Document:

EXHIBIT
      10.6

     

    INVESTOR
      REGISTRATION RIGHTS AGREEMENT

     

    THIS
      REGISTRATION RIGHTS AGREEMENT
      (this
“Agreement”),
      dated
      as of August 12, 2005, by and among IQ
      MEDICAL CORP.,
      a
      Colorado corporation (the “Company”),
      and
      the undersigned investors listed on Schedule I attached hereto (each, an
“Investor”
and
      collectively, the “Investors”).

     

    WHEREAS:

     

    A.          In
      connection with the Securities Purchase Agreement by and among the parties
      hereto of even date herewith (the “Securities
      Purchase Agreement”),
      the
      Company has agreed, upon the terms and subject to the conditions of the
      Securities Purchase Agreement, to issue and sell to the Investors secured
      convertible debentures (the “Convertible
      Debentures”)
      which
      shall be convertible into that number of shares of the Company’s common stock,
      par value $0.0001 per share (the “Common
      Stock”),
      pursuant to the terms of the Securities Purchase Agreement for an aggregate
      purchase price of up to Five Hundred Thousand Dollars ($500,000).
      Capitalized terms not defined herein shall have the meaning ascribed to them
      in
      the Securities Purchase Agreement.

     

    B.          To
      induce the Investors to execute and deliver the Securities Purchase Agreement,
      the Company has agreed to provide certain registration rights under the
      Securities Act of 1933, as amended, and the rules and regulations there under,
      or any similar successor statute (collectively, the “Securities
      Act”),
      and
      applicable state securities laws.

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and the Investors hereby agree as
      follows:

     

    1.          DEFINITIONS.

     

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    (a)          “Person”
means
      a
      corporation, a limited liability company, an association, a partnership, an
      organization, a business, an individual, a governmental or political subdivision
      thereof or a governmental agency.

     

    (b)          “Register,”
      “registered,”
and
      “registration”
refer
      to a registration effected by preparing and filing one or more Registration
      Statements (as defined below) in compliance with the Securities Act and pursuant
      to Rule 415 under the Securities Act or any successor rule providing for
      offering securities on a continuous or delayed basis (“Rule
      415”),
      and
      the declaration or ordering of effectiveness of such Registration Statement(s)
      by the United States Securities and Exchange Commission (the “SEC”).

     

    (c)          “Registrable
      Securities”
means
      the shares of Common Stock issuable to the Investors upon conversion of the
      Convertible Debentures pursuant to the Securities Purchase Agreement and the
      Warrant Shares, as this term is defined in the Securities Purchase Agreement
      dated the date hereof.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d)          “Registration
      Statement”
means
      a
      registration statement under the Securities Act which covers the Registrable
      Securities.

     

    2.          REGISTRATION.

     

    (a)          Subject
      to the terms and conditions of this Agreement, the Company shall prepare and
      file, within ten (10) days from obtaining a listing on the NASD OTC Bulletin
      Board but no later than by March 25, 2006 (the “Scheduled
      Filing Deadline”),
      with
      the SEC a registration statement on Form S-1 or SB-2 (or, if the Company is
      then
      eligible, on Form S-3) under the Securities Act (the “Initial
      Registration Statement”)
      for
      the resale by the Investors of the Registrable Securities, which includes at
      least 9,800,000 shares of Common Stock to be issued upon conversion of the
      Convertible Debentures and 100,000 shares of Common Stock underlying the Warrant
      of even date herewith. The Company shall cause the Registration Statement to
      remain effective until all of the Registrable Securities have been sold. Prior
      to the filing of the Registration Statement with the SEC, the Company shall
      furnish a copy of the Initial Registration Statement to the Investors for their
      review and comment. The Investors shall furnish comments on the Initial
      Registration Statement to the Company within twenty-four (24) hours of the
      receipt thereof from the Company.

     

    (b)          Effectiveness
      of the Initial Registration Statement.
      The
      Company shall use its best efforts (i) to have the Initial Registration
      Statement declared effective by the SEC no later one hundred twenty (120) days
      after the date filed (the “Scheduled
      Effective Deadline”)
      and
      (ii) to insure that the Initial Registration Statement and any subsequent
      Registration Statement remains in effect until all of the Registrable Securities
      have been sold, subject to the terms and conditions of this Agreement. It shall
      be an event of default hereunder if the Initial Registration Statement is not
      filed by the Scheduled Filing Deadline or declared effective by the Scheduled
      Effective Deadline.

     

    (c)          Failure
      to File or Obtain Effectiveness of the Registration Statement.
      In the
      event the Registration Statement is not filed by the Scheduled Filing Deadline
      or is not declared effective by the SEC on or before the Scheduled Effective
      Date, or if after the Registration Statement has been declared effective by
      the
      SEC, sales cannot be made pursuant to the Registration Statement (whether
      because of a failure to keep the Registration Statement effective, failure
      to
      disclose such information as is necessary for sales to be made pursuant to
      the
      Registration Statement, failure to register sufficient shares of Common Stock
      or
      otherwise then as partial relief for the damages to any holder of Registrable
      Securities by reason of any such delay in or reduction of its ability to sell
      the underlying shares of Common Stock (which remedy shall not be exclusive
      of
      any other remedies at law or in equity), the Company will pay as liquidated
      damages (the “Liquidated
      Damages”)
      to the
      holder, at the holder’s option, either a cash amount or shares of the Company’s
      Common Stock within three (3) business days, after demand therefore, equal
      to
      two percent (2%) of the liquidated value of the Convertible Debentures
      outstanding as Liquidated Damages for each thirty (30) day period after the
      Scheduled Filing Deadline or the Scheduled Effective Date as the case may
      be.

     

    (d)          Liquidated
      Damages.
      The
      Company and the Investor hereto acknowledge and agree that the sums payable
      under subsection 2(c) above shall constitute liquidated damages and not
      penalties and are in addition to all other rights of the Investor, including
      the
      right to call a default. The parties further acknowledge that (i) the amount
      of
      loss or damages likely to be incurred is incapable or is difficult to precisely
      estimate, (ii) the amounts specified in such subsections bear a reasonable
      relationship to, and are not plainly or grossly disproportionate to, the
      probable loss likely to be incurred in connection with any failure by the
      Company to obtain or maintain the effectiveness of a Registration Statement,
      (iii) one of the reasons for the Company and the Investor reaching an agreement
      as to such amounts was the uncertainty and cost of litigation regarding the
      question of actual damages, and (iv) the Company and the Investor are
      sophisticated business parties and have been represented by sophisticated and
      able legal counsel and negotiated this Agreement at arm’s length. 

    
      
        
        

      

      
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    3.          RELATED
      OBLIGATIONS.

     

    (a)          The
      Company shall keep the Registration Statement effective pursuant to
      Rule 415 at all times until the date on which the Investor shall have sold
      all the Registrable Securities covered by such Registration Statement (the
      “Registration
      Period”),
      which
      Registration Statement (including any amendments or supplements thereto and
      prospectuses contained therein) shall not contain any untrue statement of a
      material fact or omit to state a material fact required to be stated therein,
      or
      necessary to make the statements therein, in light of the circumstances in
      which
      they were made, not misleading.

     

    (b)          The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the Securities Act, as
      may
      be necessary to keep such Registration Statement effective at all times during
      the Registration Period, and, during such period, comply with the provisions
      of
      the Securities Act with respect to the disposition of all Registrable Securities
      of the Company covered by such Registration Statement until such time as all
      of
      such Registrable Securities shall have been disposed of in accordance with
      the
      intended methods of disposition by the seller or sellers thereof as set forth
      in
      such Registration Statement. In the case of amendments and supplements to a
      Registration Statement which are required to be filed pursuant to this Agreement
      (including pursuant to this Section 3(b)) by reason of the Company’s filing a
      report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under
      the
      Securities Exchange Act of 1934, as amended (the “Exchange
      Act”),
      the
      Company shall incorporate such report by reference into the Registration
      Statement, if applicable, or shall file such amendments or supplements with
      the
      SEC on the same day on which the Exchange Act report is filed which created
      the
      requirement for the Company to amend or supplement the Registration Statement.
      

     

    (c)          The
      Company shall furnish to each Investor whose Registrable Securities are included
      in any Registration Statement, without charge, (i) at least one (1) copy of
      such
      Registration Statement as declared effective by the SEC and any amendment(s)
      thereto, including financial statements and schedules, all documents
      incorporated therein by reference, all exhibits and each preliminary prospectus,
      (ii) ten (10) copies of the final prospectus included in such Registration
      Statement and all amendments and supplements thereto (or such other number
      of
      copies as such Investor may reasonably request) and (iii) such other documents
      as such Investor may reasonably request from time to time in order to facilitate
      the disposition of the Registrable Securities owned by such
      Investor.

    
      
        
        

      

      
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    (d)          The
      Company shall use its best efforts to (i) register and qualify the Registrable
      Securities covered by a Registration Statement under such other securities
      or
“blue sky” laws of such jurisdictions in the United States as any Investor
      reasonably requests, (ii) prepare and file in those jurisdictions, such
      amendments (including post-effective amendments) and supplements to such
      registrations and qualifications as may be necessary to maintain the
      effectiveness thereof during the Registration Period, (iii) take such other
      actions as may be necessary to maintain such registrations and qualifications
      in
      effect at all times during the Registration Period, and (iv) take all other
      actions reasonably necessary or advisable to qualify the Registrable Securities
      for sale in such jurisdictions; provided, however, that the Company shall not
      be
      required in connection therewith or as a condition thereto to (w) make any
      change to its articles of incorporation or by-laws, (x) qualify to do business
      in any jurisdiction where it would not otherwise be required to qualify but
      for
      this Section 3(d), (y) subject itself to general taxation in any such
      jurisdiction, or (z) file a general consent to service of process in any such
      jurisdiction. The Company shall promptly notify each Investor who holds
      Registrable Securities of the receipt by the Company of any notification with
      respect to the suspension of the registration or qualification of any of the
      Registrable Securities for sale under the securities or “blue sky” laws of any
      jurisdiction in the United States or its receipt of actual notice of the
      initiation or threat of any proceeding for such purpose.

