Document:

ex104.htm

    Exhibit
      10.4

    

      
        	
                Effective
                  Date of this Agreement:

                
                

              	
                [Date]

                
                

              
	 	 
	
                This
                  Agreement is by and between

                
                

              	
                Universal
                  Tracking Solutions

                
                

              
	
                Located
                  at

                
                

              	
                3317
                  S Higley Rd. Suite 114-475

                
                

              
	 	
                Gilbert,
                  AZ 85297

                
                

              
	 	 
	
                AND

                
                

              	
                [Distributor]

                
                

              

      

    

     

     

    Purpose
      of this
      Agreement

    [Universal
      Tracking Solutions]
      and [Distributor] agree
      that [Distributor] will
      act as an authorized reseller for [Universal Tracking Solutions]
      developed Products according to the following terms and conditions:

     

    1.         
      Appointment &
Territory

    

    [Universal
      Tracking Solutions]
      appoints [Distributor]
as an authorized,
      reseller in the U.S. for [Universal Tracking Solutions]
      Products listed in Exhibit A during the term of this Agreement.

    

    2.         
      Price &
Terms

    

    2.1         
      [Distributor] will
      purchase [Universal Tracking
      Solutions] Products at the prices, terms and conditions defined in
      Exhibit B, which prices [Universal Tracking Solutions]
      may change at any time upon written notice to [Distributor] .  In
      the event of a price
      increase,           may
      cancel any unshipped or shipped orders by notice of [Universal Tracking Solutions]
      within ten (10) Days) of receipt of notice of the price increase.

    

    2.2         
      In the event of a price decrease, [Universal Tracking Solutions]
      will credit [Distributor]  for all unsold Products shipped to [Distributor] within thirty
      (30) Days prior to such price decrease, by crediting [Distributor] with the amount
      equal to the difference between the price at which such Products were sold
      to
[Distributor] . [Distributor]
will
      supply
      [Universal Tracking
      Solutions] with documentation confirming the quantity of unsold Products
      and the prices paid for the same and provided that [Universal Tracking Solutions]
      will have the right to audit during normal business hours the accuracy of such
      documentation.  Orders received by [Universal Tracking Solutions]
      after the effective date of a price change will be billed at the new
      price.

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    2.3         
      All [Distributor] orders
      will require payment of COD by check, money order, or credit card unless special
      credit arrangements have been agreed and approved by [Universal Tracking
      Solutions].  Invoices not paid within this period will incur a
      service charge equal to the highest rate permitted by law per month on any
      outstanding overdue balance.

    

    2.4         
      Notwithstanding any other terms or provisions of this Agreement, should [Distributor] default in
      payment of the purchase price when due, or fail to comply with any provisions
      of
      this Agreement, [Universal
      Tracking Solutions] may cancel the sale of such Products or enforce the
      terms of such sale, and may remove or repossess such inventory on ten (10)
      Days
      prior written notice and take such other action as it may deem necessary to
      protect its interest, it being understood that the remedies contained in this
      section are cumulative and in addition to all other rights and remedies of
      [Universal Tracking
      Solutions].

    

    3.         
      Shipments, Cancellations &
Changes

    

    3.1         
      [Distributor] may
      request shipment up to Ten (10) Days after order date.  The Shipments
      are subject to availability.  [Universal Tracking Solutions]
      reserves the right to schedule and reschedule any order, in [Universal Tracking
      Solutions]'s discretion, and to decline any order for credit reasons or
      because the order specifies an unreasonably large quantity or makes an
      unreasonable shipment request.

    

    3.2         
      [Distributor] may cancel
      a shipment or request changes in a scheduled shipment date at no charge up
      to 5
      (five) working days before scheduled shipment.  Cancellation or
      changes prior to shipment will be subject to a charge of 5% (five percent)
      of
      the shipment price.  No cancellation or change may be made after
      shipment.  [Universal
      Tracking Solutions] will use reasonable efforts to meet any scheduled
      shipment date.  However, [Universal Tracking Solutions]
      will not be liable for delay in meeting a scheduled shipment date for any
      reason.  If [Universal Tracking Solutions]
      Products are in short supply, [Universal Tracking Solutions]
      will allocate them equitably, in [Universal Tracking
      Solutions]'s discretion, among [Distributor]  and
      all other resale channels.  [Universal Tracking Solutions]
      is prepared to drop-ship [Universal Tracking Solutions]
      Products ([Distributor]
initiated orders)
      to customers directly upon receipt of a properly
      executed Customer Purchase Order, or upon receipt of a written [Distributor] Order
      (identifying the customer details).

     

    All
      other
[Distributor] approved
      orders will be shipped directly to [Distributor] distribution
      facilities listed on Exhibit C and only after receipt of a written order from
      [Distributor]
.

     

    *         Title
      to [Universal Tracking
      Solutions] Products and risk of loss and damage will pass to [Distributor] F.O.B. shipping
      point upon delivery to a common carrier.

    *         [Universal
      Tracking Solutions]
      retains the right to fulfill orders received from customers
      directly.

    *         [Distributor]
prices
      do not
      include transportation cost.

