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Unassociated Document

    EXHIBIT
      4.4

    

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

    

    Original
      Issue Date: February 15, 2007

    Original
      Conversion Price (subject to adjustment herein): $0.1375

    

    $714,500

    

    

    CONVERTIBLE
      DEBENTURE

    

    

    THIS
      CONVERTIBLE DEBENTURE is one of a series of duly authorized and issued
      Convertible Debentures of Fellows Energy Ltd., a Nevada corporation, having
      a
      principal place of business at 370 Interlocken Boulevard, Suite 400, Broomfield,
      CO 80021 (the “Company”),
      designated as its Convertible Debenture (this debenture, the “Debenture”
and
      collectively with the other such series of debentures, the “Debentures”).

    

    FOR
      VALUE
      RECEIVED, the Company promises to pay to Palisades Master Fund L.P. or its
      registered assigns (the “Holder”),
      or
      shall have paid pursuant to the terms hereunder, the principal sum of $714,500
      by September 7, 2007, or such earlier date as this Debenture is required or
      permitted to be repaid as provided hereunder (the “Maturity
      Date”).
      This
      Debenture is subject to the following additional provisions:

    

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

    

    “Alternate
      Consideration”
shall
      have the meaning set forth in Section 5(d).

    
      
         

         

      

      
         

        
          

        

      

      
         

      

    

    “Base
      Conversion Price”
shall
      have the meaning set forth in Section 5(b).

    

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

    

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

    

    “Change
      of Control Transaction”
means
      the occurrence after the date hereof of any of (i) an acquisition after the
      date
      hereof by an individual or legal entity or “group” (as described in Rule
      13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
      through legal or beneficial ownership of capital stock of the Company, by
      contract or otherwise) of in excess of 33% of the voting securities of the
      Company, or (ii) the Company merges into or consolidates with any other Person,
      or any Person merges into or consolidates with the Company and, after giving
      effect to such transaction, the stockholders of the Company immediately prior
      to
      such transaction own less than 66% of the aggregate voting power of the Company
      or the successor entity of such transaction, or (iii) the Company sells or
      transfers its assets, as an entirety or substantially as an entirety, to another
      Person and the stockholders of the Company immediately prior to such transaction
      own less than 66% of the aggregate voting power of the acquiring entity
      immediately after the transaction, (iv) a replacement at one time or within
      a
      three year period of more than one-half of the members of the Company’s board of
      directors which is not approved by a majority of those individuals who are
      members of the board of directors on the date hereof (or by those individuals
      who are serving as members of the board of directors on any date whose
      nomination to the board of directors was approved by a majority of the members
      of the board of directors who are members on the date hereof), or (v) the
      execution by the Company of an agreement to which the Company is a party or
      by
      which it is bound, providing for any of the events set forth above in (i) or
      (iv).

    

    “Closing
      Price”
means
      on any particular date (a) the last reported closing bid price per share of
      Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
      at 4:15 PM (New York time), or (b) if there is no such price on such date,
      then
      the closing bid price on the Trading Market on the date nearest preceding such
      date (as reported by Bloomberg L.P. at 4:15 PM (New York time) for the closing
      bid price for regular session trading on such day), or (c) if the Common
      Stock is not then listed or quoted on the Trading Market and if prices for
      the
      Common Stock are then reported in the “pink sheets” published by the Pink
      Sheets, LLC (or a similar organization or agency succeeding to its functions
      of
      reporting prices), the most recent bid price per share of the Common Stock
      so
      reported, or (d) if the shares of Common Stock are not then publicly traded
      the fair market value of a share of Common Stock as determined by a qualified
      independent appraiser selected in good faith by the Holders of a majority in
      interest of the outstanding principal amount of the Debentures.

     

    
      
         

         

      

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

     

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

    

    “Conversion
      Price”
shall
      have the meaning set forth in Section 4(b).

    

    “Conversion
      Shares”
means
      the shares of Common Stock issuable upon conversion of this
      Debenture.

    

    “Debenture
      Register”
shall
      have the meaning set forth in Section 2(c).

    

    “Dilutive
      Issuance”
shall
      have the meaning set forth in Section 5(b).

    

    “Dilutive
      Issuance Notice”
shall
      have the meaning set forth in Section 5(b).

    

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

    

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

    

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.

    

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

     

    “Mandatory
      Default Amount”
shall
      equal the sum of (i) the greater of: (A) 130% of the principal amount of this
      Debenture to be prepaid, or (B) the principal amount of this Debenture to be
      prepaid, divided by the Conversion Price on (x) the date the Mandatory Default
      Amount is demanded or otherwise due or (y) the date the Mandatory Default Amount
      is paid in full, whichever is less, multiplied by the Closing Price on (x)
      the
      date the Mandatory Default Amount is demanded or otherwise due or (y) the date
      the Mandatory Default Amount is paid in full, whichever is greater, and (ii)
      all
      other amounts, costs, expenses and liquidated damages due in respect of this
      Debenture.

    

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

    

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

    

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

    
      
         

         

      

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

    

    “Purchase
      Agreement”
means
      the Securities Purchase Agreement, dated as of February 15, 2007, to which
      the
      Company and the original Holder are parties, as amended, modified or
      supplemented from time to time in accordance with its terms.

    

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

    

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

    

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

    

    “Subsidiary”
shall
      have the meaning given to such term in the Purchase Agreement.

    

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

    

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

    

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

    

    Section
      2. Interest.

     

    a) No
      Payment of Interest.
      This
      Debenture was issued for an Original Issue Discount. No interest payments shall
      be due and payable to the Holder hereunder.

     

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

    
      
         

         

      

      
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    Section
      3.  Registration
      of Transfers and Exchanges.
      

     

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

     

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

    

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

    

    Section
      4.  Conversion.

     

    a) Voluntary
      Conversion.
      At any
      time after the Original Issue Date until this Debenture is no longer
      outstanding, this Debenture shall be convertible into shares of Common Stock
      at
      the option of the Holder, in whole or in part at any time and from time to
      time
      (subject to the limitations on conversion set forth in Section 4(c)
      hereof). The Holder shall effect conversions by delivering to the Company the
      form of Notice of Conversion attached hereto as Annex
      A
      (a
“Notice
      of Conversion”),
      specifying therein the principal amount of this Debenture to be converted and
      the date on which such conversion is to be effected (a “Conversion
      Date”).
      If no
      Conversion Date is specified in a Notice of Conversion, the Conversion Date
      shall be the date that such Notice of Conversion is provided hereunder. To
      effect conversions hereunder, the Holder shall not be required to physically
      surrender this Debenture to the Company unless the entire principal amount
      of
      this Debenture has been so converted. Conversions hereunder shall have the
      effect of lowering the outstanding principal amount of this Debenture in an
      amount equal to the applicable conversion. The Holder and the Company shall
      maintain records showing the principal amount converted and the date of such
      conversions. The Company shall deliver any objection to any Notice of Conversion
      within 1 Business Day of receipt of such notice. In the event of any dispute
      or
      discrepancy, the records of the Holder shall be controlling and determinative
      in
      the absence of manifest error. The Holder and any assignee, by acceptance of
      this Debenture, acknowledge and agree that, by reason of the provisions of
      this
      paragraph, following conversion of a portion of this Debenture, the unpaid
      and
      unconverted principal amount of this Debenture may be less than the amount
      stated on the face hereof.

     

    b) Conversion
      Price.
      The
      conversion price in effect on any Conversion Date shall be equal to $0.1375
      (subject
      to adjustment herein)(the “Conversion
      Price”).

    
      
         

         

      

      
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    c) Holder’s
      Restriction on Conversion.
      The
      Company shall not effect any conversion of this Debenture, and the Holder shall
      not have the right to convert any portion of this Debenture, pursuant to Section
      4(a) or otherwise, to the extent that after giving effect to such conversion,
      the Holder (together with the Holder’s affiliates), as set forth on the
      applicable Notice of Conversion, would beneficially own in excess of 4.99%
      of
      the number of shares of the Common Stock outstanding immediately after giving
      effect to such conversion.  For purposes of the foregoing sentence, the
      number of shares of Common Stock beneficially owned by the Holder and its
      affiliates shall include the number of shares of Common Stock issuable upon
      conversion of this Debenture with respect to which the determination of such
      sentence is being made, but shall exclude the number of shares of Common Stock
      which would be issuable upon (A) conversion of the remaining, nonconverted
      portion of this Debenture beneficially owned by the Holder or any of its
      affiliates and (B) exercise or conversion of the unexercised or nonconverted
      portion of any other securities of the Company (including, without limitation,
      any other debentures or warrants) subject to a limitation on conversion or
      exercise analogous to the limitation contained herein beneficially owned by
      the
      Holder or any of its affiliates.  Except as set forth in the preceding
      sentence, for purposes of this Section 4(c), beneficial ownership shall be
      calculated in accordance with Section 13(d) of the Exchange Act. To the extent
      that the limitation contained in this section applies, the determination of
      whether this Debenture is convertible (in relation to other securities owned
      by
      the Holder) and of which a portion of this Debenture is convertible shall be
      in
      the sole discretion of such Holder. To ensure compliance with this restriction,
      the Holder will be deemed to represent to the Company each time it delivers
      a
      Notice of Conversion that such Notice of Conversion has not violated the
      restrictions set forth in this paragraph and the Company shall have no
      obligation to verify or confirm the accuracy of such determination. For purposes
      of this Section 4(c), in determining the number of outstanding shares of Common
      Stock, the Holder may rely on the number of outstanding shares of Common Stock
      as reflected in (x) the Company’s most recent Form 10-QSB or Form 10-KSB, as the
      case may be, (y) a more recent public announcement by the Company or (z) any
      other notice by the Company or the Company’s Transfer Agent setting forth the
      number of shares of Common Stock outstanding.  Upon the written or oral
      request of the Holder, the Company shall within two Trading Days confirm orally
      and in writing to the Holder the number of shares of Common Stock then
      outstanding.  In any case, the number of outstanding shares of Common Stock
      shall be determined after giving effect to the conversion or exercise of
      securities of the Company, including this Debenture, by the Holder or its
      affiliates since the date as of which such number of outstanding shares of
      Common Stock was reported. The provisions of this Section 4(c) may be waived
      by
      the Holder, at the election of the Holder, upon not less than 61 days’ prior
      notice to the Company, and the provisions of this Section 4(c) shall continue
      to
      apply until such 61st day (or such later date, as determined by the Holder,
      as
      may be specified in such notice of waiver).

