Document:

x

     

    Exhibit
      10.4

     

    REGISTRATION
      RIGHTS AGREEMENT

     

    This
      registration rights agreement (this “Agreement”)
      is
      made as of August 3, 2006, among Bullion River Gold Corp., a Nevada corporation
      (the “Company”),
      and
      the purchasers (each a “Purchaser”
and
      collectively, the “Purchasers”).

     

    This
      Agreement is made pursuant to the Securities Purchase Agreement, dated as of
      the
      date of this Agreement among the Company and the Purchasers (the “Purchase
      Agreement”).
      The
      Company and the Purchasers agree that:

     

    1. Definitions.
      Capitalized terms used and not otherwise defined in this Agreement have the
      same
      meanings as they have in the Purchase Agreement. As used in this
      Agreement:

     

    “Effectiveness
      Period”
is
      defined in Section 2.

     

    “Filing
      Date”
means
      the March 31, 2007

     

    “Holder”
or
      “Holders”
means
      the holder or holders from time to time of Registrable Securities.

     

    “Indemnified
      Party”
is
      defined in Section 5(b).

     

    “Indemnifying
      Party”
is
      defined in Section 5(b).

     

    “Losses”
      includes all losses, claims, damages, liabilities, costs, attorneys’ fees and
      expenses. 

     

    “Proceeding”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.

     

    “Prospectus”
means
      the prospectus included in the Registration Statement, as amended or
      supplemented by any prospectus supplement, whether pre- or post-effective and
      all material incorporated by reference or deemed to be incorporated by reference
      in the prospectus.

     

    “Registrable
      Securities”
means
      all of the Securities, Warrants and the Warrant Shares, together with any shares
      of Common Stock issued or issuable upon any stock split, dividend or other
      distribution, recapitalization or similar event that affects the Shares or
      the
      Warrant Shares.

     

    “Registration
      Statement”
means
      the registration statements required to be filed hereunder, including the
      Prospectus, amendments and supplements to the registration statement or
      Prospectus, whether pre- and post-effective amendments, all exhibits to them,
      and all material incorporated by reference or deemed to be incorporated by
      reference in the registration statement.

     

    
      
         

      

      
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        Registration
          Rights Agreement

      

    

    “Rule
      415”
means
      Rule 415 promulgated by the Commission pursuant to the Securities Act, as
      amended from time to time, or any similar rule or regulation hereafter adopted
      by the Commission having substantially the same purpose and effect as this
      Rule.

     

    “Rule
      424”
means
      Rule 424 promulgated by the Commission pursuant to the Securities Act, as
      amended from time to time, or any similar rule or regulation hereafter adopted
      by the Commission having substantially the same purpose and effect as this
      Rule.

     

    2. Registration.
      By the
      Filing Date, the Company will make best efforts to prepare and file with the
      Commission the Registration Statement covering the resale of all of the
      Registrable Securities for an offering to be made on a continuous basis pursuant
      to Rule 415. Subject to the terms of this Agreement, the Company will use its
      best efforts to cause the Registration Statement to be declared effective under
      the Securities Act not later August 3, 2007 and will use its best efforts to
      keep the Registration Statement continuously effective under the Securities
      Act
      until all Registrable Securities covered by the Registration Statement have
      been
      sold or may be sold without volume restrictions pursuant to Rule 144(k) (the
      “Effectiveness
      Period”).

     

    3. Registration
      Procedures.

     

    (a) Each
      Holder will furnish to the Company, upon request from the Company, a completed
      Questionnaire in the form attached to this Agreement as Annex A at least five
      Trading Days before the Filing Date or earlier at the Company’s
      request;
      and
      will furnish, at the Company’s request, a statement certifying the number of
      shares of Common Stock beneficially owned by the Holder and, if required by
      the
      Commission, the name of the Person who has voting and dispositive control over
      the Shares

     

    (b) The
      Company will (i) prepare and file with the Commission the amendments to the
      Registration Statement as may be necessary to keep the Registration Statement
      continuously effective for the Registrable Securities for the Effectiveness
      Period; (ii) respond as promptly as reasonably possible to any comments received
      from the Commission with respect to the Registration Statement or any amendment;
      and (iii) comply in all material respects with the provisions of the Securities
      Act and the Exchange Act with respect to the disposition of Registrable
      Securities covered by the Registration Statement during the applicable
      period.

     

    (c) The
      Company will use commercially reasonable efforts to avoid the issuance of,
      or,
      if issued, obtain the withdrawal of, (i) any order suspending the effectiveness
      of the Registration Statement, or (ii) any suspension of the qualification
      (or
      exemption from qualification) of any of the Registrable Securities for sale
      in
      any jurisdiction.

     

    
      
         

      

      
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        Registration
          Rights Agreement

      

    

    (d) The
      Company will use its commercially reasonable efforts to register or qualify
      or
      cooperate with the selling Holders in connection with the registration or
      qualification (or exemption from the Registration or qualification) of
      Registrable Securities for the resale by the Holder under the securities or
      Blue
      Sky laws of the jurisdictions within the United States as any Holder reasonably
      requests in writing, to keep the Registration or qualification (or exemption)
      effective during the Effectiveness Period and to do any other acts or things
      reasonably necessary to enable the disposition in those jurisdictions of the
      Registrable Securities covered by the Registration Statement; provided, that
      the
      Company is not required to qualify generally to do business in any jurisdiction
      where it is not then so qualified, subject the Company to any material tax
      in
      any jurisdiction where it is not then so subject, or file a general consent
      to
      service of process in any such jurisdiction.

