Document:

TAKE-TWO
      INTERACTIVE SOFTWARE, INC.

    CHANGE
      IN CONTROL

    EMPLOYEE
      SEVERANCE PLAN

     

    Effective
      March
      3, 2008

     

    INTRODUCTION

     

    The
      purpose of the Plan is to enable the Employer to offer certain protections
      to
      employees if their employment with the Employer is terminated without Cause
      or
      for Good Reason in connection with a Change in Control. Accordingly, to
      accomplish this purpose, the Board has adopted the Plan, effective as of March
      3, 2008. 

     

    Unless
      otherwise expressly provided in Section 2.3
      or
      unless otherwise agreed to between the Company and a Participant on or after
      the
      date hereof, Participants covered by the Plan shall not be eligible to
      participate in any other severance or termination plan, policy or practice
      of
      the Employer that would otherwise apply under the circumstances described
      herein. The Plan is intended to fall within the definition of an “employee
      welfare benefit plan” under Section 3(1) of ERISA. Important administrative
      provisions of (and information about) the Plan and important information about
      a
      Participant’s rights under the Plan and applicable law are contained in Article
      VIII. This Plan document shall constitute both the Plan document and summary
      plan description and shall be distributed to Participants in this form.
      Capitalized terms and phrases used herein shall have the meanings ascribed
      thereto in Article I.

     

    ARTICLE
      I

     

    DEFINITIONS

     

    For
      purposes of the Plan, capitalized terms and phrases used herein shall have
      the
      meanings ascribed in this Article.

     

    1.1 “Affiliate”
      shall
      mean (i) any subsidiary corporation of the Company within the meaning of Section
      424(f) of the Code, (ii) any corporation, trade or business (including, without
      limitation, a partnership or limited liability company) which is directly or
      indirectly controlled 50% or more (whether by ownership of stock, assets or
      an
      equivalent ownership interest or voting interest) by the Company, or (iii)
      any
      other entity which is designated as an Affiliate by the Board.

     

    1.2 “Base
      Salary”
      shall
      mean a Participant’s annual base compensation rate for services paid by the
      Employer to the Participant at the time immediately prior to the Participant’s
      termination of employment, as reflected in the Employer’s payroll records or, if
      higher, the Participant’s annual base compensation rate immediately prior to a
      Change in Control. Base Salary shall not include commissions, bonuses, overtime
      pay, incentive compensation, benefits paid under any qualified plan, any group
      medical, dental or other welfare benefit plan, non-cash compensation or any
      other additional compensation but shall include amounts reduced pursuant to
      a
      Participant’s salary reduction agreement under Section 125, 132(f)(4) or 401(k)
      of the Code, if any, or a nonqualified elective deferred compensation
      arrangement, if any, to the extent that in each such case the reduction is
      to
      base salary.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    1.3 “Board”
      shall
      mean the Board of Directors of the Company.

     

    1.4 “Bonus”
      shall
      mean the Participant’s annual bonus for the fiscal year in which a Change in
      Control shall occur, as in effect immediately prior to the Change in Control,
      as
      set forth under the Participant’s individual employment agreement with the
      Employer or in any written bonus plan, program or arrangement approved by the
      Board or the Compensation
      Committee of the
      Board.
      With respect to any Bonus that is based on a range and/or subject to the
      achievement of a performance goal(s), the Bonus shall be deemed to be the
      Participant’s target level bonus without regard to the actual level of
      performance (whether individual performance or company performance) achieved.
      Notwithstanding the foregoing, Bonus shall not include any bonus to be paid
      upon
      the completion of any specified milestone or project or upon the occurrence
      of a
      specified event.

     

    1.5 “Cause”
      shall
      mean the occurrence of any of the following:

     

    (a) the
      continued failure by the Participant to substantially perform his or her duties
      after receipt of notice from the Employer requesting such
      performance;

     

    (b) the
      criminal conviction by plea or after trial of having engaged in criminal
      misconduct (including embezzlement and fraud) which is demonstrably injurious
      to
      the Employer, monetarily or otherwise;

     

    (c) the
      conviction of the Participant for a felony;

     

    (d) gross
      negligence on the part of the Participant affecting the Employer; or

     

    (e) failure
      of the Participant to adhere to the Employer’s written policies or to cooperate
      in any investigation or inquiry involving the Employer.

     

    1.6 “Change
      in Control”
      shall
      have the meaning set forth in Appendix
      A
      hereto.

     

    1.7 “COBRA”
shall
      mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
      amended.

     

    1.8 “Code”
      shall
      mean the Internal Revenue Code of 1986, as amended.

     

    1.9 “Code
      Section 409A”
      shall
      mean Section 409A of the Code together with the treasury regulations and other
      official guidance promulgated thereunder.

     

    1.10 “Committee”
      shall
      mean the Compensation Committee of the Board or such other committee appointed
      by the Board from time to time to administer the Plan.

     

    1.11 “Company”
      shall
      mean Take-Two Interactive Software, Inc., a Delaware corporation, and any
      successor as provided in Article VI hereof.

     

    
      
        
        

      

      
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    1.12 “Completed
      Year of Service”
shall
      mean each full twelve (12) consecutive month period of service with the Employer
      commencing on the Participant’s most recent date of hire by the Employer and any
      anniversary thereof. Any prior periods of service shall be disregarded in
      calculating Completed Years of Service.

     

    1.13 “Continuation
      Period”
      shall
      mean a period commencing on the date of a Participant’s termination of
      employment until the earliest of: 

     

    (A)
      (i)
      in the case of a Tier 1 Employee, a period eighteen (18) months from the date
      of
      termination; (ii) in the case of a Tier 2 Employee, twelve (12) months from
      the
      date of termination; and (iii) in the case of a Tier 3 Employee, six (6) months
      from the date of termination;

     

    (B)
      the
      date
      the Participant becomes eligible for coverage under the health insurance plan
      of
      a subsequent employer; and 

     

    (C)
      the
      date
      the Participant or the Participant’s eligible dependents, as the case may be,
      cease to be eligible under COBRA.

     

    1.14 “Continued
      Health Coverage”
shall
      mean the benefit set forth in Section 2.2(b)
      below.

     

    1.15 “Delay
      Period”
      shall
      mean the period commencing on the date the Participant incurs a Separation
      from
      Service from the Employer until the earlier of (A) the six (6)-month anniversary
      of the date of such Separation from Service and (B) the date of the
      Participant’s death.

     

    1.16 “Disability”
      shall
      mean a Participant’s disability that would qualify as such under the Employer’s
      long-term disability plan without regard to any waiting periods set forth in
      such plan.

     

    1.17 “Effective
      Date”
      shall
      mean March 3, 2008.

     

    1.18 “Employer”
      shall
      mean the Company and any Affiliate.

     

    1.19 “Equity
      Vesting”
      shall
      mean the benefit set forth in Section 2.2(c)
      below.

     

    1.20 “ERISA”
      shall
      mean the Employee Retirement Income Security Act of 1974, as
      amended.

     

    1.21 “Exchange
      Act” shall
      mean the Securities Exchange Act of 1934, as amended.

     

    1.22 “Foreign
      Participant”
      shall
      mean any Participant who
      on
      the
      date of the Change in Control is
      employed
      or residing in any country other than the United States. The Company’s
      management, with the approval of the chairman of the Compensation Committee
      of
      the
      Board,
      may at
      any time prior to a Change in Control
      adopt
      special guidelines and provisions for Foreign Participants to comply with the
      applicable laws of such other countries.

     

    
      
        
        

      

      
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    1.23 “Good
      Reason”
      shall
      mean the occurrence of any of the following events on or following a Change
      in
      Control without the Participant’s express written consent, provided the
      Participant gives notice to the Employer of the Good Reason event within ninety
      (90) days after the Participant has knowledge of the Good Reason event and
      such
      events are not fully corrected in all material respects by the Employer within
      thirty (30) days following receipt of the Participant’s written
      notification:

     

    (a) a
      material diminution in
      the
      Participant’s Base
      Salary;

     

    (b) a
      material diminution in the Participant’s authority, duties or
      responsibilities;

     

    (c) a
      material diminution in the authority, duties, or responsibilities of the
      supervisor to whom the Participant is required to report, including a
      requirement that the Participant report to a corporate officer or an employee
      instead of reporting directly to the Board;

     

    (d) a
      material diminution in the budget over which the Participant retains
      authority;

     

    (e) a
      relocation of the Participant’s principal business location to an area outside a
      50 mile radius of the Participant’s principal business location immediately
      prior to the Change in Control;

     

    (f) any
      other
      action or inaction that constitutes a material breach by the Employer of the
      Plan or of an employment agreement between the Employer and the Participant;
      or

     

    (g) if
      the
      Participant has an Individual Severance Agreement that defines “good reason” (or
      words of like import), then the occurrence of any event that constitutes good
      reason under the Participant’s Individual Severance Agreement.

     

    1.24 “Individual
      Severance Agreement”
      shall
      mean an approved, executed, written agreement between the Employer and the
      Participant that has not expired or been replaced prior to the termination
      of
      the Participant’s employment and that provides for specific severance for the
      Participant in connection with a termination of employment.

     

    1.25 “Participant”
      shall
      mean any Tier 1 Employee, Tier 2 Employee, Tier 3 Employee or Tier 4 Employee
      who is employed on the date of the Change in Control. The tier for each
      Participant shall be determined by the Employer in its sole and absolute
      discretion. Notwithstanding the foregoing or anything in the Plan to the
      contrary, any individual who is providing services to the Company pursuant
      to
      the Management Agreement between the Company and ZelnickMedia Corporation dated
      March 30, 2007, as amended from time to time, shall not be eligible to be a
      Participant in the Plan.

     

    1.26 “Plan”
      shall
      mean the Take-Two Interactive Software, Inc. Change in Control Employee
      Severance Plan.

     

    
      
        
        

      

      
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    1.27 “Separation
      from Service”
      shall
      mean termination of a Participant’s employment with the Employer, provided that
      such termination constitutes a separation from service within the meaning of
      Code Section 409A. All references in the Plan to a “resignation,” “termination,”
“termination of employment” or like terms shall mean Separation from
      Service.

     

    1.28 “Separation
      Pay Limit”
shall
      mean two (2) times the lesser of (i) a Participant’s annualized compensation
      based on such Participant’s annual rate of pay for the taxable year of such
      Participant preceding the taxable year in which such Participant incurs a
      Separation from Service, and (ii) the maximum amount that may be taken into
      account under a tax qualified plan pursuant to Code Section 401(a)(17) for
      the
      year in which such Participant incurs a Separation from Service.

     

    1.29 “Severance
      Benefits”
      shall
      mean collectively, the Severance Payments, the Continued Health Coverage and
      the
      Equity Vesting.

     

    1.30 “Severance
      Payments”
      shall
      mean the payments set forth in Section 2.2(a) below.

     

    1.31 “Severance
      Period” shall
      mean (i) in the case of a Tier 1 Employee, a period eighteen (18) months from
      the date of termination; (ii) in the case of a Tier 2 Employee, twelve (12)
      months from the date of termination; (iii) in the case of a Tier 3 Employee,
      six
      (6) months from the date of termination; and (iv) in the case of a Tier 4
      Employee, two (2) weeks for every Completed Year of Service, up to a maximum
      of
      26 weeks from the date of termination.

     

    1.32 “Specified
      Employee” shall
      mean a Participant who, as of the date of his or her Separation from Service,
      is
      deemed to be a “specified employee” within the meaning of that term under
      Section 409A(a)(2)(B) of the Code and using the identification methodology
      selected by the Employer from time to time in accordance therewith, or if none,
      the default methodology set forth therein.

     

    1.33 “Tier
      1 Employee”
      shall
      mean the Chief Executive Officer of the Employer and any officer who is subject
      to Section 16 of the Exchange Act, and any other employee of the Employer as
      designated by the Company.

     

    1.34 “Tier
      2 Employee”
      shall
      mean any Senior Vice President or Studio Head of the Employer, and any other
      employee of the Employer as designated by the Company.

     

    1.35 “Tier
      3 Employee”
      shall
      mean any Vice President of the Employer, and any other employee of the Employer
      as designated by the Company. 

     

    1.36 “Tier
      4 Employee”
      shall
      mean an employee of the Employer who is not a Tier 1 Employee, Tier 2 Employee
      or Tier 3 Employee.

     

    
      
        
        

      

      
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    ARTICLE
      II

     

    SEVERANCE
      BENEFITS

     

    2.1 Eligibility
      for Severance Benefits.

     

    (a) Qualifying
      Event for a Tier 1 Employee, Tier 2 Employee or Tier 3 Employee.
      In the
      event that during the period commencing on the date of the Change in Control
      and
      ending twelve (12) months thereafter, the employment of a Tier 1 Employee,
      Tier
      2 Employee or Tier 3 Employee is terminated by the Employer without Cause or
      by
      the Participant for Good Reason, then the Employer shall pay or provide the
      Participant with the Severance Benefits.

