Document:

Exhibit 10.85

 

REGISTRATION RIGHTS AGREEMENT

 

Registration
Rights Agreement, dated effective as of May
      , 2003, by and between VCampus Corporation,
a Delaware corporation (the “Company”), and each of the purchasers set forth on
Schedule A attached hereto (each individually, a “Purchaser” and collectively,
the “Purchasers”).

 

W I T N E S S E T H
:

 

WHEREAS,
Company and each Purchaser have entered into a Securities Purchase Agreement
dated as of the date hereof (the “Purchase Agreement”), pursuant to which the
Company has agreed to issue and sell to the Purchasers, and the Purchasers have
agreed to purchase from the Company shares of Series H Preferred Stock of the
Company and Warrants exercisable for common stock of the Company (the
“Warrants”); and

 

WHEREAS, in
order to induce the Purchasers to enter into the Purchase Agreement and to
purchase the Series H Preferred Stock and/or Warrants, the Company has agreed
to provide registration rights with respect thereto;

 

NOW,
THEREFORE, in consideration of the premises and the covenants hereinafter
contained, it is agreed as follows:

 

1.                                       Definitions.  Unless otherwise defined herein,
terms used herein shall have the meaning ascribed to them in the Purchase
Agreement, and the following shall have the following respective meanings (such
meanings being equally applicable to both the singular and plural form of the
terms defined):

 

“Agreement”
shall mean this Registration Rights Agreement, including all amendments,
modifications and supplements and any exhibits or schedules to any of the
foregoing, and shall refer to the Agreement as the same may be in effect at the
time such reference becomes operative.

 

“Warrant
Shares” shall mean shares of common stock issued upon exercise of the Warrants.

 

“Holder” shall
mean (i) each Purchaser, and (ii) any other Person holding Registrable
Securities to whom the registration rights conferred by this Agreement have
been transferred in compliance with this Agreement.

 

“Majority
Holders” shall mean the Holders of a majority of the Registrable Securities.

 

“NASD” shall
mean the National Association of Securities Dealers, Inc., or any successor
corporation thereto.

 

 

“Piggy-back
Registration” shall have the meaning ascribed to it in Section 3.

 

“Registrable
Securities” shall mean the shares of common stock issuable pursuant to the
Purchase Agreement, including the Warrant Shares, and the shares of common
stock issuable upon conversion of the Series H Preferred Stock and shares of
common stock which the Purchasers hereafter obtains the right to acquire
pursuant to any dividend, distribution, stock split or similar transaction or
rights to the extent that all of the holders of the common stock received
shares of common stock; provided, however, that the aforementioned shares shall
only be treated as Registrable Securities if and for so long as they have not
been sold to or through a broker or underwriter in a public distribution, or
only until the date on which all of the Registrable Securities can be disposed
of in any three month period pursuant to Rule 144 (or any similar or
analogous rule under the Securities Act of 1933).

 

“Registration
Statement” shall mean a registration statement filed by the Company with the
U.S. Securities and Exchange Commission for a public offering and sale of
securities of the Company (other than a Registration Statement on Form S-4 or
S-8 or any successor form for securities to be offered in a transaction of the
type referred to in Rule 145 under the Securities Act or to employees of
Company pursuant to any employee benefit plan, respectively).

 

“Warrants”
shall mean the warrants to purchase shares of the Company’s common stock issued
to the Purchasers on the date hereof.

 

2.                                       Mandatory Registration.  Within
90 days from the date hereof, the Company shall file a Registration Statement
covering the Registrable Securities and shall thereafter use its best efforts
to effect the registration under the Securities Act of the Registrable
Securities for sale within 90 days after such filing, all to the extent
required to permit the disposition of the Registrable Securities so registered
for a period of up to one year.

 

3.                                       Piggy-back Registration.  If the
Company at any time proposes to file a registration statement under the
Securities Act on any form (other than a Registration Statement on Form S-4 or
S-8 or any successor form for securities to be offered in a transaction of the
type referred to in Rule 145 under the Securities Act or to employees of
Company pursuant to any employee benefit plan, respectively) for the general
registration of securities (a “Piggy-back Registration Statement”), it will
give written notice to all Holders at least 15 days before the initial filing
with the SEC of such Piggy-back Registration Statement, which notice shall set
forth the intended method of disposition of the securities proposed to be
registered by Company.  The notice shall
offer to include in such filing the aggregate number of shares of Registrable
Securities as such Holders may request.

 

Each Holder
desiring to have Registrable Securities registered under this Section 3
shall advise Company in writing within 10 Business Days after the date of
receipt of such offer from Company, setting forth the amount of such
Registrable Securities for which registration is requested.  Company shall thereupon include in such

 

2

 

filing the number of shares of
Registrable Securities for which registration is so requested, subject to the
next sentence, and shall use its best efforts to effect registration under the
Securities Act of such shares.  In
connection with any registration subject to this Section 3, which is to be
effected in a firm commitment underwriting, Company will not be required to
include Registrable Securities in such underwriting unless the Holder of such
Registrable Securities accepts the terms and conditions of the underwriting
agreement which is agreed upon between Company and the managing underwriter
selected by Company, so long as such underwriting agreement conforms to industry
standards and practices and the obligations and liabilities imposed on the
Holders under such agreement are customary for the stockholders selling
securities in an underwritten offering. 
If the managing underwriter of a proposed public offering shall advise
Company in writing that, in its opinion, the distribution of the Registrable
Securities requested to be included in the registration concurrently with the
securities being registered by Company would materially and adversely affect
the distribution of such securities by Company, then all selling security
holders with piggy-back registration rights shall reduce the amount of
securities each intended to distribute through such offering on a pro rata
basis.  Except as otherwise provided in
Section 5, all expenses of such registration shall be borne by Company. The
Company shall have the right to terminate or withdraw any Registration
Statement initiated under this Section 3 prior to the effectiveness of such
Registration Statement whether or not the Holders have elected to include
Registrable Securities in such Registration Statement.