     

    (e) The
      Company will comply with all applicable rules and regulations of the
      Commission.

     

    (f) The
      Company will notify the Holders immediately, with confirmation in writing,
      if it
      receives during the Effectiveness Period a notice from any federal or state
      regulatory authority of any action that could affect the Holders’ ability to
      sell the Registrable Securities. 

     

    4. Registration
      Expenses.
      The
      Company will bear all fees and expenses that it incurs in performing or
      complying with this Agreement whether or not any Registrable Securities are
      sold
      pursuant to the Registration Statement.

     

    5. Indemnification

     

    (a) Indemnification
      by Holders.
      Each
      Holder will, severally and not jointly, indemnify and hold harmless the Company,
      its directors, officers, agents and employees, each Person who controls the
      Company (within the meaning of Section 15 of the Securities Act and Section
      20
      of the Exchange Act), and the directors, officers, agents or employees of the
      controlling Persons, to the fullest extent permitted by applicable law, from
      and
      against all Losses arising out of or based solely upon (i) the Holder’s failure
      to comply with the prospectus delivery requirements of the Securities Act or
      (ii) any untrue or alleged untrue statement of a material fact contained in
      any
      Registration Statement, or arising out of or relating to any omission or alleged
      omission of a material fact required to be stated or necessary to make the
      statements not misleading but only if the untrue statement or omission is
      contained in written information furnished by the Holder to the Company
      specifically for inclusion in the Registration Statement. 

     

    (b) Conduct
      of Indemnification Proceedings.
      If any
      Proceeding is brought or asserted against any Person entitled to indemnity
      under
      this Agreement (an “Indemnified
      Party”),
      the
      Indemnified Party will promptly notify the Person from whom indemnity is sought
      (the “Indemnifying
      Party”)
      in
      writing, and the Indemnifying Party may assume the defense, including the
      employment of counsel reasonably satisfactory to the Indemnified Party, and
      will
      pay all fees and expenses incurred in connection with defense; but an
      Indemnified Party’s failure to give the notice does not relieve the Indemnifying
      Party of its obligations or liabilities pursuant to this Agreement, unless
      a
      court of competent jurisdiction (whose decision is not subject to appeal or
      further review) decides that the failure has prejudiced the Indemnifying
      Party.
      Notwithstanding the foregoing, an Indemnified Party may employ separate counsel
      in any Proceeding and participate in the defense, and will bear the expense
      of
      the counsel unless (i) the Indemnifying Party has agreed in writing to pay
      the
      fees and expenses, (ii) the Indemnifying Party has failed promptly to assume
      the
      defense of the Proceeding and to employ counsel reasonably satisfactory to
      the
      Indemnified Party, or (iii) the named parties to the Proceeding (including
      any
      impleaded parties) include both the Indemnified Party and the Indemnifying
      Party, and the Indemnified Party reasonably believes that a material conflict
      of
      interest is likely to exist if the same counsel were to represent the
      Indemnified Party and the Indemnifying Party (in which case, if the Indemnified
      Party notifies the Indemnifying Party in writing that it elects to employ
      separate counsel at the expense of the Indemnifying Party, the Indemnifying
      Party may not assume the defense and must bear the reasonable fees and expenses
      of the separate counsel). The Indemnifying Party is not liable for any
      settlement of any Proceeding without its written consent, which consent cannot
      be unreasonably withheld. No Indemnifying Party will, without the prior written
      consent of the Indemnified Party, settle any Proceeding that includes an
      Indemnified Party unless the settlement includes an unconditional release of
      the
      Indemnified Party from all liability on the claims that are the subject matter
      of the Proceeding. The Indemnifying Party will pay all reasonable fees and
      expenses of the Indemnified Party (including reasonable fees and expenses
      incurred in connection with investigating or preparing to defend a Proceeding
      in
      a manner consistent with this Section) to the Indemnified Party within ten
      Trading Days of written notice to the Indemnifying Party.

     

    
      
         

      

      
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        Registration
          Rights Agreement

      

    

    (c) Contribution.
      If a
      claim for indemnification under Section 5(a)
      is
      unavailable to an Indemnified Party (by reason of public policy or otherwise),
      then each Indemnifying Party, in lieu of indemnifying the Indemnified Party,
      will contribute to the amount paid or payable by the Indemnified Party as a
      result of the Losses, in the proportion that is appropriate to reflect the
      relative fault of the Indemnifying Party and Indemnified Party in connection
      with the actions, statements or omissions that resulted in the Losses and any
      other relevant equitable considerations. The relative fault of the Indemnifying
      Party and Indemnified Party must be determined by referring 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 of a material
      fact,
      has been taken or made by, or relates to information supplied by, the
      Indemnifying Party or Indemnified Party, and the parties’ relative intent,
      knowledge, access to information and opportunity to correct or prevent the
      action, statement or omission. The amount paid or payable by a party as a result
      of any Losses is deemed to include, subject to the limitations set out in this
      Agreement, any reasonable attorneys’ or other reasonable fees or expenses
      incurred by the party in connection with any Proceeding to the extent that
      the
      party would have been indemnified for the fees or expenses if the
      indemnification provided for in this Section 5
      was
      available to the party.
      The
      parties agree that it would not be just and equitable if contribution pursuant
      to this Section 5(c)
      were
      determined by pro rata allocation or by any other method of allocation that
      does
      not take into account the equitable considerations referred to in the
      immediately preceding paragraph. The indemnity and contribution agreements
      contained in this Section are in addition to any liability that the Indemnifying
      Parties may have to the Indemnified Parties.

