Document:

WARRANT
      TO PURCHASE COMMON STOCK

     

    THIS
      WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT
      AND
      NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
      OF
      1933, AS AMENDED AND NEITHER THE WARRANT NOR THE SHARES MAY BE SOLD, PLEDGED,
      OR
      OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
      ACT
      OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
      THE
      COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THIS WARRANT
      MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION
      PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN THIS WARRANT
      OR THE SHARES ISSUABLE HEREUNDER.

    

    Issuer:
      3DIcon Corporation

    Class
      of
      Stock: Common Stock 

    Issue
      Date: November 3, 2006

    Expiration
      Date: November 3, 2011

     

    THIS
      WARRANT TO PURCHASE COMMON STOCK is
      being
      issued by 3DIcon Corporation, an Oklahoma corporation (the “Company”), to Golden
      Gate Investors, Inc. (“Holder”). 

    

    ARTICLE
      1

    DESCRIPTION
      OF WARRANTS

     

    1.1  Warrants.The
      Company hereby grants to Holder the right to purchase 1,000,000 shares of the
      Company’s Common Stock (the “Shares” or “Warrant Shares”) at a price per share
      equal to the Exercise Price set forth in section 2.4 below. The Company is
      simultaneously issuing to Holder a 6.25% Convertible Debenture in the original
      principal amount of $100,000 (the “Debenture”). Whenever Holder exercises its
      conversion privileges under the Debenture, Holder will simultaneously exercise
      a
      percentage of this Warrant that is equal to the percentage of the Debenture
      being converted. The date that the Holder issues a Conversion Notice under
      the
      Debenture is hereafter referred to as the “Conversion Date.” Defined terms not
      defined herein shall have the meanings ascribed to them in the Debenture.

     

    Beginning
      one year from the Issue Date, Holder shall submit Debenture conversion notices
      and related Warrant exercise notices in an amount such that Holder receives
      a
      total of 1% of the outstanding shares of the Company every calendar quarter
      for
      a period of one year, provided that Holder is able to sell the shares under
      Rule
      144. Beginning two years from the Closing Date, Holder shall convert $3,000
      of
      the Debenture and exercise 30,000 Warrant Shares each calendar month, provided
      that Holder is able to sell the shares under Rule 144(k). If Holder converts
      more that such minimum amounts, the excess shall be credited against the next
      period’s minimum. In the event Holder does not convert and exercise the minimum
      amounts set forth in the first two sentences of this paragraph, the Company’s
      remedy shall be limited to Holder not being entitled to collect interest on
      the
      Debenture for that calendar quarter or calendar month, as
      applicable.

     

    
      	
               

            	
               

            	
               

            
	
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    1.2 Expiration
      of Warrants. This
      Warrant shall expire and Holder shall no longer be able to purchase the Warrant
      Shares on the earlier of: (a) the Expiration Date, or (b) the redemption of
      the
      Debenture by the Company in accordance with Section 2.5 of the
      Debenture.

     

    ARTICLE
      2

    EXERCISE

     

    2.1  Method
      of Exercise.
      Holder
      may exercise this Warrant by delivering a duly executed Warrant Notice of
      Exercise in substantially the form attached as Appendix
      1
      to the
      principal office of the Company.

     

    2.2  Delivery
      of Certificate and New Warrant.
      As
      promptly as practicable after the receipt of the Warrant Notice of Exercise,
      but
      in any event not more than two (2) Business Days after the Company’s receipt of
      the Warrant Notice of Exercise, the Company shall issue the Shares and cause
      to
      be mailed for delivery by overnight courier to Holder a certificate representing
      the Shares acquired and, if this Warrant has not been fully exercised and has
      not expired, a new Warrant substantially in the form of this Warrant
      representing the right to acquire the portion of the Shares not so acquired.
      

     

    2.3  Replacement
      of Warrants.
      On
      receipt of evidence reasonably satisfactory to the Company of the loss, theft,
      destruction or mutilation of this Warrant and, in the case of loss, theft or
      destruction, on delivery of an indemnity agreement reasonably satisfactory
      in
      form and amount to the Company or, in the case of mutilation, or surrender
      and
      cancellation of this Warrant, the Company at its expense shall execute and
      deliver, in lieu of this Warrant, a new warrant of like tenor.

     

    2.4  Exercise
      Price.
      The
      Exercise Price of this Warrant shall be $10.90 per Share.

     

    2.5 Certain
      Exercise Limits. For
      a
      period of one year after the Closing Date, if and to the extent that, on any
      date, the holding by the Holder of this Warrant would result in the Holder’s
      being deemed the beneficial owner of more than 9.99% of the then Outstanding
      shares of Common Stock, then the Holder shall not have the right, and the
      Company shall not have the obligation, to exercise any portion of this Warrant
      as shall cause Holder to be deemed the beneficial owner of more than 9.99%
      of
      the then Outstanding shares of Common Stock.

