Document:

Exhibit 10.2

FORM OF RESTRICTED STOCK UNIT AGREEMENT

2004/2006 EQUITY INCENTIVE PLAN

THIS RESTRICTED STOCK UNIT AGREEMENT (this "Agreement"), dated as of _________ ____, ______, is between ENERSYS, a Delaware corporation (the "Company"), and the individual identified on the signature page hereof (the "Participant").

BACKGROUND

A.The Participant is currently an employee of the Company or one of its Subsidiaries.

B.The Company desires to (i) provide the Participant with an incentive to remain in the employ of the Company or one of its Subsidiaries, and (ii) increase the Participant's interest in the success of the Company by granting restricted stock units (the "Restricted Stock Units") to the Participant.

C.The grant of the Restricted Stock Units is (i) pursuant to the EnerSys [2004/2006] Equity Incentive Plan (the "Plan"), (ii) subject to the terms and conditions of this Agreement, and (iii) not employment compensation nor and employment right and is at the sole discretion of the Company's Compensation Committee.

NOW, THEREFORE, in consideration of the covenants and agreements contained in this Agreement, the parties hereto, intending to be legally bound, agree as follows:

1.Definitions; Incorporation of Plan Terms.  Capitalized terms used in this Agreement without definition shall have the meanings assigned to them in the Plan.  This Agreement and the Restricted Stock Units shall be subject to the Plan.  The terms of the Plan are incorporated into this Agreement by reference.  If there is a conflict or an inconsistency between the Plan and this Agreement, the Plan shall govern.  The Participant hereby acknowledges receipt of a copy of the Plan.

2.Grant of Restricted Stock Units.  Subject to the provisions of this Agreement and pursuant to the provisions of the Plan, the Company hereby grants to the Participant the number of Restricted Stock Units specified on the signature page of this Agreement.  The Company shall credit to a bookkeeping account (the "Account") maintained by the Company, or a third party on behalf of the Company, for the Participant's benefit the Restricted Stock Units, each of which shall be deemed to be the equivalent of one share of the Company's common stock, par value $.0.01 per share (each, a "Share").  If and whenever any cash dividends are declared on the Shares, on the date such dividend is paid, the Company will credit to the Account a number of additional Restricted Stock Units equal to the result of dividing (i) the product of the total number of Restricted Stock Units credited to the Account on the record date for such dividend times the per Share amount of such dividend, by (ii) the Fair Market Value of one Share on the date such dividend is paid by the Company to the holders of Shares.  The additional Restricted Stock Units shall be or become vested to the same extent as the Restricted Stock Units that resulted in the crediting of such additional Restricted Stock Units.

3.Terms and Conditions.  All of the Restricted Stock Units shall initially be unvested.  

	Vesting.  Twenty-five percent (25%) of the Restricted Stock Units (rounded to the nearest whole number) shall vest on the first anniversary of the date of this Agreement and on each of the next three (3) successive anniversaries thereof unless previously vested or forfeited in accordance with the Plan or this Agreement; provided, however, that upon a Change in Control, or if the Participant's employment terminates due to death, Permanent Disability, or Retirement or the Participant terminates employment for Good Reason, or is terminated without Cause, the Restricted Stock Units, to the extent then still unvested, shall immediately become vested.  Notwithstanding the foregoing sentence, upon a Participant's termination of employment for any reason, the Company's Compensation Committee, in its sole discretion and subject to the approval of a majority of the disinterested members of the Board of Directors, may waive any vesting restrictions then remaining and permit the immediate vesting of all remaining unvested Restricted Stock Units.

(b)Restrictions on Transfer.  Until the Restricted Stock Units vest as provided in Section 3(a) of this Agreement or as otherwise provided in the Plan, no transfer of the Restricted Stock Units or any of the Participant's rights with respect to the Restricted Stock Units, whether voluntary or involuntary, by operation of law or otherwise, shall be permitted.  Unless the Company's Compensation Committee determines otherwise, upon any attempt to transfer any Restricted Stock Units or any rights in respect of the Restricted Stock Units before vesting, such unit, and all of the rights related to such unit, shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind.

(c)Forfeiture.  Upon termination of the Participant's employment with the Company or a Subsidiary for any reason other than one of the reasons set forth in the first sentence of Section 3(a), the Participant shall forfeit any and all Restricted Stock Units which have not vested as of the date of such termination and transfer such units to the Company without consideration of any kind.

(d)Payment.  The Company shall make a payment to the Participant of the Restricted Stock Units credited to the Account as provided in Section (2) upon the vesting of such Restricted Stock Units pursuant to Section 3(a).  Payment shall be made in Shares equal to the number of vested Restricted Stock Units credited to the Account.  Payment shall be made as soon as practicable after the applicable payment event, but in no event later than 30 days after the date of the applicable payment event.

4.Noncompetition.  The Participant agrees with the Company that, for so long as the Participant is employed by the Company or any of its Subsidiaries and continuing for twelve (12) months (or such longer period as may be provided in an employment or similar agreement between the Participant and the Company or one of its Subsidiaries) following a termination of such employment that occurs after any of the Restricted Stock Units have vested, the Participant will not, without the prior written consent of the Company, directly or indirectly, and whether as principal or investor or as an employee, officer, director, manager, partner, consultant, agent, or otherwise, alone or in association with any other person, firm, corporation, or other business organization, become involved in a Competing Business in any geographic area in which the Company or any of its Subsidiaries has engaged during such period in a Competing Business, or in which the Participant has knowledge of the Company's plans to engage in a Competing Business (including, without limitation, any area in which any customer of the Company or any of its Subsidiaries may be located); provided, however, that the provisions of this Section 5 shall apply solely to those activities of a Competing Business, with which the Participant was personally involved or for which the Participant was responsible while employed by the Company or its Subsidiaries during the twelve (12) month period preceding termination of the Participant's employment.

5.Wrongful Solicitation.  As a separate and independent covenant, the Participant agrees with the Company that, for so long as the Participant is employed by the Company or any of its Subsidiaries and continuing for twelve (12) months (or such longer period as may be provided in an employment or similar agreement between the Participant and the Company or one of its Subsidiaries) following a termination of such employment that occurs after any of the Restricted Stock Units have vested, the Participant will not engage in any Wrongful Solicitation.

6.Confidentiality; Specific Performance.

(a)The Participant agrees with the Company that the Participant will not at any time, except in performance of the Participant's obligations to the Company hereunder or with the prior written consent of the Company, directly or indirectly, reveal to any person, entity, or other organization (other than the Company, or its employees, officers, directors, stockholders, or agents) or use for the Participant's own benefit any information deemed to be confidential by the Company or any of its Affiliates ("Confidential Information") relating to the assets, liabilities, employees, goodwill, business, or affairs of the Company or any of its Affiliates, including, without limitation, any information concerning past, present, or prospective customers, manufacturing processes, marketing, operating, or financial data, or other confidential information used by, or useful to, the Company or any of its Affiliates and known (whether or not known with the knowledge and permission of the Company or any of its Affiliates and whether or not at any time prior to the Date of Grant developed, devised, or otherwise created in whole or in part by the efforts of the Participant) to the Participant by reason of the Participant's employment with, equity holdings in, or other association with the Company or any of its Affiliates.  The Participant further agrees that the Participant will retain all copies and extracts of any written Confidential Information acquired or developed by the Participant during any such employment, equity holding, or association in trust for the sole benefit of the Company, its Affiliates, and their successors and assigns.  The Participant further agrees that the Participant will not, without the prior written consent of the Company, remove or take from the Company's or any of its Affiliate's premises (or if previously removed or taken, the Participant will promptly return) any written Confidential Information or any copies or extracts thereof.  Upon the request and at the expense of the Company, the Participant shall promptly make all disclosures, execute all instruments and papers, and perform all acts reasonably necessary to vest and confirm in the Company and its Affiliates, fully and completely, all rights created or contemplated by this Section 6.  The term "Confidential Information" shall not include information that is or becomes generally available to the public other than as a result of a disclosure by, or at the direction of, the Participant.

(b)The Participant agrees that upon termination of the Participant's employment with the Company or any Subsidiary for any reason, the Participant will return to the Company immediately all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom, in any way evidencing (in whole or in part) Confidential Information relating to the business of the Company and its Subsidiaries and Affiliates.  The Participant further agrees that the Participant will not retain or use for the Participant's account at any time any trade names, trademark, or other proprietary business designation used or owned in connection with the business of the Company or its Subsidiaries or Affiliates.

(c)The Participant acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of this Section 7, or Section 5 or 6 above, would be inadequate and, in recognition of this fact, the Participant agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, or any other equitable remedy which may then be available.

7.Taxes.

	This Section 7(a) applies only to (a) all Participants who are U.S. employees, and (b) to those Participants who are employed by a Subsidiary of the Company that is obligated under applicable local law to withhold taxes with respect to the vesting of the Restricted Stock Units.  Such Participant shall pay to the Company or a designated Subsidiary, promptly upon request, and in any event at the time the Participant recognizes taxable income with respect to the Restricted Stock Units (or, if the Participant makes an election under Section 83(b) of the Code in connection with such grant), an amount equal to the taxes the Company determines it is required to withhold under applicable tax laws with respect to the Restricted Stock Units.  The Participant may satisfy the foregoing requirement by making a payment to the Company in cash or, with the approval of the Plan administrator, by delivering already owned unrestricted Shares, in each case, having a value equal to the minimum amount of tax required to be withheld.  Such Shares shall be valued at their fair market value on the date as of which the amount of tax to be withheld is determined.  Fractional share amounts shall be settled in cash.