     

    (b) Qualifying
      Event for a Tier 4 Employee.
      In the
      event that during the period commencing on the date of the Change in Control
      and
      ending twelve (12) months thereafter, the employment of a Tier 4 Employee is
      terminated by the Employer without Cause, then the Employer shall pay or provide
      the Participant with the Severance Benefits.

     

    (c) Non-Qualifying
      Events.
      A
      Participant shall not be entitled to Severance Benefits under the Plan if the
      Participant’s employment is terminated (i) by the Employer for Cause, (ii) by a
      Tier 1 Employee, Tier 2 Employee or Tier 3 Employee for any reason other than
      for Good Reason, (iii) by a Tier 4 Employee for any reason, or (iv) on account
      of the Participant’s death or Disability.

     

    2.2 Amount
      of Severance Benefits.
      Unless
      otherwise determined by the Committee at the time of termination, in the event
      that a Participant becomes entitled to benefits pursuant to
      Section 2.1
      hereof,
      the Employer shall pay or provide the Participant with the Severance Benefits
      as
      follows:

     

    (a) Severance
      Payment.
      Subject
      to the provisions of Sections 2.3
      through
      2.9, during the applicable Severance Period the Employer shall pay to the
      Participant an amount determined as follows:

    

    
      	
              Tier
                1 Employees

            	
              1.5
                times the Participant’s Base Salary plus Bonus

            
	
              Tier
                2 Employees

            	
              1.0
                times the Participant’s Base Salary plus Bonus

            
	
              Tier
                3 Employees

            	
              0.5
                times the Participant’s Base Salary plus Bonus

            
	
              Tier
                4 Employees

            	
              2
                weeks of the Participant’s Base Salary for every Completed Year of
                Service, up to a maximum of 26
                weeks

            

    

    

    Such
      amount shall be payable in installments in accordance with the Employer’s normal
      payroll practices (but off employee payroll). Notwithstanding the foregoing
      or
      anything in the Plan to the contrary, payment of the foregoing amounts shall
      be
      subject to Section 7.8(b)
      hereof; provided, that with respect to any Participant for who Section 1.23(g)
      of the Plan does not apply, the six-month delay set forth in Section 7.8(b)
      shall only be applied to amounts in excess of the Separation Pay
      Limit.

    
      
        
        

      

      
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    (b) Continued
      Health Coverage.
      Subject
      to the provisions of Sections 2.3
      through
      2.9 and a timely election pursuant to COBRA by a Tier 1 Employee, Tier 2
      Employee or Tier 3 Employee, during the applicable Continuation Period the
      Company shall pay the full cost for continued coverage pursuant to COBRA, for
      the Participant and the Participant’s eligible dependents, under the Employer’s
      group health plans in which the Participant participated immediately prior
      to
      the date of termination of the Participant’s employment. Following the
      applicable Continuation Period, the Participant shall be entitled to such
      continued coverage for the remainder of the COBRA period on a full self-pay
      basis to the extent eligible under COBRA. For the avoidance of doubt, Tier
      4
      Employees shall not be entitled to the benefit provided under the first sentence
      of this Section 2.2(b), but shall be entitled to continued coverage pursuant
      to
      COBRA under the Employer’s group health plans in which the Participant
      participated immediately prior to the date of termination of the Participant’s
      employment on a full self-pay basis to the extent eligible and subject to the
      Participant’s timely election pursuant to COBRA.

     

    (c) Accelerated
      Vesting of Equity Awards.
      Subject
      to the provisions of Sections 2.3
      and 2.4
      and Sections 2.6 through 2.9, to the extent not vested immediately prior to
      a
      Change in Control, all stock based awards granted to the Participant prior
      to
      the Change in Control under the Company’s 2002 Stock Option Plan or Incentive
      Stock Plan, each as amended, or any successor plan(s) thereto, that are
      outstanding as of the date of the Change in Control shall become fully vested
      as
      of the effective date of the Participant’s termination.
      Any
      stock option, stock appreciation right or similar award that provides for a
      Participant elected exercise shall become fully exercisable and will remain
      exercisable for the applicable period following termination specified in the
      applicable equity plan and/or the applicable award agreement. In the case of
      restricted stock or similar awards that are not subject to a Participant elected
      exercise, the Company shall remove any restrictions (other than restrictions
      required by Federal securities law) or conditions in respect of such award
      as of
      the effective date of the Participant’s termination. For the avoidance of doubt,
      this Section shall apply to any equity awards that, in connection with a Change
      in Control, are given in replacement of the equity awards held by the
      Participant immediately prior to the Change in Control.

     

    2.3 Effect
      of Prior Agreements. In
      the
      event that a Participant is entitled to severance payments and benefits upon
      termination under an Individual Severance Agreement, the Participant shall
      be
      entitled to, on a benefit-by-benefit basis, severance payments and benefits
      equal to the greater of the Severance Benefits hereunder and the applicable
      payments and benefits provided under such Individual Severance Agreement;
      provided that the foregoing shall not otherwise affect the Participant’s rights
      under the Plan or such Individual Severance Agreement. Notwithstanding
      anything herein to the contrary, if a Participant has an Individual Severance
      Agreement that provides for severance payments to be paid in a single lump
      sum,
      then in lieu of the Severance Payments to be paid to the Participant under
      Section 2.2(a) above, the Participant shall receive an amount equal to the
      sum
      of the Base Salary plus Bonus (if applicable) that the Participant would have
      otherwise received during the applicable Severance Period paid in a single
      lump
      sum on the 60th
      day
      following the date the Participant’s employment terminates, subject to Sections
      2.4 through 2.9 and Section 7.8(b)
      hereof; provided, that with respect to any Participant for who Section 1.23(g)
      of the Plan does not apply, the six-month delay set forth in Section 7.8(b)
      shall only be applied to amounts in excess of the Separation Pay
      Limit.

     

    
      
        
        

      

      
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    2.4 No
      Duty to Mitigate/Set-off.
      No
      Participant entitled to receive Severance Benefits hereunder shall be required
      to seek other employment or to attempt in any way to reduce any amounts payable
      to the Participant by the Employer pursuant to the Plan and, except as provided
      in Sections 2.2(b)
      hereof,
      there shall be no offset against any amounts due to the Participant under the
      Plan on account of any remuneration attributable to any subsequent employment
      that the Participant may obtain or otherwise. The amounts payable hereunder
      shall not be subject to setoff, counterclaim, recoupment, defense or other
      right
      which the Employer may have against the Participant. In the event of the
      Participant’s breach of any provision hereunder, including without limitation,
      Sections 2.5
      (other
      than as it applies to a release of claims under the Age Discrimination in
      Employment Act, as amended), 2.7
      and 2.8
      hereof,
      the Company shall be entitled to recover any payments previously made to the
      Participant hereunder. Severance Benefits shall be reduced (offset) by any
      amounts payable under any statutory entitlement (including notice of
      termination, termination pay and/or severance pay) of the Participant upon
      a
      termination of employment, including, without limitation, any payments related
      to an actual or potential liability under the Worker Adjustment and Retraining
      Notification Act (WARN) or similar state or local law.

     

    2.5 Release
      Required.
      Any
      amounts payable pursuant to the Plan shall be conditioned upon the Participant’s
      execution and non-revocation, within sixty (60) days following the effective
      date of termination, of a release in the form attached as Appendix
      B
      hereto
      (with such changes thereon as are legally necessary at the time of execution
      to
      make it enforceable).
      The
      Company shall provide the release to the Participant within seven (7) days
      following the Participant’s date of termination. The Participant will be
      required to sign the release within 45 days after the date it is provided to
      him
      or her and not revoke it within the seven (7) day period following the date
      on
      which it is signed. All payments delayed pursuant to this Section 2.5, except
      to
      the extent delayed pursuant to Section 7.8(b), shall be paid to the Participant
      in a lump sum on the first Company payroll date on or following the
      60th
      day
      after the Participant’s date of termination, and any remaining payments due to
      the Participant under the Plan shall be paid or provided in accordance with
      the
      normal payment dates specified for them herein.

     

    2.6 Code
      Section 280G.  

     

    (a) 
      Notwithstanding anything in the Plan to the contrary, in the event that any
      payment or distribution by the Company to or for the benefit of a Participant,
      whether paid or payable or distributed or distributable pursuant to the terms
      of
      the Plan or pursuant to any other plan, arrangement or agreement with the
      Employer or its affiliates, would be subject to the excise tax imposed by
      Section 4999 of the Code (the “Excise
      Tax”),
      then
      the amounts of the Severance Benefits payable under the Plan (each a
“Payment”)
      shall
      be automatically reduced to an amount one dollar ($1) less than an amount that
      would subject the Participant to the Excise Tax; provided, however, that the
      foregoing reduction shall be made only if and to the extent that such reduction
      would result in an increase in the aggregate Payment to be provided, determined
      on a net after-tax basis (taking into account the Excise Tax, imposed, any
      tax
      imposed by any comparable provision of state law, and any applicable federal,
      state and local income taxes). Notwithstanding the foregoing, if a Participant
      has a right to a gross-up payment with respect to the Excise Tax pursuant to
      an
      employment agreement or other arrangement or plan, the foregoing reduction
      shall
      not apply to amounts payable to the Participant and the terms of such employment
      agreement or other arrangement or plan shall control.

     

    
      
        
        

      

      
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    (b) All
      determinations required to be made under this Section 2.6,
      including whether an Excise Tax is payable by the Participant and the amount
      of
      such Excise Tax shall be made by a nationally recognized accounting firm or
      actuarial, benefits or compensation consulting firm (with experience in
      performing the calculations regarding the applicability of Section 280G of
      the
      Code and the Excise Tax) (the “Accountant”)
      selected by the Company. The Company shall be responsible for all charges of
      the
      Accountant.

     

    2.7 Restrictive
      Covenants.
      By
      accepting the Severance Benefits under the Plan, each Tier 1 Employee, Tier
      2
      Employee and Tier 3 Employee who is a Participant is deemed to acknowledge
      that
      the restrictive covenants (including, without limitation, confidentiality and
      non-competition) in any other agreement with the Employer previously signed
      by
      such Participant shall not be affected by the Plan and that the restrictive
      covenants therein shall continue to apply after a Change in Control or a
      termination of employment after a Change in Control in accordance with the
      terms
      of such restrictive covenants. As a condition to receiving Severance Benefits,
      such Participant shall be required to acknowledge and agree that the payment
      of
      Severance Benefits is subject to the enforcement of such restrictive
      covenants.

     

    2.8 Cooperation.
      By
      accepting the Severance Benefits under the Plan, subject to the Participant’s
      other commitments, the Participant agrees to be reasonably available to
      cooperate (but only truthfully) with the Employer and provide information as
      to
      matters which the Participant was personally involved, or has information on,
      during the Participant’s employment with the Employer and which are or become
      the subject of litigation or other dispute.

     

    2.9 Application
      of the Plan to Foreign Participants.
      Notwithstanding anything in the Plan to the contrary, the Severance Benefits
      provided hereunder to Foreign Participants shall be reduced by any statutory
      benefit that the Participant is entitled to receive upon a termination of
      employment in accordance with applicable law. For the avoidance of doubt, the
      provisions of the Plan shall not limit a Foreign Participant’s rights to receive
      any statutory benefit that the Participant is entitled to receive upon a
      termination of employment in accordance with applicable law.

     

    ARTICLE
      III

     

    UNFUNDED
      PLAN

     

    3.1 Unfunded
      Status.
      The Plan
      shall be “unfunded” for the purposes of ERISA and the Code and Severance
      Payments shall be paid out of the general assets of the Employer as and when
      Severance Payments are payable under the Plan. All Participants shall be solely
      unsecured general creditors of the Employer. If the Employer decides in its
      sole
      discretion to establish any advance accrued reserve on its books against the
      future expense of the Severance Payments payable hereunder, or if the Employer
      decides in its sole discretion to fund a trust under the Plan, such reserve
      or
      trust shall not under any circumstances be deemed to be an asset of the
      Plan.

     

    
      
        
        

      

      
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    ARTICLE
      IV

     

    ADMINISTRATION
      OF THE PLAN

     

    4.1 Plan
      Administrator.
      The
      general administration of the Plan on behalf of the Employer (as plan
      administrator under Section 3(16)(A) of ERISA) shall be placed with the
      Committee.

     

    4.2 Reimbursement
      of Expenses of Plan Committee.
      The
      Employer may, in its sole discretion, pay or reimburse the members of the
      Committee for all reasonable expenses incurred in connection with their duties
      hereunder, including, without limitation, expenses of outside legal
      counsel.

     

    4.3 Action
      by the Plan Committee.
      Decisions of the Committee shall be made by a majority of its members attending
      a meeting at which a quorum is present (which meeting may be held
      telephonically), or by written action in accordance with applicable law. Subject
      to the terms of the Plan and provided that the Committee acts in good faith,
      the
      Committee shall have complete authority to determine a Participant’s
      participation and Severance Benefits under the Plan, to interpret and construe
      the provisions of the Plan, and to make decisions in all disputes involving
      the
      rights of any person interested in the Plan.

