Document:

Exhibit 10.4
    

    
      NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
      CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
      CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE
      OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
      (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A
      FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT
      REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
      144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
      BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
      OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
    

    
      THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT. PURSUANT TO
      TREASURY REGULATION §1.1275-3(b)(1), A REPRESENTATIVE OF THE BORROWER
      HEREOF WILL, BEGINNING TEN DAYS AFTER THE ISSUE DATE OF THIS NOTE,
      PROMPTLY MAKE AVAILABLE TO THE HOLDER UPON REQUEST THE INFORMATION
      DESCRIBED IN TREASURY REGULATION §1.1275-3(b)(1)(i).
    

    
      THIS NOTE AMENDS, RESTATES AND REPLACES THAT CERTAIN SENIOR SECURED
      CONVERTIBLE PROMISSORY NOTE DATED SEPTEMBER 25, 2009, IN THE PRINCIPAL
      AMOUNT OF $1,100,000, EXECUTED BY NET TALK.COM, INC. AND IS AN
      EXTENSION, CONTINUATION AND RENEWAL OF THE INDEBTEDNESS REPRESENTED BY
      SUCH NOTE.  THE INDEBTEDNESS EVIDENCED BY SUCH NOTE HAS NOT BEEN PAID OR
      EXTINGUISHED BY THIS NOTE, AND THIS NOTE DOES NOT CONSTITUTE A NOVATION
      OF SUCH INDEBTEDNESS OR NOTE.
    

    
      12% SENIOR SECURED CONVERTIBLE DEBENTURE
DUE September 25,
      2011
    

    
      No.: CD-09-03
    

    
      Original Issue Date: September 25, 2009 (as amended and restated
      February 24, 2010)
    

    
      Original Conversion Price (subject to adjustment herein): $0.25
    

    
      Principal Amount: $1,265,607
    

    
      THIS 12% SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly
      authorized and validly issued debentures of Net Talk.com, Inc., a
      Florida corporation, having its principal place of business at 1100 NW
      163 Drive, Miami, Florida 33169 (the “Company”), designated
      as its 12% Senior Secured Convertible Debenture, due September 25, 2011
      (this debenture, the “Debenture” and collectively with the
      other such series of debentures, the “Debentures”).
    

    

    

    
      
        

        

      

      
        
          1
        

        
          

        

      

      
        

        

      

    

    
      FOR VALUE RECEIVED, the Company promises to pay to Vicis Capital Master
      Fund, or its registered assigns (the “Holder”), or shall
      have paid pursuant to the terms hereunder, the principal sum of
      $1,265,607, by September 25, 2011, or such earlier date as this
      Debenture is required or permitted to be repaid as provided hereunder
      (the “Maturity Date”), and to pay interest to the Holder on
      the aggregate unconverted and then outstanding principal amount of this
      Debenture in accordance with the provisions hereof. This Debenture is
      subject to the following additional provisions:
    

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

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

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

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

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

    
      “Change of Control Transaction” means the occurrence after
      the date hereof of any of (i) an acquisition after the date hereof by an
      individual or legal entity or “group” (as described in Rule 13d-5(b)(1)
      promulgated under the Exchange Act) of effective control (whether
      through legal or beneficial ownership of capital stock of the Company,
      by contract or otherwise) of in excess of 45% of the voting securities
      of the Company (other than by means of conversion or exercise of the
      Debentures and the Securities issued together with the Debentures), or
      (ii) the Company merges into or consolidates with any other Person, or
      any Person merges into or consolidates with the Company and, after
      giving effect to such transaction, the stockholders of the Company
      immediately prior to such transaction own less than 55% of the aggregate
      voting power of the Company or the successor entity of such transaction,
      or (iii) the Company sells or transfers all or substantially all of its
      assets to another Person and the stockholders of the Company immediately
      prior to such transaction own less than 55% of the aggregate voting
      power of the acquiring entity immediately after the transaction, or (iv)
      a replacement at one time or within a two year period of more than
      one-half of the members of the Company’s board of directors (except as
      such replacement may be required pursuant to the rules and regulations
      of a Trading Market) which is not approved by a majority of those
      individuals who are members of the board of directors on the date hereof
      (or by those individuals who are serving as members of the board of
      directors on any date whose nomination to the board of directors was
      approved by a majority of the members of the board of directors who are
      members on the date hereof), or (v) the execution by the Company of an
      agreement to which the Company is a party or by which it is bound,
      providing for any of the events set forth in clauses (i) through (iv)
      above.
    

    

    

    
      
        

        

      

      
        
          2
        

        
          

        

      

      
        

        

      

    

    
      “Common Stock” means the common stock, par value $.001 per
      share, of the Company and stock of any other class of securities into
      which such securities may hereafter be reclassified or changed into.
    

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

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

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

    
      “Debenture Register” shall have the meaning set forth in
      Section 2(b).
    

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

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

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

    
      “Exchange Act” means the Securities Exchange Act of 1934,
      as amended, and the rules and regulations promulgated thereunder.
    

    
      “Exempt Issuance” means the issuance of the following:  (1)
      shares of Common Stock issued upon conversion or exercise of any Options
      or Convertible Securities that are outstanding on the day immediately
      preceding the Initial Closing Date, provided that the terms of such
      Options or Convertible Securities are not amended, modified or changed
      on or after the Closing Date to lower the conversion or exercise price
      thereof and so long as the number of shares of Common Stock underlying
      such securities is not otherwise increased; (2) Up to 10,000,000 shares
      of Common Stock in the aggregate that are issued under the Company’s
      stock option plan (the “SOP”) pursuant to the terms of the
      SOP in effect on the day immediately preceding the Initial Closing Date;
      (3) securities issued pursuant to acquisitions or strategic transactions
      approved by a majority directors of the Company not interested in the
      transaction, provided that any such issuance shall only be to a Person
      which is, itself or through its subsidiaries, an operating company in a
      business synergistic with the business of the Corporation and in which
      the Corporation receives benefits in addition to the investment of
      funds; provided that, an issuance of securities primarily for the
      purpose of raising capital or to an entity whose primary business is
      investing in securities shall not be an Exempt Issuance; and (4) shares
      of Common Stock issued in a best efforts underwritten public offering in
      which the gross cash proceeds to the Company (before underwriting
      discounts, commissions and fees) are at least $30,000,000.
    

    

    

    
      
        

        

      

      
        
          3
        

        
          

        

      

      
        

        

      

    

    
      “February Purchase Agreement” means that certain Securities
      Purchase Agreement dated February 24, 2010 between the Company and the
      original Holder.
    

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

    
      “Interest Payment Date” shall have the meaning set forth in
      Section 2(a).
    

    
      “Late Fees” shall have the meaning set forth in Section
      2(c).
    

    
      “Mandatory Default Amount” means the sum of (i) the greater
      of (A) 110% of the outstanding principal amount of this Debenture, plus
      all accrued and unpaid interest hereon, or (B) the outstanding principal
      amount of this Debenture, plus all accrued and unpaid interest hereon,
      divided by the Conversion Price on the date the Mandatory Default Amount
      is either (a) demanded (if demand or notice is required to create an
      Event of Default) or otherwise due or (b) paid in full, whichever has a
      lower Conversion Price, multiplied by the VWAP on the date the Mandatory
      Default Amount is either (x) demanded or otherwise due or (y) paid in
      full, whichever has a higher VWAP, and (ii) all other amounts, costs,
      expenses and liquidated damages due in respect of this Debenture.
    

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

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

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

    
      “Optional Redemption Amount” means the sum of (i) 100% of
      the principal amount of the Debenture then outstanding, (ii) accrued but
      unpaid interest and (iii) all liquidated damages and other amounts due
      in respect of the Debenture.
    

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

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

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

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

    
      “Permitted Indebtedness” means the Permitted Indebtedness
      as defined by the February Purchase Agreement.
    

    

    

    
      
        

        

      

      
        
          4
        

        
          

        

      

      
        

        

      

    

    
      “Permitted Lien” means the a Permitted Lien as defined by
      the February Purchase Agreement.
    

    
      “Person” means an individual or corporation, partnership,
      trust, incorporated or unincorporated association, joint venture,
      limited liability company, joint stock company, government (or an agency
      or subdivision thereof) or other entity of any kind.
    

    
      “Purchase Agreement” means the Securities Purchase
      Agreement among the Company and the original Holders, dated as of
      September 25, 2009, as amended by that certain Securities Purchase
      Agreement dated February 24, 2010 and as each is amended, modified or
      supplemented from time to time in accordance with their terms.
    

    
      “Registration Rights Agreement” means the Amended and
      Restated Registration Rights Agreement among the Company and the Holder,
      dated February 24, 2010 as amended, modified or supplemented from time
      to time in accordance with its terms.
    

    
      “Registration Statement” means a registration statement
      that registers the resale of all Conversion Shares of the Holder, who
      shall be named as a “selling stockholder” therein, and meets the
      requirements of the Registration Rights Agreement.
    

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

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

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

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

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

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

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

    

    

    
      
        

        

      

      
        
          5
        

        
          

        

      

      
        

        

      

    

    
      Section 2.          Interest.
    

    
      a)        Payment of Interest
      in Cash or Kind. The Company shall pay interest to the Holder on the
      aggregate unconverted and then outstanding principal amount of this
      Debenture at the rate of 12% per annum, payable on each Conversion Date
      (as to that principal amount then being converted), on each Optional
      Redemption Date (as to that principal amount then being redeemed) and on
      the Maturity Date (except that, if any such date is not a Business Day,
      then such payment shall be due on the next succeeding Business Day)
      (each such date, an “Interest Payment Date”), in cash.
    

    
      b)                Interest
      Calculations. Interest shall be calculated on the basis of a 360-day
      year and shall accrue daily commencing on the Original Issue Date until
      payment in full of the principal sum, together with all accrued and
      unpaid interest, liquidated damages and other amounts which may become
      due hereunder, has been made. Interest shall cease to accrue with
      respect to any principal amount converted, provided that the Company
      actually delivers the Conversion Shares within the time period required
      by Section 4(d)(ii); if the Company fails to deliver shares within the
      time period required by Section 4(d)(ii), interest shall cease to accrue
      upon the actual delivery of the Conversion Shares. Interest hereunder
      will be paid to the Person in whose name this Debenture is registered on
      the records of the Company regarding registration and transfers of this
      Debenture (the “Debenture Register”).
    

    
      c)                Late
      Fee. All overdue accrued and unpaid interest to be paid hereunder
      shall be subject to a late fee at an interest rate equal to the lesser
      of 18% per annum or the maximum rate permitted by applicable law (“Late
      Fees”) which shall accrue daily from the date such interest is due
      hereunder through and including the date of payment in full.
    

    
      d)                Prepayment.
      Upon fifteen (15) days prior written notice to the Holder, the Company
      shall have the privilege and option to prepay the then outstanding
      principal amount of this Debenture in full, and not in part, at any time
      prior to the Maturity Date, upon payment of 110% of the then outstanding
      principal amount, plus all accrued and unpaid interest hereon, plus all
      other amounts, costs, expenses and liquidated damages due in respect of
      this Debenture. In the event of any prepayment, the Holder shall be
      permitted to convert all or a portion of this Note until the prepayment
      date specified in the notice.  Except as otherwise set forth in the
      preceding sentence, the Company may not prepay any portion of the
      principal amount of this Debenture without the prior written consent of
      the Holder.
    

    
      Section 3.          Registration
      of Transfers and Exchanges.
    

