Document:

AGREEMENT

Exhibit 10.2

 

AGREEMENT OF RECIPROCAL AND IRREVOCABLE PROMISE

FOR PURCHASE AND SALE OF PROPERTY-

 

     THIS AGREEMENT is entered into this 29 day of February, 2008, by and between FINCA SAVILA, SOCIEDAD ANÓNIMA, corporate I.D. number three-one hundred and one-one hundred four thousand nine hundred and sixty-seven, represented herein by its President with sufficient faculties for this act, Mr. CARLTON TURNER, of legal age, married, entrepreneur, resident of Texas, United States of America, United States national,
social security number *********, who does not use a second last name because that is what is customary in his country of origin, legal capacity recorded in the Commercial Section of the Public Registry to volume nine hundred and thirty-four, folio two hundred and sixty-four, entry three hundred and sixty-eight, hereinafter for the effects herein he will be referred to as "FINCA SÁVILA" (hereinafter and for all legal
purposes of this Agreement referred to as the SELLER); and SANTA LUISA CATALANA SLCAT, SOCIEDAD ANONIMA, corporate I.D. number three-one hundred and one-three hundred eighty six thousand seven hundred and eighty five, represented herein by its President with sufficient faculties for this act, Mr. FERNANDO GONZALEZ BOLAÑOS, of legal age, married, Chemical Engineer, with ID card number 2-415-984, (hereinafter and for all legal purposes of this Agreement referred to as the PURCHASER); 

WITNESSETH:

WHEREAS, SELLER is the owner of certain real property located in Liberia, Province of Guanacaste, registration numbers 22544-000, 27909A-000 and 27369, which measures jointly according to the Property Registry approximately  663,454 square meters  (hereinafter and for all legal purposes of this Agreement referred to as the PROPERTY); 

WHEREAS, SELLER desires to allow PURCHASER of the PROPERTY to purchase it via this contract.  Hence, the PURCHASER hereby states his interest in purchasing the PROPERTY, all for the price and pursuant to the terms, conditions, and provisions hereinafter set forth; and;

NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, expressing their firm conviction to be legally bound, do hereby represent, warrant, covenant and agree, as follows:

FIRST: SELLER hereby grants an exclusive Purchase and Sale Option on the PROPERTY in favor of the PURCHASER and the PURCHASER hereby accepts it.  SELLER hereby warrants and represents that the PROPERTY will not be offered or sold as long as this Agreement is standing. The SELLER finally warrants that upon the terms and provisions and subject to the conditions hereof and upon the representations and warranties herein made, he shall validly transfer, sell, assign and convey to PURCHASER free, clear, marketable and insurable title to the PROPERTY.  

SECOND: The selling price of the PROPERTY is the total amount of $1,641,346.00 dollars legal tender of the United States of America. The purchase price shall be paid to SELLER without any deductions, as follows:

	 	
a)
	
US$50,000.00 paid no later than March 4th, 2008.

	 	
b)
	
$450,000.00 paid no later than March 15th, 2008.

	 	
c)
	
The amount required to cancel the loan with Bancrédito, for approximately $459,000.00 no later than March 25th, 2008.

	 	
d)
	
The outstanding balance to be paid on or before March 25, 2008 (the "closing date").  With this last payment the public deed will be executed between SELLER AND PURCHASER and the PROPERTY will therefore be transferred to the PURCHASER or his assignee.  

	 	 	 

THIRD: The term of this Agreement shall be until March 25, 2008.

FOURTH: If PURCHASER fails to make any of the payments of this Purchase and Sale Option Agreement and there has been no breach on behalf of the SELLER (as to the warrants and representations made hereby SELLER throughout this Agreement), all the amounts paid shall be kept by SELLER as a non-refundable compensation for the damages and losses caused by the non-compliance of PURCHASER, without any need to obtain final verdict on that regard.  This will be PURCHASER'S only penalty in case of non-compliance.  

FIFTH: The PROPERTY shall be maintained in the same condition it is as of this date, except for ordinary wear and tear.  