    *         [Distributor]
prices
      do not
      include State and Local taxes.  [Distributor]  will
      pay these taxes unless [Distributor] has given [Universal
      Tracking Solutions]
      the appropriate resale exemption certificates.

    

    4.         
      Warranty & Limitations of
      Remedies

    

    4.1         
      [Distributor] and [Universal
      Tracking Solutions]
      agree that the procedure provided below for return and repair or replacement
      of
      defective Products will be [Distributor] exclusive remedy
      for any claim relating to any alleged defect or nonconformity in [Universal TrackingSolutions]
      Products.  If [Distributor] finds that any
Universal
      Tracking
      Solutions Product sold to [Distributor] by [Universal
      Tracking Solutions]
      is defective within ninety (90) days after its shipment to [Distributor]  and
      prior to its sale by [Distributor] , [Distributor]
will
      contact
      [Universal Tracking
      Solutions] regarding its repair or replacement.  [Distributor] will not ship
      (return) any Product to [Universal Tracking Solutions]
      without a "Return Authorization Number" that can be obtained by calling the
      [Universal Tracking
      Solutions] Customer Service department.  Approval for return or
      replacement will be based solely on whether the Product is in fact defective
      and
      will not be unreasonably withheld.  [Universal Tracking Solutions]
      will be entitled to determine its discretion whether to replace rather than
      repair the Product.  [Universal Tracking Solutions]
      does not warrant the performance of the Product, as more fully defined in a
      written limited warranty included with each Product, the terms of which [Universal Tracking Solutions]
      may change from time to time.  This warranty is the only warranty
      covering any [Universal
      Tracking Solutions] Product sold under this Agreement.

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    4.2         
      No Other Warranty is Expressed or Implied

    

    [Universal
      Tracking Solutions]
      specifically disclaims the implied warranties of merchantability and fitness
      for
      a particular purpose.  The remedies provided in this Agreement,
      including the procedure for return of defective goods, are [Distributor] sole and
      exclusive remedies.  [Universal Tracking Solutions]
      will not be liable for any direct, indirect, special, incidental or
      consequential damages whether based on contract, tort or any other legal
      theory.

    

    5.         
      Relationship

     

    [Distributor]
relationship
      to
      [Universal Tracking
      Solutions] will be that of an independent contractor engaged in
      purchasing [Universal Tracking
      Solutions] Products for resale to [Distributor]
customers.  [Distributor]  and
      its employees are not agents or legal representatives of [Universal Tracking Solutions]
      for any purpose and have no authority to act for, bind or commit [Universal Tracking Solutions].
[Distributor]
and
      [Universal Tracking Solutions]
      agree that this Agreement does not establish a franchise, joint venture or
      partnership.  Any commitment made by [Distributor] to its customers
      with respect to quantities, delivery, modifications, interfacing capability,
      suitability of Product, or suitability in specific applications will be [Distributor] ’s sole
      responsibility unless prior written approval is obtained from [Universal Tracking
      Solutions].

     

    [Distributor]
has
      no authority
      to modify the warranty contained in Section 5 of this Agreement or to make
      any
      other commitment on behalf of [Universal Tracking Solutions],
      and [Distributor] will
      indemnify [Universal Tracking
      Solutions] from liability for any such modified warranty or other
      commitment by [Distributor]
.  [Distributor]
has
      the right to
      determine its own resale prices, and no [Universal Tracking Solutions]
      representative will require that any particular price be charged by [Distributor] or grant or
      withhold any treatment to [Distributor] based on [Distributor]
pricing
      policies.  [Distributor]  agrees
      that it will promptly report directly to a Universal Tracking Solutions
      officer any effort by [Universal Tracking Solutions]
      personnel to interfere with its pricing policies.

    

    This
      Agreement applies only to [Universal Tracking Solutions]
      Products listed on Exhibit A.  [Distributor] acknowledges
      that [Universal Tracking
      Solutions] may market other Products, including Products in competition
      with those listed on said Exhibit A, without making them available to [Distributor] . [Universal
      Tracking Solutions]
      reserves the right to advertise, promote and sell any Product in competition
      with [Distributor] as
      [Universal Tracking
      Solutions] deems appropriate.

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    

    6.         
      Sales Promotion &
Support

    

    6.1         
      [Distributor] will use
      its best efforts in good faith to promote, demonstrate and sell [Universal Tracking Solutions]
      Products on a face-to-face basis in an end-user environment so as to create
      the
      largest volume of profitable business for [Universal Tracking Solutions],
      to ensure the highest quality of pre-sale and post-sale support to end-users
      and
      to promote the goodwill, name and interest of [Universal Tracking Solutions]
      and [Universal Tracking
      Solutions] Products.  [Distributor] will train
      and
      maintain an adequate number of employees to properly promote, demonstrate,
      sell
      and provide post-sale support of [Universal Tracking Solutions]
      Products, and to otherwise carry out its obligations under this
      Agreement.  [Distributor] will sell only
      to end-user customers (including government and corporate users as well as
      individual users).