 

4.                                       Registration Procedures. If the Company is required by the provisions of
Section 2 or 3 to use its best efforts to effect the registration of any of its
securities under the Securities Act, Company will, as expeditiously as
possible:

 

(a)                                  prepare
and file with the SEC a Registration Statement with respect to such securities
and use its best efforts to cause such Registration Statement to become and
remain effective for a period of time required for the disposition of such
securities by the holders thereof, but not to exceed one year (or, with respect
to any underwritten offering, such shorter period as the underwriters need to
complete the distribution of the registered offering or, with respect to a
shelf Registration Statement on a form under the Securities Act relating to the
offer and sale of Registrable Securities from time to time in accordance with
Rule 415, such longer period as may be required to dispose of the Registrable
Securities covered by such Registration Statement);

 

(b)                                 prepare
and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary
to keep such Registration Statement effective and to comply with the provisions
of the Securities Act with respect to the sale or other disposition of all
securities covered by such Registration Statement until the earlier of such
time as all of such securities have been disposed of in a public offering or
the expiration of one year;

 

(c)                                  furnish,
to such selling security holders such number of copies of a summary prospectus
or other prospectus, including a preliminary prospectus, in

 

3

 

conformity with
the requirements of the Securities Act, and such other documents, as such
selling security holders may reasonably request;

 

(d)                                 use
its best efforts to register or qualify the securities covered by such
Registration Statement under such other securities or blue sky laws of such
jurisdictions within the United States and Puerto Rico as each holder of such
securities shall request (provided, however, that Company shall
not be obligated to qualify as a foreign corporation to do business under the
laws of any jurisdiction in which it is not then qualified or to file any
general consent to service or process), and do such other reasonable acts and
things as may be required of it to enable such holder to consummate the
disposition in such jurisdiction of the securities covered by such Registration
Statement;

 

(e)                                  enter
into customary agreements (including an underwriting agreement in customary
form) and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities;

 

(f)                                    otherwise
use its best efforts to comply with all applicable rules and regulations of the
SEC, and make available to its security holders, as soon as reasonably
practicable, but not later than 18 months after the effective date of the
Registration Statement, an earnings statement covering the period of at least
12 months beginning with the first full month after the effective date of such
Registration Statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act;

 

(g)                                 give
written notice to Holders:

 

(i)                                     when
such Registration Statement or any amendment thereto has been filed with the
SEC and when such Registration Statement or any posteffecive amendment thereto
has become effective;

 

(ii)                                  of
any request by the SEC for amendments or supplements to such Registration
Statement or the prospectus included therein or for additional information;

 

(iii)                               of
the issuance by the SEC of any stop order suspending the effectiveness of such
Registration Statement or the initiation of any proceedings for that purpose;

 

(iv)                              of
the receipt by Company or its legal counsel of any notification with respect to
the suspension of the qualification of the common stock for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and

 

(v)                                 of
the happening of any event that requires Company to make changes in such
Registration Statement or the prospectus in order to make the statements
therein not misleading (which notice shall

 

4

 

be accompanied by an
instruction to suspend the use of the prospectus until the requisite changes
have been made);

 

(h)                                 use
its best efforts to prevent the issuance or obtain the withdrawal of any order
suspending the effectiveness of such Registration Statement at the earliest
possible time;

 

(i)                                     furnish
to each Holder, without charge, at least one copy of such Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing, all
exhibits (including those, if any, incorporated by reference);

 

(j)                                     cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing the Registrable Securities to be sold free of any
restrictive legends and in such denominations and registered in such names as
the Holders may request a reasonable period of time prior to sales of the
Registrable Securities; and

 

(k)                                  upon
the occurrence of any event contemplated by Section 4(g)(v) above, promptly
prepare a post-effective amendment to such Registration Statement or a
supplement to the related prospectus or file any other required document so
that, as thereafter delivered to Holders, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. 
If the Company notifies the Holders in accordance with Section 4(g)(v)
above to suspend the use of the prospectus until the requisite changes to the
prospectus have been made, then the Holders shall suspend use of such
prospectus, and the period of effectiveness of such Registration Statement provided
for above shall each be extended by the number of days from and including the
date of the giving of such notice to Holders shall have received such amended
or supplemented prospectus pursuant to this Section 4(k).

 

It shall be a
condition precedent to the obligation of Company to take any action pursuant to
this Agreement in respect of the securities which are to be registered at the
request of any Holder that such Holder shall furnish to Company such
information regarding the securities held by such Holder and the intended
method of disposition thereof as Company shall reasonably request and as shall
be required in connection with the action taken by Company.

 

5.                                       Expenses.  All expenses incurred in
complying with this Agreement, including, without limitation, all registration
and filing fees (including all expenses incident to filing with the NASD),
printing expenses, fees and disbursements of counsel for Company, expenses of
any special audits incident to or required by any such registration and expenses
of complying with the securities or blue sky laws of any jurisdiction pursuant
to Section 4(d), shall be paid by Company, except that:

 

(a)                                  all
such expenses in connection with any amendment or supplement to a Registration
Statement or prospectus required to be filed pursuant to

 

5

 

Section 3 which is filed more than one year after the
effective date of such Registration Statement because any Holder has not
effected the disposition of the securities requested to be registered shall be
paid by such Holder; and

 

(b)                                 Company
shall not be liable for any fees, discounts or commissions to any underwriter
or any fees or disbursements of counsel for any underwriter in respect of the
securities sold by such Holder.