SIXTH: SELLER does hereby warrant irrevocably to PURCHASER that the PROPERTY to be transferred is entirely free of liens, encumbrances, registered or unregistered mortgages, annotations, liabilities or any other type of obligations, leases, third party occupations, that there are no administrative and/or judicial claims of any nature over them, and that the real estate and municipal taxes, as well as all other management fees and bills such as water and electricity bills (if applicable) up to date, and on closing date will show all the corresponding receipts.   The mortgage and pledge on the equipment with Bancredito shall be cancel as indicated in Article 2.c) above.   The properties are transferred with the following liens (conditions, servitudes, restrictions) as of today shown in the National Registry ____________

SEVENTH: The SELLER will have to liquidate and terminate, as well as pay all severances to the employees hired (if applicable) on closing date.  Therefore PURCHASER will have no responsibility and will not be liable of any labor claims filed by the employees, and SELLER hereby warrants and represents that it will hold PURCHASER harmless and will be the only one severally liable for the above.     SELLER also guarantees that on closing date the employees will leave the PROPERTY peacefully (if applicable); failure to do so will give PURCHASER the option to terminate and rescind this Agreement without any further obligation to SELLER, and will be returned all monies paid so far.  

EIGHTH: This Purchase and Sale Option Agreement is assignable by PURCHASER only with the previous authorizartion of the SELLER.   PURCHASER shall indicate to the Notary Public that will grant the transfer deed of the PROPERTY (of PURCHASER'S exclusive choosing) the name of the person or entity that will hold the registered title of the PROPERTY. 

NINTH: The PURCHASER will not be able to occupy the PROPERTY before the transfer deed is executed, though will be able and authorized to conduct the studies he deems necessary and will therefore have complete access to the PROPERTY.  SELLER irrevocably warrants, represents and guarantees that the PURCHASER will have a peaceful and perfect ownership and title over the PROPERTY, and therefore is obliged to warranty indemnification and title in case of eviction (dispossession) or hidden or latent defects. 

TENTH:  Breach of Contract: Nonfulfillment by one of the Parties of any of the obligations assumed by means of this Sale and Purchase Agreement, will give the other party the right to request the termination of the Contract along with the respective indemnification of all damages and losses of its forceful compliance, all in accordance with what is established in Articles Six Hundred Ninety Two and following of the Civil Code.

ELEVENTH: All legal and notary fees, transfer taxes, duties and stamps required for the PROPERTY transfer, will be paid by the PURCHASER.  There are no commission agents involved in this transaction.

TWELFTH: The parties hereto represent and warrant that they have sufficient power and authority to subscribe this Agreement. The parties also state that the covenants and undertakings hereunder acquired are true and valid.

THIRTEENTH ARBITRATION: Given the desire to solve disputes in an expedite and just manner, the parties voluntarily agree that all controversies or differences that may derive from this Agreement, its execution, performance, application, interpretation or liquidation that cannot be resolved by negotiation in a three calendar day period will be submitted to the following procedures:

1.- First, to a conciliation procedure in accordance with the By-laws of the Conciliation and Arbitration Center of the Costa Rican Chamber of Commerce, which may not take more than two calendar days;

2.- If the conflict still exists, either totally or in part, the parties agree to submit it to arbitration in accordance with the above-mentioned By-law, to which the contracting parties submit to unconditionally.  The Arbitration Court will be made up of three arbitrators, one appointed by each of the parties and the third one will be appointed by both arbitrators. Said procedures will take place in the Conciliation and Arbitration Center of the Costa Rican Chamber of Commerce in accordance with law number 7727 Alternative Resolution of Conflicts and Promotion of Social Peace, as well as with the above-mentioned By-laws.

As to the fees that of the conciliators or of the Costa Rican Chamber of Commerce in the conciliation, they will be paid by both parties in equal parts whether a settlement is reached or not.  Each party will have to pay for their own attorney fees.

In case of arbitration, each party will pay for their own fees and expenses during the procedure and the losing party will repay those amounts to the winning party in the term that the arbitrator(s) determine.

FOURTEENTH:   MISCELLANEOUS:

a) Notarization of this Contract: The parties are free to notarize this Agreement and/or to authenticate its date and signatures, without being required to give prior notice to the other parties.

b) Amendment: Any and all agreements by the Parties to amend, change, extend, review or discharge this Agreement, in whole or in part, shall be binding on the parties, so long as such agreements have been made in writing and executed jointly by all the parties.

c) Entire Agreement: This Agreement constitutes and expresses the entire agreement of the parties as to all the matters herein referred to.  All previous discussions, promises, representations and understandings relative thereto among the Parties are thus inapplicable.

d) If any term, provision, covenant, or condition of this Agreement is held by a Costa Rica court of competent jurisdiction to be invalid, void, or unenforceable, the rest of the agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

e) Notices: Service of any legal or administrative notice or summons, as well as any other communications required or permitted to be given hereunder shall be in writing and shall be delivered in the main offices of each of the parties hereof, as follows: 

I-) SELLER: 

II-) PURCHASER:   

FIFTEENTH: This Agreement may be executed by and delivered to each of the parties on separate counterparts (including execution and delivery by facsimile transmission), each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same agreement, notwithstanding that all the parties have not signed the same counterpart.