     

    d) Mechanics
      of Conversion

     

    
      
         

         

      

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

    

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

     

    iii. Failure
      to Deliver Certificates.
      If in
      the case of any Notice of Conversion such certificate or certificates are not
      delivered to or as directed by the applicable Holder by the third Trading Day
      after a Conversion Date, the Holder shall be entitled by written notice to
      the
      Company at any time on or before its receipt of such certificate or certificates
      thereafter, to rescind such conversion, in which event the Company shall
      immediately return the certificates representing the principal amount of this
      Debenture tendered for conversion. 

     

    iv. Obligation
      Absolute; Partial Liquidated Damages.
      If the
      Company fails for any reason to deliver to the Holder such certificate or
      certificates pursuant to Section 4(d)(ii) by the third Trading Day after the
      Conversion Date, the Company shall pay to such Holder, in cash, as liquidated
      damages and not as a penalty, for each $1000 of principal amount being
      converted, $10 per Trading Day (increasing to $20 per Trading Day after 5
      Trading Days after such damages begin to accrue) for each Trading Day after
      such
      third Trading Day until such certificates are delivered. The Company’s
      obligations to issue and deliver the Conversion Shares upon conversion of this
      Debenture in accordance with the terms hereof are absolute and unconditional,
      irrespective of any action or inaction by the Holder to enforce the same, any
      waiver or consent with respect to any provision hereof, the recovery of any
      judgment against any Person or any action to enforce the same, or any setoff,
      counterclaim, recoupment, limitation or termination, or any breach or alleged
      breach by the Holder or any other Person of any obligation to the Company or
      any
      violation or alleged violation of law by the Holder or any other person, and
      irrespective of any other circumstance which might otherwise limit such
      obligation of the Company to the Holder in connection with the issuance of
      such
      Conversion Shares; provided,
      however,
      such
      delivery shall not operate as a waiver by the Company of any such action the
      Company may have against the Holder. In the event  the Holder of this
      Debenture  shall elect  to
      convert any or all of the outstanding  principal 

     

     

    
      
         

         

      

      
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    amount
      hereof, the Company may not refuse conversion based on any claim that the Holder
      or any one associated or affiliated with the Holder has been engaged in any
      violation of law, agreement or for any other reason, unless, an injunction
      from
      a court, on notice, restraining and or enjoining conversion of all or part
      of
      this Debenture shall have been sought and obtained and the Company posts a
      surety bond for the benefit of the Holder in the amount of 150% of the principal
      amount of this Debenture outstanding, which is subject to the injunction, which
      bond shall remain in effect until the completion of arbitration/litigation
      of
      the dispute and the proceeds of which shall be payable to such Holder to the
      extent it obtains judgment. In the absence of an injunction precluding the
      same,
      the Company shall issue Conversion Shares or, if applicable, cash, upon a
      properly noticed conversion. Nothing herein shall limit a Holder’s right to
      pursue actual damages or declare an Event of Default pursuant to Section 8
      herein for the Company’s failure to deliver Conversion Shares 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. The exercise of any such rights
      shall not prohibit the Holder from seeking to enforce damages pursuant to any
      other Section hereof or under applicable law.

     

    v. Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Conversion.
      In
      addition to any other rights available to the Holder, if the Company fails
      for
      any reason to deliver to the Holder such certificate or certificates pursuant
      to
      Section 4(d)(ii) by the third Trading Day after the Conversion Date, and if
      after such third Trading Day the Holder is required by its brokerage firm to
      purchase (in an open market transaction or otherwise) Common Stock to deliver
      in
      satisfaction of a sale by such Holder of the Conversion Shares which the Holder
      anticipated receiving upon such conversion (a “Buy-In”),
      then
      the Company 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 actual sale price of the Common Stock at the time
      of
      the sale (including brokerage commissions, if any) giving rise to such purchase
      obligation and (B) at the option of the Holder, either reissue (if surrendered)
      this Debenture in a principal amount equal to the principal amount of the
      attempted conversion or deliver to the Holder the number of shares of Common
      Stock that would have been issued had the Company timely complied with its
      delivery requirements under Section 4(d)(ii). For example, if the Holder
      purchases Common Stock having a total purchase price of $11,000 to cover a
      Buy-In with respect to an attempted conversion of this Debenture with respect
      to
      which the actual sale price of the Conversion Shares at the time of the
      sale (including
      brokerage commissions, if any) giving rise to such purchase obligation was
      a  total of $10,000 under clause (A) of  the immediately preceding
      sentence,

     

    
      
         

      

      
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    the
      Company shall
      be
      required to pay the Holder $1,000. The Holder shall provide the Company written
      notice indicating the amounts payable to the Holder in respect of the Buy-In.
      Notwithstanding anything contained herein to the contrary, if a Holder requires
      the Company to make payment in respect of a Buy-In for the failure to timely
      deliver certificates hereunder and the Company timely pays in full such payment,
      the Company shall not be required to pay such Holder liquidated damages under
      Section 4(d)(iv) in respect of the certificates resulting in such
      Buy-In.

    vi. Reservation
      of Shares Issuable Upon Conversion.
      The
      Company covenants that it will at all times reserve and keep available out
      of
      its authorized and unissued shares of Common Stock solely for the purpose of
      issuance upon conversion of this Debenture, free from preemptive rights or
      any
      other actual contingent purchase rights of persons other than the Holder (and
      the other holders of the Debentures), not less than such number of shares of
      the
      Common Stock as shall (subject to the terms and conditions set forth in the
      Purchase Agreement) be issuable (taking into account the adjustments and
      restrictions of Section 5) upon the conversion of the outstanding principal
      amount of this Debenture hereunder. The Company covenants that all shares of
      Common Stock that shall be so issuable shall, upon issue, be duly and validly
      authorized, issued and fully paid, nonassessable and, if the Registration
      Statement is then effective under the Securities Act, registered for public
      sale
      in accordance with such Registration Statement.

    

    vii. Fractional
      Shares.
      Upon a
      conversion hereunder the Company 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 Price at such time. If the Company 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.

    

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

    

    Section
      5. Certain
      Adjustments.

    
      
         

         

      

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

     

    b) Subsequent
      Equity Sales.
      If the
      Company or any Subsidiary thereof, as applicable, at any time while this
      Debenture is outstanding, shall offer, sell, grant any option to purchase or
      offer, sell or grant any right to reprice its securities, or otherwise dispose
      of or issue (or announce any offer, sale, grant or any option to purchase or
      other disposition) any Common Stock or Common Stock Equivalents entitling any
      Person to acquire shares of Common Stock, at an effective price per share less
      than the then Conversion Price (such lower price, the “Base
      Conversion Price”
and
      such issuances collectively, a “Dilutive
      Issuance”),
      as
      adjusted hereunder (if the holder of the Common Stock or Common Stock
      Equivalents so issued shall at any time, whether by operation of purchase price
      adjustments, reset provisions, floating conversion, exercise or exchange prices
      or otherwise, or due to warrants, options or rights per share which is issued
      in
      connection with such issuance, be entitled to receive shares of Common Stock
      at
      an effective price per share which is less than the Conversion Price, such
      issuance shall be deemed to have occurred for less than the Conversion Price
      on
      such date of the Dilutive Issuance), then the Conversion Price shall be reduced
      to equal the Base Conversion Price. Such adjustment shall be made whenever
      such
      Common Stock or Common Stock Equivalents are issued. Notwithstanding
      the foregoing, no adjustment will be made under this Section 5(b) in respect
      of
      an Exempt Issuance.
      The
      Company shall notify the Holder in writing, no later than the Business Day
      following the issuance of any Common Stock or Common Stock Equivalents subject
      to this section, indicating therein the applicable issuance price, or of
      applicable reset price, exchange price, conversion price and other pricing
      terms
      (such notice the “Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Company provides a Dilutive
      Issuance Notice pursuant to this Section 5(b), upon the occurrence of any
      Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
      entitled to receive a number of Conversion Shares based upon the Base Conversion
      Price regardless of whether the Holder accurately refers to the Base Conversion
      Price in the Notice of Conversion. 