     

    (e)          As
      promptly as practicable after becoming aware of such event or development,
      the
      Company shall notify each Investor in writing of the happening of any event
      as a
      result of which the prospectus included in a Registration Statement, as then
      in
      effect, includes an untrue statement of a material fact or omission to state
      a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading (provided that in no event shall such notice contain any material,
      nonpublic information), and promptly prepare a supplement or amendment to such
      Registration Statement to correct such untrue statement or omission, and deliver
      ten (10) copies of such supplement or amendment to each Investor. The Company
      shall also promptly notify each Investor in writing (i) when a prospectus or
      any
      prospectus supplement or post-effective amendment has been filed, and when
      a
      Registration Statement or any post-effective amendment has become effective
      (notification of such effectiveness shall be delivered to each Investor by
      facsimile on the same day of such effectiveness), (ii) of any request by the
      SEC
      for amendments or supplements to a Registration Statement or related prospectus
      or related information, and (iii) of the Company’s reasonable determination
      that a post-effective amendment to a Registration Statement would be
      appropriate.

     

    (f)          The
      Company shall use its best efforts to prevent the issuance of any stop order
      or
      other suspension of effectiveness of a Registration Statement, or the suspension
      of the qualification of any of the Registrable Securities for sale in any
      jurisdiction within the United States of America and, if such an order or
      suspension is issued, to obtain the withdrawal of such order or suspension
      at
      the earliest possible moment and to notify each Investor who holds Registrable
      Securities being sold of the issuance of such order and the resolution thereof
      or its receipt of actual notice of the initiation or threat of any proceeding
      for such purpose.

     

    (g)          At
      the reasonable request of any Investor, the Company shall furnish to such
      Investor, on the date of the effectiveness of the Registration Statement and
      thereafter from time to time on such dates as an Investor may reasonably request
      (i) a letter, dated such date, from the Company’s independent certified public
      accountants in form and substance as is customarily given by independent
      certified public accountants to underwriters in an underwritten public offering,
      and (ii) an opinion, dated as of such date, of counsel representing the Company
      for purposes of such Registration Statement, in form, scope and substance as
      is
      customarily given in an underwritten public offering, addressed to the
      Investors.

    
      
        
        

      

      
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    (h)          The
      Company shall make available for inspection by (i) any Investor and
      (ii) one (1) firm of accountants or other agents retained by the Investors
      (collectively, the “Inspectors”)
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the “Records”),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company’s
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided, however, that each Inspector shall agree,
      and
      each Investor hereby agrees, to hold in strict confidence and shall not make
      any
      disclosure (except to an Investor) or use any Record or other information which
      the Company determines in good faith to be confidential, and of which
      determination the Inspectors are so notified, unless (a) the disclosure of
      such
      Records is necessary to avoid or correct a misstatement or omission in any
      Registration Statement or is otherwise required under the Securities Act, (b)
      the release of such Records is ordered pursuant to a final, non-appealable
      subpoena or order from a court or government body of competent jurisdiction,
      or
      (c) the information in such Records has been made generally available to the
      public other than by disclosure in violation of this or any other agreement
      of
      which the Inspector and the Investor has knowledge. Each Investor agrees that
      it
      shall, upon learning that disclosure of such Records is sought in or by a court
      or governmental body of competent jurisdiction or through other means, give
      prompt notice to the Company and allow the Company, at its expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, the Records deemed confidential.

     

    (i)          The
      Company shall hold in confidence and not make any disclosure of information
      concerning an Investor provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws, (ii)
      the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in any Registration Statement, (iii) the release of
      such information is ordered pursuant to a subpoena or other final,
      non-appealable order from a court or governmental body of competent
      jurisdiction, or (iv) such information has been made generally available to
      the
      public other than by disclosure in violation of this Agreement or any other
      agreement. The Company agrees that it shall, upon learning that disclosure
      of
      such information concerning an Investor is sought in or by a court or
      governmental body of competent jurisdiction or through other means, give prompt
      written notice to such Investor and allow such Investor, at the Investor’s
      expense, to undertake appropriate action to prevent disclosure of, or to obtain
      a protective order for, such information.

     

    (j)          The
      Company shall use its best efforts either to cause all the Registrable
      Securities covered by a Registration Statement (i) to be listed on each
      securities exchange on which securities of the same class or series issued
      by
      the Company are then listed, if any, if the listing of such Registrable
      Securities is then permitted under the rules of such exchange or (ii) the
      inclusion for quotation on the National Association of Securities Dealers,
      Inc.
      OTC Bulletin Board for such Registrable Securities. The Company shall pay all
      fees and expenses in connection with satisfying its obligation under this
      Section 3(j).

    
      
        
        

      

      
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    (k)          The
      Company shall cooperate with the Investors who hold Registrable Securities
      being
      offered and, to the extent applicable, to facilitate the timely preparation
      and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Investors may reasonably request and registered in such names as
      the
      Investors may request.

     

    (l)          The
      Company shall use its best efforts to cause the Registrable Securities covered
      by the applicable Registration Statement to be registered with or approved
      by
      such other governmental agencies or authorities as may be necessary to
      consummate the disposition of such Registrable Securities.

     

    (m)          The
      Company shall make generally available to its security holders as soon as
      practical, but not later than ninety (90) days after the close of the period
      covered thereby, an earnings statement (in form complying with the provisions
      of
      Rule 158 under the Securities Act) covering a twelve (12) month period beginning
      not later than the first day of the Company’s fiscal quarter next following the
      effective date of the Registration Statement.

     

    (n)          The
      Company shall otherwise use its best efforts to comply with all applicable
      rules
      and regulations of the SEC in connection with any registration
      hereunder.

     

    (o)          Within
      two (2) business days after a Registration Statement which covers Registrable
      Securities is declared effective by the SEC, the Company shall deliver, and
      shall cause legal counsel for the Company to deliver, to the transfer agent
      for
      such Registrable Securities (with copies to the Investors whose Registrable
      Securities are included in such Registration Statement) confirmation that such
      Registration Statement has been declared effective by the SEC in the form
      attached hereto as Exhibit
      A.

     

    (p)          The
      Company shall take all other reasonable actions necessary to expedite and
      facilitate disposition by the Investors of Registrable Securities pursuant
      to a
      Registration Statement.

     

    4.          OBLIGATIONS
      OF THE INVESTORS.

     

    Each
      Investor agrees that, upon receipt of any notice from the Company of the
      happening of any event of the kind described in Section 3(f) or the first
      sentence of 3(e), such Investor will immediately discontinue disposition of
      Registrable Securities pursuant to any Registration Statement(s) covering such
      Registrable Securities until such Investor’s receipt of the copies of the
      supplemented or amended prospectus contemplated by Section 3(e) or receipt
      of
      notice that no supplement or amendment is required. Notwithstanding anything
      to
      the contrary, the Company shall cause its transfer agent to deliver unlegended
      certificates for shares of Common Stock to a transferee of an Investor in
      accordance with the terms of the Securities Purchase Agreement in connection
      with any sale of Registrable Securities with respect to which an Investor has
      entered into a contract for sale prior to the Investor’s receipt of a notice
      from the Company of the happening of any event of the kind described in Section
      3(f) or the first sentence of 3(e) and for which the Investor has not yet
      settled.

     

    
      
        
        

      

      
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    5.          EXPENSES
      OF REGISTRATION.

     

    All
      expenses incurred in connection with registrations, filings or qualifications
      pursuant to Sections 2 and 3, including, without limitation, all registration,
      listing and qualifications fees, printers, legal and accounting fees shall
      be
      paid by the Company. 

     

    6.          INDEMNIFICATION.

     

    With
      respect to Registrable Securities which are included in a Registration Statement
      under this Agreement:

     

    (a)          To
      the fullest extent permitted by law, the Company will, and hereby does,
      indemnify, hold harmless and defend each Investor, the directors, officers,
      partners, employees, agents, representatives of, and each Person, if any, who
      controls any Investor within the meaning of the Securities Act or the Exchange
      Act (each, an “Indemnified
      Person”),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
      expenses, joint or several (collectively, “Claims”)
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto (“Indemnified
      Damages”),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement or alleged untrue statement of
      a
      material fact in a Registration Statement or any post-effective amendment
      thereto or in any filing made in connection with the qualification of the
      offering under the securities or other “blue sky” laws of any jurisdiction in
      which Registrable Securities are offered (“Blue
      Sky Filing”),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading; (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      any
      final prospectus (as amended or supplemented, if the Company files any amendment
      thereof or supplement thereto with the SEC) or the omission or alleged omission
      to state therein any material fact necessary to make the statements made
      therein, in light of the circumstances under which the statements therein were
      made, not misleading; or (iii) any violation or alleged violation by the Company
      of the Securities Act, the Exchange Act, any other law, including, without
      limitation, any state securities law, or any rule or regulation there under
      relating to the offer or sale of the Registrable Securities pursuant to a
      Registration Statement (the matters in the foregoing clauses (i) through (iii)
      being, collectively, “Violations”).
      The
      Company shall reimburse the Investors and each such controlling person promptly
      as such expenses are incurred and are due and payable, for any legal fees or
      disbursements or other reasonable expenses incurred by them in connection with
      investigating or defending any such Claim. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising
      out of or based upon a Violation which occurs in reliance upon and in conformity
      with information furnished in writing to the Company by such Indemnified Person
      expressly for use in connection with the preparation of the Registration
      Statement or any such amendment thereof or supplement thereto; (y) shall not
      be
      available to the extent such Claim is based on a failure of the Investor to
      deliver or to cause to be delivered the prospectus made available by the
      Company, if such prospectus was timely made available by the Company pursuant
      to
      Section 3(c); and (z) shall not apply to amounts paid in settlement of any
      Claim if such settlement is effected without the prior written consent of the
      Company, which consent shall not be unreasonably withheld. Such indemnity shall
      remain in full force and effect regardless of any investigation made by or
      on
      behalf of the Indemnified Person and shall survive the transfer of the
      Registrable Securities by the Investors pursuant to Section 9
      hereof.