	This Section 7(b) only applies to Participant who are subject to the U.S. Internal Revenue Code of 1986, as amended.  Any Participant, who makes an election under Section 83(b) in connection with the grant of Restricted Stock Units under this Agreement, shall pay to the Company or a designated Subsidiary, promptly upon request, an amount equal to the taxes the Company determines it is required to withhold under applicable tax laws with respect to the Restricted Stock Units.  The Participant shall promptly notify the Company of any election made pursuant to Section 83(b) of the Code.  A form of such election is attached hereto as Exhibit A.

THE PARTICIPANT ACKNOWLEDGES THAT IT IS THE PARTICIPANT'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON THE PARTICIPANT'S BEHALF.

	The Participant acknowledges that the tax laws and regulations applicable to the Restricted Stock Units and the disposition of the shares following the vesting of Restricted Stock Units are complex and subject to change.

8.Securities Laws Requirements.  The Company shall not be obligated to transfer any shares following the vesting of Restricted Stock Units to the Participant free of a restrictive legend if such transfer, in the opinion of counsel for the Company, would violate the Securities Act of 1933, as amended (the "Securities Act") (or any other federal or state statutes having similar requirements as may be in effect at that time).

9.No Obligation to Register.  The Company shall be under no obligation to register any shares as a result of the vesting of the Restricted Stock Units pursuant to the Securities Act or any other federal or state securities laws.

10.Market Stand-Off.  In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act for such period as the Company or its underwriters may request (such period not to exceed 180 days following the date of the applicable offering), the Participant shall not, directly or indirectly, sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any of the Restricted Stock Units granted under this Agreement or any shares resulting the vesting thereof without the prior written consent of the Company or its underwriters.

11.Protections Against Violations of Agreement.  No purported sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any of the Restricted Stock Units by any holder thereof in violation of the provisions of this Units Agreement or the Certificate of Incorporation or the Bylaws of the Company, will be valid, and the Company will not transfer any shares resulting from the vesting of Restricted Stock Units on its books nor will any of such shares be entitled to vote, nor will any dividends be paid thereon, unless and until there has been full compliance with such provisions to the satisfaction of the Company.  The foregoing restrictions are in addition to and not in lieu of any other remedies, legal or equitable, available to enforce such provisions.

12.Rights as a Stockholder.  The Participant shall not possess the right to vote the shares underlying the Restricted Stock Units until the Restricted Stock Units have vested in accordance with the provisions of this Agreement and the Plan.

13.Survival of Terms.  This Agreement shall apply to and bind the Participant and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.  The terms of Sections 4, 5 and 6 shall expressly survive the forfeiture of the Restricted Stock Units and this Agreement.

14.Notices.  All notices and other communications provided for herein shall be in writing and shall be delivered by hand or sent by certified or registered mail, return receipt requested, postage prepaid, addressed, if to the Participant, to the Participant's attention at the mailing address set forth at the foot of this Agreement (or to such other address as the Participant shall have specified to the Company in writing) and, if to the Company, to the Company's office at 2366 Bernville Road, Reading, Pennsylvania 19605, Attention: General Counsel (or to such other address as the Company shall have specified to the Participant in writing).  All such notices shall be conclusively deemed to be received and shall be effective, if sent by hand delivery, upon receipt, or if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed.

15.Waiver.  The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement.

16.Authority of the Administrator.  The Plan Administrator, which is the Company's Compensation Committee, shall have full authority to interpret and construe the terms of the Plan and this Agreement.  The determination of the administrator as to any such matter of interpretation or construction shall be final, binding and conclusive.

17.Representations.  The Participant has reviewed with his own tax advisors the applicable tax (U.S., foreign, state, and local) consequences of the transactions contemplated by this Agreement.  The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.  The Participant understands that he (and not the Company) shall be responsible for any tax liability that may arise as a result of the transactions contemplated by this Agreement.

18.Investment Representation.  The Participant hereby represents and warrants to the Company that the Participant, by reason of the Participant's business or financial experience (or the business or financial experience of the Participant's professional advisors who are unaffiliated with and who are not compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly), has the capacity to protect the Participant's own interests in connection with the transactions contemplated under this Agreement.

19.Entire Agreement; Governing Law.  This Agreement and the Plan and the other related agreements expressly referred to herein set forth the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same agreement.  The headings of sections and subsections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of this Agreement.  This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania, USA.

20.Severability.  Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable, or enforceable only if modified, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification (if any) to become a part hereof and treated as though contained in this original Agreement.  Moreover, if one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to scope, activity, subject or otherwise so as to be unenforceable, in lieu of severing such unenforceable provision, such provision or provisions shall be construed by the appropriate judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable law as it shall then appear, and such determination by such judicial body shall not affect the enforceability of such provisions or provisions in any other jurisdiction.

21.Amendments; Construction.  The Plan administrator may amend the terms of this Agreement prospectively or retroactively at any time, but no such amendment shall impair the rights of the Participant hereunder without his or her consent.  To the extent the terms of Section 4 above conflict with any prior agreement between the parties related to such subject matter, the terms of Section 4 shall supersede such conflicting terms and control.  Headings to Sections of this Agreement are intended for convenience of reference only, are not part of this Restricted Stock Units and shall have no affect on the interpretation hereof.

23.Acceptance.  The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement.  The Participant has read and understand the terms and provision thereof, and accepts the shares of Restricted Stock Units subject to all the terms and conditions of the Plan and this Agreement.  The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Agreement. 

24.Miscellaneous.

(a)No Rights to Grants or Continued Employment.  The Participant acknowledges that the award granted under this Agreement is not employment compensation nor is it an employment right, and is being granted at the sole discretion of the Company's Compensation Committee.  The Participant shall not have any claim or right to receive grants of Awards under the Plan.  Neither the Plan or this Agreement, nor any action taken or omitted to be taken hereunder or thereunder, shall be deemed to create or confer on the Participant any right to be retained as an employee of the Company or any Subsidiary or other Affiliate thereof, or to interfere with or to limit in any way the right of the Company or any Affiliate or Subsidiary thereof to terminate the employment of the Participant at any time.

(b)No Restriction on Right of Company to Effect Corporate Changes.  Neither the Plan nor this Agreement shall affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred, or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the assets or business of the Company, or any other corporate act or proceeding, whether of a similar character or otherwise.

(c)Assignment.  The Company shall have the right to assign any of its rights and to delegate any of its duties under this Agreement to any of its Affiliates.

THIS AGREEMENT SHALL BE NULL AND VOID AND UNENFORCEABLE BY THE PARTICIPANT UNLESS SIGNED AND DELIVERED TO THE COMPANY NOT LATER THAN THIRTY (30) DAYS SUBSEQUENT TO THE DATE OF GRANT SET FORTH BELOW.

BY SIGNING THIS AGREEMENT, THE PARTICIPANT IS HEREBY CONSENTING TO THE PROCESSING AND TRANSFER OF THE PARTICIPANT'S PERSONAL DATA BY THE COMPANY TO THE EXTENT NECESSARY TO ADMINISTER AND PROCESS THE AWARDS GRANTED UNDER THIS AGREEMENT.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Participant has executed this Agreement, both as of the day and year first above written.
ENERSYS

 

By: _________________

Name:  ___________   

Title:    ___________

 

PARTICIPANT

 

______________________________________

Name: ____________________________

Address: __________________________

               __________________________

Date of Grant: ______________
Number of Shares of Restricted Stock Units: __________________

 

 

EXHIBIT A

FOR U.S. TAXPAYORS ONLY

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer's receipt of the property described below:

1.The name address, taxpayer identification number and taxable year of the undersigned are as follows:

NAME OF TAXPAYER: ______________________________________________________

NAME OF SPOUSE: _________________________________________________________

ADDRESS: _________________________________________________________________ 

IDENTIFICATION NO. OF TAXPAYER: ________________________________________

IDENTIFICATION NUMBER OF SPOUSE: ______________________________________

TAXABLE YEAR: ___________________________________________________________

2.The property with respect to which the election is made is described as follows: _______ shares (the "Shares") of the common stock of EnerSys ("Company").

3.The date on which the property was transferred is: ________________.

4.The property is subject to the following restrictions:

The Shares may not be transferred and are subject to forfeiture under the terms of an agreement between the taxpayer and the Company.  These restrictions lapse upon the satisfaction of certain conditions in such agreement. 

5.The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is:  $ ______________.

6.The amount (if any) paid for such property is:  $ ______________.

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned's receipt of the above-described property.  The transferee of such property is the person performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.

Dated: __________________________________________________________________

Taxpayer

The undersigned spouse of taxpayer joins in this election.

Dated: __________________________________________________________________

Spouse of Taxpayer10.1 Form of Debenture

    Exhibit 10.1

    
 

    NEITHER
      THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE
      HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN
      EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
      “SECURITIES
      ACT”),
      AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS.

     

    NS8
      CORPORATION, INC.

     

    Secured
      Convertible Debenture

     

    
      	
              Issuance
                Date: April ___, 2007

            	
              Original
                Principal Amount: $550,000

            
	
              No.
                CCP-6

            	 

    

    

    FOR
      VALUE RECEIVED, NS8
      CORPORATION, INC.,
      a
      Delaware corporation (the "Company"),
      hereby promises to pay to the order of CORNELL
      CAPITAL PARTNERS, L.P.
      or
      registered assigns (the "Holder")
      the
      amount set out above as the Original Principal Amount (as reduced pursuant
      to
      the terms hereof pursuant to redemption, conversion or otherwise, the
      "Principal")
      when
      due, whether upon the Maturity Date (as defined below), on any Installment
      Date
      with respect to the Installment Amount due on such Installment Date (each,
      as
      defined herein), acceleration, redemption or otherwise (in each case in
      accordance with the terms hereof) and to pay interest ("Interest")
      on any
      outstanding Principal at the applicable Interest Rate from the date set out
      above as the Issuance Date (the "Issuance
      Date")
      until
      the same becomes due and payable, whether upon an Interest Date (as defined
      below), any Installment Date or the Maturity Date or acceleration, conversion,
      redemption or otherwise (in each case in accordance with the terms hereof).
      This
      Secured Convertible Debenture (including all Secured Convertible Debentures
      issued in exchange, transfer or replacement hereof, this "Debenture")
      is one
      of an issue of Secured Convertible Debentures issued pursuant to the Securities
      Purchase Agreement (collectively, the "Debentures"
      and
      such other Senior Convertible Debentures, the "Other
      Debentures").
      Certain capitalized terms used herein are defined in Section 17.