    
      
         

         

      

      
        10

        
          

        

      

      
         

      

    

    c) Pro
      Rata Distributions.
      If the
      Company, at any time while this Debenture is outstanding, shall distribute
      to
      all holders of Common Stock (and not to the holders of the Debentures) evidences
      of its indebtedness or assets (including cash and cash dividends) or rights
      or
      warrants to subscribe for or purchase any security, then in each such case
      the
      Conversion Price shall be adjusted by multiplying such Conversion Price in
      effect immediately prior to the record date fixed for determination of
      stockholders entitled to receive such distribution by a fraction of which the
      denominator shall be the Closing Price determined as of the record date
      mentioned above, and of which the numerator shall be such Closing 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.

     

    d) Fundamental
      Transaction.
      If, at
      any time while this Debenture is outstanding, (A) the Company effects any merger
      or consolidation of the Company with or into another Person, (B) the Company
      effects any sale of all or substantially all of its assets in one or a series
      of
      related transactions, (C) any tender offer or exchange offer (whether by the
      Company or another Person) is completed pursuant to which holders of Common
      Stock are permitted to tender or exchange their shares for other securities,
      cash or property, or (D) the Company effects any reclassification of the Common
      Stock or any compulsory share exchange pursuant to which the Common Stock is
      effectively converted into or exchanged for other securities, cash or property
      (in any such case, a “Fundamental
      Transaction”),
      then
      upon any subsequent conversion of this Debenture, the Holder shall have the
      right to receive, for each Conversion Share that would have been issuable upon
      such conversion immediately prior to the occurrence of such Fundamental
      Transaction, the same kind and amount of securities, cash or property as it
      would have been entitled to receive upon the occurrence of such Fundamental
      Transaction if it had been, immediately prior to such Fundamental Transaction,
      the holder of one share of Common Stock (the “Alternate
      Consideration”).
      For
      purposes of any such conversion, the determination of the Conversion Price
      shall
      be appropriately adjusted to apply to such Alternate Consideration based on
      the
      amount of Alternate Consideration issuable in respect of one share of Common
      Stock in such Fundamental Transaction, and the Company shall apportion the
      Conversion Price among the Alternate Consideration in a reasonable manner
      reflecting the relative value of any different components of the Alternate
      Consideration. If holders of Common Stock are given any choice as to the
      securities, cash or property to be received in a Fundamental Transaction, then
      the Holder shall be given the same choice as to the Alternate Consideration
      it
      receives upon any conversion of this Debenture following such Fundamental
      Transaction. To the extent necessary
      to effectuate the foregoing provisions, any successor to 

     

    
      
         

         

      

      
        11

        
          

        

      

      
         

      

    

    the
      Company or surviving entity in such Fundamental Transaction shall issue to
      the
      Holder a new debenture consistent with the foregoing provisions and evidencing
      the Holder’s right to convert such debenture into Alternate Consideration. The
      terms of any agreement pursuant to which a Fundamental Transaction is effected
      shall include terms requiring any such successor or surviving entity to comply
      with the provisions of this paragraph (d) and insuring that this Debenture
      (or
      any such replacement security) will be similarly adjusted upon any subsequent
      transaction analogous to a Fundamental Transaction.

     

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

    

    f) Notice
      to the Holder.

    

    i. Adjustment
      to Conversion Price.
      Whenever the Conversion Price is adjusted pursuant to any of this Section 5,
      the
      Company shall promptly mail to each Holder a notice setting forth the Conversion
      Price after such adjustment and setting forth a brief statement of the facts
      requiring such adjustment. If the Company issues a variable rate security,
      despite the prohibition thereon in the Purchase Agreement, the Company shall
      be
      deemed to have issued Common Stock or Common Stock Equivalents at the lowest
      possible conversion or exercise price at which such securities may be converted
      or exercised in the case of a Variable Rate Transaction (as defined in the
      Purchase Agreement).

     

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

    
      
         

         

      

      
        12

        
          

        

      

      
         

      

    

     

    Section
      6. RESERVED.

    

    Section
      7. Negative
      Covenants.
      So long
      as any portion of this Debenture is outstanding, the Company will not and will
      not permit any of its Subsidiaries to directly or indirectly:

     

    a) enter
      into, create, incur, assume or suffer to exist any liens of any kind, on or
      with
      respect to any of its property or assets now owned or any interest therein
      or
      any income or profits therefrom unless this Debenture is paid off in connection
      with such lien and pursuant to Section 6(b) herein;

    

    b) amend
      its
      certificate of incorporation, bylaws or other charter documents so as to
      materially and adversely affect any rights of the Holder;

    

    c) repay,
      repurchase or offer to repay, repurchase or otherwise acquire more than a
de
      minimis
      number
      of shares of its Common Stock or Common Stock Equivalents other than as to
      the
      Conversion Shares to the extent permitted or required under the Transaction
      Documents or as otherwise permitted by the Transaction Documents; 

    

    d) enter
      into any agreement with respect to any of the foregoing;
      or

    

    e) pay
      cash
      dividends or distributions on any equity securities of the Company.

     

    Section
      8. Events
      of Default.
      

    

    a) “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):

    
      
         

         

      

      
        13

        
          

        

      

      
         

      

    

     

    i. any
      default in the payment of (A) the principal amount of any Debenture, or (B)
      liquidated damages in respect of, any Debenture, as and when the same shall
      become due and payable (whether on a Conversion Date or the Maturity Date or
      by
      acceleration or otherwise) which default under clause (B) above, is not cured,
      within 3 Trading Days;

     

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

    

    iii. a
      default
      or event of default (subject to any grace or cure period provided for in the
      applicable agreement, document or instrument) shall occur under (A) any of
      the
      Transaction Documents, or (B) any other material agreement, lease, document
      or
      instrument to which the Company or any Subsidiary is bound;

    

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

    

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

    
      
         

         

      

      
        14

        
          

        

      

      
         

      

    

     

    vi. the
      Company or any Subsidiary shall default in any of its obligations under any
      mortgage, credit agreement or other facility, indenture agreement, factoring
      agreement or other instrument under which there may be issued, or by which
      there
      may be secured or evidenced any indebtedness for borrowed money or money due
      under any long term leasing or factoring arrangement of the Company in an amount
      exceeding $150,000, 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; 

    

    vii. the
      Common Stock shall not be eligible for quotation on or quoted for trading on
      a
      Trading Market and shall not again be eligible for and quoted or listed for
      trading thereon within five Trading Days;

    

    viii. the
      Company shall be a party to any Change of Control Transaction or Fundamental
      Transaction, shall agree to sell or dispose of all or in excess of 33% of its
      assets in one or more transactions (whether or not such sale would constitute
      a
      Change of Control Transaction) or shall redeem or repurchase more than a de
      minimis number of its outstanding shares of Common Stock or other equity
      securities of the Company (other than redemptions of Conversion Shares and
      repurchases of shares of Common Stock or other equity securities of departing
      officers and directors of the Company; provided such repurchases shall not
      exceed $100,000, in the aggregate, for all officers and directors during the
      term of this Debenture);

    

    ix. a
      Registration Statement shall not have been declared effective by the Commission
      on or prior to the 180th calendar
      day after the Closing Date; 

    

    x. if,
      during the Effectiveness Period (as defined in the Registration Rights
      Agreement), the effectiveness of the Registration Statement lapses for any
      reason or the Holder shall not be permitted to resell Registrable Securities
      (as
      defined in the Registration Rights Agreement) under the Registration Statement,
      in either case, for more than 10 consecutive Trading Days or 15 non-consecutive
      Trading Days during any 12 month period; provided,
      however,
      that in
      the event that the Company
      is negotiating a merger, consolidation, acquisition or sale of all or
      substantially all of its assets or a similar transaction and in the written
      opinion of counsel to the Company, the Registration Statement, would be required
      to be amended
      to include information concerning such transactions or the parties thereto
      that
      is not available or may not be publicly disclosed at the time, the Company
      shall
      be permitted an additional 10 consecutive Trading Days during any 12 month
      period relating to such an event; and

    
      
         

         

      

      
        15

        
          

        

      

      
         

      

    

    

    xi. the
      Company shall fail for any reason to deliver certificates to a Holder prior
      to
      the fifth Trading Day after a Conversion Date or any Forced Conversion Date
      pursuant to and in accordance with Section 4(d) or the Company 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 any Debentures
      in
      accordance with the terms hereof. 

    

    b) Remedies
      Upon Event of Default.
      If any
      Event of Default occurs, the full principal amount of this Debenture, together
      with other amounts owing in respect thereof, to the date of acceleration shall
      become, at the Holder’s election, immediately due and payable in cash. The
      aggregate amount payable upon an Event of Default shall be equal to the
      Mandatory Default Amount. Commencing 5 days after the occurrence of any Event
      of
      Default that results in the eventual acceleration of this Debenture, the
      interest rate on this Debenture shall accrue at the rate of 18% per annum,
      or
      such lower maximum amount of interest permitted to be charged under applicable
      law. Upon the payment in full of the Mandatory Default Amount on this entire
      Debenture, the Holder shall promptly surrender this Debenture to or as directed
      by the Company. The Holder need not provide and the Company hereby waives any
      presentment, demand, protest or other notice of any kind, and the Holder may
      immediately and without expiration of any grace period enforce any and all
      of
      its rights and remedies hereunder and all other remedies available to it under
      applicable law. Such declaration may be rescinded and annulled by Holder at
      any
      time prior to payment hereunder and the Holder shall have all rights as a
      Debenture holder until such time, if any, as the full payment under this Section
      shall have been received by it. No such rescission or annulment shall affect
      any
      subsequent Event of Default or impair any right consequent thereon.