    
      
        
        

      

      
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    (b)          In
      connection with a Registration Statement, each Investor agrees to severally
      and
      not jointly indemnify, hold harmless and defend, to the same extent and in
      the
      same manner as is set forth in Section 6(a), the Company, each of its directors,
      each of its officers, employees, representatives, or agents and each Person,
      if
      any, who controls the Company within the meaning of the Securities Act or the
      Exchange Act (each an “Indemnified
      Party”),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the Securities Act, the Exchange Act or otherwise, insofar as
      such Claim or Indemnified Damages arise out of or is based upon any Violation,
      in each case to the extent, and only to the extent, that such Violation occurs
      in reliance upon and in conformity with written information furnished to the
      Company by such Investor expressly for use in connection with such Registration
      Statement; and, subject to Section 6(d), such Investor will reimburse any legal
      or other expenses reasonably incurred by them in connection with investigating
      or defending any such Claim; provided, however, that the indemnity agreement
      contained in this Section 6(b) and the agreement with respect to contribution
      contained in Section 7 shall not apply to amounts paid in settlement of any
      Claim if such settlement is effected without the prior written consent of such
      Investor, which consent shall not be unreasonably withheld; provided, further,
      however, that the Investor shall be liable under this Section 6(b) for only
      that
      amount of a Claim or Indemnified Damages as does not exceed the net proceeds
      to
      such Investor as a result of the sale of Registrable Securities pursuant to
      such
      Registration Statement. Such indemnity shall remain in full force and effect
      regardless of any investigation made by or on behalf of such Indemnified Party
      and shall survive the transfer of the Registrable Securities by the Investors
      pursuant to Section 9. Notwithstanding anything to the contrary contained
      herein, the indemnification agreement contained in this Section 6(b) with
      respect to any prospectus shall not inure to the benefit of any Indemnified
      Party if the untrue statement or omission of material fact contained in the
      prospectus was corrected and such new prospectus was delivered to each Investor
      prior to such Investor’s use of the prospectus to which the Claim
      relates.

     

    (c)          Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, as
      the
      case may be; provided, however, that an Indemnified Person or Indemnified Party
      shall have the right to retain its own counsel with the fees and expenses of
      not
      more than one (1) counsel for such Indemnified Person or Indemnified Party
      to be
      paid by the indemnifying party, if, in the reasonable opinion of counsel
      retained by the indemnifying party, the representation by such counsel of the
      Indemnified Person or Indemnified Party and the indemnifying party would be
      inappropriate due to actual or potential differing interests between such
      Indemnified Person or Indemnified Party and any other party represented by
      such
      counsel in such proceeding. The Indemnified Party or Indemnified Person shall
      cooperate fully with the indemnifying party in connection with any negotiation
      or defense of any such action or claim by the indemnifying party and shall
      furnish to the indemnifying party all information reasonably available to the
      Indemnified Party or Indemnified Person which relates to such action or claim.
      The indemnifying party shall keep the Indemnified Party or Indemnified Person
      fully apprised at all times as to the status of the defense or any settlement
      negotiations with respect thereto. No indemnifying party shall be liable for
      any
      settlement of any action, claim or proceeding effected without its prior written
      consent; provided, however, that the indemnifying party shall not unreasonably
      withhold, delay or condition its consent. No indemnifying party shall, without
      the prior written consent of the Indemnified Party or Indemnified Person,
      consent to entry of any judgment or enter into any settlement or other
      compromise which does not include as an unconditional term thereof the giving
      by
      the claimant or plaintiff to such Indemnified Party or Indemnified Person of
      a
      release from all liability in respect to such claim or litigation. Following
      indemnification as provided for hereunder, the indemnifying party shall be
      subrogated to all rights of the Indemnified Party or Indemnified Person with
      respect to all third parties, firms or corporations relating to the matter
      for
      which indemnification has been made. The failure to deliver written notice
      to
      the indemnifying party within a reasonable time of the commencement of any
      such
      action shall not relieve such indemnifying party of any liability to the
      Indemnified Person or Indemnified Party under this Section 6, except to the
      extent that the indemnifying party is prejudiced in its ability to defend such
      action.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (d)          The
      indemnification required by this Section 6 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills are received or Indemnified Damages are incurred.

     

    (e)          The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of action or similar right of the Indemnified Party or Indemnified Person
      against the indemnifying party or others, and (ii) any liabilities the
      indemnifying party may be subject to pursuant to the law.

     

    7.          CONTRIBUTION.

     

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 6 to the
      fullest extent permitted by law; provided, however, that: (i) no seller of
      Registrable Securities guilty of fraudulent misrepresentation (within the
      meaning of Section 11(f) of the Securities Act) shall be entitled to
      contribution from any seller of Registrable Securities who was not guilty of
      fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
      Securities shall be limited in amount to the net amount of proceeds received
      by
      such seller from the sale of such Registrable Securities.

     

    8.          REPORTS
      UNDER THE EXHANGE ACT.

     

    With
      a
      view to making available to the Investors the benefits of Rule 144 promulgated
      under the Securities Act or any similar rule or regulation of the SEC that
      may
      at any time permit the Investors to sell securities of the Company to the public
      without registration (“Rule
      144”)
      the
      Company agrees to:

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (a)          make
      and keep public information available, as those terms are understood and defined
      in Rule 144;

     

    (b)          commencing
      at the time the Company becomes obligated to make filings under the Exchange
      Act, file with the SEC in a timely manner all reports and other documents
      required of the Company under the Securities Act and the Exchange Act so long
      as
      the Company remains subject to such requirements (it being understood that
      nothing herein shall limit the Company’s obligations under Section 4(c) of the
      Securities Purchase Agreement) and the filing of such reports and other
      documents as are required by the applicable provisions of Rule 144;
      and

     

    (c)          furnish
      to each Investor so long as such Investor owns Registrable Securities, promptly
      upon request, (i) a written statement by the Company that it has complied with
      the reporting requirements of Rule 144, the Securities Act and the Exchange
      Act,
      (ii) a copy of the most recent annual or quarterly report of the Company and
      such other reports and documents so filed by the Company, and (iii) such other
      information as may be reasonably requested to permit the Investors to sell
      such
      securities pursuant to Rule 144 without registration.

     

    9.          AMENDMENT
      OF REGISTRATION RIGHTS.

     

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and Investors
      who
      then hold at least two-thirds (2/3) of the Registrable Securities. Any amendment
      or waiver effected in accordance with this Section 9 shall be binding upon
      each Investor and the Company. No such amendment shall be effective to the
      extent that it applies to fewer than all of the holders of the Registrable
      Securities. No consideration shall be offered or paid to any Person to amend
      or
      consent to a waiver or modification of any provision of any of this Agreement
      unless the same consideration also is offered to all of the parties to this
      Agreement.

     

    10.          MISCELLANEOUS.

     

    (a)          A
      Person is deemed to be a holder of Registrable Securities whenever such Person
      owns or is deemed to own of record such Registrable Securities. If the Company
      receives conflicting instructions, notices or elections from two (2) or more
      Persons with respect to the same Registrable Securities, the Company shall
      act
      upon the basis of instructions, notice or election received from the registered
      owner of such Registrable Securities.

     

    (b)          Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) business day after deposit with a nationally recognized
      overnight delivery service, in each case properly addressed to the party to
      receive the same. The addresses and facsimile numbers for such communications
      shall be:

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	
              If
                to the Company, to:

            	
              IQ
                Medical Corp.

            
	 	
              500
                Australian Avenue South - Suite 700

            
	 	
              West
                Palm Beach, Florida 33401

            
	 	
              Attention:    
                Robert V. Rudman

            
	 	
              Telephone:   
                (561) 514-0018

            
	 	
              Facsimile:      
                (561) 514-0195

            
	 	 
	
              With
                Copy to:

            	
              Gunster
                Yoakley & Stewart, P.A.

            
	 	
              Broward
                Financial Centre - Suite 1400

              500
                East Broward Blvd.

            
	 	
              Fort
                Lauderdale, Florida 33394

            
	 	
              Attention:    
                Robert C. White, Jr. Esq.