     

    6. Miscellaneous

     

    (a) Remedies.
      If the
      Company or a Holder breaches any of its obligations under this Agreement, each
      Holder or the Company, as the case may be, in addition to being entitled to
      exercise all rights granted by law and under this Agreement, is entitled to
      specific performance of its rights under this Agreement.

     

    (b) Compliance.
      Each
      Holder will comply with the prospectus delivery requirements of the Securities
      Act as applicable to it in connection with sales of Registrable Securities
      pursuant to the Registration Statement.

     

    
      
         

      

      
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        Registration
          Rights Agreement

      

    

    (c) Discontinued
      Disposition.
      Each
      Holder will, when it receives a notice from the Company under Section
3(f),
      immediately stop selling the Registrable Securities under the Registration
      Statement until the Holder has received written notice from the Company that
      the
      use of the applicable Prospectus may be resumed. The Company will use its best
      efforts to ensure that the use of the Prospectus may be resumed as promptly
      as
      is practicable.

     

    (d) Amendments
      and Waivers.
      This
      Agreement may not be amended, modified or supplemented, and waivers or consents
      to departures from its provisions may not be given, unless they are written
      and
      signed by the Company and each Holder of the then outstanding Registrable
      Securities.

     

    (e) Notices.
      Any
      notices or other communications or deliveries required or permitted to be
      provided hereunder must be made in accordance with the provisions of the
      Purchase Agreement.

     

    (f) Successors
      and Assigns.
      This
      Agreement inures to the benefit of and binds the successors and permitted
      assigns of each of the parties and inures to the benefit of each
      Holder.

     

    (g) Execution
      and Counterparts.
      This
      Agreement may be executed in any number of counterparts and delivered to the
      other parties by any means, each of which when so executed is deemed to be
      an
      original and, all of which taken together will constitute one and the same
      Agreement. 

     

    (h) Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement will be determined with the provisions of the Purchase
      Agreement.

     

    (i) Cumulative
      Remedies.
      The
      remedies provided are cumulative and do not exclude any remedies provided by
      law.

     

    (j) Severability.
      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 remain in full
      force and effect and are in no way affected, impaired or invalidated, and the
      parties will 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 the term, provision, covenant or restriction. The parties
      stipulate that they would have executed the remaining terms, provisions,
      covenants and restrictions without including any that might be declared invalid,
      illegal, void or unenforceable.

     

    
      
         

      

      
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        Registration
          Rights Agreement

      

    

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

     

    (l) Independent
      Nature of Holders’ Obligations and Rights.
      The
      obligations of each Holder are several and not joint with the obligations of
      any
      other Holder, and no Holder can be responsible in any way for the performance
      of
      the obligations of any other Holder. Nothing in the Transaction Documents
      delivered at any Closing, and no action taken by any Holder pursuant to them,
      can be deemed to constitute the Holders as a partnership, an association, a
      joint venture or any other kind of entity, or create a presumption that the
      Holders are in any way acting in concert with respect to such obligations or
      the
      transactions contemplated by this Agreement. Each Holder is entitled to protect
      and enforce its rights and it is not necessary for any other Holder to be joined
      as an additional party in any proceeding for such purpose.

     

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

    

     

    
      
         

      

      
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        Registration
          Rights Agreement

      

    

    In
      witness whereof,
      the
      parties have executed this Registration Rights Agreement as of the date first
      written above.

     

    

     

    
      	 	
              BULLION
                RIVER GOLD CORP. 

            
	 	
               

               

              By:/s/
                Nancy B. Huber

              Nancy
                B. Huber

              Chief
                Financial Officer

            

    

    

    

    

    [Signature
      page of holders follow.]

     

    
      
         

      

      
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        Registration
          Rights Agreement

      

    

    [Holders’
      signature pages to BLRV Registration Rights Agreement]

    

    Name
      of
      Holder: Elton Participation Corp

     

    Signature
      of Authorized Signatory of Holder:
      /s/
      Peter-Paul Stengel

     

    Name
      of
      Authorized Signatory: Peter-Paul Stengel

     

    Title
      of
      Authorized Signatory: Secretary

     

    

    

    [SIGNATURE
      PAGES CONTINUE]

     

    
      
         

      

      
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        Registration
          Rights Agreement

      

    

    Annex
      A

     

    Bullion
      River Gold Corp.

     

    Selling
      Security-holder Notice and Questionnaire

     

    The
      undersigned beneficial owner of common stock, par value $0.001 per
      share
      (the “Common
      Stock”),
      of
      Bullion River Gold Corp., a
      Nevada corporation
      (the “Company”),
      (the
“Registrable
      Securities”)
      understands that the Company has filed or intends to file with the Securities
      and Exchange Commission (the “Commission”)
      a
      registration statement on Form ___ (the “Registration Statement”) for the
      registration and resale under Rule 415 of the Securities Act of 1933 (the
“Securities
      Act”),
      of
      the Registrable Securities, in accordance with the terms of the Registration
      Rights Agreement, dated as of _________________,
      2006
      (the “Registration
      Rights Agreement”),
      among
      the Company and the Purchasers. All capitalized terms not otherwise defined
      herein have the meanings ascribed to them in the Registration Rights
      Agreement.

     

    Certain
      legal consequences arise from being named as a selling security-holder in the
      Registration Statement and the related prospectus. Accordingly, holders and
      beneficial owners of Registrable Securities are advised to consult their own
      securities law counsel regarding the consequences of being named or not being
      named as a selling security-holder in the Registration Statement and the related
      prospectus.

