Document:

f8k0808ex10iv_guangzhou.htm

    
      EXHIBIT
        E

      

      SECURITY
        AGREEMENT

      

                  This
        SECURITY AGREEMENT, dated as of July 31, 2007 (this “Agreement”), is
        among Guangzhou Global Telecom, Inc., a Florida corporation (the
“Company”), all of the Subsidiaries of the Company (such subsidiaries,
        the “Guarantors” and together with the Company, the “Debtors”) and
        the holders of the Company’s 8% Senior Secured Convertible Debentures due
        issued on July __, 2007 in the original aggregate principal amount of
        $_________ (collectively, the “Debentures”) signatory hereto,
        their endorsees, transferees and assigns (collectively, the “Secured
        Parties”).

      

      W
        I T N E S S E T H:

      

                  WHEREAS,
        pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
        Parties have severally agreed to extend the loans to the Company evidenced
        by
        the Debentures;

      

                  WHEREAS,
        pursuant to a certain Subsidiary Guarantee, dated as of the date hereof
        (the “Guarantee”), the Guarantors have jointly and severally
        agreed to guarantee and act as surety for payment of such Debentures;
        and

      

                  WHEREAS,
        in order to induce the Secured Parties to extend the loans evidenced by the
        Debentures, each Debtor has agreed to execute and deliver to the Secured
        Parties
        this Agreement and to grant the Secured
        Parties, pari passu with each other Secured Party and
        through the Agent, a security interest in certain property of such Debtor
        to
        secure the prompt payment, performance and discharge in full of all of the
        Company’s obligations under the Debentures and the Guarantors’ obligations under
        the Guarantee.

      

                  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.  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 Parties are granted a security
        interest by this Agreement and which shall include the following personal
        property of the Debtors, 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):

       

       

      
        
          
          

        

        
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      (i)   All
        goods, including, without limitation, (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 any 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 any
        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

       

       

      
        
          
          

        

        
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      (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 each Guarantor, including, without limitation,
        the
        shares of capital stock and the other equity interests listed on Schedule
        H 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 any 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 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)           “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.

       

       

      
        
          
          

        

        
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                 (c)           “Majority
        in Interest” means, at any time of determination, the majority in
        interest (based on then-outstanding principal amounts of Debentures at the
        time
        of such determination) of the Secured Parties.

      

                 (d)           “Necessary
        Endorsement” means undated stock powers endorsed in blank or other
        proper instruments of assignment duly executed and such other instruments
        or
        documents as the Agent (as that term is defined below) 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 any Debtor to the Secured
        Parties, including, without limitation, all obligations under this Agreement,
        the Debentures, the Guarantee 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 any of the
        Secured Parties 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: (i) principal of, and
        interest on the Debentures and the loans extended pursuant thereto; (ii)
        any and
        all other fees, indemnities, costs, obligations and liabilities of the Debtors
        from time to time under or in connection with this Agreement, the Debentures,
        the Guarantee and any other instruments, agreements or other documents executed
        and/or delivered in connection herewith or therewith; and (iii) 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 any
        Debtor.

       

          (f)           
        “Organizational Documents” means with respect to any Debtor, the
        documents by which such 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 such Debtor (such as bylaws, a partnership agreement or an
        operating, limited liability or members agreement).

       

         (g)             “Pledged
        Securities” shall have the meaning ascribed to such term in Section
        4(i).

       

       

      
        
          
          

        

        
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      (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.

      

                 2.           Grant
        of Security Interest in
        Collateral. As an inducement for the Secured Parties to extend the
        loans as evidenced by the Debentures and to secure the complete and timely
        payment, performance and discharge in full, as the case may be, of all of
        the
        Obligations, each Debtor hereby unconditionally and irrevocably pledges,
        grants
        and hypothecates to the Secured Parties a 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 (a “Security
        Interest” and, collectively, the “Security Interests”).

      

                 3.           Delivery
        of Certain Collateral.  Contemporaneously or prior to the
        execution of this Agreement, each Debtor shall deliver or cause to be delivered
        to the Agent (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 Debtors are,
        contemporaneously with the execution hereof, delivering to Agent, or have
        previously delivered to Agent, a true and correct copy of each Organizational
        Document governing any of the Pledged Securities.

      

                  4.          Representations,
        Warranties, Covenants and Agreements of the Debtors. Except as set
        forth under the corresponding section of the disclosure schedules delivered
        to
        the Secured Parties concurrently herewith (the “Disclosure
        Schedules”), which Disclosure Schedules shall be deemed a part hereof, each
        Debtor represents and warrants to, and covenants and agrees with, the Secured
        Parties as follows:

      

      (a)   Each
        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
        each
        Debtor of this Agreement and the filings contemplated therein have been duly
        authorized by all necessary action on the part of such Debtor and no further
        action is required by such Debtor.  This Agreement has been duly
        executed by each Debtor.  This Agreement constitutes the legal, valid
        and binding obligation of each Debtor, enforceable against each 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.

       

       

      
        
          
          

        

        
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       (b)           The
        Debtors have no place of business or offices where their 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, each 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 (as defined
        in the Debentures).  Except as disclosed on Schedule A, none of
        such Collateral is in the possession of any consignee, bailee, warehouseman,
        agent or processor.

      

      (c)           Except
        for Permitted Liens (as defined in the Debentures) and except as set forth
        on
Schedule B attached hereto, the Debtors are the sole owner of the
        Collateral (except for non-exclusive licenses granted by any Debtor in the
        ordinary course of business), free and clear of any liens, security interests,
        encumbrances, rights or claims, and are fully authorized to grant the Security
        Interests.  Except as set forth on Schedule B attached hereto,
        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 Parties pursuant to this Agreement) covering
        or
        affecting any of the Collateral.  Except as set forth on Schedule
        B attached hereto and except pursuant to this Agreement, as long as this
        Agreement shall be in effect, the Debtors shall not execute and shall not
        knowingly permit to be on file in any such office or agency any other financing
        statement or other document or instrument (except to the extent filed or
        recorded in favor of the Secured Parties 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 any Debtor's claim of ownership rights in or exclusive rights
        to use
        the Collateral in any jurisdiction or to any 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 any Debtor,
        threatened before any court, judicial body, administrative or regulatory
        agency,
        arbitrator or other governmental authority.

      

      (e)           Each
        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 Parties at least 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 Interests to create in favor of the Secured
        Parties a valid, perfected and continuing perfected first priority lien in
        the
        Collateral.

      

      (f)           This
        Agreement creates in favor of the Secured Parties a valid security interest
        in the Collateral, subject only to Permitted Liens (as defined in the
        Debentures) 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.  

       

       

      
        
          
          

        

        
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      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
        satisfying the requirements of Section 9-104(a)(2) of the UCC with respect
        to
        each deposit account of the Debtors, 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
        Interests created hereunder in the Collateral or (iii) the enforcement of
        the
        rights of the Agent and the Secured Parties hereunder.

      

       (g)           Each
        Debtor hereby authorizes the Agent to file one or more financing statements
        under the UCC, with respect to the Security Interests, with the proper filing
        and recording agencies in any jurisdiction deemed proper by it.

      

       (h)           The
        execution, delivery and performance of this Agreement by the Debtors does
        not
        (i) violate any of the provisions of any Organizational Documents of any
        Debtor
        or any judgment, decree, order or award of any court, governmental body or
        arbitrator or any applicable law, rule or regulation applicable to any 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 any Debtor's debt or otherwise) or other understanding
        to
        which any Debtor is a party or by which any property or asset of any Debtor
        is bound or affected. If any, all required consents (including, without
        limitation, from stockholders or creditors of any Debtor) necessary for any
        Debtor to enter into and perform its obligations hereunder have been
        obtained.

      

       (i)             The
        capital stock and other equity interests listed on Schedule H hereto (the
“Pledged Securities”) represent all of the capital stock and other equity
        interests of the Guarantors, and represent all capital stock and other equity
        interests owned, directly or indirectly, by the Company.  All of the
        Pledged Securities are validly issued, fully paid and nonassessable, and
        the
        Company 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 (as
        defined in the Debentures).  

      

      (j)           The
        ownership and other equity interests in partnerships and limited liability
        companies (if any) included in the Collateral (the “Pledged Interests”)
        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.

       

       

      
        
          
          

        

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

      

      (l)           
        No Debtor will 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 a Majority in Interest.

      

      (m)         
        Each 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)           Each
        Debtor shall maintain with financially sound and reputable insurers, insurance
        with respect to the Collateral, including Collateral hereafter acquired,
        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.  Each Debtor shall cause each insurance policy issued in
        connection herewith to provide, and the insurer issuing such policy to certify
        to the Agent, that (a) the Agent 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 Agent and such cancellation or change shall
        not
        be effective as to the Agent for at least thirty (30) days after receipt
        by the
        Agent of such notice, unless the effect of such change is to extend or increase
        coverage under the policy; and (c) the Agent 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.  

       

       

      
        
          
          

        

        
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      If
        no
        Event of Default (as defined in the Debentures) 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 applicable 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
        applicable Debtor; provided, however, that payments received
        by any 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 Agent on behalf of the Secured Parties and, if received by such Debtor,
        shall be held in trust for the Secured Parties and immediately paid over
        to the
        Agent unless otherwise directed in writing by the Agent.   Copies
        of such policies or the related certificates, in each case, naming the Agent
        as
        lender loss payee and additional insured shall be delivered to the Agent
        at
        least annually and at the time any new policy of insurance is
        issued.

      

      (o)           Each
        Debtor shall, within ten (10) days of obtaining knowledge thereof, advise
        the
        Secured Parties promptly, in sufficient detail, of any material adverse 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
        Parties’ security interest, through the Agent, therein.

      

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

      

      (q)           Each
        Debtor shall permit the Agent and its representatives and agents to inspect
        the
        Collateral during normal business hours and upon reasonable prior notice,
        and to
        make copies of records pertaining to the Collateral as may be reasonably
        requested by the Agent from time to time.

      

      (r)           Each
        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)           Each
        Debtor shall promptly notify the Secured Parties 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 such
        Debtor that may materially affect the value of the Collateral, the Security
        Interest or the rights and remedies of the Secured Parties
        hereunder.

       

       

      
        
          
          

        

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

      

      (u)           The
        Debtors 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)           No
        Debtor will 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 Parties of such change
        and, at
        the time of such written notification, such Debtor provides any financing
        statements or fixture filings necessary to perfect and continue the perfection
        of the Security Interests granted and evidenced by this Agreement.