            
	 	
              Telephone:  
                (954) 468-1360

            
	 	
              Facsimile:     
                (954) 888-2037

            
	 	 

    

    If
      to an
      Investor, to its address and facsimile number on the Schedule of Investors
      attached hereto, with copies to such Investor’s representatives as set forth on
      the Schedule of Investors or to such other address and/or facsimile number
      and/or to the attention of such other person as the recipient party has
      specified by written notice given to each other party five (5) days prior to
      the
      effectiveness of such change. Written confirmation of receipt (A) given by
      the
      recipient of such notice, consent, waiver or other communication, (B)
      mechanically or electronically generated by the sender’s facsimile machine
      containing the time, date, recipient facsimile number and an image of the first
      page of such transmission or (C) provided by a courier or overnight courier
      service shall be rebuttable evidence of personal service, receipt by facsimile
      or receipt from a nationally recognized overnight delivery service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    (c)          Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    (d)          The
      laws of the State of New Jersey shall govern all issues concerning the relative
      rights of the Company and the Investors as its stockholders. All other questions
      concerning the construction, validity, enforcement and interpretation of this
      Agreement shall be governed by the internal laws of the State of New Jersey,
      without giving effect to any choice of law or conflict of law provision or
      rule
      (whether of the State of New Jersey or any other jurisdiction) that would cause
      the application of the laws of any jurisdiction other than the State of New
      Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction
      of the Superior Courts of the State of New Jersey, sitting in Hudson County,
      New
      Jersey and federal courts for the District of New Jersey sitting Newark, New
      Jersey, for the adjudication of any dispute hereunder or in connection herewith
      or with any transaction contemplated hereby or discussed herein, and hereby
      irrevocably waives, and agrees not to assert in any suit, action or proceeding,
      any claim that it is not personally subject to the jurisdiction of any such
      court, that such suit, action or proceeding is brought in an inconvenient forum
      or that the venue of such suit, action or proceeding is improper. Each party
      hereby irrevocably waives personal service of process and consents to process
      being served in any such suit, action or proceeding by mailing a copy thereof
      to
      such party at the address for such notices to it under this Agreement and agrees
      that such service shall constitute good and sufficient service of process and
      notice thereof. Nothing contained herein shall be deemed to limit in any way
      any
      right to serve process in any manner permitted by law. If any provision of
      this
      Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
      or unenforceability shall not affect the validity or enforceability of the
      remainder of this Agreement in that jurisdiction or the validity or
      enforceability of any provision of this Agreement in any other jurisdiction.
      EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
      TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY.

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (e)          This
      Agreement, the Irrevocable Transfer Agent Instructions, the Securities Purchase
      Agreement and related documents including the Convertible Debenture and the
      Escrow Agreement dated the date hereof by and among the Company, the Investors
      set forth on the Schedule of Investors attached hereto, and David Gonzalez,
      Esq.
      (the “Escrow
      Agreement”)
      and
      the Security Agreement dated the date hereof (the “Security
      Agreement”)
      constitute the entire agreement among the parties hereto with respect to the
      subject matter hereof and thereof. There are no restrictions, promises,
      warranties or undertakings, other than those set forth or referred to herein
      and
      therein. This Agreement, the Irrevocable Transfer Agent Instructions, the
      Securities Purchase Agreement and related documents including the Convertible
      Debenture, the Escrow Agreement and the Security Agreement supersede all prior
      agreements and understandings among the parties hereto with respect to the
      subject matter hereof and thereof.

     

    (f)          This
      Agreement shall inure to the benefit of and be binding upon the permitted
      successors and assigns of each of the parties hereto.

     

    (g)          The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    (h)          This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

    (i)          Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party.

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (j)          This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    

    

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF,
      the
      parties have caused this Investor Registration Rights Agreement to be duly
      executed as of day and year first above written.

     

    
      	 	
              COMPANY:

            
	 	
              IQ
                MEDICAL CORP.

            
	 	 
	 	
              By:          /s/
                Robert V.
                Rudman                              

            
	 	
              Name: 
                Robert V. Rudman

            
	 	
              Title:    
                CFO

            
	 	 

    

    

    

    

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      I

     

    SCHEDULE
      OF INVESTORS

     

    
      	
              Name

            	 	
              Signature

            	 	
              Address/Facsimile
                

              Number
                of Investors

            
	 	 	 	 	 
	
              Cornell
                Capital Partners, LP

            	 	
              By:          Yorkville
                Advisors, LLC

            	 	
              101
                Hudson Street - Suite 3700

            
	 	 	
              Its:          General
                Partner

            	 	
              Jersey
                City, NJ 07303

            
	 	 	 	 	
              Facsimile: (201)
                985-8266

            
	 	 	 	 	 
	 	 	
              By:          /s/
                Mark
                Angelo                              

            	 	 
	 	 	
              Name:    Mark
                Angelo

            	 	 
	 	 	
              Its:          Portfolio
                Manager

            	 	 
	 	 	 	 	 
	
              With
                a copy to: 

            	 	
              Troy
                Rillo, Esq.

            	 	
              101
                Hudson Street - Suite 3700

            
	 	 	 	 	
              Jersey
                City, NJ 07302

            
	 	 	 	 	
              Facsimile:
                (201) 985-8266

            
	 	 	 	 	 

    

    

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

     

    Attention:          

    

    Re:          IQ
      MEDICAL CORP.

    

    Ladies
      and Gentlemen:

    

    We
      are
      counsel to IQ Medical Corp., a ______ corporation (the “Company”),
      and
      have represented the Company in connection with that certain Securities Purchase
      Agreement (the “Securities
      Purchase Agreement”)
      entered into by and among the Company and the investors named therein
      (collectively, the “Investors”)
      pursuant to which the Company issued to the Investors shares of its Common
      Stock, par value $____ per share (the “Common
      Stock”).
      Pursuant to the Purchase Agreement, the Company also has entered into a
      Registration Rights Agreement with the Investors (the “Investor
      Registration Rights Agreement”)
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement) under
      the Securities Act of 1933, as amended (the “Securities
      Act”).
      In
      connection with the Company’s obligations under the Registration Rights
      Agreement, on ____________ ____, the Company filed a Registration Statement
      on
      Form ________ (File No. 333-_____________) (the “Registration
      Statement”)
      with
      the Securities and Exchange SEC (the “SEC”)
      relating to the Registrable Securities which names each of the Investors as
      a
      selling stockholder there under.

     

    In
      connection with the foregoing, we advise you that a member of the SEC’s staff
      has advised us by telephone that the SEC has entered an order declaring the
      Registration Statement effective under the Securities Act at [ENTER
      TIME OF EFFECTIVENESS]
      on
[ENTER
      DATE OF EFFECTIVENESS]
      and we
      have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
      any stop order suspending its effectiveness has been issued or that any
      proceedings for that purpose are pending before, or threatened by, the SEC
      and
      the Registrable Securities are available for resale under the Securities Act
      pursuant to the Registration Statement.

     

    Very
      truly yours,

    

    [Law
      Firm]

    

    By:                                                            

    

    cc:          [LIST
      NAMES OF INVESTORS]EXHIBIT
        10.7

      

      Dated:
        August 12, 2005

      

      NEITHER
        THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE
        HAVE
        BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
        COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
        THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
        ACT”),
        AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
        REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
        EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
        REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
        SECURITIES LAWS.

       

      
        	
                No.
                  CCP-1

              	
                $500,000

              

      

       

      IQ
        MEDICAL CORP.

      

      Secured
        Convertible Debenture

      

      Due
        August 12, 2007

      

                This
        Secured Convertible Debenture (the “Debenture”)
        is
        issued by IQ
        MEDICAL CORP., a
        Colorado corporation (the “Obligor”),
        to
CORNELL
        CAPITAL PARTNERS, LP
        (the
“Holder”),
        pursuant to that certain Securities Purchase Agreement (the “Securities
        Purchase Agreement”)
        of
        even date herewith. 

      

                FOR
        VALUE RECEIVED,
        the
        Obligor hereby promises to pay to the Holder or its successors and assigns
        the
        principal sum of Five Hundred Thousand Dollars ($500,000) together with accrued
        but unpaid interest on or before August 12, 2007 (the “Maturity
        Date”)
        in
        accordance with the following terms:

      

      Interest.
        Interest shall accrue on the outstanding principal balance hereof at an annual
        rate equal to eight percent (8%). Interest shall be calculated on the basis
        of a
        360-day year and the actual number of days elapsed, to the extent permitted
        by
        applicable law. Interest hereunder will be paid to the Holder or its assignee
        (as defined in Section
        4)
        in
        whose name this Debenture is registered on the records of the Obligor regarding
        registration and transfers of Debentures (the “Debenture
        Register”).

      

      Right
        of Redemption.
        The
        Obligor at its option shall have the right, with three (3) business days
        advance
        written notice, to redeem a portion or all amounts outstanding under this
        Debenture prior to the Maturity Date. The Obligor shall pay a redemption
        premium
        of twenty percent (20%) (“Redemption
        Premium”)
        of the
        amount redeemed in addition to such redemption, plus accrued interest.

      

      Security
        Agreements.
        This
        Debenture is secured by a Security Agreement (the “Security
        Agreement”)
        of
        even date herewith between the Obligor and the Holder.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Consent
        of Holder to Sell Capital Stock or Grant Security Interests.
        So
        long
        as any of the principal amount or interest on this Debenture remains unpaid
        and
        unconverted, the Obligor shall not, without the prior consent of the Holder,
        (i) issue or sell any common stock or preferred stock with or without
        consideration, (ii) issue or sell any preferred stock, warrant, option,
        right, contract, call, or other security or instrument granting the holder
        thereof the right to acquire common stock with or without consideration,
        (iii)
        enter into any security instrument granting the holder a security interest
        in
        any of the assets of the Obligor, or
        (iv)
        file any
        registration statements on Form S-8.
        The
        foregoing restrictions shall not apply to the issuance of shares of Common
        Stock
        pursuant to a bona fide Employee Stock Option Plan of no more than 15% of
        the
        Obligor’s outstanding shares of Common Stock as of the date hereof provided,
        however, such options are issued not less than the Closing Bid price at the
        date
        of issuance.

