legal action or proceeding arising out of or relating
to this Debenture shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified copy of which judgment shall be conclusive evidence thereof and the
amount of its indebtedness, or by such other means provided by law.

       

      SECTION
7.7                                Waiver of Jury Trial.
To the fullest extent permitted by law, each of the parties hereto hereby
knowingly, voluntarily and intentionally waives its respective rights to a jury
trial of any claim or cause of action based upon or arising out of this
Debenture or any other document or any dealings between them relating to the
subject matter of this Debenture and other documents.  Each party
hereto (i) certifies that neither of their respective representatives, agents or
attorneys has represented, expressly or otherwise, that such party would not, in
the event of litigation, seek to enforce the foregoing waivers and (ii)
acknowledges that it has been induced to enter into this Debenture by, among
other things, the mutual waivers and certifications herein.

       

      SECTION
7.8                                Headings.  The
headings of the Articles and Sections of this Debenture are inserted for
convenience only and do not constitute a part of this Debenture.

       

      SECTION
7.9                                Payment
Dates.  Whenever any payment hereunder shall be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day.

       

      SECTION
7.10                                Binding
Effect.  Each Holder by accepting this Debenture agrees to be
bound by and comply with the terms and provisions of this
Debenture.

       

      SECTION
7.11                                No Stockholder
Rights.  Except as otherwise provided herein, this Debenture
shall not entitle the Holder to any of the rights of a stockholder of the
Company, including, without limitation, the right to vote, to receive dividends
and other distributions, or to receive any notice of, or to attend, meetings of
stockholders or any other proceedings of the Company, unless and to the extent
converted into shares of Common Stock in accordance with the terms
hereof.

       

      SECTION
7.12                                Facsimile
Execution.  Facsimile execution of this Debenture shall be
deemed original.

       

      IN
WITNESS WHEREOF, the Company has caused this Debenture to be signed by its duly
authorized officer on the date of this Debenture.

      

      
        	 
      	
                American
      Security Resources Corporation

              
	 
      	
                By:
      _______________________________________

              
	 
      	
                Name:  Frank
      Neukomm

              
	 
      	
                Title:   CEO

              

      

       

      

       

      

      
        
          
            

            _____________ _____________

            Initials Initials

          

           

        

        
           

          
            

          

        

        
           

        

      

      

       

      EXHIBIT
A

      DEBENTURE CONVERSION
NOTICE

      

      
        	
                TO:

              	
                American
      Security Resources Corporation

              

      

      9601 Katy
Freeway, Suite 220

      Houston,
Texas 77024

      Telephone:
713-465-1001

      Facsimile:
713-465-1080

       

      The
undersigned owner of the Convertible Debenture due December 12, 2010 (the “Debenture”) issued by
American Security Resources Corporation (the “Company”) hereby irrevocably
exercises its option to convert $__________ Principal Amount of the Debenture
into shares of Common Stock in accordance with the terms of the
Debenture.  The undersigned hereby instructs the Company to convert
the portion of the Debenture specified above into shares of Common Stock Issued
at Conversion in accordance with the provisions of Article 3 of the
Debenture.  The undersigned directs that the Common Stock and
certificates therefor deliverable upon conversion, the Debenture reissued in the
Principal Amount not being surrendered for conversion hereby, [the check or
shares of Common Stock in payment of the accrued and unpaid interest thereon to
the date of this Notice,] together with any check in payment for fractional
Common Stock, be registered in the name of and/or delivered to the undersigned
unless a different name has been indicated below.  All capitalized
terms used and not defined herein have the respective meanings assigned to them
in the Debenture.  The conversion pursuant hereto shall be deemed to
have been effected at the date and time specified below, and at such time the
rights of the undersigned as a Holder of the Principal Amount of the Debenture
set forth above shall cease and the Person or Persons in whose name or names the
Common Stock Issued at Conversion shall be registered shall be deemed to have
become the holder or holders of record of the Common Shares represented thereby
and all voting and other rights associated with the beneficial ownership of such
Common Shares shall at such time vest with such Person or Persons.

       

      Date and
time:  __________________

       

      ______________________________

       

      By:
___________________________

       

      Title:
_________________________

       

      
        

         

        

        Fill in
for registration of Debenture:

        Please
print name and address

        (including
ZIP code number):

        _____________________________________________

        _____________________________________________

        _____________________________________________

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