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year above written.

	
For and on behalf of SELLER:
	
For and on behalf of PURCHASER:Exhibit 4.1 

    EXHIBIT
      A

    

    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 ___, 2008

    Original
      Conversion Price (subject to adjustment herein):
$0.20

    

    $_______________

    

    9%
      SENIOR SECURED CONVERTIBLE DEBENTURE

    DUE
      FEBRUARY ___, 2011

    

    THIS
      DEBENTURE is one of a series of
      duly authorized and validly issued 9% Senior Secured Convertible Debentures
      of
      Fearless International, Inc., a Nevada corporation, (the “Company”),
      having its principal place of business at 972 Lincoln Road, Suite 200, Miami,
      FL
      33139, Attention: Chief Executive Officer, 305.674.1311, designated as its
      9% Senior Secured Convertible Debenture due February ___, 2011 (this debenture,
      the “Debenture” and, collectively with the other debentures of such
      series, the “Debentures”).

    

    FOR
      VALUE
      RECEIVED, the Company promises to pay to ________________________ or its
      registered assigns (the “Holder”), or shall have paid pursuant to the
      terms hereunder, the principal sum of $_______________ on February ___, 2011
      (the “Maturity Date”) or such earlier date as this Debenture is required
      or permitted to be repaid as provided hereunder, and to pay interest to the
      Holder on the aggregate unconverted and then outstanding principal amount of
      this Debenture in accordance with the provisions hereof. This Debenture is
      subject to the following additional provisions:

    

    Section
      1. Definitions. For the purposes hereof, in addition to the
      terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise
      defined herein shall have the 

    
      
        
        

      

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    meanings
      set forth 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(e).

    

    “Bankruptcy
      Event” means any of the following events: (a) the Company or any Significant
      Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof
      commences a case or other proceeding under any bankruptcy, reorganization,
      arrangement, adjustment of debt, relief of debtors, dissolution, insolvency
      or
      liquidation or similar law of any jurisdiction relating to the Company or any
      Significant Subsidiary thereof; (b) there is commenced against the Company
      or
      any Significant Subsidiary thereof any such case or proceeding that is not
      dismissed within 60 days after commencement; (c) the Company or any Significant
      Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
      or other order approving any such case or proceeding is entered; (d) the Company
      or any Significant Subsidiary thereof suffers any appointment of any custodian
      or the like for it or any substantial part of its property that is not
      discharged or stayed within 60 calendar days after such appointment; (e) the
      Company or any Significant Subsidiary thereof makes a general assignment for
      the
      benefit of creditors; or (f) the Company or any Significant Subsidiary thereof,
      by any act or failure to act, expressly indicates its consent to, approval
      of or
      acquiescence in any of the foregoing or takes any corporate or other action
      for
      the purpose of effecting any of the foregoing.

    

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

    

    “Business
      Day” means any day except any Saturday, any Sunday, any day which shall be a
      federal legal holiday in the United States or any day on which banking
      institutions in the State of New York are authorized or required by law or
      other
      governmental 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 60% of the
      voting securities of the Company (other than by means of conversion or exercise
      of the Debentures and the Securities issued together with the Debentures),
      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 40% of the aggregate voting power of the Company
      or
      the successor entity of such transaction, or (iii) the Company sells or
      transfers all or substantially all of its assets to another Person and the
      stockholders of the Company immediately prior to such transaction own less
      than
      60% of the aggregate 

    
      
        
        

      

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    voting
      power of the acquiring entity immediately after the transaction, or (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 consummation of an agreement to which the Company is a
      party
      or by which it is bound, providing for any of the events set forth in clauses
      (i) through (iv) above. A Change of Control Transaction shall not be triggered
      by the Reverse Stock Split required pursuant to Section 4.19 of the Purchase
      Agreement.

    

    “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, collectively, the shares of Common Stock issuable upon
      conversion of this Debenture in accordance with the terms hereof.