      

      This
        Debenture is subject to the following additional provisions:

      

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

      

      Section
        2.          Events
        of Default.

      

      (a)          An
        “Event
        of Default”,
        wherever used herein, means any one of the following events (whatever the
        reason
        and whether it shall be voluntary or involuntary or effected by operation
        of law
        or pursuant to any judgment, decree or order of any court, or any order,
        rule or
        regulation of any administrative or governmental body):

      

      (i)          Any
        default in the payment of the principal of, interest on or other charges
        in
        respect of this Debenture, free of any claim of subordination, as and when
        the
        same shall become due and payable (whether on a Conversion Date or the Maturity
        Date or by acceleration or otherwise);

      

      (ii)          The
        Obligor shall fail to observe or perform any other covenant, agreement or
        warranty contained in, or otherwise commit any breach or default of any
        provision of this Debenture (except as may be covered by Section
        2(a)(i)
        hereof)
        or any Transaction Document (as defined in Section
        4)
        which
        is not cured with in the time prescribed;

      

      (iii)          The
        Obligor or any subsidiary of the Obligor shall commence, or there shall be
        commenced against the Obligor or any subsidiary of the Obligor under any
        applicable bankruptcy or insolvency laws as now or hereafter in effect or
        any
        successor thereto, or the Obligor or any subsidiary of the Obligor commences
        any
        other proceeding under any reorganization, arrangement, adjustment of debt,
        relief of debtors, dissolution, insolvency or liquidation or similar law
        of any
        jurisdiction whether now or hereafter in effect relating to the Obligor or
        any
        subsidiary of the Obligor or there is commenced against the Obligor or any
        subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding
        which remains undismissed for a period of 61 days; or the Obligor or any
        subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any order
        of
        relief or other order approving any such case or proceeding is entered; or
        the
        Obligor or any subsidiary of the Obligor suffers any appointment of any
        custodian, private or court appointed receiver or the like for it or any
        substantial part of its property which continues undischarged or unstayed
        for a
        period of sixty one (61) days; or the Obligor or any subsidiary of the Obligor
        makes a general assignment for the benefit of creditors; or the Obligor or
        any
        subsidiary of the Obligor shall fail to pay, or shall state that it is unable
        to
        pay, or shall be unable to pay, its debts generally as they become due; or
        the
        Obligor or any subsidiary of the Obligor shall call a meeting of its creditors
        with a view to arranging a composition, adjustment or restructuring of its
        debts; or the Obligor or any subsidiary of the Obligor shall by any act or
        failure to act expressly indicate its consent to, approval of or acquiescence
        in
        any of the foregoing; or any corporate or other action is taken by the Obligor
        or any subsidiary of the Obligor for the purpose of effecting any of the
        foregoing;

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      (iv)          The
        Obligor or any subsidiary of the Obligor shall default in any of its obligations
        under any other debenture or any mortgage, credit agreement or other facility,
        indenture agreement, factoring agreement or other instrument under which
        there
        may be issued, or by which there may be secured or evidenced any indebtedness
        for borrowed money or money due under any long term leasing or factoring
        arrangement of the Obligor or any subsidiary of the Obligor in an amount
        exceeding $100,000, whether such indebtedness now exists or shall hereafter
        be
        created and such default shall result in such indebtedness becoming or being
        declared due and payable prior to the date on which it would otherwise become
        due and payable;

      

      (v)          The
        Obligor shall fail to obtain listing for its Common Stock for trading on
        either
        the NASD OTC Bulletin Board (“OTC”),
        Nasdaq SmallCap Market, New York Stock Exchange, American Stock Exchange
        or the
        Nasdaq National Market (each, a “Subsequent
        Market”)
        in
        accordance with Section 4(f) of the Securities Purchase Agreement of even
        date
        herewith; 

      

      (vi)
                  Upon obtaining the
        listing in accordance with Section 4(f) of the Securities Purchase Agreement
        of
        even date herewith, the Common Stock shall cease to be quoted for trading
        or
        listed for trading on either the NASD OTC Bulletin Board (“OTC”),
        Nasdaq SmallCap Market, New York Stock Exchange, American Stock Exchange
        or the
        Nasdaq National Market (each, a “Subsequent
        Market”)
        and
        shall not again be quoted or listed for trading thereon within five (5) Trading
        Days of such delisting;

      

      (vi)          The
        Obligor or any subsidiary of the Obligor shall be a party to any Change of
        Control Transaction (as defined in Section
        4);
        

      

      (vii)          The
        Obligor shall fail to file the Underlying Shares Registration Statement (as
        defined in Section
        4)
        with
        the Commission (as defined in Section
        4),
        or the
        Underlying Shares Registration Statement shall not have been declared effective
        by the Commission, in each case within the time periods set forth in the
        Registration Rights Agreement of even date herewith between the Obligor and
        the
        Holder;

      

      (viii)          If
        the effectiveness of the Underlying Shares Registration Statement lapses
        for any
        reason or the Holder shall not be permitted to resell the shares of Common
        Stock
        underlying this Debenture under the Underlying Shares Registration Statement,
        in
        either case, for more than five (5) consecutive Trading Days or an aggregate
        of
        eight Trading Days (which need not be consecutive Trading Days);

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      (ix)          The
        Obligor shall fail for any reason to deliver Common Stock certificates to
        a
        Holder prior to the fifth (5th)
        Trading
        Day after a Conversion Date or the Obligor shall provide notice to the Holder,
        including by way of public announcement, at any time, of its intention not
        to
        comply with requests for conversions of this Debenture in accordance with
        the
        terms hereof; 

      

      (x)          The
        Obligor shall fail for any reason to deliver the payment in cash pursuant
        to a
        Buy-In (as defined herein) within three (3) days after notice is claimed
        delivered hereunder; 

      

      (b)          During
        the time that any portion of this Debenture is outstanding, if any Event
        of
        Default has occurred, the full principal amount of this Debenture, together
        with
        interest and other amounts owing in respect thereof, to the date of acceleration
        shall become at the Holder's election, immediately due and payable in cash,
        provided
        however,
        the
        Holder may request (but shall have no obligation to request) payment of such
        amounts in Common Stock of the Obligor. If an Event of Default occurs and
        remains uncured, the Conversion Price shall be reduced to 20% of the Conversion
        Price. In addition to any other remedies, the Holder shall have the right
        (but
        not the obligation) to convert this Debenture at any time after (x) an Event
        of
        Default or (y) the Maturity Date at the Conversion Price then in-effect.
        The
        Holder need not provide and the Obligor hereby waives any presentment, demand,
        protest or other notice of any kind, and the Holder may immediately and without
        expiration of any grace period enforce any and all of its rights and remedies
        hereunder and all other remedies available to it under applicable law. Such
        declaration may be rescinded and annulled by Holder at any time prior to
        payment
        hereunder. No such rescission or annulment shall affect any subsequent Event
        of
        Default or impair any right consequent thereon. Upon an Event of Default,
        notwithstanding any other provision of this Debenture or any Transaction
        Document, the Holder shall have no obligation to comply with or adhere to
        any
        limitations, if any, on the conversion of this Debenture or the sale of the
        Underlying Shares. 

      

      Section
        3.          Conversion.

      

      (a)          (i)          Conversion
        at Option of Holder.

      

      (A)          This
        Debenture shall be convertible into shares of Common Stock at the option
        of the
        Holder, in whole or in part at any time and from time to time, after the
        Original Issue Date (as defined in Section 4) (subject to the limitations
        on
        conversion set forth in Section
        3(a)(ii)
        hereof).
        The number of shares of Common Stock issuable upon a conversion hereunder
        equals
        the quotient obtained by dividing (x) the outstanding amount of this Debenture
        to be converted by (y) the Conversion Price (as defined in Section
        3(c)(i)).
        The
        Obligor shall deliver Common Stock certificates to the Holder prior to the
        Fifth
        (5th)
        Trading
        Day after a Conversion Date.

      

      (B)          Notwithstanding
        anything to the contrary contained herein, if on any Conversion Date: (1)
        the
        number of shares of Common Stock at the time authorized, unissued and unreserved
        for all purposes, or held as treasury stock, is insufficient to pay principal
        and interest hereunder in shares of Common Stock; (2) the Common Stock is
        not
        listed or quoted for trading on the OTC, the “Pink Sheets” or on a Subsequent
        Market; (3) the Obligor has failed to timely satisfy its conversion; or (4)
        the
        issuance of such shares of Common Stock would result in a violation of
Section
        3(a)(ii),
        then,
        at the option of the Holder, the Obligor, in lieu of delivering shares of
        Common
        Stock pursuant to Section
        3(a)(i)(A),
        shall
        deliver, within three (3) Trading Days of each applicable Conversion Date,
        an
        amount in cash equal to the product of the outstanding principal amount to
        be
        converted plus any interest due therein divided by the Conversion Price and
        multiplied by the highest closing price of the stock from date of the conversion
        notice till the date that such cash payment is made.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      Further,
        if the Obligor shall not have delivered any cash due in respect of conversion
        of
        this Debenture or as payment of interest thereon by the fifth (5th)
        Trading
        Day after the Conversion Date, the Holder may, by notice to the Obligor,
        require
        the Obligor to issue shares of Common Stock pursuant to Section
        3(c),
        except
        that for such purpose the Conversion Price applicable thereto shall be the
        lesser of the Conversion Price on the Conversion Date and the Conversion
        Price
        on the date of such Holder demand. Any such shares will be subject to the
        provisions of this Section.