 

6.                                       Indemnification and Contribution.

 

(a)                                  In
the event of any registration of any Registrable Securities under the
Securities Act pursuant to this Agreement, Company shall indemnify and hold
harmless the holder of such Registrable Securities, such holder’s directors and
officers, and each other person (including each underwriter) who participated
in the offering of such Registrable Securities and each other person, if any,
who controls such holder or such participating person within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such holder or any such director or officer or participating
person or controlling person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
(i) any alleged untrue statement of any material fact contained, on the
effective date thereof, in any Registration Statement under which such
securities were registered under the Securities Act, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
or (ii) any alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and shall reimburse such holder or such director, officer or participating
person or controlling person for any legal or any other expenses reasonably
incurred by such holder or such director, officer or participating person or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any actual or alleged
untrue statement or actual or alleged omission made in such Registration
Statement, preliminary prospectus, prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to Company
by such holder specifically for use therein or (in the case of any underwritten
offering) so furnished for such purposes by any underwriter.  Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such holder
or such director, officer or participating person or controlling person, and
shall survive the transfer of such securities by such holder.

 

6

 

(b)                                 Each
Holder, by acceptance hereof, agrees to indemnify and hold harmless Company,
its directors and officers and each other person, if any, who controls Company
within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which Company or any such director or officer
or any such person may become subject under the Securities Act or any other
statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
information in writing provided to Company by such Holder specifically for use
in the following documents and contained, on the effective date thereof, in any
Registration Statement under which securities were registered under the
Securities Act at the request of such holder, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement
thereto.  Notwithstanding the provisions
of this paragraph (b) or paragraph (c) below, no Holder shall be required to
indemnify any person pursuant to this Section 6 or to contribute pursuant to
paragraph (c) below in an amount in excess of the amount of the aggregate net
proceeds received by such Holder in connection with any such registration under
the Securities Act.

 

(c)                                  If
the indemnification provided for in this Section 6 from the indemnifying party
is unavailable to an indemnified party hereunder in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations.  The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such action.  The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.

 

The parties
hereto agree that it would not be just and equitable if contribution pursuant
to this Section 6(c) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred

 

7

 

to in the immediately preceding
paragraph.  No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation.

 

7.                                       Certain Limitations on Registration Rights. 
Notwithstanding the other provisions of this Agreement:

 

(a)                                  Company
shall have the right to delay the filing or effectiveness of, or by written
notice require the Holders to cease sales of Registrable Securities pursuant
to, a Registration Statement required pursuant to this Agreement during one or
more periods aggregating not more than 60 days in any twelve-month period (such
period or periods, the “Suspension Period”) in the event that (i) Company
would, in accordance with the advice of its counsel, be required to disclose in
the prospectus information not otherwise then required by law to be publicly
disclosed, (ii) in the judgment of Company’s Board of Directors, there is a
reasonable likelihood that such disclosure, or any other action to be taken in
connection with the prospectus, would materially and adversely affect any
existing or prospective material business situation, transaction or negotiation
or otherwise materially and adversely affect Company, or (iii) the Registration
Statement can no longer be used under the Securities Act; provided that the
period of effectiveness of the Registration Statement shall be extended by the
length of any such Suspension Period;

 

(b)                                 If
Company suspends the Registration Statement or requires the Holders to cease
sales of the common stock pursuant to paragraph (a) above, Company shall, as
promptly as practicable following the termination of the circumstances which
entitled Company to do so, take such action as may be necessary to reinstate
the effectiveness of the Registration Statement and/or give written notice to
all Holders authorizing them to resume sales pursuant to the Registration
Statement.  If, as a result thereof, the
prospectus included in the Registration Statement has been amended to comply
with the requirements of the Securities Act, Company shall enclose such revised
prospectus with a notice to Holders given pursuant to this paragraph (b), and
the Shareholders shall make no offers or sales of shares pursuant to such
Registration Statement other than by means of such revised prospectus.

 

8.                                       Restrictions on Sale After Public Offering.  Except
for transfers made in transactions exempt from the registration requirements
under the Securities Act, Company and each Holder hereby agree not to offer,
sell, contract to sell or otherwise dispose of any of their Registrable
Securities within 120 days after the date of any final prospectus relating to
the public offering of common stock, if underwritten, whether by Company or by
any Holders, except pursuant to such prospectus or with the written consent of
the managing underwriter or underwriters for such offering.

 

8

 

9.                                       Miscellaneous.

 

(a)                                  Amendments
and Waivers.  Except as otherwise
provided herein, the provisions of this Agreement may not be amended, modified
or supplemented, and waivers or consents to departure from the provisions
hereof may not be given without the written consent of the Majority Holders and
the Company.

 

(b)                                 Notice
Generally.  Any notice, demand,
request, consent, approval, declaration, delivery or other communication
hereunder to be made pursuant to the provisions of this Agreement shall be
sufficiently given or made if in writing and either delivered in person with
receipt acknowledged or sent by registered or certified mail, return receipt
requested, postage prepaid, or by telecopy and confirmed by telecopy
answerback, addressed as follows:

 

(i)                                     If
to any Holder, at its last known address appearing on the books of Company
maintained for such purpose.

