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Exhibit 10.14    
    

PHASE I AND PHASE II

  

ENGINEERING SERVICES AGREEMENT

   

BETWEEN

   

ADVANCED BIOENERGY LLC AND

   

FAGEN ENGINEERING, LLC

   

September 8, 2005  

   TABLE OF CONTENTS  

	 
	 	 
	 	 
	 	Page

	Article 2    Definitions; Rules of Interpretation	 	1
	 	 	1.1	 	Rules of Construction	 	1
	 	 	1.2	 	Defined Terms	 	1
	Article 2    Retention of Agent	 	2
	Article 3    Engineer Responsibilities	 	3
	 	 	3.1	 	Services	 	3
	 	 	3.2	 	Phase I Design Package	 	3
	 	 	3.3	 	`Delivery of Phase I Design Package	 	3
	 	 	3.4	 	The Phase II Design Package	 	3
	 	 	3.5	 	Delivery of Phase II Design Package	 	4
	 	 	3.6	 	Delays	 	4
	 	 	3.7	 	Utility Routing and Design Services Limited	 	4
	Article 4    Client Responsibilities	 	4
	 	 	4.1	 	Client's Representative	 	4
	 	 	4.2	 	Client's Requirements	 	4
	 	 	4.3	 	Other Information	 	4
	 	 	4.4	 	Access to Property	 	4
	 	 	4.5	 	Review of Documents	 	4
	 	 	4.6	 	Consents, Approvals, Licenses, and Permits	 	4
	 	 	4.7	 	Bids	 	4
	 	 	4.8	 	Other Services	 	5
	 	 	4.9	 	Services Outside Scope of Engineer's Services	 	5
	 	 	4.10	 	Deviation from Design	 	5
	 	 	4.11	 	Developments Affecting Scope or Timing of Services	 	5
	Article 5    Compensation And Payment	 	5
	 	 	5.1	 	Compensation	 	5
	 	 	5.2	 	Reimbursement of Engineer Expenses	 	5
	 	 	5.2	 	Reimbursement of Subcontractor Expenses	 	5
	 	 	5.4	 	Fees for Work Outside Scope of Services	 	5
	 	 	5.5	 	Collection of Unpaid Amounts	 	5
	 	 	5.6	 	Fee Schedule and Reimbursable Rate Schedule Subject to Change	 	5
	 	 	5.7	 	Invoices	 	5
	 	 	5.8	 	Payment	 	5
	 	 	5.9	 	Late Payment and Interest	 	5
	 	 	5.10	 	Suspension for Failure to Pay	 	6
	 	 	5.11	 	Payment	 	6
	 	 	5.12	 	Withholding Payments	 	6
	 	 	5.13	 	Purchase Orders	 	6
	 	 	5.14	 	Changes in Project	 	6
	Article 6    Construction Cost And Cost Estimates	 	7
	 	 	6.1	 	Construction Cost	 	7
	 	 	6.2	 	Cost Estimates	 	7
	Article 7    Termination	 	7
	 	 	7.1	 	Termination Upon Default	 	7
	 	 	7.2	 	Termination Upon Abandonment of Project	 	7
	Article 8    Ownership of Work Product	 	7
	 	 	8.1	 	Work Product	 	7
	 	 	8.2	 	Copies Provided to Client	 	7
	 	 	8.3	 	Prohibited Use of Work Product	 	7
	 	 	7.1	 	8.4 Derogation of Engineer's Rights to Work Product	 	7
	Article 9    Successors and Assigns	 	8
	 	 	9.1	 	Successors	 	8
	 	 	9.2	 	Written Consent Required	 	8
	 	 	9.3	 	No Third-Party Beneficiaries	 	8
	 	 	 	 	 	 	 

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	Article 10    Warranty	 	8
	 	 	10.1	 	No Warranty Extended	 	8
	 	 	10.2	 	No Responsibility for Construction	 	8
	 	 	10.3	 	No Software Warranty	 	8
	Article 11    Indemnification	 	8
	 	 	11.1	 	Engineer's Indemnification	 	8
	 	 	11.2	 	Client's Indemnification	 	8
	 	 	11.3	 	Hazardous Materials Indemnification	 	8
	Article 12    Dispute Resolution	 	8
	 	 	12.1	 	Arbitration	 	8
	Article 13    Confidentiality	 	9
	 	 	13.1	 	Non-Disclosure Obligation	 	9
	 	 	13.2	 	Publicity and Advertising	 	9
	 	 	13.3	 	Term of Obligation	 	9
	Article 14    Miscellaneous	 	9
	 	 	14.1	 	Governing Law	 	9
	 	 	14.2	 	Severability	 	9
	 	 	14.3	 	No Waiver	 	9
	 	 	14.4	 	Captions and Headings	 	10
	 	 	14.5	 	Engineer's Accounting Records	 	10
	 	 	14.6	 	Counterparts	 	10
	 	 	14.7	 	Survival	 	10
	 	 	14.8	 	Period of Response	 	10
	 	 	14.9	 	No Privity with Client's Contractors	 	10
	 	 	14.10	 	Amendments	 	10
	 	 	14.11	 	Entire Agreement	 	10
	 	 	14.12	 	Notice	 	10
	 	 	14.13	 	Extent of Agreement	 	11
	 	 	14.14	 	Subrogation Waiver	 	11

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   PHASE I AND PHASE II

ENGINEERING SERVICES AGREEMENT  

        THIS PHASE I AND PHASE II ENGINEERING SERVICES AGREEMENT (the  "Agreement") is made as of
September 8, 2005, (the "Effective Date") by and between Advanced
BioEnergy LLC, a [Indiana] limited liability company (the "Client") and Fagen Engineering, Inc. a Minnesota Limited
Liability Company (the "Engineer"). Each of the Owner and Engineer are referred to herein individually as a  "Party"and collectively as the "Parties."

RECITALS  

        WHEREAS, Client is developing a 100 million gallons per year dry grind ethanol production facility to be
located near Fairmont, Nebraska (the "Plant") to be owned and operated by Client; and 

        WHEREAS, Client and Design / Builder intend to enter into that certain Lump-Sum Design-Build Agreement  ("Design-Build Agreement") under which the Engineer, or an
affiliate of Design I Builder, will serve as the design-builder for the Plant and provide
design, Engineering, procurement and construction services for the development and construction of the Plant; and 

        WHEREAS, Client wishes to retain an entity in advance of entering into the Design-Build Agreement to perform certain Engineering and
design work that will be required under the Design-Build Agreement on the terms and conditions set forth in this Agreement, and Engineer desires to act as such entity on such terms and conditions. 

        NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound by this Agreement, the parties do hereby agree as follows: 

Article 1

Definitions; Rules of Interpretation  

        1.1    Rules of Construction.    

        The
capitalized terms listed in this Article 1 shall have the meanings set forth herein whenever the terms appear in this Agreement, whether in the singular or the plural or in
the present or past tense. Other terms used in this Agreement but not listed in this Article shall have meanings as commonly used in the English language and, where applicable, in generally accepted
construction and design-build industry standards. Words not otherwise defined herein that have well known and generally accepted technical or trade meanings are used herein in accordance with such
recognized meanings. In addition, the following rules of interpretation shall apply: 

	(a)
	The
masculine shall include the feminine and neuter.

	(b)
	References
to "Articles," "Sections," "Schedules," or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits of this Agreement.

	(c)
	This
Agreement was negotiated and prepared by each of the Parties with the advice and participation of counsel. The Parties have agreed
to the wording of this Agreement and none of the provisions hereof shall be construed against one Party on the ground that such Party is the author of
this Agreement or any part hereof. The following definitions will apply in this Agreement: 

        1.2    Defined Terms.    

        In
addition to definitions appearing elsewhere in this Agreement, the following terms have the following meanings: 

        Agreement will have the meaning given to such term in the Preamble to this Agreement. 

        Applicable Law means 

	(a)
	any
and all laws, legislation, statutes, codes, acts, rules, regulations, ordinances, treaties or other similar legal requirements enacted, issued or promulgated by a Governmental
Authority;

	(b)
	any
and all orders, judgments, writs, decrees, injunctions, Governmental Approvals or other decisions of a Governmental Authority, and 

1

 

	(c)
	any
and all legally binding announcements, directives or published practices or interpretations, regarding any of the foregoing in (a) or (b) of this definition,
enacted, issued or promulgated by a Governmental Authority, 

to
the extent, for each of the foregoing in (a), (b) and (c) of this definition, applicable to or binding upon (i) a Party, its affiliates, its shareholders, its members, it
partners or their respective representatives, to the extent any such person is engaged in activities related to the Services; or (ii) the property of a Party, its affiliates, its shareholders,
its members, its partners or their respective representatives, to the extent such property is used in connection with the Services or an activity related to the Services. 