     

    (1)  GENERAL
      TERMS

     

    (a)  Payment
      of Principal.
      On each
      Installment Date, the Company shall pay to the Holder an amount equal to the
      Installment Amount due on such Installment Date in accordance with Section
      3.
On
      the
      Maturity Date, the Company shall pay to the Holder an amount in cash
      representing all outstanding Principal, accrued and unpaid Interest.
The
      "Maturity
      Date"
      shall
      be April _____, 2010, as may be extended at the option of the Holder (i) in
      the
      event that, and for so long as, an Event of Default (as defined below) shall
      have occurred and be continuing on the Maturity Date (as may be extended
      pursuant to this Section 1) or any event shall have occurred and be continuing
      on the Maturity Date (as may be extended pursuant to this Section 1) that with
      the passage of time and the failure to cure would result in an Event of Default.
      Other than as specifically permitted by this Debenture, the Company may not
      prepay or redeem any portion of the outstanding Principal without the prior
      written consent of the Holder.

     

    (b)  Interest.
      Interest shall accrue on the outstanding principal balance hereof at an annual
      rate of fourteen percent (14%) (“Interest
      Rate”).
      Interest shall be payable on the final day of each calendar quarter (or the
      following Business Day, if such day is not a Business Day), in arrears,
      calculated on the basis of a 365-day year and the actual number of days elapsed,
      to the extent permitted by applicable law. Accrued interest shall also be paid
      on the Maturity Date. Interest shall be paid to the Holder or its assignee
      in
      whose name this Debenture is registered on the records of the Company regarding
      registration and transfers of Debentures, in cash.

     

    Security.
      The
      Debenture is
      secured by the
      Amended and Restated Security Agreement (the “Security
      Agreement”)
      of
      even date herewith between the Company and the Buyers, and a Pledge and Escrow
      Agreement (the “Pledge
      Agreement”)
      dated
      November 14, 2005, among the Company, Cornell, and the Escrow Agent (collectively
      the (“Security
      Documents”);
      

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (2)  EVENTS
      OF DEFAULT. 

     

    (a)  An
      “Event
      of Default”,
      wherever used herein, 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):

     

    (i)  the
      Company's failure to pay to the Holder any amount of Principal, Interest, or
      other amounts when and as due under this Debenture (including, without
      limitation, the Company's failure to pay any redemption payments or amounts
      hereunder) or any other Transaction Document;

     

    (ii)  The
      Company or any subsidiary of the Company shall commence, or there shall be
      commenced against the Company or any subsidiary of the Company under any
      applicable bankruptcy or insolvency laws as now or hereafter in effect or any
      successor thereto, or the Company or any subsidiary of the Company 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 of the Company or there is commenced against the Company or any
      subsidiary of the Company any such bankruptcy, insolvency or other proceeding
      which remains undismissed for a period of 61 days; or the Company or any
      subsidiary of the Company is adjudicated insolvent or bankrupt; or any order
      of
      relief or other order approving any such case or proceeding is entered; or
      the
      Company or any subsidiary of the Company suffers any appointment of any
      custodian, private or court appointed receiver or the like for it or any
      substantial part of its property which continues undischarged or unstayed for
      a
      period of sixty one (61) days; or the Company or any subsidiary of the Company
      makes a general assignment for the benefit of creditors; or the Company or
      any
      subsidiary of the Company shall fail to pay, or shall state that it is unable
      to
      pay, or shall be unable to pay, its debts generally as they become due; or
      the
      Company or any subsidiary of the Company shall call a meeting of its creditors
      with a view to arranging a composition, adjustment or restructuring of its
      debts; or the Company or any subsidiary of the Company shall by any act or
      failure to act expressly indicate its consent to, approval of or acquiescence
      in
      any of the foregoing; or any corporate or other action is taken by the Company
      or any subsidiary of the Company for the purpose of effecting any of the
      foregoing;

     

    (iii)  The
      Company or any subsidiary of the Company shall default in any of its obligations
      under any other debenture or 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 or any subsidiary of the Company in an amount
      exceeding $100,000, whether such indebtedness now exists or shall hereafter
      be
      created and such default shall result in such indebtedness becoming or being
      declared due and payable prior to the date on which it would otherwise become
      due and payable;

     

    (iv)  If
      the
      Common Stock is quoted or listed for trading on any of the following and it
      ceases to be so quoted or listed for trading and shall not again be quoted
      or
      listed for trading on any Primary Market within five (5) Trading Days of such
      delisting: (a) the American Stock Exchange, (b) New York Stock Exchange, (c)
      the
      Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC
      Bulletin Board (“OTCBB”) (each, a “Primary Market”);

     

    (v)  The
      Company or any subsidiary of the Company shall be a party to any Change of
      Control Transaction (as defined in Section 6) unless in connection with such
      Change of Control Transaction this Debenture is retired; 

     

    (vi)  The
      Company shall fail to file the Underlying Shares Registration Statement with
      the
      Commission, or the Underlying Shares Registration Statement shall not have
      been
      declared effective by the Commission, in each case within thirty (30) days
      of
      the periods set forth in the Registration Rights Agreement (“Registration
      Rights Agreement”)
      dated
      April ___, 2007 among the Company and each Buyer listed on Schedule I attached
      thereto, or, while the Underlying Shares Registration Statement is required
      to
      be maintained effective pursuant to the terms of the Investor Registration
      Rights Agreement, the effectiveness of the Underlying Shares Registration
      Statement lapses for any reason (including, without limitation, the issuance
      of
      a stop order) or is unavailable to the Holder for sale of all of the Holder’s
      Registrable Securities (as defined in the Investor Registration Rights
      Agreement) in accordance with the terms of the Investor Registration Rights
      Agreement, and such lapse or unavailability continues for a period of more
      than
      ten (10) consecutive Trading Days or for more than an aggregate of twenty (20)
      days in any 365-day period (which need not be consecutive);

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (vii)  the
      Company's (A) failure to cure a Conversion Failure by delivery of the required
      number of shares of Common Stock within five (5) Business Days after the
      applicable Conversion Failure or (B) notice, written or oral, to any holder
      of
      the Debentures, including by way of public announcement, at any time, of its
      intention not to comply with a request for conversion of any Debentures into
      shares of Common Stock that is tendered in accordance with the provisions of
      the
      Debentures, other than pursuant to Section 4(c);

     

    (viii)  The
      Company shall fail for any reason to deliver the payment in cash pursuant to
      a
      Buy-In (as defined herein) within three (3) Business Days after such payment
      is
      due; 

     

    (ix)  The
      Company shall fail to observe or perform any other covenant, agreement or
      warranty contained in, or otherwise commit any breach or default of any
      provision of this Debenture (except as may be covered by Section 2(a)(i) through
      2(a)(vii) hereof) or any Transaction Document (as defined in Section 16) which
      is not cured within the time prescribed.

     

    (x)  any
      Event
      of Default (as defined in the Other Debentures) occurs with respect to any
      Other
      Debentures.

     

    (b)  During
      the time that any portion of this Debenture is outstanding, if any Event of
      Default has occurred, the full unpaid 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; provided however, the Holder may request (but shall have no
      obligation to request) payment of such amounts in Common Stock of the Company.
      Furthermore, in addition to any other remedies, the Holder shall have the right
      (but not the obligation) to convert this Debenture at any time after (x) an
      Event of Default or (y) the Maturity Date at the lower of the Conversion Price
      or the Company Conversion Price. The Holder need not provide and the Company
      hereby waives any presentment, demand, protest or other notice of any kind,
      (other than required notice of conversion) 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. No such rescission or annulment shall affect any subsequent
      Event of Default or impair any right consequent thereon. 

     

    (3)  COMPANY
      INSTALLMENT CONVERSION OR REDEMPTION.
      