     

    Section
      9. Miscellaneous.
      

     

    a) Notices.
      Any and
      all notices or other communications or deliveries to be provided by the Holder
      hereunder, including, without limitation, any Notice of Conversion, shall be
      in
      writing and delivered personally, by facsimile, sent by a nationally recognized
      overnight courier service, addressed to the Company, at the address set forth
      above, facsimile number 303.327.1526,
      Attn: George Young or
      such
      other address or facsimile number as the Company may specify for such purposes
      by notice to the Holder delivered in accordance with this Section. Any and
      all
      notices or other communications or deliveries to be provided by the Company
      hereunder shall be in writing and delivered personally, by facsimile, sent
      by a
      nationally recognized overnight courier service addressed to each Holder at
      the
      facsimile telephone number or address of such Holder appearing on the books
      of
      the Company, or if no such facsimile telephone number
      or
      address appears, at the principal place of business of the Holder. Any notice
      or
      other communication or deliveries hereunder shall be deemed given and effective
      on the earliest of (i) the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile telephone number specified in this
      Section prior to 5:30 p.m. (New York City time), (ii) the date after the date
      of
      transmission, if such notice or communication is delivered via facsimile at
      the
      facsimile telephone number specified in this Section later than 5:30 p.m. (New
      York City time) on any date and earlier than 11:59 p.m. (New York City time)
      on
      such date, (iii) the second Business Day following the date of mailing, if
      sent
      by nationally recognized overnight courier service, or (iv) upon actual receipt
      by the party to whom such notice is required to be given.
       

    

    
      
         

         

      

      
        16

        
          

        

      

      
         

      

    

    b) Absolute
      Obligation.
      Except
      as expressly provided herein, no provision of this Debenture shall alter or
      impair the obligation of the Company, which is absolute and unconditional,
      to
      pay the principal of and liquidated damages (if any) on, this Debenture at
      the
      time, place, and rate, and in the coin or currency, herein prescribed. This
      Debenture is a direct debt obligation of the Company. This Debenture ranks
      pari passu
      with all
      other Debentures now or hereafter issued under the terms set forth
      herein.  

     

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

    

    d) Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Debenture shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each party agrees that all legal
      proceedings concerning the interpretations, enforcement and defense of the
      transactions contemplated by any of the Transaction Documents (whether brought
      against a party hereto or its respective affiliates, directors, officers,
      shareholders, employees or agents) shall be commenced in the state and federal
      courts sitting in the City of New York, Borough of Manhattan (the “New
      York Courts”).
      Each
      party hereto hereby irrevocably submits to the exclusive jurisdiction of the
      New
      York Courts for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein
      (including with respect to the enforcement of any of the Transaction Documents),
      and hereby irrevocably waives, and agrees not to assert in any suit, action
      or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, or such New York Courts are improper or inconvenient venue
      for
      such proceeding. Each party hereby irrevocably waives personal service of
      process and consents to process being served in any such suit, action or
      proceeding by mailing a copy thereof via registered or certified mail or
      overnight delivery (with evidence of delivery) to such party at the address
      in
      effect for notices to it under this Debenture and agrees that such service
shall
      constitute good and sufficient service of process and notice thereof. Nothing
      contained herein shall be deemed to limit in any way any right to serve process
      in any manner permitted by law. Each party hereto hereby irrevocably waives,
      to
      the fullest extent permitted by applicable law, any and all right to trial
      by
      jury in any legal proceeding arising out of or relating to this Debenture or
      the
      transactions contemplated hereby. If either party shall commence an action
      or
      proceeding to enforce any provisions of this Debenture, then the prevailing
      party in such action or proceeding shall be reimbursed by the other party for
      its attorneys fees and other costs and expenses incurred with the investigation,
      preparation and prosecution of such action or
      proceeding.

    
      
         

         

      

      
        17

        
          

        

      

      
         

      

    

     

    e) Waiver.
      Any
      waiver by the Company or the Holder of a breach of any provision of this
      Debenture shall not operate as or be construed to be a waiver of any other
      breach of such provision or of any breach of any other provision of this
      Debenture. The failure of the Company or the Holder to insist upon strict
      adherence to any term of this Debenture on one or more occasions shall not
      be
      considered a waiver or deprive that party of the right thereafter to insist
      upon
      strict adherence to that term or any other term of this Debenture. Any waiver
      must be in writing.

     

    f) Severability.
      If any
      provision of this Debenture is invalid, illegal or unenforceable, the balance
      of
      this Debenture shall remain in effect, and if any provision is inapplicable
      to
      any person or circumstance, it shall nevertheless remain applicable to all
      other
      persons and circumstances. If it shall be found that any interest or other
      amount deemed interest due hereunder violates applicable laws governing usury,
      the applicable rate of interest due hereunder shall automatically be lowered
      to
      equal the maximum permitted rate of interest. The Company covenants (to the
      extent that it may lawfully do so) that it shall not at any time insist upon,
      plead, or in any manner whatsoever claim or take the benefit or advantage of,
      any stay, extension or usury law or other law which would prohibit or forgive
      the Company from paying all or any portion of the principal of or interest
      on
      this Debenture as contemplated herein, wherever enacted, now or at any time
      hereafter in force, or which may affect the covenants or the performance of
      this
      indenture, and the Company (to the extent it may lawfully do so) hereby
      expressly waives all benefits or advantage of any such law, and covenants that
      it will not, by resort to any such law, hinder, delay or impeded the execution
      of any power herein granted to the Holder, but will suffer and permit the
      execution of every such as though no such law has been enacted.

     

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

    

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

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    i) Assumption. 
      Any successor to the Company or surviving entity in a Fundamental Transaction
      shall (i) assume in writing all of the obligations of the Company under this
      Debenture and the other Transaction Documents pursuant to written agreements
      in
      form and substance satisfactory to the Holder (such approval not to be
      unreasonably withheld or delayed) prior to such Fundamental Transaction and
      (ii)
      to issue to the Holder a new debenture of such successor entity evidenced by
      a
      written instrument substantially similar in form and substance to this
      Debenture, including, without limitation, having a principal amount and interest
      rate equal to the principal amounts and the interest rates of the Debentures
      held by the Holder and having similar ranking to this Debenture, and
      satisfactory to the Holder (any such approval not to be unreasonably withheld
      or
      delayed).  The provisions of this Section 9(i) shall apply similarly and
      equally to successive Fundamental Transactions and shall be applied without
      regard to any limitations of this Debenture.

    

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

    
      
         

      

      
        19

        
          

        

      

      
         

        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Debenture to be duly executed
      by a
      duly authorized officer as of the date first above indicated.

     

     

    
      	 	 	 
	 	
              FELLOWS
                ENERGY LTD.

            
	 
 	 
 	 
 
	 	By:  	/s/ GEORGE
              S.
              YOUNG
	 	
              
George
              S. Young
	 	Chief
              Executive OfficerExhibit 4.5

    

      EXHIBIT
        4.5

      

      REGISTRATION
        RIGHTS AGREEMENT

      

      This
        Registration Rights Agreement (this “Agreement”)
        is
        made and entered into as of February 15, 2007, among Fellows Energy Ltd.,
        a
        Nevada corporation (the “Company”),
        and
        the purchasers signatory hereto (each such purchaser is a “Purchaser”
and
        collectively, the “Purchasers”).

      

      This
        Agreement is made pursuant to the Securities Purchase Agreement, dated as
        of the
        date hereof among the Company and the Purchasers (the “Purchase
        Agreement”).

      

      The
        Company and the Purchasers hereby agree as follows:

      

      1.
        Definitions

      

       Capitalized
        terms used and not otherwise defined herein that are defined in the Purchase
        Agreement shall have the meanings given such terms in the Purchase
        Agreement.
        As used
        in this Agreement, the following terms shall have the following
        meanings:

      

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

      

      “Effectiveness
        Date”
means,
        with respect to the initial Registration Statement required to be filed
        hereunder, the 60th
        calendar
        day following the date hereof and, with respect to any additional Registration
        Statements which may be required pursuant to Section 3(c), the 120th
        calendar
        day following the date on which the Company first knows, or reasonably should
        have known, that such additional Registration Statement is required hereunder;
        provided,
        however,
        in the
        event the Company is notified by the Commission that one of the above
        Registration Statements will not be reviewed or is no longer subject to further
        review and comments, the Effectiveness Date as to such Registration Statement
        shall be the fifth Trading Day following the date on which the Company is
        so
        notified if such date precedes the dates required above.

      

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

      

      “Event”
shall
        have the meaning set forth in Section 2(b).

      

      “Event
        Date”
shall
        have the meaning set forth in Section 2(b).

      

      “Filing
        Date”
means,
        with respect to the initial Registration Statement required hereunder, the
        30th
        calendar
        day following the date hereof and, with respect to any additional Registration
        Statements which may be required pursuant to Section 3(c), the 30th
        day
        following the date on which the Company first knows, or reasonably should
        have
        known that such additional Registration Statement is required
        hereunder.

      

      
        
          
          

        

        
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      “Holder”
or
        “Holders”
means
        the holder or holders, as the case may be, from time to time of Registrable
        Securities.