        Client will have the meaning given to such term in the Preamble to this Agreement. 

        Client's Representative will have the meaning given to such term in Section 4.1 

        Construction Cost will have the meaning given to such term in Section 6.1.1. 

        Design-Build Agreement will have the meaning given to such term in the Recitals to this Agreement. 

        Effective Date will have the meaning given to such term in the Preamble to this Agreement. 

        Engineer will have the meaning given to such term in the Preamble to this Agreement. 

        Engineer Responsible Parties will have the meaning given to such term in Section 4.11. 

        Fixed Fee will have the meaning given to such term in Section 5.1. 

        Governmental Approvals will mean any material authorizations or permissions issued or granted by any Governmental Authority to the
project, the Client, the Engineer, subcontractors and their affiliates in connection with any activity related to the Services. 

        Governmental Authority will mean any federal, state, local or municipal governmental body; any governmental, quasi-governmental,
regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority
or power; or any court or governmental tribunal; in each case having jurisdiction over the Client, the Engineer, the Plant, or the Site. 

        Monthly Invoice will have the meaning given to such term in Section 5.7. 

        Party or Parties will have the meaning given to such term in the Preamble to this Agreement. 

        Phase I Activities will mean the Client's Deliverable Site obligations pursuant to Exhibit C to the Lump Sum Design-Build Agreement
as may be amended from time to time. 

        Phase I Design Package will have the meaning given to such term in Section 3.1. 

        Phase II Activities will mean the Client's Deliverable Site obligations pursuant to Exhibit C to the Lump Sum Design-Build
Agreement as may be amended from time to time. 

        Phase II Design Package will have the meaning given to such term in Section 3.1. 

        Plant will have the meaning given to such term in the Recitals to this Agreement. 

        Services will have the meaning given to such term in Section 3.1 

        Site will mean the land or premises on which the Plant is located. 

        Subcontractor will mean any person or entity, including but not limited to independent Engineers, associates, and consultants, retained by
Engineer, or by any person or entity retained directly or indirectly by Engineer, in each case as an independent contractor, to perform a portion of the Services. 

        Work Product will have the meaning given to such term in Section 8.1. 

Article 2

Retention of the Agent  

        2.1    Retention of Services.    On the terms and subject to the conditions hereinafter set forth, Client hereby
retains Engineer to perform, and Engineer hereby agrees to perform, the Services. Engineer will provide such 

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Services
solely pursuant to the terms and conditions set forth herein including any indemnifications and limitations on liability. 

Article 3

Engineer Responsibilities  

        3.1    Services.    Engineer shall perform the Engineering services necessary to satisfy the requirements of the Phase
I Deliverable Site ("Phase I Design Package") and the Phase II-Final Civil Design Plans ("Phase II Design
Package") Engineering services required under the Design-Build Agreement (collectively, "Services").

        3.2    Phase I Design Package. (Grading and Drainage).    The Phase I Design Package to be provided by ENGINEER shall
consist of the Engineering and design of the Plant site and shall include the following drawings 

	1)
	Cover
Sheet

	2)
	Property
Layout Drawing

	3)
	Grading,
Drainage and Erosion Control Plan Drawing (Multiple Drawings if Required)

	•
	Used
for Land Disturbance Permitting

	•
	Site
grading is held 6-inches low for topsoil and seeding

	4)
	Roadway
Alignment Drawing

	5)
	Culvert
Cross Sections and Details (Multiple Drawings)

	6)
	Seeding
and Landscaping (If Required) 

Plan
sets along with a Bid Tabulation Sheet will be supplied to the owner so all contractors bid the same quantities. A telephone conference call for a Phase 1 pre-bid meeting will be
provided upon OWNER'S request. 

        3.3    Delivery of Phase I Design Package.:    Engineer shall deliver the completed Phase I Design Package no later
than 60 days after the receipt of all Owner deliverables.. 

        3.4    Phase II Design Package.:    The Phase II Design Package to be provided by ENGINEER shall provide the
Engineering and design of site work and utilities for the Plant, all within the property line of Plant, and shall consist of the following 

	1)
	Cover
Sheet

	2)
	Property
Layout Drawing

	3)
	Site
Grading and Drainage Drawing (Final Interior Plant Grading)

	4)
	Roadway
Alignment

	5)
	Utility
Layout (Fire Loop)

	•
	The
OWNER is required to select an insurance provider to allow the proper positioning and number of required hydrants and hydrants with monitors.

	6)
	Utility
Layout (Potable Water)

	7)
	Utility
Layout (Well Water) if using on-site wells

	8)
	Utility
Layout (Sanitary Sewer)

	•
	Fagen
Engineering does not design any on-site septic treatment or drain field, this will be designed by others and completed by the OWNER at the OWNER'S expense.

	9)
	Utility
Layout (Utility Water Blowdown)

	•
	The
OWNER is required to supply the NPDES discharge point to allow line routing to be completed.

	•
	The
OWNER is required to select the water supply and water treatment system to allow sizing of the line.

	10)
	Utility
Layout (Natural Gas) 

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	•
	Fagen
Engineering provides a preferred routing through the site, line size and pipe specifications are typically provided by the gas supplier.

	11)
	Geometric
Layout (For Project Control Verification)

	12)
	Site
Utility Piping Tables Drawing

	13)
	Tank
Farm Layout Drawing

	14)
	Tank
Farm Details Drawing

	15)
	Sections
and Details Drawing (If required)

	16)
	Miscellaneous
Details Drawing (If required) 

A
telephone conference call for a Phase 2 pre-bid meeting will be provided upon OWNER'S request. 

        3.5    Delivery of Phase II Design Package.:    Engineer shall deliver the completed Phase II Design Package no later
than 60 days after the receipt of all Owner deliverables. 

        3.6    Delays.    The Parties agree that Engineer shall not be responsible for delays in providing the Engineering
services under this Agreement due to factors beyond Engineer's control. 

        3.7    Utility Routing and Design Services Limited.    The Parties agree that Engineer shall provide the routing and
design for the utilities necessary for the Plant only within the Plant property line and up to the Plant property line, and that, for purposes of this Agreement, Engineer assumes a tie-in
point to a city utility. The Parties agree that, if there is no city tie-in point, Engineer will route the utilities to the Plant property line and stop. Any special tie-in
requirements necessary to connect the utilities at the Plant property line are not included in the price under the scope of this Agreement and shall only be designed and Engineered by Engineer
pursuant to a change in the price hereunder. 

Article 4

Client Responsibilities  

        4.1    Client's Representative.    Client shall, prior to the commencement of Services by Engineer, name a
representative ("Client's Representative") with authority to receive information and transmit instructions for Client. Client's Representative shall be
vested with authority to act on behalf of Client and Engineer shall be entitled to rely on Client's Representative's communications with regard to the Services. 

        4.2    Client's Requirements.    Client shall, prior to the commencement of Services by Engineer, provide Engineer
with Client's requirements for the project, including objectives and constraints, design and construction standards, bonding and insurance requirements, and contract forms. 

        4.3    Other Information.    Prior to the commencement of Services by Engineer, Client shall provide Engineer with all
other information available to Client and pertinent to the project and the Services. The items required by Client pursuant to this Section 4.3 shall be furnished at Client's expense, and
Engineer shall be entitled to rely upon the accuracy and completeness thereof. 

        4.4    Access to Property.    Prior to the commencement of Services and as necessary during the performance of
Services, Client shall arrange for access by Engineer upon public and private property, as required for the performance of the Services under this Agreement. 

        4.5    Review of Documents.    As related to the performance of Services hereunder, Client shall examine documents
presented by Engineer, obtain legal and other advice as Client deems appropriate, and render written decisions within reasonable time. The items required by Client pursuant to this Section 4.5
shall be furnished at Client's expense, and Engineer shall be entitled to rely upon the accuracy and completeness thereof. 