    

    “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 set forth in the Registration Rights
      Agreement. 

    

    “Equity
      Conditions” means, during the period in question, (i) the Company shall have
      duly honored all conversions and redemptions scheduled to occur or occurring
      by
      virtue of one or more Notices of Conversion of the Holder, if any, (ii) the
      Company shall have paid all liquidated damages and other amounts owing to the
      Holder in respect of this Debenture, (iii) there is an effective Registration
      Statement pursuant to which the Holder is permitted to utilize the prospectus
      thereunder to resell all of the shares subject to the Conversion Notice, Forced
      Conversion Notice or interest payment at issue (and the Company believes, in
      good faith, that such effectiveness will continue uninterrupted for the
      foreseeable future), (iv) the Common Stock is trading on a Trading Market and
      all of the shares issuable pursuant to the Conversion Notice, Forced Conversion
      Notice or interest payment at issue are listed or quoted for trading on such
      Trading Market (and the Company believes, in good faith, that trading of the
      Common Stock on a Trading Market will continue uninterrupted for the foreseeable
      future), (v) there is a sufficient number of authorized but unissued and
      otherwise unreserved shares of Common Stock for the issuance of all of the
      shares issuable pursuant to the Transaction Documents, (vi) there is no existing
      Event of Default or no existing event which, with the passage of time or the
      giving of notice, would constitute an Event of Default, (vii) the issuance
      of
      the shares in 

    
      
        
        

      

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    question
      (or, in the case of an Optional Redemption, the shares issuable upon conversion
      in full of the Optional Redemption Amount) to the Holder would not violate
      the
      limitations set forth in Section 4(c) herein, (viii) there has been no public
      announcement of a pending or proposed Fundamental Transaction or Change of
      Control Transaction that has not been consummated, (ix) the Holder is not in
      possession of any information provided to it by the Company that constitutes,
      or
      may constitute, material non-public information and (x) for each Trading Day
      in
      a period of 20 consecutive Trading Days prior to the applicable date in
      question, the daily trading volume for the Common Stock on the principal Trading
      Market exceeds (1) $75,000 of shares (subject to adjustment for forward and
      reverse stock splits and the like) per Trading Day for payments of shares for
      interest or (2) $175,000 of shares (subject to adjustment for forward and
      reverse stock splits and the like) per Trading Day in the case of a Forced
      Redemption pursuant to Section 6 herein

    

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

    

    “Forced
      Conversion” shall have
      the meaning set forth in Section 6(c).

    

    “Forced
      Conversion Date” shall
      have the meaning set forth in Section 6(c).

    

    “Forced
      Conversion Notice” shall have the meaning set forth in Section
      6(c).

    

    “Forced
      Conversion Notice Date” shall have the meaning set forth in Section
      6(c).

    

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

     

    “Interest
      Conversion Rate” means 90% of the lesser of (a) the average of the VWAPs for
      the 20 consecutive Trading Days ending on the Trading Day that is immediately
      prior to the applicable Interest Payment Date or (b) the average of the VWAPs
      for the 20 consecutive Trading Days ending on the Trading Day that is
      immediately prior to the date the applicable Interest Conversion Shares are
      issued and delivered if such delivery is after the Interest Payment
      Date.

    

    “Interest
      Conversion Shares” shall have the meaning set forth in Section
      2(a).

    

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

     

    “Interest
      Payment Date” shall have the meaning set forth in Section 2(a).

    

    “Interest
      Share Amount” shall have the meaning set forth in Section 2(a).

    

    “Late
      Fees” shall have the meaning set forth in Section 2(d).

    

    “Line
      of Credit” means the Company’s existing revolving line of credit up to
      $2,500,000, as may be amended, extended or replaced from time to time and
      including 

    
      
        
        

      

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    indebtedness
      incurred in connection therewith, provided, that the limit shall not be
      increased and the economic terms shall be no less favorable to the Company
      as
      such terms exist as of the date of the Purchase Agreement. 

    

    “Mandatory
      Default Amount” means the sum of (i) the greater of (A) 120% of the
      outstanding principal amount of this Debenture, plus 100% of accrued and unpaid
      interest hereon, or (B) the outstanding principal amount of this Debenture,
      plus
      all accrued and unpaid interest hereon, divided by the Conversion Price on
      the
      date the Mandatory Default Amount is either (a) demanded (if demand or notice
      is
      required to create an Event of Default) or otherwise due or (b) paid in full,
      whichever has a lower Conversion Price, multiplied by the VWAP on the date
      the
      Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid
      in
      full, whichever has a higher VWAP, 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).