     

      
Only
      with prior written
      and express approval of [Universal Tracking Solutions],
[Distributor]
may
      sell
      [Universal Tracking
      Solutions] Products purchased during the term of this Agreement to other
      resellers that are currently authorized to carry those Universal Tracking Solutions
      Products, as necessary for stock balancing or other purposes.  [Distributor] may not sell
      Products to unauthorized resale outlets. [Distributor] will provide
      [Universal Tracking
      Solutions] with monthly sales reports that will include the number of
      Products sold to end-users for each month, the end-users zip code, date of
      purchase and Product configuration.  [Distributor] will permit
      [Universal Tracking
      Solutions], during normal business hours, to inspect the sales and
      support facilities of [Distributor] and all customer
      records and correspondence relating to the sale and support of [Universal Tracking Solutions]
      Products.]

    

    6.2           
      [Distributor] will
      ensure that a customer is provided with a knowledge of all facilities provided
      by [Universal Tracking
      Solutions] and [Distributor] , including
      but
      not limited to:  [Universal Tracking Solutions]
      Products, HOT LINE telephone numbers, [Universal Tracking Solutions]
      Product Registration Cards, [Universal Tracking Solutions]
      and Approved [Distributor]
training courses,
      [Universal Tracking Solutions]
      Product Warranty information.]

    

    7.         
      Trademark Usage &
Licensing

    

    7.1         
      From time to time, [Universal
      Tracking Solutions] may designate one or more Universal Tracking
      Solutions
      trademarks as available for [Distributor] ’s use, and will
      provide standards for that use, in [Universal Tracking Solutions]
      materials. [Universal Tracking
      Solutions] authorizes [Distributor] to use these
      designated marks.

    

    7.1.1        [Distributor]
will
      use the
      designated marks according with these standards solely in advertising and
      promoting [Universal Tracking
      Solutions] Products, in good taste and in a manner that preserves their
      value and [Universal Tracking
      Solutions]'s rights to them.

    

    7.1.2       
      [Distributor] may not
      use any Universal Tracking
      Solutions trademark or trade name in any way that will imply [Distributor] is an agency
      or
      branch of [Universal Tracking
      Solutions].  [Distributor] will immediately
      change or discontinue any use as requested by [Universal Tracking
      Solutions].

    

    

    7.2          
      Unless prior written consent is granted by [Universal Tracking Solutions],
[Distributor]
will
      not
      copy or modify any materials supplied under this Agreement, except as noted
      in
      Exhibit B.  [Distributor] will not remove
      or omit any copyright notice contained in these materials.

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    

    7.3         
      [Distributor] is granted
      the right to distribute materials supplied by [Universal Tracking Solutions]
      according to the license terms supplied with these materials.  [Distributor] may also use the
      materials for demonstration purposes also according to those license
      terms.

    

    7.3.1        Where
      an end-user Agreement is supplied with the Product, the user must sign the
      Agreement or indicate acceptance by opening the media package in order to obtain
      a license to use it. Use of the Product will be subject to the terms of the
      Agreement.

    

    7.3.2         Where
      the Product is designated as confidential or a trade secret in its license
      terms, [Distributor]
will safeguard the
      Product according to industry standards and applicable
      law, using the same degree of care to prevent unauthorized disclosure as [Distributor]  uses
      with its own trade secrets and those of other suppliers.

    

    8.         
      Amendment and / or
      Termination

     

    [Universal
      Tracking Solutions]
      may, from time to time, give [Distributor] written notice
      of amendments to this Agreement.  Any such amendment will
      automatically become a part of this Agreement on the effective date specified
      in
      the notice unless [Distributor]
objects in writing
      within [ten) working days of the notice
      date.  Each party acknowledges that the other has made no commitments
      regarding duration or renewal of this Agreement beyond those expressly stated
      in
      this Agreement.  Either party may terminate this Agreement with or
      without cause, at any time upon [ninety) days written notice.  If
      [Universal Tracking
      Solutions] determines that [Distributor] is deficient
      in
      meeting responsibilities under this Agreement, [Universal Tracking Solutions]
      may provide written notice of such deficiencies and establish a reasonable
      period of time, not to exceed [sixty) days, in which [Distributor] may remedy such
      deficiencies.  If [Distributor] does not remedy
      the deficiencies, [Universal
      Tracking Solutions] may terminate this Agreement at its
      discretion.

     

    No
      waiver by [Universal Tracking Solutions]
      of any deficiency will constitute a waiver of [Universal Tracking
      Solutions]'s rights to terminate this Agreement for a subsequent
      deficiency.  Upon termination or expiration of this Agreement, [Distributor] will immediately
      cease to be an authorized [Universal Tracking Solutions]
      dealer and will refrain from representing itself as our Dealer and from using
      any [Universal Tracking
      Solutions] trademarks or trade names.  Upon any such
      termination or expiration, at the option of either party, [Universal Tracking Solutions]
      will repurchase any of [Universal Tracking Solutions]
      Products sold to [Distributor]
by [Universal
      Tracking
      Solutions] under this Agreement in their unopened, original packaging and
      marketable as new merchandise.  [Universal Tracking Solutions]
      will pay [Distributor]
[Universal
      Tracking
      Solutions]'s then current [Distributor] price or [Distributor]
original
      purchase price for such Products, whichever is lower.  The indemnities
      provided in this Agreement will survive termination or expiration of this
      Agreement.