     

    ARTICLE
      3

    ADJUSTMENT
      TO THE SHARES

     

    The
      number of Shares purchasable upon the exercise of this Warrant and the Exercise
      Price shall be subject to adjustment from time to time upon the occurrence
      of
      certain events, as follows:

     

    3.1  Reclassification.
      In case
      of any reclassification or change of outstanding securities of the class
      issuable upon exercise of this Warrant then, and in any such case, the Holder,
      upon the exercise hereof at any time after the consummation of such
      reclassification or change, shall be entitled to receive in lieu of each Share
      theretofore issuable upon exercise of this Warrant, the kind and amount of
      shares of stock, other securities, money and/or property received upon such
      reclassification or change by a holder of one Share. The provisions of this
      Section 3.1 shall similarly apply to successive reclassifications or
      changes.

    
       

      
        	 	 	 
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    3.2  Subdivision
      or Combination of Shares.
      If the
      Company at any time while this Warrant remains outstanding and unexpired shall
      subdivide or combine its Shares, the Exercise Price shall be proportionately
      decreased in the case of a subdivision or increased in the case of a
      combination.

     

    3.3  Stock
      Dividends.
      If the
      Company, at any time while this Warrant is outstanding shall pay a dividend
      with
      respect to its Shares payable in Shares, or make any other distribution of
      Shares with respect to Shares (except any distribution specifically provided
      for
      in Section 3.1 and Section 3.2 above), then the Exercise Price shall be
      adjusted, effective from and after the date of determination of shareholders
      entitled to received such dividend or distribution, to that price determined
      by
      multiplying the Exercise Price in effect immediately prior to such date of
      determination by a fraction, (a) the numerator of which shall be the total
      number of Shares outstanding immediately prior to such dividend or distribution,
      and (b) the denominator of which shall be the total number of Shares outstanding
      immediately after such dividend or distribution.

     

    3.4  Non-Cash
      Dividends.
      If the
      Company at any time while this Warrant is outstanding shall pay a dividend
      with
      respect to Shares payable in securities other than Shares or other non-cash
      property, or make any other distribution of such securities or property with
      respect to Shares (except any distribution specifically provided for in Section
      3.1 and Section 3.2 above), then this Warrant shall represent the right to
      acquire upon exercise of this Warrant such securities or property which a holder
      of Shares would have been entitled to receive upon such dividend or
      distribution, without the payment by the Holder of any additional consideration
      for such securities or property.

     

    3.5  Effect
      of Reorganization and Asset Sales.
      If any
      (i) reorganization or reclassification of the Common Stock (ii) consolidation
      or
      merger of the Company with or into another corporation, or (iii) sale or all
      or
      substantially all of the Company’s operating assets to another corporation
      followed by a liquidation of the Company (any such transaction shall be referred
      to herein as an “Event”), is effected in such a way that holders of common Stock
      are entitled to receive securities and/or assets as a result of their Common
      Stock ownership, the Holder, upon exercise of this Warrant, shall be entitled
      to
      receive such shares of stock securities or assets which the Holder would have
      received had it fully exercised this Warrant on or prior the record date for
      such Event. The Company shall not merge into or consolidate with another
      corporation or sell all of its assets to another corporation for a consideration
      consisting primarily of securities of such corporation, unless the successor
      or
      acquiring corporation, as the case may be, shall expressly assume the due and
      punctual observance and performance of each and every covenant and condition
      of
      this Warrant to be performed or observed by the Company and all of the
      obligations and liabilities hereunder, subject to such modification as shall
      be
      necessary to provide for adjustments which shall be as nearly equivalent as
      practicable to the adjustments provided for in this Section 2. The foregoing
      provisions shall similarly apply to successive mergers, consolidations or sales
      of assets.

    
       

      
        	 	 	 
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    3.6  Adjustment
      of Number of Shares.
      Upon
      each adjustment in the Exercise Price, the number of Shares shall be adjusted,
      to the nearest whole share, to the product obtained by multiplying the number
      of
      Shares, purchasable immediately prior to such adjustment by a fraction, the
      numerator of which shall be the Exercise Price immediately prior to such
      adjustment and the denominator of which shall be the Exercise Price immediately
      thereafter.

     

    3.7  No
      Impairment.
      The
      Company shall not, by amendment of its articles of incorporation or through
      a
      reorganization, transfer of assets, consolidation, merger, dissolution, issue,
      or sale of securities or any other voluntary action, avoid or seek to avoid
      the
      observance or performance of any of the terms to be observed or performed under
      this Warrant by the Company, but shall at all times in good faith assist in
      carrying out all of the provisions of this Warrant and in taking all such action
      as may be reasonably necessary or appropriate to protect Holder’s rights
      hereunder against impairment. If the Company takes any action affecting its
      Common Stock other than as described above that adversely affects Holder’s
      rights under this Warrant, the Exercise Price shall be adjusted downward and
      the
      number of Shares issuable upon exercise of this Warrant shall be adjusted upward
      in such a manner that the aggregate Exercise Price of this Warrant is
      unchanged.