      

      (w)          Except
        in the ordinary course of business, no Debtor may 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 Agent which
        shall
        not be unreasonably withheld.

      

      (x)           No
        Debtor may relocate its chief executive office to a new location without
        providing 30 days prior written notification thereof to the Secured Parties
        and
        so long as, at the time of such written notification, such Debtor provides
        any
        financing statements or fixture filings necessary to perfect and continue
        the
        perfection of the Security Interests granted and evidenced by this
        Agreement.

      

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

      

      (z)           
        (i) The actual name of each Debtor is the name set forth in Schedule
        D attached hereto; (ii) no Debtor has any trade names except as set forth
        on
Schedule E attached hereto; (iii) no Debtor has 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 any Debtor or been
        acquired by any 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 applicable
        Debtor shall deliver such Collateral to the Agent.

       

       

      
        
          
          

        

        
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                 (bb)           Each
        Debtor, in its capacity as issuer, hereby agrees to comply with any and all
        orders and instructions of Agent regarding the Pledged Interests consistent
        with
        the terms of this Agreement without the further consent of any Debtor as
        contemplated by Section 8-106 (or any successor section) of the
        UCC.  Further, each Debtor agrees that it shall not enter into a
        similar agreement (or one that would confer “control” within the meaning of
        Article 8 of the UCC) with any other person or entity.

       

          (cc)           Each
        Debtor shall cause all tangible chattel paper constituting Collateral to
        be
        delivered to the Agent, or, if such delivery is not possible, then to cause
        such
        tangible chattel paper to contain a legend noting that it is subject to the
        security interest created by this Agreement.  To the extent that any
        Collateral consists of electronic chattel paper, the applicable Debtor shall
        cause the underlying chattel paper to be “marked” within the meaning of Section
        9-105 of the UCC (or successor section thereto).

      

      (dd)       If
        there is any investment property or deposit account included as Collateral
        that
        can be perfected by “control” through an account control agreement, the
        applicable Debtor shall cause such an account control agreement, in form
        and
        substance in each case satisfactory to the Agent, to be entered into and
        delivered to the Agent for the benefit of the Secured Parties.

      

      (ee)        To
        the extent that any Collateral consists of letter-of-credit rights, the
        applicable Debtor shall cause the issuer of each underlying letter of credit
        to
        consent to an assignment of the proceeds thereof to the Secured
        Parties.

      

      (ff)         To
        the extent that any Collateral is in the possession of any third party, the
        applicable Debtor shall join with the Agent in notifying such third party
        of the
        Secured Parties’ security interest in such Collateral and shall use its best
        efforts to obtain an acknowledgement and agreement from such third party
        with
        respect to the Collateral, in form and substance reasonably satisfactory
        to the
        Agent.

      

      (gg)        If
        any Debtor shall at any time hold or acquire a commercial tort claim, such
        Debtor shall promptly notify the Secured Parties in a writing signed by such
        Debtor of the particulars thereof and grant to the Secured Parties in such
        writing a security interest therein and in the proceeds thereof, all upon
        the
        terms of this Agreement, with such writing to be in form and substance
        satisfactory to the Agent.

      

      (hh)        Each
        Debtor shall immediately provide written notice to the Secured Parties of
        any
        and all accounts which arise out of contracts with any governmental authority
        and, to the extent necessary to perfect or continue the perfected status
        of the
        Security Interests in such accounts and proceeds thereof, shall execute and
        deliver to the Agent an assignment of claims for such accounts and cooperate
        with the Agent in taking any other steps required, in its judgment, under
        the
        Federal Assignment of Claims Act or any similar federal, state or local statute
        or rule to perfect or continue the perfected status of the Security Interests
        in
        such accounts and proceeds thereof.

       

       

      
        
          
          

        

        
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       (ii)         
        Each Debtor shall cause each subsidiary of such Debtor to immediately become
        a
        party hereto (an “Additional Debtor”), by executing and delivering an
        Additional Debtor Joinder in substantially the form of Annex A attached
        hereto and comply with the provisions hereof applicable to the
        Debtors.  Concurrent therewith, the Additional Debtor shall deliver
        replacement schedules for, or supplements to all other Schedules to (or referred
        to in) this Agreement, as applicable, which replacement schedules shall
        supersede, or supplements shall modify, the Schedules then in
        effect.  The Additional Debtor shall also deliver such opinions of
        counsel, authorizing resolutions, good standing certificates, incumbency
        certificates, organizational documents, financing statements and other
        information and documentation as the Agent may reasonably
        request.  Upon delivery of the foregoing to the Agent, the Additional
        Debtor shall be and become a party to this Agreement with the same rights
        and
        obligations as the Debtors, for all purposes hereof as fully and to the same
        extent as if it were an original signatory hereto and shall be deemed to
        have
        made the representations, warranties and covenants set forth herein as of
        the
        date of execution and delivery of such Additional Debtor Joinder, and all
        references herein to the “Debtors” shall be deemed to include each Additional
        Debtor.

      

      (jj)           Each
        Debtor shall vote the Pledged Securities to comply with the covenants and
        agreements set forth herein and in the Debentures.

      

      (kk)           Each
        Debtor shall register the pledge of the applicable Pledged Securities on
        the
        books of such Debtor.  Each Debtor shall notify each issuer of Pledged
        Securities to register the pledge of the applicable Pledged Securities in
        the
        name of the Secured Parties on the books of such issuer.  Further,
        except with respect to certificated securities delivered to the Agent, the
        applicable Debtor shall deliver to Agent 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
        Agent 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
        Agent, will take such steps as may be necessary to effect the transfer, and
        will
        comply with all other instructions of Agent regarding such Pledged Securities
        without the further consent of the applicable Debtor.

      

      (ll)           In
        the event that, upon an occurrence of an Event of Default, Agent 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, each Debtor shall, to the extent applicable: (i) deliver
        to
        Agent 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 Debtors
        and
        their direct and indirect subsidiaries; (ii) use its best efforts to obtain
        resignations of the persons then serving as officers and directors of the
        Debtors and their direct and indirect subsidiaries, if so requested; and
        (iii)
        use its 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 Agent and allow the Transferee or Agent to continue the business
        of the Debtors and their direct and indirect subsidiaries.

       

       

      
        
          
          

        

        
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      (mm)                  Without
        limiting the generality of the other obligations of the Debtors hereunder,
        each
        Debtor shall promptly (i) cause to be registered at the United States Copyright
        Office all of its material copyrights, (ii) cause the security interest
        contemplated hereby with respect to all Intellectual Property registered
        at the
        United States Copyright Office or United States Patent and Trademark Office
        to
        be duly recorded at the applicable office, and (iii) give the Agent notice
        whenever it acquires (whether absolutely or by license) or creates any
        additional material Intellectual Property.

      

       (nn)                   Each
        Debtor will from time to time, at the joint and several expense of the Debtors,
        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
        Agent
        may reasonably request, in order to perfect and protect any security interest
        granted or purported to be granted hereby or to enable the Secured Parties
        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.

      

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

      

      (pp)                    Except
        as set forth on Schedule G attached hereto, 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 Agent’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 any Debtor is subject or
        to
        which any Debtor is party.

      

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

       

       

      
        
          
          

        

        
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      (a)   The
        occurrence of an Event of Default (as defined in the Debentures) under the
        Debentures;

      

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

      

      (c)   The
        failure by any Debtor to observe or perform any of its obligations hereunder
        for
        five (5) days after delivery to such 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 such Debtor is using best efforts to cure
        same
        in a timely fashion; or

      

      (d)   If
        any 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 any Debtor, or a proceeding shall be commenced by any Debtor, or by any
        governmental authority having jurisdiction over any Debtor, seeking to establish
        the invalidity or unenforceability thereof, or any Debtor shall deny that
        any
        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 at any time thereafter, each Debtor
        shall, upon receipt of any revenue, income, dividend, interest or other sums
        subject to the Security Interests, whether payable pursuant to the Debentures
        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 Parties and shall forthwith endorse and transfer any such sums or
        instruments, or both, to the Secured Parties, pro-rata in proportion to their
        respective then-currently outstanding principal amount of Debentures for
        application to the satisfaction of the Obligations (and if any Debenture
        is not
        outstanding, pro-rata in proportion to the initial purchases of the remaining
        Debentures).

      

      (b)           If
        any 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 such 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), such Debtor agrees to (i) accept the same as the agent of the
        Secured Parties; (ii) hold the same in trust on behalf of and for the benefit
        of
        the Secured Parties; and (iii) to deliver any and all certificates or
        instruments evidencing the same to Agent on or before the close of business
        on
        the fifth business day following the receipt thereof by such Debtor, in the
        exact form received together with the Necessary Endorsements, to be held
        by
        Agent subject to the terms of this Agreement as Collateral.

      
 

      
        
          
          

        

        
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                8.              Rights
        and Remedies Upon Default.

      

                 (a)           Upon
        the occurrence of any Event of Default and at any time thereafter, the Secured
        Parties, acting through the Agent, shall have the right to exercise all of
        the
        remedies conferred hereunder and under the Debentures, and the Secured Parties
        shall have all the rights and remedies of a secured party under the
        UCC.  Without limitation, the Agent, for the benefit of the Secured
        Parties, shall have the following rights and powers:

      

      (i)           The
        Agent 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 where the Collateral,
        or
        any part thereof, is or may be placed and remove the same, and each Debtor
        shall
        assemble the Collateral and make it available to the Agent at places which
        the
        Agent shall reasonably select, whether at such Debtor's premises or elsewhere,
        and make available to the Agent, without rent, all of such Debtor’s respective
        premises and facilities for the purpose of the Agent taking possession of,
        removing or putting the Collateral in saleable or disposable form.

      

      (ii)            Upon
        notice to the
        Debtors by Agent, all rights of each Debtor to exercise the voting and other
        consensual rights which it would otherwise be entitled to exercise and all
        rights of each Debtor to receive the dividends and interest which it would
        otherwise be authorized to receive and retain, shall cease.  Upon such
        notice, Agent shall have the right to receive, for the benefit of the Secured
        Parties, any interest, cash dividends or other payments on the Collateral
        and,
        at the option of Agent, to exercise in such Agent’s discretion all voting rights
        pertaining thereto.  Without limiting the generality of the foregoing,
        Agent shall have the right (but not the obligation) to exercise all rights
        with
        respect to the Collateral as it were the sole and absolute owner 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 any Debtor or any of its direct or indirect
        subsidiaries.