    

    “Optional
      Redemption” shall have the meaning set forth in Section 6(a).

    

    “Optional
      Redemption Amount” means the sum of (i) (a) from the one year anniversary of
      the Closing Date until the two year anniversary of the Closing Date, 120% of
      the
      then outstanding principal amount of the Debenture and (b) from the two year
      anniversary of the Closing Date until the Maturity Date, 110% of the then
      outstanding principal amount of the Debenture, (ii) accrued but unpaid interest
      and (iii) all liquidated damages and other amounts due in respect of the
      Debenture.

    

    “Optional
      Redemption Date” shall have the meaning set forth in Section
      6(a).

    

    “Optional
      Redemption Notice” shall have the meaning set forth in Section
      6(a).

    

    “Optional
      Redemption Notice Date” shall have the meaning set forth in Section 6(a).

    

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

    

    “Permitted
      Sale” means a sale or license by the Company of all or substantially all of
      its assets in which (a) the aggregate purchase price for the assets is greater
      than $40 million, and (b) the equity securities of the acquiring company are
      listed or quoted for trading on a Trading Market.

    
      
        
        

      

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    “Permitted
      Indebtedness” means (a) the indebtedness evidenced by the
      Debentures, (b) the Indebtedness existing on the Original Issue Date and set
      forth on Schedule 3.1(aa) attached to the Purchase Agreement, (c) lease
      obligations and purchase money indebtedness of up to $4,000,000, in the
      aggregate, incurred in connection with the acquisition of capital assets and
      lease obligations with respect to newly acquired or leased assets, (d)
      indebtedness that (i) is expressly subordinate to the Debentures pursuant to
      a
      written subordination agreement with the Purchasers that is acceptable to each
      Purchaser in its sole and absolute discretion and (ii) matures at a date later
      than the Maturity Date, (e) the Line of Credit and (f) indebtedness incurred
      in
      connection with an issuance or issuances contemplated by clause (e) under the
      definition of Exempt Issuance (as defined in the Purchase
      Agreement).

    

    “Permitted
      Lien” means the individual and collective reference to the following: (a)
      Liens for taxes, assessments and other governmental charges or levies not yet
      due or Liens for taxes, assessments and other governmental charges or levies
      being contested in good faith and by appropriate proceedings for which adequate
      reserves (in the good faith judgment of the management of the Company or a
      Subsidiary) have been established in accordance with GAAP; (b) Liens imposed
      by
      law which were incurred in the ordinary course of the Company’s or a
      Subsidiary’s business, such as carriers’, warehousemen’s and mechanics’ Liens,
      statutory landlords’ Liens, and other similar Liens arising in the ordinary
      course of its business, and which (x) do not individually or in the aggregate
      materially detract from the value of such property or assets or materially
      impair the use thereof in the operation of the business of the Company and
      its
      consolidated Subsidiaries or (y) are being contested in good faith by
      appropriate proceedings, which proceedings have the effect of preventing for
      the
      foreseeable future the forfeiture or sale of the property or asset subject
      to
      such Lien; (c) Liens incurred in connection with Permitted Indebtedness under
      clauses (a), (b), (c), (e) and (f) thereunder, provided that such Liens pursuant
      to clause (c) of the definition of Permitted Indebtedness are not secured by
      assets of the Company or its Subsidiaries other than the assets so acquired
      or
      leased.

     

    “Purchase
      Agreement”
means
      the
      Securities Purchase Agreement, dated as of February ___, 2008, among the Company
      and the original Holders, 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,
      among the Company and the original Holders, as amended, modified or supplemented
      from time to time in accordance with its terms.

    

    “Registration
      Statement”
means
      a
      registration statement that registers the resale of all Conversion Shares and
      Interest Conversion Shares of the Holder, names the Holder as a “selling
      stockholder” therein, and meets the requirements of the Registration Rights
      Agreement.

    

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

    
      
        
        

      

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    “Share
      Delivery Date” shall have the meaning set forth in Section
      4(d).

    

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

    

    “Threshold
      Period” shall have the meaning set forth in Section 6(c). 

    

    “Trading
      Day” means a day on which the principal Trading Market is open for
      business.