     

    (a)  General.
      On each
      applicable Installment Date, the Company shall pay to the Holder of this
      Debenture the Installment Amount due on such date by converting such Installment
      Amount into shares of Common Stock of the Company, provided that there is not
      then an Equity Conditions Failure, in accordance with this Section 3 (a
      "Company
      Conversion");
      provided, however, that the Company may, at its option following notice to
      the
      Holder, redeem such Installment Amount (a "Company
      Redemption")
      or by
      any combination of a Company Conversion and a Company Redemption so long as
      all
      of the outstanding applicable Installment Amount shall be converted and/or
      redeemed by the Company on the applicable Installment Date, subject to the
      provisions of this Section 3. On or prior to the date which is the fifth
      (5th)
      Trading
      Day prior to each Installment Date (each, an "Installment
      Notice Due Date"),
      the
      Company shall deliver written notice (each, a "Company
      Installment Notice"),
      to
      the Holder which Company Installment Notice shall (i) either (A) confirm that
      the applicable Installment Amount of the Holder’s Debenture shall be converted
      in whole pursuant to a Company Conversion or (B) (1) state that the Company
      elects to redeem, or is required to redeem in accordance with the provisions
      of
      the Debenture, in whole or in part, the applicable Installment Amount pursuant
      to a Company Redemption and (2) specify the portion (including Interest) which
      the Company elects or is required to redeem pursuant to a Company Redemption
      (such amount to be redeemed, the "Company
      Redemption Amount")
      and
      the portion (including Interest), if any, that the Company elects to convert
      pursuant to a Company Conversion (such amount a "Company
      Conversion Amount")
      which
      amounts when added together, must equal the applicable Installment Amount and
      (ii) if the Installment Amount is to be paid, in whole or in part, pursuant
      to a
      Company Conversion, certify that there is not then an Equity Conditions Failure
      as of the date of the Company Installment Notice. Each Company Installment
      Notice shall be irrevocable. If the Company does not timely deliver a Company
      Installment Notice in accordance with this Section 3, then the Company shall
      be
      deemed to have delivered an irrevocable Company Installment Notice confirming
      a
      Company Conversion and shall be deemed to have certified that there is not
      then
      an Equity Conditions Failure in connection with any such conversion. The Company
      Conversion Amount (whether set forth in the Company Installment Notice or by
      operation of this Section 3) shall be converted in accordance with Section
      3(b)
      and the Company Redemption Amount shall be paid in accordance with Section
      3(c).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)  Mechanics
      of Company Conversion.
      Subject
      to Section 3(d), if the Company delivers a Company Installment Notice and
      elects, or is deemed to have elected, in whole or in part, a Company Conversion
      in accordance with Section 3(a), then the applicable Company Conversion Amount,
      if any, which remains outstanding as of the applicable Installment Date shall
      be
      converted as of the applicable Installment Date by converting on such
      Installment Date such Company Conversion Amount at the Company Conversion Price;
      provided that the Equity Conditions are then satisfied (or waived in writing
      by
      the Holder) on such Installment Date and that the Holder Pro Rata Amount of
      the
      Installment Volume Limitation is not exceeded. If the Equity Conditions are
      not
      satisfied (or waived in writing by the Holder) on such Installment Date or
      the
      Holder Pro Rata Amount of the Installment Volume Limitation is exceeded, then
      at
      the option of the Holder designated in writing to the Company, the Holder may
      require the Company to do any one or more of the following: (i) the Company
      shall redeem all or any part of the unconverted Company Conversion Amount
      designated by the Holder (such designated amount is referred to as the
      "Unconverted
      Redemption Amount")
      and
      the Company shall pay to the Holder within three (3) days of such Installment
      Date, by wire transfer of immediately available funds, an amount in cash equal
      to such Unconverted Redemption Amount, and/or (ii) the Company Conversion shall
      be null and void with respect to all or any part of the unconverted Company
      Conversion Amount designated by the Holder and the Holder shall be entitled
      to
      all the rights of a holder of this Debenture with respect to such designated
      amount of the Company Conversion Amount; provided, however, that the Conversion
      Price for such unconverted Company Conversion Amount shall thereafter be
      adjusted to equal the lesser of (A) the Company Conversion Price as in effect
      on
      the date on which the Holder voided the Company Conversion and (B) the Company
      Conversion Price as in effect on the date on which the Holder delivers a
      Conversion Notice relating thereto. If the Company fails to redeem any
      Unconverted Redemption Amount by the third (3rd)
      day
      following the applicable Installment Date, then the Holder shall have all rights
      under this Debenture (including, without limitation, such failure constituting
      an Event of Default). Notwithstanding anything to the contrary in this Section
      3(b), but subject to Section 4(c)(i), until the Company delivers Common Stock
      representing the Company Conversion Amount to the Holder, the Company Conversion
      Amount may be converted by the Holder into Common Stock pursuant to Section
      4.
      In the event that the Holder elects to convert the Company Conversion Amount
      prior to the applicable Installment Date as set forth in the immediately
      preceding sentence, the Company Conversion Amount so converted shall be deducted
      from the Installment Amounts relating to the applicable Installment Dates as
      set
      forth in the applicable Conversion Notice.

     

    (c)  Mechanics
      of Company Redemption.
      If the
      Company elects a Company Redemption in accordance with Section 3(a), then the
      Company Redemption Amount, if any, which is to be paid to the Holder on the
      applicable Installment Date shall be redeemed by the Company on such Installment
      Date, and the Company shall pay to the Holder on such Installment Date, by
      wire
      transfer of immediately available funds, in an amount in cash (the "Company
      Installment Redemption Price")
      equal
      to 120% of the Principal portion of the Company Redemption Amount plus accrued
      and unpaid Interest. If the Company fails to redeem the Company Redemption
      Amount on the applicable Installment Date by payment of the Company Installment
      Redemption Price on such date, then at the option of the Holder designated
      in
      writing to the Company (any such designation, "Conversion
      Notice"
      for
      purposes of this Debenture), the Holder may require the Company to convert
      all
      or any part of the Company Redemption Amount into shares of Common Stock of
      the
      Company at the Company Conversion Price. Conversions required by this Section
      3(c) shall be made in accordance with the provisions of Section 4(b).
      Notwithstanding anything to the contrary in this Section 3(c), but subject
      to
      Section 4(c)(i), until the Company Installment Redemption Price (together with
      any interest thereon) is paid in full, the Company Redemption Amount (together
      with any interest thereon) may be converted, in whole or in part, by the Holder
      into Common Stock pursuant to Section 4. In the event the Holder elects to
      convert all or any portion of the Company Redemption Amount prior to the
      applicable Installment Date as set forth in the immediately preceding sentence,
      the Company Redemption Amount so converted shall be deducted from the
      Installment Amounts relating to the applicable Installment Dates as set forth
      in
      the applicable Conversion Notice.

     

    (d)  Deferred
      Installment Amount.
      Notwithstanding any provision of this Section 3 to the contrary, the Holder
      may,
      at its option and in its sole discretion, deliver a written notice to the
      Company at least two (2) days prior to any Installment Notice Due Date electing
      to have the payment of all or any portion of an Installment Amount payable
      on
      the next Installment Date deferred to the Maturity Date. Any amount deferred
      to
      the Maturity Date pursuant to this Section 3(d) shall continue to accrue
      Interest through the Maturity Date.

     

    (e)  (RESERVED) 

     

    (f)  Company’s
      Additional Cash Redemption.
      The
      Company at its option shall have the right to redeem (“Optional
      Redemption”)
      a
      portion or all amounts outstanding under this Debenture in addition to any
      Installment Amount prior to the Maturity Date provided that as of the date
      of
      the Holder’s receipt of a Redemption Notice (as defined herein) (i) the Closing
      Bid Price is less than the Conversion Price, (ii) the Underlying Shares
      Registration Statement is effective, and (iii) no Event of Default has occurred.
      The Company shall pay an amount equal to the principal amount being redeemed
      plus a redemption premium (“Redemption
      Premium”)
      equal
      to twenty percent (20%) of the Principal amount being redeemed, and accrued
      Interest, (collectively referred to as the “Company
      Additional Redemption
      Amount”).
      In
      order to make a redemption pursuant to this Section, the Company shall first
      provide written notice to the Holder of its intention to make a redemption
      (the
“Redemption
      Notice”)
      setting forth the amount of Principal it desires to redeem. After receipt of
      the
      Redemption Notice the Holder shall have three (3) Business Days to elect to
      convert all or any portion of this Debenture, subject to the limitations set
      forth in Section 4(b). On the fourth (4th) Business Day after the Redemption
      Notice, the Company shall deliver to the Holder the Company Additional
      Redemption Amount with respect to the Principal amount redeemed after giving
      effect to conversions effected during the three (3) Business Day
      period.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (4)  CONVERSION
      OF DEBENTURE.This
      Debenture shall be convertible into shares of the Company's Common Stock, on
      the
      terms and conditions set forth in this Section 4.

     

    (a)  Conversion
      Right.
      Subject
      to the provisions of Section 4(c), at any time or times on or after the Issuance
      Date, the Holder shall be entitled to convert any portion of the outstanding
      and
      unpaid Conversion Amount (as defined below) into fully paid and nonassessable
      shares of Common Stock in accordance with Section 4(b), at the Conversion Rate
      (as defined below). The number of shares of Common Stock issuable upon
      conversion of any Conversion Amount pursuant to this Section 4(a) shall be
      determined by dividing (x) such Conversion Amount by (y) the Conversion Price
      (the "Conversion
      Rate").
      The
      Company shall not issue any fraction of a share of Common Stock upon any
      conversion. If the issuance would result in the issuance of a fraction of a
      share of Common Stock, the Company shall round such fraction of a share of
      Common Stock up to the nearest whole share. The Company shall pay any and all
      transfer, stamp and similar taxes that may be payable with respect to the
      issuance and delivery of Common Stock upon conversion of any Conversion Amount.
      

     

    (i)  "Conversion
      Amount"
      means
      the portion of the Principal to be converted, redeemed or otherwise with respect
      to which this determination is being made.

     

    (ii)  "Conversion
      Price"
      means,
      as of any Conversion Date (as defined below) or other date of determination,
      $0.02,
      subject to adjustment as provided herein (the “Conversion
      Price”).
      

     

    (b)  Mechanics
      of Conversion.