      

      (iii)           The
        Agent shall have
        the right to operate the business of each 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 Agent 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 any
        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 Agent, for the benefit of the Secured Parties, 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 any Debtor, which are hereby waived and
        released.

      

      
        
          
          

        

        
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      (iv)                       The
        Agent 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 Agent, on behalf of the Secured Parties, and to enforce the Debtors’
rights against such account debtors and obligors.

      

      (v)                       The
        Agent, for the benefit of the Secured Parties, may (but is not obligated
        to)
        direct any financial intermediary or any other person or entity holding any
        investment property to transfer the same to the Agent, on behalf of the Secured
        Parties, or its designee.

      

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

      

                 (b)           The
        Agent shall 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 Agent
        may sell the Collateral without giving any warranties and may specifically
        disclaim such warranties.  If the Agent sells any of the Collateral on
        credit, the Debtors will only be credited with payments actually made by
        the
        purchaser.  In addition, each Debtor waives any and all rights that it
        may have to a judicial hearing in advance of the enforcement of any of the
        Agent’s rights and remedies hereunder, including, without limitation, its right
        following an Event of Default to take immediate possession of the Collateral
        and
        to exercise its rights and remedies with respect thereto.

       

          (c)           For
        the purpose of enabling the Agent to further exercise rights and remedies
        under
        this Section 8 or elsewhere provided by agreement or applicable law, each
        Debtor
        hereby grants to the Agent, for the benefit of the Agent and the Secured
        Parties, an irrevocable, nonexclusive license (exercisable without payment
        of
        royalty or other compensation to such Debtor) to use, license or sublicense
        following an Event of Default, any Intellectual Property now owned or hereafter
        acquired by such 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 or from payments made on account of any insurance
        policy insuring any portion of the Collateral 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 Agent in enforcing the Secured
        Parties’ rights hereunder and in connection with collecting, storing and
        disposing of the Collateral, and then to satisfaction of the Obligations
        pro
        rata among the Secured Parties (based on then-outstanding principal amounts
        of
        Debentures at the time of any such determination), and to the payment of
        any
        other amounts required by applicable law, after which the Secured Parties
        shall
        pay to the applicable Debtor any surplus proceeds. 

       

       

      
        
          
          

        

        
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      If,
        upon
        the sale, license or other disposition of the Collateral, the proceeds thereof
        are insufficient to pay all amounts to which the Secured Parties are legally
        entitled, the Debtors will be liable for the deficiency, together with interest
        thereon, at the rate of 18% per annum or the lesser amount permitted by
        applicable law (the “Default Rate”), and the reasonable fees of any attorneys
        employed by the Secured Parties to collect such deficiency.  To the
        extent permitted by applicable law, each Debtor waives all claims, damages
        and
        demands against the Secured Parties 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 Parties as determined by a final judgment
        (not subject to further appeal) of a court of competent
        jurisdiction.

      

                 10.           Securities
        Law Provision.  Each Debtor recognizes that Agent 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.  Each 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 Agent 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.  Each
        Debtor shall cooperate with Agent in its attempt to satisfy any requirements
        under the Securities Laws (including, without limitation, registration
        thereunder if requested by Agent) applicable to the sale of the Pledged
        Securities by Agent.

       

                  11.              Costs
        and Expenses. Each 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 Agent.  The Debtors shall also pay all
        other claims and charges which in the reasonable opinion of the Agent is
        reasonably likely to prejudice, imperil or otherwise affect the Collateral
        or
        the Security Interests therein.  The Debtors will also, upon demand,
        pay to the Agent 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 Agent, for the benefit of the Secured Parties, 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
        Parties
        under the Debentures. 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 Debtors assume 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) neither the Agent nor any 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) each Debtor shall remain obligated and liable
        under
        each contract or agreement included in the Collateral to be observed or
        performed by such Debtor thereunder.  

       

       

      
        
          
          

        

        
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      Neither
        the Agent nor any 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 Agent or any Secured Party of any payment relating to any
        of the
        Collateral, nor shall the Agent or any Secured Party be obligated in any
        manner
        to perform any of the obligations of any 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 Agent or any 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 Agent or to which the Agent or any Secured Party may be entitled
        at any time or times.

      

                 13.           Security
        Interests Absolute. All rights of the
        Secured Parties and all obligations of the Debtors hereunder, shall be absolute
        and unconditional, irrespective of: (a) any lack of validity or enforceability
        of this 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 Debentures 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 guarantee, or any other
        security, for all or any of the Obligations; (d) any action by the Secured
        Parties 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 Interests granted hereby.  Until the Obligations shall
        have been paid and performed in full, the rights of the Secured Parties shall
        continue even if the Obligations are barred for any reason, including, without
        limitation, the running of the statute of limitations or
        bankruptcy.  Each 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 Parties 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 Parties,
        then, in any such event, each 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.  Each Debtor waives all right to require the
        Secured Parties to proceed against any other person or entity or to apply
        any
        Collateral which the Secured Parties may hold at any time, or to marshal
        assets,
        or to pursue any other remedy. Each Debtor waives any defense arising by
        reason
        of the application of the statute of limitations to any obligation secured
        hereby.

       

      
 

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

                  

          14.             Term
        of Agreement. This Agreement and the Security Interests shall terminate
        on the date on which all payments under the Debentures have been indefeasibly
        paid in full and all other Obligations have been paid or discharged; provided,
        however, that all indemnities of the Debtors contained in this Agreement
        (including, without limitation, Annex B hereto) shall survive and remain
        operative and in full force and effect regardless of the termination of this
        Agreement.

       

          15.
                   Power
        of Attorney; Further Assurances.

      

       (a)           Each
        Debtor authorizes the Agent, and does hereby make, constitute and appoint
        the
        Agent and its officers, agents, successors or assigns with full power of
        substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
        the name of the Agent or such 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 Agent; (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 Agent, and
        at
        the expense of the Debtors, 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 Agent deems necessary to protect, preserve and realize upon the
        Collateral and the Security Interests granted therein in order to effect
        the
        intent of this Agreement and the Debentures all as fully and effectually
        as the
        Debtors might or could do; and each 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 any Debtor is subject or to which
        any
        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, each 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 Agent, to perfect the Security Interests granted hereunder
        and
        otherwise to carry out the intent and purposes of this Agreement, or for
        assuring and confirming to the Agent the grant or perfection of a perfected
        security interest in all the Collateral under the UCC.

       

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      
 

      (c)           Each
        Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact,
        with full authority in the place and instead of such Debtor and in the name
        of
        such Debtor, from time to time in the Agent’s discretion, to take any action and
        to execute any instrument which the Agent 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 such
        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 Agent.  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.

      

                  16.              Notices.
        All notices, requests, demands and other communications hereunder shall be
        subject to the notice provision of the Purchase Agreement (as such term is
        defined in the Debentures).

      

                  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 Agent 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 Parties’
rights and remedies hereunder.

      

                 18.             
        Appointment of Agent. The Secured Parties
        hereby appoint Enable Growth Partners, LP to act as their agent
        (“Enable”or
        “Agent”) for purposes of exercising any and all rights and
        remedies of the Secured Parties hereunder. Such appointment shall continue
        until
        revoked in writing by a Majority in Interest, at which time a Majority in
        Interest shall appoint a new Agent, provided that the existing Agent may
        not be
        removed as Agent unless such Agent shall then hold less than
        $100,000 in principal amount of Debentures;
provided, further, that such removal may occur only if
        each of the other Secured Parties shall then hold not less than an aggregate
        of
        $50,000 in principal amount of Debentures.  The Agent shall have
        the rights, responsibilities and immunities set forth in Annex B
        hereto.

       

                  19.              Miscellaneous.

      

      (a)           No
        course of dealing between the Debtors and the Secured Parties, nor any failure
        to exercise, nor any delay in exercising, on the part of the Secured Parties,
        any right, power or privilege hereunder or under the Debentures 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 Parties 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.

       

      
 

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      (c)           This
        Agreement, together with the exhibits and schedules hereto, contain the entire
        understanding of the parties with respect to the subject matter hereof and
        supersede all prior agreements and understandings, oral or written, with
        respect
        to such matters, which the parties acknowledge have been merged into this
        Agreement and the exhibits and schedules hereto. No provision of this
        Agreement may be waived, modified, supplemented or amended except in a written
        instrument signed, in the case of an amendment, by the Debtors and the Secured
        Parties or, in the case of a waiver, by the party against whom enforcement
        of
        any such waived provision is sought.

      

      (d)           If
        any term, provision, covenant or restriction of this Agreement is held by
        a
        court of competent jurisdiction to be invalid, illegal, void or unenforceable,
        the remainder of the terms, provisions, covenants and restrictions set forth
        herein shall remain in full force and effect and shall in no way be affected,
        impaired or invalidated, and the parties hereto shall use their commercially
        reasonable efforts to find and employ an alternative means to achieve the
        same
        or substantially the same result as that contemplated by such term, provision,
        covenant or restriction. It is hereby stipulated and declared to be the
        intention of the parties that they would have executed the remaining terms,
        provisions, covenants and restrictions without including any of such that
        may be
        hereafter declared invalid, illegal, void or unenforceable.

      

      (e)
                   No waiver of
        any default with respect to any provision, condition or requirement of this
        Agreement shall be deemed to be a continuing waiver in the future or a waiver
        of
        any subsequent default or a waiver of any other provision, condition or
        requirement hereof, nor shall any delay or omission of any party to exercise
        any
        right hereunder in any manner impair the exercise of any such
        right.

      

      (f)
                   This Agreement
        shall be binding upon and inure to the benefit of the parties and their
        successors and permitted assigns.  The Company and the Guarantors may
        not assign this Agreement or any rights or obligations hereunder without
        the
        prior written consent of each Secured Party (other than by
        merger).  Any Secured Party may assign any or all of its rights under
        this Agreement to any Person to whom such Secured Party assigns or transfers
        any
        Securities, provided such transferee agrees in writing to be bound, with
        respect
        to the transferred Securities, by the provisions of this Agreement that apply
        to
        the “Secured Parties.”

      

      (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.

       

      
 

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      (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 Debtor agrees that all
        proceedings concerning the interpretations, enforcement and defense of the
        transactions contemplated by this Agreement and the Debentures (whether brought
        against a party hereto or its respective affiliates, directors, officers,
        shareholders, partners, members, employees or agents) shall be commenced
        exclusively in the state and federal courts sitting in the City of New York,
        Borough of Manhattan. Each Debtor 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.

      

      (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)           All
        Debtors shall jointly and severally be liable for the obligations of each
        Debtor
        to the Secured Parties hereunder.