    

    9.         
      Confidentiality

    

    [Distributor]
agrees
      to
      maintain confidential and protect in the same manner that [Distributor] protects
      valuable confidential information belonging to [Distributor] any information
      furnished by [Universal
      Tracking Solutions] that is labeled confidential.

    

    10.         
      General
      Considerations

    

    Neither
      party may assign or transfer this Agreement.  Any attempted assignment
      or transfer will be void.  [Distributor] will advise
      [Universal Tracking
      Solutions] of any change in itsownership, control or
      operating arrangements.  Either party's failure to enforce any
      provisions of this Agreement will not be deemed a waiver of that provision
      or of
      the right to enforce it in the future.  [Universal Tracking Solutions]
      standard Terms and Conditions of Sale, may be stated on the reverse of [Universal Tracking Solutions]
      invoice form, and are incorporated in this Agreement.  In the event of
      any inconsistency, the terms of this Agreement will prevail.  This
      Agreement contains the entire and only understanding regarding the Dealer Resale
      relationship between [Universal
      Tracking Solutions] and [Distributor]
.  [Universal
      Tracking Solutions] gives notice of objection to any additional or
      inconsistent terms defined in any purchase order or other document issued by
      [Distributor]
.

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    No
      United States Government procurement
      regulations will be deemed included under this Agreement or binding on either
      party unless specifically accepted in writing and signed by both
      parties.

     

    Neither
      [Universal Tracking Solutions]
      or [Distributor] will be
      liable for its failure to perform under this Agreement due to contingencies
      beyond its reasonable control including, but not limited to, strikes, riots,
      wars, fire, acts of God, or acts in compliance with any law of the United States
      of America or any other government body or agency of it.

    

    11.         
      Legal Fees & Binding
      Arbitration

    

    In
      the
      event of any litigation or other legal proceeding including but not limited
      to
      arbitration or mediation between [Universal Tracking Solutions]
      and [Distributor]
arising from this
      Agreement, the prevailing party will be entitled to
      recover, in addition to any other relief awarded or granted, its reasonable
      costs and expenses (including attorney fees) incurred in the
      proceeding.

    

    11.1           
      Any dispute relating to the interpretation or performance of this Agreement
      will
      be resolved at the request of either party through binding arbitration.
      Arbitration will be conducted in the county of Maricopa in the state of Arizona
      according to the then-existing rules of the American Arbitration Association.
      Judgment upon any award by the arbitrators may be entered by any State or
      Federal Court having jurisdiction. [Universal Tracking Solutions]
      and [Distributor] intend
      that this Agreement to arbitrate be irrevocable.

    

    12.         
      General

    

    12.1           
      All notices, demands or consents required or permitted under this Agreement
      will
      be in writing and will be delivered personally or sent by certified or
      registered mail to the respective parties at the addresses defined on the first
      page of this Agreement, or at such other address as will be given by either
      party to the other in writing.

    

    12.2           
      No waiver, amendment or modification of any provisions of this Agreement will
      be
      effective unless in writing and signed by the party against whom such waiver,
      amendment or modification is sought to be enforced. No failure or delay by
      either party in exercising any right, power or remedy under this Agreement,
      except as specifically provided in this Agreement, will operate as a waiver
      of
      any such right, power or remedy. However, any legal action alleging breach
      of
      this Agreement may not be commenced more than [one] year after the breach
      complained of.

    

    12.3           
      This Agreement will be binding upon and defer to the benefit of the successors
      and permitted assigns of [Universal Tracking Solutions]
      and [Distributor]
.  Except as described
      below, [Universal Tracking Solutions]
      or [Distributor] may not
      assign any of its rights ordelegate any of its obligations
      under this Agreement to any third party without the express written permission
      of the other.  However, [Distributor] understands that
      [Universal Tracking
      Solutions] may assign this Agreement to a partnership or successor
      corporation and approves such transfer in advance.

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    12.4           
      The validity, construction and performance of this Agreement will be governed
      by
      the internal laws of the State of Arizona, without regard to provisions
      regarding conflicts of law.

    

    12.5           
      [Universal Tracking
      Solutions] and [Distributor] understand
      and
      acknowledge that violation of their respective covenants and Agreements may
      cause the other irreparable harm and damage, that may not be recovered at law,
      and each agrees that the others remedies for breach may be in equity by way
      of
      injunctive relief, as well as for damages and any other relief available to
      the
      non-breaching party, whether in law or in equity.

    

    12.6           
      The Captions and section headings used in this Agreement are for convenience
      only and are not a part of this Agreement and will not be used in construing
      it.

    

    12.7           
      If any provisions of this Agreement are held by a court of competent
      jurisdiction to be invalid under any applicable statute or rule of law, they
      are
      to that extent to be deemed omitted and the remaining provisions of this
      Agreement will remain in full force and effect.

    

    12.8           
      This Agreement, including the attached Exhibits, constitutes the entire
      Agreement between [Universal
      Tracking Solutions] and [Distributor] concerning
      this
      transaction, and replaces all previous communications, representations,
      understandings, and Agreements, whether verbal or written between [Universal Tracking Solutions]
      and [Distributor] or any
      official or representative of either of them.