     

    NOTICE

     

    The
      undersigned beneficial owner (the “Selling
      Security-holder”)
      of
      Registrable Securities hereby elects to include the Registrable Securities
      owned
      by it and listed below in Item 3 (unless otherwise specified under Item 3)
      in
      the Registration Statement.

     

    
      
         

      

      
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        Registration
          Rights Agreement

      

    

    The
      undersigned hereby provides the following information to the Company and
      represents and warrants that this information is accurate:

     

    QUESTIONNAIRE

     

    1. Name.

     

    
      	 	
              (a)

            	
              Full
                legal name of Selling
                Security-holder

            

    

     

    
      	 
	 

    

    

    
      	 	
              (b)

            	
              Full
                legal name of registered Holder (if not the same as (a) above) through
                which Registrable Securities listed in Item 3 below are
                held:

            

    

     

    
      	 
	 

    

    

    
      	 	
              (c)

            	
              Full
                legal name of natural control person (which means a natural person
                who
                directly or indirectly alone or with others has power to vote or
                dispose
                of the securities covered by the
                questionnaire):

            

    

     

    
      	 
	 

    

    

     

    2.
      Address for notices to Selling Security-holder:

     

    
      	 
	 
	 
	
              Telephone: 

            
	
              Fax: 

            
	
              Contact
                person: 

            

    

    

    3.
      Beneficial Ownership of Registrable Securities:

     

    
      	 	
              (a)

            	
              Type
                and number of Registrable Securities beneficially
                owned:

            

    

     

    
      	 
	 
	 
	 

    

    

     

    
      
         

      

      
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        Registration
          Rights Agreement

      

    

    4.
      Broker-Dealer Status:

     

    
      	 	
              (a)

            	
              Are
                you a broker-dealer?

            

    

     

    Yes
      o
No
o

     

    
      	 	
              Note:

            	
              If
                yes, the Commission’s staff has indicated that you should be identified as
                an underwriter in the Registration
                Statement.

            

    

     

    
      	 	
              (b)

            	
              Are
                you an affiliate of a
                broker-dealer?

            

    

    
       

      Yes
        o
No
o

    

     

    
      	 	
              (c)

            	
              If
                you are an affiliate of a broker-dealer, do you certify that you
                bought
                the Registrable Securities in the ordinary course of business, and
                at the
                time of the purchase of the Registrable Securities to be resold,
                you had
                no agreements or understandings, directly or indirectly, with any
                person
                to distribute the Registrable
                Securities?

            

    

    
       

      Yes
        o
No
o

    

     

    
      	 	
              Note:

            	
              If
                no, the Commission’s staff has indicated that you should be identified as
                an underwriter in the Registration
                Statement.

            

    

     

    5.
      Beneficial Ownership of Other Securities of the Company Owned by the Selling
      Security-holder.

     

    Except
      as set forth below in this Item 5, the undersigned is not the beneficial or
      registered owner of any securities of the Company other than the Registrable
      Securities listed above in Item 3.

     

    
      	 	
              (a)

            	
              Type
                and number of other securities beneficially owned by the Selling
                Security-holder:

            

    

     

    
      	 
	 
	 

    

    6.
      Relationships with the Company:

     

    Except
      as set forth below, neither the undersigned nor any of its affiliates, officers,
      directors or principal equity holders (owners of 5% of more of the equity
      securities of the undersigned) has held any position or office or has had any
      other material relationship with the Company (or its predecessors or affiliates)
      during the past three years.

     

    State
      any
      exceptions here:

     

    
      	 
	 
	 

    

     

    
      
         

      

      
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        Registration
          Rights Agreement

      

    

    The
      undersigned agrees to notify the Company promptly of any inaccuracies or changes
      in the foregoing information that may occur subsequent to this date at any
      time
      while the Registration Statement remains effective.

     

    By
      signing below, the undersigned consents to the disclosure of the information
      contained in its answers to Items 1 through 6 and the inclusion of the
      information in the Registration Statement and the related Prospectus. The
      undersigned understands that the Company will rely upon this information in
      connection with its preparation or amendment of the Registration Statement
      and
      the related Prospectus.

     

    In
      witness whereof
      the
      undersigned, by authority duly given, has caused this Notice and Questionnaire
      to be executed and delivered either in person or by its duly authorized
      agent.

     

    Dated:____________________________________        Beneficial
      Owner: ________________________________ 

    

    By:___________________________________________ 

    Name:

    Title: 

    

    Please
      fax a copy of this completed and executed Notice and Questionnaire to
      775-324-7893; and return the original by overnight mail to Bullion River Gold
      Corp., 3500 Lakeside Court, Suite 200, Reno, NV 89509.

     

     

     

    Page
      12 of 1210% Secured Convertible Debenture

     

    Exhibit
      10.5

    

    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 REGULATION S PROMULGATED 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. 

    

    

    Original
      Issue Date: August 3,
      2006

    Conversion
      Price $0.75

    

    

    $2,000,000.00

    

    10%
      SECURED CONVERTIBLE DEBENTURE

    DUE
      August 3,
      2008

    

    This
      10%
      Secured Convertible Debentures of Bullion River Gold Corp., a Nevada
      corporation, having a principal place of business at 3500 Lakeside Court, Suite
      200, Reno, NV 89509 (the “Company”),
      designated as its 10% Secured Convertible Debenture, due August 3, 2008 (this
      debenture, the “Debenture”
and
      collectively with the other such series of debentures, the “Debentures”).
      This
      Debenture is secured as provided for in the Securities Purchase Agreement and
      the Pledge Agreement referred to therein.