 

(ii)                                  If
to Company, at

 

VCampus Corporation

Suite 200

1850 Centennial Park Drive

Reston, VA 20191

Attention:  Chief Financial
Officer

Telecopy Number:  (703) 654-7311

 

with a copy to

 

Wyrick Robbins
Yates & Ponton LLP

Suite 300

4101 Lake
Boone Trail

Raleigh,
NC  27607

Attn:  Kevin A. Prakke, Esq.

 

or at such other address as may be substituted by notice given as
herein provided.  The giving of any
notice required hereunder may be waived in writing by the party entitled to
receive such notice.  Every notice,
demand, request, consent, approval, declaration, delivery or other
communication hereunder shall be deemed to have been duly given or served on
the date on which personally delivered, with receipt acknowledged, telecopied
and confirmed by telecopy answerback or three Business Days after the same
shall have been deposited in the United States mail.

 

9

 

(c)                                  Successors
and Assigns.  This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto including any person to whom Registrable Securities are
transferred.

 

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

 

(e)                                  Governing
Law; Jurisdiction.  This Agreement
shall be governed by, construed and enforced in accordance with the laws of the
State of Delaware without giving effect to the conflict of laws provisions
thereof.

 

(f)                                    Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.

 

(g)                                 Entire
Agreement.  This Agreement, together
with the Purchase Agreement, the Series H Certificate of Designations and
Warrants, represents the complete agreement and understanding of the parties
hereto in respect of the subject matter contained herein and therein.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to the subject
matter hereof.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

10

 

IN WITNESS
WHEREOF, the parties hereto have executed this Registration Rights Agreement as
of the date first above written.

 

	
  COMPANY:

  	
  VCAMPUS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: 
  Christopher Nelson

  
	
   

  	
   

  	
  Title: 
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  PURCHASERS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
												

 

11

 

SCHEDULE A

Schedule of Purchasers

 

12Exhibit 4.16

                                FORM OF DEBENTURE

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

AMOUNT                                          $25,000
DEBENTURE NUMBER                     SEPTEMBER-2002-101
ISSUANCE DATE                         SEPTEMBER 3, 2002

MATURITY DATE                         SEPTEMBER 3, 2005

         FOR VALUE RECEIVED, jacobson resonance enterprises, inc. a Nevada
corporation (the "Company"), hereby promises to pay TECINVEST SERVICES, INC.
(the "Holder") on September 3, 2005, (the "Maturity Date"), the principal amount
of Twenty-five Thousand Dollars ($75,000) U.S., and to pay interest on the
principal amount hereof, in such amounts, at such times and on such terms and
conditions as are specified herein.

Article 1. Interest

         The Company shall pay interest on the unpaid principal amount of this
Debenture (the "Debenture") at the time of each conversion until the principal
amount hereof is paid in full or has been converted. The Debentures shall pay
six percent (6%) cumulative interest, in cash or in shares of common stock, par
value $.001 per share, of the Company ("Common Stock"), at the Company's option,
at the time of each conversion. The closing shall be deemed to have occurred on
the date the funds are received by the Company (the "Closing Date"). If the
interest is to be paid in cash, the Company shall make such payment within five
(5) business days of the date of conversion. If the interest is to be paid in
Common Stock, said Common Stock shall be delivered to the Holder, or per
Holder's instructions, within five (5) business days of the date of conversion.
The Debentures are subject to automatic conversion at the end of three (3) years
from the date of issuance at which time all Debentures outstanding will be
automatically converted based upon the formula set forth in Section 3.2.

Article 2. Method of Payment

         This Debenture must be surrendered to the Company in order for the
Holder to receive payment of the principal amount hereof. The Company shall have
the option of paying the interest on this Debenture in United States dollars or
in Common Stock upon conversion pursuant to Article 1 hereof. The Company may
draw a check for the payment of interest to the order of the Holder of this
Debenture and mail it to the Holder's address as shown on the Register (as
defined in Section 7.2 below). Interest and principal payments shall be subject
to withholding under applicable United States Federal Internal Revenue Service
Regulations.

Article 3.  Conversion

         Section 3.1. Conversion Privilege

         (a) The Holder of this Debenture shall have the right to convert it
into shares of Common Stock at any time following the Closing Date and which is
before the close of business on the Maturity Date, except as set forth in
Section 3.1(c) below. The number of shares of Common Stock issuable upon the
conversion of this Debenture is determined pursuant to Section 3.2 and rounding
the result to the nearest whole share.

         (b) Less than all of the principal amount of this Debenture may be
converted into Common Stock if the portion converted is $5,000 or a whole
multiple of $5,000 and the provisions of this Article 3 that apply to the
conversion of all of the Debenture shall also apply to the conversion of a
portion of it. This Debenture may not be converted, whether in whole or in part,
except in accordance with Article 3.

         (c) In the event all or any portion of this Debenture remains
outstanding on the Maturity Date, the unconverted portion of such Debenture will
automatically be converted into shares of Common Stock on such date in the
manner set forth in Section 3.2.

         Section 3.2. Conversion Procedure.

         (a) Debentures. Upon receipt by the Company or its designated attorney
of a facsimile or original of Holder's signed Notice of Conversion (See Exhibit
A attached hereto) preceded by, together with or followed by receipt of the
original Debenture to be converted in whole or in part in the manner set forth
in 3.2(b) below, the Company shall instruct its transfer agent to issue one or
more Certificates representing that number of shares of Common Stock into which
the Debenture is convertible. The Company shall act as Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to each Debenture.