     

    3.8  Fractional
      Shares.
      No
      fractional Shares shall be issuable upon the exercise of this Warrant, and
      the
      number of Shares to be issued shall be rounded down to the nearest whole
      Share.

     

    3.9  Certificate
      as to Adjustments.
      Upon
      any adjustment of the Exercise Price, the Company, at its expense, shall compute
      such adjustment and furnish Holder with a certificate of its Chief Financial
      Officer setting forth such adjustment and the facts upon which such adjustment
      is based. The Company shall, upon written request, furnish Holder a certificate
      setting forth the Exercise Price in effect upon the date thereof and the series
      of adjustments leading to such Exercise Price.

     

    3.10  No
      Rights of Shareholders.
      This
      Warrant does not entitle Holder to any voting rights or any other rights as
      a
      shareholder of the Company prior to the exercise of Holder’s right to purchase
      Shares as provided herein.

     

    ARTICLE
      4

    REPRESENTATIONS
      AND COVENANTS OF THE COMPANY

     

    4.1  Representations
      and Warranties.
      The
      Company hereby represents and warrants to Holder that all Shares which may
      be
      issued upon the exercise of the purchase right represented by this Warrant,
      shall, upon issuance, be duly authorized, validly issued, fully paid and
      nonasessable, and free of any liens and encumbrances. 

     

    4.2  Notice
      of Certain Events.
      If the
      Company proposes at any time (a) to declare any dividend or distribution
      upon its Common Stock, whether in cash, property, stock, or other securities
      and
      whether or not a regular cash dividend; (b) to offer for subscription pro rata
      to the holders of any class or series of its stock any additional shares of
      stock of any class or series or other rights; (c) to effect any reclassification
      or recapitalization of Common Stock; or (d) to merge or consolidate with or
      into
      any other corporation, or sell, lease, license, or convey all or substantially
      all of its assets, or to liquidate, dissolve or wind up, then, in connection
      with each such event, the Company shall give Holder (1) at least 20 days prior
      written notice of the date on which a record will be taken for such dividend,
      distribution, or subscription rights (and specifying the date on which the
      holders of Common Stock will be entitled thereto) or for determining rights
      to
      vote, if any, in respect of the matters referred to in (c) and (d) above; and
      (2) in the case of the matters referred to in (c) and (d) above at least 20
      days
      prior written notice of the date when the same will take place (and specifying
      the date on which the holders of Common Stock will be entitled to exchange
      their
      Common Stock for securities or other property deliverable upon the occurrence
      of
      such event).

    
       

      
        	 	 	 
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    4.3  Information
      Rights.
      So long
      as Holder holds this Warrant and/or any of the Shares, the Company shall deliver
      to Holder (a) promptly after mailing, copies of all notices or other written
      communications to the shareholders of the Company, (b) within ninety (90)
      days of their availability, the annual audited financial statements of the
      Company certified by independent public accountants of recognized standing,
      and
      (c) within forty-five (45) days after the end of each fiscal quarter or
      each fiscal year, the Company’s quarterly, unaudited financial
      statements.

     

    4.4  Reservation
      of Warrant Shares.
      The
      Company has reserved and will keep available, out of the authorized and unissued
      shares of Common Stock, the full number of shares sufficient to provide for
      the
      exercise of the rights of purchase represented by this Warrant.

     

    ARTICLE
      5

    REPRESENTATIONS
      AND COVENANTS OF THE HOLDER

     

    5.1  Private
      Issue.
      Holder
      understands (i) that the Shares issuable upon exercise of Holder’s rights
      contained in the Warrant are not registered under the Act or qualified under
      applicable state securities laws on the ground that the issuance contemplated
      by
      the Warrant will be exempt from the registration and qualifications requirements
      thereof, and (ii) that the Company’s reliance on such exemption is predicated on
      Holder’s representations set forth in this Article 5.

     

    5.2  Financial
      Risk.
      Holder
      has such knowledge and experience in financial and business matters as to be
      capable of evaluating the merits and risks of its investment and has the ability
      to bear the economic risks of its investment.

     

    5.3  Risk
      of No Registration.
      Holder
      understands that if the Company does not register with the Securities and
      Exchange Commission pursuant to Section 12 of the Act, or file reports pursuant
      to Section 15(d), of the Securities Exchange Act of 1934 (the “1934 Act”), or if
      a registration statement covering the securities under the Act is not in effect
      when it desires to sell (i) the right to purchase Shares pursuant to the
      Warrant, or (ii) the Shares issuable upon exercise of the right to purchase,
      it
      may be required to hold such securities for an indefinite period.

     

    5.4  Accredited
      Investor.
      Holder
      is an “accredited investor,” as such term is defined in Regulation D promulgated
      pursuant to the Act.

     

    
      
        	 	 	 
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    ARTICLE
      6

    MISCELLANEOUS

     

    6.1  Term.
      This
      Warrant is exercisable, in whole or in part, at any time and from time to time
      on or after the Issue Date and on or before the Expiration Date set forth
      above.