      

      (k)           Each
        Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
        Parties and their respective partners, members, shareholders, officers,
        directors, employees and agents (and any other persons with other titles
        that have similar functions) (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.  

       

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      This
        indemnification provision is in addition to, and not in limitation of, any
        other indemnification provision in the Debentures, the Purchase Agreement
        (as
        such term is defined in the Debentures) or any other agreement, instrument
        or
        other document executed or delivered in connection herewith or
        therewith.

      

      (l)           Nothing
        in this Agreement shall be construed to subject Agent or any Secured Party
        to
        liability as a partner in any Debtor or any if its direct or indirect
        subsidiaries that is a partnership or as a member in any Debtor or any of
        its
        direct or indirect subsidiaries that is a limited liability company, nor
        shall
        Agent or any Secured Party be deemed to have assumed any obligations under
        any
        partnership agreement or limited liability company agreement, as applicable,
        of
        any such 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 such Debtor as a partner or member, as applicable, pursuant
        hereto.

      

      (m)           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 any Debtor or any direct or indirect
        subsidiary of any Debtor or compliance with any provisions of any of the
        Organizational Documents, the Debtors hereby grant such consent and approval
        and
        waive any such noncompliance with the terms of said documents.

      

      [SIGNATURE
        PAGES FOLLOW]

       

       

       

       

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

       

      
 

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

      

      

      
        	
                GUANGZHOU
                  GLOBAL TELECOM, INC.

                 

              
	
                By: 
                  /s/  Li Yanquan                        

                     Name:
                  Li Yanquan

                     Title:
                  Chief Executive Officer

                 

              
	 
	
                GLOBAL
                  TELECOM HOLDING LIMITED

                 

                 

              
	
                By:/s/ 
                  Li Yanquan                        

                     Name:
                  Li Yanquan

                     Title:
                  Chief Executive Officer

                 

              
	 
	
                GUANGZHOU
                  GLOBAL TELECOMMUNICATION COMPANY LIMITED

                 

                 

              
	
                By:/s/ 
                  Li Yanquan                        

                     Name:
                  Li Yanquan

                     Title:
                  Chief Executive Officer

                 

              

      

      

      

      

      

      

      

                            [SIGNATURE
        PAGE OF HOLDERS FOLLOWS]

       

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      [SIGNATURE
        PAGE OF HOLDERS TO GZGT SA]

      

                 Name
        of Investing Entity: __________________________

      Signature
        of Authorized Signatory of Investing entity:
        _________________________

      Name
        of
        Authorized Signatory: _________________________

      Title
        of
        Authorized Signatory: __________________________

      

       

      [SIGNATURE
        PAGE OF HOLDERS FOLLOWS]

      

      

      

      
 

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      

      SECURITY
        AGREEMENT SCHEDULES

      

      

      SCHEDULE
        A

      

      Principal
        Place of Business of Debtors:

      APT
        29D,
        Block E

      No.11
        Hao
        Jing Street, Zhu Jiang Di Jing Yuan

      YiZhou
        Road, HaiZhu District,

      Guangzhou
        China, 510310

      

      

      Locations
        Where Collateral is Located or Stored:

      APT
        29D,
        Block E

      No.11
        Hao
        Jing Street, Zhu Jiang Di Jing Yuan

      YiZhou
        Road, HaiZhu District,

      Guangzhou
        China, 510310

       

       

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

       

       

      
 

      SCHEDULE
        B

      PERMITTED
        LIENS

      

      None

       

       

       

      
 

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
        C

      JURISDICTIONS
        TO FILE AND RECORD SECURITY INTERESTS

      

      Florida

      

      

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      SCHEDULE
        D

      STATE
        OF ORGANIZATION

      

      Guangzhou
        Global Telecom, Inc. – Florida

      

      Global
        Telecom Holding Limited - British Virgin Islands

      

      Guangzhou
        Global Telecom Limited - 广州寰球通讯有限公司–
        People’s Republic of China

       

       

       

       

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

       

       

      SCHEDULE
        E

      TRADE
        NAMES

      

      Guangzhou
        Global Telecom, Inc. was previously known as Avalon Development Enterprises,
        Inc.

      

      

      

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
        F

      INTELLECTUAL
        PROPERTY

      

      None.

       

       

       

       

       

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        G

      GOVERNMENTAL
        AUTHORITY

      

      None.

      

       

       

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

       

       

       

      SCHEDULE
        H

      PLEDGED
        SECURITIES

      

      

      Global
        Telecom Holding Limited

      1,000
        shares of common stock

      

      Guangzhou
        Global Telecom Limited

      All
        registered capital of RMB 3,030,000

      

      

      

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

      

      

      

      ANNEX
        A

      to

      SECURITY

      AGREEMENT

      
         

        FORM
          OF ADDITIONAL DEBTOR JOINDER

         

      

       

      Security
        Agreement dated as of [_____ ___, 200__ made by

      Guangzhou
        Global Telecom, Inc

      and
        its
        subsidiaries party thereto from time to time, as Debtors

      to
        and in
        favor of

      the
        Secured Parties identified therein (the “Security
        Agreement”)

      

                 Reference
        is made to the Security Agreement as defined above; capitalized terms used
        herein and not otherwise defined herein shall have the meanings given to
        such
        terms in, or by reference in, the Security Agreement.

      

                 The
        undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
        to the Secured Parties referred to above, the undersigned shall (a) be an
        Additional Debtor under the Security Agreement, (b) have all the rights and
        obligations of the Debtors under the Security Agreement as fully and to the
        same
        extent as if the undersigned was an original signatory thereto and (c) be
        deemed
        to have made the representations and warranties set forth therein as of the
        date
        of execution and delivery of this Additional Debtor Joinder.  WITHOUT
        LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS
        TO
        THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET
        FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER
        OF
        JURY TRIAL PROVISIONS SET FORTH THEREIN.

      

                 Attached
        hereto are supplemental and/or replacement Schedules to the Security Agreement,
        as applicable.

      

                 An
        executed copy of this Joinder shall be delivered to the Secured Parties,
        and the
        Secured Parties may rely on the matters set forth herein on or after the
        date
        hereof.  This Joinder shall not be modified, amended or terminated
        without the prior written consent of the Secured Parties.

       

       

            

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

       

       

       

       IN
        WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
        the
        name and on behalf of the undersigned.

      

      
        	 	
                [Name
                  of Additional Debtor]

              

      

      

      
        	 	
                By:

              

      

      
        	 	
                Name:

              

      

      
        	 	
                Title:

              

      

      

      
        	 	
                Address:

              

      

      

      

      

      

      

      
        	
                 

              	
                Dated:

              

      

      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      ANNEX
        B

      to

      SECURITY

      AGREEMENT

      

      THE
        AGENT

      

                            1.  Appointment. The
        Secured Parties (all capitalized terms used herein and not otherwise defined
        shall have the respective meanings provided in the Security Agreement to
        which
        this Annex B is attached (the "Agreement")), by their acceptance of the
        benefits of the Agreement, hereby designate Enable Growth Partners, LP
        (“Enable” or “Agent”) as the Agent to act as specified herein
        and in the Agreement.  Each Secured Party shall be deemed irrevocably
        to authorize the Agent to take such action on its behalf under the provisions
        of
        the Agreement and any other Transaction Document (as such term is defined
        in the
        Debentures) and to exercise such powers and to perform such duties hereunder
        and
        thereunder as are specifically delegated to or required of the Agent by the
        terms hereof and thereof and such other powers as are reasonably incidental
        thereto.  The Agent may perform any of its duties hereunder by or
        through its agents or employees.

      

                            2.
        Nature of Duties.  The Agent shall have no
        duties or responsibilities except those expressly set forth in the
        Agreement.  Neither the Agent nor any of its partners, members,
        shareholders, officers, directors, employees or agents shall be liable for
        any
        action taken or omitted by it as such under the Agreement or hereunder or
        in
        connection herewith or therewith, be responsible for the consequence of any
        oversight or error of judgment or answerable for any loss, unless caused
        solely
        by its or their gross negligence or willful misconduct as determined by a
        final
        judgment (not subject to further appeal) of a court of competent
        jurisdiction.  The duties of the Agent shall be mechanical and
        administrative in nature; the Agent shall not have by reason of the Agreement
        or
        any other Transaction Document a fiduciary relationship in respect of any
        Debtor
        or any Secured Party; and nothing in the Agreement or any other Transaction
        Document, expressed or implied, is intended to or shall be so construed as
        to
        impose upon the Agent any obligations in respect of the Agreement or any
        other
        Transaction Document except as expressly set forth herein and
        therein.

      

                            3.
        Lack of Reliance on the
Agent.  Independently and without reliance
        upon the Agent, each Secured Party, to the extent it deems appropriate, has
        made
        and shall continue to make (i) its own independent investigation of the
        financial condition and affairs of the Company and its subsidiaries in
        connection with such Secured Party’s investment in the Debtors, the creation and
        continuance of the Obligations, the transactions contemplated by the Transaction
        Documents, and the taking or not taking of any action in connection therewith,
        and (ii) its own appraisal of the creditworthiness of the Company and its
        subsidiaries, and of the value of the Collateral from time to time, and the
        Agent shall have no duty or responsibility, either initially or on a continuing
        basis, to provide any Secured Party with any credit, market or other
        information with respect thereto, whether coming into its possession before
        any
        Obligations are incurred or at any time or times
        thereafter.  

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      The
        Agent
        shall not be responsible to the Debtors or any Secured Party for any
        recitals, statements, information, representations or warranties herein or
        in
        any document, certificate or other writing delivered in connection herewith,
        or
        for the execution, effectiveness, genuineness, validity, enforceability,
        perfection, collectibility, priority or sufficiency of the Agreement or any
        other Transaction Document, or for the financial condition of the Debtors
        or the
        value of any of the Collateral, or be required to make any inquiry concerning
        either the performance or observance of any of the terms, provisions or
        conditions of the Agreement or any other Transaction Document, or the financial
        condition of the Debtors, or the value of any of the Collateral, or the
        existence or possible existence of any default or Event of Default under
        the
        Agreement, the Debentures or any of the other Transaction
        Documents.