        4.6    Consents, Approvals, Licenses and Permits.    Prior to the commencement of Services and as necessary during the
performance of the Services, Client shall obtain all consents, approvals, licenses, permits, and other Governmental Approvals necessary for project and for the performance of the Services. The items
required by Client pursuant to this Section 4.6 shall be furnished at Client's expense, and Engineer shall be entitled to rely upon the accuracy and completeness thereof. 

        4.7    Bids.    Client shall advertise for and open bids when scheduled. 

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        4.8    Other Services.    Client shall furnish all legal, accounting and insurance counseling services as may be
necessary at any time for the Services, including auditing services the Owner may require to verify the Monthly Invoices or
to ascertain how or for what purposes the Engineer and/or Subcontractors have used the money paid by or on behalf of the Owner. 

        4.9    Service Outside Scope of Engineer's Services.    Client shall, at its own expense, as necessary for the
performance and completions of the Services, provide any additional services necessary for project that are outside scope of the Services provided by Engineer under this Agreement. Engineer shall be
entitled to rely upon, as applicable, the completeness and accuracy of such additional services. 

        4.10    Deviation from Design.    Client shall indemnify and hold harmless Engineer, its employees, its agents, its
affiliates, and any other persons or entities within its control or for whom Engineer would otherwise be responsible ("Engineer Responsible Parties")
against claims arising out of Engineer's design, if there has been, in the completion of the Phase I Activities and the Phase II Activities, a deviation from the design beyond the Engineer's control
or failure to follow Engineer's recommendation and such deviation or failure caused the claims. 

        4.11    Developments Affecting Scope or Timing of Services.    Client shall promptly notify Engineer, in writing, when
Client learns of contractor error or any development that affects scope or timing of Engineer's Services. 

Article 5

Compensation and Payment  

        5.1    Compensation.    In consideration of its performance of the Services, Client shall pay Engineer a fixed fee of
[*]([*]) ("fixed fee") as compensation for Engineer's time in the performance of the Services, the full amount of which shall be included in and
credited to the Design-Build Agreement's contract price. The fixed fee established pursuant to this section will be paid in monthly billings based on a project percent complete basis. 

        5.2    Reimbursement of Engineer Expenses.    Client shall reimburse Engineer for its expenses related to the
performance of the Services based on the fee schedule attached hereto as Exhibit A. Reimbursable expenses will be invoiced monthly and will be in accordance with Engineer's current reimbursable
schedule attached hereto as Exhibit B. 

        5.3    Reimbursement of Subcontractor Expenses.    

        5.3.1    Subcontractor charges related to time spent in the performance of the Services shall not be marked-up by
Engineer. Client shall reimburse Engineer for costs related to Subcontractor's time in accordance with the Subcontractors' invoices for the work. 

        5.3.2    Subcontractor reimbursable expenses will be marked up in accordance with the current reimbursable schedule attached
hereto as Exhibit B. 

        5.4    Fees for Work Outside Scope of Services.    Fees for all work outside the scope of Engineer's responsibilities
described in Article 3, including change order work, shall be computed in accordance with Engineer's current fee schedules, unless otherwise agreed to in writing. 

        5.5    Collection of Unpaid Amounts.    If any amount due is not paid in accordance with this agreement and Fagen
Engineering must collect that amount, Fagen Engineering shall be entitled to recover, in addition to the amount due, the cost of collection, including reasonable attorney's fees in connection with
those collection efforts. 

        5.6    Fee Schedule and Reimbursable Rate Schedule Subject to Change.    Engineer's rate structures effective on the
Effective Date are reflected in the attached fee schedule attached hereto as Exhibit A and the reimbursable rate schedule attached hereto as Exhibit B. Engineer and Client acknowledge
that the rates set forth in Exhibits A and B change on January 1 of each year. 

        5.7    Invoices.    Engineer shall submit a monthly invoice ("Monthly
Invoice") for services rendered and reimbursable expenses incurred by Engineer and any Subcontractors. 

        5.8    Payment.    Within thirty (30) days after Client's receipt of each Monthly Invoice, Client shall pay
Engineer all amounts due. 

        5.9    Late Payment and Interest.    If Client fails to make payment within thirty (30) days after receipt of
Monthly Invoice, interest at maximum legal rate or at an annual rate of 18%, whichever is less, shall accrue 

	*
	Material
has been omitted pursuant to a request for confidential treatment and such materials have been filed separately with the Securities and Exchange Commission. 

5

 

        5.10    Suspension for Failure to Pay.    If Client fails to make payment within thirty (30) days after receipt
of Monthly Invoice, Engineer may, at its option, after giving seven (7) days' written notice, suspend services until it all amounts due to Engineer by Client have been paid in full. 

        5.11    Payments from Lawful Sources.    Client shall provide for payment from one or more lawful source of all sums
to be paid Engineer. 

        5.12    Withholding Payments.    Engineer's compensation shall not be reduced on account of any amounts withheld from
payment to Subcontractors. 

        5.13    Purchase Orders.    If Client issues a purchase order or other document to initiate the commencement of
services hereunder, it is expressly agreed that any terms and conditions appearing thereon shall have no application and only the provisions of this agreement shall automatically apply. 

        5.14    Changes in Project.    If Client requests changes in the project which affect the Services, compensation for
and time of performance of Engineer's services shall be adjusted appropriately. 

6

   Article 6

Construction Cost and Cost Estimates  

        6.1    Construction Cost.    

        6.1.1    "Construction Cost" means total cost of entire project to Client, except for Engineer's
compensation and expenses, cost of land, right-of-way, legal and accounting services, insurance, financing charges, and other costs which are Client's responsibility as
provided herein. 

        6.1.2    Labor furnished by Client shall be included in Construction Cost at current market rates, including a reasonable
allowance for overhead, fringe benefits, and profit. Materials and equipment furnished by Client shall be included at current marked prices F.O.B. project site, except that used material and equipment
shall be included as if purchased new for project. 

        6.2    Cost Estimates.    Client and Engineer acknowledge that Engineer has no control over cost of labor, materials,
equipment of services furnished by others, over contractors' methods of determining prices, or other competitive bidding or market conditions and that Engineer's estimates of project construction cost
will be made on the basis of its employees' experience and qualifications and will represent Engineer's employees' best judgment as experienced and qualified professionals, familiar with the
construction industry. Engineer does not guarantee that proposal, bids, or actual construction cost will not vary from its estimates of project cost and Owner acknowledges the same. 

Article 7

Termination  

        7.1    Termination Upon Default.    Either party may terminate this Agreement upon twenty (20) days' written
notice, if the other party has substantially defaulted through no fault of the terminating party. 

        7.2    Termination Upon Abandonment of Project.    Client may terminate this Agreement upon twenty (20) days'
written notice if project is abandoned. In such event, past due amounts for services rendered, plus unpaid reimbursable expenses and termination charge consisting of the unpaid balance of the Fixed
Fee, shall constitute total compensation due. 

Article 8

Ownership of Work Product  

        8.1    Work Product.    All tangible items prepared by Engineer, including but not limited to all drawings,
specifications, calculations, data, notes and other materials and documents, including electronic data furnished by Engineer to Client and to Subcontractors under this Agreement  ("Work Product") shall
be instruments of service, and Engineer shall retain the ownership and property interests therein, including the copyrights
thereto. 

        8.2    Copies Provided to Client.    Client may retain copies of Work Product for reference; provided, however, that
Client may not make copies of the Work Product available without Engineer's written permission, and, granted such permission, may only do so to the extent such the use of such copies of the Work
Product directly pertains to the Services, the Plant, or the construction thereof. Pursuant to Section 8.1 of this Agreement, Engineer retains ownership of and property interests in any Work
Product made available and/or copied. 

        8.3    Prohibited Use of Work Product.    Reuse of the Work Product on any another project without Engineer's written
consent is prohibited. Client shall indemnify and hold harmless Engineer Responsible Parties against claims resulting from such prohibited reuse. Said items are not intended to be suitable for
completion of this project by others. 

        8.4    Derogation of Engineer's Rights to Work Product.    Submittal or distribution of Work Product in connection
with the performance and completion of the Services and the construction of the project does not constitute publication in derogation of Engineer's rights and does not in any way diminish Engineer's
Work Product rights established herein.. 

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Article 9

Successors and Assigns  

        9.1    Successors    The parties intend that the provisions of this Agreement are binding upon the Parties, their
employees, agents, heirs, successors and assigns. 