     

    6.2  Compliance
      with Securities Laws on Transfer.
      This
      Warrant may not be transferred or assigned in whole or in part without
      compliance with applicable federal and state securities laws by the transferor
      and the transferee (including, without limitation, the delivery of investment
      representation letters and legal opinions reasonably satisfactory to the
      Company, as reasonably requested by the Company). The Company shall not require
      Holder to provide an opinion of counsel if the transfer is to an affiliate
      of
      Holder.

     

    6.3  Transfer
      Procedure.
      Holder
      shall have the right without the consent of the Company to transfer or assign
      in
      whole or in part this Warrant and the Shares issuable upon exercise of this
      Warrant. Holder agrees that unless there is in effect a registration statement
      under the Act covering the proposed transfer of all or part of this Warrant,
      prior to any such proposed transfer the Holder shall give written notice thereof
      to the Company (a “Transfer Notice”). Each Transfer Notice shall describe the
      manner and circumstances of the proposed transfer in reasonable detail and,
      if
      the company so requests, shall be accompanied by an opinion of legal counsel,
      in
      a form reasonably satisfactory to the Company, to the effect that the proposed
      transfer may be effected without registration under the Act; provided that
      the
      Company will not require opinions of counsel for transactions involving
      transfers to affiliates or pursuant to Rule 144 promulgated by the
      Securities and Exchange Commission under the act, except in unusual
      circumstances.

     

    6.4  Notices,
      etc.
      All
      notices and other communications required or permitted hereunder shall be in
      writing and shall be delivered personally, or sent by telecopier machine or
      by a
      nationally recognized overnight courier service, and shall be deemed given
      when
      so delivered personally, or by telecopier machine or overnight courier service
      as follows: 

    

    If
      to the
      Company, to:

    

    3DIcon
      Corporation

    7507
      Sandusky Ave.

    Tulsa,
      Oklahoma 74136

    Telephone: 918-492-5082

    Facsimile: 918-492-5367

    

    With
      a
      copy to:

    

    John
      M.
      O’Connor, Esq.

    Newton,
      O’Connor, Turner & Ketchum

    15
      W.
      Sixth Street, Suite 2700

    Tulsa,
      Oklahoma 74119

    Telephone: 918-587-0101

    Facsimile: 918-587-0102

    
       

      
        	 	 	 
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    If
      to the
      Holder, to:

    

    Golden
      Gate Investors, Inc.

    7817
      Herschel Avenue, Suite 200

    La
      Jolla,
      CA 92037

    Telephone: 858-551-8789

    Facsimile: 858-551-8779

     

    or
      at
      such other address as the Company shall have furnished to the Holder. Each
      such
      notice or other communication shall for all purposes of this agreement be
      treated as effective or having been given when delivered if delivered
      personally, or, if sent by mail, at the earlier of its receipt or five days
      after the same has been deposited in a regularly maintained receptacle for
      the
      deposit of the United States mail, addressed and mailed as
      aforesaid.

     

    6.5  Counterparts.
      This
      agreement may be executed in any number of counterparts, each of which shall
      be
      enforceable against the parties actually executing such counterparts, and all
      of
      which together shall constitute one instrument. Facsimile execution shall be
      deemed originals.

     

    6.6  Waiver.
      This
      Warrant and any term hereof may be changed, waived, discharged or terminated
      only by an instrument in writing signed by the party against which enforcement
      of such change, waiver, discharge or termination is sought.

     

    6.7  Attorneys
      Fees.
      In the
      event of any dispute between the parties concerning the terms and provisions
      of
      this Warrant, the party prevailing in such dispute shall be entitled to collect
      from the other party all costs incurred in such dispute, including reasonable
      attorneys fees.

     

    6.8  Governing
      Law; Jurisdiction.
      This
      Warrant shall be governed by and construed in accordance with the laws of the
      State of California, without giving effect to its principles regarding conflicts
      of law. Each of the parties hereto consents to the jurisdiction of the federal
      courts whose districts encompass any part of the City of San Diego or the state
      courts of the State of California sitting in the City of San Diego in connection
      with any dispute arising under this Warrant 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.

     

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

    
       

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

     

    
      	3DIcon
              Corporation	 	Golden
              Gate Investors, Inc.
	 	 	 	 
	 By:	
               

               

            	 	 By:  	 
	 	 	 	 
	 	 
 	 	 
 	 
 
	 Title:	 	 	Title:	     

    

     

    
       

      
        	 	 	 
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    APPENDIX
      1

     

    WARRANT
      NOTICE OF EXERCISE

     

    1. The
      undersigned hereby elects to purchase _____ shares of the Common Stock of
      3DIcon Corporation pursuant to the terms of the Warrant to Purchase Common
      Stock
      issued to Golden Gate Investors, Inc. on November ___, 2006.