    

    FOR
      VALUE
      RECEIVED, the Company promises to pay to Elton Participation Corp. or its
      registered assigns (each a “Holder”),
      the
      principal sum of $2,000,000.00 by August 3, 2008,
      or such
      earlier date as this Debenture is required or permitted to be repaid as provided
      hereunder (the “Maturity
      Date”),
      and
      to pay interest to the Holder on the aggregate unconverted and then outstanding
      principal amount of this Debenture in accordance with the provisions hereof.
      This Debenture is subject to the following additional provisions:

    

    Section
      1. Definitions

    

    For
      the
      purposes hereof, in addition to the terms defined elsewhere in this Debenture:
      (a) capitalized terms not otherwise defined herein have the meanings given
      to
      such terms in the Purchase Agreement, and (b) the following terms shall have
      the
      following meanings:

    

    “Alternate
      Consideration”
shall
      have the meaning set forth in Section 6.3.

    

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

    

    “Common
      Stock”
means
      the common stock, par value $0.001 per share, of the Company and stock of any
      other class of securities into which such securities may hereafter have been
      reclassified or changed into.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Conversion
      Date”
shall
      have the meaning set forth in Section 4.1.

    

    “Conversion
      Price”
shall
      have the meaning set forth in Section 4.3.

    

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

    

    “Effectiveness
      Period”
shall
      have the meaning given to such term in the Registration Rights
      Agreement.

    

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

    

    “Fundamental
      Transaction”
shall
      have the meaning set forth in Section 6.3.

    

    “Interest
      Conversion Rate”
means
      $0.75 per share.

    

    “Interest
      Payment Date”
shall
      have the meaning set forth in Section 2.2.

     

    “Maturity
      Date”
means
      August 3 , 2008

    

    “Nevada
      Courts”
shall
      have the meaning set forth in Section 9.4.

    

    “Notice
      of Conversion”
shall
      have the meaning set forth in Section 4.1.

    

    “Optional
      Prepayment”
shall
      have the meaning set forth in Section 7.

    

    “Optional
      Prepayment Amount”
shall
      have the meaning set forth in Section 7

    

    “Optional
      Prepayment Date”
shall
      have the meaning set forth in Section 7.

    

    “Optional
      Prepayment Notice”
shall
      have the meaning set forth in Section 7.

    

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

    

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

    

    “Purchase
      Agreement”
means
      the Securities Purchase Agreement, dated as of August 3,
      2006, to
      which the Company and the original Holder are parties, as amended, modified
      or
      supplemented from time to time in accordance with its terms.

     

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

    

    “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 Over The Counter Bulletin Board, the
      Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange
      or the Nasdaq National Market.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    Section
      2. Interest

    

    2.1 Accrual
      of Interest.
      Interest
      shall accrue on the principal balance of this Debenture at the rate of ten
      percent (10%) per annum.

    

    2.2 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 10% simple
      interest per annum, payable quarterly on January 1, April 1, July 1 and October
      1, beginning on October 1, 2006, and on the Maturity Date (except that, if
      any
      such date is not a Business Day, then such payment shall be due on the next
      succeeding Business Day) (each such date, an “Interest
      Payment Date”).
      Interest may be paid in cash, or if by mutual consent of the Company and the
      Holder,
      by
      shares of Common Stock at the “Interest
      Conversion Rate”
      or a
      combination of shares and cash.

     

    Section
      3. Repayment of Principal

    

    3.1 Repayment
      in U.S. Dollars.
      On or
      before the Maturity Date, the Company shall repay the unpaid principal amount
      of
      this Debenture in U.S. Dollars.

    

    3.2 The
      Company and the Holder may before or at the Maturity Date mutually agree to
      extend the Maturity Date for one year period(s).

    

    Section
      4.Conversion Into Shares of Common Stock

    

    4.1 Voluntary
      Conversion.
      At any
      time after the Original Issue date and until this Debenture is no longer
      outstanding, this Debenture shall be convertible into shares of Common Stock
      (“Conversion
      Shares”)
      at the
      option of the Holder, in whole or in part,
      at any
      time and from time to time. The Holder shall effect conversions by delivering
      to
      the Company the form of Notice of Conversion attached hereto as
      Annex
      A
      (a
“Notice
      of Conversion”),
      specifying therein the principal amount of this Debenture,
      and
      accrued interest thereon,
      to be
      converted and the date on which such conversion is to be effected (a
“Conversion
      Date”).
      If no
      Conversion Date is specified in a Notice of Conversion, the Conversion Date
      shall be the date that such Notice of Conversion is provided 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. Any and all conversion hereunder shall be made in
amounts
      of not less than $10,000 (and in increments
      of $10,000)
      unless
      the balance of the outstanding debenture amount is less than $10,000 and then
      in
      such event, the entire amount of the debenture shall be converted into shares
      of
      Common Stock if Holder elects to convert
      such
      balance.

    

    4.2 Conversion
      Records.
      The
      Holder and the Company shall maintain records showing the principal amount
      converted and the date of such conversions. The Company shall deliver a copy
      of
      its records as to Holder in a reasonable time following any conversion. If
      Holder disagrees with the Company’s records, Holder shall provide notice of such
      objection to the Company within twenty days following the Company’s mailing of
      such record to holder. In the event of any dispute or discrepancy, the records
      of the Company 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.
      Notwithstanding anything herein to the contrary, the Holders right to convert
      hereunder shall in no way excuse the Company from having to meet its obligation
      to pay the outstanding principal and interest on this Debenture nor shall it
      limit the Holder’s right to seek any other remedy against the Company for
      failing to meet such obligations. The right to convert this Debenture into
      Conversion Shares is in addition to any other rights or remedies the Holder
      may
      have hereunder or under law.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    4.3 Conversion
      Price.
      The
      conversion price in effect on any Conversion Date shall be $0.75 (subject to
      adjustment
      as
      provided
      herein)(the “Conversion
      Price”).