     

    4.4 Delegation
      of Authority.
      Subject
      to the limitations of applicable law, the Committee may delegate any and all
      of
      its powers and responsibilities hereunder to other persons by formal resolution
      filed with and accepted by the Board. Any such delegation shall not be effective
      until it is accepted by the Board and the persons designated, and may be
      rescinded at any time by written notice from the Committee to the person to
      whom
      the delegation is made.

     

    4.5 Retention
      of Professional Assistance.
      The
      Committee may employ such legal counsel, accountants and other persons as may
      be
      required in carrying out its work in connection with the Plan.

     

    4.6 Accounts
      and Records.
      The
      Committee shall maintain such accounts and records regarding the fiscal and
      other transactions of the Plan and such other data as may be required to carry
      out its functions under the Plan and to comply with all applicable
      laws.

     

    4.7 Indemnification.
      The
      Committee, its members and any person designated pursuant to Section 4.4 above
      shall not be liable for any action or determination made in good faith with
      respect to the Plan. The Employer shall, to the fullest extent permitted by
      law,
      indemnify and hold harmless each member of the Committee and each director,
      officer and employee of the Employer for liabilities or expenses they and each
      of them incur in carrying out their respective duties under the Plan, other
      than
      for any liabilities or expenses arising out of such individual’s willful
      misconduct or fraud.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

     

    ARTICLE
      V

     

    AMENDMENT
      AND TERMINATION

     

    5.1 Amendment
      and Termination.
      The
      Company reserves the right to amend or terminate, in whole or in part, any
      or
      all of the provisions of the Plan by action of the Board (or a duly authorized
      committee thereof) at any time, provided that in no event shall any amendment
      reducing the Severance Benefits provided hereunder or any Plan termination
      be
      effective prior to the eighteen (18) month anniversary of the Effective Date,
      and further provided that the Company shall not amend or terminate the Plan
      at
      any time after (i) the occurrence of a Change in Control or (ii) the date the
      Company enters into a definitive agreement which, if consummated, would result
      in a Change in Control, unless the potential Change in Control is abandoned
      (as
      publicly announced by the Company), in either case until eighteen (18) months
      after the occurrence of a Change in Control, provided that all Severance
      Benefits under the Plan have been paid.

     

    ARTICLE
      VI

     

    SUCCESSORS

     

    For
      purposes of the Plan, the Company shall include any and all successors or
      assignees, whether direct or indirect, by purchase, merger, consolidation or
      otherwise, to all or substantially all the business or assets of the Company
      and
      such successors and assignees shall perform the Company’s obligations under the
      Plan, in the same manner and to the same extent that the Company would be
      required to perform if no such succession or assignment had taken place. In
      the
      event the surviving corporation in any transaction to which the Company is
      a
      party is a subsidiary of another corporation, then the ultimate parent
      corporation of such surviving corporation shall cause the surviving corporation
      to perform the Plan in the same manner and to the same extent that the Company
      would be required to perform if no such succession or assignment had taken
      place. In such event, the term “Company,” as used in the Plan, shall mean the
      Company, as hereinbefore defined and any successor or assignee (including the
      ultimate parent corporation) to the business or assets which by reason hereof
      becomes bound by the terms and provisions of the Plan.

     

    ARTICLE
      VII

     

    MISCELLANEOUS

     

    7.1 Minors
      and Incompetents.
      If the
      Committee shall find that any person to whom Severance Benefits are payable
      under the Plan is unable to care for his or her affairs because of illness
      or
      accident, or is a minor, any Severance Benefits due (unless a prior claim
      therefore shall have been made by a duly appointed guardian, committee or other
      legal representative) may be paid to the spouse, child, parent, or brother
      or
      sister, or to any person deemed by the Committee to have incurred expense for
      such person otherwise entitled to the Benefits, in such manner and proportions
      as the Committee may determine in its sole discretion. Any such Severance
      Benefits shall be a complete discharge of the liabilities of the Employer,
      the
      Committee and the Board under the Plan.

     

    7.2 Limitation
      of Rights.
      Nothing
      contained herein shall be construed as conferring upon a Participant the right
      to continue in the employ of the Employer as an employee in any other capacity
      or to interfere with the Employer’s right to discharge him or her at any time
      for any reason whatsoever.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

     

    7.3 Payment
      Not Salary.
      Any
      Severance Benefits payable under the Plan shall not be deemed salary or other
      compensation to the Participant for the purposes of computing benefits to which
      he or she may be entitled under any pension plan or other arrangement of the
      Employer maintained for the benefit of its employees, unless such plan or
      arrangement provides otherwise.

     

    7.4 Severability.
      In case
      any provision of the Plan shall be illegal or invalid for any reason, said
      illegality or invalidity shall not affect the remaining parts hereof, but the
      Plan shall be construed and enforced as if such illegal and invalid provision
      never existed.

     

    7.5 Withholding.
      The
      Employer shall have the right to make such provisions as it deems necessary
      or
      appropriate to satisfy any obligations it may have to withhold federal, state
      or
      local income or other taxes incurred by reason of payments pursuant to the
      Plan.
      In lieu thereof, the Company and/or the Employer shall have the right to
      withhold the amounts of such taxes from any other sums due or to become due
      from
      the Company and/or the Employer to the Participant upon such terms and
      conditions as the Committee may prescribe.

     

    7.6 Non-Alienation
      of Benefits.
      The
      Severance Benefits payable under the Plan shall not be subject to alienation,
      transfer, assignment, garnishment, execution or levy of any kind, and any
      attempt to cause any Severance Benefits to be so subjected shall not be
      recognized.

     

    7.7 Governing
      Law.
      To the
      extent legally required, the Code and ERISA shall govern the Plan and, if any
      provision hereof is in violation of any applicable requirement thereof, the
      Company reserves the right to retroactively amend the Plan to comply therewith.
      To the extent not governed by the Code and ERISA, the Plan shall be governed
      by
      the laws of the State of New York, without reference to rules relating to
      conflicts of law.

     

    7.8 Code
      Section 409A. 

     

    (a) General.
      Although the Company makes no guarantee with respect to the tax treatment of
      payments hereunder and shall
      not
      be responsible in any event with regard to non-compliance with Code Section
      409A, the
      Plan
      is intended to either comply with, or be exempt from, the requirements of Code
      Section 409A. To the extent that the Plan is not exempt from the requirements
      of
      Code Section 409A, the Plan is intended to comply with the requirements of
      Code
      Section 409A and shall be limited, construed and interpreted in accordance
      with
      such intent. Accordingly, the Company reserves the right to amend the provisions
      of the Plan at any time and in any manner without the consent of Participants
      solely to comply with the requirements of Code Section 409A and to avoid the
      imposition of an excise tax under Code Section 409A on any payment to be made
      hereunder, provided that there is no reduction in the Severance Benefits
      hereunder. Notwithstanding the foregoing, in no event whatsoever shall the
      Employer be liable for any additional tax, interest or penalty that may be
      imposed on a Participant by Code Section 409A or any damages for failing to
      comply with Code Section 409A.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

     

    (b) Separation
      from Service; Specified Employees.
      A
      termination of employment shall not be deemed to have occurred for purposes
      of
      any provision of the Plan providing for the payment of any amounts or benefits
      upon or following a termination of employment unless such termination is also
      a
      Separation from Service. If a Participant is deemed on the date of termination
      to be a Specified Employee, then with regard to any payment that is specified
      as
      subject to this Section, such payment shall not be made prior to the expiration
      of the Delay Period. All payments delayed pursuant to this
      Section 7.8(b)
      (whether
      they would have otherwise been payable in a single lump sum or in installments
      in the absence of such delay) shall be paid to the Participant in a single
      lump
      sum on the first Company payroll date on or following the first day following
      the expiration of the Delay Period, and any remaining payments and benefits
      due
      under the Plan shall be paid or provided in accordance with the normal payment
      dates specified for them herein.

     

    7.9 Non-Exclusivity.
      The
      adoption of the Plan by the Company shall not be construed as creating any
      limitations on the power of the Company to adopt such other supplemental
      retirement income arrangements as it deems desirable, and such arrangements
      may
      be either generally applicable or limited in application.

     

    7.10 Non-Employment.
      The Plan
      is not an agreement of employment and it shall not grant the Participant any
      rights of employment.

     

    7.11 Headings
      and Captions.
      The
      headings and captions herein are provided for reference and convenience only.
      They shall not be considered part of the Plan and shall not be employed in
      the
      construction of the Plan.

     

    7.12 Gender
      and Number.
      Whenever
      used in the Plan, the masculine shall be deemed to include the feminine and
      the
      singular shall be deemed to include the plural, unless the context clearly
      indicates otherwise.

     

    7.13 Communications.
      All
      announcements, notices and other communications regarding the Plan will be
      made
      by the Employer in writing.

     

    ARTICLE
      VIII

     

     

    WHAT
      ELSE A PARTICIPANT NEEDS

    TO
      KNOW ABOUT THE PLAN

     

    8.1 Claims
      Procedure. Any
      claim
      by a Participant with respect to eligibility, participation, contributions,
      benefits or other aspects of the operation of the Plan shall be made in writing
      to a person designated by the Committee from time to time for such purpose.
      If
      the designated person receiving a claim believes, following consultation with
      the Chairman of the Committee, that the claim should be denied, he or she shall
      notify the Participant in writing of the denial of the claim within ninety
      (90)
      days after his or her receipt thereof. This period may be extended an additional
      ninety (90) days in special circumstances and, in such event, the Participant
      shall be notified in writing of the extension, the special circumstances
      requiring the extension of time and the date by which the Committee expects
      to
      make a determination with respect to the claim. If the extension is required
      due
      to the Participant’s failure to submit information necessary to decide the
      claim, the period for making the determination will be tolled from the date
      on
      which the extension notice is sent until the date on which the Participant
      responds to the Plan’s request for information.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

     

    If
      a
      claim is denied in whole or in part, or any adverse benefit determination is
      made with respect to the claim, the Participant will be provided with a written
      notice setting forth (a) the specific reason or reasons for the denial making
      reference to the pertinent provisions of the Plan or of Plan documents on which
      the denial is based, (b) a description of any additional material or information
      necessary to perfect or evaluate the claim, and explain why such material or
      information, if any, is necessary, and (c) inform the Participant of his or
      her
      right to request review of the decision. The notice shall also provide an
      explanation of the Plan’s claims review procedure and the time limits applicable
      to such procedure, as well as a statement of the Participant’s right to bring a
      civil action under Section 502(a) of ERISA following an adverse benefit
      determination on review. If a Participant is not notified (of the denial or
      an
      extension) within ninety (90) days from the date the Participant notifies the
      Plan Administrator, the Participant may request a review of the application
      as
      if the claim had been denied.

     

    A
      Participant may appeal the denial of a claim by submitting a written request
      for
      review to the Committee, within
      sixty (60) days
      after
      written notification of denial is received. Receipt of such denial shall be
      deemed to have occurred if the notice of denial is sent via first class mail
      to
      the Participant’s last
      shown
      address on the books of the Employer. Such
      period may be extended by the Committee for good cause shown. The claim will
      then be reviewed by the Committee. In connection with this appeal, the
      Participant (or his or her duly authorized representative) may (a) be provided,
      upon written request and free of charge, with reasonable access to (and copies
      of) all documents, records, and other information relevant to the claim, and
      (b)
      submit to the Committee written comments, documents, records, and other
      information related to the claim. If the Committee deems it appropriate, it
      may
      hold a hearing as to a claim. If a hearing is held, the Participant shall be
      entitled to be represented by counsel.

     

    The
      review by the Committee will take into account all comments, documents, records,
      and other information the Participant submits relating to the claim. The
      Committee will make a final written decision on a claim review, in most cases
      within sixty (60) days after receipt of a request for a review. In some cases,
      the claim may take more time to review, and an additional processing period
      of
      up to sixty (60) days may be required. If that happens, the Participant will
      receive a written notice of that fact, which will also indicate the special
      circumstances requiring the extension of time and the date by which the
      Committee expects to make a determination with respect to the claim. If the
      extension is required due to the Participant’s failure to submit information
      necessary to decide the claim, the period for making the determination will
      be
      tolled from the date on which the extension notice is sent to the Participant
      until the date on which the Participant responds to the Plan’s request for
      information.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

     

    The
      Committee decision on the claim for review will be communicated to the
      Participant in writing. If an adverse benefit determination is made with respect
      to the claim, the notice will include: (a) the specific reason(s) for any
      adverse benefit determination, with references to the specific Plan provisions
      on which the determination is based; (b) a statement that the Participant is
      entitled to receive, upon request and free of charge, reasonable access to
      (and
      copies of) all documents, records and other information relevant to the claim;
      and (c) a statement of the Participant’s right to bring a civil action under
      Section 502(a) of ERISA. A Participant may not start a lawsuit to obtain
      benefits until after he or she has requested a review and a final decision
      has
      been reached on review, or until the appropriate timeframe described above
      has
      elapsed since the Participant filed a request for review and the Participant
      has
      not received a final decision or notice that an extension will be necessary
      to
      reach a final decision. These procedures must be exhausted before a Participant
      (or any beneficiary) may bring a legal action seeking payment of benefits.
      In
      addition, no lawsuit may be started more than two years after the date on which
      the applicable appeal was denied. If there is no decision on appeal, no lawsuit
      may be started more than two years after the time when the Committee should
      have
      decided the appeal. The law also permits the Participant to pursue his or her
      remedies under Section 502(a) of ERISA without exhausting these appeal
      procedures if the Plan has failed to follow them.