      

      (C)          The
        Holder shall effect conversions by delivering to the Obligor a completed
        notice
        in the form attached hereto as Exhibit A (a “Conversion
        Notice”).
        The
        date on which a Conversion Notice is delivered is the “Conversion
        Date.”
Unless
        the Holder is converting the entire principal amount outstanding under this
        Debenture, the Holder is not required to physically surrender this Debenture
        to
        the Obligor in order to effect conversions. Conversions hereunder shall have
        the
        effect of lowering the outstanding principal amount of this Debenture plus
        all
        accrued and unpaid interest thereon in an amount equal to the applicable
        conversion. The Holder and the Obligor shall maintain records showing the
        principal amount converted and the date of such conversions. In the event
        of any
        dispute or discrepancy, the records of the Holder shall be controlling and
        determinative in the absence of manifest error.

      

      (ii)          Certain
        Conversion Restrictions.

      

      (A)          A
        Holder may not convert this Debenture or receive shares of Common Stock as
        payment of interest hereunder to the extent such conversion or receipt of
        such
        interest payment would result in the Holder, together with any affiliate
        thereof, beneficially owning (as determined in accordance with Section 13(d)
        of
        the Exchange Act and the rules promulgated thereunder) in excess of 4.9%
        of the
        then issued and outstanding shares of Common Stock, including shares issuable
        upon conversion of, and payment of interest on, this Debenture held by such
        Holder after application of this Section. Since the Holder will not be obligated
        to report to the Obligor the number of shares of Common Stock it may hold
        at the
        time of a conversion hereunder, unless the conversion at issue would result
        in
        the issuance of shares of Common Stock in excess of 4.9% of the then outstanding
        shares of Common Stock without regard to any other shares which may be
        beneficially owned by the Holder or an affiliate thereof, the Holder shall
        have
        the authority and obligation to determine whether the restriction contained
        in
        this Section will limit any particular conversion hereunder and to the extent
        that the Holder determines that the limitation contained in this Section
        applies, the determination of which portion of the principal amount of this
        Debenture is convertible shall be the responsibility and obligation of the
        Holder. If the Holder has delivered a Conversion Notice for a principal amount
        of this Debenture that, without regard to any other shares that the Holder
        or
        its affiliates may beneficially own, would result in the issuance in excess
        of
        the permitted amount hereunder, the Obligor shall notify the Holder of this
        fact
        and shall honor the conversion for the maximum principal amount permitted
        to be
        converted on such Conversion Date in accordance with the periods described
        in
Section
        3(a)(i)(A)
        and, at
        the option of the Holder, either retain any principal amount tendered for
        conversion in excess of the permitted amount hereunder for future conversions
        or
        return such excess principal amount to the Holder. The provisions of this
        Section may be waived by a Holder (but only as to itself and not to any other
        Holder) upon not less than 65 days prior notice to the Obligor. Other Holders
        shall be unaffected by any such waiver.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      (b)          (i)          Nothing
        herein shall limit a Holder's right to pursue actual damages or declare an
        Event
        of Default pursuant to Section
        2
        herein
        for the Obligor 's failure to deliver certificates representing shares of
        Common
        Stock upon conversion within the period specified herein and such Holder
        shall
        have the right to pursue all remedies available to it at law or in equity
        including, without limitation, a decree of specific performance and/or
        injunctive relief, in each case without the need to post a bond or provide
        other
        security. The exercise of any such rights shall not prohibit the Holder from
        seeking to enforce damages pursuant to any other Section hereof or under
        applicable law. 

      

      (ii)          In
        addition to any other rights available to the Holder, if the Obligor fails
        to
        deliver to the Holder such certificate or certificates pursuant to Section
        3(a)(i)(A)
        by the
        fifth (5th)
        Trading
        Day after the Conversion Date, and if after such fifth (5th)
        Trading
        Day the Holder purchases (in an open market transaction or otherwise) Common
        Stock to deliver in satisfaction of a sale by such Holder of the Underlying
        Shares which the Holder anticipated receiving upon such conversion (a
“Buy-In”),
        then
        the Obligor shall (A) pay in cash to the Holder (in addition to any remedies
        available to or elected by the Holder) the amount by which (x) the Holder's
        total purchase price (including brokerage commissions, if any) for the Common
        Stock so purchased exceeds (y) the product of (1) the aggregate number of
        shares
        of Common Stock that such Holder anticipated receiving from the conversion
        at
        issue multiplied by (2) the market price of the Common Stock at the time
        of the
        sale giving rise to such purchase obligation and (B) at the option of the
        Holder, either reissue a Debenture in the principal amount equal to the
        principal amount of the attempted conversion or deliver to the Holder the
        number
        of shares of Common Stock that would have been issued had the Obligor timely
        complied with its delivery requirements under Section
        3(a)(i)(A).
        For
        example, if the Holder purchases Common Stock having a total purchase price
        of
        $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures
        with respect to which the market price of the Underlying Shares on the date
        of
        conversion was a total of $10,000 under clause (A) of the immediately preceding
        sentence, the Obligor shall be required to pay the Holder $1,000. The Holder
        shall provide the Obligor written notice indicating the amounts payable to
        the
        Holder in respect of the Buy-In. 

      

      (c)          (i)          The
        conversion price in effect on any Conversion Date shall be equal to the lesser
        of (a) an amount equal to one hundred twenty percent (120%) of the average
        closing bid price of the Common Stock, as quoted by Bloomberg L.P., for the
        five
        (5) Trading Days immediately preceding the date hereof, or (b) an amount
        equal to eighty percent (80%) of the lowest Closing Bid Price of the Common
        Stock (on the OTC or on the exchange which the Common Stock is then listed,
        including the “Pink Sheets”), as quoted by Bloomberg, LP (the “VWAP”),
        for
        five (5) Trading Days immediately preceding the Conversion Date (as defined
        herein) (the lesser price of either subparagraph (a) or (b) shall be referred
        to
        as the “Conversion
        Price”).

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      (ii)          If
        the Obligor, at any time while this Debenture is outstanding, shall (a) pay
        a stock dividend or otherwise make a distribution or distributions on shares
        of
        its Common Stock or any other equity or equity equivalent securities payable
        in
        shares of Common Stock, (b) subdivide outstanding shares of Common Stock
        into a
        larger number of shares, (c) combine (including by way of reverse stock split)
        outstanding shares of Common Stock into a smaller number of shares, or (d)
        issue
        by reclassification of shares of the Common Stock any shares of capital stock
        of
        the Obligor, then the Conversion Price shall be multiplied by a fraction
        of
        which the numerator shall be the number of shares of Common Stock (excluding
        treasury shares, if any) outstanding before such event and of which the
        denominator shall be the number of shares of Common Stock outstanding after
        such
        event. Any adjustment made pursuant to this Section shall become effective
        immediately after the record date for the determination of stockholders entitled
        to receive such dividend or distribution and shall become effective immediately
        after the effective date in the case of a subdivision, combination or
        re-classification.

      

      (iii)          If
        the Obligor, at any time while this Debenture is outstanding, shall issue
        rights, options or warrants to all holders of Common Stock (and not to the
        Holder) entitling them to subscribe for or purchase shares of Common Stock
        at a
        price per share less than the Closing Bid Price at the record date mentioned
        below, then the Conversion Price shall be multiplied by a fraction, of which
        the
        denominator shall be the number of shares of the Common Stock (excluding
        treasury shares, if any) outstanding on the date of issuance of such rights
        or
        warrants (plus the number of additional shares of Common Stock offered for
        subscription or purchase), and of which the numerator shall be the number
        of
        shares of the Common Stock (excluding treasury shares, if any) outstanding
        on
        the date of issuance of such rights or warrants, plus the number of shares
        which
        the aggregate offering price of the total number of shares so offered would
        purchase at such Closing Bid Price. Such adjustment shall be made whenever
        such
        rights or warrants are issued, and shall become effective immediately after
        the
        record date for the determination of stockholders entitled to receive such
        rights, options or warrants. However, upon the expiration of any such right,
        option or warrant to purchase shares of the Common Stock the issuance of
        which
        resulted in an adjustment in the Conversion Price pursuant to this Section,
        if
        any such right, option or warrant shall expire and shall not have been
        exercised, the Conversion Price shall immediately upon such expiration be
        recomputed and effective immediately upon such expiration be increased to
        the
        price which it would have been (but reflecting any other adjustments in the
        Conversion Price made pursuant to the provisions of this Section after the
        issuance of such rights or warrants) had the adjustment of the Conversion
        Price
        made upon the issuance of such rights, options or warrants been made on the
        basis of offering for subscription or purchase only that number of shares
        of the
        Common Stock actually purchased upon the exercise of such rights, options
        or
        warrants actually exercised.