    

    4.4 Mechanics
      of Conversion

    

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

    

    (b) Delivery
      of Certificate Upon Conversion.
      Not
      later than seven Trading Days after any Conversion Date, the Company will
      deliver or cause to be delivered to the Holder (A) a certificate or certificates
      representing the Conversion Shares which shall be free of restrictive legends
      and trading restrictions (other than those required by the Purchase Agreement)
      representing the number of shares of Common Stock being acquired upon the
      conversion of this Debenture including payment of interest in shares of Common
      Stock. The Company shall, if available and if allowed under applicable
      securities laws, use its best efforts to deliver any certificate or certificates
      required to be delivered by the Company under this Section electronically
      through the Depository Trust Corporation or another established clearing
      corporation performing similar functions.

    

    (c) 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 a Conversion Date, the Holder shall be entitled by written notice to
      the
      Company at any time on or before its receipt of such certificate or certificates
      thereafter, to rescind such conversion, in which event the Company shall
      immediately return the certificates representing the principal amount of this
      Debenture tendered for conversion.

     

    (d) 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 solely for the purpose of
      issuance upon conversion of this Debenture and payment of interest on this
      Debenture, each as herein provided, free from preemptive rights or any other
      actual contingent purchase rights of persons other than the Holder (and the
      other holders of the Debentures), not less than such number of shares of the
      Common Stock as shall (subject to the terms and conditions set forth in the
      Purchase Agreement) be issuable (taking into account the adjustments and
      restrictions of Section 6) 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 and validly authorized, issued and fully paid, and
      nonassessable.

     

    (e) Fractional
      Shares.
      The
      Holder shall be entitled to receive, in lieu of fractional shares, one whole
      share of Common Stock.

    

    (g). 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 certificate, provided that the Company shall not be required to pay
      any
      tax that may be payable in respect of any transfer involved in the issuance
      and
      delivery of any such certificate upon conversion in a name other than that
      of
      the Holder of this Debenture so converted and the Company shall not be required
      to issue or deliver such certificates unless or until the person or persons
      requesting the issuance thereof shall have paid to the Company the amount of
      such tax or shall have established to the satisfaction of the Company that
      such
      tax has been paid.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    Section
      5. Registration of Transfers and Exchanges

    

    5.1 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 made for such registration of transfer
      or
      exchange.

    

    5.2 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.

    

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

    

    Section
      6. Certain Adjustments

    

    6.1 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 on shares of its
      Common Stock or any other equity or equity equivalent securities payable in
      shares of Common Stock (which, for avoidance of doubt, shall not include any
      shares of Common Stock issued by the Company pursuant to this Debenture,
      including as interest thereon), (B) subdivides outstanding shares of Common
      Stock into a larger number of shares, (C) combines (including by way of reverse
      stock split) outstanding shares of Common Stock into a smaller number of shares,
      or (D) issues by 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 treasury shares, if any) 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.

     

    6.2 Subsequent
      Equity Issuances.
      If the
      Company or any subsidiary thereof, at any time while any Debenture is
      outstanding, issues, sells or grants any option to purchase or issues, sells
      or
      grants any right to reprice its securities, or otherwise disposes of or issues
      (or announces any sale, grant or any option to purchase or other disposition
      of)
      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
      higher of (i) the then Conversion Price and (ii) 80% of the then VWAP (such
      lower effective price price per share, the “Base
      Conversion Price”
and
      such issuances collectively, a “Dilutive
      Issuance”)
      (if a
      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 higher of the then Conversion Price or 80%
      of
      the then VWAP, as applicable, on such date of the Dilutive Issuance), then
      the
      Conversion Price shall be reduced, and only reduced, by multiplying the
      Conversion Price by a fraction, the numerator of which is the number of shares
      of Common Stock issued and outstanding (on a fully-diluted basis) immediately
      prior to the Dilutive Issuance plus the number of shares of Common Stock which
      the actual cash offering price for such Dilutive Issuance would purchase at
      the
      then Exercise Price, and the denominator of which shall be the sum of the number
      of shares of Common Stock issued and outstanding (on a fully-diluted basis)
      immediately prior to the Dilutive Issuance plus the number of shares of Common
      Stock and Common Stock Equivalents so issued or issuable in connection with
      the
      Dilutive Issuance, but in no event shall such adjustment reduce the Conversion
      Price to less than $0.05. 

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    Notwithstanding
      the foregoing, no adjustment will be made under this Section 6.2 in respect
      of
      an Exempt Issuance.
      The
      Company shall notify each Holder in writing, no later than the five (5) Business
      Days prior to the issuance of any Common Stock or Common Stock Equivalents
      subject to this Section 6.2, 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 6.2, upon the occurrence of any
      Dilutive Issuance, each 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 such Holder accurately refers to the
      Base Conversion Price in the Notice of Conversion.

    

    6.3 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 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 one 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 one 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 paragraph (d) and insuring that this Debenture
      (or
      any such replacement security) will be similarly adjusted upon any subsequent
      transaction analogous to a Fundamental Transaction.

    

    6.4 Calculations.
      All
      calculations under this Section 6 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
      6,
      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
      treasury shares, if any) issued and outstanding.

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    6.5 Notice
      to the Holder.