     

    (i)  Optional
      Conversion.
      To
      convert any Conversion Amount into shares of Common Stock on any date (a
      "Conversion
      Date"),
      the
      Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
      on or
      prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice
      of conversion in the form attached hereto as Exhibit
      I
      (the
      "Conversion
      Notice")
      to the
      Company and (B) if required by Section 4(b)(iv), surrender this Debenture to
      a
      nationally recognized overnight delivery service for delivery to the Company
      (or
      an indemnification undertaking reasonably satisfactory to the Company with
      respect to this Debenture in the case of its loss, theft or destruction). On
      or
      before the third Business Day following the date of receipt of a Conversion
      Notice (the "Share
      Delivery Date"),
      the
      Company shall (X) if legends are not required to be placed on certificates
      of
      Common Stock pursuant to the Securities Purchase Agreement and provided that
      the
      Transfer Agent is participating in the Depository Trust Company's ("DTC")
      Fast
      Automated Securities Transfer Program, credit such aggregate number of shares
      of
      Common Stock to which the Holder shall be entitled to the Holder's or its
      designee's balance account with DTC through its Deposit Withdrawal Agent
      Commission system or (Y) if the Transfer Agent is not participating in the
      DTC
      Fast Automated Securities Transfer Program, issue and deliver to the address
      as
      specified in the Conversion Notice, a certificate, registered in the name of
      the
      Holder or its designee, for the number of shares of Common Stock to which the
      Holder shall be entitled which certificates shall not bear any restrictive
      legends unless required pursuant to Section 2(g) of the Securities Purchase
      Agreement. If this Debenture is physically surrendered for conversion and the
      outstanding Principal of this Debenture is greater than the Principal portion
      of
      the Conversion Amount being converted, then the Company shall as soon as
      practicable and in no event later than three (3) Business Days after receipt
      of
      this Debenture and at its own expense, issue and deliver to the holder a new
      Debenture representing the outstanding Principal not converted. The Person
      or
      Persons entitled to receive the shares of Common Stock issuable upon a
      conversion of this Debenture shall be treated for all purposes as the record
      holder or holders of such shares of Common Stock upon the transmission of a
      Conversion Notice. In the event of a partial conversion of this Debenture
      pursuant hereto, the principal amount converted shall be deducted from the
      Installment Amounts relating to the Installment Dates as set forth in the
      Conversion Notice.

     

    (ii)  Company's
      Failure to Timely Convert.
      If
      within three (3) Trading Days after the Company's receipt of the facsimile
      copy
      of a Conversion Notice the Company shall fail to issue and deliver a certificate
      to the Holder or credit the Holder's balance account with DTC for the number
      of
      shares of Common Stock to which the Holder is entitled upon such holder's
      conversion of any Conversion Amount (a "Conversion
      Failure"),
      and
      if on or after such Trading Day the Holder purchases (in an open market
      transaction or otherwise) Common Stock to deliver in satisfaction of a sale
      by
      the Holder of Common Stock issuable upon such conversion that the Holder
      anticipated receiving from the Company (a "Buy-In"),
      then
      the Company shall, within three (3) Business Days after the Holder's request
      and
      in the Holder's discretion, either (i) pay cash to the Holder in an amount
      equal
      to the Holder's total purchase price (including brokerage commissions and other
      out of pocket expenses, if any) for the shares of Common Stock so purchased
      (the
"Buy-In
      Price"),
      at
      which point the Company's obligation to deliver such certificate (and to issue
      such Common Stock) shall terminate, or (ii) promptly honor its obligation to
      deliver to the Holder a certificate or certificates representing such Common
      Stock and pay cash to the Holder in an amount equal to the excess (if any)
      of
      the Buy-In Price over the product of (A) such number of shares of Common Stock,
      times (B) the Closing Bid Price on the Conversion Date.

     

    (iii)  Book-Entry.
      Notwithstanding anything to the contrary set forth herein, upon conversion
      of
      any portion of this Debenture in accordance with the terms hereof, the Holder
      shall not be required to physically surrender this Debenture to the Company
      unless (A) the full Conversion Amount represented by this Debenture is being
      converted or (B) the Holder has provided the Company with prior written notice
      (which notice may be included in a Conversion Notice) requesting reissuance
      of
      this Debenture upon physical surrender of this Debenture. The Holder and the
      Company shall maintain records showing the Principal and Interest converted
      and
      the dates of such conversions or shall use such other method, reasonably
      satisfactory to the Holder and the Company, so as not to require physical
      surrender of this Debenture upon conversion.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)  Limitations
      on Conversions.

     

    (i)  Beneficial
      Ownership.
      The
      Company shall not effect any conversions of this Debenture and the Holder shall
      not have the right to convert any portion of this Debenture or receive shares
      of
      Common Stock as payment of interest hereunder to the extent that after giving
      effect to such conversion or receipt of such interest payment, the Holder,
      together with any affiliate thereof, would beneficially own (as determined
      in
      accordance with Section 13(d) of the Exchange Act and the rules promulgated
      thereunder) in excess of 4.99% of the number of shares of Common Stock
      outstanding immediately after giving effect to such conversion or receipt of
      shares as payment of interest. Since the Holder will not be obligated to report
      to the Company the number of shares of Common Stock it may hold at the time
      of a
      conversion hereunder, unless the conversion at issue would result in the
      issuance of shares of Common Stock in excess of 4.99% of the then outstanding
      shares of Common Stock without regard to any other shares which may be
      beneficially owned by the Holder or an affiliate thereof, the Holder shall
      have
      the authority and obligation to determine whether the restriction contained
      in
      this Section will limit any particular conversion hereunder and to the extent
      that the Holder determines that the limitation contained in this Section
      applies, the determination of which portion of the principal amount of this
      Debenture is convertible shall be the responsibility and obligation of the
      Holder. If the Holder has delivered a Conversion Notice for a principal amount
      of this Debenture that, without regard to any other shares that the Holder
      or
      its affiliates may beneficially own, would result in the issuance in excess
      of
      the permitted amount hereunder, the Company shall notify the Holder of this
      fact
      and shall honor the conversion for the maximum principal amount permitted to
      be
      converted on such Conversion Date in accordance with Section 4(a) and, any
      principal amount tendered for conversion in excess of the permitted amount
      hereunder shall remain outstanding under this Debenture. The provisions of
      this
      Section may be waived by a Holder (but only as to itself and not to any other
      Holder) upon not less than 65 days prior notice to the Company. Other Holders
      shall be unaffected by any such waiver.

     

    (d)  Other
      Provisions.

     

    (i)  The
      Company shall at all times reserve and keep available out of its authorized
      Common Stock the full number of shares of Common Stock issuable upon conversion
      of all outstanding amounts under this Debenture; and within three (3) Business
      Days following the receipt by the Company of a Holder's notice that such minimum
      number of Underlying Shares is not so reserved, the Company shall promptly
      reserve a sufficient number of shares of Common Stock to comply with such
      requirement.

     

    (ii)  All
      calculations under this Section 4 shall be rounded to the nearest $0.0001 or
      whole share.

     

    (iii)  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, not less
      than such number of shares of the Common Stock as shall (subject to any
      additional requirements of the Company as to reservation of such shares set
      forth in this Debenture or in the Transaction Documents) be issuable (taking
      into account the adjustments and restrictions set forth herein) 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, nonassessable and, if the Underlying Shares Registration
      Statement has been declared effective under the Securities Act, registered
      for
      public sale in accordance with such Underlying Shares Registration
      Statement.

     

    (iv)  Nothing
      herein shall limit a Holder's right to pursue actual damages or declare an
      Event
      of Default pursuant to Section 2 herein for the Company 's failure to deliver
      certificates representing shares of Common Stock upon conversion within the
      period specified herein and such Holder shall have the right to pursue all
      remedies available to it at law or in equity including, without limitation,
      a
      decree of specific performance and/or injunctive relief, in each case without
      the need to post a bond or provide other security. The exercise of any such
      rights shall not prohibit the Holder from seeking to enforce damages pursuant
      to
      any other Section hereof or under applicable law. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (5)  Adjustments
      to Conversion Price

     

    (a)  Adjustment
      of Conversion Price upon Issuance of Common Stock.
      If the
      Company, at any time while this Debenture is outstanding, issues or sells,
      or in
      accordance with this Section 5(a) is deemed to have issued or sold, any shares
      of Common Stock, excluding shares of Common Stock deemed to have been issued
      or
      sold by the Company in connection with any Excluded Securities, for a
      consideration per share (the “New
      Issuance Price”)
      less
      than a price equal to the Conversion Price in effect immediately prior to such
      issue or sale (such price the "Applicable
      Price")
      (the
      foregoing a "Dilutive
      Issuance"),
      then
      immediately after such Dilutive Issuance the Conversion Price then in effect
      shall be reduced to an amount equal to the New Issuance Price. For purposes
      of
      determining the adjusted Conversion Price under this Section 5(a), the following
      shall be applicable:

     

    (i)  Issuance
      of Options.
      If the
      Company in any manner grants or sells any Options and the lowest price per
      share
      for which one share of Common Stock is issuable upon the exercise of any such
      Option or upon conversion or exchange or exercise of any Convertible Securities
      issuable upon exercise of such Option is less than the Applicable Price, then
      such share of Common Stock shall be deemed to be outstanding and to have been
      issued and sold by the Company at the time of the granting or sale of such
      Option for such price per share. For purposes of this Section, the "lowest
      price
      per share for which one share of Common Stock is issuable upon the exercise
      of
      any such Option or upon conversion or exchange or exercise of any Convertible
      Securities issuable upon exercise of such Option" shall be equal to the sum
      of
      the lowest amounts of consideration (if any) received or receivable by the
      Company with respect to any one share of Common Stock upon granting or sale
      of
      the Option, upon exercise of the Option and upon conversion or exchange or
      exercise of any Convertible Security issuable upon exercise of such Option.
      No
      further adjustment of the Conversion Price shall be made upon the actual
      issuance of such share of Common Stock or of such Convertible Securities upon
      the exercise of such Options or upon the actual issuance of such Common Stock
      upon conversion or exchange or exercise of such Convertible
      Securities.