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

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

    

    

    
      
        

        

      

      
        
          6
        

        
          

        

      

      
        

        

      

    

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

    
      Section 4.        Conversion.
    

    
      a)                Voluntary
      Conversion. At any time after the Original Issue Date until this
      Debenture is no longer outstanding, this Debenture shall be convertible,
      in whole or in part, into shares of Common Stock at the option of the
      Holder, at any time and from time to time (subject to the conversion
      limitations set forth in Section 4(c) hereof). The Holder shall effect
      conversions by delivering to the Company a Notice of Conversion, the
      form of which is attached hereto as Annex A (a “Notice
      of Conversion”), specifying therein the principal amount of this
      Debenture to be converted and the date on which such conversion shall be
      effected (a “Conversion Date”). If no Conversion Date is
      specified in a Notice of Conversion, the Conversion Date shall be the
      date that such Notice of Conversion is deemed delivered hereunder. To
      effect conversions hereunder, the Holder shall not be required to
      physically surrender this Debenture to the Company unless the entire
      principal amount of this Debenture plus all accrued and unpaid interest
      thereon has been so converted. Conversions hereunder shall have the
      effect of lowering the outstanding principal amount of this Debenture in
      an amount equal to the applicable conversion. The Holder and the Company
      shall maintain records showing the principal amount(s) converted and the
      date of such conversion(s). The Company may deliver an objection to any
      Notice of Conversion within 1 Business Day of delivery of such Notice of
      Conversion. The Holder, and any assignee by acceptance of this
      Debenture, acknowledge and agree that, by reason of the provisions of
      this paragraph, following conversion of a portion of this Debenture, the
      unpaid and unconverted principal amount of this Debenture may be less
      than the amount stated on the face hereof.
    

    
      b)                Conversion
      Price. The conversion price in effect on any Conversion Date shall
      be equal to $0.25 (subject to adjustment herein) (the “Conversion
      Price”).
    

    
      c)                Conversion
      Limitations.
    

    
      i.                Holder’s Restriction on Conversion. At any time after
      the Company has had a registration statement filed pursuant to the
      Securities Act or the Exchange Act declared effective, the Company shall
      not effect any conversion of this Debenture, and a Holder shall not have
      the right to convert any portion of this Debenture, to the extent that
      after giving effect to the conversion set forth on the applicable Notice
      of Conversion, such Holder (together with such Holder’s Affiliates, and
      any other person or entity acting as a group together with such Holder
      or any of such Holder’s Affiliates) would beneficially own in excess of
      the Beneficial Ownership Limitation (as defined below). For purposes of
      the foregoing sentence, the number of shares of Common Stock
      beneficially owned by such Holder and its Affiliates shall include the
      number of shares of Common Stock issuable upon conversion of this
      Debenture with respect to which such determination is being made, but
      shall exclude the number of shares of Common Stock which are issuable
      upon (A) conversion of the remaining, unconverted principal amount of
      this Debenture beneficially owned by such Holder or any of its
      Affiliates and (B) exercise or conversion of the unexercised or
      unconverted portion of any other securities of the Company subject to a
      limitation on conversion or exercise analogous to the limitation
      contained herein (including, without limitation, any other Debentures or
      the Warrants) beneficially owned by such Holder or any of its Affiliates.
    

    

    

    
      
        

        

      

      
        
          7
        

        
          

        

      

      
        

        

      

    

    
      Except as set forth in the preceding sentence, for purposes of this
      Section 4(c)(i), beneficial ownership shall be calculated in accordance
      with Section 13(d) of the Exchange Act and the rules and regulations
      promulgated thereunder. To the extent that the limitation contained in
      this Section 4(c)(i) applies, the determination of whether this
      Debenture is convertible (in relation to other securities owned by such
      Holder together with any Affiliates) and of which principal amount of
      this Debenture is convertible shall be in the sole discretion of such
      Holder, and the submission of a Notice of Conversion shall be deemed to
      be such Holder’s determination of whether this Debenture may be
      converted (in relation to other securities owned by such Holder together
      with any Affiliates) and which principal amount of this Debenture is
      convertible, in each case subject to such aggregate percentage
      limitations. To ensure compliance with this restriction, each Holder
      will be deemed to represent to the Company each time it delivers a
      Notice of Conversion that such Notice of Conversion has not violated the
      restrictions set forth in this paragraph and the Company shall have no
      obligation to verify or confirm the accuracy of such determination. In
      addition, a determination as to any group status as contemplated above
      shall be determined in accordance with Section 13(d) of the Exchange Act
      and the rules and regulations promulgated thereunder. For purposes of
      this Section 4(c)(i), in determining the number of outstanding shares of
      Common Stock, a Holder may rely on the number of outstanding shares of
      Common Stock as stated in the most recent of the following: (A) the
      Company’s most recent Form 10-Q or Form 10-K, as the case may be; (B) a
      more recent public announcement by the Company; or (C) a more recent
      notice by the Company or the Company’s transfer agent setting forth the
      number of shares of Common Stock outstanding. Upon the written or oral
      request of a Holder, the Company shall within two Trading Days confirm
      orally and in writing to such Holder the number of shares of Common
      Stock then outstanding. In any case, the number of outstanding shares of
      Common Stock shall be determined after giving effect to the conversion
      or exercise of securities of the Company, including this Debenture, by
      such Holder or its Affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported. The “Beneficial
      Ownership Limitation” shall be 4.99% of the number of shares of the
      Common Stock outstanding immediately after giving effect to the issuance
      of shares of Common Stock issuable upon conversion of this Debenture
      held by the Holder. The Beneficial Ownership Limitation provisions of
      this Section 4(c)(i) may be waived by such Holder, at the election of
      such Holder, upon not less than sixty-one (61) days’ prior notice to the
      Company, to change the Beneficial Ownership Limitation to 9.99% of the
      number of shares of the Common Stock outstanding immediately after
      giving effect to the issuance of shares of Common Stock upon conversion
      of this Debenture held by the Holder and the provisions of this Section
      4(c)(ii) shall continue to apply. Upon such a change by a Holder of the
      Beneficial Ownership Limitation from such 4.99% limitation to such 9.99%
      limitation, the Beneficial Ownership Limitation may be further waived by
      such Holder, at the election of such Holder, upon not less than
      sixty-one (61) days' prior notice to the Company. The provisions of this
      paragraph shall be construed and implemented in a manner otherwise than
      in strict conformity with the terms of this Section 4(c)(i) to correct
      this paragraph (or any portion hereof) which may be defective or
      inconsistent with the intended Beneficial Ownership Limitation herein
      contained or to make changes or supplements necessary or desirable to
      properly give effect to such limitation. The limitations contained in
      this paragraph shall apply to a successor holder of this Debenture.
    

    

    

    
      
        

        

      

      
        
          8
        

        
          

        

      

      
        

        

      

    

    
      d)                Mechanics
      of Conversion.
    

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

    
      ii.       Delivery of Certificate
      Upon Conversion. Not later than 3 Trading Days after each Conversion
      Date (the “Share Delivery Date”), the Company shall
      deliver, or cause to be delivered, to the Holder (A) a certificate or
      certificates representing the Conversion Shares which, on or after the
      effective date of the Registration Statement, shall be free of
      restrictive legends and trading restrictions (other than those which may
      then be required by the Purchase Agreement) representing the number of
      shares of Common Stock being acquired upon the conversion of this
      Debenture and (B) a bank check in the amount of accrued and unpaid
      interest. On or after the effective date of the Registration Statement,
      the Company shall use its best efforts to deliver any certificate or
      certificates required to be delivered by the Company under this Section
      4 electronically through the Depository Trust Company or another
      established clearing corporation performing similar functions.
    

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

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

    

    

    
      
        

        

      

      
        
          9
        

        
          

        

      

      
        

        

      

    

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

    
      vi.       Fractional Shares.
      Upon a conversion hereunder the Company shall not be required to issue
      stock certificates representing fractions of shares of Common Stock, but
      may if otherwise permitted, make a cash payment in respect of any final
      fraction of a share based on the VWAP at such time. If the Company
      elects not, or is unable, to make such a cash payment, the Holder shall
      be entitled to receive, in lieu of the final fraction of a share, 1
      whole share of Common Stock.
    

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

    

    

    
      
        

        

      

      
        
          10
        

        
          

        

      

      
        

        

      

    

    
      Section 5.          Certain
      Adjustments.
    

    
      a)                 Stock
      Dividends and Stock Splits. If the Company, at any time while this
      Debenture is outstanding: (A) subdivides outstanding shares of Common
      Stock into a larger number of shares; (B) combines (including by way of
      a reverse stock split) outstanding shares of Common Stock into a smaller
      number of shares; or (C) issues, in the event of a reclassification of
      shares of the Common Stock, any shares of capital stock of the Company,
      then the Conversion Price shall be multiplied by a fraction of which the
      numerator shall be the number of shares of Common Stock (excluding any
      treasury shares of the Company) outstanding immediately before such
      event and of which the denominator shall be the number of shares of
      Common Stock outstanding immediately after such event. Any adjustment
      made pursuant to this Section shall become effective immediately after
      the record date for the determination of stockholders entitled to
      receive such dividend or distribution and shall become effective
      immediately after the effective date in the case of a subdivision,
      combination or re-classification.
    

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

    

    

    
      
        

        

      

      
        
          11
        

        
          

        

      

      
        

        

      

    

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

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

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

    

    

    
      
        

        

      

      
        
          12
        

        
          

        

      

      
        

        

      

    

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

    
      (g)                Notice
      to the Holder.
    

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

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

    

    

    
      
        

        

      

      
        
          13
        

        
          

        

      

      
        

        

      

    

    
      Section 6.          Optional
      Redemption at Election of Holder; Forced Conversion.
    

    
      (a)                Optional
      Redemption at Election of Holder. Subject to the provisions of this
      Section 6, upon a Change of Control Transaction and at any time on or
      before the 90th calendar day following the consummation of
      such Change of Control Transaction, the Holder may deliver a notice to
      the Company (an “Optional Redemption Notice” and the date
      such notice is deemed delivered hereunder, the “Optional
      Redemption Notice Date”) of its election to require the Company to
      redeem all or a portion of the then outstanding Debentures for an amount
      in cash equal to the Optional Redemption Amount on the 5th Trading
      Day following the Optional Redemption Notice Date (such date, the “Optional
      Redemption Date” and such redemption, the “Optional Redemption”).
      The Optional Redemption Amount is due in full on the Optional Redemption
      Date. The Holder may rescind the Optional Redemption Notice at any time
      until the later of (i) the Optional Redemption Date or (ii) the date on
      which the Optional Redemption Amount is actually paid in full. The
      Holder may elect to convert the outstanding principal amount of the
      Debenture pursuant to Section 4 prior to actual payment in cash for any
      redemption under this Section 6 by the delivery of a Notice of
      Conversion to the Company. The Company covenants and agrees that it will
      honor all Notices of Conversion tendered from the time of delivery of
      the Optional Redemption Notice through the date all amounts owing
      thereon are due and paid in full. If any portion of the cash payment for
      an Optional Redemption shall not be paid by the Company by the
      respective due date, interest shall accrue thereon at the rate of 18%
      per annum (or the maximum rate permitted by applicable law, whichever is
      less) until the payment of the Optional Redemption Amount plus all
      amounts owing thereon is paid in full.
    

    
      Section 7.          Negative
      Covenants. As long as any portion of this Debenture remains
      outstanding, unless Purchasers holding in the aggregate at least 66% of
      the principal amount of the then outstanding Debentures shall otherwise
      consent in writing, the Company shall not, and shall not permit any of
      its Subsidiaries to, directly or indirectly:
    

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

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

    

    

    
      
        

        

      

      
        
          14
        

        
          

        

      

      
        

        

      

    

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

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

    
      e)                 none of the officers, directors or other Affiliates
      of the Company shall enter into any transaction with the Company or any
      Subsidiary (other than for services as employees, officers and
      directors), including entering into any contract, agreement or other
      arrangement providing for the furnishing of services to or by, providing
      for rental of real or personal property to or from, or otherwise
      requiring payments to or from any officer, director or other Affiliates
      or any entity in which any officer, director, or other Affiliates has a
      substantial interest or is an officer, director, trustee or partner;
    

    
      f)                  on an annualized basis, none of the officers of the
      Company or a Subsidiary shall receive an increase in salary or bonus in
      excess of 15% of the prior year’s salary or bonus, as applicable;
      provided that the foregoing restriction shall not apply to the extent
      inconsistent with that certain employment agreement between the Company
      and Mr. Anastasios Kyriakides as in effect as of the  Initial Closing
      Date;
    

    
      g)                 enter into any agreement with respect to any of the
      foregoing; or
    

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

    
      Section 8.          Events
      of Default.
    