    

    (a) Adjustment
      to Conversion Price.
      Whenever the Conversion Price is adjusted pursuant to any of this Section 6,
      the
      Company shall promptly mail to each Holder a notice setting forth the Conversion
      Price after such adjustment and setting forth a brief statement of the facts
      requiring such adjustment. If the Company issues a variable rate security,
      despite the prohibition thereon in the Purchase Agreement, the Company shall
      be
      deemed to have issued Common Stock or Common Stock Equivalents at the lowest
      possible conversion or exercise price at which such securities may be converted
      or exercised in the case of a Variable Rate Transaction (as defined in the
      Purchase Agreement).

    

    (b) Notice
      to Allow Conversion by Holder.
      If (A)
      the Company shall declare a dividend (or any other distribution) 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 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; (E) the Company shall
      authorize the voluntary or involuntary dissolution, liquidation or winding
      up of
      the affairs of the Company
      or (F)
      the Company shall authorize entering into any other type of Fundamental
      Transaction;
      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 mailed to the Holder at its last addresses as it shall appear upon the stock
      books of the Company, 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,
      or
      other Fundamental Transaction,
      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,
      or
      other Fundamental Transaction;
      provided, that the failure to mail such notice or any defect therein or in
      the
      mailing thereof shall not affect the validity of the corporate action required
      to be specified in such notice. The Holder is entitled to convert this Debenture
      during the 20-day period commencing the date of such notice to the effective
      date of the event triggering such notice.

    

    Section
      7. Optional Prepayment Right

    

    Prior
      to
      the later of (i) August 3, 2007 and (ii) the date on which the Conversion Shares
      are registered pursuant to a registration statement filed with and declared
      effective by the Commission, the Company may only prepay the Debenture with
      the
      approval of the holder thereof. Following August 3, 2007, upon the Conversion
      Shares being registered pursuant to a registration statement filed with and
      declared effective by the Commission, the Company may,
      upon
      five (5) Business Days prior written notice to the Holder, prepay
      in
      part or in full the Debenture in accordance with this Section 7.
      The
      prepayment amount must be $300,000 or a greater amount. Notice
      of
      any
      proposed
      prepayment hereunder (an “Optional
      Prepayment”)
      shall
      be delivered to the Holder
      of the
      Debentures and shall state (1) that the Company wishes
      to
      prepay the Debentures issued on the Original Issue Date and (2) the date of
      prepayment (the “Optional
      Prepayment Notice”).
      Subject
      to receiving the written consent of the Holder, on
      the date
      fixed for prepayment (the “Optional
      Prepayment Date”),
      the
      Company shall make payment of the Optional Prepayment Amount (as defined below)
      to the Holder. If the Company prepays
      a
      Debenture, the Company shall make payment to the Holder of an amount in cash
      equal to the
      principal amount to
      be
      prepaid
      plus any
      amount of interest owed hereunder to the Holder (“Optional
      Prepayment Amounts”).
      The
      Holder shall at all times prior to the Optional Prepayment Date maintain the
      right to convert all or any portion of the Debenture (and,
      thereafter, any unconverted portion) and
      any
      portion of Debenture so converted after receipt of an Optional Prepayment Notice
      and prior to the Optional Prepayment Date set forth in such notice and payment
      of the aggregate Optional Prepayment Amount shall be deducted from the principal
      amount of Debenture which is otherwise subject to prepayment pursuant to such
      notice. 

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    Section
      8.Events of Default.

    

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

    

    (a) any
      default in the payment of (A) the principal amount of any Debenture, or (B)
      interest 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 three
      (3)
      Trading
      Days;

    

    (b) the
      Company shall fail to observe or perform any other material covenant or material
      agreement contained in this Debenture or any other Debenture which failure
      is
      not cured, if possible to cure, within the earlier to occur of five
      (5)
      Trading
      Days after notice of such default sent by the Holder or by any other
      Holder;

    

    (c) a
      default
      or event of default (subject to any grace or cure period provided for in the
      applicable agreement, document or instrument) shall occur under any of the
      Transaction Documents,

    

    (d) any
      representation or warranty or covenant made herein, in any other Transaction
      Documents, in any written statement pursuant hereto or thereto, or in any other
      report, financial statement or certificate made or delivered to the Holder
      or
      any other holder of Debentures shall be untrue or incorrect in any material
      respect as of the date when made or deemed made;

    

    (e) (i)
      the
      Company or any of its Subsidiaries shall commence a case, as debtor, under
      any
      applicable bankruptcy or insolvency laws as now or hereafter in effect or any
      successor thereto, or the Company or any Subsidiary commences any other
      proceeding under any reorganization, arrangement, adjustment of debt, relief
      of
      debtors, dissolution, insolvency or liquidation or similar law of any
      jurisdiction whether now or hereafter in effect relating to the Company or
      any
      Subsidiary thereof or (ii) there is commenced a case against the Company or
      any
      Subsidiary thereof, under any applicable bankruptcy or insolvency laws, as
      now
      or hereafter in effect or any successor thereto which remains undismissed for
      a
      period of 60 days; or (iii) the Company or any Subsidiary thereof is adjudicated
      by a court of competent jurisdiction insolvent or bankrupt; or any order of
      relief or other order approving any such case or proceeding is entered; or
      (iv)
      the Company or any Subsidiary thereof suffers any appointment of any custodian
      or the like for it or any substantial part of its property which continues
      undischarged or unstayed for a period of 60 days; or (v) the Company or any
      Subsidiary thereof makes a general assignment for the benefit of creditors;
      or
      (vi) the Company shall fail to pay, or shall state that it is unable to pay,
      or
      shall be unable to pay, any
      of
      its debts or its
      debts
      generally as they become due; or (vii) the Company or any Subsidiary thereof
      shall call a meeting of its creditors with a view to arranging a composition,
      adjustment or restructuring of its debts; or (viii) the Company or any
      Subsidiary thereof shall by any act or failure to act expressly indicate its
      consent to, approval of or acquiescence in any of the foregoing; or (ix) any
      corporate or other action is taken by the Company or any Subsidiary thereof
      for
      the purpose of effecting any of the foregoing; or

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (f) the
      Company or any Subsidiary shall default in 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 of the Company in an amount exceeding $1,000,000, whether
      such indebtedness now exists or shall hereafter,
      be
      created,
      unless
      otherwise approved in writing by the Holder.