         (b) Conversion Procedures. The face amount of this Debenture may be
converted, in whole or in part, anytime following the Closing Date. Such
conversion shall be effectuated by surrendering to the Company, or its attorney,
this Debenture to be converted together with a facsimile or original of the
signed Notice of Conversion which evidences Holder's intention to convert the
Debenture indicated. The date on which the Notice of Conversion is effective
("Conversion Date") shall be deemed to be the date on which the Holder has
delivered to the Company a facsimile or original of the signed Notice of
Conversion, as long as the original Debenture(s) to be converted are received by
the Company within three (3) business days thereafter. Notwithstanding the
above, any Notice of Conversion not received by 5:00 P.M. EST, shall be deemed
to have been received the next business day.

         (c) Common Stock to be Issued. Upon the conversion of any Debentures
and upon receipt by the Company or its attorney of a facsimile or original of
Holder's signed Notice of Conversion the Company shall instruct its transfer
agent to issue stock certificates without restrictive legend or stop transfer
instructions, if at that time the Registration Statement has been deemed
effective (or with proper restrictive legend if the Registration Statement has
not as yet been declared effective), in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable upon such
conversion, as applicable. The Company warrants that no instructions, other than
these instructions, have been given or will be given to the transfer agent and
that the Common Stock shall otherwise be freely resold, except as may be set
forth herein.

         (d) Conversion Rate. Holder is entitled to convert the face amount of
this Debenture, plus accrued interest, anytime following the Closing Date, at
the lesser of (i) one hundred ten percent (110%) of the average closing bid
price for the five (5) trading days immediately preceding the Closing Date or
(ii) seventy-five percent (75%) of the average of the six (6) lowest closing bid
prices during the twenty (20) trading days prior to conversion, each being
referred to as the "Conversion Price". No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded up or down, as the case may be, to the nearest
whole share.

         (e) Nothing contained in this Debenture shall be deemed to establish or
require the payment of interest to the Holder at a rate in excess of the maximum
rate permitted by governing law. In the event that the rate of interest required
to be paid exceeds the maximum rate permitted by governing law, the rate of
interest required to be paid thereunder shall be automatically reduced to the
maximum rate permitted  under the governing law and such excess shall be
returned with reasonable promptness by the Holder to the Company.

         (f) It shall be the Company's responsibility to take all necessary
actions and to bear all such costs to issue the Common Stock as provided herein,
including the responsibility and cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Holder a new Debenture equal
to the unconverted amount, if so requested in writing by Holder.

         (g) Within five (5) business days after receipt of the documentation
referred to above in Section 3.2(b), the Company shall deliver a certificate, in
accordance with Section 3.2(c) for the number of shares of Common Stock issuable
upon the conversion. In the event the Company does not make delivery of the
Common Stock, as instructed by Holder, within five (5) business days after the
Conversion Date, then in such event the Company shall pay to Holder one percent
(1%) in cash, of the dollar value of the Debentures being converted per each day
after the fifth (5th) business day following the Conversion Date that the Common
Stock is not delivered to the Purchaser.

         The Company acknowledges that its failure to deliver the Common Stock
within five (5) business days after the Conversion Date will cause the Holder to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Debenture a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to quantify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Debenture.

         To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 3.2(g) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 3.2(g) shall not
apply but instead the provisions of Section 3.2(h) shall apply.

         The Company shall make any payments incurred under this Section 3.2(g)
in immediately available funds within five (5) business days from the date the
Common Stock is fully delivered. Nothing herein shall limit a Holder's right to
pursue actual damages or cancel the conversion for the Company's failure to
issue and deliver Common Stock to the Holder within five (5) business days after
the Conversion Date.

         (h) The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the Debentures by all Holders of
the entire amount of Debentures then outstanding. If, at any time Holder submits
a Notice of Conversion and the Company does not have sufficient authorized but
unissued shares of Common Stock (or alternative shares of Common Stock as may be
contributed by Stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the Holder
all of the shares of Common Stock which are available, and the Notice of
Conversion as to any Debentures requested to be converted but not converted (the
"Unconverted Debentures"), may be deemed null and void upon written notice sent
by the Holder to the Company. The Company shall provide notice of such
Conversion Default ("Notice of Conversion Default") to all existing Holders of
outstanding Debentures, by facsimile, within three (3) business day of such
default (with the original delivered by overnight or two day courier), and the
Holder shall give notice to the Company by facsimile within five business days
of receipt of the original Notice of Conversion Default (with the original
delivered by overnight or two day courier) of its election to either nullify or
confirm the Notice of Conversion.

         The Company agrees to pay to all Holders of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Holder where N = the number
of days from the Conversion Default Date to the date (the "Authorization Date")
that the Company authorizes a sufficient number of shares of Common Stock to
effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, upon written notice sent by the Holder to the
Company, which Conversion Default shall be payable as follows: (i) in the event
Holder elects to take such payment in cash, cash payments shall be made to such
Holder of outstanding Debentures by the fifth day of the following calendar
month, or (ii) in the event Holder elects to take such payment in stock, the
Holder may convert such payment amount into Common Stock at the conversion rate
set forth in section 3.2(d) at anytime after the 5th day of the calendar month
following the month in which the Authorization Notice was received, until the
expiration of the mandatory two (2) year conversion period.

         The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Holder to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Debenture. Nothing herein shall
limit the Holder's right to pursue actual damages for the Company's failure to
maintain a sufficient number of authorized shares of Common Stock.