     

    2. Please
      issue a certificate or certificates representing said shares in the name of
      the
      undersigned or in such other name as is specified below:

    

    Golden
      Gate Investors, Inc.

    7817
      Herschel Ave., Suite 200

    La
      Jolla,
      California 92037

     

    3. The
      undersigned makes the representations and covenants set forth in Article 5
      of the Warrant to Purchase Common Stock.

    
      	 	 	 
	 	 
	 
    
              	 
 	 
 
	(Signature)	 	 
	 	 	 
	  
	
            
	
              (Date)

            	 

    

     

    
      
        	 	 	 
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        9THIS
        SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
        (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND IS BEING
        OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
        OF
        THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD OR TRANSFERRED
        EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
        ACT
        OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
        OF THE
        SECURITIES ACT OR SUCH OTHER LAWS.

       

      6
        1⁄4 % CONVERTIBLE DEBENTURE

      

      Company:
        3DIcon
        Corporation

      Company
        Address: 7507
        Sandusky Ave., Tulsa, Oklahoma 74136

      Closing
        Date: November
        3, 2006

      Maturity
        Date: November
        3, 2009

      Principal
        Amount:
        $1,250,000

      First
        Payment Due Date: January
        15, 2007

       

      3DIcon
        Corporation, an Oklahoma corporation, and any successor or resulting corporation
        by way of merger, consolidation, sale or exchange of all or substantially
        all of
        the assets or otherwise (the “Company”),
        for
        value received, hereby promises to pay to the Holder (as such term is
        hereinafter defined), or such other Person (as such term is hereinafter defined)
        upon order of the Holder, on the Maturity Date, the Principal Amount (as
        such
        term is hereinafter defined), as such sum may be adjusted pursuant to Article
        3,
        and to pay interest thereon from the Closing Date, monthly in arrears, on
        the
        15th
        day of
        each month (each an “Interest
        Payment Due Date”
        and
        collectively, the “Interest
        Payment Due Dates”),
        commencing on the First Payment Due Date, at the rate of six and one-quarter
        percent (6 1⁄4 %) per annum (the “Debenture
        Interest Rate”),
        until
        the Principal Amount of this Debenture has been paid in full. All interest
        payable on the Principal Amount of this Debenture shall be calculated on
        the
        basis of a 360-day year for the actual number of days elapsed. Payment of
        interest on this Debenture shall be in cash or, at the option of the Holder,
        in
        shares of Common Stock of the Company valued at the then applicable Conversion
        Price (as defined herein). This Debenture may not be prepaid without the
        written
        consent of the Holder.

       

      ARTICLE
        1

      DEFINITIONS

       

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

       

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

       

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

    

    

      
        	
                 

                ___________________

                Initials

              	 	
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            1

            
              

            

          

           

        

      

       

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

       

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

       

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

       

      (vi) “Common
        Stock Issued at Conversion”,
        means
        the Common Stock deliverable upon conversion of this Debenture, including
        all
        securities of any other class or series into which this Debenture may hereafter
        be convertible, whether now or hereafter created and however
        designated.

       

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

       

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

       

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

       

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

       

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

       

      (xii) “Deadline”
        means
        the date that is the 90th day from the Closing Date, provided, however, the
        Deadline shall be extended by such time as is necessary for the Company to
        respond to comments by the SEC, so long as the Company files the appropriate
        registration statement within 30 days of the Closing Date and thereafter
        responds to all SEC comments within 10 Business Days of receipt thereof,
        and
        provided, further, that such 10 Business Day period shall be extended to
        a date
        that is the second Business Day following the receipt by the Company of
        information necessary to formulate such response to the SEC in the event
        such
        information must be provided by the Holder or an Affiliate of the Holder,
        and
        such information is not provided to the Company on or before eight Business
        Days
        from the original receipt of the SEC comments.

      

        
          	
                   

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        	
                 

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      (xxiii) “Principal
        Amount”
        means,
        for any date of calculation, the principal sum set forth in the first paragraph
        of this Debenture; provided (1) “Principal Amount” shall include only so much of
        the amount which the Holder has actually advanced pursuant to the Securities
        Purchase Agreement and which has actually been advanced to the Company out
        of
        the Escrow, and (2) “Principal Amount” shall not include any amount of the
        Debenture with respect to which Holder has at the time furnished a Conversion
        Notice in compliance with Section 3.2. Notwithstanding anything herein or
        in the
        Securities Purchase Agreement to the contrary, Holder shall never be entitled
        to
        convert any portion of the Debenture with respect to which Holder has not
        yet
        paid the Purchase Price and such portion of the Purchase Price has been released
        to the Company from the Escrow, in accordance with the terms of the Securities
        Purchase Agreement.

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        	
                 

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

       

      ARTICLE
        2

      EXCHANGES,
        TRANSFER AND REPAYMENT

       

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

       

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

       

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

       

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

       

      ARTICLE
        3

      CONVERSION
        OF DEBENTURE

       

      SECTION
        3.1 Conversion;
        Conversion Price; Valuation Event.
        