      

      “Indemnified
        Party”
shall
        have the meaning set forth in Section 5(c).

      

      “Indemnifying
        Party”
shall
        have the meaning set forth in Section 5(c).

      

      “Losses”
shall
        have the meaning set forth in Section 5(a).

      

      “Plan
        of Distribution”
shall
        have the meaning set forth in Section 2(a). 

      

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

      

      “Prospectus”
means
        the prospectus included in a Registration Statement (including, without
        limitation, a prospectus that includes any information previously omitted
        from a
        prospectus filed as part of an effective registration statement in reliance
        upon
        Rule 430A promulgated under the Securities Act), as amended or supplemented
        by
        any prospectus supplement, with respect to the terms of the offering of any
        portion of the Registrable Securities covered by a Registration Statement,
        and
        all other amendments and supplements to the Prospectus, including post-effective
        amendments, and all material incorporated by reference or deemed to be
        incorporated by reference in such Prospectus.

      

      “Registrable
        Securities”
means
        (i) all of the shares of Common Stock issuable upon conversion in full of
        the
        Debentures, (ii) any shares of Common Stock issued or issuable to the Holders
        pursuant to and in connection with that certain First Amendment and Waiver
        Agreement, dated February 15, 2007, by and among the Company and Palisades,
        ,
        (iii) any shares of Common Stock issued or issuable to Crescent International
        Ltd. (“Crescent”) pursuant to and in connection with that certain First
        Amendment and Waiver Agreement, dated February 15, 2007, by and among the
        Company and Crescent (iv) any securities issued or issuable upon any stock
        split, dividend or other distribution, recapitalization or similar event
        with
        respect to the foregoing, (v) any additional shares issuable in connection
        with
        any anti-dilution provisions in the Debentures (without giving effect to
        any
        limitations on conversion set forth in the Debenture) and (vi) shares issuable
        in lieu of cash payments of liquidated damages pursuant to Section
        2(b).

      

      “Registration
        Statement”
means
        the registration statements required to be filed hereunder and any additional
        registration statements contemplated by Section 3(c), including (in each
        case)
        the Prospectus, amendments and supplements to such registration statement
        or
        Prospectus, including pre- and post-effective amendments, all exhibits thereto,
        and all material incorporated by reference or deemed to be incorporated by
        reference in such registration statement.

      

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

      

      
        
          
          

        

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

      

      “Selling
        Shareholder Questionnaire”
shall
        have the meaning set forth in Section 3(a).

      

      2.
         Shelf
        Registration

      

          (a)
        On or
        prior to each Filing Date, the Company shall prepare and file with the
        Commission a “Shelf” Registration Statement covering the resale of 130% of the
        Registrable Securities on such Filing Date for an offering to be made on
        a
        continuous basis pursuant to Rule 415. The Registration Statement shall be
        on
        Form S-3 (except if the Company is not then eligible to register for resale
        the
        Registrable Securities on Form S-3, in which case such registration shall
        be on
        another appropriate form in accordance herewith) and shall contain (unless
        otherwise directed by the Holders) substantially the “Plan
        of Distribution”
        attached hereto as Annex
        A.
        Subject
        to the terms of this Agreement, the Company shall use its best efforts to
        cause
        a Registration Statement to be declared effective under the Securities Act
        as
        promptly as possible after the filing thereof, but in any event prior to
        the
        applicable Effectiveness Date, and shall use its best efforts to keep such
        Registration Statement continuously effective under the Securities Act until
        all
        Registrable Securities covered by such Registration Statement have been sold
        or
        may be sold without volume restrictions pursuant to Rule 144(k) as determined
        by
        the counsel to the Company pursuant to a written opinion letter to such effect,
        addressed and acceptable to the Company’s transfer agent and the affected
        Holders (the “Effectiveness
        Period”).
        The
        Company shall telephonically request effectiveness of a Registration Statement
        as of 5:00 pm Eastern Time on a Trading Day. The Company shall immediately
        notify the Holders via facsimile of the effectiveness of a Registration
        Statement on the same Trading Day that the Company telephonically confirms
        effectiveness with the Commission, which shall be the date requested for
        effectiveness of a Registration Statement. The Company shall, by 9:30 am
        Eastern
        Time on the Trading Day after the Effective Date (as defined in the Purchase
        Agreement), file a Form 424(b)(5) with the Commission. Failure to so notify
        the
        Holder within 1 Trading Day of such notification shall be deemed an Event
        under
        Section 2(b).

      

      
        
          
          

        

        
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          (b)
        If: (i) a
        Registration Statement is not filed on or prior to its Filing Date (if the
        Company files a Registration Statement without affording the Holders the
        opportunity to review and comment on the same as required by Section 3(a),
        the
        Company shall not be deemed to have satisfied this clause (i)), or (ii) the
        Company fails to file with the Commission a request for acceleration in
        accordance with Rule 461 promulgated under the Securities Act, within five
        Trading Days of the date that the Company is notified (orally or in writing,
        whichever is earlier) by the Commission that a Registration Statement will
        not
        be “reviewed,” or not subject to further review, or (iii) prior to its
        Effectiveness Date, the Company fails to file a pre-effective amendment and
        otherwise respond in writing to comments made by the Commission in respect
        of
        such Registration Statement within 10 calendar days after the receipt of
        comments by or notice from the Commission that such amendment is required
        in
        order for a Registration Statement to be declared effective, or (iv) a
        Registration Statement filed or required to be filed hereunder is not declared
        effective by the Commission by its Effectiveness Date, or (v) after the
        Effectiveness Date, a Registration Statement ceases for any reason to remain
        continuously effective as to all Registrable Securities for which it is required
        to be effective, or the Holders are not permitted to utilize the Prospectus
        therein to resell such Registrable Securities for 10 consecutive calendar
        days
        but no more than an aggregate of 15 calendar days during any 12-month period
        (which need not be consecutive Trading Days) (any such failure or breach being
        referred to as an “Event”,
        and
        for purposes of clause (i) or (iv) the date on which such Event occurs, or
        for
        purposes of clause (ii) the date on which such five Trading Day period is
        exceeded, or for purposes of clause (iii) the date which such 10 calendar
        day
        period is exceeded, or for purposes of clause (v) the date on which such
        10 or
        15 calendar day period, as applicable, is exceeded being referred to as
“Event
        Date”),
        then
        in addition to any other rights the Holders may have hereunder or under
        applicable law, on each such Event Date and on each monthly anniversary of
        each
        such Event Date (if the applicable Event shall not have been cured by such
        date)
        until the applicable Event is cured, the Company shall pay to each Holder
        an
        amount in cash, as partial liquidated damages and not as a penalty, equal
        to
        1.5% of the aggregate purchase price paid by such Holder pursuant to the
        Purchase Agreement for any Registrable Securities then held by such Holder.
        If
        the Company fails to pay any partial liquidated damages pursuant to this
        Section
        in full within seven days after the date payable, the Company will pay interest
        thereon at a rate of 18% per annum (or such lesser maximum amount that is
        permitted to be paid by applicable law) to the Holder, accruing daily from
        the
        date such partial liquidated damages are due until such amounts, plus all
        such
        interest thereon, are paid in full. The partial liquidated damages pursuant
        to
        the terms hereof shall apply on a daily pro-rata basis for any portion of
        a
        month prior to the cure of an Event.

      

      3.
        Registration
        Procedures.

      

      In
        connection with the Company’s registration obligations hereunder, the Company
        shall:

      

      (a)  Not
        less
        than five Trading Days prior to the filing of each Registration Statement
        or any
        related Prospectus or any amendment or supplement thereto (including any
        document that would be incorporated or deemed to be incorporated therein
        by
        reference), the Company shall, (i) furnish to each Holder copies of all such
        documents proposed to be filed, which documents (other than those incorporated
        or deemed to be incorporated by reference) will be subject to the review
        of such
        Holders, and (ii) cause its officers and directors, counsel and independent
        certified public accountants to respond to such inquiries as shall be necessary,
        in the reasonable opinion of respective counsel to conduct a reasonable
        investigation within the meaning of the Securities Act. The Company shall
        not
        file a Registration Statement or any such Prospectus or any amendments or
        supplements thereto to which the Holders of a majority of the Registrable
        Securities shall reasonably object in good faith, provided that, the Company
        is
        notified of such objection in writing no later than 5 Trading Days after
        the
        Holders have been so furnished copies of such documents. Each Holder agrees
        to
        furnish to the Company a completed Questionnaire in the form attached to
        this
        Agreement as Annex B (a “Selling
        Shareholder Questionnaire”)
        not
        less than two Trading Days prior to the Filing Date or by the end of the
        fourth
        Trading Day following the date on which such Holder receives draft materials
        in
        accordance with this Section. 