     

    8.2 Plan
      Interpretation and Benefit Determination. This
      Section 8.2 shall only apply with respect to Tier 4 Employees. The Committee
      (or, where applicable, any duly authorized delegee of the Committee) shall
      have
      the exclusive right, power, and authority, in its sole and absolute discretion,
      to administer, apply and interpret the Plan and any other documents, and to
      decide all factual and legal matters arising in connection with the operation
      or
      administration of the Plan. 

     

    Without
      limiting the generality of the foregoing, the Committee (or, where applicable,
      any duly authorized delegee of the Committee) shall have the sole and absolute
      discretionary authority to:

    

    (a) take
      all
      actions and make all decisions (including factual decisions) with respect to
      the
      eligibility for, and the amount of, benefits payable under the
      Plan;

     

    (b) formulate,
      interpret and apply rules, regulations and policies necessary to administer
      the
      Plan;

     

    (c) decide
      questions, including legal or factual questions, relating to the calculation
      and
      payment of benefits, and all other determinations made, under the
      Plan;

     

    (d) resolve
      and/or clarify any factual or other ambiguities, inconsistencies and omissions
      arising under the Plan or other Plan documents; and

     

    (e) process,
      and approve or deny, benefit claims and rule on any benefit
      exclusions.

     

    All
      determinations made by the Committee (or, where applicable, any duly authorized
      delegee of the Committee) with respect to any matter arising under the Plan
      shall be final and binding on the Employer, the Participant, any beneficiary,
      and all other parties affected thereby.

     

    8.3 Statement
      of Participants Rights Under ERISA.
      Participants
      in the Plan are entitled to certain rights and protections under ERISA. ERISA
      provides that all Participants in the Plan shall be entitled to:

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

     

    (a) Receive
      Information About the Plan and Plan Benefits.

     

    (i) Examine,
      without charge, at the Committee’s office and at other specified locations, such
      as worksites, all documents governing the Plan, including insurance contracts,
      and a copy of the latest annual report (Form 5500 Series), if any, filed by
      the
      Plan with the U.S. Department of Labor and available at the Public Disclosure
      Room of the Employee Benefits Security Administration. 

     

    (ii) Obtain,
      upon written request to the Committee, copies of documents governing the
      operation of the Plan, including insurance contracts, and copies of the latest
      annual report (Form 5500 Series), if any, and updated summary plan description.
      The Committee may make a reasonable charge for the copies.

     

    (iii) Receive
      a
      summary of the Plan’s annual financial report (if any). The Committee is
      required by law to furnish each Participant with a copy of this summary annual
      report.

     

    (b) Prudent
      Actions by Plan Fiduciaries.
      In
      addition to creating rights for Participants in the Plan, ERISA imposes duties
      upon the people who are responsible for the operation of the employee benefit
      plan. The people who operate the Plan, called “fiduciaries” of the Plan, have a
      duty to do so prudently and in the interest of Participants and other Plan
      beneficiaries. No one, including the Employer or any other person, may fire
      a
      Participant or otherwise discriminate against a Participant in any way to
      prevent a Participant from obtaining a welfare benefit or exercising a
      Participant’s rights under ERISA.

     

    (c) Enforce
      a Participant’s Rights.

     

    (i) If
      a
      Participant’s claim for a welfare benefit is denied or ignored, in whole or in
      part, a Participant has a right to know why this was done, to obtain copies
      of
      documents relating to the decision without charge, and to appeal any denial,
      all
      within certain time schedules.

     

    (ii) Under
      ERISA, there are steps a Participant can take to enforce the above rights.
      For
      instance, if a Participant requests a copy of Plan documents or the latest
      annual report from the Plan and does not receive them within 30 days, a
      Participant may file suit in a Federal court. In such a case, the court may
      require the Committee to provide materials and pay the Participant up to $110
      per day until the Participant receives the materials, unless the materials
      were
      not sent because of reasons beyond the control of the Committee. If a
      Participant has a claim for benefits which is denied or ignored, in whole or
      in
      part, after a Participant has exhausted the Plan’s claim and review procedures
      described above, a Participant may file suit in a state or Federal court. If
      a
      Participant is discriminated against for asserting a Participant’s rights, a
      Participant may seek assistance from the U.S. Department of Labor, or a
      Participant may file suit in a Federal court. The court will decide who should
      pay court costs and legal fees. If a Participant is successful, the court may
      order the person that the Participant has sued to pay these costs and fees.
      If a
      Participant loses, the court may order the Participant to pay these costs and
      fees, for example, if it finds the Participant’s claim is
      frivolous.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    

     

    (d) Assistance
      with Your Questions.
      If a
      Participant has any questions about the Plan, the Participant should contact
      the
      Committee. If a Participant has any questions about this statement or about
      the
      Participant’s rights under ERISA, or if a Participant needs assistance in
      obtaining documents from the Committee, the Participant should contact the
      nearest office of the Employee Benefits Security Administration, U.S. Department
      of Labor, listed in the Participant’s telephone directory or the Division of
      Technical Assistance and Inquiries, Employee Benefits Security Administration,
      U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.
      A Participant may also obtain certain publications about a Participant’s rights
      and responsibilities under ERISA by calling the publications hotline of the
      Employee Benefits Security Administration.

     

    8.4 Plan
      Document.
      This
      document shall constitute both the Plan document and summary plan description
      and shall be distributed to all Participants in this form.

     

    8.5 Other
      Important Facts.

     

    
      	
              OFFICIAL
                NAME OF THE PLAN:

            	
              Take-Two
                Interactive Software, Inc. Change in Control Employee Severance
                Plan

            
	
              SPONSOR:

            	
              Take-Two
                Interactive Software, Inc.

              622
                Broadway

              New
                York, New York 10012

            
	
              EMPLOYER
                IDENTIFICATION

              NUMBER
                (EIN):

            	
              51-0350842

            
	
              PLAN
                NUMBER:

            	
              501

            
	
              TYPE
                OF PLAN:

            	
              Employee
                Welfare Severance Benefit Plan

            
	
              END
                OF PLAN YEAR:

            	
              October
                31

            
	
              TYPE
                OF ADMINISTRATION:

            	
              Employer
                Administered

            
	
              PLAN
                ADMINISTRATOR:

            	
              Take-Two
                Interactive Software, Inc.

              622
                Broadway

              New
                York, New York 10012

              (646)
                536-2842

            
	
              EFFECTIVE
                DATE:

            	
              March
                3, 2008

            

    

    

    The
      Committee keeps records of the Plan and is responsible for the administration
      of
      the Plan. The Committee will also answer any questions a Participant may have
      about the Plan.

     

    Service
      of legal process may be made upon the Committee (at the address above) or the
      Company’s General Counsel.

     

    No
      individual may, in any case, become entitled to additional benefits or other
      rights under the Plan after the Plan is terminated. Under no circumstances,
      will
      any benefit under the Plan ever vest or become nonforfeitable.

    
 

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    APPENDIX
      A

     

    CHANGE
      IN CONTROL

    

    A
“Change
      in Control” shall be deemed to have occurred if any of the following shall have
      occurred:

     

    (a) upon
      any
“person” as such term is used in Sections 13(d) and 14(d) of the
      Exchange
      Act (other than the Company, any trustee or other fiduciary holding securities
      under any employee benefit plan of the Company, or any company owned, directly
      or indirectly, by the stockholders of the Company in substantially the same
      proportions as their ownership of common stock of the Company), becoming the
      beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly
      or
      indirectly, of securities of the Company representing 50% or more of: (A) the
      then outstanding shares
      of
      common stock of the Company or (B) the combined voting power of the Company’s
      then outstanding securities;

     

    (b) during
      any period of two consecutive years individuals who at the beginning of such
      period constitute the Board and any new director (other than a director
      designated by a person who has entered into an agreement with the Company to
      effect a transaction described in paragraph (a), (c), or (d) of this Section
      or
      any a director whose initial assumption of office is in connection with an
      actual or threatened election or other proxy contest, including but not limited
      to a consent solicitation, relating to the election of directors to the Board)
      whose election by the Board or nomination for election by the Company’s
      stockholders was approved by a vote of at least two-thirds of the directors
      then
      still in office who either were directors at the beginning of the two-year
      period or whose election or nomination for election was previously so approved,
      cease for any reason to constitute at least a majority of the
      Board;

     

    (c) a
      merger
      or consolidation of the Company or a subsidiary with any other corporation,
      other than a merger or consolidation which would result in the voting securities
      of the Company outstanding immediately prior thereto continuing to represent
      (either by remaining outstanding or by being converted into voting securities
      of
      the surviving entity) more than 50% of the combined voting power of the voting
      securities of the Company or such surviving entity or such surviving entity’s
      parent outstanding immediately after such merger or consolidation;
      or

     

    (d) upon
      the
      approval by the stockholders of the Company of a plan of an agreement for the
      sale or disposition by the Company of all or substantially all of the Company’s
      assets other than the sale or disposition of all or substantially all of the
      assets of the Company to a person or persons who beneficially own, directly
      or
      indirectly, at least 50% or more of the combined voting power of the outstanding
      voting securities of the Company at the time of the sale.

     

    Only
      one
      Change in Control may occur under the Plan. 

     

     

    
      
        
        

      

      
        A
          - 1

        
          

        

      

      
        
        

      

    

     

    APPENDIX
      B

    AGREEMENT
      AND
      RELEASE

    

    Take-Two
      Interactive Software, Inc. (“Company”)
      and
[name]
      (“Employee”),
      agree
      to the terms and conditions set forth below:

    

    1. Employee’s
      employment with the Company is terminated as of ________________ ___, 20__
      (the
“Termination
      Date”).
      Employee acknowledges that the Termination Date is the termination date of
      [his/her] employment
      for purposes of participation in and coverage under all benefit plans and
      programs sponsored by or through the Company. Employee acknowledges and agrees
      that the Company shall not have any obligation to rehire Employee, nor shall
      the
      Company have any obligation to consider [him/her]
      for
      employment, after the Termination Date.

    

    2. In
      exchange for the general release in paragraph 4 below and other promises
      contained herein, and in accordance with the terms of the Take-Two
      Interactive Software, Inc. Change in Control Employee Severance Plan
      (“Severance
      Plan”),
      which
      Employee hereby acknowledges receiving, including
      without limitation, Section 7.8(b) of the Severance Plan to the extent
      applicable, Employee will receive (collectively, the “Severance
      Benefits”):

    

    (a) [ADD
      FOR
      ALL PARTICIPANTS AS APPLICABLE]
      a
      Severance Payment (as defined in the Severance Plan) in the total gross amount
      of $[amount]
      (the
“Severance
      Payment”),
      which
      shall be paid in accordance with the Company’s normal payroll practices (but off
      employee payroll) [IF
      CONTINUATION PAYMENTS
      - in
      substantially equal installments for a period of [For Tier 1 Employee - eighteen
      (18) months] [For Tier 2 Employee - twelve (12) months] [For Tier 3 Employee
      -
      six (6) months] [For Tier 4 Employee - _______ weeks1 ]
      from
      the Termination Date [IF
      LUMP SUM PAYMENT REQUIRED PURSUANT TO SECTION 2.3 OF THE SEVERANCE
      PLAN
      - in a
      single cash lump sum payment on the sixtieth (60th)
      day
      following the Termination Date], subject to all applicable payroll withholding
      deductions; and

     

    (b) [ADD
      FOR
      TIER 1, 2 AND 3 EMPLOYEES AS APPLICABLE]
      the
      Continued Health Coverage (as defined in the Severance Plan) applicable to
      Tier
      [1/2/3] Employees pursuant to Section 2.2(b) of the Severance Plan.

     

    3. Employee
      hereby agrees and acknowledges that the Severance Benefits exceed any payment,
      benefit or other thing of value to which Employee might otherwise be entitled
      under any policy, plan or procedure of Company or its parent or affiliates
      or
      pursuant to any prior agreement or contract with Company or its parent or
      affiliates. 

     

     

      
        

      

    

    1
      Insert two (2) weeks for every Completed Year of Service (as defined in the
      Severance Plan) by the employee, up to a maximum of 26 weeks.

    
      
        
        

      

      
        B
          - 1

        
          

        

      

      
        
        

      

    

    

    

    4. (a) In
      exchange for the Severance Benefits and other valuable consideration, Employee,
      for [himself/herself]
      and
      for
[his/her]
      heirs,
      executors, administrators and assigns (referred to collectively as “Releasors”),
      forever releases and discharges Company and any and all of Company’s parent
      companies, partners, subsidiaries, affiliates, successors and assigns and any
      and all of its and their past and/or present officers, directors, partners,
      agents, employees, representatives, counsel, employee benefit plans and their
      fiduciaries and administrators, successors and assigns (referred to collectively
      as the “Releasees”),
      from
      any and all claims, demands, causes of action, fees and liabilities of any
      kind
      whatsoever, whether known or unknown, which Releasors ever had, now have or
      may
      have against Releasees by reason of any actual or alleged act, omission,
      transaction, practice, conduct, occurrence or other matter up to and including
      the date Employee signs this Agreement and
      Release.