    

    “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 American Stock
      Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
      Select Market, the New York Stock Exchange or the OTC Bulletin
      Board.

    

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

    

    “VWAP”
      means, for any date, the price determined by the first of the following clauses
      that applies: (a) if the Common Stock is then listed or quoted on a Trading
      Market, the daily volume weighted average price of the Common Stock for such
      date (or the nearest preceding date) on the Trading Market on which the Common
      Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based
      on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York
      City
      time)); (b)  if the OTC Bulletin Board is not a Trading Market, the volume
      weighted average price of the Common Stock for such date (or the nearest
      preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
      quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
      are then reported in the “Pink Sheets” published by 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) in all other cases, the fair market value of a share of Common Stock as
      determined by an independent appraiser selected in good faith by the Holder
      and
      reasonably acceptable to the Company.

    

    Section
      2. Interest.

     

    a) Payment
      of
      Interest in Cash or Kind.
      Interest shall
      start to accrue on the one year anniversary of the Original Issue Date. The
      Company shall pay interest to the Holder on the aggregate unconverted and then
      outstanding principal amount of this Debenture at the rate of 9% per annum,
      compounding monthly, payable quarterly on the 10th
      Business Day
      following each of January 1, April 1, July 1 and October 1, beginning on the
      first such date after the one year anniversary of the Original Issue Date,
      on
      each Conversion Date (as to that principal amount then being converted), on
      each
      Optional Redemption Date (as to that principal amount then being redeemed),
      and
      on the Maturity Date (each such date, an “Interest
      Payment
      Date”)
      (if any Interest
      Payment Date is not a 

    
      
        
        

      

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    Business
      Day, then the applicable payment shall be due on the next succeeding Business
      Day), in cash or, at the Company’s option, in duly authorized, validly issued,
      fully paid and non-assessable shares of Common Stock at the Interest Conversion
      Rate (the dollar amount to be paid in shares, the “Interest Share
      Amount”) or a combination thereof; provided, however, that
      payment in shares of Common Stock may only occur if as of the Interest Payment
      Date (i) all of the Equity Conditions are in effect (unless waived by the Holder
      in writing) during the 20 Trading Days immediately prior to the applicable
      Interest Payment Date (the “Interest Notice Period”) and through and
      including the date such shares of Common Stock are actually issued to the
      Holder, (ii) the Company shall have given the Holder notice in accordance with
      the notice requirements set forth below and (iii) as to such Interest Payment
      Date, prior to such Interest Notice Period (but not more than 5 Trading Days
      prior to the commencement of such Interest Notice Period), the Company shall
      have delivered to the Holder’s account with The Depository Trust Company a
      number of shares of Common Stock to be applied against such Interest Share
      Amount equal to the quotient of (x) the applicable Interest Share Amount divided
      by (y) the then Conversion Price (the “Interest Conversion Shares”).

     

    b) Company’s
      Election to Pay Interest in Cash or Shares of Common Stock. Subject to the
      terms and conditions herein, the decision whether to pay interest hereunder
      in
      cash, shares of Common Stock or a combination thereof shall be at the discretion
      of the Company. Prior to the commencement of any Interest Notice Period, the
      Company shall deliver to the Holder a written notice of its election to pay
      interest hereunder on the applicable Interest Payment Date either in cash,
      shares of Common Stock or a combination thereof and the Interest Share Amount
      as
      to the applicable Interest Payment Date, provided that the Company may indicate
      in such notice that the election contained in such notice shall apply to future
      Interest Payment Dates until revised by a subsequent notice. During any Interest
      Notice Period, the Company’s election (whether specific to an Interest Payment
      Date or continuous) shall be irrevocable as to such Interest Payment Date.
      Subject to the aforementioned conditions, failure to timely deliver such written
      notice to the Holder shall be deemed an election by the Company to pay the
      interest on such Interest Payment Date in cash. At any time the Company delivers
      a notice to the Holder of its election to pay the interest in shares of Common
      Stock, the Company shall, if required by applicable law, timely file a
      prospectus supplement pursuant to Rule 424 disclosing such election. The
      aggregate number of shares of Common Stock otherwise issuable to the Holder
      on
      an Interest Payment Date shall be reduced by the number of Interest Conversion
      Shares previously issued to the Holder in connection with such Interest Payment
      Date. 