         (i) If, by the fifth (5th) business day after the Conversion Date of
any portion of the Debentures to be converted (the "Delivery Date"), the
transfer agent fails for any reason to deliver the Common Stock upon conversion
by the Holder and after such Delivery Date, the Holder purchases, in an open
market transaction or otherwise, shares of Common Stock (the "Covering Shares")
solely in order to make delivery in satisfaction of a sale of Common Stock by
the Holder (the "Sold Shares"), which delivery such Holder anticipated to make
using the Common Stock issuable upon conversion (a "Buy-In"), the Company shall
pay to the Holder, in addition to any other amounts due to Holder pursuant to
this Debenture, and not in lieu thereof, the Buy-In Adjustment Amount (as
defined below). The "Buy In Adjustment Amount" is the amount equal to the
excess, if any, of (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Covering Shares over (y) the net proceeds (after
brokerage commissions, if any) received by the Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Holder in
immediately available funds within five (5) business days of written demand by
the Holder. By way of illustration and not in limitation of the foregoing, if
the Holder purchases shares of Common Stock having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount which the Company will be required to pay to the Holder will
be $1,000.

         (j) The Company shall furnish to Holder such number of prospectuses
and other documents incidental to the registration of the shares of Common Stock
underlying the Debentures, including any amendment of or supplements thereto.

         (k) Limitation on Issuance of Shares. If the Company's Common Stock
becomes listed on the Nasdaq SmallCap Market after the issuance of the
Debentures, the Company may be limited in the number of shares of Common Stock
it may issue by virtue of (X) the number of authorized shares or (Y) the
applicable rules and regulations of the principal securities market on which the
Common Stock is listed or traded, including, but not necessarily limited to,
NASDAQ Rule 4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable
(collectively, the "Cap Regulations"). Without limiting the other provisions
thereof, the Debentures shall provide that (i) the Company will take all steps
reasonably necessary to be in a position to issue shares of Common Stock on
conversion of the Debentures without violating the Cap Regulations and (ii) if,
despite taking such steps, the Company still cannot issue such shares of Common
Stock without violating the Cap Regulations, the holder of a Debenture which
cannot be converted as result of the Cap Regulations (each such Debenture, an
"Unconverted Debenture") shall have the right to elect either of the following
remedies:

                  (x) if permitted by the Cap Regulations, require the Company
                      to issue shares of Common Stock in accordance with such
                      holder's Notice of Conversion at a conversion  purchase
                      price equal to the average of the closing bid price per
                      share of Common Stock for any five (5) consecutive trading
                      days (subject to certain equitable adjustments for certain
                      events occurring during such period) during the sixty (60)
                      trading days immediately  preceding the Conversion Date;
                      or

                  (y) require the Company to redeem each Unconverted Debenture
                      for an amount (the "Redemption Amount"), payable in cash,
                      equal to the sum of (i) one hundred thirty-three percent
                      (133%) of the principal of an Unconverted Debenture, plus
                      (ii) any accrued but unpaid interest thereon through and
                      including the date (the "Redemption Date") on which the
                      Redemption Amount is paid to the holder.

         A holder of an Unconverted Debenture may elect one of the above
remedies with respect to a portion of such Unconverted Debenture and the other
remedy with respect to other portions of the Unconverted Debenture. The
Debentures shall contain provisions substantially consistent with the above
terms, with such additional provisions as may be consented to by the Holder. The
provisions of this section are not intended to limit the scope of the provisions
otherwise included in the Debentures.

         (l)  Limitation on Amount of Conversion and  wnership. Notwithstanding
anything to the contrary in this Debenture, in no event shall the Holder be
entitled to convert that amount of Debenture, and in no event shall the Company
permit that amount of conversion, into that number of shares, which when added
to the sum of the number of shares of Common Stock beneficially owned, (as such
term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange
Act of 1934, as may be amended, (the "1934 Act")), by the Holder, would exceed
9.99% of the number of shares of Common Stock outstanding on the Conversion
Date, as determined in accordance with Rule 13d-1(j) of the 1934 Act. In the
event that the number of shares of Common Stock outstanding as determined in
accordance with Section 13(d) of the 1934 Act is different on any Conversion
Date than it was on the Closing Date, then the number of shares of Common Stock
outstanding on such Conversion Date shall govern for purposes of determining
whether the Holder would be acquiring beneficial ownership of more than 9.99% of
the number of shares of Common Stock outstanding on such Conversion Date.

         (m)  Legend. The Holder acknowledges that each certificate representing
the Debentures, and the Common Stock unless registered pursuant to the
Registration Rights Agreement, shall be stamped or otherwise imprinted with a
legend substantially in the following form:

         THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR
         SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
         EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION  STATEMENT UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE
         144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
         DISPOSITION OF SECURITIES), OR (iii) IF AN EXEMPTION FROM REGISTRATION
         UNDER SUCH ACT IS AVAILABLE.

         (n) Prior to conversion of all the Debentures and exercise of all the
Warrants, if at anytime the conversion of all the Debentures and exercise of all
the Warrants outstanding would result in an insufficient number of authorized
shares of Common Stock being available to cover all the conversions, then in
such event, the Company will move to call and hold a shareholder's meeting or
have shareholder action with written consent of the proper number of
shareholders within thirty (30) days of such event, or such greater period of
time if statutorily required or reasonably necessary as regards standard
brokerage house and/or SEC requirements and/or procedures, for the purpose of
authorizing additional shares of Common Stock to facilitate the conversions. In
such an event management of the Company shall recommend to all shareholders to
vote their shares in favor of increasing the authorized number of shares of
Common Stock. Management of the Company shall vote all of its shares of Common
Stock in favor of increasing the number of shares of authorized Common Stock.
Company represents and warrants that under no circumstances will it deny or
prevent Holder's right to convert the Debentures as permitted under the terms of
this Subscription Agreement or the Registration Rights Agreement. Nothing in
this Section shall limit the obligation of the Company to make the payments set
forth in Section 3.2(g). In the event the Company's shareholder's meeting does
not result in the necessary authorization, the Company shall redeem the
outstanding Debentures for an amount equal to (x) the sum of the principal of
the outstanding Debentures plus accrued interest thereon multiplied by (y) 133%.