    

    (b) Without
      limiting the generality of the foregoing, this Agreement and
      Release is intended to and shall release Releasees from any and all claims,
      whether known or unknown, that Releasors ever had, now have or may have against
      Releasees arising out of Employee’s employment with Company or any of the
      Releasees, the terms and conditions of such employment and/or the termination
      of
      such employment, including but not limited to: any claim under the Age
      Discrimination in Employment Act, as amended (“ADEA”),
      and/or the Older Workers Benefit Protection Act which laws prohibit
      discrimination on account of age; (ii) any claim under Title VII of the
      Civil Rights Act of 1964, as amended, which, among other things, prohibits
      discrimination/retaliation on account of race, color, religion, sex, and
      national origin; (iii) any claim under the Americans with Disabilities Act
      (“ADA”)
      or
      Sections 503 and 504 of the Rehabilitation Act of 1973, each as amended;
      (iv) any claim under the Employee Retirement Income Security Act of 1974,
      as amended (“ERISA”);
      (v) any claim under the Family and Medical Leave Act; (vi) any claim
      or other action under the National Labor Relations Act, as amended; (vii) any
      claim under the Workers’ Adjustment and Retraining Notification Act;
      (viii) any claim under the New York State Human Rights Law, the New York
      Executive Law, the New York Labor Law, the New York City Administrative Code
      or
      any other applicable state or local labor or human rights laws; (ix) the
      Sarbanes-Oxley Act of 2002; (x) any other claim of discrimination,
      harassment or retaliation in employment (whether based on federal, state or
      local law, regulation, or decision; (xi) any other claim (whether based on
      federal, state or local law, statutory or decisional) arising out of the terms
      and conditions of Employee’s employment with and termination from the Company
      and/or the Released Parties; (xii) any claims for wrongful discharge,
      whistleblowing, constructive discharge, promissory estoppel, detrimental
      reliance, negligence, defamation, emotional distress, compensatory or punitive
      damages, and/or equitable relief; (xiii) any claims under federal, state,
      or local occupational safety and health laws or regulations, all as amended;
      and
      (xiv) any claim for attorneys' fees, costs, disbursements and/or the
      like.
      By
      virtue of the foregoing, Employee agrees that [he/she]
      has
      waived any damages and other relief available to [him/her]
      (including, without limitation, money damages, equitable relief and
      reinstatement) under the claims waived in this paragraph 4. Notwithstanding
      anything herein to the contrary, the sole matters to which this Agreement of
      Release does not apply are: (i)
      claims
      to the Severance Benefits, (ii) claims under the Consolidated Omnibus Budget
      Reconciliation Act of 1985, as amended, (iii) claims arising after the date
      Employee signs this Agreement and Release,
      (iv)
      claims to vested accrued benefits under the Employer’s 401(k) or other tax
      qualified retirement plans in accordance with the terms of such plans and
      applicable law, (v) claims
      relating to any rights of indemnification under the Company’s organizational
      documents or otherwise, (vi) [or
      claims
      relating to any outstanding stock options or other equity-based award on the
      Termination Date,]
      or (vii)
      claims relating to an approved, executed, agreement between the Company and
      Employee that provides for specific severance in connection with a termination
      of employment which such agreement has not expired or been replaced prior to
      the
      termination of the Employee’s employment. Employee acknowledges that Employee
      has been informed that Employee might have specific rights and/or claims under
      the ADEA. Employee specifically waives such rights and/or claims under the
      ADEA
      to the extent such rights and/or claims arose on or prior to the date this
      Agreement of Release is executed by Employee.

    
      
        
        

      

      
        B
          - 2

        
          

        

      

      
        
        

      

    

    

    

    5. Employee
      agrees that at no time will [he/she]
      engage
      in any form of conduct or make any statements or representations that disparage
      or otherwise impair the reputation, goodwill or commercial interests of the
      Releasees. Nothing in this Agreement and Release shall prohibit or restrict
      Employee from: (i) making any disclosure of information, as required by law,
      in
      a proceeding or lawsuit in which the Company is a party, or additionally in
      any
      other civil proceeding or lawsuit upon ten (10) business days prior written
      notice to the Company; (ii) providing information to, or testifying or otherwise
      assisting in an investigation or proceeding brought by any federal regulatory
      or
      law enforcement agency or legislative body or the Company’s designated legal,
      compliance, or human resources officers; (iii) filing, testifying, participating
      or otherwise assisting in a proceeding relating to an alleged violation of
      any
      federal, state or municipal law relating to fraud or any rule or regulation
      of
      the Securities and Exchange Commission; or (iv) challenging the validity of
      this
      Agreement and Release as it applies to a release of claims under
      ADEA.

    

    6. Employee
      agrees to make [himself/herself]
      reasonably available at times and for durations reasonably acceptable to both
      parties to assist the Company with respect to any issues wherein the Company
      considers Employee’s knowledge or expertise reasonably beneficial. The Company
      will reimburse Employee for all reasonable out of pocket expenses that incurred
      while [he/she]
      is
      engaged in such activity. Employee will also cooperate fully with the Company
      in
      the defense or prosecution of any claims or actions now in existence or which
      may be brought in the future against or on behalf of the Company which relate
      to
      events or occurrences that transpired while the Employee was employed by the
      Company. Employee’s full cooperation in connection with such claims or actions
      shall include, but not be limited to, being available to meet with counsel
      to
      prepare for discovery or trial and to act as a witness on behalf of the Company
      at mutually convenient times. Employee shall also cooperate fully with the
      Company in connection with any such investigation or review of any federal,
      state or local regulatory authority as any such investigation or review relates
      to events or occurrences that transpired while Employee was employed by the
      Company. The Company shall pay for any reasonable out-of-pocket expenses
      incurred by Employee in connection with [his/her]
      performance of the obligations pursuant to this paragraph 6. Employee’s
      performance under this paragraph 6 following the Termination Date shall be
      subject to [his/her]
      then
      current employment obligations.

    

    7. Employee
      represents that [he/she]
      has
      returned (or will return) to Company all property belonging to Company,
      including but not limited to electronic devices (e.g., Blackberry and/or laptop
      computer), keys, card access to buildings and office floors, and business
      information and documents. 

    
      
        
        

      

      
        B
          - 3

        
          

        

      

      
        
        

      

    

    

    

    8. If
      any
      provision of this Agreement and Release is held to be illegal, void, or
      unenforceable, such provision shall be of no force or effect. However, the
      illegality or unenforceability of such provision shall have no effect upon,
      and
      shall not impair the enforceability of, any other provision of this Agreement
      and
      Release. Further, to the extent any provision of this Agreement and Release
      is
      deemed to be overbroad or unenforceable as written, such provision shall be
      given the maximum effect permissible under law.

    

    9. This
      Agreement and
      Release represents the entire understanding between the parties hereto with
      respect to the subject matter hereof, and may not be changed or modified except
      by a written agreement signed by both of the parties hereto after the Effective
      Date of this Agreement and
      Release. In the event of any conflict between any of the provisions of this
      Agreement and
      Release and the provisions of the Severance Plan, the terms of the Severance
      Plan shall govern.

    

      10. Except
        as
        may be preempted by federal law, this Agreement and
        Release shall
        be
        governed by the laws of the State of New York, without regard to conflict
        of
        laws principles, and the parties in any action arising out of this Agreement
        and
        Release shall
        be
        subject to the personal jurisdiction and venue of the federal and state courts,
        as applicable, in the County of New York, State of New York.

    

    11. The
      parties agree that this Agreement and Release and its terms are confidential
      and
      shall be accorded the utmost confidentiality. Employee
      hereby agrees to keep confidential and not disclose the terms and conditions
      of
      this Agreement to any person or entity without the prior written consent of
      the
      Company, except to Employee’s accountants, attorneys and/or spouse, provided
      that they also agree to maintain the confidentiality of this Agreement. Employee
      shall be responsible for any disclosure by them. Employee further represent
      that
      Employee has not disclosed the terms and conditions of this Agreement to anyone
      other than Employee’s attorneys, accountants and/or spouse. This Section 10 does
      not prohibit disclosure of this Agreement by any party if required by law,
      provided that if Employee is required to make such disclosure the Employee
      has
      given the Company prompt written notice of any legal process and cooperated
      with
      the Company’s efforts to seek a protective order.

    

    12. Employee
      acknowledges that during the course of Employee’s employment with the Company,
      Employee has had access to information relating to the Company, its divisions,
      subsidiaries, or related entities and its/their business that is not generally
      known by persons not employed by the Company and that could not easily be
      determined or learned by someone outside of the Company (“Confidential
      Information”).
      Such
      information is confidential or proprietary and may include but not be limited
      to
      customer or client contact lists, trade secrets, patents, copyrighted materials,
      proprietary computer software and programs, products, systems analyses, lists
      of
      suppliers and supplier contracts, internal policies and marketing strategies,
      financial information relating to the Company and its employees, and other
      documents and information that provide the Company with a competitive advantage
      and that could not be easily determined or learned or obtained by someone
      outside the Company. Employee further acknowledges that: (i) such confidential
      and proprietary information is the exclusive, unique, and valuable property
      of
      the Company, its divisions, subsidiaries and/or related entities; (ii) the
      businesses of the Company depend on such confidential and proprietary
      information; and (iii) the Company wishes to protect such confidential and
      proprietary information by keeping it confidential for the use and benefit
      of
      the Company, its subsidiaries, divisions, and/or related entities. Employee
      agrees not to disclose or use such Confidential Information at any time in
      the
      future, except if authorized by the Company in writing or if required in
connection
      with a subpoena or other legal process or investigation by any governmental,
      regulatory or self-regulatory agency or in connection with any legal proceeding
      brought against Employee, or in connection with a proceeding to enforce this
      Agreement.

    
      
        
        

      

      
        B
          - 4

        
          

        

      

      
        
        

      

    

    

    

    13. Employee
      agrees that for a period of six (6) months following Employee’s termination of
      employment with the Company (the “Restricted
      Period”),
      Employee will not, directly or indirectly, individually or on behalf of any
      other person, firm, corporation or other entity, solicit, induce, hire or retain
      any employee of the Company to leave the employ of the Company or to accept
      employment or retention as an independent contractor with, or render services
      to
      or with any other person, firm, corporation or other entity unaffiliated with
      the Company or take any action to assist or aid any other person, firm,
      corporation or other entity in identifying, soliciting, hiring or retaining
      any
      such employee (provided Employee may serve as a reference after he is no longer
      employed by the Company but not with regard to any entity with which he is
      affiliated or from which he is receiving compensation). Furthermore, during
      the
      Restricted Period, Employee will not (i) solicit or induce any customer or
      client of the Company to purchase goods or services offered by the Company
      from
      another person, firm, corporation or other entity or assist or aid any other
      persons or entity in identifying or soliciting any such customer or client,
      (ii)
      encourage any customer, client, supplier or other business relationship of
      the
      Company to terminate or alter such relationship, (iii) encourage any prospective
      customer or supplier not to enter into a business relationship with the Company,
      or (iv) impair or attempt to impair any relationship, contractual or otherwise,
      written or oral, between the Company and any customer, supplier or other
      business relationship.

    

    14. Employee
      acknowledges and agrees that the Company will suffer irreparable damage if
      any
      of the provisions of paragraphs 5, 12 or 13 of this Agreement and Release are
      breached and that the Company’s remedies at law for a breach of such provisions
      would be inadequate and, in recognition of this fact, Employee agrees that,
      in
      the event of such a breach, in addition to any remedies at law, the Company
      will
      be entitled to obtain equitable relief in the form of specific performance,
      temporary restraining order, a temporary or permanent injunction or any other
      equitable remedy which may then be available.

    

    15. This
      Agreement and
      Release is binding upon, and shall inure to the benefit of, the parties and
      their respective heirs, executors, administrators, successors and
      assigns.

    

    16. Employee
      acknowledges that [he/she]:
      (a) has
      carefully read this Agreement and
      Release in its entirety; (b) has had an opportunity to consider the terms of
      this Agreement and
      Release [insert
      only if employees are over 40: and
      the
      disclosure information attached hereto as
      Exhibit I (which is provided pursuant to the Older Workers Benefit Protection
      Act)]
      for at
      least [twenty-one (21)] [forty-five (45)] days; (c) is hereby advised by Company
      in writing to consult with an attorney of [his/her]
      choice
      in connection with this Agreement and
      Release; (d) fully understands the significance of all of the terms and
      conditions of this Agreement and
      Release and has discussed them with an attorney of [his/her]
      choice,
      or has had a reasonable opportunity to do so; and (e) is signing this Agreement
      and
      Release voluntarily and of [his/her]
      own free
      will and agrees to abide by all the terms and conditions contained
      herein.