      

                            4.
        Certain Rights of the Agent.  The Agent shall have
        the right to take any action with respect to the Collateral, on behalf of
        all of
        the Secured Parties.  To the extent practical, the Agent shall request
        instructions from the Secured Parties with respect to any material act or
        action
        (including failure to act) in connection with the Agreement or any other
        Transaction Document, and shall be entitled to act or refrain from acting
        in
        accordance with the instructions of Secured Parties holding a majority in
        principal amount of Debentures (based on then-outstanding principal amounts
        of
        Debentures at the time of any such determination); if such instructions are
        not
        provided despite the Agent’s request therefor, the Agent shall be entitled to
        refrain from such act or taking such action, and if such action is taken,
        shall
        be entitled to appropriate indemnification from the Secured Parties in respect
        of actions to be taken by the Agent; and the Agent shall not incur liability
        to
        any person or entity by reason of so refraining.  Without limiting the
        foregoing, (a) no Secured Party shall have any right of action whatsoever
        against the Agent as a result of the Agent acting or refraining from acting
        hereunder in accordance with the terms of the Agreement or any other Transaction
        Document, and the Debtors shall have no right to question or challenge the
        authority of, or the instructions given to, the Agent pursuant to the foregoing
        and (b) the Agent shall not be required to take any action which the Agent
        believes (i) could reasonably be expected to expose it to personal liability
        or
        (ii) is contrary to this Agreement, the Transaction Documents or applicable
        law.

      

                            5.  Reliance.  The
        Agent shall be entitled to rely, and shall be fully protected in relying,
        upon
        any writing, resolution, notice, statement, certificate, telex, teletype
        or
        telecopier message, cablegram, radiogram, order or other document or telephone
        message signed, sent or made by the proper person or entity, and, with respect
        to all legal matters pertaining to the Agreement and the other Transaction
        Documents and its duties thereunder, upon advice of counsel selected by it
        and
        upon all other matters pertaining to this Agreement and the other Transaction
        Documents and its duties thereunder, upon advice of other experts selected
        by
        it. Anything to the contrary notwithstanding, the Agent shall have no
        obligation whatsoever to any Secured Party to assure that the Collateral
        exists
        or is owned by the Debtors or is cared for, protected or insured or that
        the
        liens granted pursuant to the Agreement have been properly or sufficiently
        or
        lawfully created, perfected, or enforced or are entitled to any particular
        priority.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
 

                            6.  Indemnification.  To
        the extent that the Agent is not reimbursed and indemnified by the Debtors,
        the
        Secured Parties will jointly and severally reimburse and indemnify the Agent,
        in
        proportion to their initially purchased respective principal amounts of
        Debentures, from and against any and all liabilities, obligations, losses,
        damages, penalties, actions, judgments, suits, costs, expenses or disbursements
        of any kind or nature whatsoever which may be imposed on, incurred by or
        asserted against the Agent in performing its duties hereunder or under the
        Agreement or any other Transaction Document, or in any way relating to or
        arising out of the Agreement or any other Transaction Document except for
        those
        determined by a final judgment (not subject to further appeal) of a court
        of
        competent jurisdiction to have resulted solely from the Agent's own gross
        negligence or willful misconduct.  Prior to taking any action
        hereunder as Agent, the Agent may require each Secured Party to deposit with
        it
        sufficient sums as it determines in good faith is necessary to protect the
        Agent for costs and expenses associated with taking such action.

      

                            7.  Resignation
        by the Agent.

      

      (a)  The
        Agent may resign from the performance of all its functions and duties under
        the
        Agreement and the other Transaction Documents at any time by giving 30 days'
        prior written notice (as provided in the Agreement) to the Debtors and the
        Secured Parties.  Such resignation shall take effect upon the
        appointment of a successor Agent pursuant to clauses (b) and (c)
        below.

      

      (b)  Upon
        any such notice of resignation, the Secured Parties, acting by a Majority
        in Interest, shall appoint a successor Agent hereunder.

      

      (c)
        If a
        successor Agent shall not have been so appointed within said 30-day period,
        the
        Agent shall then appoint a successor Agent who shall serve as Agent until
        such
        time, if any, as the Secured Parties appoint a successor Agent as provided
        above.  If a successor Agent has not been appointed within such 30-day
        period, the Agent may petition any court of competent jurisdiction or may
        interplead the Debtors and the Secured Parties in a proceeding for the
        appointment of a successor Agent, and all fees, including, but not limited
        to,
        extraordinary fees associated with the filing of interpleader and expenses
        associated therewith, shall be payable by the Debtors on demand.

      

                            8.  Rights
        with respect to Collateral.  Each Secured Party
        agrees with all other Secured Parties and the Agent (i) that it shall not,
        and
        shall not attempt to, exercise any rights with respect to its security interest
        in the Collateral, whether pursuant to any other agreement or otherwise (other
        than pursuant to this Agreement), or take or institute any action against
        the
        Agent or any of the other Secured Parties in respect of the Collateral or
        its
        rights hereunder (other than any such action arising from the breach of this
        Agreement) and (ii) that such Secured Party has no other rights with respect
        to
        the Collateral other than as set forth in this Agreement and the other
        Transaction Documents. Upon the acceptance of any appointment as Agent
        hereunder by a successor Agent, such successor Agent shall thereupon succeed
        to
        and become vested with all the rights, powers, privileges and duties of the
        retiring Agent and the retiring Agent shall be discharged from its duties
        and
        obligations under the Agreement.  After any retiring Agent’s resignation or
        removal hereunder as Agent, the provisions of the Agreement including this
        Annex
        B shall inure to its benefit as to any actions taken or omitted to be taken
        by
        it while it was Agent.f8k0808ex10v_guangzhou.htm

    
                                                                                                                                                EXHIBIT
        A

      

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

      

      Original
        Issue Date:

      Original
        Conversion Price (subject to adjustment herein):
$0.82

      

      $_______________

      

      

      FORM
        OF 8% SENIOR SECURED CONVERTIBLE DEBENTURE

      

      

      THIS
        DEBENTURE is one of a series of
        duly authorized and validly issued 8% Senior Secured Convertible Debentures
        of
        Guangzhou Global Telecom, Inc., a Florida corporation (the “Company”),
        having its principal place of business at APT 29D, Block E, No.11 Hao Jing
        Street, Zhu Jiang Di Jing Yuan, YiZhou Road, HaiZhu District, Guangzhou China,
        510310, designated as its 8% Senior Secured Convertible Debenture (this
        debenture, the “Debenture” and, collectively with the other debentures of
        such series, the “Debentures”).

      

      FOR
        VALUE
        RECEIVED, the Company promises to pay to ________________________ or its
        registered assigns (the “Holder”), or shall have paid pursuant to the
        terms hereunder, the principal sum of $_______________ on July __, 2009 (the
        “Maturity Date”) or such earlier date as this Debenture is required or
        permitted to be repaid as provided hereunder, 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 and (b) the following terms shall have the following
        meanings:

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      
 

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

      

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

      

      “Change
        of Control Transaction” means the occurrence after the date hereof of any of
        (i) an acquisition after the date hereof by an individual or legal entity
        or
“group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
        effective control (whether through legal or beneficial ownership of capital
        stock of the Company, by contract or otherwise) of in excess of 33% of the
        voting securities of the Company (other than by means of conversion or exercise
        of the Debentures and the Securities issued together with the Debentures),
        or
        (ii) the Company merges into or consolidates with any other Person, or any
        Person merges into or consolidates with the Company and, after giving effect
        to
        such transaction, the stockholders of the Company immediately prior to such
        transaction own less than 66% of the aggregate voting power of the Company
        or
        the successor entity of such transaction, or (iii) the Company sells or
        transfers all or substantially all of its assets to another Person and the
        stockholders of the Company immediately prior to such transaction own less
        than
        66% of the aggregate voting power of the acquiring entity immediately after
        the
        transaction, or 

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (iv)
        a
        replacement at one time or within a three year period of more than one-half
        of
        the members of the Company’s board of directors which is not approved by a
        majority of those individuals who are members of the board of directors on
        the
        date hereof (or by those individuals who are serving as members of the board
        of
        directors on any date whose nomination to the board of directors was approved
        by
        a majority of the members of the board of directors who are members on the
        date
        hereof), or (v) the execution by the Company of an agreement to which the
        Company  is a party or by which it is bound, providing for any of the
        events set forth in clauses (i) through (iv) above.

      

      “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(c).

      

      “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).

      

      “Effectiveness
        Period” shall have the meaning set forth in the Registration Rights
        Agreement.

      

      “Equity
        Conditions” means, during
        the period in question,
(i) the Company shall have duly honored all conversions and redemptions
        scheduled to occur or occurring by virtue of one or more Notices of Conversion
        of the Holder, if any, (ii) the Company shall have paid all liquidated damages
        and other amounts owing to the Holder in respect of this Debenture, (iii) there is an effective
        Registration Statement pursuant to which the Holder is permitted to utilize
        the
        prospectus thereunder to resell all of the shares issuable pursuant to the
        Transaction Documents (and the Company believes, in good faith, that such
        effectiveness will continue uninterrupted for the foreseeable future), (iv)
        the
        Common Stock is trading on a Trading Market and all of the shares issuable
        pursuant to the Transaction Documents are listed or quoted for trading on
        such
        Trading Market (and the Company believes, in good faith, that trading of
        the
        Common Stock on a Trading Market will continue uninterrupted for the foreseeable
        future), (v) there is a sufficient number of authorized but unissued and
        otherwise unreserved shares of Common Stock for the issuance of all of the
        shares issuable pursuant to the Transaction Documents, (vi) there is no existing
        Event of Default or no existing event which, with the passage of time or
        the
        giving of notice, would constitute an Event of Default, (vii) the issuance
        of
        the shares in question (or, in the case of an Optional or Monthly Redemption,
        the shares issuable upon conversion in full of the Optional or Monthly
        Redemption Amount) to
        the Holder would not violate the
        limitations set forth in Section 4(c) herein, (viii) there has been no
        public announcement of a pending or proposed Fundamental Transaction or Change
        of Control Transaction that has not been consummated, (ix) the Holder is
        not in
        possession of any information provided by the Company that constitutes, or
        may
        constitute, material non-public information and (x) for each Trading Day
        in a
        period of 20 consecutive Trading Days prior to the applicable date in question,
        the daily trading volume for the Common Stock on the principal Trading Market
        exceeds $200,000 of shares (subject to adjustment for forward and reverse
        stock
        splits and the like) per Trading Day.

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
 

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

       

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

      

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

      

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

      

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

      

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

      

      “Interest
        Conversion Rate” means the lesser of (a) the Conversion Price or (b) 85% of
        the average of the VWAPs for the 10 consecutive Trading Days ending on the
        Trading Day that is immediately prior to the applicable Interest Payment
        Date.