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

    
      i.        any default in the payment of (A) the principal amount of any
      Debenture or (B) interest, liquidated damages and other amounts owing to
      a Holder on any Debenture, as and when the same shall become due and
      payable (whether on a Conversion Date or the Maturity Date or by
      acceleration or otherwise) which default, solely in the case of an
      interest payment or other default under clause (B) above, is not cured
      within five (5) Trading Days;
    

    
      ii.       the Company shall fail to observe or perform any other
      covenant or agreement contained in the Debentures which failure is not
      cured, if possible to cure, within the earlier to occur of (A) Fifteen
      (15) Trading Days after notice of such failure sent by the Holder or by
      any other Holder and (B) 30 Trading Days after the Company has become or
      should have become aware of such failure;
    

    

    

    
      
        

        

      

      
        
          15
        

        
          

        

      

      
        

        

      

    

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

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

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

    
      vi.       the Company or any Subsidiary shall default on any of its
      obligations under any mortgage, credit agreement or other facility,
      indenture agreement, factoring agreement or other instrument under which
      there may be issued, or by which there may be secured or evidenced, any
      indebtedness for borrowed money or money due under any long term leasing
      or factoring arrangement that (a) involves an obligation greater than
      $250,000, whether such indebtedness now exists or shall hereafter be
      created, and (b) results in such indebtedness becoming or being declared
      due and payable prior to the date on which it would otherwise become due
      and payable;
    

    
      vii.      the Common Stock shall not be eligible for listing or
      quotation for trading on a Trading Market (as defined above) and shall
      not be eligible to resume listing or quotation for trading thereon
      within ten (10) Trading Days;
    

    
      viii.     the Company shall fail for any reason to deliver certificates
      to a Holder prior to the tenth (10th) Trading Day after a
      Conversion Date pursuant to Section 4(d) Of the Company shall provide at
      any time notice to the Holder, including by way of public announcement,
      of the Company’s intention to not honor requests for conversions of any
      Debentures in accordance with the terms hereof; or
    

    
      ix.       any monetary judgment, writ or similar final process shall be
      entered or filed against the Company, any Subsidiary or any of their
      respective property or other assets for more than $150,000, and such
      judgment, writ or similar final process shall remain unvacated, unbonded
      or unstayed for a period of forty five (45) calendar days.
    

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

    

    

    
      
        

        

      

      
        
          16
        

        
          

        

      

      
        

        

      

    

    
      Section 9.          Miscellaneous.
    

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

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

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

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

    

    

    
      
        

        

      

      
        
          17
        

        
          

        

      

      
        

        

      

    

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

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

    

    

    
      
        

        

      

      
        
          18
        

        
          

        

      

      
        

        

      

    

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

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

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

    
      j)                 Secured
      Obligation. The obligations of the Company under this Debenture are
      secured by all assets of the Company pursuant to the Amended and
      Restated Security Agreement, dated as of February 24, 2010, between the
      Company, the Subsidiaries of the Company and the Secured Parties (as
      defined therein), as amended.
    

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

    

    

    
      
        

        

      

      
        
          19
        

        
          

        

      

      
        

        

      

    

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

    
    	
           
        	
          
            NET TALK.COM, INC.
          

        
	

        	

        	
           
        
	

        	

        	
           
        
	

        	
          
            By:
          

        	
          
            /s/ Anastasios Kyriakides
          

        
	

        	

        	
          
            Name: Anastasios Kyriakides
          

        
	

        	

        	
          
            Title: CEO and President
          

        

    

    

    

    
      
        

        

      

      
        
          20
        

        
          

        

      

      
        

        

      

    

    
      ANNEX A
    

    
      NOTICE OF CONVERSION
    

    
      The undersigned hereby elects to convert principal under the 12% Senior
      Secured Convertible Debenture of NET TALK.COM, INC., a Florida
      corporation (the “Company”), due on September 25, 2011 (No.
      CD-09-03), into shares of common stock, par value $.001 per share (the “Common
      Stock”), of the Company according to the conditions hereof, as of
      the date written below. If shares are to be issued in the name of a
      person other than the undersigned, the undersigned will pay all transfer
      taxes payable with respect thereto and is delivering herewith such
      certificates and opinions as reasonably requested by the Company in
      accordance therewith. No fee will be charged to the holder for any
      conversion, except for such transfer taxes, if any.
    

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

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

    
      Conversion calculations:
    

    
    	
           
        	
          Date to Effect Conversion:
        
	

        	
           
        
	

        	
          Principal Amount of Debenture to be Converted:
        
	

        	
           
        
	

        	
          
            Payment of Interest in Common Stock      yes      no
          

        
	

        	
           
        
	

        	
          
            If yes, $         of Interest Accrued on Account of Conversion at
            Issue.
          

        
	

        	
           
        
	

        	
          Number of shares of Common Stock to be issued:
        
	

        	
           
        
	

        	
          Signature:
        
	

        	
           
        
	

        	
          Name:
        
	

        	
           
        
	

        	
          Address:
        

    

    

    

    
      
        

        

      

      
        
          21
        

        
          

        

      

      
        

        

      

    

    
      Schedule 1
    

    
      CONVERSION SCHEDULE
    

    
      The 12% Senior Secured Convertible Debentures due on September 25, 2011,
      in the aggregate principal amount of $1,265,607 issued by Net Talk.com,
      Inc. (No. CD-09-03). This Conversion Schedule reflects conversions made
      under Section 4 of the above referenced Debenture.
    

    
      Dated:
    

    
      

      

    

    
    	
          
             
          

          
             
          

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

        	
          
             
          

          
             
          

          
            Amount of
Conversion
          

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

        	
          
             
          

          
             
          

          
             
          

          
            Company Attest
          

        

    

    
      

      22Exhibit 10.5
    

    
      AMENDED AND RESTATED SECURITY AGREEMENT
    

    
      THIS AMENDED AND RESTATED SECURITY AGREEMENT, dated as of February 24,
      2010 (this “Agreement”), among Net Talk.com, Inc., a Florida corporation
      (the “Debtor”), and Vicis Capital Master Fund, a sub-trust of Vicis
      Capital Series Master Trust, a unit trust organized and existing under
      the laws of the Cayman Islands and the holder of the Debtor’s securities
      listed on Schedule H hereto (the “Securities”), and its
      endorsees, transferees and assigns (collectively referred to as the
      “Secured Party”).
    

    
      WITNESSETH:
    

    
      WHEREAS, Debtor and Vicis Capital Master Fund wish to amend and restate
      that certain Security Agreement dated as of September 10, 2008 between
      Debtor and Vicis Capital Master Fund, as the assign of Debt Opportunity
      Fund LLLP (the “September Security Agreement”) and amend and restate
      that certain Security Agreement dated as of January 30, 2009, as amended
      on February 6, 2009, as further amended on July 20, 2009, as further
      amended on September 25, 2009 between Debtor and Vicis Capital Master
      Fund, as the assign of Debt Opportunity Fund LLLP (the “January Security
      Agreement”); and
    

    
      WHEREAS, Debtor and Vicis Capital Master Fund have entered into a
      Securities Purchase Agreement dated of even date herewith (the “Purchase
      Agreement”), pursuant to which Debtor and Vicis Capital Master Fund
      agreed that all of the obligations of Debtor under the Purchase
      Agreement and the Securities shall be secured by a lien on all the
      personal property and assets of the Debtor now existing or hereinafter
      acquired; and
    

    
      WHEREAS, Debtor wishes to grant the Secured Party a perfected security
      interest in certain property of the Debtor.
    

    
      NOW, THEREFORE, in consideration of the agreements herein contained and
      for other good and valuable consideration, the receipt and sufficiency
      of which is hereby acknowledged, the parties hereto hereby agree as
      follows:
    

    
      1.        Certain Definitions.
      As used in this Agreement, the following terms shall have the
      meanings set forth in this Section 1. Capitalized terms used but not
      defined herein, shall have their respective meanings ascribed to them in
      the Purchase Agreement.  Terms used but not otherwise defined in this
      Agreement that are defined in Article 9 of the UCC (such as “account”,
      “chattel paper”, “commercial tort claim”, “deposit account”, “document”,
      “equipment”, “fixtures”, “general intangibles”, “goods”, “instruments”,
      “inventory”, “investment property”, “letter of-credit rights”,
      “proceeds” and “supporting obligations”) shall have the respective
      meanings given such terms in Article 9 of the UCC.
    

    
      (a)        “Collateral” means the collateral in which the Secured Party
      is granted a security interest by this Agreement and which shall include
      the following personal property of the Debtor, whether presently owned
      or existing or hereafter acquired or coming into existence, wherever
      situated, and all additions and accessions thereto and all substitutions
      and replacements thereof, and all proceeds, products and accounts
      thereof, including, without limitation, all proceeds from the sale or
      transfer of the Collateral and of insurance covering the same and of any
      tort claims in connection therewith, and all dividends, interest, cash,
      notes, securities, equity interest or other property at any time and
      from time to time acquired, receivable or otherwise distributed in
      respect of, or in exchange for, any or all of the Pledged Securities (as
      defined below):
    

    

    

    
      
        

        

      

      
        
          1
        

        
          

        

      

      
        

        

      

    

    
      (i) All goods, including, without limitations, (A) all machinery,
      equipment, computers, motor vehicles, trucks, tanks, boats, ships,
      appliances, furniture, special and general tools, fixtures, test and
      quality control devices and other equipment of every kind and nature and
      wherever situated, together with all documents of title and documents
      representing the same, all additions and accessions thereto,
      replacements therefor, all parts therefor, and all substitutes for any
      of the foregoing and all other items used and useful in connection with
      the Debtor’s businesses and all improvements thereto; and (B) all
      inventory;
    

    
      (ii) All contract rights and other general intangibles, including,
      without limitation, all partnership interests, membership interests,
      stock or other securities, rights under any of the Organizational
      Documents, agreements related to the Pledged Securities, licenses,
      distribution and other agreements, computer software (whether
      “off-the-shelf”, licensed from any third party or developed by the
      Debtor), computer software development rights, leases, franchises,
      customer lists, quality control procedures, grants and rights, goodwill,
      trademarks, service marks, trade styles, trade names, patents, patent
      applications, copyrights, and income tax refunds;
    

    
      (iii) All accounts, together with all instruments, all documents of
      title representing any of the foregoing, all rights in any
      merchandising, goods, equipment, motor vehicles and trucks which any of
      the same may represent, and all right, title, security and guaranties
      with respect to each account, including any right of stoppage in transit;
    

    
      (iv) All documents, letter-of-credit rights, instruments and chattel
      paper;
    

    
      (v) All commercial tort claims;
    

    
      (vi) All deposit accounts and all cash (whether or not deposited in such
      deposit accounts);
    

    
      (vii) All investment property;
    

    
      (viii) All supporting obligations; and
    

    
      (ix) All files, records, books of account, business papers, and computer
      programs; and
    

    

    

    
      
        

        

      

      
        
          2
        

        
          

        

      

      
        

        

      

    

    
      (x) the products and proceeds of all of the foregoing Collateral set
      forth in clauses (i)-(ix) above.
    

    
      Without limiting the generality of the foregoing, the Collateral shall
      include all investment property and general intangibles respecting
      ownership and/or other equity interests in the Debtor, including,
      without limitation, the shares of capital stock and the other equity
      interests listed on Schedule G hereto (as the same may be
      modified from time to time pursuant to the terms hereof), and any other
      shares of capital stock and/or other equity interests of any other
      direct or indirect subsidiary of the Debtor obtained in the future, and,
      in each case, all certificates representing such shares and/or equity
      interests and, in each case, all rights, options, warrants, stock, other
      securities and/or equity interests that may hereafter be received,
      receivable or distributed in respect of, or exchanged for, any of the
      foregoing (all of the foregoing being referred to herein as the “Pledged
      Securities”) and all rights arising under or in connection with the
      Pledged Securities, including, but not limited to, all dividends,
      interest and cash. Notwithstanding the foregoing, nothing herein shall
      be deemed to constitute an assignment of any asset which, in the event
      of an assignment, becomes void by operation of applicable law or the
      assignment of which is otherwise prohibited by applicable law (in each
      case to the extent that such applicable law is not overridden by
      Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar
      applicable law); provided, however, that to the extent permitted by
      applicable law, this Agreement shall create a valid security interest in
      such asset and, to the extent permitted by applicable law, this
      Agreement shall create a valid security interest in the proceeds of such
      asset.
    

    
      (b)       “Debentures” means the Debtor’s (i) 12% Senior Secured
      Convertible Debenture due June 30, 2011; (ii) 12% Senior Secured
      Convertible Debenture due July 20, 2011; and (iii) 12% Senior Secured
      Convertible Debenture due September 15, 2011.
    

    
      (c)       “Intellectual Property” means the collective reference to all
      rights, priorities and privileges relating to intellectual property,
      whether arising under United States, multinational or foreign laws or
      otherwise, including, without limitation, (i) all copyrights arising
      under the laws of the United States, any other country or any political
      subdivision thereof, whether registered or unregistered and whether
      published or unpublished, all registrations and recordings thereof, and
      all applications in connection therewith, including, without limitation,
      all registrations, recordings and applications in the United States
      Copyright Office, (ii) all letters patent of the United States, any
      other country or any political subdivision thereof, all reissues and
      extensions thereof, and all applications for letters patent of the
      United States or any other country and all divisions, continuations and
      continuations-in-part thereof, (iii) all trademarks, trade names,
      corporate names, company names, business names, fictitious business
      names, trade dress, service marks, logos, domain names and other source
      or business identifiers, and all goodwill associated therewith, now
      existing or hereafter adopted or acquired, all registrations and
      recordings thereof, and all applications in connection therewith,
      whether in the United States Patent and Trademark Office or in any
      similar office or agency of the United States, any State thereof or any
      other country or any political subdivision thereof, or otherwise, and
      all common law rights related thereto, (iv) all trade secrets arising
      under the laws of the United States, any other country or any political
      subdivision thereof, (v) all rights to obtain any reissues, renewals or
      extensions of the foregoing, (vi) all licenses for any of the foregoing,
      and (vii) all causes of action for infringement of the foregoing.
    