     

    

    

    Understood,
      Agreed & Approved

    We
      have
      carefully reviewed this contract and agree to and accept all of its terms and
      conditions.  We are executing this Agreement as of the Effective Date
      above.

    Universal
      Tracking Solutions,

    

     

    _____________    _____________
      ___________________________

     

    ByBy

     

                               _____________                                       _________

     

    Name                                                              Name

     

                     _______________________________________________

     

    TitleTitle

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    Exhibit
      A

    

     

    Universal
      Tracking Solutions Products

    

    All
      Universal Tracking Solutions GPS products are covered by this agreement between
      Universal Tracking Solutions.

    

    

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    Exhibit
      B

    

    Prices,
      Terms and Conditions

    

    [Redacted]

    

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    

    Exhibit
      C

    

     

    Reselling
      Distribution Facilities

    

    Units
      will be shipped to the following reseller’s address via FedEx Ground unless
      otherwise specified by [Distributor].

    

    [Distributor]

     

    ___________________

    

     

    

    

    
      
        
        

      

      
        -10-ex41.htm

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

     

    7
      3⁄4 % CONVERTIBLE DEBENTURE

     

    

    Company:
      eTelCharge.com

    Company
      Address: 1636 N.
      Hampton, Suite 270, Desoto, Texas 75115

    Closing
      Date: December 27,
      2007

    Maturity
      Date: December 26,
      2011

    Principal
      Amount:
      $1,500,000.00

     

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

     

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

    ARTICLE
      1

     

    DEFINITIONS

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

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

     

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

     

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

     

    (xi)                 
      “Current Market Price”
      on any date of determination means the closing price of a Common Share on such
      day as reported as the closing price on the NASDAQ OTCBB Exchange; provided further,
      that, if such security is not listed or admitted to trading on the NASDAQ OTCBB,
      as reported on the principal national security exchange or quotation system
      on
      which such security is quoted or listed or admitted to trading, including
      without limitation the “pink sheets” through the Interdealer Trading Quotation
      System, or, if not quoted or listed or admitted to trading on any national
      securities exchange or quotation system, the closing bid price of such security
      on the over-the-counter market on the day in question as reported by Bloomberg
      LP or a similar generally accepted reporting service, as the case may be.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    (xxvii)                 
      “Volume Weighted Average
      Price”  per Common Share means the volume weighted average
      price of the Common Shares during any Trading Day as reported on the NASDAQ
      OTCBB Exchange; provided further,
      that, if such security is not listed or admitted to trading on the NASDAQ OTCBB,
      as reported on the principal national security exchange or quotation system
      on
      which such security is quoted or listed or admitted to trading, including
      without limitation the “pink sheets” through the Interdealer Trading Quotation
      System, or, if not quoted or listed or admitted to trading on any national
      securities exchange or quotation system, the volume weighted average price
      of
      the Common Shares during any Trading Day on the over-the-counter market as
      reported by Bloomberg LP or a similar generally accepted reporting service,
      as
      the case may be.

     

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

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    ARTICLE
      2

     

    EXCHANGES,
      TRANSFER AND REPAYMENT

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    ARTICLE
      3

     

    CONVERSION
      OF DEBENTURE

     

    SECTION
      3.1                                
Conversion; Conversion
      Price; Valuation Event.

     

    At
      the
      option of the Holder, this Debenture may be converted, either in whole or in
      part, up to the full Principal Amount hereof into Common Shares (calculated
      as
      to each such conversion to the nearest 1/100th of a share), at any time and
      from
      time to time on any Business Day, subject to compliance with Section 3.2. The
      number of Common Shares into which this Debenture may be converted is equal
      to
      the dollar amount of the Debenture being converted divided by the Conversion
      Price. The “Conversion
      Price” shall be equal to the lesser of (i) $0.50 (as adjusted for any
      stock splits, stock
      dividends, combinations, subdivisions, recapitalizations or the like), or
      (ii) 80% of the average of the 3 lowest Volume Weighted Average Prices during
      the 20 Trading Days prior to Holder’s election to convert (the percentage figure
      being a “Discount
      Multiplier”). The Company reserves the right to increase the number of
      Trading Days in clause (ii) above, as it deems appropriate.

     

    If
      the
      Holder elects to convert a portion of the Debenture and, on the day that the
      election is made, the Volume Weighted Average Price is below $0.05 (as adjusted for any stock splits,
      stock
      dividends, combinations, subdivisions, recapitalizations or the like),
      the Company shall have the right to prepay that portion of the Debenture that
      Holder elected to convert, plus any accrued and unpaid interest, at 120% of
      such
      amount. In the event that the Company elects to prepay that portion of the
      Debenture, Holder shall be deemed to have withdrawn its Conversion
      Notice.