      

      (iv)          If
        the Obligor or any subsidiary thereof, as applicable, with respect to Common
        Stock Equivalents (as defined below), at any time while this Debenture is
        outstanding, shall issue shares of Common Stock or rights, warrants, options
        or
        other securities or debt that are convertible into or exchangeable for shares
        of
        Common Stock (“Common
        Stock Equivalents”)
        entitling any Person to acquire shares of Common Stock, at a price per share
        less than the Conversion Price (if the holder of the Common Stock or Common
        Stock Equivalent so issued shall at any time, whether by operation of purchase
        price adjustments, reset provisions, floating conversion, exercise or exchange
        prices or otherwise, or due to warrants, options or rights per share which
        is
        issued in connection with such issuance, be entitled to receive shares of
        Common
        Stock at a price per share which is less than the Conversion Price, such
        issuance shall be deemed to have occurred for less than the Conversion Price),
        then, at the sole option of the Holder, the Conversion Price shall be adjusted
        to mirror the conversion, exchange or purchase price for such Common Stock
        or
        Common Stock Equivalents (including any reset provisions thereof) at issue.
        Such
        adjustment shall be made whenever such Common Stock or Common Stock Equivalents
        are issued. The Obligor shall notify the Holder in writing, no later than
        one
        (1) business day following the issuance of any Common Stock or Common Stock
        Equivalent subject to this Section, indicating therein the applicable issuance
        price, or of applicable reset price, exchange price, conversion price and
        other
        pricing terms. No adjustment under this Section shall be made as a result
        of
        issuances and exercises of options to purchase shares of Common Stock issued
        for
        compensatory purposes pursuant to any of the Obligor's stock option or stock
        purchase plans.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      (v)          If
        the Obligor, at any time while this Debenture is outstanding, shall distribute
        to all holders of Common Stock (and not to the Holder) evidences of its
        indebtedness or assets or rights or warrants to subscribe for or purchase
        any
        security, then in each such case the Conversion Price at which this Debenture
        shall thereafter be convertible shall be determined by multiplying the
        Conversion Price in effect immediately prior to the record date fixed for
        determination of stockholders entitled to receive such distribution by a
        fraction of which the denominator shall be the Closing Bid Price determined
        as
        of the record date mentioned above, and of which the numerator shall be such
        Closing Bid Price on such record date less the then fair market value at
        such
        record date of the portion of such assets or evidence of indebtedness so
        distributed applicable to one outstanding share of the Common Stock as
        determined by the Board of Directors in good faith. In either case the
        adjustments shall be described in a statement provided to the Holder of the
        portion of assets or evidences of indebtedness so distributed or such
        subscription rights applicable to one share of Common Stock. Such adjustment
        shall be made whenever any such distribution is made and shall become effective
        immediately after the record date mentioned above.

      

      (vi)          In
        case of any reclassification of the Common Stock or any compulsory share
        exchange pursuant to which the Common Stock is converted into other securities,
        cash or property, the Holder shall have the right thereafter to, at its option,
        (A) convert the then outstanding principal amount, together with all accrued
        but
        unpaid interest and any other amounts then owing hereunder in respect of
        this
        Debenture into the shares of stock and other securities, cash and property
        receivable upon or deemed to be held by holders of the Common Stock following
        such reclassification or share exchange, and the Holder of this Debenture
        shall
        be entitled upon such event to receive such amount of securities, cash or
        property as the shares of the Common Stock of the Obligor into which the
        then
        outstanding principal amount, together with all accrued but unpaid interest
        and
        any other amounts then owing hereunder in respect of this Debenture could
        have
        been converted immediately prior to such reclassification or share exchange
        would have been entitled, or (B) require the Obligor to prepay the outstanding
        principal amount of this Debenture, plus all interest and other amounts due
        and
        payable thereon. The entire prepayment price shall be paid in cash. This
        provision shall similarly apply to successive reclassifications or share
        exchanges.

      

      (vii)          The
        Obligor shall maintain a share reserve of not less than 100% of the shares
        of
        Common Stock issuable upon conversion of this Debenture; and within three
        (3)
        Business Days following the receipt by the Obligor of a Holder's notice that
        such minimum number of Underlying Shares is not so reserved, the Obligor
        shall
        promptly reserve a sufficient number of shares of Common Stock to comply
        with
        such requirement.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      (viii)          All
        calculations under this Section
        3
        shall be
        rounded up to the nearest $0.001 of a share.

      

      (ix)          Whenever
        the Conversion Price is adjusted pursuant to Section
        3
        hereof,
        the Obligor shall promptly mail to the Holder a notice setting forth the
        Conversion Price after such adjustment and setting forth a brief statement
        of
        the facts requiring such adjustment.

      

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

      

      (xi)          In
        case of any (1) merger or consolidation of the Obligor or any subsidiary
        of the
        Obligor with or into another Person, or (2) sale by the Obligor or any
        subsidiary of the Obligor of more than one-half of the assets of the Obligor
        in
        one or a series of related transactions, a Holder shall have the right to
        (A)
        exercise any rights under Section
        2(b),
        (B)
        convert the aggregate amount of this Debenture then outstanding into the
        shares
        of stock and other securities, cash and property receivable upon or deemed
        to be
        held by holders of Common Stock following such merger, consolidation or sale,
        and such Holder shall be entitled upon such event or series of related events
        to
        receive such amount of securities, cash and property as the shares of Common
        Stock into which such aggregate principal amount of this Debenture could
        have
        been converted immediately prior to such merger, consolidation or sales would
        have been entitled, or (C) in the case of a merger or consolidation, require
        the
        surviving entity to issue to the Holder a convertible Debenture with a principal
        amount equal to the aggregate principal amount of this Debenture then held
        by
        such Holder, plus all accrued and unpaid interest and other amounts owing
        thereon, which such newly issued convertible Debenture shall have terms
        identical (including with respect to conversion) to the terms of this Debenture,
        and shall be entitled to all of the rights and privileges of the Holder of
        this
        Debenture set forth herein and the agreements pursuant to which this Debentures
        were issued. In the case of clause (C), the conversion price applicable for
        the
        newly issued shares of convertible preferred stock or convertible Debentures
        shall be based upon the amount of securities, cash and property that each
        share
        of Common Stock would receive in such transaction and the Conversion Price
        in
        effect immediately prior to the effectiveness or closing date for such
        transaction. The terms of any such merger, sale or consolidation shall include
        such terms so as to continue to give the Holder the right to receive the
        securities, cash and property set forth in this Section upon any conversion
        or
        redemption following such event. This provision shall similarly apply to
        successive such events.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      (d)          The
        Obligor covenants that it will at all times reserve and keep available out
        of
        its authorized and unissued shares of Common Stock solely for the purpose
        of
        issuance upon conversion of this Debenture and payment of interest on this
        Debenture, each as herein provided, free from preemptive rights or any other
        actual contingent purchase rights of persons other than the Holder, not less
        than such number of shares of the Common Stock as shall (subject to any
        additional requirements of the Obligor as to reservation of such shares set
        forth in this Debenture) be issuable (taking into account the adjustments
        and
        restrictions of Sections
        2(b) and 3(c))
        upon
        the conversion of the outstanding principal amount of this Debenture and
        payment
        of interest hereunder. The Obligor covenants that all shares of Common Stock
        that shall be so issuable shall, upon issue, be duly and validly authorized,
        issued and fully paid, nonassessable and, if the Underlying Shares Registration
        Statement has been declared effective under the Securities Act, registered
        for
        public sale in accordance with such Underlying Shares Registration
        Statement.

      

      (e)          Upon
        a conversion hereunder the Obligor shall not be required to issue stock
        certificates representing fractions of shares of the Common Stock, but may
        if
        otherwise permitted, make a cash payment in respect of any final fraction
        of a
        share based on the Closing Bid Price at such time. If the Obligor elects
        not, or
        is unable, to make such a cash payment, the Holder shall be entitled to receive,
        in lieu of the final fraction of a share, one whole share of Common
        Stock.

      

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

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

                (g)          Any
        notices, consents, waivers or other communications required or permitted
        to be
        given under the terms hereof must be in writing and will be deemed to have
        been
        delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
        when
        sent by facsimile (provided confirmation of transmission is mechanically
        or
        electronically generated and kept on file by the sending party); or (iii)
        one
        (1) trading day after deposit with a nationally recognized overnight delivery
        service, in each case properly addressed to the party to receive the same.
        The
        addresses and facsimile numbers for such communications shall be:

       

      
        	
                If
                  to the Company, to:

              	
                IQ
                  Medical Corp.

              
	 	
                500
                  Australian Avenue South - Suite 700

              
	 	
                West
                  Palm Beach, Florida 33401

              
	 	
                Attention:          Robert
                  V. Rudman

              
	 	
                Telephone:        (561)
                  514-0018

              
	 	
                Facsimile:          (561)
                  514-0195

              
	 	 
	
                With
                  a copy to: 

              	
                Gunster
                  Yoakley & Stewart, P.A.

              
	 	
                Broward
                  Financial Centre - Suite 1400

                 

                500
                  East Broward Blvd.

              
	 	
                Fort
                  Lauderdale, Florida 33394

              
	 	
                Attention:          Robert
                  C. White, Jr. Esq.

              
	 	
                Telephone:        (954)
                  468-1360

              
	 	
                Facsimile:          (954)
                  888-2037

              
	 	 
	
                If
                  to the Holder:

              	
                Cornell
                  Capital Partners, LP

              
	 	
                101
                  Hudson Street, Suite 3700

              
	 	
                Jersey
                  City, NJ 07303

              
	 	
                Attention:          Mark
                  Angelo

              
	 	
                Telephone:        (201)
                  985-8300

              
	 	 
	
                With
                  a copy to:

              	
                Troy
                  Rillo, Esq. 