    
      
        
        

      

      
        B
          - 5

        
          

        

      

      
        
        

      

    

    

    

    17. Employee
      may accept this Agreement and
      Release by signing it before a notary public and delivering it to [INSERT
      NAME AND ADDRESS OF CONTACT]
      on or
      before the [twenty-first (21st)]
      [forty-fifth (45th)]
      day
      after [he/she]
      receives
      this Agreement and
      Release. Notwithstanding the foregoing, Employee may not sign this Agreement
      and
      Release before [his/her]
      last day
      of employment and this Agreement and
      Release will not be accepted or effective if signed before the Termination
      Date.
      After signing this Agreement and
      Release, Employee shall have seven (7) days (the “Revocation
      Period”)
      to
      revoke [his/her]
      decision
      by indicating [his/her]
      desire
      to do so in writing delivered to [INSERT
      NAME]
      at the
      above address by no later than the last day of the Revocation Period. If the
      last day of the Revocation Period falls on a Saturday, Sunday or holiday, the
      last day of the Revocation Period will be deemed to be the next business day.
      Provided Employee does not revoke this Agreement and
      Release during the Revocation Period, the Effective Date of this Agreement
      and
      Release shall be the later of the eighth (8th)
      day
      after Employee signs this Agreement and
      Release or the 

    day
      after
      the last day of the Revocation Period (the “Effective
      Date”).
      

    

    

    
      	
              Dated:
                ______________

            	 	    

	 	 	
              (signature)

            
	 	 	
               

              [Employee]

            

    

    

    

    

    TAKE-TWO
      INTERACTIVE SOFTWARE, INC.

    

    

    
      	
              Accepted
                by:__________________________

            	
              Dated:_____________________

            
	 	 
	
              Name:_______________________________

            	 

    

    

     

    
      
        
        

      

      
        B
          -
          6EXHIBIT
      A

    

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

    

    Original
      Issue Date: March 5, 2008

    Original
      Conversion Price (subject to adjustment herein): $0.9824

    

    $_______________

     

    ORIGINAL
      ISSUE DISCOUNT

    SENIOR
      SECURED CONVERTIBLE DEBENTURE

    DUE
      MARCH 5, 2010

    

    THIS
      ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series
      of duly authorized and validly issued Original Issue Discount Senior Secured
      Convertible Debentures of Statmon Technologies Corp., a Nevada corporation,
      (the
“Company”),
      having its principal place of business at 3000 Lakeside Drive, Suite 300 South,
      Bannockburn, IL 60015, designated as its Original Issue Discount Senior Secured
      Convertible Debenture due March 5, 2010 (this debenture, the “Debenture”
and,
      collectively with the other debentures of such series, the “Debentures”).

    

    FOR
      VALUE
      RECEIVED, the Company promises to pay to ________________________ or its
      registered assigns (the “Holder”),
      or
      shall have paid pursuant to the terms hereunder, the principal sum of
      $_______________ on March 5, 2010 (the “Maturity
      Date”)
      or
      such earlier date as this Debenture is required or permitted to be repaid as
      provided hereunder. This Debenture is subject to the following additional
      provisions:

    

    Section
      1. Definitions.
      For the
      purposes hereof, in addition to the terms defined elsewhere in this Debenture,
      (a) capitalized terms not otherwise defined herein shall have the meanings
      set
      forth in the Purchase Agreement and (b) the following terms shall have the
      following meanings:

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

    

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

    

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

    

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

    

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

    

    “Change
      of Control Transaction”
means
      the occurrence after the date hereof of any of (i) an acquisition after the
      date
      hereof by an individual or legal entity or “group” (as described in Rule
      13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
      through legal or beneficial ownership of capital stock of the Company, by
      contract or otherwise) of in excess of 40% of the voting securities of the
      Company (other than by means of conversion or exercise of the Debentures and
      the
      Securities issued together with the Debentures), or (ii) the Company merges
      into
      or consolidates with any other Person, or any Person merges into or consolidates
      with the Company and, after giving effect to such transaction, the stockholders
      of the Company immediately prior to such transaction own less than 66% of the
      aggregate voting power of the Company or the successor entity of such
      transaction, or (iii) the Company sells or transfers all or substantially all
      of
      its assets to another Person and the stockholders of the Company immediately
      prior to such transaction own less than 66% of the aggregate voting power of
      the
      acquiring entity immediately after the transaction, or (iv) a replacement at
      one
      time or within a three (3) year period of more than one-half of the members
      of
      the Company’s board of directors which is not approved by a majority of those
      individuals who are members of the board of directors on the date hereof (or
      by
      those individuals who are serving as members of the board of directors on any
      date whose nomination to the board of directors was approved by a majority
      of
      the members of the board of directors who are members on the date hereof),
      or
      (v) the execution by the Company of an agreement to which the Company is a
      party
      or by which it is bound, providing for any of the events set forth in clauses
      (i) through (iv) above.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

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

    

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

    

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

    

    “Debenture
      Register”
means
      the records of the Company regarding registration and transfer of this
      Debenture.

    

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

    

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

    

    “Equity
      Conditions”
means,
      during the period in question, (i)
      the
      Company shall have duly honored all conversions and redemptions scheduled to
      occur or occurring by virtue of one or more Notices of Conversion of the Holder,
      if any, (ii) the Company shall have paid all liquidated damages and other
      amounts owing to the Holder in respect of this Debenture, (iii)
      (a)
      the Legend may be removed from the applicable Security pursuant to Section
      4.1
      of the Purchase Agreement or (b) all of the Conversion Shares issuable pursuant
      to the Transaction Documents may be resold pursuant to Rule 144 without volume
      or manner-of-sale restrictions or current public information requirements as
      determined by the counsel to the Company pursuant to a written opinion letter
      to
      such effect, addressed and acceptable to the Transfer Agent and the Holder,
      (iv)
      the Common Stock is trading on a Trading Market and all of the shares issuable
      pursuant to the Transaction Documents are listed or quoted for trading on such
      Trading Market (and the Company believes, in good faith, that trading of the
      Common Stock on a Trading Market will continue uninterrupted for the foreseeable
      future), (v) there is a sufficient number of authorized but unissued and
      otherwise unreserved shares of Common Stock for the issuance of all of the
      shares issuable pursuant to the Transaction Documents, (vi) there is no existing
      Event of Default or no existing event which, with the passage of time or the
      giving of notice, would constitute an Event of Default, (vii) the issuance
      of
      the shares in question to the Holder would not violate the limitations set
      forth
      in Section 4(c) herein, (viii)
      there has been no public announcement of a pending or proposed Fundamental
      Transaction or Change of Control Transaction that has not been consummated,
      (ix)
      the Holder is not in possession of any information provided by the Company
      that
      constitutes, or may constitute, material non-public information and (x) for
      each
      Trading Day in a period of twenty (20) consecutive Trading Days prior to the
      applicable date in question, the daily dollar trading volume for the Common
      Stock on the principal Trading Market exceeds $250,000 per Trading Day in the
      case of an Optional Redemption pursuant to Section 6(a) herein and a Forced
      Conversion pursuant to Section 6(c) herein.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

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

    

    “Forced
      Conversion”
shall
      have the meaning set forth in Section 6(c).

    

    “Forced
      Conversion Date”
shall
      have the meaning set forth in Section 6(c).

    

    “Forced
      Conversion Notice”
shall
      have the meaning set forth in Section 6(c).

    

    “Forced
      Conversion Notice Date”
shall
      have the meaning set forth in Section 6(c). 

    

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

     

    “Mandatory
      Default Amount”
means
      the sum of (i) the greater of (A) 125% of the outstanding principal amount
      of
      this Debenture or (B) the outstanding principal amount of this Debenture divided
      by the Conversion Price on the date the Mandatory Default Amount is either
      (a)
      demanded (if demand or notice is required to create an Event of Default) or
      otherwise due or (b) paid in full, whichever has a lower Conversion Price,
      multiplied by the VWAP on the date the Mandatory Default Amount is either (x)
      demanded or otherwise due or (y) paid in full, whichever has a higher VWAP,
      and
      (ii) all other amounts, costs, expenses and liquidated damages due in respect
      of
      this Debenture.

    

    “New
      York Courts”
shall
      have the meaning set forth in Section 9(d).

    

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

    

    “Optional
      Redemption”
shall
      have the meaning set forth in Section 6(a).

    

    “Optional
      Redemption Amount”
means
      the sum of (i) 125% of the then outstanding principal amount of the Debenture,
      and (ii) all liquidated damages and other amounts due in respect of the
      Debenture.

    

    “Optional
      Redemption Date”
shall
      have the meaning set forth in Section 6(a).

    

    “Optional
      Redemption Notice”
shall
      have the meaning set forth in Section 6(a).

    

    “Optional
      Redemption Notice Date”
shall
      have the meaning set forth in Section 6(a). 

    

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

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Permitted
      Indebtedness”
      means (a)
      the
      indebtedness evidenced by the Debentures, (b) lease obligations and purchase
      money indebtedness of up to $500,000, in the aggregate, incurred in connection
      with the acquisition of capital assets and lease obligations with respect to
      newly acquired or leased assets, (c) indebtedness that (i) is expressly
      subordinate to the Debentures in an aggregate amount of $2,000,000 ($1,000,000
      for working capital and $1,000,000 for existing noteholder indebtedness)
      pursuant to a written subordination agreement with the Purchasers that is
      acceptable to each Purchaser in its sole and absolute discretion and (ii)
      matures at a date later than the ninety-first (91st)
      day
      following the Maturity Date, (d) trade and inventory payables and (e)
      indebtedness incurred in connection with an issuance or issuances contemplated
      by clause (f) under the definition of Exempt Issuance (as defined in the
      Purchase Agreement).

    

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

     

    “Purchase
      Agreement”
means
      the Securities Purchase Agreement, dated as of March 5, 2008, among the Company
      and the original Holders, as amended, modified or supplemented from time to
      time
      in accordance with its terms.

    

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

    

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

    

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

    

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

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “Trading
      Day”
means
      a
      day on which the principal Trading Market is open for business.

    

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

    

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

    

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

    

    Section
      2. Interest
      and Prepayment.
      This
      Debenture was issued for an original issue discount. No regularly scheduled
      interest payments shall be made on this Debenture. Except as otherwise set
      forth
      in this Debenture, the Company may not prepay any portion of the Principal
      Amount of this Debenture without the prior written consent of the
      Holder.

     

    Section
      3.  Registration
      of Transfers and Exchanges.
      

     

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

     

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

    

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

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    Section
      4.  Conversion.

     

    a) Voluntary
      Conversion.
      At any
      time after the Original Issue Date until this Debenture is no longer
      outstanding, this Debenture shall be convertible, in whole or in part, into
      shares of Common Stock at the option of the Holder, at any time and from time
      to
      time (subject to the conversion limitations set forth in Section 4(c)
      hereof). The Holder shall effect conversions by delivering to the Company a
      Notice of Conversion, the form of which is attached hereto as Annex
      A
      (a
“Notice
      of Conversion”),
      specifying therein the principal amount of this Debenture to be converted and
      the date on which such conversion shall be effected (such date, the
“Conversion
      Date”).
      If no
      Conversion Date is specified in a Notice of Conversion, the Conversion Date
      shall be the date that such Notice of Conversion is deemed delivered hereunder.
      To effect conversions hereunder, the Holder shall not be required to physically
      surrender this Debenture to the Company unless the entire principal amount
      of
      this Debenture has been so converted. Conversions hereunder shall have the
      effect of lowering the outstanding principal amount of this Debenture in an
      amount equal to the applicable conversion. The Holder and the Company shall
      maintain records showing the principal amount(s) converted and the date of
      such
      conversion(s). The Company may deliver an objection to any Notice of Conversion
      within two (2) Business Days of delivery of such Notice of Conversion. In the
      event of any dispute or discrepancy, the records of the Holder shall be
      controlling and determinative in the absence of manifest error. The
      Holder, and any assignee by acceptance of this Debenture, acknowledge and agree
      that, by reason of the provisions of this paragraph, following conversion of
      a
      portion of this Debenture, the unpaid and unconverted principal amount of this
      Debenture may be less than the amount stated on the face
      hereof.

     

    b) Conversion
      Price.
      The
      conversion price in effect on any Conversion Date shall be equal to $0.9824,
      subject
      to adjustment herein (the “Conversion
      Price”).