        9.2    Written Consent Required.    Neither party shall assign, sublet, or transfer any interest in this Agreement
without written consent of the other; provided, however, that Engineer may employ such Subcontractors as it may deem appropriate. 

        9.3    No Third-Party Beneficiaries.    None of the provisions of this Agreement will be for the benefit of or
enforceable by any person other than the Parties hereto, their successors and permitted assigns and legal representatives 

Article 10

Warranty  

        10.1    No Warranty Extended.    Engineer shall use reasonable care to reflect requirements of all Applicable Laws,
rules, or regulations of which Engineer has knowledge or about which Client specifically advises in writing, which are in effect on date of Agreement. ENGINEER INTENDS TO RENDER SERVICES IN ACCORDANCE
WITH GENERALLY ACCEPTED PROFESSIONAL STANDARDS, BUT NO OTHER WARRANTY IS EXTENDED, EITHER EXPRESS OR IMPLIED, IN CONNECTION WITH SUCH SERVICES. Client's rights and remedies in this Agreement are
exclusive. 

        10.2    No Responsibility for Construction.    Engineer shall not be responsible for contractors' construction means,
methods, techniques, sequences, or procedures, or for contractors' safety precautions and programs, or for contractors' failure according to contract documents. 

        10.3    No Software Warranty.    The Engineer believes that any computer software provided under this Agreement is
suitable for the intended purpose, however, it does not warrant the suitability, merchantability, or fitness for a particular purpose of this software. 

Article 11

Indemnification  

        11.1    Engineer's Indemnification.    To the fullest extent permitted by law, Engineer shall indemnify and hold
harmless Client, Client's officers, directors, partners, employees, and agents from and against any and all claims for bodily injury and for damage to tangible property caused solely by the negligent
acts or omissions of Engineer or Engineer Responsible Parties and Engineer's Engineers in the performance and furnishing of Engineer's services under this Agreement. Any indemnification shall be
limited to the terms and amounts of coverage of the Engineer's insurance policies. 

        11.2    Client's Indemnification.    To the fullest extent permitted by law, Client shall indemnify and hold harmless
Engineer, Engineer's officers, directors, partners, employees, and agents and Engineer's Engineers from and against any and all claims for bodily injury and for damage to tangible property caused
solely by the negligent acts of omission of Client or Client's officers, directors, partners, employees, agents, and Client's Engineers with respect to this Agreement on the Project. 

        11.3    Hazardous Materials Indemnification.    In addition to the indemnity provided under this section, and to the
fullest extent permitted by law, Client shall indemnify and hold harmless Engineer and its officers, directors, partners, employees, and agents and Engineer's Engineers from and against all claims,
costs, losses, and damages (including but not limited to all fees and charges of Engineers, architects, attorneys, and other professionals and all court of arbitration or other dispute resolution
costs) caused by, arising out of, or relating to the presence, discharge, release, or escape of asbestos, PCBs, petroleum, hazardous waste, or radioactive materials at, on, under, or from the Project
site. 

Article 12

Dispute Resolution  

        12.1    Arbitration.    In an effort to resolve any conflicts that arise out of or relate to this Agreement, the
Client and the Engineer agree that all disputes shall be submitted first to nonbinding mediation. If mediation does 

8

 

not
resolve the conflicts, the controversy shall be decided by final and binding arbitration conducted in Minneapolis, Minnesota in accordance with the Construction Industry Arbitration Rules of the
American Arbitration Association then in effect, unless the Parties mutually agree otherwise. 

The
award of the arbitrator(s) shall be final and binding upon the parties without the right of appeal to the courts. Judgment may be entered upon it in accordance with Applicable Law by any court
having jurisdiction thereof. 

Engineer
and Client expressly agree that any arbitration pursuant to this Section 12.1 may be joined or consolidated with any arbitration involving any other person or entity
(i) necessary to resolve the claim, dispute or controversy, or (ii) substantially involved in or affected by such claim, dispute or controversy. Both Engineer and Client will include
appropriate provisions in all contracts they execute with other parties in connection with the Services to require such joinder or consolidation. 

The
prevailing party in any arbitration, or any other final, binding dispute proceeding upon which the parties may agree, shall be entitled to recover from the other party reasonable attorneys' fees
and expenses incurred by the prevailing party. 

Article 13

Confidentiality  

        13.1    Non-Disclosure Obligation.    Neither Party shall disclose to third parties any confidential or
proprietary information regarding the other Party's business affairs, finances, technology, processes, plans or installations, product information, know-how, or other information that is
received from the other Party pursuant to this Agreement or the Parties' relationship prior thereto or is developed pursuant to this Agreement, without the express written consent of the other Party,
which consent shall not be unreasonably withheld. The Parties shall at all times use their respective reasonable efforts to keep all information regarding the terms and conditions of this Agreement
confidential and shall disclose such information to third Persons only as reasonably required for the permitting of the Project; financing the development, construction, ownership, operation and
maintenance of the Plant; or as reasonably required by either Party for performing its obligations hereunder and if prior to such disclosure, the disclosing Party informs such third Persons of the
existence of this confidentiality obligation and only if such third Persons agree to maintain the confidentiality of any information received. This Article 13 shall not apply to information
that was already in the possession of one Party prior to receipt from the other, that is now or hereafter becomes a part of the public domain through no fault of the Party wishing to disclose, or that
corresponds in substance to information heretofore or hereafter furnished by third parties without restriction on disclosure. 

        13.2    Publicity and Advertising.    Neither Owner nor Design-Builder shall make or permit any of their
subcontractors, agents, or vendors to make any external announcement or publication, release any photographs or information concerning the Project or any part thereof, or make any other type of
communication to any member of the public, press, business entity, or any official body which names the other Party unless prior written consent is obtained from the other Party, which consent shall
not be unreasonably withheld. 

        13.3    Term of Obligation.    The confidentiality obligations of the Parties pursuant to this Article 20 shall
survive the expiration or other termination of this Agreement for a period of two (2) years. 

Article 14

Miscellaneous  

        14.1    Governing Law.    This Agreement shall be governed by and construed and enforced in accordance with, the
substantive laws of the state of Minnesota, without regard to the conflict of laws provisions thereof. 

        14.2    Severability.    If any provision or any part of a provision of the Agreement shall be finally determined to
be superseded, invalid, illegal, or otherwise unenforceable pursuant to any applicable Legal Requirements, such determination shall not impair or otherwise affect the validity, legality, or
enforceability of the remaining provision or parts of the provision of the Agreement, which shall remain in full force and effect as if the unenforceable provision or part were deleted. 

        14.3    No Waiver.    The failure of either Engineer or Client to insist, in any one or more instances, on the
performance of any of the obligations required by the other under this Agreement shall not be construed as a waiver or relinquishment of such obligation or right with respect to future performance. 

9

 

        14.4    Captions and Headings.    The table of contents and the headings used in this Agreement are for ease of
reference only and shall not in any way be construed to limit, define, extend, describe, alter, or otherwise affect the scope or the meaning of any provision of this Agreement. 

        14.5    Engineer's Accounting Records.    Records of Engineer's personnel time, reimbursable expenses, and accounts
between parties shall be maintained on a generally recognized accounting basis. 

        14.6    Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original and all of which together shall be deemed one and the same Agreement, and may be executed and delivered by facsimile signature, which shall be considered an original. 

        14.7    Survival.    Notwithstanding any provisions herein to the contrary, the Work Product provisions set forth in
Article 8 and the indemnity obligations set forth herein shall survive (in full force) the expiration or termination of this Agreement, and shall continue to apply to the Parties to this
Agreement even after termination of this Agreement or the transfer of such Party's interest in this Agreement. 

        14.8    Period of Response.    Any applicable statute of limitations shall commence to run and any alleged cause of
action shall be deemed to have accrued no later than completion of services to be performed by ENGINEER. 

        14.9    No Privity with Client's Contractors.    Nothing in this Agreement is intended or deemed to create any legal
or contractual relationship between Engineer and any Client contractor or subcontractor retained to perform the Phase I Activities and the Phase II Activities. 

        14.10    Amendments.    This Agreement may not be changed, altered, or amended in any way except in writing signed by
a duly authorized representative of each Party. 

        14.11    Entire Agreement.    This Agreement consists of the terms and conditions set forth herein, as well as the
Exhibits hereto, which are incorporated by reference herein and made a part hereof. This Agreement sets forth the full and complete understanding of the Parties as of the Effective Date with respect
to the subject matter hereof. 