    

    c) Interest
      Calculations. Interest shall be calculated on the basis of a 360-day year,
      consisting of twelve 30 calendar day periods, and shall accrue daily commencing
      on the Original Issue Date until payment in full of the outstanding principal,
      together with all accrued and unpaid interest, liquidated damages and other
      amounts which may become due hereunder, has been made. Payment of interest
      in
      shares of Common Stock (other than the Interest Conversion Shares issued prior
      to an Interest Notice Period) shall otherwise occur pursuant to Section 4(d)(ii)
      herein and, solely for purposes of the 

    
      
        
        

      

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payment
      of interest in shares, the Interest Payment Date shall be deemed the Conversion
      Date. Interest shall cease to accrue with respect to any principal amount
      converted, provided that the Company actually delivers the Conversion Shares
      within the time period required by Section 4(d)(ii) herein, or if not delivered
      within such period, then as and when delivered. Interest hereunder will be
      paid
      to the Person in whose name this Debenture is registered on the records of
      the
      Company regarding registration and transfers of this Debenture (the
“Debenture Register”). Except as otherwise provided herein, if at any
      time the Company pays interest partially in cash and partially in shares of
      Common Stock to the holders of the Debentures, then such payment of cash shall
      be distributed ratably among the holders of the then-outstanding Debentures
      based on their (or their predecessor’s) initial purchases of Debentures pursuant
      to the Purchase Agreement. 

    

    
d) Late
      Fee. All overdue accrued and unpaid interest to be paid hereunder shall
      entail a late fee at an interest rate equal to the lesser of 15% per annum
      or
      the maximum rate permitted by applicable law (“Late Fees”) which shall
      accrue daily from the date such interest is due hereunder through and including
      the date of actual payment in full. Notwithstanding anything to the contrary
      contained herein, if on any Interest Payment Date the Company has elected to
      pay
      accrued interest in the form of Common Stock but the Company is not permitted
      to
      pay accrued interest in Common Stock because it fails to satisfy the conditions
      for payment in Common Stock set forth in Section 2(a) herein, then, at the
      option of the Holder, the Company, in lieu of delivering either shares of Common
      Stock pursuant to this Section 2 or paying the regularly scheduled interest
      payment in cash, shall deliver, within three Trading Days of each applicable
      Interest Payment Date, an amount in cash equal to the product of (x) the number
      of shares of Common Stock otherwise deliverable to the Holder in connection
      with
      the payment of interest due on such Interest Payment Date multiplied by (y)
      the
      highest VWAP during the period commencing on the Interest Payment Date and
      ending on the Trading Day prior to the date such payment is actually made.
      If
      any Interest Conversion Shares are issued to the Holder in connection with
      an
      Interest Payment Date and are not applied against an Interest Share Amount,
      then
      the Holder shall promptly return such excess shares to the Company.

     

    e) 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. 

    

    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 payable
      for such registration of exchange.

     

    
      
        
        

      

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    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 for transfer to the Company
      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, in whole or
      in
      part, into shares of Common Stock at the option of the Holder, at any time
      and
      from time to time (subject to the conversion limitations set forth in
      Section 4(c) hereof). The Holder shall effect conversions by delivering to
      the Company a Notice of Conversion, the form of which is 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 shall be effected, which shall not be more than two Trading Days
      after the giving of such notice (such date, the “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 deemed delivered hereunder.
      To effect conversions hereunder, the Holder shall not be required to physically
      surrender this Debenture to the Company unless the entire principal amount
      of
      this Debenture, plus all accrued and unpaid interest thereon, has been so
      converted. Conversions hereunder shall have the effect of lowering the
      outstanding principal amount of this Debenture in an amount equal to the
      applicable conversion. The Holder and the Company shall maintain records showing
      the principal amount(s) converted and the date of such conversion(s). The
      Company may deliver an objection to any Notice of Conversion within 2 Business
      Days of delivery of such Notice of Conversion. 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 $0.20, subject to adjustment herein (the “Conversion
      Price”); provided, however, if the average of the VWAPs for
      the 20 consecutive Trading Days immediately following the six month anniversary
      of the Original Issue Date (the “20-Day VWAP”) is less than $0.125
      (subject to adjustment for reverse and forward stock splits, stock dividends,
      stock combinations and other similar transactions of the Common Stock that
      

    
      
        
        

      

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    occur
      after the Original Issue Date), then the Conversion Price shall be reduced
      to
      equal the quotient obtained by dividing A by [(A/E) - F] (such new price, the
      “New Conversion Price”), where:

    

    (A)
      = Aggregate Original Principal
      Amount;

    

    (E)
      = 20-Day VWAP; and

    

    (F)
      = The aggregate number of
      Shares issued pursuant to Section 2(a)(v) of the Purchase
      Agreement.