    

    

    
      
        

        

      

      
        
          3
        

        
          

        

      

      
        

        

      

    

    
      (d) “Necessary Endorsement” shall mean undated stock powers endorsed in
      blank or other proper instruments of assignment duly executed and such
      other instruments or documents as the Secured Party may reasonably
      request.
    

    
      (e) “Obligations” means all of the liabilities and obligations (primary,
      secondary, direct, contingent, sole, joint or several) due or to become
      due, or that are now or may be hereafter contracted or acquired, or
      owing to, of the Debtor to the Secured Party, including, without
      limitation, all obligations under this Agreement, the Purchase
      Agreement, the Securities, and the Transaction Documents and any other
      instruments, agreements or other documents executed and/or delivered in
      connection herewith or therewith, in each case, whether now or hereafter
      existing, voluntary or involuntary, direct or indirect, absolute or
      contingent, liquidated or unliquidated, whether or not jointly owed with
      others, and whether or not from time to time decreased or extinguished
      and later increased, created or incurred, and all or any portion of such
      obligations or liabilities that are paid, to the extent all or any part
      of such payment is avoided or recovered directly or indirectly from the
      Secured Party as a preference, fraudulent transfer or otherwise as such
      obligations may be amended, supplemented, converted, extended or
      modified from time to time. Without limiting the generality of the
      foregoing, the term “Obligations” shall include, without limitation
      payments, when due, of: (i) principal and interest on the Debentures and
      the loans extended pursuant thereto; (ii) principal and dividends
      payable on the shares of Series A Preferred Stock held by the Secured
      Party and the amounts extended pursuant thereto; (iii) any and all other
      fees, indemnities, costs, obligations and liabilities of the Debtor from
      time to time under or in connection with this Agreement, the Purchase
      Agreement, the Securities, and the Transaction Documents and any other
      instruments, agreements or other documents executed and/or delivered in
      connection herewith or therewith; and (iv) all amounts (including but
      not limited to post-petition interest) in respect of the foregoing that
      would be payable but for the fact that the obligations to pay such
      amounts are unenforceable or not allowable due to the existence of a
      bankruptcy, reorganization or similar proceeding involving the Debtor.
    

    
      (f) “Organizational Documents” means with respect to the Debtor, the
      documents by which the Debtor was organized (such as a certificate of
      incorporation, certificate of limited partnership or articles of
      organization, and including, without limitation, any certificates of
      designation for preferred stock or other forms of preferred equity) and
      which relate to the internal governance of the Debtor (such as bylaws, a
      partnership agreement or an operating, limited liability or members
      agreement).
    

    
      (g) “Series A Preferred Stock” means the Company’s Series A Convertible
      Preferred Stock, par value $.001 per share.
    

    
      (h) “UCC” means the Uniform Commercial Code of the State of New York and
      or any other applicable law of any state or states which has
      jurisdiction with respect to all, or any portion of, the Collateral or
      this Agreement, from time to time. It is the intent of the parties that
      defined terms in the UCC should be construed in their broadest sense so
      that the term “Collateral” will be construed in its broadest sense.
      Accordingly if there are, from time to time, changes to defined terms in
      the UCC that broaden the definitions, they are incorporated herein and
      if existing definitions in the UCC are broader than the amended
      definitions, the existing ones shall be controlling.
    

    

    

    
      
        

        

      

      
        
          4
        

        
          

        

      

      
        

        

      

    

    
      2.        Grant of Security
      Interest. As an inducement for the Secured Party to extend
      the loans as evidenced by the Debentures, to enter into the Purchase
      Agreement and purchase shares of Series A Preferred Stock and the other
      Securities identified therein, and to secure the complete and timely
      payment, performance and discharge in full, as the case may be, of all
      of the Obligations, the Debtor hereby unconditionally and irrevocably
      pledges, grants and hypothecates to the Secured Party a continuing and
      perfected security interest in and to, a lien upon and a right of
      set-off against all of their respective right, title and interest of
      whatsoever kind and nature in and to, the Collateral (the “Security
      Interest”).
    

    
      3.        Delivery of Certain
      Collateral. Contemporaneously or prior to the execution of this
      Agreement, the Debtor shall deliver or cause to be delivered to the
      Secured Party (a) any and all certificates and other instruments
      representing or evidencing the Pledged Securities, and (b) any and all
      certificates and other instruments or documents representing any of the
      other Collateral, in each case, together with all necessary
      endorsements. The Debtor is, contemporaneously with the execution
      hereof, delivering to the Secured Party, or has previously delivered to
      the Secured Party, a true and correct copy of each Organizational
      Document governing any of the Pledged Securities.
    

    
      4.        Representations,
      Warranties, Covenants and Agreements of the Debtor. The Debtor
      represents and warrants to, and covenants and agrees with, the Secured
      Party as follows:
    

    
      (a) The Debtor has the requisite corporate, partnership, limited
      liability company or other power and authority to enter into this
      Agreement and otherwise to carry out its obligations hereunder. The
      execution, delivery and performance by the Debtor of this Agreement and
      the filings contemplated therein have been duly authorized by all
      necessary action on the part of the Debtor and no further action is
      required by the Debtor. This Agreement has been duly executed by the
      Debtor. This Agreement constitutes the legal, valid and binding
      obligation of the Debtor, enforceable against the Debtor in accordance
      with its terms except as such enforceability may be limited by
      applicable bankruptcy, insolvency, reorganization and similar laws of
      general application relating to or affecting the rights and remedies of
      creditors and by general principles of equity.
    

    
      (b) The Debtor has no place of business or offices where its respective
      books of account and records are kept (other than temporarily at the
      offices of its attorneys or accountants) or places where Collateral is
      stored or located, except as set forth on Schedule A attached
      hereto. Except as specifically set forth on Schedule A, the
      Debtor is the record owner of the real property where such Collateral is
      located, and there exist no mortgages or other liens on any such real
      property except for Permitted Liens. Except as disclosed on Schedule A,
      none of such Collateral is in the possession of any consignee, bailee,
      warehouseman, agent or processor.
    

    

    

    
      
        

        

      

      
        
          5
        

        
          

        

      

      
        

        

      

    

    
      (c) Except for Permitted Liens and except as set forth on Schedule B
      attached hereto, the Debtor is the sole owner of the Collateral (except
      for non-exclusive licenses granted by the Debtor in the ordinary course
      of business), free and clear of any liens, security interests,
      encumbrances, rights or claims, and is fully authorized to grant the
      Security Interest. There is not on file in any governmental or
      regulatory authority, agency or recording office an effective financing
      statement, security agreement, license or transfer or any notice of any
      of the foregoing (other than those that will be filed in favor of the
      Secured Party pursuant to this Agreement) covering or affecting any of
      the Collateral. So long as this Agreement shall be in effect, the Debtor
      shall not execute and shall not knowingly permit to be on file in any
      such office or agency any such financing statement or other document or
      instrument (except to the extent filed or recorded in favor of the
      Secured Party pursuant to the terms of this Agreement).
    

    
      (d) No written claim has been received that any Collateral or Debtor’s
      use of any Collateral violates the rights of any third party. There has
      been no adverse decision to the Debtor’s claim of ownership rights in or
      exclusive rights to use the Collateral in any jurisdiction or to the
      Debtor’s right to keep and maintain such Collateral in full force and
      effect, and there is no proceeding involving said rights pending or, to
      the best knowledge of the Debtor, threatened before any court, judicial
      body, administrative or regulatory agency, arbitrator or other
      governmental authority.
    

    
      (e) The Debtor shall at all times maintain its books of account and
      records relating to the Collateral at its principal place of business
      and its Collateral at the locations set forth on Schedule A
      attached hereto and may not relocate such books of account and records
      or tangible Collateral unless it delivers to the Secured Party at least
      thirty (30) days prior to such relocation (i) written notice of such
      relocation and the new location thereof (which must be within the United
      States) and (ii) evidence that appropriate financing statements under
      the UCC and other necessary documents have been filed and recorded and
      other steps have been taken to perfect the Security Interest to create
      in favor of the Secured Party a valid, perfected and continuing
      perfected first priority lien in the Collateral.
    

    
      (f) This Agreement creates in favor of the Secured Party a valid
      security interest in the Collateral, subject only to Permitted Liens
      securing the payment and performance of the Obligations. Upon making the
      filings described in the immediately following paragraph, all security
      interests created hereunder in any Collateral which may be perfected by
      filing Uniform Commercial Code financing statements shall have been duly
      perfected. Except for the filing of the Uniform Commercial Code
      financing statements referred to in the immediately following paragraph,
      the recordation of the Intellectual Property Security Agreement (as
      defined below) with respect to copyrights and copyright applications in
      the United States Copyright Office referred to in paragraph (m), the
      execution and delivery of deposit account control agreements referred to
      in paragraph (dd) satisfying the requirements of Section 9-104(a)(2) of
      the UCC with respect to each deposit account of the Debtor, and the
      delivery of the certificates and other instruments provided in Section
      3, no action is necessary to create, perfect or protect the security
      interests created hereunder. Without limiting the generality of the
      foregoing, except for the filing of said financing statements, the
      recordation of said Intellectual Property Security Agreement, and the
      execution and delivery of said deposit account control agreements, no
      consent of any third parties and no authorization, approval or other
      action by, and no notice to or filing with, any governmental authority
      or regulatory body is required for (i) the execution, delivery and
      performance of this Agreement, (ii) the creation or perfection of the
      Security Interest created hereunder in the Collateral or (iii) the
      enforcement of the rights of the Secured Party hereunder.
    

    

    

    
      
        

        

      

      
        
          6
        

        
          

        

      

      
        

        

      

    

    
      (g) The Debtor hereby authorizes the Secured Party to file one or more
      financing statements under the UCC, with respect to the Security
      Interest with the proper filing and recording agencies in any
      jurisdiction deemed proper by them.
    

    
      (h) The execution, delivery and performance of this Agreement by the
      Debtor does not (i) violate any of the provisions of any Organizational
      Documents of the Debtor or any judgment, decree, order or award of any
      court, governmental body or arbitrator or any applicable law, rule or
      regulation applicable to the Debtor or (ii) conflict with, or constitute
      a default (or an event that with notice or lapse of time or both would
      become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation (with or without notice, lapse
      of time or both) of, any agreement, credit facility, debt or other
      instrument (evidencing the Debtor’s debt or otherwise) or other
      understanding to which the Debtor is a party or by which any property or
      asset of the Debtor is bound or affected. No consent (including, without
      limitation, from stockholders or creditors of the Debtor) is required
      for the Debtor to enter into and perform its obligations hereunder.
    

    
      (i) The capital stock and other equity interests listed on Schedule G
      hereto represent all of the capital stock and other equity interests of
      the Debtor, and represent all capital stock and other equity interests
      owned, directly or indirectly, by the Debtor. All of the Pledged
      Securities are validly issued, fully paid and nonassessable, and the
      Debtor is the legal and beneficial owner of the Pledged Securities, free
      and clear of any lien, security interest or other encumbrance except for
      the security interests created by this Agreement and other Permitted
      Liens.
    

    
       (j) The ownership and other equity interests in partnerships and
      limited liability companies (if any) included in the Collateral by their
      express terms do not provide that they are securities governed by
      Article 8 of the UCC and are not held in a securities account or by any
      financial intermediary.
    

    
      (k) The Debtor shall at all times maintain the liens and Security
      Interest provided for hereunder as valid and perfected first priority
      liens and security interests in the Collateral in favor of the Secured
      Party until this Agreement and the Security Interest hereunder shall be
      terminated pursuant to Section 11 hereof. The Debtor hereby agrees to
      defend the same against the claims of any and all persons and entities.
      The Debtor shall safeguard and protect all Collateral for the account of
      the Secured Party. At the request of the Secured Party, the Debtor will
      sign and deliver to the Secured Party at any time or from time to time
      one or more financing statements pursuant to the UCC in form reasonably
      satisfactory to the Secured Party and will pay the cost of filing the
      same in all public offices wherever filing is, or is deemed by the
      Secured Party to be, necessary or desirable to effect the rights and
      obligations provided for herein. Without limiting the generality of the
      foregoing, the Debtor shall pay all fees, taxes and other amounts
      necessary to maintain the Collateral and the Security Interest
      hereunder, and the Debtor shall obtain and furnish to the Secured Party
      from time to time, upon demand, such releases and/or subordinations of
      claims and liens which may be required to maintain the priority of the
      Security Interest hereunder.
    