       

      (a)
        Subject to the limitations set forth in Section 3.5 hereof, and further subject
        to the limitations on the obligation to either release funds from the Escrow
        or
        issue Conversion Shares pursuant to Section I.B of the Securities Purchase
        Agreement, at the option of the Holder, this Debenture may be converted,
        either
        in whole or in part, up to the full Principal Amount hereof into Common Shares
        (calculated as to each such conversion to the nearest 1/100th of a share),
        at
        any time and from time to time on any Business Day, subject to compliance
        with
        Section 3.2. The number of Common Shares into which this Debenture may be
        converted is equal to the dollar amount of the Debenture being converted
        divided
        by the Conversion Price. The “Conversion
        Price”
        shall be
        equal to the lesser of (i) $2.00, or (ii) 80% of the average of the five
        lowest
        Volume Weighted Average Prices during the twenty Trading Days prior to Holder’s
        election to convert (the percentage figure being a “Discount
        Multiplier”);
        provided,
        that in
        the event the Registration Statement has not been declared effective by the
        SEC
        by the Deadline then the applicable Discount Multiplier shall decrease by
        three
        percentage points for each month or partial month occurring after the Deadline
        that the Registration Statement is not effective or, if the Registration
        Statement has theretofore been declared effective but is not thereafter
        effective, then the applicable Discount Multiplier shall decrease by three
        percentage points for each week or partial week occurring after the Deadline
        that the Registration Statement is not effective. In addition, if the
        Registration Statement has theretofore been declared effective but is not
        thereafter effective, Holder, at its option, shall be entitled to the Conversion
        Price on the date that the Registration Statement is no longer effective,
        for a
        period beginning on the date that the Registration Statement is declared
        effective and continuing for the number of days that a Registration Statement
        was not effective. The Company reserves the right to increase the number
        of
        Trading Days in clause (ii) above, as it deems appropriate.

       

      
        	
                 

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      If
        the
        Holder elects to convert a portion of the Debenture and, on the day that
        the
        election is made, the Volume Weighted Average Price is below $0.75, the Company
        shall have the right to prepay that portion of the Debenture that Holder
        elected
        to convert, plus any accrued and unpaid interest, at 135% of such amount.
        In the
        event that the Company elects to prepay that portion of the Debenture, Holder
        shall have the right to withdraw its Conversion Notice. If, at anytime during
        the month, the Volume Weighted Average Price is below $0.75, Holder shall
        not be
        obligated to convert any portion of the Debenture during that month.

       

      (b) Notwithstanding
        the provisions of Section 3.1(a), in the event the Company’s Registration
        Statement has not been declared effective by the Deadline or, if the
        Registration Statement has theretofore been declared effective but is not
        thereafter effective, the following will also apply in addition to any damages
        incurred by the Holder as a result thereof:

       

      (i) The
        Holder may demand repayment of one hundred and fifteen percent (115%) of
        the
        Principal Amount of the Debenture, together with all accrued and unpaid interest
        on the Principal Amount of the Debenture, in cash, at any time after the
        Deadline but prior to the Company’s Registration Statement being declared
        effective by the SEC or during the period that the Company’s Registration
        Statement is not effective, such repayment to be made within three (3) business
        days of such demand. In the event that the Debenture is so accelerated, in
        addition to the repayment of one hundred and fifteen percent (115%) of the
        Principal Amount together with accrued interest as aforesaid, the Company
        shall
        immediately issue and pay, as the case may be, to the Holder 25,000 Shares
        of
        Common Stock and $15,000 for each thirty (30) day period, or portion thereof,
        during which the Principal Amount, including interest thereon, remains unpaid
        following demand, with the monthly payment amount to increase to $20,000
        for
        each thirty (30) day period, or portion thereof, after the first ninety (90)
        day
        period;

       

      
        	
                 

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      (ii) If
        the
        SEC indicates that the Company’s Registration Statement will be declared
        effective upon request by the Company, and the Company does not, within 3
        business days of the SEC indication, request that the Registration Statement
        become effective, the amounts set forth in subsection (i) above shall
        double.

       

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

       

      (b) If,
        at
        any time after the date of this Debenture, (i) the Company wrongfully
        challenges, disputes or denies the right of the Holder hereof to effect the
        conversion of this Debenture into Common Shares or otherwise wrongfully
        dishonors or rejects any Conversion Notice delivered in accordance with this
        Section 3.2 or (ii) any third party who is not and has never been an Affiliate
        of the Holder commences any lawsuit or legal proceeding or otherwise asserts
        any
        claim before any court or public or governmental authority which seeks to
        challenge, deny, enjoin, limit, modify, delay or dispute the right of the
        Holder
        hereof to effect the conversion of this Debenture into Common Shares, then
        the
        Holder shall have the right, but not the obligation, by written notice to
        the
        Company, to require the Company to promptly redeem this Debenture for cash
        at
        one hundred and thirty-five (135%) of the Principal Amount thereof, together
        with all accrued and unpaid interest thereon to the date of redemption. Under
        any of the circumstances set forth above, the Company shall be responsible
        for
        the payment of all costs and expenses of the Holder, including reasonable
        legal
        fees and expenses, as and when incurred in defending itself in any such action
        or pursuing its rights hereunder (in addition to any other rights of the
        Holder).