     

    (ii)  Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities and the lowest
      price per share for which one share of Common Stock is issuable upon such
      conversion or exchange or exercise thereof is less than the Applicable Price,
      then such share of Common Stock shall be deemed to be outstanding and to have
      been issued and sold by the Company at the time of the issuance or sale of
      such
      Convertible Securities for such price per share. For the purposes of this
      Section, the "lowest price per share for which one share of Common Stock is
      issuable upon such conversion or exchange or exercise" shall be equal to the
      sum
      of the lowest amounts of consideration (if any) received or receivable by the
      Company with respect to any one share of Common Stock upon the issuance or
      sale
      of the Convertible Security and upon the conversion or exchange or exercise
      of
      such Convertible Security. No further adjustment of the Conversion Price shall
      be made upon the actual issuance of such share of Common Stock upon conversion
      or exchange or exercise of such Convertible Securities, and if any such issue
      or
      sale of such Convertible Securities is made upon exercise of any Options for
      which adjustment of the Conversion Price had been or are to be made pursuant
      to
      other provisions of this Section, no further adjustment of the Conversion Price
      shall be made by reason of such issue or sale.

     

    (iii)  Change
      in Option Price or Rate of Conversion.
      If the
      purchase price provided for in any Options, the additional consideration, if
      any, payable upon the issue, conversion, exchange or exercise of any Convertible
      Securities, or the rate at which any Convertible Securities are convertible
      into
      or exchangeable or exercisable for Common Stock changes at any time, the
      Conversion Price in effect at the time of such change shall be adjusted to
      the
      Conversion Price which would have been in effect at such time had such Options
      or Convertible Securities provided for such changed purchase price, additional
      consideration or changed conversion rate, as the case may be, at the time
      initially granted, issued or sold. For purposes of this Section, if the terms
      of
      any Option or Convertible Security that was outstanding as of the Issuance
      Date
      are changed in the manner described in the immediately preceding sentence,
      then
      such Option or Convertible Security and the Common Stock deemed issuable upon
      exercise, conversion or exchange thereof shall be deemed to have been issued
      as
      of the date of such change. No adjustment shall be made if such adjustment
      would
      result in an increase of the Conversion Price then in effect.

     

    (iv)  Calculation
      of Consideration Received.
      In case
      any Option is issued in connection with the issue or sale of other securities
      of
      the Company, together comprising one integrated transaction in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for the difference of (x) the aggregate
      fair
      market value of such Options and other securities issued or sold in such
      integrated transaction, less (y) the fair market value of the securities other
      than such Option, issued or sold in such transaction and the other securities
      issued or sold in such integrated transaction will be deemed to have been issued
      or sold for the balance of the consideration received by the Company. If any
      Common Stock, Options or Convertible Securities are issued or sold or deemed
      to
      have been issued or sold for cash, the consideration received therefor will
      be
      deemed to be the gross amount raised by the Company; provided, however, that
      such gross amount is not greater than 110% of the net amount received by the
      Company therefor. If any Common Stock, Options or Convertible Securities are
      issued or sold for a consideration other than cash, the amount of the
      consideration other than cash received by the Company will be the fair value
      of
      such consideration, except where such consideration consists of securities,
      in
      which case the amount of consideration received by the Company will be the
      Closing Bid Price of such securities on the date of receipt. If any Common
      Stock, Options or Convertible Securities are issued to the owners of the
      non-surviving entity in connection with any merger in which the Company is
      the
      surviving entity, the amount of consideration therefor will be deemed to be
      the
      fair value of such portion of the net assets and business of the non-surviving
      entity as is attributable to such Common Stock, Options or Convertible
      Securities, as the case may be. The fair value of any consideration other than
      cash or securities will be determined jointly by the Company and the Holder.
      If
      such parties are unable to reach agreement within ten (10) days after the
      occurrence of an event requiring valuation (the "Valuation
      Event"),
      the
      fair value of such consideration will be determined within five (5) Business
      Days after the tenth (10th)
      day
      following the Valuation Event by an independent, reputable appraiser jointly
      selected by the Company and the Holder. The determination of such appraiser
      shall be deemed binding upon all parties absent manifest error and the fees
      and
      expenses of such appraiser shall be borne by the Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (v)  Record
      Date.
      If the
      Company takes a record of the holders of Common Stock for the purpose of
      entitling them (A) to receive a dividend or other distribution payable in Common
      Stock, Options or in Convertible Securities or (B) to subscribe for or purchase
      Common Stock, Options or Convertible Securities, then such record date will
      be
      deemed to be the date of the issue or sale of the Common Stock deemed to have
      been issued or sold upon the declaration of such dividend or the making of
      such
      other distribution or the date of the granting of such right of subscription
      or
      purchase, as the case may be.

     

    (b)  Adjustment
      of Conversion Price upon Subdivision or Combination of Common
      Stock.
      If the
      Company, at any time while this Debenture is outstanding, shall (a) pay a
      stock dividend or otherwise make a distribution or distributions on shares
      of
      its Common Stock or any other equity or equity equivalent securities payable
      in
      shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
      a
      larger number of shares, (c) combine (including by way of reverse stock split)
      outstanding shares of Common Stock into a smaller number of shares, or (d)
      issue
      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 before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding 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.

     

    (c)  Purchase
      Rights.
      If at
      any time the Company grants, issues or sells any Options, Convertible Securities
      or rights to purchase stock, warrants, securities or other property pro rata
      to
      the record holders of any class of Common Stock (the "Purchase
      Rights"),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of shares of Common Stock acquirable
      upon complete conversion of this Debenture (without taking into account any
      limitations or restrictions on the convertibility of this Debenture) immediately
      before the date on which a record is taken for the grant, issuance or sale
      of
      such Purchase Rights, or, if no such record is taken, the date as of which
      the
      record holders of Common Stock are to be determined for the grant, issue or
      sale
      of such Purchase Rights.

     

    (d)  Other
      Events.
      If any
      event occurs of the type contemplated by the provisions of this Section 4 but
      not expressly provided for by such provisions (including, without limitation,
      the granting of stock appreciation rights, phantom stock rights or other rights
      with equity features), then the Company's Board of Directors will make an
      appropriate adjustment in the Conversion Price so as to protect the rights
      of
      the Holder under this Debenture; provided that no such adjustment will increase
      the Conversion Price as otherwise determined pursuant to this Section
      5.

     

    (e)  Other
      Corporate Events.
      In
      addition to and not in substitution for any other rights hereunder, prior to
      the
      consummation of any Fundamental Transaction pursuant to which holders of shares
      of Common Stock are entitled to receive securities or other assets with respect
      to or in exchange for shares of Common Stock (a "Corporate
      Event"),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon a conversion of this Debenture, at
      the
      Holder's option, (i) in addition to the shares of Common Stock receivable upon
      such conversion, such securities or other assets to which the Holder would
      have
      been entitled with respect to such shares of Common Stock had such shares of
      Common Stock been held by the Holder upon the consummation of such Corporate
      Event (without taking into account any limitations or restrictions on the
      convertibility of this Debenture) or (ii) in lieu of the shares of Common Stock
      otherwise receivable upon such conversion, such securities or other assets
      received by the holders of shares of Common Stock in connection with the
      consummation of such Corporate Event in such amounts as the Holder would have
      been entitled to receive had this Debenture initially been issued with
      conversion rights for the form of such consideration (as opposed to shares
      of
      Common Stock) at a conversion rate for such consideration commensurate with
      the
      Conversion Rate. Provision made pursuant to the preceding sentence shall be
      in a
      form and substance satisfactory to the Required Holders. The provisions of
      this
      Section shall apply similarly and equally to successive Corporate Events and
      shall be applied without regard to any limitations on the conversion or
      redemption of this Debenture.

     

    (f)  Whenever
      the Conversion Price is adjusted pursuant to Section 5 hereof, the Company
      shall
      promptly mail to the Holder a notice setting forth the Conversion Price after
      such adjustment and setting forth a brief statement of the facts requiring
      such
      adjustment.

     

    (g)  In
      case
      of any (1) merger or consolidation of the Company or any subsidiary of the
      Company with or into another Person, or (2) sale by the Company or any
      subsidiary of the Company of more than one-half of the assets of the Company
      in
      one or a series of related transactions, a Holder shall have the right to (A)
      exercise any rights under Section 2(b), (B) convert the aggregate amount of
      this
      Debenture then outstanding into the shares of stock and other securities, cash
      and property receivable upon or deemed to be held by holders of Common Stock
      following such merger, consolidation or sale, and such Holder shall be entitled
      upon such event or series of related events to receive such amount of
      securities, cash and property as the shares of Common Stock into which such
      aggregate principal amount of this Debenture could have been converted
      immediately prior to such merger, consolidation or sales would have been
      entitled, or (C) in the case of a merger or consolidation, require the surviving
      entity to issue to the Holder a convertible Debenture with a principal amount
      equal to the aggregate principal amount of this Debenture then held by such
      Holder, plus all accrued and unpaid interest and other amounts owing thereon,
      which such newly issued convertible Debenture shall have terms identical
      (including with respect to conversion) to the terms of this Debenture, and
      shall
      be entitled to all of the rights and privileges of the Holder of this Debenture
      set forth herein and the agreements pursuant to which this Debentures were
      issued. In the case of clause (C), the conversion price applicable for the
      newly
      issued shares of convertible preferred stock or convertible Debentures shall
      be
      based upon the amount of securities, cash and property that each share of Common
      Stock would receive in such transaction and the Conversion Price in effect
      immediately prior to the effectiveness or closing date for such transaction.
      The
      terms of any such merger, sale or consolidation shall include such terms so
      as
      to continue to give the Holder the right to receive the securities, cash and
      property set forth in this Section upon any conversion or redemption following
      such event. This provision shall similarly apply to successive such
      events.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (6)  REISSUANCE
      OF THIS DEBENTURE.