     

    8.2 Remedies
      Upon Event of Default.
      If any
      Event of Default occurs, the Company
      shall give Holder prompt notice thereof and the full
      principal amount of this Debenture, together with interest and other amounts
      owing in respect thereof, to the date of acceleration shall become, at the
      Holder’s election, immediately due and payable in cash. Upon the payment in full
      of the
      principal and interest under
      the
      Debenture under this Section 8.2, the Holder shall promptly surrender this
      Debenture to or as directed by the Company. 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 declaration may be rescinded and
      annulled by Holder at any time prior to payment hereunder and the Holder shall
      have all rights as a Debenture holder until such time, if any, as the full
      payment under this Section shall have been received by it. No such rescission
      or
      annulment shall affect any subsequent Event of Default or impair any right
      consequent thereon.

    

    Section
      9. Miscellaneous

    

    9.1 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, sent by a nationally recognized
      overnight courier service, addressed to the Company, at the address set forth
      above, facsimile number (775) 324-7893, Attn: Peter Kuhn or such other address
      or facsimile number as the Company may specify for such purposes by notice
      to
      the Holder delivered in accordance with this Section. 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, sent by a nationally
      recognized overnight courier service addressed to each Holder at the facsimile
      telephone number or address of such Holder appearing on the books of the
      Company, or if no such facsimile telephone 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 telephone number specified in this Section prior
      to
      5:30 p.m. (Nevada time), (ii) the date after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile telephone
      number specified in this Section later than 5:30 p.m. (Nevada time) on any
      date
      and earlier than 11:59 p.m. (Nevada time) on such 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.

    

    9.2 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, interest and liquidated damages (if any) on, this
      Debenture at the time, place, and rate, and in the coin or currency, herein
      prescribed. This Debenture is a direct debt obligation of the Company. This
      Debenture ranks pari passu with all other Debentures now or hereafter issued
      under the terms set forth herein.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    9.3 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,
      and indemnity, if requested, all reasonably satisfactory to the
      Company.

    

    9.4 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 Nevada, without regard to the principles
      of conflicts of law thereof. Each party agrees that all legal proceedings
      concerning the interpretations, 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 Reno, State of Nevada (the “Nevada
      Courts”).
      Each
      party hereto hereby irrevocably submits to the exclusive jurisdiction of the
      Nevada 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
      any such court, or such Nevada 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 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 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 with the investigation, preparation and
      prosecution of such action or proceeding.

    

    9.5 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
      must be in writing.

    

    9.6 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 applicable laws governing usury,
      the applicable rate of interest due hereunder shall automatically be lowered
      to
      equal the maximum permitted rate of interest. 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.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

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

    

    9.8 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.

    

    9.9 Assumption.
      Any
      successor to the Company or surviving entity in a Fundamental Transaction shall
      (i) assume in writing 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) prior to such Fundamental Transaction and (ii) to 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 amounts and the interest rates of the Debentures held by the
      Holder and having similar ranking to this Debenture, and satisfactory to the
      Holder (any such approval not to be unreasonably withheld or delayed). The
      provisions of this Section 9.9
      shall
      apply similarly and equally to successive Fundamental Transactions and shall
      be
      applied without regard to any limitations of this Debenture.

     

    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.

     

    BULLION
      RIVER GOLD CORP.

    

    By:
       /s/ Nancy B. Huber

    Name:
      Nancy B. Huber

    Title:
      Chief Financial Officer

    

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    ANNEX
      A

    

    NOTICE
      OF
      CONVERSION

    

    The
      undersigned hereby elects to convert principal (and
      accrued interest thereon) under
      the
      10% Secured Convertible Debenture of Bullion River Gold Corp., a Nevada
      corporation (the “Company”),
      due
      on August 3,
      2008
      into
      shares of common stock, par value $0.001 per share (the “Common
      Stock”),
      of
      the Company according to the conditions hereof, as of the date written below.
      If
      shares are to be issued in the name of a person other than the undersigned,
      the
      undersigned will pay all transfer taxes payable with respect thereto and is
      delivering herewith such certificates and opinions as reasonably requested
      by
      the Company in accordance therewith. No fee will be charged to the holder for
      any conversion, except for such transfer taxes, if any.

    

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

    

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

    

    Conversion
      calculations:

    

    Date
      to
      Effect Conversion:___________________

    

    Principal
      Amount of Debenture to be Converted:
      $________

    Payment
      of Interest in Common Stock __ yes __ no

    

    If
      yes,
      $_____ of Interest Accrued on Account of

    Conversion
      at Issue.

    

    Number
      of
      shares of Common Stock to be issued:

    _______________________________________

    

    

    Signature:________________________________

    

    Name:___________________________________

    

    Address:
      _________________________________

    

     

    12

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