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Telephone:        (201)
                  985-8300

              
	 	
                Facsimile:          (201)
                  985-8266

              
	 	 

      

       

      or
        at
        such other address and/or facsimile number and/or to the attention of such
        other
        person as the recipient party has specified by written notice given to each
        other party three (3) business days prior to the effectiveness of such change.
        Written confirmation of receipt (i) given by the recipient of such notice,
        consent, waiver or other communication, (ii) mechanically or electronically
        generated by the sender's facsimile machine containing the time, date, recipient
        facsimile number and an image of the first page of such transmission or (iii)
        provided by a nationally recognized overnight delivery service, shall be
        rebuttable evidence of personal service, receipt by facsimile or receipt
        from a
        nationally recognized overnight delivery service in accordance with clause
        (i),
        (ii) or (iii) above, respectively.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      Section
        4.          Definitions.
        For the
        purposes hereof, the following terms shall have the following
        meanings:

      

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

      

      “Change
        of Control Transaction”
means
        the occurrence of (a) an acquisition after the date hereof by an individual
        or
        legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
        Exchange Act) of effective control (whether through legal or beneficial
        ownership of capital stock of the Obligor, by contract or otherwise) of in
        excess of fifty percent (50%) of the voting securities of the Obligor (except
        that the acquisition of voting securities by the Holder shall not constitute
        a
        Change of Control Transaction for purposes hereof), (b) a replacement at
        one
        time or over time of more than one-half of the members of the board of directors
        of the Obligor which is not approved by a majority of those individuals who
        are
        members of the board of directors on the date hereof (or by those individuals
        who are serving as members of the board of directors on any date whose
        nomination to the board of directors was approved by a majority of the members
        of the board of directors who are members on the date hereof), (c) the merger,
        consolidation or sale of fifty percent (50%) or more of the assets of the
        Obligor or any subsidiary of the Obligor in one or a series of related
        transactions with or into another entity, or (d) the execution by the Obligor
        of
        an agreement to which the Obligor is a party or by which it is bound, providing
        for any of the events set forth above in (a), (b) or (c).

      

      “Commission”
means
        the Securities and Exchange Commission.

      

      “Common
        Stock”
means
        the common stock, par value $0.0001, of the Obligor and stock of any other
        class
        into which such shares may hereafter be changed or reclassified.

      

      “Exchange
        Act”
means
        the Securities Exchange Act of 1934, as amended.

      

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

      

      “Closing
        Bid Price”
means
        the price per share in the last reported trade of the Common Stock on the
        OTC or
        on the exchange which the Common Stock is then listed as quoted by Bloomberg,
        LP.

      

      “Person”
means
        a
        corporation, an association, a partnership, organization, a business, an
        individual, a government or political subdivision thereof or a governmental
        agency.

      

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

      

      “Trading
        Day”
means
        a
        day on which the shares of Common Stock are quoted on the OTC or quoted or
        traded on such Subsequent Market on which the shares of Common Stock are
        then
        quoted or listed; provided, that in the event that the shares of Common Stock
        are not listed or quoted, then Trading Day shall mean a Business
        Day.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      “Transaction
        Documents”
means
        the Securities Purchase Agreement or any other agreement delivered in connection
        with the Securities Purchase Agreement, including, without limitation, the
        Security Agreement, the Irrevocable Transfer Agent Instructions, and the
        Investor Registration Rights Agreement.

      

      “Underlying
        Shares”
means
        the shares of Common Stock issuable upon conversion of this Debenture or
        as
        payment of interest in accordance with the terms hereof.

      

      “Underlying
        Shares Registration Statement”
means
        a
        registration statement meeting the requirements set forth in the Registration
        Rights Agreement, covering among other things the resale of the Underlying
        Shares and naming the Holder as a “selling stockholder” thereunder.

      

      Section
        5.          Except
        as expressly provided herein, no provision of this Debenture shall alter
        or
        impair the obligations of the Obligor, which are absolute and unconditional,
        to
        pay the principal of, interest and other charges (if any) on, this Debenture
        at
        the time, place, and rate, and in the coin or currency, herein prescribed.
        This
        Debenture is a direct obligation of the Obligor. This Debenture ranks pari
        passu
        with all other Debentures now or hereafter issued under the terms set forth
        herein. As long as this Debenture is outstanding, the Obligor shall not and
        shall cause their subsidiaries not to, without the consent of the Holder,
        (i)
        amend its certificate of incorporation, bylaws or other charter documents
        so as
        to adversely affect any rights of the Holder; (ii) repay, repurchase or offer
        to
        repay, repurchase or otherwise acquire shares of its Common Stock or other
        equity securities other than as to the Underlying Shares to the extent permitted
        or required under the Transaction Documents; or (iii) enter into any agreement
        with respect to any of the foregoing. 

      

      Section
        6.          This
        Debenture shall not entitle the Holder to any of the rights of a stockholder
        of
        the Obligor, 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 Obligor, unless
        and to
        the extent converted into shares of Common Stock in accordance with the terms
        hereof.

      

      Section
        7.          If
        this Debenture is mutilated, lost, stolen or destroyed, the Obligor shall
        execute and deliver, in exchange and substitution for and upon cancellation
        of
        the mutilated Debenture, or in lieu of or in substitution for a lost, stolen
        or
        destroyed Debenture, a new Debenture for the principal amount of this Debenture
        so mutilated, lost, stolen or destroyed but only upon receipt of evidence
        of
        such loss, theft or destruction of such Debenture, and of the ownership hereof,
        and indemnity, if requested, all reasonably satisfactory to the
        Obligor.

      

      Section
        8.          No
        indebtedness of the Obligor is senior to this Debenture in right of payment,
        whether with respect to interest, damages or upon liquidation or dissolution
        or
        otherwise. Without the Holder’s consent, the Obligor will not and will not
        permit any of their subsidiaries to, directly or indirectly, enter into,
        create,
        incur, assume or suffer to exist any indebtedness of any kind, on or with
        respect to any of its property or assets now owned or hereafter acquired
        or any
        interest therein or any income or profits there from that is senior in any
        respect to the obligations of the Obligor under this Debenture.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      Section
        9.          This
        Debenture shall be governed by and construed in accordance with the laws
        of the
        State of New Jersey, without giving effect to conflicts of laws thereof.
        Each of
        the parties consents to the jurisdiction of the Superior Courts of the State
        of
        New Jersey sitting in Hudson County, New Jersey and the U.S. District Court
        for the District of New Jersey sitting in Newark, New Jersey in connection
        with
        any dispute arising under this Debenture and hereby waives, to the maximum
        extent permitted by law, any objection, including any objection based on
        forum non conveniens
        to the
        bringing of any such proceeding in such jurisdictions. 

      

      Section
        10.          If
        the Obligor fails to strictly comply with the terms of this Debenture, then
        the
        Obligor shall reimburse the Holder promptly for all fees, costs and expenses,
        including, without limitation, attorneys’ fees and expenses incurred by the
        Holder in any action in connection with this Debenture, including, without
        limitation, those incurred: (i) during any workout, attempted workout, and/or
        in
        connection with the rendering of legal advice as to the Holder’s rights,
        remedies and obligations, (ii) collecting any sums which become due to the
        Holder, (iii) defending or prosecuting any proceeding or any counterclaim
        to any
        proceeding or appeal; or (iv) the protection, preservation or enforcement
        of any
        rights or remedies of the Holder.

      

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

      

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

      

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

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      Section
        14.          THE
        PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
        OF
        THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
        OR
        ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
        DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
        VERBAL
        OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
        FOR
        THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

      

      [REMAINDER
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      IN
        WITNESS WHEREOF,
        the
        Obligor has caused this Secured Convertible Debenture to be duly executed
        by a
        duly authorized officer as of the date set forth above.

      
        	 	
                IQ
                  MEDICAL CORP. 

              
	 	 
	 	
                By:/s/
                  Robert V. Rudman

              
	 	
                Name:  Robert
                  V. Rudman

              
	 	
                Title:    CFO

              

      

      

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      EXHIBIT
        “A”

      

      NOTICE
        OF CONVERSION

      

      (To
        be executed by the Holder in order to convert the
        Debenture)

      

      

      
        	
                TO:

              	 

      

      

      

      The
        undersigned hereby irrevocably elects to convert $                                                  
        of the
        principal amount of the above Debenture into Shares of Common Stock of IQ
        Medical Corp., according to the conditions stated therein, as of the Conversion
        Date written below.

       

      
        	
                Conversion
                  Date:

              	
                                                                                                

              
	
                Applicable
                  Conversion Price:

              	
                                                                                                

              
	
                Signature:

              	
                                                                                                

              
	
                Name:

              	
                                                                                                

              
	
                Address:

              	
                                                                                                

              
	
                Amount
                  to be converted:

              	
                $                                                                                  

              
	
                Amount
                  of Debenture

                unconverted:

              	
                $                                                                                  

              
	
                Conversion
                  Price per share: 

              	
                $                                                                                  

              
	
                Number
                  of shares of Common 

                Stock
                  to be issued:

              	
                                                                                                

              
	
                Please
                  issue the shares of 

                Common
                  Stock in the following 

                name
                  and to the following 

                address:

              	
                                                                                                

              
	
                Issue
                  to:

              	
                                                                                                

              
	
                Authorized
                  Signature:

              	
                                                                                                

              
	
                Name:

              	
                                                                                                

              
	
                Title:

              	
                                                                                                

              
	
                Phone
                  Number:

              	
                                                                                                

              
	
                Broker
                  DTC Participant Code:

              	
                                                                                                

              
	
                Account
                  Number:

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