      

      
        
          
          

        

        
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      (b)  (i)
        Prepare and file with the Commission such amendments, including post-effective
        amendments, to a Registration Statement and the Prospectus used in connection
        therewith as may be necessary to keep a Registration Statement continuously
        effective as to the applicable Registrable Securities for the Effectiveness
        Period and prepare and file with the Commission such additional Registration
        Statements in order to register for resale under the Securities Act all of
        the
        Registrable Securities; (ii) cause the related Prospectus to be amended or
        supplemented by any required Prospectus supplement (subject to the terms
        of this
        Agreement), and as so supplemented or amended to be filed pursuant to Rule
        424;
        (iii) respond as promptly as reasonably possible to any comments received
        from
        the Commission with respect to a Registration Statement or any amendment
        thereto
        and as promptly as reasonably possible provide the Holders true and complete
        copies of all correspondence from and to the Commission relating to a
        Registration Statement; and (iv) comply in all material respects with the
        provisions of the Securities Act and the Exchange Act with respect to the
        disposition of all Registrable Securities covered by a Registration Statement
        during the applicable period in accordance (subject to the terms of this
        Agreement) with the intended methods of disposition by the Holders thereof
        set
        forth in such Registration Statement as so amended or in such Prospectus
        as so
        supplemented.

      

      (c)  If
        during
        the Effectiveness Period, the number of Registrable Securities at any time
        exceeds 90% of the number of shares of Common Stock then registered in a
        Registration Statement, then the Company shall file as soon as reasonably
        practicable but in any case prior to the applicable Filing Date, an additional
        Registration Statement covering the resale by the Holders of not less than
        130%
        of the number of such Registrable Securities.

      

      (d)  Notify
        the Holders of Registrable Securities to be sold (which notice shall, pursuant
        to clauses (ii) through (vi) hereof, be accompanied by an instruction to
        suspend
        the use of the Prospectus until the requisite changes have been made) as
        promptly as reasonably possible (and, in the case of (i)(A) below, not less
        than
        five Trading Days prior to such filing) and (if requested by any such Person)
        confirm such notice in writing no later than one Trading Day following the
        day
        (i)(A) when a Prospectus or any Prospectus supplement or post-effective
        amendment to a Registration Statement is proposed to be filed; (B) when the
        Commission notifies the Company whether there will be a “review” of such
        Registration Statement and whenever the Commission comments in writing on
        such
        Registration Statement (the Company shall provide true and complete copies
        thereof and all written responses thereto to each of the Holders); and (C)
        with
        respect to a Registration Statement or any post-effective amendment, when
        the
        same has become effective; (ii) of any request by the Commission or any other
        Federal or state governmental authority for amendments or supplements to
        a
        Registration Statement or Prospectus or for additional information; (iii)
        of the
        issuance by the Commission or any other federal or state governmental authority
        of any stop order suspending the effectiveness of a Registration Statement
        covering any or all of the Registrable Securities or the initiation of any
        Proceedings for that purpose; (iv) of the receipt by the Company of any
        notification with respect to the suspension of the qualification or exemption
        from qualification of any of the Registrable Securities for sale in any
        jurisdiction, or the initiation or threatening of any Proceeding for such
        purpose; (v) of the occurrence of any event or passage of time that makes
        the
        financial statements included in a Registration Statement ineligible for
        inclusion therein or any statement made in a Registration Statement or
        Prospectus or any document incorporated or deemed to be incorporated therein
        by
        reference untrue in any material respect or that requires any revisions to
        a
        Registration Statement, Prospectus or other documents so that, in the case
        of a
        Registration Statement or the Prospectus, as the case may be, it will not
        contain any untrue statement of a material fact or omit to state any material
        fact required to be stated therein or necessary to make the statements therein,
        in light of the circumstances under which they were made, not misleading;
        and
        (vi) the occurrence or existence of any pending corporate development with
        respect to the Company that the Company believes may be material and that,
        in
        the determination of the Company, makes it not in the best interest of the
        Company to allow continued availability of a Registration Statement or
        Prospectus; provided that any and all of such information shall remain
        confidential to each Holder until such information otherwise becomes public,
        unless disclosure by a Holder is required by law; provided,
        further,
        notwithstanding each Holder’s agreement to keep such information confidential,
        the Holders make no acknowledgement that any such information is material,
        non-public information.

      

      
        
          
          

        

        
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      (e)  Use
        its
        best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
        of
        (i) any order suspending the effectiveness of a Registration Statement, or
        (ii)
        any suspension of the qualification (or exemption from qualification) of
        any of
        the Registrable Securities for sale in any jurisdiction, at the earliest
        practicable moment.

      

      (f)  Furnish
        to each Holder, without charge, at least one conformed copy of each such
        Registration Statement and each amendment thereto, including financial
        statements and schedules, all documents incorporated or deemed to be
        incorporated therein by reference to the extent requested by such Person,
        and
        all exhibits to the extent requested by such Person (including those previously
        furnished or incorporated by reference) promptly after the filing of such
        documents with the Commission.

      

      (g)  Promptly
        deliver to each Holder, without charge, as many copies of the Prospectus
        or
        Prospectuses (including each form of prospectus) and each amendment or
        supplement thereto as such Persons may reasonably request in connection with
        resales by the Holder of Registrable Securities. Subject to the terms of
        this
        Agreement, the Company hereby consents to the use of such Prospectus and
        each
        amendment or supplement thereto by each of the selling Holders in connection
        with the offering and sale of the Registrable Securities covered by such
        Prospectus and any amendment or supplement thereto, except after the giving
        on
        any notice pursuant to Section 3(d).

      

      (h)  If
        NASDR
        Rule 2710 requires any broker-dealer to make a filing prior to executing
        a sale
        by a Holder, make an Issuer Filing with the NASDR, Inc. Corporate Financing
        Department pursuant to NASDR Rule 2710(b)(10)(A)(i) and respond within five
        Trading Days to any comments received from NASDR in connection therewith,
        and
        pay the filing fee required in connection therewith.

      

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

      

      
        
          
          

        

        
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      (j)  If
        requested by the Holders, cooperate with the Holders to facilitate the timely
        preparation and delivery of certificates representing Registrable Securities
        to
        be delivered to a transferee pursuant to a Registration Statement, which
        certificates shall be free, to the extent permitted by the Purchase Agreement,
        of all restrictive legends, and to enable such Registrable Securities to
        be in
        such denominations and registered in such names as any such Holders may
        request.

      

      (k)  Upon
        the
        occurrence of any event contemplated by this Section 3, as promptly as
        reasonably possible under the circumstances taking into account the Company’s
        good faith assessment of any adverse consequences to the Company and its
        stockholders of the premature disclosure of such event, prepare a supplement
        or
        amendment, including a post-effective amendment, to a Registration Statement
        or
        a supplement to the related Prospectus or any document incorporated or deemed
        to
        be incorporated therein by reference, and file any other required document
        so
        that, as thereafter delivered, neither a Registration Statement nor such
        Prospectus will contain an untrue statement of a material fact or omit to
        state
        a material fact required to be stated therein or necessary to make the
        statements therein, in light of the circumstances under which they were made,
        not misleading. If
        the
        Company notifies the Holders in accordance with clauses (ii) through (vi)
        of
        Section 3(d) above to suspend the use of any Prospectus until the requisite
        changes to such Prospectus have been made, then the Holders shall suspend
        use of
        such Prospectus. The Company will use its best efforts to ensure that the
        use of
        the Prospectus may be resumed as promptly as is practicable. The Company
        shall
        be entitled to exercise its right under this Section 3(k) to suspend the
        availability of a Registration Statement and Prospectus, subject to the payment
        of partial liquidated damages pursuant to Section 2(b), for a period not
        to
        exceed 60 days (which need not be consecutive days) in any 12 month
        period.

      

      (l)  Comply
        with all applicable rules and regulations of the Commission.

      

      (m)  The
        Company may require each selling Holder to furnish to the Company a certified
        statement as to the number of shares of Common Stock beneficially owned by
        such
        Holder and, if required by the Commission, the person thereof that has voting
        and dispositive control over the Shares. During any periods that the Company
        is
        unable to meet its obligations hereunder with respect to the registration
        of the
        Registrable Securities solely because any Holder fails to furnish such
        information within three Trading Days of the Company’s request, any liquidated
        damages that are accruing at such time as to such Holder only shall be tolled
        and any Event that may otherwise occur solely because of such delay shall
        be
        suspended as to such Holder only, until such information is delivered to
        the
        Company.

      

      
        
          
          

        

        
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          4.
        Registration
        Expenses.
        All
        fees and expenses incident to the performance of or compliance with this
        Agreement by the Company shall be borne by the Company whether or not any
        Registrable Securities are sold pursuant to a Registration Statement. The
        fees
        and expenses referred to in the foregoing sentence shall include, without
        limitation, (i) all registration and filing fees (including, without limitation,
        fees and expenses (A) with respect to filings required to be made with the
        Trading Market on which the Common Stock is then listed for trading, (B)
        in
        compliance with applicable state securities or Blue Sky laws reasonably agreed
        to by the Company in writing (including, without limitation, fees and
        disbursements of counsel for the Company in connection with Blue Sky
        qualifications or exemptions of the Registrable Securities and determination
        of
        the eligibility of the Registrable Securities for investment under the laws
        of
        such jurisdictions as requested by the Holders) and (C) if not previously
        paid
        by the Company in connection with an Issuer Filing, with respect to any filing
        that may be required to be made by any broker through which a Holder intends
        to
        make sales of Registrable Securities with NASD Regulation, Inc. pursuant
        to the
        NASD Rule 2710, so long as the broker is receiving no more than a customary
        brokerage commission in connection with such sale, (ii) printing expenses
        (including, without limitation, expenses of printing certificates for
        Registrable Securities and of printing prospectuses if the printing of
        prospectuses is reasonably requested by the holders of a majority of the
        Registrable Securities included in a Registration Statement), (iii) messenger,
        telephone and delivery expenses, (iv) fees and disbursements of counsel for
        the
        Company, (v) Securities Act liability insurance, if the Company so desires
        such
        insurance, and (vi) fees and expenses of all other Persons retained by the
        Company in connection with the consummation of the transactions contemplated
        by
        this Agreement. In addition, the Company shall be responsible for all of
        its
        internal expenses incurred in connection with the consummation of the
        transactions contemplated by this Agreement (including, without limitation,
        all
        salaries and expenses of its officers and employees performing legal or
        accounting duties), the expense of any annual audit and the fees and expenses
        incurred in connection with the listing of the Registrable Securities on
        any
        securities exchange as required hereunder. In no event shall the Company
        be
        responsible for any broker or similar commissions or, except to the extent
        provided for in the Transaction Documents, any legal fees or other costs
        of the
        Holders.