        14.12    Notice.    Whenever the Agreement requires that notice be provided to a Party, notice shall be delivered in
writing to such party at the address listed below. Notice will be deemed to have been validly given if delivered
(i) in person to the individual intended to receive such notice, (ii) by registered or by certified mail, postage prepaid to the address indicated in the Agreement within four
(4) days after being sent, or (iii) by facsimile, by the time stated in a machine-generated confirmation that notice was received at the facsimile number of the intended recipient. 

If
to Engineer, to: 

Fagen
Engineering LLC

501 W. Highway 212

P. O. Box 159

Granite Falls, MN 56241

Attention: John Austgen

Fax: (320) 564-4861 

with
a copy to: 

Fagen, Inc.

501 W. Highway 212

P. O. Box 159

Granite Falls, MN 56241

Attention: Bruce Langseth

Fax: (320) 564-3278 

If
to Client, to: 

Revis
L. Stephenson III

Chairman

1850 Fox Ridge Road

Orono, MN 55356 

10

 

        14.13    Extent of Agreement.    This Agreement and the Exhibits incorporated therein represent the entire agreement
between the parties and may be amended only by written instrument signed by both parties. 

        14.14    Subrogation Waiver.    The parties waive all rights against each other, and against contractors Engineer,
agents, and employees of the other for damages covered by any property insurance during construction, and each shall require similar waivers from their contractors, Engineers, and agents 

[The
next page is the signature page.] 

11

        IN WITNESS WHEREOF, the parties hereto have caused their names to be hereunto subscribed by their officers thereunto duly authorized,
intending thereby that this Agreement shall be effective as of this September 1, 2005. 

	ADVANCED BIOENERGY LLC	 	FAGEN ENGINEERING LLC
	

By:	
 	

/s/  REVIS L. STEPHENSON III      
	
 	

By:	
 	

/s/  JOHN R. AUSTGEN      

	

Attest:	
 	

/s/  BRANDON HANNA      
	
 	

Attest:	
 	

/s/  RICHARD J. POTTER      

	

Address for giving notices:	
 	

Address for giving notices:
	

1850 Fox Ridge Road

Orono, MN 55356	
 	

501 West Highway 212

PO Box 159

Granite Falls, MN 56241

EXHIBIT A  

FAGEN ENGINEERING LLC  

Fee Schedule FY 2005  

CONFIDENTIAL  

	TYPICAL ASSIGNMENT
 
	 	BILLING CLASS
	 	BILLING RATE

	Clerical / CADD Operator	 	1	 	$	[*]
	Clerical / CADD Operator	 	2	 	$	[*]
	CADD Operator / Designer	 	3	 	$	[*]
	CADD Operator / Designer / Engineer	 	4	 	$	[*]
	Designer I Engineer / PM	 	5	 	$	[*]
	Engineer / Senior Engineer / PM	 	6	 	$	[*]
	Senior Engineer / PM	 	7	 	$	[*]
	Senior Engineer / PM	 	8	 	$	[*]
	Senior Engineer / PM / Principal	 	9	 	$	[*]
	PM / Principal	 	10	 	$	[*]
	Principal	 	11	 	$	[*]
	Principal	 	12	 	$	[*]
	Principal	 	13	 	$	[*]

Subject to Revision January 1, 2006

	*
	Material
has been omitted pursuant to a request for confidential treatment and such materials have been filed separately with the Securities and Exchange Commission. 

EXHIBIT B  

Fagen Engineering LLC

Reimbursable Expense Billing Schedule  

Effective January 1, 2005  

CONFIDENTIAL  

	Expense Code
 
	 	Expense Description
	 	Billing Rate

	BCA	 	Blackline Print Copy — A	 	$[*]
	BCB	 	Blackline Print Copy — B	 	$[*]
	BCC	 	Blackline Print Copy — C	 	$[*]
	BCD	 	Blackline Print Copy — D	 	$[*]
	BCE	 	Blackline Print Copy — E	 	$[*]
	BOA	 	Paper Print Original — A	 	$[*]
	BOB	 	Paper Print Original • B	 	$[*]
	BOC	 	Paper Print Original — C	 	$[*]
	BOD	 	Paper Print Original — D	 	$[*]
	BOE	 	Paper Print Original — E	 	$[*]
	DISK	 	Floppy Disk 31/2" /ea	 	$[*]
	FAX	 	Fax Machine Usage/Page	 	$[*]
	LD	 	Long Distance Phone Calls	 	[*]
	LODGING	 	Lodging	 	[*]
	MEALS	 	Meal Expense	 	[*]
	MILEAGE	 	Mileage/Mile	 	$[*]
	PC1	 	Photocopies 81/2 11 (<OO)/ea	 	$[*]
	PC2	 	Photocopies 11 × 17/ea	 	$[*]
	PC3	 	Photocopies (>100)/ea Postage	 	$[*]
	PO	 	Outside Professional	 	[*]
	PROSVC	 	Services	 	[*]
	PROSVCEXP	 	Outside Professional Services Expenses	 	[*]
	FLM	 	Film & Developing	 	[*]
	SPECCOV	 	Specification Book — Cover & Binder/ea	 	$[*]
	TRANS	 	Transportation	 	[*]
	UPS	 	Delivery Service Charges	 	[*]
	VELLUM	 	Original Print/square foot	 	$[*]

Subject to Revision January 1, 2006

	*
	Material
has been omitted pursuant to a request for confidential treatment and such materials have been filed separately with the Securities and Exchange Commission. 

QuickLinks

Exhibit 10.14EXHIBIT 10.40

                                                         Dated: October 18, 2005

     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 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.

No. CCP-2                                                             $2,310,542

                       STARTECH ENVIRONMENTAL CORPORATION

               Amended and Restated Secured Convertible Debenture

                              Due October 18, 2006

     This Amended and Restated Secured Convertible Debenture (the "Debenture")
is issued by STARTECH ENVIRONMENTAL CORPORATION, a Colorado corporation (the
"Obligor"), to CORNELL CAPITAL PARTNERS, LP (the "Holder"), pursuant to that
certain Securities Purchase Agreement (the "Securities Purchase Agreement")
dated September 15, 2005. On September 15, 2005, the Obligor issued to the
Holder a secured convertible debenture in the principal amount of One Million
One Hundred Fifty Thousand Dollars ($1,150,000) (the "September Debenture").
This Debenture is being issued to reflect the consolidation of the September
Debenture (along with accrued and unpaid interested in the amount of $10,542
through the date hereof) and additional funding in the principal amount of One
Million One Hundred Fifty Thousand Dollars ($1,150,000), for the total amount of
Two Million Three Hundred Ten Thousand Five Hundred Forty Two Dollars
($2,310,542).

     FOR VALUE RECEIVED, the Obligor hereby promises to pay to the Holder or its
successors and assigns the principal sum of Two Million Three Hundred Ten
Thousand Five Hundred Forty Two Dollars ($2,310,542) together with accrued but
unpaid interest on or before September 15, 2006 (the "Maturity Date") in
accordance with the following terms:

     Interest. Interest shall accrue on the outstanding principal balance hereof
at an annual rate equal to ten percent (10%). Interest shall be calculated on
the basis of a 360-day year and the actual number of days elapsed, to the extent
permitted by applicable law. Interest hereunder will be paid to the Holder or
its assignee (as defined in Section 4) in whose name this Debenture is
registered on the records of the Obligor regarding registration and transfers of
Debentures (the "Debenture Register"). Interest shall be paid monthly commencing
one (1) month following the date hereof.

                                       1
<PAGE>

     Monthly Payments. The Obligor shall make monthly scheduled payments
("Scheduled Payments") consisting of principal and accrued interest. The first
Scheduled Payment shall be due and payable on the earlier of (a) the first day
of the first month immediately following the date that the Underlying Shares
Registration Statement is declared effective by the Commission, or (b) on March
15, 2006. After the first Scheduled Payment, each subsequent Scheduled Payment
shall be due and payable on the same day of each subsequent calendar month until
the Maturity Date. The principal amount of each Scheduled Payment shall be
determined by dividing the outstanding principal amount of this Debenture as of
the date of such Scheduled Payment by the number of Scheduled Payments remaining
until the Maturity Date. For example, if on the date of the first Scheduled
Payment the outstanding principal balance of this Debenture is $150,000 and
there are 7 Scheduled Payments remaining prior to the Maturity Date then the
first Scheduled Payment would consist of $21,429 of principal plus accrued
interest at the interest rate specified above. All payments in respect of the
indebtedness evidenced hereby shall be made in collected funds, and shall be
applied to principal, accrued interest and charges and expenses owing under or
in connection with this Debenture in such order as the Holder elects, except
that payments shall be applied to accrued interest before principal.
Notwithstanding the foregoing, this Debenture shall become due and immediately
payable, including all accrued but unpaid interest, upon the closing of a
Funding Event (as defined in Section 4 hereof) or pursuant to an Event of
Default (as defined in Section 2 hereof).