     

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

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    (b)           
      If, at any time after the date of this Debenture, (i) the Company challenges,
      disputes or denies the right of the Holder hereof to effect the conversion
      of
      this Debenture into Common Shares or otherwise dishonors or rejects any
      Conversion Notice delivered in accordance with this Section 3.2 or (ii) any
      third party who is not and has never been an Affiliate of the Holder commences
      any lawsuit or legal proceeding or otherwise asserts any claim before any court
      or public or governmental authority which seeks to challenge, deny, enjoin,
      limit, modify, delay or dispute the right of the Holder hereof to effect the
      conversion of this Debenture into Common Shares, then the Holder shall have
      the
      right, but not the obligation, by written notice to the Company, to require
      the
      Company to promptly redeem this Debenture for cash at one hundred twenty percent
      (120%) of the Principal Amount thereof, together with all accrued and unpaid
      interest thereon to the date of redemption. Under any of the circumstances
      set
      forth above, the Company shall be responsible for the payment of all costs
      and
      expenses of the Holder, including reasonable legal fees and expenses, as and
      when incurred in defending itself in any such action or pursuing its rights
      hereunder (in addition to any other rights of the Holder).

     

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

     

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

     

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

     

    (i)                 
      Reclassification,
      Etc.  In case the Company shall reorganize its capital,
      reclassify its capital stock, consolidate or merge with or into another Person
      (where the Company is not the survivor or where there is a change in or
      distribution with respect to the Common Stock of the Company), sell, convey,
      transfer or otherwise dispose of all or substantially all its property, assets
      or business to another Person, or effectuate a transaction or series of related
      transactions in which more than fifty percent (50%) of the voting power of
      the
      Company is disposed of (each, a “Fundamental Corporate
      Change”) and, pursuant to the terms of such Fundamental Corporate Change,
      shares of common stock of the successor or acquiring corporation, or any cash,
      shares of stock or other securities or property of any nature whatsoever
      (including warrants or other subscription or purchase rights) in addition to
      or
      in lieu of common stock of the successor or acquiring corporation (“Other Property”) are to be
      received by or distributed to the holders of Common Stock of the Company, then
      the Holder of this Debenture shall have the right thereafter, at its sole
      option, to (x) require the Company to prepay this Debenture for cash at one
      hundred twenty percent (120%) of the Principal Amount thereof, together with
      all
      accrued and unpaid interest thereon to the date of prepayment, but only if
      the
      Fundamental Corporate Change is other than a stock split, a reincorporation
      whose sole purpose is to change the state of incorporation of the Company,
      or a
      reorganization in which the Company’s stockholders continue to own, in
      substantially the same proportion, the outstanding capital stock of the Company,
      (y) receive the number of shares of common stock of the successor or
      acquiring corporation or of the Company, if it is the surviving corporation,
      and
      Other Property as is receivable upon or as a result of such Fundamental
      Corporate Change by a holder of the number of shares of Common Stock into which
      the outstanding portion of this Debenture may be converted at the Conversion
      Price applicable immediately prior to such Fundamental Corporate Change or
      (z) require the Company, or such successor, resulting or purchasing
      corporation, as the case may be, to, without benefit of any additional
      consideration therefor, execute and deliver to the Holder a debenture with
      substantial identical rights, privileges, powers, restrictions and other terms
      as this Debenture in an amount equal to the amount outstanding under this
      Debenture immediately prior to such Fundamental Corporate Change.  For
      purposes hereof, “common stock
      of the successor or acquiring corporation” shall include stock of such
      corporation of any class which is not preferred as to dividends or assets over
      any other class of stock of such corporation and which is not subject to
      prepayment and shall also include any evidences of indebtedness, shares of
      stock
      or other securities which are convertible into or exchangeable for any such
      stock, either immediately or upon the arrival of a specified date or the
      happening of a specified event and any warrants or other rights to subscribe
      for
      or purchase any such stock.  The foregoing provisions shall similarly
      apply to successive Fundamental Corporate Changes.

     

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    SECTION
      3.5                                
Certain Conversion
      Limits.

     