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    c) Conversion
      Limitations.
      The
      Company shall not effect any conversion of this Debenture, and a Holder shall
      not have the right to convert any portion of this Debenture, to the extent
      that
      after giving effect to the conversion set forth on the applicable Notice of
      Conversion, the Holder (together with the Holder’s Affiliates, and any other
      person or entity acting as a group together with the Holder or any of the
      Holder’s Affiliates) would beneficially own in excess of the Beneficial
      Ownership Limitation (as defined below).  For purposes of the foregoing
      sentence, the number of shares of Common Stock beneficially owned by the Holder
      and its Affiliates shall include the number of shares of Common Stock issuable
      upon conversion of this Debenture with respect to which such determination
      is
      being made, but shall exclude the number of shares of Common Stock which are
      issuable upon (A) conversion of the remaining, unconverted principal amount
      of
      this Debenture beneficially owned by the Holder or any of its Affiliates, and
      (B) exercise or conversion of the unexercised or unconverted portion of any
      other securities of the Company subject to a limitation on conversion or
      exercise analogous to the limitation contained herein (including, without
      limitation, any other Debentures or the Warrants) beneficially owned by the
      Holder or any of its Affiliates.  Except as set forth in the preceding
      sentence, for purposes of this Section 4(c), beneficial ownership shall be
      calculated in accordance with Section 13(d) of the Exchange Act and the rules
      and regulations promulgated thereunder. To the extent that the limitation
      contained in this Section 4(c) applies, the determination of whether this
      Debenture is convertible (in relation to other securities owned by the Holder
      together with any Affiliates) and of which principal amount of this Debenture
      is
      convertible shall be in the sole discretion of the Holder, and the submission
      of
      a Notice of Conversion shall be deemed to be the Holder’s determination of
      whether this Debenture may be converted (in relation to other securities owned
      by the Holder together with any Affiliates) and which principal amount of this
      Debenture is convertible, in each case subject to the Beneficial Ownership
      Limitation. To ensure compliance with this restriction, the Holder will be
      deemed to represent to the Company each time it delivers a Notice of Conversion
      that such Notice of Conversion has not violated the restrictions set forth
      in
      this paragraph and the Company shall have no obligation to verify or confirm
      the
      accuracy of such determination. In
      addition, a determination as to any group status as contemplated above shall
      be
      determined in accordance with Section 13(d) of the Exchange Act and
      the
      rules and regulations promulgated thereunder. For
      purposes of this Section 4(c), in determining the number of outstanding shares
      of Common Stock, the Holder may rely on the number of outstanding shares of
      Common Stock as stated in the most recent of the following: (A) the Company’s
      most recent 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 (2) Trading Days confirm orally and in writing to
      the
      Holder the number of shares of Common Stock then outstanding.  In any case,
      the number of outstanding shares of Common Stock shall be determined after
      giving effect to the conversion or exercise of securities of the Company,
      including this Debenture, by the Holder or its Affiliates since the date as
      of
      which such number of outstanding shares of Common Stock was reported. The
“Beneficial
      Ownership Limitation”
shall
      be 4.99% of the number of shares of the Common Stock outstanding immediately
      after giving effect to the issuance of shares of Common Stock issuable upon
      conversion of this Debenture held by the Holder. The Holder, upon not less
      than
      61 days’ prior notice to the Company, may increase or decrease the Beneficial
      Ownership Limitation provisions of this Section 4(c), provided that the
      Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
      shares of the Common Stock outstanding immediately after giving effect to the
      issuance of shares of Common Stock upon conversion of this Debenture held by
      the
      Holder and the provisions of this Section 4(c) shall continue to apply. Any
      such
      increase or decrease will not be effective until the 61st
      day
      after such notice is delivered to the Company. The provisions of this paragraph
      shall be construed and implemented in a manner otherwise than in strict
      conformity with the terms of this Section 4(c) to correct this paragraph (or
      any
      portion hereof) which may be defective or inconsistent with the intended
      Beneficial Ownership Limitation herein contained or to make changes or
      supplements necessary or desirable to properly give effect to such
      limitation.
      The
      limitations contained in this paragraph shall apply to a successor holder of
      this
      Debenture.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    d) Mechanics
      of Conversion.

     

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

    

    ii. Delivery
      of Certificate Upon Conversion.
      Not
      later than three (3) Trading Days after each Conversion Date (the “Share
      Delivery Date”),
      the
      Company shall deliver, or cause to be delivered, to the Holder a certificate
      or
      certificates representing the Conversion Shares which shall be free of
      restrictive legends and trading restrictions (other than those which may then
      be
      required by the Purchase Agreement) representing the number of Conversion Shares
      being acquired upon the conversion of this Debenture. The Company shall, if
      available and if allowed under applicable securities laws, use its best efforts
      to deliver any certificate or certificates required to be delivered by the
      Company under this Section 4 electronically through the Depository Trust Company
      or another established clearing corporation performing similar functions.

     

    iii. Failure
      to Deliver Certificates.
      If in
      the case of any Notice of Conversion such certificate or certificates are not
      delivered to or as directed by the applicable Holder by the third (3rd)
      Trading
      Day after the Conversion Date, the Holder shall be entitled to elect by written
      notice to the Company at any time on or before its receipt of such certificate
      or certificates, to rescind such Conversion, in which event the Company shall
      promptly return to the Holder any original Debenture delivered to the Company
      and the Holder shall promptly return to the Company the Common Stock
      certificates representing the principal amount of this Debenture unsuccessfully
      tendered for conversion to the Company. 

     

    iv. Obligation
      Absolute; Partial Liquidated Damages.
      The
      Company’s obligations to issue and deliver the Conversion Shares upon conversion
      of this Debenture in accordance with the terms hereof are absolute and
      unconditional, irrespective of any action or inaction by the Holder to enforce
      the same, any waiver or consent with respect to any provision hereof, the
      recovery of any judgment against any Person or any action to enforce the same,
      or any setoff, counterclaim, recoupment, limitation or termination, or any
      breach or alleged breach by the Holder or any other Person of any obligation
      to
      the Company or any violation or alleged violation of law by the Holder or any
      other Person, and irrespective of any other circumstance which might otherwise
      limit such obligation of the Company to the Holder in connection with the
      issuance of such Conversion Shares; provided,
      however,
      that
      such delivery shall not operate as a waiver by the Company of any such action
      the Company may have against the Holder. In the event the Holder of this
      Debenture shall elect to convert any or all of the outstanding principal amount
      hereof, the Company may not refuse conversion based on any claim that the Holder
      or anyone associated or affiliated with the Holder has been engaged in any
      violation of law, agreement or for any other reason, unless an injunction from
      a
      court, on notice to Holder, restraining and or enjoining conversion of all
      or
      part of this Debenture shall have been sought and obtained, and the Company
      posts a surety bond for the benefit of the Holder in the amount of 150% of
      the
      outstanding principal amount of this Debenture, which is subject to the
      injunction, which bond shall remain in effect until the completion of
      arbitration/litigation of the underlying dispute and the proceeds of which
      shall
      be payable to the Holder to the extent it obtains judgment. In the absence
      of
      such injunction, the Company shall issue Conversion Shares or, if applicable,
      cash, upon a properly noticed conversion. If the Company fails for any reason
      to
      deliver to the Holder such certificate or certificates pursuant to Section
      4(d)(ii) by the third Trading Day after the Conversion Date (the “Delivery
      Deadline”),
      the
      Company shall pay to the Holder, in cash, as liquidated damages and not as
      a
      penalty, for each $1,000 of principal amount being converted, $10 per Trading
      Day (increasing to $20 per Trading Day seven (7) Trading Day after such
      liquidated damages have begun to accrue) for each Trading Day after the second
      (2nd)
      Trading
      Day after the Delivery Deadline until such certificates are delivered. Nothing
      herein shall limit a Holder’s right to pursue actual damages or declare an Event
      of Default pursuant to Section 8 hereof for the Company’s failure to deliver
      Conversion Shares within the period specified herein and the Holder shall have
      the right to pursue all remedies available to it hereunder, at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief. The exercise of any such rights shall not prohibit the Holder
      from seeking to enforce damages pursuant to any other Section hereof or under
      applicable law.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

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

    

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

    

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

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    Section
      5. Certain
      Adjustments.

     

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

     

    b) Subsequent
      Equity Sales.
      If, at
      any time while this Debenture is outstanding, the Company or any Subsidiary,
      as
      applicable, sells or grants any option to purchase or sells or grants any right
      to reprice, or otherwise disposes of or issues (or announces any sale, grant
      or
      any option to purchase or other disposition), any Common Stock or Common Stock
      Equivalents entitling any Person to acquire shares of Common Stock at an
      effective price per share that is lower than the then Conversion Price (such
      lower price, the “Base
      Conversion Price”
and
      such issuances, collectively, a “Dilutive
      Issuance”)
      (if
      the holder of the Common Stock or Common Stock Equivalents so issued shall
      at
      any time, whether by operation of purchase price adjustments, reset provisions,
      floating conversion, exercise or exchange prices or otherwise, or due to
      warrants, options or rights per share which are issued in connection with such
      issuance, be entitled to receive shares of Common Stock at an effective price
      per share that is lower than the Conversion Price, such issuance shall be deemed
      to have occurred for less than the Conversion Price on such date of the Dilutive
      Issuance), then the Conversion Price shall be reduced to equal the Base
      Conversion Price. Such adjustment shall be made whenever such Common Stock
      or
      Common Stock Equivalents are issued. Notwithstanding
      the foregoing, no adjustment will be made under this Section 5(b) in respect
      of
      an Exempt Issuance.
      If the
      Company enters into a Variable Rate Transaction, despite the prohibition set
      forth in the Purchase Agreement, the Company shall be deemed to have issued
      Common Stock or Common Stock Equivalents at the lowest possible conversion
      price
      at which such securities may be converted or exercised. The Company shall notify
      the Holder in writing, no later than two (2) Business Days following the
      issuance of any Common Stock or Common Stock Equivalents subject to this Section
      5(b), indicating therein the applicable issuance price, or applicable reset
      price, exchange price, conversion price and other pricing terms (such notice,
      the “Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Company provides a Dilutive
      Issuance Notice pursuant to this Section 5(b), upon the occurrence of any
      Dilutive Issuance, the Holder is entitled to receive a number of Conversion
      Shares based upon the Base Conversion Price on or after the date of such
      Dilutive Issuance, regardless of whether the Holder accurately refers to the
      Base Conversion Price in the Notice of Conversion.

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

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

     

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

    

    g) Notice
      to the Holder.

    

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

     

    
      
        
        

      

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

     

    Section
      6. Redemption
      and Forced Conversion.

    

    a) Optional
      Redemption at Election of Company.
      Subject
      to the provisions of this Section 6, at any time after the twelve (12) month
      anniversary of the date of the Purchase Agreement, the Company may deliver
      a
      notice to the Holder (an “Optional
      Redemption Notice”
and
      the
      date such notice is deemed delivered hereunder, the “Optional
      Redemption Notice Date”)
      of its
      irrevocable election to redeem some or all of the then outstanding principal
      amount of this Debenture for cash in an amount equal to the Optional Redemption
      Amount on the twentieth (20th)Trading
      Day following the Optional Redemption Notice Date (such date, the “Optional
      Redemption Date”
and
      such redemption, the “Optional
      Redemption”).
      The
      Optional Redemption Amount is payable in full on the Optional Redemption Date.
      The Company may only effect an Optional Redemption if each of the Equity
      Conditions shall have been met (unless waived in writing by the Holder) on
      each
      Trading Day during the period commencing on the Optional Redemption Notice
      Date
      through to the Optional Redemption Date and through and including the date
      payment of the Optional Redemption Amount is actually made in full. If any
      of
      the Equity Conditions shall cease to be satisfied at any time during the twenty
      (20) Trading Day period, then the Holder may elect to nullify the Optional
      Redemption Notice by notice to the Company within three (3) Trading Days after
      the first day on which any such Equity Condition has not been met (provided
      that
      if, by a provision of the Transaction Documents, the Company is obligated to
      notify the Holder of the non-existence of an Equity Condition, such notice
      period shall be extended to the third Trading Day after proper notice from
      the
      Company) in which case the Optional Redemption Notice shall be null and void,
      ab
      initio. The Company covenants and agrees that it will honor all Notices of
      Conversion tendered from the time of delivery of the Optional Redemption Notice
      through the date all amounts owing thereon are due and paid in
      full.

     

    
      
        
        

      

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

     

    c) Forced
      Conversion.
      Notwithstanding anything herein to the contrary, if after the twelve (12) month
      anniversary of the date of the Purchase Agreement, the VWAP for each of any
      thirty (30) consecutive Trading Days, which period shall have commenced only
      after the twelve (12) month anniversary of the date of the Purchase Agreement
      (such period the “Threshold
      Period”),
      exceeds 250% of the then Conversion Price (subject to adjustment for reverse
      and
      forward stock splits, stock dividends, stock combinations and other similar
      transactions of the Common Stock that occur after the Original Issue Date),
      the
      Company may, within one (1) Trading Day after the end of any such Threshold
      Period, deliver a written notice to the Holder (a “Forced
      Conversion Notice”
and
      the
      date such notice is delivered to the Holder, the “Forced
      Conversion Notice Date”)
      to
      cause the Holder to convert all or part of the then outstanding principal amount
      of this Debenture plus, if so specified in the Forced Conversion Notice, accrued
      but unpaid liquidated damages and other amounts owing to the Holder under this
      Debenture, it being agreed that the “Conversion Date” for purposes of Section 4
      shall be deemed to occur on the third (3rd)
      Trading
      Day following the Forced Conversion Notice Date (such third (3rd)
      Trading
      Day, the “Forced
      Conversion Date”).
      The
      Company may not deliver a Forced Conversion Notice, and any Forced Conversion
      Notice delivered by the Company shall not be effective, unless all of the Equity
      Conditions are met (unless waived in writing by the Holder) on each Trading
      Day
      occurring during the applicable Threshold Period through and including the
      later
      of the Forced Conversion Date and the Trading Day after the date such Conversion
      Shares pursuant to such conversion are delivered to the Holder. Any Forced
      Conversion shall be applied ratably to all Holders based on their initial
      purchases of Debentures pursuant to the Purchase Agreement, provided that any
      voluntary conversions by a Holder shall be applied against the Holder’s pro rata
      allocation, thereby decreasing the aggregate amount forcibly converted hereunder
      if only a portion of this Debenture is forcibly converted. For purposes of
      clarification, a Forced Conversion shall be subject to all of the provisions
      of
      Section 4, including, without limitation, the provision requiring payment of
      liquidated damages and limitations on conversions.