     Right of Redemption. The Obligor at its option shall have the right, with
three (3) business days advance written notice, to redeem a portion or all
amounts outstanding under this Debenture prior to the Maturity Date or any
Scheduled Payment date. In the event that the Closing Bid Price of the Common
Stock on any date that the Obligor provides advance written notice of redemption
or on the date redemption is made is greater than the Conversion Price then in
effect, the Obligor shall pay a redemption premium of twenty percent (20%)
("Redemption Premium") of the amount redeemed in addition to such redemption. So
long as this Debenture is held by Cornell Capital Partners, LP or its affiliates
(as defined in Rule 144 promulgated under the Securities Act of 1933, as
amended), the Company shall not make the monthly payments or redeem this
Debenture with the proceeds of the Standby Equity Distribution Agreement dated
September 15, 2005 between the Company and Cornell Capital Partners, LP.

     Security Agreements. This Debenture is secured by a Security Agreement (the
"Security Agreement") dated September 15, 2005 between the Obligor and the
Holder, a Pledge and Escrow Agreement (the "Pledge Agreement") dated September
15, 2005 among the Obligor, the Holder, and the Escrow Agent, and an Officer
Pledge and Escrow Agreement ("Officer Pledge Agreement") dated September 15,
2005 among the Obligor, the Holder, the Pledgors and the Escrow Agent.

     Consent of Holder to Sell Capital Stock or Grant Security Interests. Except
for the capital stock to be issued pursuant to the Amended and Restated Standby
Equity Distribution Agreement dated the date hereof between the Obligor and
Cornell Capital Partners, LP, so long as any of the principal amount or interest
on this Debenture remains unpaid and unconverted, the Obligor shall not, without
the prior consent of the Holder, which consent shall not be unreasonably
withheld, (i) issue or sell any common stock or preferred stock with or without
consideration, (ii) issue or sell any preferred stock, warrant, option, right,
contract, call, or other security or instrument granting the holder thereof the
right to acquire common stock with or without consideration, (iii) enter into
any security instrument granting the holder a security interest in any of the

                                       2
<PAGE>

assets of the Obligor, or (iv) file any registration statements on Form S-8. The
foregoing restriction shall not apply to the following: (a) any issuance by the
Obligor of securities in connection with a strategic partnership or a joint
venture or other partnering arrangement or to consultants (the primary purpose
of which is not to raise equity capital), (b) any issuance by the Obligor of
securities as consideration for a merger or consolidation or the acquisition of
a business, product, license, or other assets of another person or entity, (c)
securities issued pursuant to the conversion or exercise of convertible or
exercisable securities issued or outstanding on or prior to the date hereof or
issued pursuant to the Securities Purchase Agreement, (d) any warrants issued to
Trendwith Securities, Inc. and its designees for the transactions contemplated
by the Securities Purchase Agreement, provided, however, that the exercise price
of such warrants is not less than the Closing Bid Price of the Common Stock on
the date of issuance of such options, (e) the Warrant Shares and any securities
issued or issuable pursuant to the Securities Purchase Agreement, (f) any
issuance by the Obligor of its equity securities to raise capital so long as the
proceeds received by the Obligor are used to repay all outstanding principal and
accrued but unpaid interest under the Debenture along with the 20% Redemption
Premium if the price of the Obligor's Common Stock in connection with such
capital raise is below the Conversion Price, provided, however, the Obligor
provides the Holder with ten (10) days notice of such capital raise, (g) options
or grants of options to purchase up to 500,000 shares of Common Stock, provided
(I) such options are issued after the date of this Warrant to employees of the
Obligor, and (II) the exercise price of such options is not less than the
Closing Bid Price of the Common Stock on the date of issuance of such option and
(h) previously issued options prior to the date hereof to R. Dechairo, J.
Equale, N. Perna and K. Hale.

     This Debenture is subject to the following additional provisions:

     Section 1. This Debenture is exchangeable for an equal aggregate principal
amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.

     Section 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) Any default in the payment of the principal of, interest on or
other charges in respect of this Debenture, free of any claim of subordination,
as and when the same shall become due and payable (whether on a Scheduled
Payment due date, a Conversion Date or the Maturity Date or by acceleration or
otherwise), which is not cured within two (2) business days of such default;

          (ii) The Obligor 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)
hereof) or any Transaction Document (as defined in Section 4) which is not cured
within ten (10) business days of written notice of such default;

                                       3
<PAGE>

          (iii) The Obligor or any subsidiary of the Obligor shall commence, or
there shall be commenced against the Obligor or any subsidiary of the Obligor
under any applicable bankruptcy or insolvency laws as now or hereafter in effect
or any successor thereto, or the Obligor or any subsidiary of the Obligor
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
Obligor or any subsidiary of the Obligor or there is commenced against the
Obligor or any subsidiary of the Obligor any such bankruptcy, insolvency or
other proceeding which remains undismissed for a period of 61 days; or the
Obligor or any subsidiary of the Obligor is adjudicated insolvent or bankrupt;
or any order of relief or other order approving any such case or proceeding is
entered; or the Obligor or any subsidiary of the Obligor 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 Obligor or any subsidiary of the Obligor
makes a general assignment for the benefit of creditors; or the Obligor or any
subsidiary of the Obligor 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
Obligor or any subsidiary of the Obligor shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its
debts; or the Obligor or any subsidiary of the Obligor 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 Obligor
or any subsidiary of the Obligor for the purpose of effecting any of the
foregoing;

          (iv) The Obligor or any subsidiary of the Obligor 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 Obligor or any subsidiary of the Obligor 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, which is not cured within ten (10) business days of such
default;

          (v) The Common Stock shall cease to be quoted for trading or listed
for trading on either the Nasdaq OTC Bulletin Board ("OTC"), Nasdaq SmallCap
Market, New York Stock Exchange, American Stock Exchange or the Nasdaq National
Market (each, a "Subsequent Market") and shall not again be quoted or listed for
trading thereon within five (5) Trading Days of such delisting;

          (vi) The Obligor or any subsidiary of the Obligor shall be a party to
any Change of Control Transaction (as defined in Section 4);

          (vii) The Obligor shall fail to file the Underlying Shares
Registration Statement (as defined in Section 4) with the Commission (as defined
in Section 4), or the Underlying Shares Registration Statement shall not have
been declared effective by the Commission, in each case within the time periods
set forth in the Registration Rights Agreement dated September 15, 2005 between
the Obligor and the Holder;

                                       4
<PAGE>

          (viii) If the effectiveness of the Underlying Shares Registration
Statement lapses for any reason or the Holder shall not be permitted to resell
the shares of Common Stock underlying this Debenture under the Underlying Shares
Registration Statement, in either case, for more than five (5) consecutive
Trading Days or an aggregate of eight (8) Trading Days (which need not be
consecutive Trading Days);

          (ix) The Obligor shall fail for any reason to deliver Common Stock
certificates to a Holder prior to the fifth (5th) Trading Day after a Conversion
Date or the Obligor shall provide notice to the Holder, including by way of
public announcement, at any time, of its intention not to comply with requests
for conversions of this Debenture in accordance with the terms hereof;

          (x) The Obligor 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 notice is claimed delivered hereunder;

     (b) During the time that any portion of this Debenture is outstanding, if
any Event of Default has occurred and is continuing, the full principal amount
of this Debenture, together with interest and other amounts owing in respect
thereof, to the date of acceleration shall become at the Holder's election,
immediately due and payable in cash, provided however, the Holder may request
(but shall have no obligation to request) payment of such amounts in Common
Stock of the Obligor. If an Event of Default occurs and remains uncured, the
Conversion Price shall be reduced to $0.46. 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 Conversion Price then in-effect. The Holder need not provide and the Obligor
hereby waives any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such declaration may be rescinded and
annulled by Holder at any time prior to payment hereunder. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon. Upon the occurrence and continuance of an Event of Default,
notwithstanding any other provision of this Debenture or any Transaction
Document, the Holder shall have no obligation to comply with or adhere to any
limitations, if any, on the conversion of this Debenture or the sale of the
Underlying Shares.