      

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

      

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

      

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

      

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

      

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

      

      “Mandatory
        Default Amount”  means the sum of (i) the greater of (A) 130% of
        the outstanding principal amount of this Debenture, plus 100% of 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.

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
 

      “Monthly
        Conversion Period” shall have the meaning set forth in Section 6(b)
        hereof.

      

      “Monthly
        Conversion Price” shall have the meaning set forth in Section 6(b)
        hereof.

      

      “Monthly
        Redemption” means the redemption of this Debenture pursuant to Section 6(b)
        hereof.

      

       “Monthly
        Redemption Amount” means, as to a Monthly Redemption, $______1, plus accrued but unpaid interest,
        liquidated
        damages and any other amounts then owing to the Holder in respect of this
        Debenture.

      

      “Monthly
        Redemption Date” means the 1st of each month, commencing on February 1, 2008
        and terminating upon the full redemption of this Debenture.

      

      “Monthly
        Redemption Notice” shall have the meaning set forth in Section 6(b)
        hereof.

      

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

      

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

      

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

      

      “Optional
        Redemption Amount” means the sum of (i) 120% of the then outstanding
        principal amount of the Debenture, (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(a).

      

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

      

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

      

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

      

      “Permitted
        Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b)
        the Indebtedness existing on the Original Issue Date and set forth on
Schedule 3.1(aa) attached to the Purchase Agreement, (c) lease
        obligations and purchase money indebtedness of up to $100,000, in the aggregate,
        incurred in connection with the acquisition of capital assets and lease
        obligations with respect to newly acquired or leased assets and (d) indebtedness
        that (i) is expressly subordinate to the Debentures pursuant to a written
        subordination agreement with the Purchasers that is acceptable to each Purchaser
        in its sole and absolute discretion and (ii) matures at a date later than
        the
        Maturity Date).

       

      
        ______________________________

        1           1/18th
          of the original
          Principal Amount.

      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      
 

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

       

      “Pre-Redemption
        Conversion Shares” shall have the meaning set forth in Section 6(b)
        hereof.

      

      “Purchase
        Agreement” means the Securities Purchase Agreement, dated as of July 31,
        2007, among the Company and the original Holders, as amended, modified or
        supplemented from time to time in accordance with its terms.

      

      “Registration
        Rights Agreement” means the Registration Rights Agreement, dated as of the
        date of the Purchase Agreement, among the Company and the original Holders,
        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 and Interest Conversion Shares of the Holder, names the
        Holder
        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.

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      
 

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

      

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

      

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

      

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

      

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

      

      Section
        2.                                Interest.

      

      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 8% per annum, payable quarterly on November 1, February
        1, May 1 and August 1, beginning on the first such date after the Original
        Issue
        Date, on each Monthly Redemption Date (as to that principal amount then being
        redeemed), 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 (each such date, an “Interest
        Payment Date”) (if any Interest Payment Date is not a Business Day, then the
        applicable payment shall be due on the next succeeding Business Day), in
        cash
        or, at the Company’s option, in duly authorized, validly issued, fully paid and
        non-assessable shares of Common Stock at the Interest Conversion Rate (the
        dollar amount to be paid in shares, the “Interest Share Amount”) or a
        combination thereof; provided, however, that payment in shares of
        Common Stock may only occur if 

       

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (i)
        all
        of the Equity Conditions have been met (unless waived by the Holder in writing)
        during the 20 Trading Days immediately prior to the applicable Interest Payment
        Date  (the “Interest Notice Period”) and through and including
        the date such shares of Common Stock are actually issued to the Holder, (ii)
        the
        Company shall have given the Holder notice in accordance with the notice
        requirements set forth below and (iii) as to such Interest Payment Date,
        prior
        to such Interest Notice Period (but not more than 5 Trading Days prior to
        the
        commencement of such Interest Notice Period), the Company shall have delivered
        to the Holder’s account with The Depository Trust Company a number of shares of
        Common Stock to be applied against such Interest Share Amount equal to the
        quotient of (x) the applicable Interest Share Amount divided by (y) the then
        Conversion Price (the “Interest Conversion Shares”).

      

      b)  Company’s
        Election to Pay Interest in Kind.  Subject to the terms and
        conditions herein, the decision whether to pay interest hereunder in cash,
        shares of Common Stock or a combination thereof shall be at the discretion
        of
        the Company.  Prior to the commencement of any Interest Notice Period,
        the Company shall deliver to the Holder a written notice of its election
        to pay
        interest hereunder on the applicable Interest Payment Date either in cash,
        shares of Common Stock or a combination thereof and the Interest Share Amount
        as
        to the applicable Interest Payment Date, provided that the Company may indicate
        in such notice that the election contained in such notice shall apply to
        future
        Interest Payment Dates until revised by a subsequent notice.  During
        any Interest Notice Period, the Company’s election (whether specific to an
        Interest Payment Date or continuous) shall be irrevocable as to such Interest
        Payment Date.  Subject to the aforementioned conditions, failure to
        timely deliver such written notice to the Holder shall be deemed an election
        by
        the Company to pay the interest on such Interest Payment Date in
        cash.  At any time the Company delivers a notice to the Holder of its
        election to pay the interest in shares of Common Stock, the Company shall
        timely
        file a prospectus supplement pursuant to Rule 424 disclosing such
        election.  The aggregate number of shares of Common Stock otherwise
        issuable to the Holder on an Interest Payment Date shall be reduced by the
        number of Interest Conversion Shares previously issued to the Holder in
        connection with such Interest Payment Date.

      

      c)  Interest
        Calculations. Interest shall be calculated on the basis of a 360-day year,
        consisting of twelve 30 calendar day periods, and shall accrue daily commencing
        on the Original Issue Date until payment in full of the outstanding principal,
        together with all accrued and unpaid interest, liquidated damages and other
        amounts which may become due hereunder, has been made.  Payment of
        interest in shares of Common Stock (other than the Interest Conversion Shares
        issued prior to an Interest Notice Period) shall otherwise occur pursuant
        to
        Section 4(d)(ii) herein and, solely for purposes of the payment of interest
        in
        shares, the Interest Payment Date shall be deemed the Conversion
        Date.  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)
        herein.  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”).
        Except as otherwise provided herein, if at any time the Company pays interest
        partially in cash and partially in shares of Common Stock to the holders
        of the
        Debentures, then such payment of cash shall be distributed ratably among
        the
        holders of the then-outstanding Debentures based on their (or their
        predecessor’s) initial purchases of Debentures pursuant to the Purchase
        Agreement.

       

       

      
        
          
          

        

        
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      d)  Late
        Fee.  All overdue accrued and unpaid interest to be paid hereunder
        shall entail 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 actual payment in full. Notwithstanding anything to the contrary
        contained herein, if on any Interest Payment Date the Company has elected
        to pay
        accrued interest in the form of Common Stock but the Company is not permitted
        to
        pay accrued interest in Common Stock because it fails to satisfy the conditions
        for payment in Common Stock set forth in Section 2(a) herein, then, at the
        option of the Holder, the Company, in lieu of delivering either shares of
        Common
        Stock pursuant to this Section 2 or paying the regularly scheduled interest
        payment in cash, shall deliver, within three Trading Days of each applicable
        Interest Payment Date, an amount in cash equal to the product of (x) the
        number
        of shares of Common Stock otherwise deliverable to the Holder in connection
        with
        the payment of interest due on such Interest Payment Date multiplied by (y)
        the
        highest VWAP during the period commencing on the Interest Payment Date and
        ending on the Trading Day prior to the date such payment is actually
        made.  If any Interest Conversion Shares are issued to the Holder in
        connection with an Interest Payment Date and are not applied against an Interest
        Share Amount, then the Holder shall promptly return such excess shares to
        the
        Company.

      

      e)  Prepayment.  Except
        as otherwise set forth in this Debenture, the Company may not prepay any
        portion
        of the principal amount of this Debenture without the prior written consent
        of
        the Holder.

      

      Section
        3.                      Registration
        of Transfers and Exchanges.

      

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

      

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

      

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

       

       

      
        
          
          

        

        
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      Section
        4.                      Conversion.

      

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

      

      b)  Conversion
        Price.  The conversion price in effect on any Conversion Date
        shall be equal to $0.82, subject to adjustment herein (the
“Conversion Price”).

      

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

       

       

       

      
        
          
          

        

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

       

       

       

      
        
          
          

        

        
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                d)  

              	
                Mechanics
                  of Conversion.

              

      

      

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

      i.  

      

      ii.  Delivery
        of Certificate Upon Conversion. Not later than three 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,
        shall
        be free of restrictive legends and trading restrictions (other than those
        which
        may then be required by the Purchase Agreement) representing the number of
        Conversion Shares being acquired upon the conversion of this Debenture
        (including, if the Company has given continuous notice pursuant to Section
        2(b)
        for payment of interest in shares of Common Stock at least 20 Trading Days
        prior
        to the date on which the Conversion Notice is delivered to the Company, shares
        of Common Stock representing the payment of accrued interest otherwise
        determined pursuant to Section 2(a) but assuming that the Interest Notice
        Period
        is the 20 Trading Days period immediately prior to the date on which the
        Conversion Notice is delivered to the Company and excluding for such issuance
        the condition that the Company deliver Interest Conversion Shares as to such
        interest payment) and (B) a bank check in the amount of accrued and unpaid
        interest (if the Company has elected or is required to pay accrued interest
        in
        cash). On or after the Effective Date, 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 third Trading Day after the Conversion Date,
        the
        Holder shall be entitled to elect by written notice to the Company at any
        time
        on or before its receipt of such certificate or certificates, to rescind
        such
        Conversion, in which event the Company shall promptly return to the Holder
        any
        original Debenture delivered to the Company and the Holder shall promptly
        return
        to the Company the Common Stock certificates representing the principal amount
        of this Debenture unsuccessfully tendered for conversion to the
        Company.