    The
      Company shall not effect any conversion of this Debenture, and a Holder shall
      not have the right to convert any portion of this Debenture, to the extent
      that
      after giving effect to the conversion, as set forth on the applicable Conversion
      Notice, such Holder (together with such Holder’s Affiliates, and any other
      person or entity acting as a group together with such Holder or any of such
      Holder’s Affiliates) would beneficially own in excess of the Beneficial
      Ownership Limitation (as defined below).  For purposes of the
      foregoing sentence, the number of shares of Common Stock beneficially owned
      by
      such Holder and its Affiliates shall include the number of shares of Common
      Stock issuable upon conversion of this Debenture with respect to which such
      determination is being made, but shall exclude the number of shares of Common
      Stock which are issuable upon (A) conversion of the remaining, unconverted
      principal amount of this Debenture beneficially owned by such Holder or any
      of
      its Affiliates and (B) exercise or conversion of the unexercised or unconverted
      portion of any other securities of the Company subject to a limitation on
      conversion or exercise analogous to the limitation contained herein (including,
      without limitation, any other Debentures or warrants to purchase shares of
      the
      Company’s Common Stock) beneficially owned by such Holder or any of its
      Affiliates.  Except as set forth in the preceding sentence, for
      purposes of this Section 3.5, beneficial ownership shall be calculated in
      accordance with Section 13(d) of the Exchange Act and the rules and regulations
      promulgated thereunder.  To the extent that the limitation contained
      in this Section 3.5 applies, the determination of whether this Debenture is
      convertible (in relation to other securities owned by such Holder together
      with
      any Affiliates) and of which principal amount of this Debenture is convertible
      shall be in the sole discretion of such Holder, and the submission of a
      Conversion Notice shall be deemed to be such Holder’s determination of whether
      this Debenture may be converted (in relation to other securities owned by such
      Holder together with any Affiliates) and which principal amount of this
      Debenture is convertible, in each case subject to such aggregate percentage
      limitations.  To ensure compliance with this restriction, each Holder
      will be deemed to represent to the Company each time it delivers a Conversion
      Notice that such Conversion Notice has not violated the restrictions set forth
      in this paragraph and the Company shall have no obligation to verify or confirm
      the accuracy of such determination.  In addition, a determination as
      to any group status as contemplated above shall be determined in accordance
      with
      Section 13(d) of the Exchange Act and the rules and regulations promulgated
      thereunder.  For purposes of this Section 3.5, in determining the
      number of outstanding shares of Common Stock, a Holder may rely on the number
      of
      outstanding shares of Common Stock provided to the Holder in writing by the
      Company after Holder makes such request or in the event that the Company files,
      any of the following with the Securities and Exchange Commission, the most
      recent of the following: (A) the Company's most recent Form 10-QSB or Form
      10-KSB, as the case may be, (B) a more recent public announcement by the
      Company; or (C) a more recent notice by the Company or the Company’s transfer
      agent setting forth the number of shares of Common Stock
      outstanding.  Upon the written or oral request of a Holder, the
      Company shall within two Trading Days confirm orally and in writing to such
      Holder the number of shares of Common Stock then outstanding on the records
      of
      the Company as of the date of the request.  In any case, the number of
      outstanding shares of Common Stock shall be determined after giving effect
      to
      the conversion or exercise of securities of the Company, including this
      Debenture, by such Holder or its Affiliates since the date as of which such
      number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership
      Limitation” shall be 4.99% of the number of shares of the Common Stock
      outstanding immediately after giving effect to the issuance of shares of Common
      Stock issuable upon conversion of this Debenture held by the
      Holder.  The Beneficial Ownership Limitation provisions of this
      Section 3.5 may be waived by such Holder, at the election of such Holder, upon
      not less than 61 days’ prior notice to the Company, to, at the sole discretion
      of the Holder, either change the Beneficial Ownership Limitation to (i) 9.99%
      of
      the number of shares of the Common Stock outstanding immediately after giving
      effect to the issuance of shares of Common Stock upon conversion of the
      Debenture held by the Holder and the provisions of this Section 3.5 shall
      continue to apply, or (ii) remove any Beneficial Ownership Limitation under
      this
      Debenture.  The provisions of this paragraph shall be construed and
      implemented in a manner otherwise than in strict conformity with the terms
      of
      this Section 3.5 to correct this paragraph (or any portion hereof) which may
      be
      defective or inconsistent with the intended Beneficial Ownership Limitation
      herein contained or to make changes or supplements necessary or desirable to
      properly give effect to such limitation.  If any court of competent
      jurisdiction shall determine that the foregoing limitation is ineffective to
      prevent a Holder from being deemed the beneficial owner of more than 9.99%
      of
      the then outstanding shares of Common Stock, then the Company shall prepay
      such
      portion of this Debenture as shall cause such Holder not to be deemed the
      beneficial owner of more than 9.99% of the then outstanding shares of Common
      Stock.  Upon such determination by a court of competent jurisdiction,
      the Holder shall have no interest in or rights under such portion of the
      Debenture.  Any and all interest paid on or prior to the date of such
      determination shall be deemed interest paid on the remaining portion of this
      Debenture held by the Holder.  Such prepayment shall be for cash at a
      prepayment price of one hundred fifty percent (150%) of the Principal Amount
      thereof, together with all accrued and unpaid interest thereon to the date
      of
      prepayment.  The limitations contained in this paragraph shall apply
      to a successor holder of this Debenture.

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

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

     

    ARTICLE
      4

     

    STATUS;
      RESTRICTIONS ON TRANSFER

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    ARTICLE
      5

     

    COVENANTS

     

    SECTION
      5.1                                
Conversion.  The
      Company shall cause the transfer agent, not later than three (3) Business Days
      after the Company’s receipt of a Conversion Notice, to issue and deliver to the
      Holder the requisite shares of Common Stock Issued at Conversion.