    

    

    
      
        

        

      

      
        
          7
        

        
          

        

      

      
        

        

      

    

    
      (l) Subject to Permitted Liens, the Debtor will not transfer, pledge,
      hypothecate, encumber, license, sell or otherwise dispose of any of the
      Collateral (except for non-exclusive licenses granted by a Debtor in its
      ordinary course of business and sales of inventory by a Debtor in its
      ordinary course of business) without the prior written consent of the
      Secured Party.
    

    
      (m) The Debtor shall keep and preserve its equipment, inventory and
      other tangible Collateral in good condition, repair and order and shall
      not operate or locate any such Collateral (or cause to be operated or
      located) in any area excluded from insurance coverage.
    

    
      (n) The Debtor shall maintain with financially sound and reputable
      insurers, insurance with respect to the Collateral against loss or
      damage of the kinds and in the amounts customarily insured against by
      entities of established reputation having similar properties similarly
      situated and in such amounts as are customarily carried under similar
      circumstances by other such entities and otherwise as is prudent for
      entities engaged in similar businesses but in any event sufficient to
      cover the full replacement cost thereof. The Debtor shall cause each
      insurance policy issued in connection herewith to provide, and the
      insurer issuing such policy to certify to the Secured Party that (a) the
      Secured Party will be named as lender loss payee and additional insured
      under each such insurance policy; (b) if such insurance be proposed to
      be cancelled or materially changed for any reason whatsoever, such
      insurer will promptly notify the Secured Party and such cancellation or
      change shall not be effective as to the Secured Party for at least
      thirty (30) days after receipt by the Secured Party of such notice,
      unless the effect of such change is to extend or increase coverage under
      the policy; and (c) the Secured Party will have the right (but no
      obligation) at its election to remedy any default in the payment of
      premiums within thirty (30) days of notice from the insurer of such
      default. If no Event of Default exists and if the proceeds arising out
      of any claim or series of related claims do not exceed $100,000, loss
      payments in each instance will be applied by the Debtor to the repair
      and/or replacement of property with respect to which the loss was
      incurred to the extent reasonably feasible, and any loss payments or the
      balance thereof remaining, to the extent not so applied, shall be
      payable to the Debtor, provided, however, that payments received by the
      Debtor after an Event of Default occurs and is continuing or in excess
      of $100,000 for any occurrence or series of related occurrences shall be
      paid to the Secured Party and, if received by the Debtor, shall be held
      in trust for and immediately paid over to the Secured Party unless
      otherwise directed in writing by the Secured Party. Copies of such
      policies or the related certificates, in each case, naming the Secured
      Party as lender loss payee and additional insured shall be delivered to
      the Secured Party at least annually and at the time any new policy of
      insurance is issued.
    

    

    

    
      
        

        

      

      
        
          8
        

        
          

        

      

      
        

        

      

    

    
      (o) The Debtor shall, within ten (10) days of obtaining knowledge
      thereof, advise the Secured Party promptly, in sufficient detail, of any
      substantial change in the Collateral, and of the occurrence of any event
      which would have a material adverse effect on the value of the
      Collateral or on the Secured Party’s security interest therein.
    

    
      (p) The Debtor shall promptly execute and deliver to the Secured Party
      such further deeds, mortgages, assignments, security agreements,
      financing statements or other instruments, documents, certificates and
      assurances and take such further action as the Secured Party may from
      time to time request and may in its sole discretion deem necessary to
      perfect, protect or enforce its security interest in the Collateral
      including, without limitation, if applicable, the execution and delivery
      of a separate security agreement with respect to the Debtor’s
      Intellectual Property (“Intellectual Property Security Agreement”) in
      which the Secured Party have been granted a security interest hereunder,
      substantially in a form acceptable to the Secured Party, which
      Intellectual Property Security Agreement, other than as stated therein,
      shall be subject to all of the terms and conditions hereof.
    

    
      (q) The Debtor shall permit the Secured Party and its representatives
      and agents to inspect, upon reasonable advanced notice, the Collateral
      at any time, and to make copies of records pertaining to the Collateral
      as may be requested by a Secured Party from time to time.
    

    
      (r) The Debtor shall take all steps reasonably necessary to diligently
      pursue and seek to preserve, enforce and collect any rights, claims,
      causes of action and accounts receivable in respect of the Collateral.
    

    
      (s) The Debtor shall promptly notify the Secured Party in sufficient
      detail upon becoming aware of any attachment, garnishment, execution or
      other legal process levied against any Collateral and of any other
      information received by the Debtor that may materially affect the value
      of the Collateral, the Security Interest or the rights and remedies of
      the Secured Party hereunder.
    

    
      (t) All information heretofore, herein or hereafter supplied to the
      Secured Party by or on behalf of the Debtor with respect to the
      Collateral is accurate and complete in all material respects as of the
      date furnished.
    

    
      (u) The Debtor shall at all times preserve and keep in full force and
      effect their respective valid existence and good standing and any rights
      and franchises material to its business.
    

    
      (v) The Debtor will not change its name, type of organization,
      jurisdiction of organization, organizational identification number (if
      it has one), legal or corporate structure, or identity, or add any new
      fictitious name unless it provides at least 30 days prior written notice
      to the Secured Party of such change and, at the time of such written
      notification, the Debtor provides any financing statements or fixture
      filings necessary to perfect and continue perfected the perfected
      security interest granted and evidenced by this Agreement.
    

    

    

    
      
        

        

      

      
        
          9
        

        
          

        

      

      
        

        

      

    

    
      (w) The Debtor may not consign any of its Inventory or sell any of its
      Inventory on bill and hold, sale or return, sale on approval, or other
      conditional terms of sale without the consent of the Secured Party which
      shall not be unreasonably withheld, except to the extent such
      consignment or sale does not exceed 15% of the total value of all of the
      Debtor’s finished goods in Inventory.
    

    
      (x) The Debtor may not relocate its chief executive office to a new
      location without providing 30 days prior written notification thereof to
      the Secured Party and so long as, at the time of such written
      notification, the Debtor provides any financing statements or fixture
      filings necessary to perfect and continue perfected the perfected
      security Interest granted and evidenced by this Agreement.
    

    
      (y) The Debtor was organized and remains organized solely under the laws
      of the state set forth next to the Debtor’s name in the first paragraph
      of this Agreement. Schedule D attached hereto sets forth the
      Debtor’s organizational identification number or, if the Debtor does not
      have one, states that one does not exist.
    

    
      (z)       (i) The actual name of the Debtor is the name set forth in the
      preamble above; (ii) the Debtor does not have any trade names except as
      set forth on Schedule E attached hereto; (iii) The Debtor has not
      used any name other than that stated in the preamble hereto or as set
      forth on Schedule E for the preceding five years; and (iv) no
      entity has merged into the Debtor or been acquired by the Debtor within
      the past five years except as set forth on Schedule E.
    

    
      (aa) At any time and from time to time that any Collateral consists of
      instruments, certificated securities or other items that require or
      permit possession by the secured party to perfect the security interest
      created hereby, the Debtor shall deliver such Collateral to the Secured
      Party.
    

    
      (bb) The Debtor shall vote the Pledged Securities to comply with the
      covenants and agreements set forth herein, in the Purchase Agreement and
      in the Debentures.
    

    
      (cc) The Debtor shall register the pledge of the applicable Pledged
      Securities on the books of the Debtor. The Debtor shall notify each
      issuer of Pledged Securities to register the pledge of the applicable
      Pledged Securities in the name of the Secured Party on the books of such
      issuer. Further, except with respect to certificated securities
      delivered to the Secured Party, the Debtor shall deliver to the Secured
      Party an acknowledgement of pledge (which, where appropriate, shall
      comply with the requirements of the relevant UCC with respect to
      perfection by registration) signed by the issuer of the applicable
      Pledged Securities, which acknowledgement shall confirm that: (a) it has
      registered the pledge on its books and records; and (b) at any time
      directed by the Secured Party during the continuation of an Event of
      Default, such issuer will transfer the record ownership of such Pledged
      Securities into the name of any designee of Secured Party, will take
      such steps as may be necessary to effect the transfer, and will comply
      with all other instructions of Secured Party regarding such Pledged
      Securities without the further consent of the Debtor.
    

    

    

    
      
        

        

      

      
        
          10
        

        
          

        

      

      
        

        

      

    

    
      (dd) In the event that, upon an occurrence of an Event of Default,
      Secured Party shall sell all or any of the Pledged Securities to another
      party or parties (herein called the “Transferee”) or shall purchase or
      retain all or any of the Pledged Securities, the Debtor shall, to the
      extent applicable: (i) deliver to the Secured Party or the Transferee,
      as the case may be, the articles of incorporation, bylaws, minute books,
      stock certificate books, corporate seals, deeds, leases, indentures,
      agreements, evidences of indebtedness, books of account, financial
      records and all other Organizational Documents and records of the Debtor
      and its direct and indirect subsidiaries; (ii) use its best efforts to
      obtain resignations of the persons then serving as officers and
      directors of the Debtor and its direct and indirect subsidiaries, if so
      requested; and (iii) use its reasonable best efforts to obtain any
      approvals that are required by any governmental or regulatory body in
      order to permit the sale of the Pledged Securities to the Transferee or
      the purchase or retention of the Pledged Securities by the Secured Party
      and allow the Transferee or Secured Party to continue the business of
      the Debtor and its direct and indirect subsidiaries.
    

    
      (ee) The Debtor will from time to time promptly execute and deliver all
      such further instruments and documents, and take all such further action
      as may be necessary or desirable, or as the Secured Party may reasonably
      request, in order to perfect and protect any security interest granted
      or purported to be granted hereby or to enable the Secured Party to
      exercise and enforce their rights and remedies hereunder and with
      respect to any Collateral or to otherwise carry out the purposes of this
      Agreement.
    

    
      (ff) Schedule F attached hereto lists all of the patents, patent
      applications, trademarks, trademark applications, registered copyrights,
      and domain names owned by the Debtor as of the date hereof. Schedule F
      lists all material licenses in favor of the Debtor for the use of any
      patents, trademarks, copyrights and domain names as of the date hereof.
      All material patents and trademarks of the Debtor have been duly
      recorded (or applications for such patents and trademarks are currently
      pending) at the United States Patent and Trademark Office and all
      material copyrights of the Debtor have been duly recorded (or
      applications for such copyrights is currently pending) at the United
      States Copyright Office.
    

    
      (gg) None of the account debtors or other persons or entities obligated
      on any of the Collateral is a governmental authority covered by the
      Federal Assignment of Claims Act or any similar federal, state or local
      statute or rule in respect of such Collateral.
    

    
      5.        Effect of Pledge on
      Certain Rights. If any of the Collateral subject to this
      Agreement consists of nonvoting equity or ownership interests
      (regardless of class, designation, preference or rights) that may be
      converted into voting equity or ownership interests upon the occurrence
      of certain events (including, without limitation, upon the transfer of
      all or any of the other stock or assets of the issuer), it is agreed
      that the pledge of such equity or ownership interests pursuant to this
      Agreement or the enforcement of any of Secured Party’s rights hereunder
      shall not be deemed to be the type of event which would trigger such
      conversion rights notwithstanding any provisions in the Organizational
      Documents or agreements to which the Debtor is subject or to which the
      Debtor is party.
    

    
      6.        Defaults. The
      following events shall be “Events of Default”:
    

    

    

    
      
        

        

      

      
        
          11
        

        
          

        

      

      
        

        

      

    

    
      (a) The occurrence of an Event of Default set forth in any of the
      Debentures or the Purchase Agreement;
    

    
      (b) Any representation or warranty of the Debtor in this Agreement shall
      prove to have been incorrect in any material respect when made;
    

    
      (c) The failure by the Debtor to observe or perform any of its
      obligations hereunder for five (5) days after delivery to the Debtor of
      notice of such failure by or on behalf of a Secured Party unless such
      default is capable of cure but cannot be cured within such time frame
      and the Debtor is using best efforts to cure same in a timely fashion; or
    

    
      (d) If any material provision of this Agreement shall at any time for
      any reason be declared to be null and void, or the validity or
      enforceability thereof shall be contested by the Debtor, or a proceeding
      shall be commenced by the Debtor, or by any governmental authority
      having jurisdiction over the Debtor, seeking to establish the invalidity
      or unenforceability thereof, or the Debtor shall deny that the Debtor
      has any liability or obligation purported to be created under this
      Agreement.
    