       

       

      
        
          
          

        

        
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      iv.  Obligation
        Absolute; Partial Liquidated Damages.  The Company’s obligations
        to issue and deliver the Conversion Shares upon conversion of this Debenture
        in
        accordance with the terms hereof are absolute and unconditional, irrespective
        of
        any action or inaction by the Holder to enforce the same, any waiver or consent
        with respect to any provision hereof, the recovery of any judgment against
        any
        Person or any action to enforce the same, or any setoff, counterclaim,
        recoupment, limitation or termination, or any breach or alleged breach by
        the
        Holder or any other Person of any obligation to the Company or any violation
        or
        alleged violation of law by the Holder or any other Person, and irrespective
        of
        any other circumstance which might otherwise limit such obligation of the
        Company to the Holder in connection with the issuance of such Conversion
        Shares;
provided, however, that such delivery shall not operate as a
        waiver by the Company of any such action the Company may have against the
        Holder.  In the event the Holder of this Debenture shall elect to
        convert any or all of the outstanding principal amount hereof, the Company
        may
        not refuse conversion based on any claim that the Holder or anyone associated
        or
        affiliated with the Holder has been engaged in any violation of law, agreement
        or for any other reason, unless an injunction from a court, on notice to
        Holder,
        restraining and or enjoining conversion of all or part of this Debenture
        shall
        have been sought and obtained, and the Company posts a surety bond for the
        benefit of the Holder in the amount of 150% of the outstanding principal
        amount
        of this Debenture, which is subject to the injunction, which bond shall remain
        in effect until the completion of arbitration/litigation of the underlying
        dispute and the proceeds of which shall be payable to the Holder to the extent
        it obtains judgment.  In the absence of such injunction, the Company
        shall issue Conversion Shares or, if applicable, cash, upon a properly noticed
        conversion.  If the Company fails for any reason to deliver to the
        Holder such certificate or certificates pursuant to Section 4(d) by the third
        Trading Day after the Conversion Date, the Company shall pay to the Holder,
        in
        cash, as liquidated damages and not as a penalty, for each $1000 of principal
        amount being converted, $10 per Trading Day (increasing to $20 per Trading
        Day
        on the fifth Trading Day after such liquidated damages begin to accrue) for
        each
        Trading Day after such third Trading Day until such certificates are
        delivered.    Nothing herein shall limit a Holder’s right to
        pursue actual damages or declare an Event of Default pursuant to Section
        8
        hereof for the Company’s failure to deliver Conversion Shares within the period
        specified herein and the Holder shall have the right to pursue all remedies
        available to it hereunder, at law or in equity including, without limitation,
        a
        decree of specific performance and/or injunctive relief.  The exercise
        of any such rights shall not prohibit the Holder from seeking to enforce
        damages
        pursuant to any other Section hereof or under applicable law.

      

      v.  Compensation
        for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In
        addition to any other rights available to the Holder, if the Company fails
        for
        any reason to deliver to the Holder such certificate or certificates by the
        Share Delivery Date pursuant to Section 4(d)(ii), and if after such Share
        Delivery Date the Holder is required by its brokerage firm to purchase (in
        an
        open market transaction or otherwise), or the Holder’s brokerage firm otherwise
        purchases, shares of Common Stock to deliver in satisfaction of a sale by
        the
        Holder of the Conversion Shares which the Holder was entitled to receive
        upon
        the conversion relating to such Share Delivery Date (a “Buy-In”), then
        the Company shall (A) pay in cash to the Holder (in addition to any other
        remedies available to or elected by the Holder) the amount by which (x) the
        Holder’s total purchase price (including any brokerage commissions) for the
        Common Stock so purchased exceeds (y) the product of (1) the aggregate number
        of
        shares of Common Stock that the Holder was entitled to receive from the
        conversion at issue multiplied by (2) the actual sale price at which the
        sell
        order giving rise to such purchase obligation was executed (including any
        brokerage commissions) and (B) at the option of the Holder, either reissue
        (if
        surrendered) this Debenture in a principal amount equal to the principal
        amount
        of the attempted conversion or deliver to the Holder the number of shares
        of
        Common Stock that would have been issued if the Company had timely complied
        with
        its delivery requirements under Section 4(d)(ii).  

       

       

       

      
        
          
          

        

        
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      For
        example, if the Holder purchases Common Stock having a total purchase price
        of
        $11,000 to cover a Buy-In with respect to an attempted conversion of this
        Debenture with respect to which the actual sale price of the Conversion Shares
        (including any brokerage commissions) giving rise to such purchase obligation
        was a total of $10,000 under clause (A) of the immediately preceding sentence,
        the Company shall be required to pay the Holder $1,000.  The Holder
        shall provide the Company written notice indicating the amounts payable to
        the
        Holder in respect of the Buy-In and, upon request of the Company, evidence
        of
        the amount of such loss.  Nothing herein shall limit a Holder’s right
        to pursue any other remedies available to it hereunder, at law or in equity
        including, without limitation, a decree of specific performance and/or
        injunctive relief with respect to the Company’s failure to timely deliver
        certificates representing shares of Common Stock upon conversion of this
        Debenture as required pursuant to the terms hereof.

      

      vi.  Reservation
        of Shares Issuable Upon Conversion. The Company covenants that it will at
        all times reserve and keep available out of its authorized and unissued shares
        of Common Stock for the sole purpose of issuance upon conversion of this
        Debenture 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 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.

      

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

       

       

      
        
          
          

        

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

      

      Section
        5.                                   Certain
        Adjustments.

      

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

      

      b)  Subsequent
        Equity Sales.  If, at any time while this Debenture is
        outstanding,  the Company or any Subsidiary, as applicable, sells or
        grants any option to purchase or sells or grants any right to reprice, or
        otherwise disposes of or issues (or announces any sale, grant or any option
        to
        purchase or other disposition), any Common Stock or Common Stock Equivalents
        entitling any Person to acquire shares of Common Stock at an effective price
        per
        share that is lower than the then Conversion Price (such lower price, the
        “Base Conversion Price” and such issuances, collectively, a “Dilutive
        Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so
        issued shall at any time, whether by operation of purchase price adjustments,
        reset provisions, floating conversion, exercise or exchange prices or otherwise,
        or due to warrants, options or rights per share which are issued in connection
        with such issuance, be entitled to receive shares of Common Stock at an
        effective price per share that is lower than the Conversion Price, such issuance
        shall be deemed to have occurred for less than the Conversion Price on such
        date
        of the Dilutive Issuance), then the Conversion Price shall be reduced to
        equal
        the Base Conversion Price.  

       

       

      
        
          
          

        

        
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      Such
        adjustment shall be made whenever such Common Stock or Common Stock Equivalents
        are issued.  Notwithstanding the foregoing, no adjustment will be made
        under this Section 5(b) in respect of an Exempt Issuance.  If the
        Company enters into a Variable Rate Transaction, despite the prohibition
        set
        forth in the Purchase Agreement, the Company shall be deemed to have issued
        Common Stock or Common Stock Equivalents at the lowest possible conversion
        price
        at which such securities may be converted or exercised. The Company shall
        notify
        the Holder in writing, no later than 1 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.

       

      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.  

       

       

      
        
          
          

        

        
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      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.

       

       

      
        
          
          

        

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

      

      g)  Notice
        to the Holder.

      

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

      

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

       

       

      
        
          
          

        

        
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      Section
        6.                                   Redemption
        and Forced Conversion.

      

      a)  Optional
        Redemption at Election of Company.  Subject to the provisions of
        this Section 6, at any time after the Effective Date, the Company may deliver
        a
        notice to the Holder (an “Optional Redemption Notice” and the date such
        notice is deemed delivered hereunder, the “Optional Redemption Notice
        Date”) of its irrevocable election to redeem some or all of the then
        outstanding principal amount of this Debenture for cash in an amount equal
        to
        the Optional Redemption Amount on the 10th Trading
        Day
        following the Optional Redemption Notice Date (such date, the “Optional
        Redemption Date” and such redemption, the “Optional
        Redemption”).  The Optional Redemption Amount is payable in full
        on the Optional Redemption Date.  The Company may only effect an
        Optional Redemption if each of the Equity Conditions shall have been met
        (unless
        waived in writing by the Holder) on each Trading Day during the period
        commencing on the Optional Redemption Notice Date through to the Optional
        Redemption Date and through and including the date payment of the Optional
        Redemption Amount is actually made in full.  If any of the Equity
        Conditions shall cease to be satisfied at any time during the 10 Trading
        Day
        period, then the Holder may elect to nullify the Optional Redemption Notice
        by
        notice to the Company within 3 Trading Days after the first day on which
        any
        such Equity Condition has not been met (provided that if, by a provision
        of the
        Transaction Documents, the Company is obligated to notify the Holder of the
        non-existence of an Equity Condition, such notice period shall be extended
        to
        the third Trading Day after proper notice from the Company) in which case
        the
        Optional Redemption Notice shall be null and void,
ab initio.  The Company covenants and agrees that
        it will honor all Notices of Conversion tendered from the time of delivery
        of
        the Optional Redemption Notice through the date all amounts owing thereon
        are
        due and paid in full.

      

      b)  Monthly
        Redemption.  On each Monthly Redemption Date, the Company shall
        redeem the Monthly Redemption Amount (the “Monthly Redemption”). The
        Monthly Redemption Amount payable on each Monthly Redemption Date shall be
        paid
        in cash; provided, however, as to any Monthly Redemption and upon
        10 Trading Days’ prior written irrevocable notice (the “Monthly Redemption
        Notice”), in lieu of a cash redemption payment the Company may elect to pay
        all or part of a Monthly Redemption Amount in Conversion Shares based on
        a
        conversion price equal to the lesser of (i) the then Conversion Price and
        (ii)
        85% of the average of the VWAPs for the 10 consecutive Trading Days ending
        on
        the Trading Day that is immediately prior to the applicable Monthly Redemption
        Date (subject to adjustment for any stock dividend, stock split, stock
        combination or other similar event affecting the Common Stock during such
        10
        Trading Day period) (the price calculated during the 10 Trading Day period
        immediately prior to the Monthly Redemption Date, the “Monthly Conversion
        Price” and such 10 Trading Day period, the “Monthly Conversion
        Period”); provided, further, that the Company may not pay the
        Monthly Redemption Amount in Conversion Shares unless (y) from the date the
        Holder receives the duly delivered Monthly Redemption Notice through and
        until
        the date such Monthly Redemption is paid in full, the Equity Conditions have
        been satisfied, unless waived in writing by the Holder, and (z) as to such
        Monthly Redemption, prior to such Monthly Conversion Period (but not more
        than 5
        Trading Days prior to the commencement of the Monthly Conversion Period),
        the
        Company shall have delivered to the Holder’s account with The Depository Trust
        Company a number of shares of Common Stock to be applied against such Monthly
        Redemption Amount equal to the quotient of (x) the applicable Monthly Redemption
        Amount divided by (y) Monthly Conversion Price assuming for such purposes
        that
        the Monthly Conversion Period ended 5 Trading Days prior to the actual Monthly
        Conversion Period for such Monthly Conversion (the “Pre-Redemption Conversion
        Shares”).  