         Section  3.3. Fractional Shares. The Company shall not issue fractional
shares of Common Stock, or scrip representing fractions of such shares, upon the
conversion of this Debenture. Instead, the Company shall round up or down, as
the case may be, to the nearest whole share.

         Section 3.4. Taxes on Conversion. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon the conversion of this Debenture. However, the Holder shall
pay any such tax which is due because the shares are issued in a name other than
its name.

         Section 3.5. Company to Reserve Stock. The Company shall reserve the
number of shares of Common Stock required pursuant to and upon the terms set
forth in the Subscription Agreement to permit the conversion of this Debenture.
All shares of Common Stock which may be issued upon the conversion hereof shall
upon issuance be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof.

         Section 3.6. Restrictions on Sale. This Debenture has not been
registered under the Securities Act of 1933, as amended, (the "Act") and is
being issued under Section 4(2) of the Act and Rule 506 of Regulation D
promulgated under the Act. This Debenture and the Common Stock issuable upon the
conversion thereof may only be sold pursuant to registration under or an
exemption from the Act.

         Section 3.7.  Mergers, Etc. If the Company merges or consolidates with
another corporation or sells or transfers all or substantially all of its assets
to another person and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange for Common Stock,
then as a condition of such merger, consolidation, sale or transfer, the Company
and any such successor, purchaser or transferee shall amend this Debenture to
provide that it may thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock, securities or
property receivable upon such merger, consolidation, sale or transfer by a
holder of the number of shares of Common Stock into which this Debenture might
have been converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly equivalent as may be
practicable to adjustments provided for in this Article 3. (10)

         Section 3.8 Company Optional Redemption. In the event the closing bid
price on the day prior to the Conversion Date is less than the closing bid price
on the Closing Date, the Company, at its sole option, shall have the right to
exercise an "Optional Redemption" to redeem the amount being converted, as
follows: The Company must notify the Holder in writing that it is exercising its
right of Optional Redemption on the same day the Company receives a notice of
conversion from the Holder, as long as such notice of conversion is received by
the Company before 11:00 a.m. New York time, otherwise the Company has until the
next business day to exercise such right. In the event the Company exercises
such right of Optional Redemption up to and including the 90th calendar day
following the Closing Date, the Company shall pay the Holder in U.S. currency
127% of the face amount of the Debenture being redeemed (133% if after 90
calendar days), plus accrued interest, however, any liquidated damages resulting
from failure to file the registration statement within 30 calendar days of the
Closing Date or failure of the registration statement to be declared effective
within 120 calendar days of the Closing Date shall be waived by the Holder if
the Company exercises its rights of Optional Redemption on or before the 120th
calendar day following the Closing Date, as long as the redemption amount is
paid to the Holder within 5 calendar days of the date the Holder receives
written notice from the Company of the Optional Redemption notice.

Article 4.  Mergers

         The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes in
writing the obligations of the Company under this Debenture and immediately
after such transaction no Event of Default exists. Any reference herein to the
Company shall refer to such surviving or transferee corporation and the
obligations of the Company shall terminate upon such written assumption.

Article 5.  Reports

         The Company will mail to the Holder hereof at its address as shown on
the Register a copy of any annual, quarterly or current report that it files
with the Securities and Exchange Commission promptly after the filing thereof
and a copy of any annual, quarterly or other report or proxy statement that it
gives to its shareholders generally at the time such report or statement is sent
to shareholders.

Article 6.  Defaults and Remedies

         Section 6.1. Events of Default. An "Event of Default" occurs if (a) the
Company does not make the payment of the principal of this Debenture by
conversion into Common Stock within ten (10) business days of the Maturity Date,
upon redemption or otherwise, (b) the Company does not make a payment, other
than a payment of principal, for a period of five (5) business days thereafter,
(c) any of the Company's representations or warranties contained in the
Subscription Agreement or this Debenture were false when made or the Company
fails to comply with any of its other agreements in the Subscription Agreement
or this Debenture and such failure continues for the period and after the notice
specified below, (d) the Company pursuant to or within the meaning of any
Bankruptcy Law (as hereinafter defined): (i) commences a voluntary case; (ii)
consents to the entry of an order for relief against it in an involuntary case;
(iii) consents to the appointment of a Custodian (as hereinafter defined) of it
or for all or substantially all of its property or (iv) makes a general
assignment for the benefit of its creditors or (v) a court of competent
jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for
relief against the Company in an involuntary case; (B) appoints a Custodian of
the Company or for all or substantially all of its property or (C) orders the
liquidation of the Company, and the order or decree remains unstayed and in
effect for sixty (60) calendar days, (e) the Company's Common Stock is suspended
or no longer listed on any recognized exchange including electronic
over-the-counter bulletin board for in excess of five (5) consecutive trading
days. As used in this Section 6.1, the term "Bankruptcy Law" means Title 11 of
the United States Code or any similar federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law. A default under clause (c) above
is not an Event of Default until the holders of at least 25% of the aggregate
principal amount of the Debentures outstanding notify the Company of such
default and the Company does not cure it within thirty (30) business days after
the receipt of such notice, unless the Company commences to cure such default
within such period, which must specify the default, demand that it be remedied
and state that it is a "Notice of Default".