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    ARTICLE
      6

     

    EVENTS
      OF DEFAULT; REMEDIES

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

    SECTION
      6.2                                
Acceleration of
      Maturity; Rescission and Annulment.  If an Event of Default
      occurs and is continuing, provided however, that once an Event of Default occurs
      as described in clause (xi) of Section 6.1, such Event of Default will not
      be
      cured by the subsequent trading of the Common Stock at a price greater than
      that
      specified in such clause, then and in every such case the Holder may, in
      Holder’s sole and absolute discretion, by a notice in writing to the Company,
      rescind any outstanding Conversion Notice and declare that any or all amounts
      owing or otherwise outstanding under this Debenture are immediately due and
      payable and upon any such declaration this Debenture or such portion thereof,
      as
      applicable, shall become immediately due and payable in cash at a price of
      one
      hundred twenty percent (120%) of the Principal Amount thereof, together with
      all
      accrued and unpaid interest thereon to the date of payment; provided, however,
      in the case
      of any Event of Default described in clause (xi) of Section 6.1 such amount
      shall become immediately due and payable in cash at a price of one hundred
      and
      ten percent (110%) of the Principal Amount thereof, together with all accrued
      and unpaid interest thereon to the date of payment; provided further, in
      the case of any Event of Default described in clauses (iii), (iv), (v) or (vii)
      of Section 6.1, all amounts owing or otherwise outstanding under this Debenture
      automatically shall become immediately due and payable without the necessity
      of
      any notice or declaration as aforesaid.  In the event that the Company
      is obligated to pay any amount to the Holder in connection with an acceleration
      of the maturity of this Debenture as set forth herein, the Company shall first
      apply against such amount an amount equal to the outstanding amount owed by
      the
      Holder to the Company under the Promissory Note, if any, and the amount
      otherwise owed by the Company to the Holder in connection with an acceleration
      of the maturity of this Debenture shall be reduced by the outstanding amount
      owed by the Holder to the Company under the Promissory Note, with the Promissory
      Note deemed paid by Holder to the extent of and with respect to such amount,
      and
      if the amount due from the Company to the Holder in connection with an
      acceleration of the maturity of this Debenture is equal to or greater than
      the
      outstanding amount owed under the Promissory Note, the Company shall cancel
      and
      deem the Promissory Note as paid in full in connection with the application
      of
      the amount owed by the Holder to the Company under Promissory Note against
      the
      amount otherwise owed by the Company to the Holder hereunder.  The
      Company shall immediately pay in cash to the Holder any remaining amount owed
      by
      the Company to the Holder in connection with the acceleration of the maturity
      of
      this Debenture as described herein, after the application of the outstanding
      amount owed under the Promissory Note (as defined in the Securities Purchase
      Agreement), if any, to such obligation.

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

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

     

    ARTICLE
      7

     

    MISCELLANEOUS

     

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

     

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

     

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

     

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

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

     

    (1)           
      If to the Company, to:

    

    eTelCharge.com

    1636
      N.
      Hampton, Suite 270

    Desoto,
      Texas

    Telephone:                                
      972-298-3800

    Facsimile:                                
      [_______________________]

    

    (2)           
      If to the Holder, to:

     

    Golden
      Gate Investors, Inc.

    7817
      Herschel Avenue, Suite 200

    La
      Jolla,
      California 92037

    Telephone:                                
      858-551-8789

    Facsimile:                                
      858-551-8779

     

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

     

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

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

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

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

    

     

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

     

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

    

    eTelCharge.com

     

    By:                                                                           
      

     

     

    Name:                                                                           
      

     

     

    Title:
      _____________________________________

     

    

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

     

    EXHIBIT A

     

    DEBENTURE
      CONVERSION
      NOTICE

    

    TO:           
      eTelCharge.com

    1636
      N.
      Hampton, Suite 270

    Desoto,
      Texas

    Facsimile:                                
      [_______________________]

     

    The
      undersigned owner of the Convertible Debenture due December 26, 2011 (the
“Debenture”) issued by
      eTelCharge.com (the “Company”) hereby irrevocably
      exercises its option to convert $__________ Principal Amount of the Debenture
      into shares of Common Stock in accordance with the terms of the
      Debenture.  The undersigned hereby instructs the Company to convert
      the portion of the Debenture specified above into shares of Common Stock Issued
      at Conversion in accordance with the provisions of Article 3 of the
      Debenture.  The undersigned directs that the Common Stock and
      certificates therefor deliverable upon conversion, the Debenture reissued in
      the
      Principal Amount not being surrendered for conversion hereby, [the check or
      shares of Common Stock in payment of the accrued and unpaid interest thereon
      to
      the date of this Notice,] together with any check in payment for fractional
      Common Stock, be registered in the name of and/or delivered to the undersigned
      unless a different name has been indicated below.  All capitalized
      terms used and not defined herein have the respective meanings assigned to
      them
      in the Debenture.  The conversion pursuant hereto shall be deemed to
      have been effected at the date and time specified below, and at such time the
      rights of the undersigned as a Holder of the Principal Amount of the Debenture
      set forth above shall cease and the Person or Persons in whose name or names
      the
      Common Stock Issued at Conversion shall be registered shall be deemed to have
      become the holder or holders of record of the Common Shares represented thereby
      and all voting and other rights associated with the beneficial ownership of
      such
      Common Shares shall at such time vest with such Person or Persons.

     

    Date
      and
      time:  __________________

     

    

     

    ______________________________

     

    By:
      ___________________________

     

    Title:
      _________________________

     

    Fill
      in
      for registration of Debenture:

     

    Please
      print name and address

     

    (including
      ZIP code number):

     

    

    
      
         

      

      
        -18-

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