       

      
        	
                 

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

       

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

       

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

       

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

       

      
        	
                 

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      SECTION
        3.5 Certain
        Conversion Limits.

       

      So
        long
        as any of the Principal Amount of this Debenture is outstanding, the Holder
        shall not have the right, and the Company shall not have the obligation,
        to
        convert any portion of this Debenture if, following a Conversion Notice from
        the
        Holder, the result would be that the Holder would be deemed the beneficial
        owner
        of more than 9.99% of the then Outstanding shares of Common Stock. Further,
        for
        a period of one year after the Closing Date, if and to the extent that, on
        any
        date, the mere holding by the Holder of this Debenture (regardless of the
        actual
        conversion of any portion thereof) would result in the Holder’s being deemed the
        beneficial owner of
        more
        than 9.99% of the then Outstanding shares of Common Stock, then in addition
        to
        the Holder having no right, and the Company having no obligation, to convert
        any
        portion of this Debenture as shall cause such Holder to be deemed the beneficial
        owner of more than 9.99% of the then Outstanding shares of Common Stock if
        any
        court of competent jurisdiction shall determine that the foregoing limitation
        is
        ineffective to prevent the Holder, by mere ownership of the Debenture, from
        being deemed the beneficial owner of more than 9.99% of the then Outstanding
        shares of Common Stock, then the Company shall prepay such portion of this
        Debenture as shall cause such Holder not to be deemed the beneficial owner
        of
        more than 9.99% of the then Outstanding shares of Common Stock. Upon such
        determination by a court of competent jurisdiction, the Holder shall have
        no
        interest in or rights under such portion of the Debenture. Any and all interest
        paid on or prior to the date of such determination shall be deemed interest
        paid
        on the remaining portion of this Debenture held by the Holder. 

       

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

       

      
        	
                 

                ___________________

                Initials

              	 	
                 ____________________

                Initials

              

      

      

      
        
          
             

          

          
            9

            
              

            

          

           

        

      

       

      ARTICLE
        4

      STATUS;
        RESTRICTIONS ON TRANSFER

       

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

       

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

       

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

       

      “The
        securities represented by this certificate have not been registered under
        the
        Securities Act of 1933, as amended (the “Securities Act”). The securities may
        not be offered for sale, sold or otherwise transferred except (i) pursuant
        to an
        effective registration statement under the Securities Act or (ii) pursuant
        to an
        exemption from registration under the Securities Act in respect of which
        the
        issuer of this certificate has received an opinion of counsel satisfactory
        to
        the issuer of this certificate to such effect. The securities are further
        subject to the terms of a Securities Purchase Agreement dated November ___,
        2006, copies of which may be obtained at no cost by written request made
        by the
        holder of record of this certificate to the Secretary of the issuer of this
        certificate at the principal executive offices of the issuer of this
        certificate.”

       

      ARTICLE
        5

      COVENANTS

       

      SECTION
        5.1 Conversion.
        The
        Company shall cause the transfer agent, not later than two (2) Business Days
        after the Conversion Date, to issue and deliver to the Holder the requisite
        shares of Common Stock Issued at Conversion. Such delivery shall be by
        electronic transfer if a Registration Statement covering the Common Stock
        has
        been declared effective by the SEC.

       

      
        	
                 

                ___________________

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                Initials

              

      

      

      
        
          
             

          

          
            10

            
              

            

          

           

        

      

       

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

       

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

       

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

       

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

       

      SECTION
        5.6 Right
        of First Refusal on Other Financing. Subsequent
        to the date on which the Company’s registration statement filed pursuant to the
        Registration Rights Agreement becomes effective with the SEC, in the event
        that
        the Company obtains a commitment for any other financing (either debt, equity,
        or a combination thereof) which is to close during the term of this Debenture,
        Holder shall be entitled to a right of first refusal to enable it to, at
        Holder’s option, match the terms of the other financing. The Company shall
        deliver to Holder, at least 10 days prior to the proposed closing date of
        such
        transaction, written notice describing the proposed transaction, including
        the
        terms and conditions thereof, and providing Holder an option during the 10
        day
        period following delivery of such notice to provide the financing being offered
        in such transaction on the same terms as contemplated by such
        transaction.