     Section 3. Conversion.

     (a)  (i) Conversion at Option of Holder.

          (A) This Debenture shall be convertible into shares of Common Stock at
the option of the Holder, in whole or in part at any time and from time to time,
after the Original Issue Date (as defined in Section 4) (subject to the
limitations on conversion set forth in Section 3(a)(ii) hereof). The number of
shares of Common Stock issuable upon a conversion hereunder equals the quotient
obtained by dividing (x) the outstanding amount of this Debenture to be
converted by (y) the Conversion Price (as defined in Section 3(c)(i)). The
Obligor shall deliver Common Stock certificates to the Holder prior to the Fifth
(5th) Trading Day after a Conversion Date.

                                       5
<PAGE>

          (B) Notwithstanding anything to the contrary contained herein, if on
any Conversion Date: (1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay principal and interest hereunder in shares of Common
Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on
a Subsequent Market; (3) the Obligor has failed to timely satisfy its
conversion; or (4) the issuance of such shares of Common Stock would result in a
violation of Section 3(a)(ii), then, at the option of the Holder, the Obligor,
in lieu of delivering shares of Common Stock pursuant to Section 3(a)(i)(A),
shall deliver, within three (3) Trading Days of each applicable Conversion Date,
an amount in cash equal to the product of the outstanding principal amount to be
converted plus any interest due therein divided by the Conversion Price and
multiplied by the highest closing price of the stock from date of the conversion
notice till the date that such cash payment is made.

     Further, if the Obligor shall not have delivered any cash due in respect of
conversion of this Debenture or as payment of interest thereon by the fifth
(5th) Trading Day after the Conversion Date, the Holder may, by notice to the
Obligor, require the Obligor to issue shares of Common Stock pursuant to Section
3(c), except that for such purpose the Conversion Price applicable thereto shall
be the lesser of the Conversion Price on the Conversion Date and the Conversion
Price on the date of such Holder demand. Any such shares will be subject to the
provisions of this Section.

          (C) The Holder shall effect conversions by delivering to the Obligor a
completed notice in the form attached hereto as Exhibit A (a "Conversion
Notice"). The date on which a Conversion Notice is delivered is the "Conversion
Date." Unless the Holder is converting the entire principal amount outstanding
under this Debenture, the Holder is not required to physically surrender this
Debenture to the Obligor in order to effect conversions. Conversions hereunder
shall have the effect of lowering the outstanding principal amount of this
Debenture plus all accrued and unpaid interest thereon in an amount equal to the
applicable conversion. The Holder and the Obligor shall maintain records showing
the principal amount converted and the date of such conversions. In the event of
any dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error.

          (ii) Certain Conversion Restrictions.

               (A) A Holder may not convert this Debenture or receive shares of
Common Stock as payment of interest hereunder to the extent such conversion or
receipt of such interest payment would result in the Holder, together with any
affiliate thereof, beneficially owning (as determined in accordance with Section
13(d) of the Exchange Act and the rules promulgated thereunder) in excess of
4.9% of the then issued and outstanding shares of Common Stock, including shares
issuable upon conversion of, and payment of interest on, this Debenture held by
such Holder after application of this Section. Since the Holder will not be
obligated to report to the Obligor 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 4.9% of the then

                                       6
<PAGE>

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 Obligor 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 the periods described in
Section 3(a)(i)(A) and, at the option of the Holder, either retain any principal
amount tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess principal amount to the Holder. 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 written notice to the
Obligor. Other Holders shall be unaffected by any such waiver.

     (b)  (i) 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
Obligor '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.

          (ii) In addition to any other rights available to the Holder, if the
Obligor fails to deliver to the Holder such certificate or certificates pursuant
to Section 3(a)(i)(A) by the fifth (5th) Trading Day after the Conversion Date,
and if after such fifth (5th) Trading Day the Holder purchases (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "Buy-In"), then the Obligor shall (A) pay in
cash to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by (2) the market
price of the Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either reissue a Debenture in
the principal amount equal to the principal amount of the attempted conversion
or deliver to the Holder the number of shares of Common Stock that would have
been issued had the Obligor timely complied with its delivery requirements under
Section 3(a)(i)(A). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Debentures with respect to which the market price of the
Underlying Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Obligor shall be required to pay
the Holder $1,000. The Holder shall provide the Obligor written notice
indicating the amounts payable to the Holder in respect of the Buy-In.

                                       7
<PAGE>

     (c)  (i) The conversion price (the "Conversion Price") in effect on any
Conversion Date shall be equal to $1.84, which may be adjusted pursuant to the
other terms of this Debenture.

          (ii) If the Obligor, 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 Obligor, 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.

          (iii) Except for the following: (a) any issuance by the Obligor of
securities in connection with a strategic partnership or a joint venture or
other partnering arrangement or to consultants (the primary purpose of which is
not to raise equity capital), (b) any issuance by the Obligor of securities as
consideration for a merger or consolidation or the acquisition of a business,
product, license, or other assets of another person or entity, (c) securities
issued pursuant to the conversion or exercise of convertible or exercisable
securities issued or outstanding on or prior to the date hereof or issued
pursuant to the Securities Purchase Agreement, (d) any warrants issued to
Trendwith Securities, Inc. and its designees for the transactions contemplated
by the Securities Purchase Agreement, provided, however, that the exercise price
of such warrants is not less than the Closing Bid Price of the Common Stock on
the date of issuance of such options, (e) the Warrant Shares and any securities
issued or issuable pursuant to the Securities Purchase Agreement, (f) options or
grants of options to purchase up to 500,000 shares of Common Stock, provided (I)
such options are issued after the date of this Warrant to employees of the
Company, and (II) the exercise price of such options is not less than the
Closing Bid Price of the Common Stock on the date of issuance of such option and
(g) previously issued options prior to the date hereof to R. Dechairo, J.
Equale, N. Perna and K. Hale, if the Obligor, at any time while this Debenture
is outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to the Holder) entitling them to subscribe for or purchase shares
of Common Stock at a price per share less than the Closing Bid Price at the
record date mentioned below, then the Conversion Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants (plus the number of additional shares of Common Stock
offered for subscription or purchase), and of which the numerator shall be the
number of shares of the Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants, plus the number
of shares which the aggregate offering price of the total number of shares so
offered would purchase at such Closing Bid Price. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants. However, upon the expiration of any

                                       8
<PAGE>

such right, option or warrant to purchase shares of the Common Stock the
issuance of which resulted in an adjustment in the Conversion Price pursuant to
this Section, if any such right, option or warrant shall expire and shall not
have been exercised, the Conversion Price shall immediately upon such expiration
be recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section after the
issuance of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights, options or warrants been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock actually purchased upon the exercise of such rights, options or
warrants actually exercised.

          (iv) Except for the following: (a) any issuance by the Obligor of
securities in connection with a strategic partnership or a joint venture or
other partnering arrangement or to consultants (the primary purpose of which is
not to raise equity capital), (b) any issuance by the Obligor of securities as
consideration for a merger or consolidation or the acquisition of a business,
product, license, or other assets of another person or entity, (c) securities
issued pursuant to the conversion or exercise of convertible or exercisable
securities issued or outstanding on or prior to the date hereof or issued
pursuant to the Securities Purchase Agreement, (d) any warrants issued to
Trendwith Securities, Inc. and its designees for the transactions contemplated
by the Securities Purchase Agreement, provided, however, that the exercise price
of such warrants is not less than the Closing Bid Price of the Common Stock on
the date of issuance of such options, (e) the Warrant Shares and any securities
issued or issuable pursuant to the Securities Purchase Agreement, (f) options or
grants of options to purchase up to 500,000 shares of Common Stock, provided (I)
such options are issued after the date of this Warrant to employees of the
Company, and (II) the exercise price of such options is not less than the
Closing Bid Price of the Common Stock on the date of issuance of such option and
(g) previously issued options prior to the date hereof to R. Dechairo, J.
Equale, N. Perna and K. Hale, if the Obligor or any subsidiary thereof, as
applicable, with respect to Common Stock Equivalents (as defined below), at any
time while this Debenture is outstanding, shall issue shares of Common Stock or
rights, warrants, options or other securities or debt that are convertible into
or exchangeable for shares of Common Stock ("Common Stock Equivalents")
entitling any Person to acquire shares of Common Stock, at a price per share
less than the Conversion Price (if the holder of the Common Stock or Common
Stock Equivalent so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares of Common
Stock at a price per share which is less than the Conversion Price, such
issuance shall be deemed to have occurred for less than the Conversion Price),
then, at the sole option of the Holder, the Conversion Price shall be adjusted
to mirror the conversion, exchange or purchase price for such Common Stock or
Common Stock Equivalents (including any reset provisions thereof) at issue. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. The Obligor shall notify the Holder in writing, no later than one
(1) business day following the issuance of any Common Stock or Common Stock
Equivalent subject to this Section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms. No adjustment under this Section shall be made as a result of
issuances and exercises of options to purchase shares of Common Stock issued for
compensatory purposes pursuant to any of the Obligor's stock option or stock
purchase plans.