    

    
      
        
        

      

      
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    Section
      7. Negative
      Covenants.
      As long
      as any portion of this Debenture remains outstanding, the Company shall not,
      and
      shall not permit any of its subsidiaries (whether or not a Subsidiary on the
      Original Issue Date) to, directly or indirectly:

    

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

     

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

    

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

    

    g) repay,
      repurchase or offer to repay, repurchase or otherwise acquire more than a
de minimis
      number
      of shares of its Common Stock or Common Stock Equivalents other than as to
      (a)
      the Conversion Shares or Warrant Shares as permitted or required under the
      Transaction Documents and (b) repurchases of Common Stock or Common Stock
      Equivalents of departing officers and directors of the Company, provided that
      such repurchases shall not exceed an aggregate of $100,000 for all officers
      and
      directors during the term of this Debenture; 

    

    
      
        
        

      

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

    

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

    

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

     

    Section
      8. Events
      of Default.
      

    

    a) “Event
      of Default”
means,
      wherever used herein, any of the following events (whatever the reason for
      such
      event and whether such event shall be voluntary or involuntary or effected
      by
      operation of law or pursuant to any judgment, decree or order of any court,
      or
      any order, rule or regulation of any administrative or governmental body),
      which
      default is not cured within ten (10) Trading Days of written notice given to
      the
      Company by the Holders representing at least 85% of the outstanding principal
      amount of the Debentures of this series, unless specified otherwise
      below:

    

    i. any
      default in the payment of (A) the principal amount of any Debenture or (B)
      liquidated damages and other amounts owing to a Holder on any Debenture, as
      and
      when the same shall become due and payable (whether on a Conversion Date or
      the
      Maturity Date or by acceleration or otherwise) which default, solely in the
      case
      of a default under clause (B) above, is not cured within three (3) Trading
      Days;

     

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

    

    iii. a
      default
      or event of default (subject to any grace or cure period provided in the
      applicable agreement, document or instrument) shall occur under (A) any of
      the
      Transaction Documents or (B) any other material agreement, lease, document
      or
      instrument to which the Company or any Subsidiary is obligated (and not covered
      by clause (vi) below);

    

    
      
        
        

      

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

    

    v. the
      Company or any Significant Subsidiary shall be subject to a Bankruptcy
      Event;

     

    vi. the
      Company or any Subsidiary shall default on any of its obligations under any
      mortgage, credit agreement or other facility, indenture agreement, factoring
      agreement or other instrument under which there may be issued, or by which
      there
      may be secured or evidenced, any indebtedness for borrowed money or money due
      under any long term leasing or factoring arrangement that (a) involves an
      obligation greater than $150,000, whether such indebtedness now exists or shall
      hereafter be created, and (b) results in such indebtedness becoming or being
      declared due and payable prior to the date on which it would otherwise become
      due and payable; 

    

    vii. the
      Common Stock shall not be eligible for listing or quotation for trading on
      a
      Trading Market and shall not be eligible to resume listing or quotation for
      trading thereon within five (5) Trading Days;

    

    viii. the
      Company shall be a party to any Change of Control Transaction or Fundamental
      Transaction or shall agree to sell or dispose of all or in excess of forty
      percent (40%) of its assets in one transaction or a series of related
      transactions (whether or not such sale would constitute a Change of Control
      Transaction);

    

    ix. the
      Company shall fail for any reason to deliver certificates to a Holder prior
      to
      the seventh (7th)
      Trading
      Day after a Conversion Date or any Forced Conversion Date pursuant to Section
      4(d) or the Company shall provide at any time notice to the Holder, including
      by
      way of public announcement, of the Company’s intention to not honor requests for
      conversions of any Debentures in accordance with the terms hereof; 

    

    x. the
      Company does not meet the current public information requirements under Rule
      144
      in respect of the shares of Common Stock issuable pursuant to the Transaction
      Documents; or

    

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

     

    
      
        
        

      

      
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    b) Remedies
      Upon Event of Default.
      If any
      Event of Default occurs, the outstanding principal amount of this Debenture,
      plus accrued but unpaid liquidated damages and other amounts owing in respect
      thereof through the date of acceleration, shall become, at the Holder’s
      election, immediately due and payable in cash at the Mandatory Default Amount.
      Commencing five (5) days after the occurrence of any Event of Default that
      results in the eventual acceleration of this Debenture, the interest rate on
      this Debenture shall accrue at an interest rate equal to the lesser of eighteen
      percent (18%) per annum or the maximum rate permitted under applicable law.
      Upon
      the payment in full of the Mandatory Default Amount, the Holder shall promptly
      surrender this Debenture to or as directed by the Company. In connection with
      such acceleration described herein, the Holder need not provide, and the Company
      hereby waives, any presentment, demand, protest or other notice of any kind,
      and
      the Holder may immediately and without expiration of any grace period enforce
      any and all of its rights and remedies hereunder and all other remedies
      available to it under applicable law. Such acceleration may be rescinded and
      annulled by Holder at any time prior to payment hereunder and the Holder shall
      have all rights as a holder of the Debenture until such time, if any, as the
      Holder receives full payment pursuant to this Section 8(b). No such rescission
      or annulment shall affect any subsequent Event of Default or impair any right
      consequent thereon.

    

    Section
      9. Miscellaneous.
      

     

    a) Notices.
      Any and
      all notices or other communications or deliveries to be provided by the Holder
      hereunder, including, without limitation, any Notice of Conversion, shall be
      in
      writing and delivered personally, by facsimile, or sent by a nationally
      recognized overnight courier service, addressed to the Company, at the address
      set forth above, or such other facsimile number or address as the Company may
      specify for such purpose by notice to the Holder delivered in accordance with
      this Section 9. Any and all notices or other communications or deliveries to
      be
      provided by the Company hereunder shall be in writing and delivered personally,
      by facsimile, or sent by a nationally recognized overnight courier service
      addressed to each Holder at the facsimile number or address of the Holder
      appearing on the books of the Company, or if no such facsimile number or address
      appears, at the principal place of business of the Holder. Any notice or other
      communication or deliveries hereunder shall be deemed given and effective on
      the
      earliest of (i) the date of transmission, if such notice or communication is
      delivered via facsimile at the facsimile number specified in this Section 9
      prior to 5:30 p.m. (New York City time), (ii) the date immediately following
      the
      date of transmission, if such notice or communication is delivered via facsimile
      at the facsimile number specified in this Section 9 between 5:30 p.m. (New
      York
      City time) and 11:59 p.m. (New York City time) on any date, (iii) the
      second
      (2nd)
      Business
      Day following the date of mailing, if sent by nationally recognized overnight
      courier service, or (iv) upon actual receipt by the party to whom such notice
      is
      required to be given.

     

    
      
        
        

      

      
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    b) Absolute
      Obligation.
      Except
      as expressly provided herein, no provision of this Debenture shall alter or
      impair the obligation of the Company, which is absolute and unconditional,
      to
      pay the principal of, and liquidated damages, as applicable, on this Debenture
      at the time, place, and rate, and in the coin or currency, herein prescribed.
      This Debenture is a direct debt obligation of the Company. This Debenture ranks
      pari passu
      with all
      other Debentures now or hereafter issued under the terms set forth
      herein.  

     

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

    

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

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

       

    

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

     

    f) Severability.
      If any
      provision of this Debenture is invalid, illegal or unenforceable, the balance
      of
      this Debenture shall remain in effect, and if any provision is inapplicable
      to
      any Person or circumstance, it shall nevertheless remain applicable to all
      other
      Persons and circumstances. If it shall be found that any interest or other
      amount deemed interest due hereunder violates the applicable law governing
      usury, the applicable rate of interest due hereunder shall automatically be
      lowered to equal the maximum rate of interest permitted under applicable law.
      The Company covenants (to the extent that it may lawfully do so) that it shall
      not at any time insist upon, plead, or in any manner whatsoever claim or take
      the benefit or advantage of, any stay, extension or usury law or other law
      which
      would prohibit or forgive the Company from paying all or any portion of the
      principal of this Debenture as contemplated herein, wherever enacted, now or
      at
      any time hereafter in force, or which may affect the covenants or the
      performance of this indenture, and the Company (to the extent it may lawfully
      do
      so) hereby expressly waives all benefits or advantage of any such law, and
      covenants that it will not, by resort to any such law, hinder, delay or impede
      the execution of any power herein granted to the Holder, but will suffer and
      permit the execution of every such as though no such law has been
      enacted.

     

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

    

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

    

    i) Assumption. 
      Any successor to the Company or any surviving entity in a Fundamental
      Transaction shall (i) assume, prior to such Fundamental Transaction, all of
      the
      obligations of the Company under this Debenture and the other Transaction
      Documents pursuant to written agreements in form and substance satisfactory
      to
      the Holder (such approval not to be unreasonably withheld or delayed) and (ii)
      issue to the Holder a new debenture of such successor entity evidenced by a
      written instrument substantially similar in form and substance to this
      Debenture, including, without limitation, having a principal amount equal to
      the
      principal amount of this Debenture and having similar ranking to this Debenture,
      which shall be satisfactory to the Holder (any such approval not to be
      unreasonably withheld or delayed).  The provisions of this Section 9(i)
      shall apply similarly and equally to successive Fundamental Transactions and
      shall be applied without regard to any limitations of this
      Debenture.

    

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    j) Secured
      Obligation.
      The
      obligations of the Company under this Debenture are secured by all assets of
      the
      Company and each Subsidiary pursuant to the Security Agreement, dated as of
      March 5, 2008 between the Company, the Subsidiaries of the Company and the
      Secured Parties (as defined therein).

    

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

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

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

    

      
        	 	
                STATMON
                  TECHNOLOGIES CORP.

              
	 	 
	 	
                By:

              	 
	 	 	
                Name:

              
	 	 	
                Title:

              

      

      
        	 	
                Facsimile No. for delivery of Notices:

              	 

      

    

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    ANNEX
      A

    

    NOTICE
      OF CONVERSION

    

    The
      undersigned hereby elects to convert principal under the Original Issue Discount
      Secured Convertible Debenture due March 5, 2010 of Statmon Technologies Corp.,
      a
      Nevada corporation (the “Company”),
      into
      shares of common stock (the “Common
      Stock”),
      of
      the Company according to the conditions hereof, as of the date written below.
      If
      shares of Common Stock are to be issued in the name of a person other than
      the
      undersigned, the undersigned will pay all transfer taxes payable with respect
      thereto and is delivering herewith such certificates and opinions as reasonably
      requested by the Company in accordance therewith. No fee will be charged to
      the
      holder for any conversion, except for such transfer taxes, if any.

    

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

    

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

    

      
        	
                Conversion
                  calculations:

              	 	 
	 	 	
                Date
                  to Effect Conversion:

              
	 	 	 
	 	 	
                Principal
                  Amount of Debenture to be Converted:

              
	 	 	 
	 	 	
                Number
                  of shares of Common Stock to be issued:

              
	 	 	 
	 	 	
                Signature:

              
	 	 	 
	 	 	
                Name:

              
	 	 	 
	 	 	
                Address
                  for Delivery of Common Stock Certificates:

              
	 	 	 
	 	 	
                Or

              
	 	 	 
	 	 	
                DWAC
                  Instructions:

              
	 	 	 
	 	 	
                Broker
                  No:______________________

              
	 	 	
                Account
                  No:_____________________

              

      

    

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    Schedule
      1

    

    CONVERSION
      SCHEDULE

    

    The
      Original Issue Discount Secured Convertible Debentures due on March 5, 2010
      in
      the aggregate principal amount of $____________ are issued by Statmon
      Technologies Corp. This Conversion Schedule reflects conversions made under
      Section 4 of the above referenced Debenture.

    

    Dated:

    

      
        	
                Date
                  of Conversion
(or for first entry,
Original Issue
                  Date)

              	 	
                Amount
                  of
Conversion

              	 	
                Aggregate
Principal
Amount
Remaining
Subsequent
                  to
Conversion
(or original
Principal
Amount)

              	 	
                Company
                  Attest

              
	  	 	
                 

              	 	
                 

              	 	
                 

              
	 	 	
                 

              	 	
                 

              	 	
                 

              
	
                 

              	 	
                 

              	 	
                 

              	 	
                 

              

      

    

     

     

    
      
        
        

      

      
        26

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