       

      ARTICLE
        6

      EVENTS
        OF DEFAULT; REMEDIES

       

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

       

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

       

      
        	
                 

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            11

            
              

            

          

           

        

      

       

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

       

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

       

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

       

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

       

      
        	
                 

                ___________________

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            12

            
              

            

          

           

        

      

       

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

       

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

       

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

       

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

       

      SECTION
        6.2 Acceleration
        of Maturity; Rescission and Annulment.
        If an
        Event of Default occurs and is continuing, then and in every such case the
        Holder may, by a notice in writing to the Company, rescind any outstanding
        Conversion Notice and declare that all amounts owing or otherwise outstanding
        under this Debenture are immediately due and payable and upon any such
        declaration this Debenture shall become immediately due and payable in cash
        at a
        price of one hundred and thirty-five percent (135%) of the Principal Amount
        thereof, together with all accrued and unpaid interest thereon to the date
        of
        payment; provided,
        however,
        in the
        case of any Event of Default described in clauses (iii), (iv), (v) or (vii)
        of
        Section 6.1, such amount automatically shall become immediately due and payable
        without the necessity of any notice or declaration as aforesaid.

       

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

       

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

       

      
        	
                 

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            13

            
              

            

          

           

        

      

       

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

       

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

       

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

       

      ARTICLE
        7

      MISCELLANEOUS

       

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

       

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

       

      
        	
                 

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            14

            
              

            

          

           

        

      

       

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

       

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

       

      (1)          
        If
        to the
        Company, to:

      

      3DIcon
        Corporation

      7507
        Sandusky Ave.

      Tulsa,
        Oklahoma 74136

      Telephone: 918-492-5082

      Facsimile:   918-492-5367

      

      With
        a
        copy to:

      

      John
        M.
        O’Connor, Esq.

      Newton,
        O’Connor, Turner & Ketchum

      15
        W.
        Sixth Street, Suite 2700

      Tulsa,
        Oklahoma 74119

      Telephone: 918-587-0101

      Facsimile:  
        918-587-0102

       

      

      (2)         
         If
        to the
        Holder, to:

       

      Golden
        Gate Investors, Inc.

      7817
        Herschel Avenue, Suite 200

      La
        Jolla,
        California 92037

      Telephone: 858-551-8789

      Facsimile:   858-551-8779

       

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

       

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

       

      
        	
                 

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

       

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

       

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

       

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

       

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

       

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

       

      SECTION
        7.12 Facsimile
        Execution.
        Facsimile execution shall be deemed originals.

       

      
        	
                 

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            16

            
              

            

          

           

        

      

       

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

      
        	 	 	 
	 	
                3DIcon
                  Corporation

              
	 
 	 
 	 
 
	
              	By:  	/s/
                Martin Keating
	 	
                
Title:
                Chief Executive Officer

      

       

      
        	
                 

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            17

            
              

            

          

           

        

      

       

      EXHIBIT A

      DEBENTURE
        CONVERSION NOTICE

      

      TO: 3DIcon
        Corporation

       

      The
        undersigned owner of this Convertible Debenture due November ___, 2009 (the
“Debenture”)
        issued
        by 3DIcon Corporation (the “Company”)
        hereby
        irrevocably exercises its option to convert $__________ Principal Amount
        of the
        Debenture into shares of Common Stock in accordance with the terms of the
        Debenture. The undersigned hereby instructs the Company to convert the portion
        of the Debenture specified above into shares of Common Stock Issued at
        Conversion in accordance with the provisions of Article 3 of the Debenture.
        The
        undersigned directs that the Common Stock and certificates therefor deliverable
        upon conversion, the Debenture reissued in the Principal Amount not being
        surrendered for conversion hereby, [the check or shares of Common Stock in
        payment of the accrued and unpaid interest thereon to the date of this Notice,]
        together with any check in payment for fractional Common Stock, be registered
        in
        the name of and/or delivered to the undersigned unless a different name has
        been
        indicated below. All capitalized terms used and not defined herein have the
        respective meanings assigned to them in the Debenture. The conversion pursuant
        hereto shall be deemed to have been effected at the date and time specified
        below, and at such time the rights of the undersigned as a Holder of the
        Principal Amount of the Debenture set forth above shall cease and the Person
        or
        Persons in whose name or names the Common Stock Issued at Conversion shall
        be
        registered shall be deemed to have become the holder or holders of record
        of the
        Common Shares represented thereby and all voting and other rights associated
        with the beneficial ownership of such Common Shares shall at such time vest
        with
        such Person or Persons.

       

      In
        the
        event that, at the time this Conversion Notice is received by the Company,
        there
        is not then in effect a registration statement on file with the Securities
        and
        Exchange Commission covering the Common Stock issued upon Conversion, then
        the
        undersigned hereby reaffirms all representations contained in Section II
        of the
        Securities Purchase Agreement dated October ___, 2006 as if such representations
        were made on the date hereof.

       

      Date
        and
        time: __________________

       

      ______________________________

       

      By:
        ___________________________

       

      Title:
        _________________________

       

      Fill
        in
        for registration of Debenture:

      Please
        print name and address

      (including
        ZIP code number):

       

      
        ______________________________

        
           

          ______________________________

           

          
            ______________________________

             

          

        

      

      
        	
                 

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            A-1

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