      

          5.
        Indemnification

      

          (a)
        Indemnification
        by the Company.
        The
        Company shall, notwithstanding any termination of this Agreement, indemnify
        and
        hold harmless each Holder, the officers, directors, agents, brokers (including
        brokers who offer and sell Registrable Securities as principal as a result
        of a
        pledge or any failure to perform under a margin call of Common Stock),
        investment advisors and employees of each of them, each Person who controls
        any
        such Holder (within the meaning of Section 15 of the Securities Act or Section
        20 of the Exchange Act) and the officers, directors, agents and employees
        of
        each such controlling Person, to the fullest extent permitted by applicable
        law,
        from and against any and all losses, claims, damages, liabilities, costs
        (including, without limitation, reasonable attorneys’ fees) and expenses
        (collectively, “Losses”),
        as
        incurred, arising out of or relating to any untrue or alleged untrue statement
        of a material fact contained in a Registration Statement, any Prospectus
        or any
        form of prospectus or in any amendment or supplement thereto or in any
        preliminary prospectus, or arising out of or relating to any omission or
        alleged
        omission of a material fact required to be stated therein or necessary to
        make
        the statements therein (in the case of any Prospectus or form of prospectus
        or
        supplement thereto, in light of the circumstances under which they were made)
        not misleading, except to the extent, but only to the extent, that (i) such
        untrue statements or omissions are based solely upon information regarding
        such
        Holder furnished in writing to the Company by such Holder expressly for use
        therein, or to the extent that such information relates to such Holder or
        such
        Holder’s proposed method of distribution of Registrable Securities and was
        reviewed and expressly approved in writing by such Holder expressly for use
        in a
        Registration Statement, such Prospectus or such form of Prospectus or in
        any
        amendment or supplement thereto (it being understood that the Holder has
        approved Annex A hereto for this purpose) or (ii) in the case of an occurrence
        of an event of the type specified in Section 3(d)(ii)-(vi), the use by such
        Holder of an outdated or defective Prospectus after the Company has notified
        such Holder in writing that the Prospectus is outdated or defective and prior
        to
        the receipt by such Holder of the Advice contemplated in Section 6(d). The
        Company shall notify the Holders promptly of the institution, threat or
        assertion of any Proceeding arising from or in connection with the transactions
        contemplated by this Agreement of which the Company is aware.

      

      
        
          
          

        

        
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          (b)
        Indemnification
        by Holders.
        Each
        Holder shall, severally and not jointly, indemnify and hold harmless the
        Company, its directors, officers, agents and employees, each Person who controls
        the Company (within the meaning of Section 15 of the Securities Act and Section
        20 of the Exchange Act), and the directors, officers, agents or employees
        of
        such controlling Persons, to the fullest extent permitted by applicable law,
        from and against all Losses, as incurred, to the extent arising out of or
        based
        solely upon: (x) such Holder’s failure to comply with the prospectus delivery
        requirements of the Securities Act or (y) any untrue or alleged untrue statement
        of a material fact contained in any Registration Statement, any Prospectus,
        or
        any form of prospectus, or in any amendment or supplement thereto or in any
        preliminary prospectus, or arising out of or relating to any omission or
        alleged
        omission of a material fact required to be stated therein or necessary to
        make
        the statements therein not misleading (i) to the extent, but only to the
        extent,
        that such untrue statement or omission is contained in any information so
        furnished in writing by such Holder to the Company specifically for inclusion
        in
        such Registration Statement or such Prospectus or (ii) to the extent that
        (1)
        such untrue statements or omissions are based solely upon information regarding
        such Holder furnished in writing to the Company by such Holder expressly
        for use
        therein, or to the extent that such information relates to such Holder or
        such
        Holder’s proposed method of distribution of Registrable Securities and was
        reviewed and expressly approved in writing by such Holder expressly for use
        in a
        Registration Statement (it being understood that the Holder has approved
        Annex A
        hereto for this purpose), such Prospectus or such form of Prospectus or in
        any
        amendment or supplement thereto or (2) in the case of an occurrence of an
        event
        of the type specified in Section 3(d)(ii)-(vi), the use by such Holder of
        an
        outdated or defective Prospectus after the Company has notified such Holder
        in
        writing that the Prospectus is outdated or defective and prior to the receipt
        by
        such Holder of the Advice contemplated in Section 6(d). In no event shall
        the
        liability of any selling Holder hereunder be greater in amount than the dollar
        amount of the net proceeds received by such Holder upon the sale of the
        Registrable Securities giving rise to such indemnification
        obligation.

      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

          (c)
        Conduct
        of Indemnification Proceedings.
        If any
        Proceeding shall be brought or asserted against any Person entitled to indemnity
        hereunder (an “Indemnified
        Party”),
        such
        Indemnified Party shall promptly notify the Person from whom indemnity is
        sought
        (the “Indemnifying
        Party”)
        in
        writing, and the Indemnifying Party shall have the right to assume the defense
        thereof, including the employment of counsel reasonably satisfactory to the
        Indemnified Party and the payment of all fees and expenses incurred in
        connection with defense thereof; provided, that the failure of any Indemnified
        Party to give such notice shall not relieve the Indemnifying Party of its
        obligations or liabilities pursuant to this Agreement, except (and only)
        to the
        extent that it shall be finally determined by a court of competent jurisdiction
        (which determination is not subject to appeal or further review) that such
        failure shall have prejudiced the Indemnifying Party.

      

          An
        Indemnified Party shall have the right to employ separate counsel in any
        such
        Proceeding and to participate in the defense thereof, but the fees and expenses
        of such counsel shall be at the expense of such Indemnified Party or Parties
        unless: (1) the Indemnifying Party has agreed in writing to pay such fees
        and
        expenses; (2) the Indemnifying Party shall have failed promptly to assume
        the
        defense of such Proceeding and to employ counsel reasonably satisfactory
        to such
        Indemnified Party in any such Proceeding; or (3) the named parties to any
        such
        Proceeding (including any impleaded parties) include both such Indemnified
        Party
        and the Indemnifying Party, and such Indemnified Party shall reasonably believe
        that a material conflict of interest is likely to exist if the same counsel
        were
        to represent such Indemnified Party and the Indemnifying Party (in which
        case,
        if such Indemnified Party notifies the Indemnifying Party in writing that
        it
        elects to employ separate counsel at the expense of the Indemnifying Party,
        the
        Indemnifying Party shall not have the right to assume the defense thereof
        and
        the reasonable fees and expenses of one separate counsel shall be at the
        expense
        of the Indemnifying Party). The Indemnifying Party shall not be liable for
        any
        settlement of any such Proceeding effected without its written consent, which
        consent shall not be unreasonably withheld. No Indemnifying Party shall,
        without
        the prior written consent of the Indemnified Party, effect any settlement
        of any
        pending Proceeding in respect of which any Indemnified Party is a party,
        unless
        such settlement includes an unconditional release of such Indemnified Party
        from
        all liability on claims that are the subject matter of such
        Proceeding.

      

          Subject
        to
        the terms of this Agreement, all reasonable fees and expenses of the Indemnified
        Party (including reasonable fees and expenses to the extent incurred in
        connection with investigating or preparing to defend such Proceeding in a
        manner
        not inconsistent with this Section) shall be paid to the Indemnified Party,
        as
        incurred, within ten Trading Days of written notice thereof to the Indemnifying
        Party; provided, that the Indemnified Party shall promptly reimburse the
        Indemnifying Party for that portion of such fees and expenses applicable
        to such
        actions for which such Indemnified Party is not entitled to indemnification
        hereunder, determined based upon the relative faults of the
        parties.

      

          (d)
        Contribution.
        If the
        indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified
        Party or insufficient to hold an Indemnified Party harmless for any Losses,
        then
        each Indemnifying Party shall contribute to the amount paid or payable by
        such
        Indemnified Party, in such proportion as is appropriate to reflect the relative
        fault of the Indemnifying Party and Indemnified Party in connection with
        the
        actions, statements or omissions that resulted in such Losses as well as
        any
        other relevant equitable considerations. The relative fault of such Indemnifying
        Party and Indemnified Party shall be determined by reference to, among other
        things, whether any action in question, including any untrue or alleged untrue
        statement of a material fact or omission or alleged omission of a material
        fact,
        has been taken or made by, or relates to information supplied by, such
        Indemnifying Party or Indemnified Party, and the parties’ relative intent,
        knowledge, access to information and opportunity to correct or prevent such
        action, statement or omission. The amount paid or payable by a party as a
        result
        of any Losses shall be deemed to include, subject to the limitations set
        forth
        in this Agreement, any reasonable attorneys’ or other reasonable fees or
        expenses incurred by such party in connection with any Proceeding to the
        extent
        such party would have been indemnified for such fees or expenses if the
        indemnification provided for in this Section was available to such party
        in
        accordance with its terms.