    
      7.         Duty To Hold In
      Trust.
    

    
      (a) Upon the occurrence of any Event of Default and during the
      continuation of such Event of Default, the Debtor shall, upon receipt of
      any revenue, income, dividend, interest or other sums subject to the
      Security Interest, whether payable pursuant to any of the Securities or
      otherwise, or of any check, draft, note, trade acceptance or other
      instrument evidencing an obligation to pay any such sum, hold the same
      in trust for the Secured Party and shall forthwith endorse and transfer
      any such sums or instruments, or both, to the Secured Party.
    

    
      (b) If the Debtor shall become entitled to receive or shall receive any
      securities or other property (including, without limitation, shares of
      Pledged Securities or instruments representing Pledged Securities
      acquired after the date hereof, or any options, warrants, rights or
      other similar property or certificates representing a dividend, or any
      distribution in connection with any recapitalization, reclassification
      or increase or reduction of capital, or issued in connection with any
      reorganization of the Debtor or any of its direct or indirect
      subsidiaries) in respect of the Pledged Securities (whether as an
      addition to, in substitution of, or in exchange for, such Pledged
      Securities or otherwise), the Debtor agrees to (i) accept the same as
      the agent of the Secured Party; (ii) hold the same in trust on behalf of
      and for the benefit of the Secured Party; and (iii) to deliver any and
      all certificates or instruments evidencing the same to the Secured Party
      on or before the close of business on the fifth business day following
      the receipt thereof by the Debtor, in the exact form received together
      with the necessary endorsements, to be held by the Secured Party subject
      to the terms of this Agreement as Collateral.
    

    
      8.        Rights and Remedies Upon
      Default.
    

    
       (a) Upon the occurrence of any Event of Default and during the
      continuation of such Event of Default, the Secured Party, acting through
      any agent appointed for such purpose, shall have the right to exercise
      all of the remedies conferred hereunder, under the Purchase Agreement,
      the Debentures and the other Transaction Documents, and the Secured
      Party shall have all the rights and remedies of a secured party under
      the UCC. Without limitation, the Secured Party shall have the following
      rights and powers:
    

    

    

    
      
        

        

      

      
        
          12
        

        
          

        

      

      
        

        

      

    

    
      (i) The Secured Party shall have the right to take possession of the
      Collateral and, for that purpose, enter, with the aid and assistance of
      any person, any premises of the Debtor where the Collateral, or any part
      thereof, is or may be placed and remove the same, and the Debtor shall
      assemble the Collateral and make it available to the Secured Party at
      places which the Secured Party shall reasonably select, whether at the
      Debtor’s premises or elsewhere, and make available to the Secured Party,
      without rent, all of the Debtor’s respective premises and facilities for
      the purpose of the Secured Party taking possession of, removing or
      putting the Collateral in saleable or disposable form.
    

    
      (ii) Upon notice to the Debtor by the Secured Party, all rights of the
      Debtor to exercise the voting and other consensual rights which it would
      otherwise be entitled to exercise and all rights of the Debtor to
      receive the dividends and interest which it would otherwise be
      authorized to receive and retain, shall cease. Upon such notice, Secured
      Party shall have the right to receive any interest, cash dividends or
      other payments on the Collateral and, at the option of Secured Party, to
      exercise in such Secured Party’s discretion all voting rights pertaining
      thereto. Without limiting the generality of the foregoing, Secured Party
      shall have the right (but not the obligation) to exercise all rights
      with respect to the Collateral as if they were the sole and absolute
      owners thereof, including, without limitation, to vote and/or to
      exchange, at its sole discretion, any or all of the Collateral in
      connection with a merger, reorganization, consolidation,
      recapitalization or other readjustment concerning or involving the
      Collateral or the Debtor or any of its direct or indirect subsidiaries.
    

    
      (iii) The Secured Party shall have the right to operate the business of
      the Debtor using the Collateral and shall have the right to assign,
      sell, lease or otherwise dispose of and deliver all or any part of the
      Collateral, at public or private sale or otherwise, either with or
      without special conditions or stipulations, for cash or on credit or for
      future delivery, in such parcel or parcels and at such time or times and
      at such place or places, and upon such terms and conditions as the
      Secured Party may deem commercially reasonable, all without (except as
      shall be required by applicable statute and cannot be waived)
      advertisement or demand upon or notice to the Debtor or right of
      redemption of a Debtor, which are hereby expressly waived. Upon each
      such sale, lease, assignment or other transfer of Collateral, the
      Secured Party may, unless prohibited by applicable law which cannot be
      waived, purchase all or any part of the Collateral being sold, free from
      and discharged of all trusts, claims, right of redemption and equities
      of the Debtor, which are hereby waived and released.
    

    
      (iv) The Secured Party shall have the right (but not the obligation) to
      notify any account debtors and any obligors under instruments or
      accounts to make payments directly to the Secured Party and to enforce
      the Debtor’s rights against such account debtors and obligors.
    

    

    

    
      
        

        

      

      
        
          13
        

        
          

        

      

      
        

        

      

    

    
      (v) The Secured Party may (but are not obligated to) direct any
      financial intermediary or any other person or entity holding any
      investment property to transfer the same to the Secured Party or their
      designee.
    

    
      (vi) The Secured Party may (but are not obligated to) transfer any or
      all Intellectual Property registered in the name of the Debtor at the
      United States Patent and Trademark Office and/or Copyright Office into
      the name of the Secured Party or any designee or any purchaser of any
      Collateral.
    

    
      (b) The Secured Party may comply with any applicable law in connection
      with a disposition of Collateral and such compliance will not be
      considered adversely to affect the commercial reasonableness of any sale
      of the Collateral. The Secured Party may sell the Collateral without
      giving any warranties and may specifically disclaim such warranties. If
      the Secured Party sells any of the Collateral on credit, the Debtor will
      only be credited with payments actually made by the purchaser. In
      addition, the Debtor waives any and all rights that it may have to a
      judicial hearing in advance of the enforcement of any of the Secured
      Party’s rights and remedies hereunder, including, without limitation,
      their right following an Event of Default to take immediate possession
      of the Collateral and to exercise their rights and remedies with respect
      thereto.
    

    
      (c) For the purpose of enabling the Secured Party to further exercise
      rights and remedies under this Section 8 or elsewhere provided by
      agreement or applicable law, the Debtor hereby grants to the Secured
      Party, for the benefit of the Secured Party, an irrevocable,
      nonexclusive license (exercisable without payment of royalty or other
      compensation to the Debtor) to use, license or sublicense following, and
      during the continuation of, an Event of Default, any Intellectual
      Property now owned or hereafter acquired by the Debtor, and wherever the
      same may be located, and including in such license access to all media
      in which any of the licensed items may be recorded or stored and to all
      computer software and programs used for the compilation or printout
      thereof.
    

    
      9.        Applications of Proceeds.
      The proceeds of any such sale, lease or other disposition of the
      Collateral hereunder shall be applied first, to the expenses of
      retaking, holding, storing, processing and preparing for sale, selling,
      and the like (including, without limitation, any taxes, fees and other
      costs incurred in connection therewith) of the Collateral, to the
      reasonable attorneys’ fees and expenses incurred by the Secured Party in
      enforcing their rights hereunder and in connection with collecting,
      storing and disposing of the Collateral, and then to satisfaction of the
      Obligations, and to the payment of any other amounts required by
      applicable law, after which the Secured Party shall pay to the Debtor
      any surplus proceeds. If, upon the sale, license or other disposition of
      the Collateral, the proceeds thereof are insufficient to pay all amounts
      to which the Secured Party is legally entitled, the Debtor will be
      liable for the deficiency, together with interest thereon, at the rate
      of 10% per annum or the lesser amount permitted by applicable law (the
      “Default Rate”), and the reasonable fees of any attorneys employed by
      the Secured Party to collect such deficiency. To the extent permitted by
      applicable law, the Debtor waives all claims, damages and demands
      against the Secured Party arising out of the repossession, removal,
      retention or sale of the Collateral, unless due solely to the gross
      negligence or willful misconduct of the Secured Party as determined by a
      final judgment (not subject to further appeal) of a court of competent
      jurisdiction.
    

    

    

    
      
        

        

      

      
        
          14
        

        
          

        

      

      
        

        

      

    

    
      10. Securities Law Provision. The Debtor recognizes that
      Secured Party may be limited in its ability to effect a sale to the
      public of all or part of the Pledged Securities by reason of certain
      prohibitions in the Securities Act of 1933, as amended, or other federal
      or state securities laws (collectively, the “Securities Laws”), and may
      be compelled to resort to one or more sales to a restricted group of
      purchasers who may be required to agree to acquire the Pledged
      Securities for their own account, for investment and not with a view to
      the distribution or resale thereof. The Debtor agrees that sales so made
      may be at prices and on terms less favorable than if the Pledged
      Securities were sold to the public, and that Secured Party has no
      obligation to delay the sale of any Pledged Securities for the period of
      time necessary to register the Pledged Securities for sale to the public
      under the Securities Laws. The Debtor shall cooperate with Secured Party
      in its attempt to satisfy any requirements under the Securities Laws
      (including, without limitation, registration thereunder if requested by
      the Secured Party) applicable to the sale of the Pledged Securities by
      the Secured Party.
    

    
      11.       Costs and Expenses. The
      Debtor agrees to pay all reasonable out-of-pocket fees, costs and
      expenses incurred in connection with any filing required hereunder,
      including without limitation, any financing statements pursuant to the
      UCC, continuation statements, partial releases and/or termination
      statements related thereto or any expenses of any searches reasonably
      required by the Secured Party. The Debtor shall also pay all other
      claims and charges which in the reasonable opinion of the Secured Party
      might materially prejudice, imperil or otherwise affect the Collateral
      or the Security Interest therein. The Debtor will also, upon demand, pay
      to the Secured Party the amount of any and all reasonable expenses,
      including the reasonable fees and expenses of its counsel and of any
      experts and agents, which the Secured Party may incur in connection with
      (i) the enforcement of this Agreement, (ii) the custody or preservation
      of, or the sale of, collection from, or other realization upon, any of
      the Collateral, or (iii) the exercise or enforcement of any of the
      rights of the Secured Party under the Securities. Until so paid, any
      fees payable hereunder shall be added to the principal amount of the
      Debentures and shall bear interest at the Default Rate.
    

    
      12.       Responsibility for Collateral.
               The Debtor
      assumes all liabilities and responsibility in connection with all
      Collateral, and the Obligations shall in no way be affected or
      diminished by reason of the loss, destruction, damage or theft of any of
      the Collateral or its unavailability for any reason. Without limiting
      the generality of the foregoing, (a) the Secured Party (i) has any duty
      (either before or after an Event of Default) to collect any amounts in
      respect of the Collateral or to preserve any rights relating to the
      Collateral, or (ii) has any obligation to clean-up or otherwise prepare
      the Collateral for sale, and (b) the Debtor shall remain obligated and
      liable under each contract or agreement included in the Collateral to be
      observed or performed by the Debtor thereunder. The Secured Party shall
      have any obligation or liability under any such contract or agreement by
      reason of or arising out of this Agreement or the receipt by the Secured
      Party of any payment relating to any of the Collateral, nor shall the
      Secured Party be obligated in any manner to perform any of the
      obligations of the Debtor under or pursuant to any such contract or
      agreement, to make inquiry as to the nature or sufficiency of any
      payment received by the Secured Party in respect of the Collateral or as
      to the sufficiency of any performance by any party under any such
      contract or agreement, to present or file any claim, to take any action
      to enforce any performance or to collect the payment of any amounts
      which may have been assigned to the Secured Party or to which the
      Secured Party may be entitled at any time or times.
    