     

    (a)  Transfer.
      If this
      Debenture is to be transferred, the Holder shall surrender this Debenture to
      the
      Company, whereupon the Company will, subject to the satisfaction of the transfer
      provisions of the Securities Purchase Agreement, forthwith issue and deliver
      upon the order of the Holder a new Debenture (in accordance with Section 5(d)),
      registered in the name of the registered transferee or assignee, representing
      the outstanding Principal being transferred by the Holder and, if less then
      the
      entire outstanding Principal is being transferred, a new Debenture (in
      accordance with Section 5(d)) to the Holder representing the outstanding
      Principal not being transferred. The Holder and any assignee, by acceptance
      of
      this Debenture, acknowledge and agree that, by reason of the provisions of
      Section 4(b)(iii) following conversion or redemption of any portion of this
      Debenture, the outstanding Principal represented by this Debenture may be less
      than the Principal stated on the face of this Debenture.

     

    (b)  Lost,
      Stolen or Mutilated Debenture.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Debenture, and, in the case
      of
      loss, theft or destruction, of any indemnification undertaking by the Holder
      to
      the Company in customary form and, in the case of mutilation, upon surrender
      and
      cancellation of this Debenture, the Company shall execute and deliver to the
      Holder a new Debenture (in accordance with Section 5(d)) representing the
      outstanding Principal.

     

    (c)  Debenture
      Exchangeable for Different Denominations.
      This
      Debenture is exchangeable, upon the surrender hereof by the Holder at the
      principal office of the Company, for a new Debenture or Debentures (in
      accordance with Section 5(d)) representing in the aggregate the outstanding
      Principal of this Debenture, and each such new Debenture will represent such
      portion of such outstanding Principal as is designated by the Holder at the
      time
      of such surrender.

     

    (d)  Issuance
      of New Debentures.
      Whenever the Company is required to issue a new Debenture pursuant to the terms
      of this Debenture, such new Debenture (i) shall be of like tenor with this
      Debenture, (ii) shall represent, as indicated on the face of such new Debenture,
      the Principal remaining outstanding (or in the case of a new Debenture being
      issued pursuant to Section 5(a) or Section 5(c), the Principal designated by
      the
      Holder which, when added to the principal represented by the other new
      Debentures issued in connection with such issuance, does not exceed the
      Principal remaining outstanding under this Debenture immediately prior to such
      issuance of new Debentures), (iii) shall have an issuance date, as indicated
      on
      the face of such new Debenture, which is the same as the Issuance Date of this
      Debenture, (iv) shall have the same rights and conditions as this Debenture,
      and
      (v) shall represent accrued and unpaid Interest from the Issuance
      Date.

     

    (7)  NOTICES.
      Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms hereof 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 confirmation of transmission is mechanically or
      electronically generated and kept on file by the sending party); or (iii) one
      (1) Trading 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, to:

            	
              NS8
                Corporation

            
	 	
              600
                University Street - Suite 1525

            
	 	
              Seattle,
                WA 98101

            
	 	
              Attention: Anthony
                Alda

            
	 	
              Telephone: (604)
                677-6994

            
	 	
              Facsimile: (604)
                677-7011

            
	 	 
	
              With
                a copy to: 

            	
              Sichenzia
                Ross Friedman Ference LLP

            
	 	
              1065
                Avenue of the Americas, 21st
                Floor

            
	 	
              New
                York, New York 10018

            
	 	
              Telephone: (212)
                930-9700

            
	 	
              Facsimile: (212)
                930-9725

            
	 	 

    

    

    
      	
              If
                to the Holder:

            	
              Cornell
                Capital Partners, LP

            
	 	
              101
                Hudson Street, Suite 3700

            
	 	
              Jersey
                City, NJ 07303

            
	 	
              Attention: Mark
                Angelo

            
	 	
              Telephone: (201)
                985-8300

            
	 	 
	
              With
                a copy to:

            	
              Troy
                Rillo, David Gonzalez, Esq. 

            
	 	
              101
                Hudson Street - Suite 3700

            
	 	
              Jersey
                City, NJ 07302

            
	 	
              Telephone: (201)
                985-8300

            
	 	
              Facsimile: (201)
                985-8266

            
	 	 

    

    

    or
      at
      such other address and/or facsimile number and/or to the attention of such
      other
      person as the recipient party has specified by written notice given to each
      other party three (3) Business Days prior to the effectiveness of such change.
      Written confirmation of receipt (i) given by the recipient of such notice,
      consent, waiver or other communication, (ii) mechanically or electronically
      generated by the sender's facsimile machine containing the time, date, recipient
      facsimile number and an image of the first page of such transmission or (iii)
      provided by a nationally recognized overnight delivery service, shall be
      rebuttable evidence of personal service, receipt by facsimile or receipt from
      a
      nationally recognized overnight delivery service in accordance with clause
      (i),
      (ii) or (iii) above, respectively.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (8)  Except
      as
      expressly provided herein, no provision of this Debenture shall alter or impair
      the obligations of the Company, which are absolute and unconditional, to pay
      the
      principal of, interest and other charges (if any) on, this Debenture at the
      time, place, and rate, and in the coin or currency, herein prescribed. This
      Debenture is a direct obligation of the Company. As long as this Debenture
      is
      outstanding, the Company shall not and shall cause their subsidiaries not to,
      without the consent of the Holder, (i) amend its certificate of incorporation,
      bylaws or other charter documents so as to adversely affect any rights of the
      Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise
      acquire shares of its Common Stock or other equity securities other than as
      to
      the Underlying Shares to the extent permitted or required under the Transaction
      Documents; or (iii) enter into any agreement with respect to any of the
      foregoing. 

     

    (9)  This
      Debenture shall not entitle the Holder to any of the rights of a stockholder
      of
      the Company, including without limitation, the right to vote, to receive
      dividends and other distributions, or to receive any notice of, or to attend,
      meetings of stockholders or any other proceedings of the Company, unless and
      to
      the extent converted into shares of Common Stock in accordance with the terms
      hereof.

     

    (10)  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. Without the Holder’s consent, the Company will not and will not
      permit any of their subsidiaries to, directly or indirectly, enter into, create,
      incur, assume or suffer to exist any indebtedness of any kind, on or with
      respect to any of its property or assets now owned or hereafter acquired or
      any
      interest therein or any income or profits there from that is senior in any
      respect to the obligations of the Company under this Debenture.

     

    (11)  This
      Debenture shall be governed by and construed in accordance with the laws of
      the
      State of New Jersey, without giving effect to conflicts of laws thereof. Each
      of
      the parties consents to the jurisdiction of the Superior Courts of the State
      of
      New Jersey sitting in Hudson County, New Jersey and the U.S. District Court
      for the District of New Jersey sitting in Newark, New Jersey in connection
      with
      any dispute arising under this Debenture and hereby waives, to the maximum
      extent permitted by law, any objection, including any objection based on forum
      non conveniens to the bringing of any such proceeding in such jurisdictions.
      

     

    (12)  If
      the
      Company fails to strictly comply with the terms of this Debenture, then the
      Company shall reimburse the Holder promptly for all fees, costs and expenses,
      including, without limitation, attorneys’ fees and expenses incurred by the
      Holder in any action in connection with this Debenture, including, without
      limitation, those incurred: (i) during any workout, attempted workout, and/or
      in
      connection with the rendering of legal advice as to the Holder’s rights,
      remedies and obligations, (ii) collecting any sums which become due to the
      Holder, (iii) defending or prosecuting any proceeding or any counterclaim to
      any
      proceeding or appeal; or (iv) the protection, preservation or enforcement of
      any
      rights or remedies of the Holder.

     

    (13)  Any
      waiver by 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
      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.

     

    (14)  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 shall violate 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    (16)  THE
      PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
      OF
      THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
      OR
      ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
      DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
      OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
      FOR
      THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

     

    (17)  CERTAIN
      DEFINITIONS For
      purposes of this Debenture, the following terms shall have the following
      meanings:

     

    (a)  “Approved
      Stock Plan”
means
      a
      stock option plan that has been approved by the Board of Directors of the
      Company, pursuant to which the Company’s securities may be issued only to any
      employee, officer, or director for services provided to the
      Company.

     

    (b)  "Bloomberg"
      means
      Bloomberg Financial Markets.

     

    (c)  “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 are
      authorized or required by law or other government action to close.

     

    (d)  “Change
      of Control Transaction”
means
      the occurrence of (a) an acquisition after the date hereof by an individual
      or
      legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
      Exchange Act) of effective control (whether through legal or beneficial
      ownership of capital stock of the Company, by contract or otherwise) of in
      excess of fifty percent (50%) of the voting securities of the Company (except
      that the acquisition of voting securities by the Holder or any other current
      holder of convertible securities of the Company shall not constitute a Change
      of
      Control Transaction for purposes hereof), (b) a replacement at one time or
      over
      time of more than one-half of the members of the board of directors of the
      Company which is not approved by a majority of those individuals who are members
      of the board of directors on the date hereof (or by those individuals who are
      serving as members of the board of directors on any date whose nomination to
      the
      board of directors was approved by a majority of the members of the board of
      directors who are members on the date hereof), (c) the merger, consolidation
      or
      sale of fifty percent (50%) or more of the assets of the Company or any
      subsidiary of the Company in one or a series of related transactions with or
      into another entity, or (d) the execution by the Company of an agreement to
      which the Company is a party or by which it is bound, providing for any of
      the
      events set forth above in (a), (b) or (c).