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

          The
        parties
        hereto agree that it would not be just and equitable if contribution pursuant
        to
        this Section 5(d) were determined by pro rata allocation or by any other
        method
        of allocation that does not take into account the equitable considerations
        referred to in the immediately preceding paragraph. Notwithstanding the
        provisions of this Section 5(d), no Holder shall be required to contribute,
        in
        the aggregate, any amount in excess of the amount by which the proceeds actually
        received by such Holder from the sale of the Registrable Securities subject
        to
        the Proceeding exceeds the amount of any damages that such Holder has otherwise
        been required to pay by reason of such untrue or alleged untrue statement
        or
        omission or alleged omission, except in the case of fraud by such
        Holder.

      

          The
        indemnity
        and contribution agreements contained in this Section are in addition to
        any
        liability that the Indemnifying Parties may have to the Indemnified
        Parties.

      

          6.
        Miscellaneous

      

      (a)  Remedies.
        In the
        event of a breach by the Company or by a Holder, of any of their obligations
        under this Agreement, each Holder or the Company, as the case may be, in
        addition to being entitled to exercise all rights granted by law and under
        this
        Agreement, including recovery of damages, will be entitled to specific
        performance of its rights under this Agreement. The Company and each Holder
        agree that monetary damages would not provide adequate compensation for any
        losses incurred by reason of a breach by it of any of the provisions of this
        Agreement and hereby further agrees that, in the event of any action for
        specific performance in respect of such breach, it shall waive the defense
        that
        a remedy at law would be adequate.

      

      (b)  No
        Piggyback on Registrations.
        Except
        as set forth on Schedule
        6(b)
        attached
        hereto (i) neither the Company nor any of its security holders (other than
        the
        Holders in such capacity pursuant hereto) may include securities of the Company
        in the initial Registration Statement other than the Registrable Securities
        and
        (ii) no Person has any right to cause the Company to effect the registration
        under the Securities Act of any securities of the Company. The Company shall
        not
        file any other registration statements until the initial Registration Statement
        required hereunder is declared effective by the Commission, provided that
        this
        Section 6(b) shall not prohibit the Company from filing amendments to
        registration statements already filed.

      

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      (c)  Compliance.
        Each
        Holder covenants and agrees that it will comply with the prospectus delivery
        requirements of the Securities Act as applicable to it in connection with
        sales
        of Registrable Securities pursuant to a Registration Statement.

      

      (d)  Discontinued
        Disposition.
        Each
        Holder agrees by its acquisition of such Registrable Securities that, upon
        receipt of a notice from the Company of the occurrence of any event of the
        kind
        described in Section 3(d), such Holder will forthwith discontinue disposition
        of
        such Registrable Securities under a Registration Statement until such Holder’s
        receipt of the copies of the supplemented Prospectus and/or amended Registration
        Statement, or until it is advised in writing (the “Advice”)
        by the
        Company that the use of the applicable Prospectus may be resumed, and, in
        either
        case, has received copies of any additional or supplemental filings that
        are
        incorporated or deemed to be incorporated by reference in such Prospectus
        or
        Registration Statement. The Company will use its best efforts to ensure that
        the
        use of the Prospectus may be resumed as promptly as it practicable. The Company
        agrees and acknowledges that any periods during which the Holder is required
        to
        discontinue the disposition of the Registrable Securities hereunder shall
        be
        subject to the provisions of Section 2(b).

      

      (e)  Piggy-Back
        Registrations.
        If at
        any time during the Effectiveness Period there is not an effective Registration
        Statement covering all of the Registrable Securities and the Company shall
        determine to prepare and file with the Commission a registration statement
        relating to an offering for its own account or the account of others under
        the
        Securities Act of any of its equity securities, other than on Form S-4 or
        Form
        S-8 (each as promulgated under the Securities Act) or their then equivalents
        relating to equity securities to be issued solely in connection with any
        acquisition of any entity or business or equity securities issuable in
        connection with the stock option or other employee benefit plans, then the
        Company shall send to each Holder a written notice of such determination
        and, if
        within fifteen days after the date of such notice, any such Holder shall
        so
        request in writing, the Company shall include in such registration statement
        all
        or any part of such Registrable Securities such Holder requests to be
        registered; provided,
        however,
        that,
        the Company shall not be required to register any Registrable Securities
        pursuant to this Section 6(e) that are eligible for resale pursuant to Rule
        144(k) promulgated under the Securities Act or that are the subject of a
        then
        effective Registration Statement.

      

      (f)  Amendments
        and Waivers.
        The
        provisions of this Agreement, including the provisions of this sentence,
        may not
        be amended, modified or supplemented, and waivers or consents to departures
        from
        the provisions hereof may not be given, unless the same shall be in writing
        and
        signed by the Company and each Holder of the then outstanding Registrable
        Securities. Notwithstanding the foregoing, a waiver or consent to depart
        from
        the provisions hereof with respect to a matter that relates exclusively to
        the
        rights of Holders and that does not directly or indirectly affect the rights
        of
        other Holders may be given by Holders of all of the Registrable Securities
        to
        which such waiver or consent relates; provided,
        however,
        that
        the provisions of this sentence may not be amended, modified, or supplemented
        except in accordance with the provisions of the immediately preceding sentence.
        

      

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      (g)  Notices.
        Any and
        all notices or other communications or deliveries required or permitted to
        be
        provided hereunder shall be delivered as set forth in the Purchase Agreement.
        

      

      (h)  Successors
        and Assigns.
        This
        Agreement shall inure to the benefit of and be binding upon the successors
        and
        permitted assigns of each of the parties and shall inure to the benefit of
        each
        Holder. The Company may not assign its rights or obligations hereunder without
        the prior written consent of all of the Holders of the then-outstanding
        Registrable Securities. Each Holder may assign their respective rights hereunder
        in the manner and to the Persons as permitted under the Purchase
        Agreement.

      

      (i)  No
        Inconsistent Agreements.
        Neither
        the Company nor any of its subsidiaries has entered, as of the date hereof,
        nor
        shall the Company or any of its subsidiaries, on or after the date of this
        Agreement, enter into any agreement with respect to its securities, that
        would
        have the effect of impairing the rights granted to the Holders in this Agreement
        or otherwise conflicts with the provisions hereof. Except as set forth on
        Schedule
        6(i),
        neither
        the Company nor any of its subsidiaries has previously entered into any
        agreement granting any registration rights with respect to any of its securities
        to any Person that have not been satisfied in full.

      

      (j)  Execution
        and Counterparts.
        This
        Agreement may be executed in any number of counterparts, each of which when
        so
        executed shall be deemed to be an original and, all of which taken together
        shall constitute one and the same Agreement. In the event that any signature
        is
        delivered by facsimile transmission, such signature shall create a valid
        binding
        obligation of the party executing (or on whose behalf such signature is
        executed) the same with the same force and effect as if such facsimile signature
        were the original thereof.

      

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

      

      (l)  Cumulative
        Remedies.
        The
        remedies provided herein are cumulative and not exclusive of any remedies
        provided by law.

      

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

      

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

      

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      (o)  Independent
        Nature of Holders’ Obligations and Rights.
        The
        obligations of each Holder hereunder are several and not joint with the
        obligations of any other Holder hereunder, and no Holder shall be responsible
        in
        any way for the performance of the obligations of any other Holder hereunder.
        Nothing contained herein or in any other agreement or document delivered
        at any
        closing, and no action taken by any Holder pursuant hereto or thereto, shall
        be
        deemed to constitute the Holders as a partnership, an association, a joint
        venture or any other kind of entity, or create a presumption that the Holders
        are in any way acting in concert with respect to such obligations or the
        transactions contemplated by this Agreement. Each Holder shall be entitled
        to
        protect and enforce its rights, including without limitation the rights arising
        out of this Agreement, and it shall not be necessary for any other Holder
        to be
        joined as an additional party in any proceeding for such purpose.

       

       

      

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

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      

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

       

      
        	 	 	 
	 	
                FELLOWS
                  ENERGY LTD.

              
	 
 	 
 	 
 
	 	By:  	/s/ 
GEORGE
                S. YOUNG
	 	
                

                Name:
                  George S. Young

              
	 	
                Title:
                  Chief Executive Officer

              

      

         

      

      

      

      

      

      

      

      

      [SIGNATURE
        PAGE OF HOLDERS FOLLOWS]

      

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      [SIGNATURE
        PAGE OF HOLDERS TO FLWE RRA]

       

      
         

        Name
          of
          Holder: PALISADES MASTER FUND, L.P.

         

        
          	 	 	 	 
	/s/ Arlene
                  DeCastro	 	 	/s/ Peter
                  Cooper
	
                  
Arlene
                  DeCastro	 	 	
                  
Peter
                  Cooper
	Authorized
                  Signatory	 	 	Authorized
                  Signatory

        

         

        
 

      

      

      [SIGNATURE
        PAGES CONTINUE]

      

      

      

      16

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