         Section 6.2. Acceleration. If an Event of Default occurs and is
continuing, the Holder hereof by notice to the Company, may declare the
remaining principal amount of this Debenture, together with all accrued interest
and any liquidated damages, to be due and payable. Upon such declaration, the
remaining principal amount shall be due and payable immediately.

         Section 6.3  Concerning Seniority. Except as disclosed in the Company's
SEC filings, no indebtedness of the Company is senior to this Debenture in right
of payment, whether with respect to interest, damages or upon liquidation or
dissolution or otherwise.

         Section 6.4  Liquidation Value. The liquidation value of this Debenture
shall be equal to 125% of the outstanding balance remaining on this Debenture
plus accrued but unpaid interest and liquidated damages.

Article 7.  Registered Debentures

         Section 7.1. Series. This Debenture is one of a numbered series of
Debentures which are identical except as to the principal amount and date of
issuance thereof. Such Debentures are referred to herein collectively as the
"Debentures". The Debentures shall be issued in whole multiples of $5,000.

         Section 7.2. Record Ownership. The Company, or its attorney, shall
maintain a register of the holders of the Debentures (the "Register") showing
their names and addresses and the serial numbers and principal amounts of
Debentures issued to them. The Register may be maintained in electronic,
magnetic or other computerized form. The Company may treat the person named as
the Holder of this Debenture in the Register as the sole owner of this
Debenture. The Holder of this Debenture is the person exclusively entitled to
receive payments of interest on this Debenture, receive notifications with
respect to this Debenture, convert it into Common Stock and otherwise exercise
all of the rights and powers as the absolute owner hereof.

         Section 7.3. Worn or Lost Debentures. If this Debenture becomes worn,
defaced or mutilated but is still substantially intact and recognizable, the
Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by written notice to
the Company actually received by the Company before it is notified that the
Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or verification
as the Company may request.

Article 8.  Notice.

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

If to the Company:

         Jacobson Resonance Enterprises, Inc.
         8200 Jog Road, Suite 100
         Boynton Beach, Florida 33437
         Attention: Frank A. Chaviano, COO
         Telephone: 561-752-4141
         Facsimile: 561-752-3939

         With a copy to:
         Michael Paige, Esq.
         Jackson & Campbell, P.C.
         1120 20th Street, NW
         South Tower
         Washington, D.C. 20036-3437
         Telephone: 202-457-6696
         Facsimile: 202-457-1678

If to the Investor:
         At the Address set forth in the Investor Questionnaire.

         With a copy to:
         c/o Joseph B. LaRocco, Esq.
         49 Locust Avenue, Suite 107
         New Canaan, CT 06840
         Telephone:  203-966-0566

         Facsimile:  203-966-0363

         Each party shall provide five (5) business days prior notice to the
other party of any change in address, phone number or facsimile number.

Article 9.  Time

         Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. A "business day" shall
mean a day on which the banks in New York are not required or allowed to be
closed.

Article 10.  No Assignment

         This Debenture shall not be assignable.

Article 11.  Rules of Construction.

         In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.

Article 12.  Governing Law

         The validity, terms, performance and enforcement of this Debenture
shall be governed and construed by the provisions hereof and in accordance with
the laws of the State of Florida applicable to agreements that are negotiated,
executed, delivered and performed solely in the State of Florida.

Article 13.  Litigation

         (a) Forum Selection and Consent to Jurisdiction. Any litigation
arising out of, under, or in connection with, this Debenture or any course of
conduct, course of dealing, statements (whether oral or written) or actions of
the Company or Holder shall be brought and maintained exclusively in the courts
of the State of Florida. The Company hereby expressly and irrevocably submits to
the jurisdiction of the state and federal courts of the State of Florida for the
purpose of any such litigation as set forth above and irrevocably agrees to be
bound by any final judgment rendered thereby in connection with such litigation.
The Company further irrevocably consents to the service of process by registered
mail, postage prepaid, or by personal service within or without the State of
Florida. The Company hereby expressly and irrevocably waives, to the fullest
extent permitted by law, any objection which it may have or hereafter may have
to the laying of venue of any such litigation brought in any such court referred
to above and any claim that any such litigation has been brought in any
inconvenient forum. To the extent that the Company has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution or otherwise) with respect to itself or its property, the Company
hereby irrevocably waives such immunity in respect of its obligations under this
Debenture.

         (b) Waiver of Jury Trial. The Holder and the Company hereby  knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this Debenture, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder purchasing this Debenture.

         (c)  Governing Law. The terms of this Debenture shall be governed by
and construed and enforced in accordance with the laws of the State of Florida
without regard to the conflicts of laws principles thereof.

         IN WITNESS WHEREOF, the Company has duly executed this Debenture as of
the date first written above.

                                          JACOBSON RESONANCE ENTERPRISES, INC.

                                          By  /s/  Frank Chaviano
                                          Name:    Frank Chaviano
                                          Title:   COO

Exhibit C

                              NOTICE OF CONVERSION

  (To be Executed by the Registered owner in order to Convert the Debentures.)

         The undersigned hereby irrevocably elects, as of ______________,  200_
to convert $__________ of Convertible Debentures into Common Stock of JACOBSON
RESONANCE ENTERPRISES, INC. (the "Company") according to the conditions set
forth in the Debenture dated September 2002, and issued by the Company.

This conversion is being made for an immediate sale.

Date of Conversion________________________________________________

Applicable Conversion Price________________________________________

Number of Shares Issuable upon this conversion_______________________

Name (Print) ______________________________________________________

Address__________________________________________________________

_________________________________________________________________

Phone______________________   Fax_________________________________

By: _______________________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]