       

       

      
        
          
          

        

        
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      The
        Holder may convert, pursuant to Section 4(a), any principal amount of this
        Debenture subject to a Monthly Redemption at any time prior to the date that
        the
        Monthly Redemption Amount, plus accrued but unpaid interest, liquidated damages
        and any other amounts then owing to the Holder are due and paid in
        full.  Unless otherwise indicated by the Holder in the applicable
        Notice of Conversion, any principal amount of this Debenture converted during
        the applicable Monthly Conversion Period until the date the Monthly Redemption
        Amount is paid in full shall be first applied to the principal amount subject
        to
        the Monthly Redemption Amount payable in cash and then to the Monthly
        Redemption  Amount payable in Conversion Shares.  Any
        principal amount of this Debenture converted during the applicable Monthly
        Conversion Period in excess of the Monthly Redemption Amount shall be applied
        against the last principal amount of this Debenture scheduled to be redeemed
        hereunder, in reverse time order from the Maturity Date; provided,
however, if any such conversion is applied against such Monthly
        Redemption Amount, the Pre-Redemption Conversion Shares, if any were issued
        in
        connection with such Monthly Redemption or were not already applied to such
        conversions, shall be first applied against such conversion.  The
        Company covenants and agrees that it will honor all Notice of Conversions
        tendered up until such amounts are paid in full.  The Company’s
        determination to pay a Monthly Redemption in cash, shares of Common Stock
        or a
        combination thereof shall be applied ratably to all of the holders of the
        then
        outstanding Debentures based on their (or their predecessor’s) initial purchases
        of Debentures pursuant to the Purchase Agreement.  At any time the
        Company delivers a notice to the Holder of its election to pay the Monthly
        Redemption Amount in shares of Common Stock, the Company shall file a prospectus
        supplement pursuant to Rule 424 disclosing such election.

      

      c)  Redemption
        Procedure.  The payment of cash or issuance of Common Stock, as
        applicable, pursuant to an Optional or Monthly Redemption shall be payable
        on
        the Optional or Monthly Redemption Date.  If any portion of the
        payment pursuant to an Optional or Monthly Redemption shall not be paid by
        the
        Company by the applicable due date, interest shall accrue thereon at an interest
        rate equal to the lesser of 18% per annum or the maximum rate permitted by
        applicable law until such amount is paid in full.  Notwithstanding
        anything herein contained to the contrary, if any portion of the Optional
        or
        Monthly Redemption Amount remains unpaid after such date, the Holder may
        elect,
        by written notice to the Company given at any time thereafter,
        to invalidate such Optional or Monthly Redemption, abinitio,
        and, with respect to the Company’s failure to honor the Optional Redemption, the
        Company shall have no further right to exercise such Optional
        Redemption.  

       

       

      
        
          
          

        

        
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      Notwithstanding
        anything to the contrary in this Section 6, the Company’s determination to
        redeem in cash or its elections under Section 6(b) shall be applied ratably
        among the Holders of Debentures. The Holder may elect to convert the outstanding
        principal amount of the Debenture pursuant to Section 4 prior to actual payment
        in cash for any redemption under this Section 6 by the delivery of a Notice
        of
        Conversion to the Company.

      

      d)  Forced
        Conversion. Notwithstanding anything herein to the contrary, if after the
        Effective Date, the VWAP for each of any 20 out of any 30 consecutive Trading
        Days, which period shall have commenced only after the Effective Date (such
        period the “Threshold Period”), exceeds $____2 (subject to adjustment
        for reverse and forward
        stock splits, stock dividends, stock combinations and other similar transactions
        of the Common Stock that occur after the Original Issue Date), the Company
        may,
        within 1 Trading Day after the end of any such Threshold Period, deliver
        a
        written notice to the Holder (a “Forced Conversion Notice” and the date
        such notice is delivered to the Holder, the “Forced Conversion Notice
        Date”) to cause the Holder to convert all or part of the then outstanding
        principal amount of this Debenture plus, if so specified in the Forced
        Conversion Notice, accrued but unpaid interest, liquidated damages and other
        amounts owing to the Holder under this Debenture, it being agreed that the
        “Conversion Date” for purposes of Section 4 shall be deemed to occur on the
        third Trading Day following the Forced Conversion Notice Date (such third
        Trading Day, the “Forced Conversion Date”).  The Company may
        not deliver a Forced Conversion Notice, and any Forced Conversion Notice
        delivered by the Company shall not be effective, unless all of the Equity
        Conditions are met (unless waived in writing by the Holder) on each Trading
        Day
        occurring during the applicable Threshold Period through and including the
        later
        of the Forced Conversion Date and the Trading Day after the date such Conversion
        Shares pursuant to such conversion are delivered to the Holder.  Any
        Forced Conversion shall be applied ratably to all Holders based on their
        initial
        purchases of Debentures pursuant to the Purchase Agreement, provided that
        any
        voluntary conversions by a Holder shall be applied against the Holder’s pro rata
        allocation, thereby decreasing the aggregate amount forcibly converted hereunder
        if only a portion of this Debenture is forcibly converted.  For
        purposes of clarification, a Forced Conversion shall be subject to all of
        the
        provisions of Section 4, including, without limitation, the provision requiring
        payment of liquidated damages and limitations on conversions.

      

      Section
        7.                                   Negative
        Covenants. As long as any portion of this Debenture remains outstanding,
        unless the holders of at least 75% in principal amount of the then outstanding
        Debentures shall have otherwise given prior written consent, the Company
        shall
        not, and shall not permit any of its subsidiaries (whether or not a Subsidiary
        on the Original Issue Date) to, directly or indirectly:

      

      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;

       

      
        ____________________________________

        2           250%
          of the Conversion Price on the Initial Issue Date.

      

       

      
 

      
        
          
          

        

        
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      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;

      

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

      

      d)  repay,
        repurchase or offer to repay, repurchase or otherwise acquire more than a
        deminimis 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)  pay
        cash
        dividends or distributions on any equity securities of the Company;

      

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

      

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

      

      Section
        8.                          Events
        of Default.

      

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

      

      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 3 Trading Days;

       

       

      
        
          
          

        

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

      

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

      

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

      

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

      

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

      

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

      

      viii.  the
        Company shall be a party to any Change of Control Transaction or Fundamental
        Transaction or shall agree to sell or dispose of all or in excess of 33%
        of its
        assets in one transaction or a series of related transactions (whether or
        not
        such sale would constitute a Change of Control Transaction);

      

      ix.  the
        Initial Registration Statement (as defined in the Registration Rights Agreement)
        shall not have been declared effective by the Commission on or prior to the
        180th calendar
        day
        after the Closing Date;

       

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      
 

      x.  if,
        during the Effectiveness Period (as defined in the Registration Rights
        Agreement), either (a) the effectiveness of the Registration Statement lapses
        for any reason or (b) the Holder shall not be permitted to resell Registrable
        Securities (as defined in the Registration Rights Agreement) under the
        Registration Statement for a period of more than 20 consecutive Trading Days
        or
        30 non-consecutive Trading Days during any 12 month period; provided,
however, that if the Company is negotiating a merger, consolidation,
        acquisition or sale of all or substantially all of its assets or a similar
        transaction and, in the written opinion of counsel to the Company, the
        Registration Statement would be required to be amended to include information
        concerning such pending transaction(s) or the parties thereto which information
        is not available or may not be publicly disclosed at the time, the Company
        shall
        be permitted an additional 10 consecutive Trading Days during any 12 month
        period pursuant to this Section 8(a)(x);

      

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

      

      xii.  any
        monetary judgment, writ or similar final process shall be entered or filed
        against the Company, any subsidiary or any of their respective property or
        other
        assets for more than $50,000, and such judgment, writ or similar final process
        shall remain unvacated, unbonded or unstayed for a period of 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 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.

       

       

      
        
          
          

        

        
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      Section
        9.                         Miscellaneous.

      

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

       

       

      
        
          
          

        

        
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      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.

      

      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. 

       

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

       

      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.

      

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

      

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

      

      i)  Assumption. 
        Any successor to the Company or any surviving entity in a Fundamental
        Transaction shall (i) assume, prior to such Fundamental Transaction, all
        of the
        obligations of the Company under this Debenture and the other Transaction
        Documents pursuant to written agreements in form and substance satisfactory
        to
        the Holder (such approval not to be unreasonably withheld or delayed) and
        (ii)
        issue to the Holder a new debenture of such successor entity evidenced by
        a
        written instrument substantially similar in form and substance to this
        Debenture, including, without limitation, having a principal amount 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 and each Subsidiary pursuant to
        the
        Security Agreement, dated as of July __, 2007, between the Company, the
        Subsidiaries of the Company and the Secured Parties (as defined
        therein).

      

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

       

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

       

       

      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.

      

      

      
        	
                GUANGZHOU
                  GLOBAL TELECOM, INC.

                 

                 

              
	
                By 
                  /s/  Li Yankuan            

                     Name:
                  Li Yankuan

                     Title:
                  Chief Executive Officer

                Facsimile
                  No. for delivery of Notices: (732) 577-1188 c/o Richard I. Anslow
                  Esq.,
                  Anslow & Jaclin, LLP

              
	 
	 

      

       

       

      
 

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      ANNEX
        A

       

      NOTICE
        OF CONVERSION

      

      

      The
        undersigned hereby elects to
        convert principal under the 8% Senior Secured Convertible Debentures of
        Guangzhou Global Telecom, Inc., a Florida corporation (the “Company”),
        into shares of common stock (the “Common Stock”), of the Company
        according to the conditions hereof, as of the date written below.  If
        shares of Common Stock are to be issued in the name of a person other than
        the
        undersigned, the undersigned will pay all transfer taxes payable with respect
        thereto and is delivering herewith such certificates and opinions as reasonably
        requested by the Company in accordance therewith.  No fee will be
        charged to the holder for any conversion, except for such transfer taxes,
        if
        any.

      

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

      

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

      

      Conversion
        calculations:

      Date
        to
        Effect Conversion:

      

      Principal
        Amount of Debenture to be Converted:

      

      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
        for Delivery of Common Stock Certificates:

      

      Or

      

      DWAC
        Instructions:

      

      Broker
        No:      _____________________________________                                                

      Account
        No:  _____________________________________

       

       

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      Schedule
        1

       

      CONVERSION
        SCHEDULE

      

      The
        8%
        Senior Secured Convertible Debentures of Guangzhou Global Telecom, Inc.,
        a
        Florida corporation, in the aggregate principal amount of
        $____________.  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

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