    

    

    
      
        

        

      

      
        
          15
        

        
          

        

      

      
        

        

      

    

    
      13.       Security Interest Absolute.
      All rights of the Secured Party and all obligations of the Debtor
      hereunder, shall be absolute and unconditional, irrespective of:
    

    
      (a) any lack of validity or enforceability of this Agreement, the
      Purchase Agreement, the Debentures or any agreement entered into in
      connection with the foregoing, or any portion hereof or thereof;
    

    
      (b) any change in the time, manner or place of payment or performance
      of, or in any other term of, all or any of the Obligations, or any other
      amendment or waiver of or any consent to any departure from the
      Securities or any other agreement entered into in connection with the
      foregoing; (c) any exchange, release or nonperfection of any of the
      Collateral, or any release or amendment or waiver of or consent to
      departure from any other collateral for, or any guaranty, or any other
      security, for all or any of the Obligations; (d) any action by the
      Secured Party to obtain, adjust, settle and cancel in its sole
      discretion any insurance claims or matters made or arising in connection
      with the Collateral; or (e) any other circumstance which might otherwise
      constitute any legal or equitable defense available to a Debtor, or a
      discharge of all or any part of the Security Interest granted hereby.
      Until the Obligations shall have been paid and performed in full, the
      rights of the Secured Party shall continue even if the Obligations are
      barred for any reason, including, without limitation, the running of the
      statute of limitations or bankruptcy. The Debtor expressly waives
      presentment, protest, notice of protest, demand, notice of nonpayment
      and demand for performance. In the event that at any time any transfer
      of any Collateral or any payment received by the Secured Party hereunder
      shall be deemed by final order of a court of competent jurisdiction to
      have been a voidable preference or fraudulent conveyance under the
      bankruptcy or insolvency laws of the United States, or shall be deemed
      to be otherwise due to any party other than the Secured Party, then, in
      any such event, the Debtor’s obligations hereunder shall survive
      cancellation of this Agreement, and shall not be discharged or satisfied
      by any prior payment thereof and/or cancellation of this Agreement, but
      shall remain a valid and binding obligation enforceable in accordance
      with the terms and provisions hereof The Debtor waives all right to
      require the Secured Party to proceed against any other person or entity
      or to apply any Collateral which the Secured Party may hold at any time,
      or to marshal assets, or to pursue any other remedy. The Debtor waives
      any defense arising by reason of the application of the statute of
      limitations to any obligation secured hereby.
    

    
      14.       Term of Agreement. This
      Agreement and the Security Interest shall terminate on the date on which
      all payments under the Debentures have been indefeasibly paid in full,
      the Secured Party cease to hold any Securities, and all other
      Obligations have been paid or discharged; provided, however, that all
      indemnities of the Debtor contained in this Agreement shall survive and
      remain operative and in full force and effect regardless of the
      termination of this Agreement.
    

    

    

    
      
        

        

      

      
        
          16
        

        
          

        

      

      
        

        

      

    

    
      15.       Power of Attorney; Further
      Assurances.
    

    
      (a) The Debtor authorizes the Secured Party, and does hereby make,
      constitute and appoint the Secured Party and its officers, agents,
      successors or assigns with full power of substitution, as the Debtor’s
      true and lawful attorney-in-fact, with power, in the name of the various
      Secured Party or the Debtor, to, after the occurrence and during the
      continuance of an Event of Default, (i) endorse any note, checks,
      drafts, money orders or other instruments of payment (including payments
      payable under or in respect of any policy of insurance) in respect of
      the Collateral that may come into possession of the Secured Party; (ii)
      to sign and endorse any financing statement pursuant to the UCC or any
      invoice, freight or express bill, bill of lading, storage or warehouse
      receipts, drafts against debtors, assignments, verifications and notices
      in connection with accounts, and other documents relating to the
      Collateral; (iii) to pay or discharge taxes, liens, security interests
      or other encumbrances at any time levied or placed on or threatened
      against the Collateral; (iv) to demand, collect, receipt for,
      compromise, settle and sue for monies due in respect of the Collateral;
      (v) to transfer any Intellectual Property or provide licenses respecting
      any Intellectual Property; and (vi) generally, at the option of the
      Secured Party, and at the expense of the Debtor, at any time, or from
      time to time, to execute and deliver any and all documents and
      instruments and to do all acts and things which the Secured Party deems
      necessary to protect, preserve and realize upon the Collateral and the
      Security Interest granted therein in order to effect the intent of this
      Agreement, the Purchase Agreement and the Debentures all as fully and
      effectually as the Debtor might or could do; and the Debtor hereby
      ratifies all that said attorney shall lawfully do or cause to be done by
      virtue hereof This power of attorney is coupled with an interest and
      shall be irrevocable for the term of this Agreement and thereafter as
      long as any of the Obligations shall be outstanding. The designation set
      forth herein shall be deemed to amend and supersede any inconsistent
      provision in the Organizational Documents or other documents or
      agreements to which the Debtor is subject or to which the Debtor is a
      party. Without limiting the generality of the foregoing, after the
      occurrence and during the continuance of an Event of Default, each
      Secured Party is specifically authorized to execute and file any
      applications for or instruments of transfer and assignment of any
      patents, trademarks, copyrights or other Intellectual Property with the
      United States Patent and Trademark Office and the United States
      Copyright Office.
    

    
      (b) On a continuing basis, the Debtor will make, execute, acknowledge,
      deliver, file and record, as the case may be, with the proper filing and
      recording agencies in any jurisdiction, including, without limitation,
      the jurisdictions indicated on Schedule C attached hereto, all
      such instruments, and take all such action as may reasonably be deemed
      necessary or advisable, or as reasonably requested by the Secured Party,
      to perfect the Security Interest granted hereunder and otherwise to
      carry out the intent and purposes of this Agreement, or for assuring and
      confirming to the Secured Party the grant or perfection of a perfected
      security interest in all the Collateral under the UCC.
    

    
      (c) The Debtor hereby irrevocably appoints the Secured Party as the
      Debtor’s attorney-in-fact, with full authority in the place and instead
      of the Debtor and in the name of the Debtor, from time to time in the
      Secured Party’s discretion, to take any action and to execute any
      instrument which the Secured Party may deem necessary or advisable to
      accomplish the purposes of this Agreement, including the filing, in its
      sole discretion, of one or more financing or continuation statements and
      amendments thereto, relative to any of the Collateral without the
      signature of the Debtor where permitted by law, which financing
      statements may (but need not) describe the Collateral as “all assets” or
      “all personal property” or words of like import, and ratifies all such
      actions taken by the Secured Party. This power of attorney is coupled
      with an interest and shall be irrevocable for the term of this Agreement
      and thereafter as long as any of the Obligations shall be outstanding.
    

    

    

    
      
        

        

      

      
        
          17
        

        
          

        

      

      
        

        

      

    

    
      16.       Notices. All
      notices, requests, demands and other communications hereunder shall be
      subject to the notice provision of the Purchase Agreement.
    

    
      17.       Other Security. To the
      extent that the Obligations are now or hereafter secured by property
      other than the Collateral or by the guarantee, endorsement or property
      of any other person, firm, corporation or other entity, then the Secured
      Party shall have the right, in its sole discretion, to pursue,
      relinquish, subordinate, modify or take any other action with respect
      thereto, without in any way modifying or affecting any of the Secured
      Party’s rights and remedies hereunder.
    

    
      18.       Miscellaneous.
    

    
      (a)       No course of dealing between the Debtor and the Secured Party,
      nor any failure to exercise, nor any delay in exercising, on the part of
      the Secured Party, any right, power or privilege hereunder or under the
      Securities shall operate as a waiver thereof; nor shall any single or
      partial exercise of any right, power or privilege hereunder or
      thereunder preclude any other or further exercise thereof or the
      exercise of any other right, power or privilege.
    

    
      (b)       All of the rights and remedies of the Secured Party with
      respect to the Collateral, whether established hereby or by the
      Debentures or by any other agreements, instruments or documents or by
      law shall be cumulative and may be exercised singly or concurrently.
    

    
      (c)       This Agreement constitutes the entire agreement of the parties
      with respect to the subject matter hereof and is intended to supersede
      all prior negotiations, understandings and agreements with respect
      thereto. Except as specifically set forth in this Agreement, no
      provision of this Agreement may be modified or amended except by a
      written agreement specifically referring to this Agreement and signed by
      the parties hereto.
    

    
      (d)       In the event any provision of this Agreement is held to be
      invalid, prohibited or unenforceable in any jurisdiction for any reason,
      unless such provision is narrowed by judicial construction, this
      Agreement shall, as to such jurisdiction, be construed as if such
      invalid, prohibited or unenforceable provision had been more narrowly
      drawn so as not to be invalid, prohibited or unenforceable. If,
      notwithstanding the foregoing, any provision of this Agreement is held
      to be invalid, prohibited or unenforceable in any jurisdiction, such
      provision, as to such jurisdiction, shall be ineffective to the extent
      of such invalidity, prohibition or unenforceability without invalidating
      the remaining portion of such provision or the other provisions of this
      Agreement and without affecting the validity or enforceability of such
      provision or the other provisions of this Agreement in any other
      jurisdiction.
    

    

    

    
      
        

        

      

      
        
          18
        

        
          

        

      

      
        

        

      

    

    
      (e) No waiver of any breach or default or any right under this Agreement
      shall be considered valid unless in writing and signed by the party
      giving such waiver, and no such waiver shall be deemed a waiver of any
      subsequent breach or default or right, whether of the same or similar
      nature or otherwise.
    

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

    
      (g) Each party shall take such further action and execute and deliver
      such further documents as may be necessary or appropriate in order to
      carry out the provisions and purposes of this Agreement.
    

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

    

    

    
      
        

        

      

      
        
          19
        

        
          

        

      

      
        

        

      

    

    
      (i) This Agreement may be executed in any number of counterparts, each
      of which when so executed shall be deemed to be an original and, all of
      which taken together shall constitute one and the same Agreement. In the
      event that any signature is delivered by facsimile transmission, such
      signature shall create a valid binding obligation of the party executing
      (or on whose behalf such signature is executed) the same with the same
      force and effect as if such facsimile signature were the original
      thereof.
    

    
       (j) The Debtor shall indemnify, reimburse and hold harmless the Secured
      Party and its partners, members, shareholders, officers, directors,
      investment advisors, agents, and employees of each of them
      (collectively, “Indemnitees”) from and against any and all losses,
      claims, liabilities, damages, penalties, suits, costs and expenses, of
      any kind or nature, (including fees relating to the cost of
      investigating and defending any of the foregoing) imposed on, incurred
      by or asserted against such Indemnitee in any way related to or arising
      from or alleged to arise from this Agreement or the Collateral, except
      any such losses, claims, liabilities, damages, penalties, suits, costs
      and expenses which result from the gross negligence or willful
      misconduct of the Indemnitee as determined by a final, nonappealable
      decision of a court of competent jurisdiction. This indemnification
      provision is in addition to, and not in limitation of, any other
      indemnification provision in the Securities, the Purchase Agreement or
      any other agreement, instrument or other document executed or delivered
      in connection herewith or therewith.
    

    
      (k) Nothing in this Agreement shall be construed to subject any Secured
      Party to liability as a partner in the Debtor or any if its direct or
      indirect subsidiaries that is a partnership or as a member in the Debtor
      or any of its direct or indirect subsidiaries that is a limited
      liability company, nor shall Secured Party or any Secured Party be
      deemed to have assumed any obligations under any partnership agreement
      or limited liability company agreement, as applicable, of any the Debtor
      or any if its direct or indirect subsidiaries or otherwise, unless and
      until any such Secured Party exercises its right to be substituted for
      the Debtor as a partner or member, as applicable, pursuant hereto.
    

    
      (1) To the extent that the grant of the security interest in the
      Collateral and the enforcement of the terms hereof require the consent,
      approval or action of any partner or member, as applicable, of the
      Debtor or any direct or indirect subsidiary of the Debtor or compliance
      with any provisions of any of the Organizational Documents, the Debtor
      hereby grants such consent and approval and waive any such noncompliance
      with the terms of said documents.
    

    
      19.       Effect of Amendment and
      Restatement.  This Agreement amends and restates each of the
      September Security Agreement and the January Security Agreement, and
      shall not be construed to be a substitution or novation of either the
      September Security Agreement or the January Security Agreement.
    

    
      [SIGNATURE PAGES FOLLOW]
    

    

    

    
      
        

        

      

      
        
          20
        

        
          

        

      

      
        

        

      

    

    
      IN WITNESS WHEREOF, the parties hereto have caused this Amended and
      Restated Security Agreement to be duly executed on the day and year
      first above written.
    

    
    	
           
        	
          
            “Debtor”
          

        
	

        	
          
            NET TALK.COM, INC.,
          

        
	

        	
           
        
	

        	
           
        
	

        	
          
            By: /s/ Anastasios Kyriakides
          

        
	

        	
          
            Name: Anastasios Kyriakides
          

        
	

        	
          
            Title: CEO and President
          

        

    

    
      

      

      

      

      

    

    
      [SIGNATURE PAGE OF SECURED PARTY FOLLOWS]
    

    

    

    
      
        

        

      

      
        
          21
        

        
          

        

      

      
        

        

      

    

    
       [SIGNATURE PAGE OF SECURED PARTY TO SECURITY AGREEMENT]
    

    
      

      

    

    
    	
           
        	
          VICIS CAPITAL MASTER FUND,
        
	

        	
          
            a sub-trust of Vicis Capital Series Master Trust
          

        
	

        	
          By: Vicis Capital LLC
        
	

        	
           
        
	

        	
           
        
	

        	
          
            By: /s/ Shad Stastney
          

        
	

        	
          
            Name: Shad Stastney
          

        
	

        	
          
            Title: Member
          

        

    

    

    

    
      
        

        

      

      
        
          22
        

        
          

        

      

      
        

        

      

    

    

    

    
      SCHEDULE A
    

    
      Nettalk.com, Inc.
    