                                       9
<PAGE>

          (v) If the Obligor, at any time while this Debenture is outstanding,
shall distribute to all holders of Common Stock (and not to the Holder)
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any security, then in each such case the Conversion Price at which
this Debenture shall thereafter be convertible shall be determined by
multiplying the Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Closing Bid Price determined as
of the record date mentioned above, and of which the numerator shall be such
Closing Bid Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.

          (vi) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the Holder shall have the right thereafter
to, at its option, (A) convert the then outstanding principal amount, together
with all accrued but unpaid interest and any other amounts then owing hereunder
in respect of this Debenture into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of the Common Stock
following such reclassification or share exchange, and the Holder of this
Debenture shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the Obligor
into which the then outstanding principal amount, together with all accrued but
unpaid interest and any other amounts then owing hereunder in respect of this
Debenture could have been converted immediately prior to such reclassification
or share exchange would have been entitled, or (B) require the Obligor to prepay
the outstanding principal amount of this Debenture, plus all interest and other
amounts due and payable thereon. The entire prepayment price shall be paid in
cash. This provision shall similarly apply to successive reclassifications or
share exchanges.

          (vii) The Obligor shall maintain a share reserve of not less than 100%
of the shares of Common Stock issuable upon conversion of this Debenture; and
within three (3) Business Days following the receipt by the Obligor of a
Holder's notice that such minimum number of Underlying Shares is not so
reserved, the Obligor shall promptly reserve a sufficient number of shares of
Common Stock to comply with such requirement.

          (viii) All calculations under this Section 3 shall be rounded up to
the nearest $0.001 of a share.

          (ix) Whenever the Conversion Price is adjusted pursuant to Section 3
hereof, the Obligor 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.

          (x) If (A) the Obligor shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Obligor shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Obligor shall authorize the granting to all holders of the Common Stock rights

                                       10
<PAGE>

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

          (xi) In case of any (1) merger or consolidation of the Obligor or any
subsidiary of the Obligor with or into another Person, or (2) sale by the
Obligor or any subsidiary of the Obligor of more than one-half of the assets of
the Obligor 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.

                                       11
<PAGE>

     (d) The Obligor 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 Obligor as to reservation of such shares set
forth in this Debenture) be issuable (taking into account the adjustments and
restrictions of Sections 2(b) and 3(c)) upon the conversion of the outstanding
principal amount of this Debenture and payment of interest hereunder. The
Obligor 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.

     (e) Upon a conversion hereunder the Obligor shall not be required to issue
stock certificates representing fractions of shares of the Common Stock, but may
if otherwise permitted, make a cash payment in respect of any final fraction of
a share based on the Closing Bid Price at such time. If the Obligor elects not,
or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common
Stock.

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

     (g) 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:

                                       12
<PAGE>

If to the Company, to:        Startech Environmental Corporation
                              15 Old Danbury Road - Suite 203
                              Wilton, CT 06897
                              Attention: Peter J. Scanlon
                              Telephone: (203) 762-2499
                              Facsimile: (203) 761-0839

With a copy to:               Kramer Levin Naftalis & Frankel, LLP
                              1177 Avenue of the Americas
                              New York, NY 10036
                              Attention: Scott S. Rosenblum, Esq.
                              Telephone: (212) 715-9411
                              Facsimile: (212) 715-8411

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, 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.

     Section 4. Definitions. For the purposes hereof, the following terms shall
have the following meanings:

     "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.

     "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 Obligor,
by contract or otherwise) of in excess of fifty percent (50%) of the voting

                                       13
<PAGE>

securities of the Obligor (except that the acquisition of voting securities by
the Holder 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 Obligor 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 Obligor or any subsidiary of the Obligor in one or a series of
related transactions with or into another entity, or (d) the execution by the
Obligor of an agreement to which the Obligor is a party or by which it is bound,
providing for any of the events set forth above in (a), (b) or (c).

     "Commission" means the Securities and Exchange Commission.

     "Common Stock" means the common stock, no par value, of the Obligor and
stock of any other class into which such shares may hereafter be changed or
reclassified.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Funding Event" means any transaction or series of transactions closed
after the Original Issue Date in which the Obligor raises $3,500,000 or more
through the sale of their equity securities or securities exercisable or
convertible into equity securities.

     "Original Issue Date" shall mean 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.

     "Closing Bid Price" means the price per share in the last reported trade of
the Common Stock on the OTC or on the exchange which the Common Stock is then
listed as quoted by Bloomberg, LP.

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

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

     "Trading Day" means a day on which the shares of Common Stock are quoted on
the OTC or quoted or traded on such Subsequent 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.

     "Transaction Documents" means the Securities Purchase Agreement or any
other agreement delivered in connection with the Securities Purchase Agreement,
including, without limitation, the Security Agreement, the Pledge Agreement, the
Irrevocable Transfer Agent Instructions, the Warrant, and the Investor
Registration Rights Agreement.

                                       14
<PAGE>

     "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.

     "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.

     Section 5. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligations of the Obligor, 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
Obligor. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. As long as this Debenture is
outstanding, the Obligor shall not and shall cause its subsidiary 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.

     Section 6. This Debenture shall not entitle the Holder to any of the rights
of a stockholder of the Obligor, 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 Obligor,
unless and to the extent converted into shares of Common Stock in accordance
with the terms hereof.

     Section 7. If this Debenture is mutilated, lost, stolen or destroyed, the
Obligor shall execute and deliver, in exchange and substitution for and upon
cancellation of the mutilated Debenture, or in lieu of or in substitution for a
lost, stolen or destroyed Debenture, a new Debenture for the principal amount of
this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Obligor.

     Section 8. No indebtedness of the Obligor 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 Obligor will not
and will not permit any of its subsidiary 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 Obligor under this Debenture.

     Section 9. 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.

                                       15
<PAGE>

     Section 10. If the Obligor fails to strictly comply with the terms of this
Debenture, then the Obligor 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.

     Section 11. 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.

     Section 12. 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 Obligor 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 Obligor 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 Obligor (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.

     Section 13. 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.

     Section 14. 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.

                   [REMAINDER OF PAGE INTENTIONLLY LEFT BLANK]

                                       16
<PAGE>

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

                                             STARTECH ENVIRONMENTAL CORPORATION

                                             By: /s/  Peter J. Scanlon
                                             -----------------------------------
                                             Name:    Peter J. Scanlon
                                             Title:   CFO

                                       17
<PAGE>

                                   EXHIBIT "A"

                              NOTICE OF CONVERSION

        (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 the above Debenture into Shares of Common Stock of Startech
Environmental Corporation, according to the conditions stated therein, as of the
Conversion Date written below.

Conversion Date:
--------------------------------------------------------------------------------
Applicable Conversion Price:
--------------------------------------------------------------------------------
Signature:
--------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------------
Amount to be converted:                   $
--------------------------------------------------------------------------------
Amount of Debenture unconverted:          $
--------------------------------------------------------------------------------
Conversion Price per share:               $
--------------------------------------------------------------------------------
Number of shares of Common Stock to be
issued:
--------------------------------------------------------------------------------
Please issue the shares of Common Stock
in the following name and to the
following address:
--------------------------------------------------------------------------------
Issue to:
--------------------------------------------------------------------------------
Authorized Signature:
--------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
Phone Number:
--------------------------------------------------------------------------------
Broker DTC Participant Code:
--------------------------------------------------------------------------------
Account Number:
--------------------------------------------------------------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}]]