     

    (e)  “Closing
      Bid Price”
means
      the price per share in the last reported trade of the Common Stock on a Primary
      Market or on the exchange which the Common Stock is then listed as quoted by
      Bloomberg.

     

    (f)  “Convertible
      Securities”
means
      any
      stock
      or securities (other than Options) directly or indirectly convertible into
      or
      exercisable or exchangeable for Common Stock.

     

    (g)  “Commission”
means
      the Securities and Exchange Commission.

     

    (h)  “Common
      Stock”
means
      the common stock, par value $.0001, of the Company and stock of any other class
      into which such shares may hereafter be changed or reclassified.

     

    (i)  "Company
      Conversion Price"
      means,
      the lower of (i) the applicable Conversion Price and (ii) that price which
      shall
      be computed as eighty percent (80%) of the lowest daily Volume Weighted Average
      Price of the Common Stock during the thirty (30) consecutive Trading Days
      immediately preceding the applicable Installment Date. All such determinations
      to be appropriately adjusted for any stock split, stock dividend, stock
      combination or other similar transaction.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (j)  "Equity
      Conditions"
      means
      that each of the following conditions is satisfied: (i) on each day during
      the
      period beginning two (2) weeks prior to the applicable date of determination
      and
      ending on and including the applicable date of determination (the "Equity
      Conditions Measuring Period"), either (x) the Underlying Shares Registration
      Statement filed pursuant to the Registration Rights Agreement shall be effective
      and available for the resale of all applicable shares of Common Stock to be
      issued in connection with the event requiring determination or (y) all
      applicable shares of Common Stock to be issued in connection with the event
      requiring determination shall be eligible for sale without restriction and
      without the need for registration under any applicable federal or state
      securities laws; (ii) on each day during the Equity Conditions Measuring Period,
      the Common Stock is designated for quotation on the Principal Market and shall
      not have been suspended from trading on such exchange or market nor shall
      delisting or suspension by such exchange or market been threatened or pending
      either (A) in writing by such exchange or market or (B) by falling below the
      then effective minimum listing maintenance requirements of such exchange or
      market; (iii) during the Equity Conditions Measuring Period, the Company shall
      have delivered Conversion Shares upon conversion of the Debentures to the Holder
      on a timely basis as set forth in Section 4(b)(ii) hereof; (iv) any applicable
      shares of Common Stock to be issued in connection with the event requiring
      determination may be issued in full without violating Section 4(c) hereof and
      the rules or regulations of the Primary Market; (v) during the Equity Conditions
      Measuring Period, there shall not have occurred either (A) an Event of Default
      or (B) an event that with the passage of time or giving of notice would
      constitute an Event of Default; and (vii) the Company shall have no knowledge
      of
      any fact that would cause (x) the Registration Statements required pursuant
      to
      the Registration Rights Agreement not to be effective and available for the
      resale of all applicable shares of Common Stock to be issued in connection
      with
      the event requiring determination or (y) any applicable shares of Common Stock
      to be issued in connection with the event requiring determination not to be
      eligible for sale without restriction and without the need for registration
      under any applicable federal or state securities laws.

     

    (k)  "Equity
      Conditions Failure"
      means
      that on any applicable date the Equity Conditions have not been satisfied (or
      waived in writing by the Holder).

     

    (l)  “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    (m)  “Excluded
      Securities”
means,
      (a) shares issued or deemed to have been issued by the Company pursuant to
      an
      Approved Stock Plan (b) shares of Common Stock issued or deemed to be issued
      by
      the Company upon the conversion, exchange or exercise of any right, option,
      obligation or security outstanding on the date prior to date of the Securities
      Purchase Agreement, provided that the terms of such right, option, obligation
      or
      security are not amended or otherwise modified on or after the date of the
      Securities Purchase Agreement, and provided that the conversion price, exchange
      price, exercise price or other purchase price is not reduced, adjusted or
      otherwise modified and the number of shares of Common Stock issued or issuable
      is not increased (whether by operation of, or in accordance with, the relevant
      governing documents or otherwise) on or after the date of the Securities
      Purchase Agreement, (c) shares issued in connection with any acquisition by
      the
      Company, whether through an acquisition of stock or a merger of any business,
      assets or technologies, leasing arrangement or any other transaction the primary
      purpose of which is not to raise equity capital, and (d) the shares of
      Common Stock issued or deemed to be issued by the Company upon conversion of
      this Debenture.

     

    (n)  "Holder
      Pro Rata Amount"
      means a
      fraction (i) the numerator of which is the Original Principal Amount of this
      Debenture on the Issuance Date and (ii) the denominator of which is the
      aggregate Purchase Price (as defined in the Securities Purchase
      Agreement).

     

    (o)  "Installment
      Amount"
      means
      with respect to any Installment Date, the lesser of (A) the product of (i)
      $220,000 multiplied by (ii) Holder Pro Rata Amount and (B) the Principal amount
      under this Debenture as of such Installment Date, as any such Installment Amount
      may be reduced pursuant to the terms of this Debenture, whether upon conversion,
      redemption or otherwise, together with, in each case the sum of any accrued
      and
      unpaid Interest with respect to such Principal amount. The Installment Amount
      on
      any Installment Date shall be reduced by the Principal Amount of any conversions
      made by the Holder of this Debenture during thirty days immediately preceding
      such Installment Date. In the event the Holder shall sell or otherwise transfer
      any portion of this Debenture, the transferee shall be allocated a pro rata
      portion of the each unpaid Installment Amount hereunder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (p)  "Installment
      Date"
      means
      the first Business Day on or after April 1, 2008, and continuing on the first
      Business Day of each successive calendar month thereafter. 

     

    (q)  "Installment
      Volume Limitation"
      means
      15% of the aggregate dollar trading volume (as reported on Bloomberg) of the
      Common Stock on the Principal Market over the forty (40) consecutive Trading
      Day
      period ending on the Trading Day immediately preceding the applicable
      Installment Notice Date.

     

    (r)  “Options”
      means
      any
      rights, warrants or options to subscribe for or purchase shares of Common Stock
      or Convertible Securities.

     

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

     

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

     

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

     

    (v)  “Securities
      Purchase Agreement”
means
      the Securities Purchase Agreement dated April ___, 2007 by and among the Company
      and the Buyers listed on Schedule I attached thereto. 

     

    (w)  “Trading
      Day”
means
      a
      day on which the shares of Common Stock are quoted on the OTCBB or quoted or
      traded on such Primary Market on which the shares of Common Stock are then
      quoted or listed; provided, that in the event that the shares of Common Stock
      are not listed or quoted, then Trading Day shall mean a Business
      Day.

     

    (x)  “Transaction
      Documents”
means
      the Securities Purchase Agreement or any other agreement delivered in connection
      with the Securities Purchase Agreement, including, without limitation, the
      Escrow Agreement, the Irrevocable Transfer Agent Instructions, and the
      Registration Rights Agreement.

     

    (y)  “Underlying
      Shares”
means
      the shares of Common Stock issuable upon conversion of this Debenture or as
      payment of interest in accordance with the terms hereof.

     

    (z)  “Underlying
      Shares Registration Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement, covering among other things the resale of the Underlying
      Shares and naming the Holder as a “selling stockholder” thereunder.

     

    (aa)  "Volume
      Weighted Average Price"
      means,
      for any security as of any date, the daily dollar volume-weighted average price
      for such security on the Primary Market as reported by Bloomberg through its
      “Historical Prices - Px Table with Average Daily Volume” functions, or, if no
      dollar volume-weighted average price is reported for such security by Bloomberg,
      the average of the highest closing bid price and the lowest closing ask price
      of
      any of the market makers for such security as reported in the "pink sheets"
      by
      Pink Sheets LLC. 

     

    (bb)  "Warrants"
      has the
      meaning ascribed to such term in the Securities Purchase Agreement, and shall
      include all warrants issued in exchange therefor or replacement
      thereof.

     

    [Signature
      Page Follows]

     

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Secured Convertible Debenture to be duly executed by
      a
      duly authorized officer as of the date set forth above.

     

    

    
      	 	
              COMPANY:

            
	 	
              NS8
                CORPORATION, INC.

            
	 	 
	 	
              By:      

            
	 	
              Name: Anthony
                Alda

            
	 	
              Title: Chief
                Executive Officer

            
	 	 

    

    

    

    

    
      
        
          

        

         

      

      
         

        
          

        

      

      
         

        
        

      

    

    

     

    EXHIBIT
      I

     

     

    CONVERSION
      NOTICE

     

     

    (To
      be executed by the Holder in order to Convert the
      Debenture)

     

    

    
      	
               

              TO:
                

               

            

    

    

    The
      undersigned hereby irrevocably elects to convert $     of
      the principal amount of Debenture No.CCP-6 into Shares of Common Stock of
NS8
      CORPORATION, INC.,
      according to the conditions stated therein, as of the Conversion Date written
      below.

     

    
      	
              Conversion
                Date:

            	                                                                                                                         
              
	
              Conversion
                Amount to be converted:

            	
              $                                                                                                                       
                        

            
	
              Conversion
                Price:

            	
              $                                                                                                                              

            
	
              Number
                of shares of Common Stock to be issued:

            	                                                                                                                         
              
	
              Amount
                of Debenture Unconverted:

            	$                                                                                                                        
	 	 
	 	 
	
               

              Please
                issue the shares of Common Stock in the following name and to the
                following address:

               

            
	
               

              Issue
                to:

               

            	 
	 	 
	
              Authorized
                Signature:

            	                                                                                                                         
              
	
              Name:

            	                                                                                                                         
              
	
              Title:

            	                                                                                                                           
	
              Broker
                DTC Participant Code:

            	 
	
              Account
                Number:

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