    
    	
          1.
        	
           
        	
          Fixed and intangible assets owned by Nettalk.com, Inc. are listed on
          attached Depreciations schedule, dated February 24, 2010.
        
	
          2.
        	

        	
          Our executive offices and Net Operations Center are located at:
        
	

        	

        	
          1100 NW 163rd Drive, Suite B 4, No. Miami, FL 33169.
        
	
          3.
        	

        	
          Our accounting records and corporate agreements are maintained at
          our executive offices.
        
	
          4.
        	

        	
          Liens on our equipment are limited to claims on Debenture agreements
          signed with Vicis Capital, as follows:
        
	
           
        
	

        	

        	
          12% Debenture, dated September 10, 2008, in the amount of $1,000,000
        
	

        	

        	
          12% Debenture, dated September 10, 2008, in the amount of $500,000
        
	

        	

        	
          12% Debenture, dated January 30, 2009, in the amount of $600,000
        
	

        	

        	
          12% Debenture, dated February 6, 2009, in the amount of $500,000
        
	

        	

        	
          12% Debenture, dated July 20, 2009, in the amount of $500,000
        
	

        	

        	
          12% Debenture, dated September 25, 2009, in the amount of $1,100,000
        
	
           
        
	

        	

        	
          All above listed debentures are amended per new agreements, dated
          February 24, 2010.
        

    

    

    

    
      
        

        

      

      
        
          23
        

        
          

        

      

      
        

        

      

    

    

    

    
      SCHEDULE B
    

    
      Nettalk.com, Inc.
    

    
    	
          1.
        	
           
        	
          
            Our inventory is located at Moulton Logistic, our fulfillment
            house, as follows:
Moulton Logistics Management
c/o Karen
            Bellemare
2440 Clements Ferry Road
Charleston, SC 29492–7735
Telephone:
            (843) 554-7641 ext 100
          

        
	
           
        
	
          2.
        	

        	
          Liens on our inventory are limited to claims on Debenture agreements
          signed with Vicis Capital, as follows:
        
	
           
        
	

        	

        	
          12% Debenture, dated September 10, 2008, in the amount of $1,000,000
        
	

        	

        	
          12% Debenture, dated September 10, 2008, in the amount of $500,000
        
	

        	

        	
          12% Debenture, dated January 30, 2009, in the amount of $600,000
        
	

        	

        	
          12% Debenture, dated February 6, 2009, in the amount of $500,000
        
	

        	

        	
          12% Debenture, dated July 20, 2009, in the amount of $500,000
        
	

        	

        	
          12% Debenture, dated September 25, 2009, in the amount of $1,100,000
        
	
           
        
	

        	

        	
          All above listed debentures are amended per new agreements, dated
          February 24, 2010.
        

    

    

    

    
      
        

        

      

      
        
          24
        

        
          

        

      

      
        

        

      

    

    

    

    
      SCHEDULE C
    

    
      Nettalk.com, Inc.
    

    

    

    
      There are not written claims received regarding Nettalk’s right and use
      of any of its collateral.  There is no adverse decision to Nettalk’s
      claims of ownership rights in or exclusive rights to use our collateral
      in any jurisdiction or to Nettalk’s rights to keep and maintain such
      collateral in full force and effect.
    

    
      
        

        

      

      
        
          25
        

        
          

        

      

      
        

        

      

    

    

    

    
      SCHEDULE D
    

    
      Nettalk.com, Inc.
    

    
    	
          1.
        	
           
        	
          Intellectual property:
        
	
           
        
	

        	

        	
          A
        	
          We presently have federal trademarks, as follows:
        
	

        	

        	

        	
          “Net Talk”
        	
          Serial No.: 77626299
        
	

        	

        	

        	
          “Connecting the world”
        	
          Serial No.: 78783778
        
	

        	

        	

        	
          “Connecting the globe”
        	
          Serial No.: 77852806
        
	

        	

        	

        	
          “TK6000”
        	
          Serial No.: 77821831
        
	

        	

        	

        	
          “TK4000”
        	
          Serial No.: 77862553
        
	

        	

        	

        	
          “Your Phone Company in a Box”
        	
          Serial No.: 77787836
        
	

        	

        	

        	
          “More talk, no bills”
        	
          Serial No.: 77787770
        
	

        	

        	

        	
          “Fire your phonecompany”
        	
          Serial No.: 77787823
        
	
           
        
	

        	

        	
          B
        	
          We presently have two pending patents applications,as follows:
        
	

        	

        	

        	
          TK6000
        	
          Application No. 12/366,851
        
	

        	

        	

        	
          TK4000
        	
          Application No. 12,561/507
        
	
           
        
	

        	

        	
          C
        	
          We have registered the followinginternet domain names:
        
	

        	

        	

        	
          Nettalkasia.com
        
	

        	

        	

        	
          Nettalkiptv.com
        
	

        	

        	

        	
          Nettalkla.com
        
	

        	

        	

        	
          Nettalkmexico.com
        
	

        	

        	

        	
          Nettalktelecom.com
        
	

        	

        	

        	
          Nettalkuk.com
        
	

        	

        	

        	
          Nettalkusa.com
        
	

        	

        	

        	
          Nettalkwifi.com
        
	

        	

        	

        	
          Nettalkwimax.com
        
	

        	

        	

        	
          Nettalkbiz.com
        
	

        	

        	

        	
          Nettalkbusiness.com
        
	

        	

        	

        	
          Nettalkcanada.com
        
	

        	

        	

        	
          Nettalkeurope.com
        
	

        	

        	

        	
          Nettalkfree.com
        
	

        	

        	

        	
          Nettalkglobal.com
        
	

        	

        	

        	
          Nettalkhome.com
        
	

        	

        	

        	
          Nettalkiptv.com
        
	

        	

        	

        	
          Nettalkla.com
        
	

        	

        	

        	
          Nettalkmexico.com
        
	

        	

        	

        	
          Nettalktelecom.com
        
	

        	

        	

        	
          Nettalkuk.com
        
	

        	

        	

        	
          Nettalkusa.com
        
	

        	

        	

        	
          Nettalkwifi.com
        
	

        	

        	

        	
          Nettalkwimax.com
        
	
           
        
	

        	

        	
          D
        	
          
            We have been granted and or are applying for Competitive Local
            Exchange Carrier (“CLEC”) Licenses in thirty-five states, as
            follows:
          

        
	

        	

        	

        	
          Alabama
        	
          Georgia
        	
          Massachusetts
        	
          New Mexico
        	
          South Dakota
        
	

        	

        	

        	
          Arizona
        	
          Idaho
        	
          Minnesota
        	
          New York
        	
          Texas
        
	

        	

        	

        	
          Arkansas
        	
          Illinois
        	
          Montana
        	
          North Carolina
        	
          Utah
        
	

        	

        	

        	
          California
        	
          Indiana
        	
          Nebraska
        	
          North Dakota
        	
          Vermont
        
	

        	

        	

        	
          Connecticut
        	
          Kansas
        	
          Nevada
        	
          Ohio
        	
          Washington DC
        
	

        	

        	

        	
          Delaware
        	
          Kentucky
        	
          New Jersey
        	
          Oregon
        	
          Washington
        
	

        	

        	

        	
          Florida
        	
          Maryland
        	
          New York
        	
          Pennsylvania
        	
          Wisconsin
        

    

    
      
        

        

      

      
        
          26
        

        
          

        

      

      
        

        

      

    

    

    

    
      SCHEDULE E
    

    
      Nettalk.com, Inc.
    

    
      1.  Nettalk.com, Inc. was organized in the State of Florida.
    

    
      2.  Nettalk.com, Inc. Federal Tax Identification number is: 20 – 4830633.
    

    
      3.  Nettalk.com, Inc. State of Florida ax Identification number is:
      23-8015074239-0.
    

    
      4.  Our previous name was Discover Screens, Inc. (name changed on Sept
      10, 2008).
    

    
      
        

        

      

      
        
          27
        

        
          

        

      

      
        

        

      

    

    

    

    
      SCHEDULE F
    

    
      Nettalk.com, Inc.                                 Schedule F
    

    
    	
          1.
        	
           
        	
          Intellectual property:
        
	
           
        
	

        	

        	
          A
        	
          We presently have federal trademarks, as follows:
        
	

        	

        	

        	
          “Net Talk”
        	
          Serial No.: 77626299
        
	

        	

        	

        	
          “Connecting the world”
        	
          Serial No.: 78783778
        
	

        	

        	

        	
          “Connecting the globe”
        	
          Serial No.: 77852806
        
	

        	

        	

        	
          “TK6000”
        	
          Serial No.: 77821831
        
	

        	

        	

        	
          “TK4000”
        	
          Serial No.: 77862553
        
	

        	

        	

        	
          “Your Phone Companyin a Box”
        	
          Serial No.: 77787836
        
	

        	

        	

        	
          “More talk, no bills”
        	
          Serial No.: 77787770
        
	

        	

        	

        	
          “Fire your phone company”
        	
          Serial No.: 77787823
        
	
           
        
	

        	

        	
          B
        	
          We presently have two pending patents applications, as follows:
        
	

        	

        	

        	
          TK6000
        	
          Application No. 12/366,851
        
	

        	

        	

        	
          TK4000
        	
          Application No. 12,561/507
        
	
           
        
	

        	

        	
          C
        	
          We have registeredthe following internet domain names:
        
	

        	

        	

        	
          Nettalkasia.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkiptv.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkla.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkmexico.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalktelecom.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkuk.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkusa.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkwifi.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkwimax.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkbiz.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkbusiness.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkcanada.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkeurope.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkfree.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkglobal.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkhome.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkiptv.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkla.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkmexico.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalktelecom.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkuk.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkusa.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkwifi.com
        	

        	

        	

        
	

        	

        	

        	
          Nettalkwimax.com
        	

        	

        	

        
	
           
        
	

        	

        	
          D
        	
          We have been granted and or are applying for Competitive Local
          Exchange Carrier (“CLEC”) Licenses in thirty-five states, as follows:
        
	

        	

        	

        	
          Alabama
        	
          Georgia
        	
          Massachusetts
        	
          New Mexico
        	
          South Dakota
        
	

        	

        	

        	
          Arizona
        	
          Idaho
        	
          Minnesota
        	
          New York
        	
          Texas
        
	

        	

        	

        	
          Arkansas
        	
          Illinois
        	
          Montana
        	
          North Carolina
        	
          Utah
        
	

        	

        	

        	
          California
        	
          Indiana
        	
          Nebraska
        	
          North Dakota
        	
          Vermont
        
	

        	

        	

        	
          Connecticut
        	
          Kansas
        	
          Nevada
        	
          Ohio
        	
          Washington DC
        
	

        	

        	

        	
          Delaware
        	
          Kentucky
        	
          New Jersey
        	
          Oregon
        	
          Washington
        
	

        	

        	

        	
          Florida
        	
          Maryland
        	
          New York
        	
          Pennsylvania
        	
          Wisconsin
        

    

    

    

    
      
        

        

      

      
        
          28
        

        
          

        

      

      
        

        

      

    

    

    

    
      SCHEDULE G
    

    
      Nettalk.com, Inc.
    

    

    

    
      Fixed and intangible assets owned by Nettalk.com, Inc. are listed on
      attached Depreciations schedule, dated, February 24, 2010.
    

    
      As of February 24, 2010, Nettalk.com, Inc. did not own any capital
      stock, or equity interest.  Furthermore, there were no pledged
      securities owned.
    

    

    

    
      
        

        

      

      
        
          29
        

        
          

        

      

      
        

        

      

    

    

    

    
      SCHEDULE H
    

    

    

    
      12% Senior Secured Convertible Debenture due June 30, 2011
    

    
      12% Senior Secured Convertible Debenture due July 20, 2011
    

    
      12% Senior Secured Convertible Debenture due September 15, 2011
    

    
      Shares of 12% Series A Convertible Preferred Stock
    

    
      Series D Common Stock Purchase Warrants
    

    
      

      30

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00169-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00169-of-00352.parquet"}]]