    

    The
      New
      Conversion Price shall not be adjusted to be equal a price below $0.10 (subject
      to adjustment for reverse and forward stock splits, stock dividends, stock
      combinations and other similar transactions of the Common Stock that occur
      after
      the Original Issue Date). After any adjustment to the Conversion Price pursuant
      this Section 4(b), the Conversion Price shall be deemed to mean the New
      Conversion Price. 

    

    c) Holder’s
      Restriction on Conversion. The Company shall not effect any conversion of
      this Debenture, and a Holder shall not have the right to convert any portion
      of
      this Debenture, to the extent that after giving effect to the conversion set
      forth on the applicable Notice of Conversion, the Holder (together with the
      Holder’s Affiliates, and any other person or entity acting as a group together
      with the Holder or any of the Holder’s Affiliates) would beneficially own in
      excess of the Beneficial Ownership Limitation (as defined below).  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 such determination is being made, but shall exclude the number of
      shares of Common Stock which are issuable upon (A) conversion of the remaining,
      unconverted principal amount of this Debenture beneficially owned by the Holder
      or any of its Affiliates and (B) exercise or conversion of the unexercised
      or
      unconverted portion of any other securities of the Company subject to a
      limitation on conversion or exercise analogous to the limitation contained
      herein (including, without limitation, any other Debentures or the Warrants)
      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 and the rules and regulations promulgated thereunder. To the extent that
      the
      limitation contained in this Section 4(c) applies, the determination of whether
      this Debenture is convertible (in relation to other securities owned by the
      Holder together with any Affiliates) and of which principal amount of this
      Debenture is convertible shall be in the sole discretion of the Holder, and
      the
      submission of a Notice of Conversion shall be deemed to be the Holder’s
      determination of whether this Debenture may be converted (in relation to other
      securities owned by the Holder together with any Affiliates) and which principal
      amount of this Debenture is convertible, in each case subject to the Beneficial
      Ownership Limitation. 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 

    
      
        
        

      

        11

        
          

        

      

      
        
        

      

    

    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. In addition, a determination as to any group
      status as contemplated above shall be determined in accordance with Section
      13(d) of the Exchange Act and the rules and regulations promulgated
      thereunder. 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 stated in the most recent of the
      following: (A) the Company’s most recent periodic or annual report, as the case
      may be; (B) a more recent public announcement by the Company; or (C) a more
      recent 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 a 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 “Beneficial Ownership Limitation” shall be
      4.99% of the number of shares of the Common Stock outstanding immediately after
      giving effect to the issuance of shares of Common Stock issuable upon conversion
      of this Debenture held by the Holder. The Holder, upon not less than 61 days’
prior notice to the Company, may increase or decrease the Beneficial Ownership
      Limitation provisions of this Section 4(c), provided that the Beneficial
      Ownership Limitation in no event exceeds 9.99% of the number of shares of the
      Common Stock outstanding immediately after giving effect to the issuance of
      shares of Common Stock upon conversion of this Debenture held by the Holder
      and
      the provisions of this Section 4(c) shall continue to apply. Any such increase
      or decrease will not be effective until the 61st day after such
      notice is delivered to the Company.  The provisions of this paragraph shall
      be construed and implemented in a manner otherwise than in strict conformity
      with the terms of this Section 4(c) to correct this paragraph (or any portion
      hereof) which may be defective or inconsistent with the intended Beneficial
      Ownership Limitation herein contained or to make changes or supplements
      necessary or desirable to properly give effect to such limitation. The
      limitations contained in this paragraph shall apply to a successor holder of
      this Debenture.

     

    d) Mechanics
      of Conversion.

     

    i. Conversion
      Shares Issuable Upon Conversion of Principal Amount. The number of
      Conversion Shares 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 each
      Conversion Date (the “Share Delivery Date”), the Company shall deliver,
      or cause to be delivered, to the Holder (A) a certificate or certificates
      representing the Conversion Shares which, on or after the Effective

    
      
        
        

      

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    Date,
      shall be free to the extent permitted by the Purchase Agreement and applicable
      law, of restrictive legends and trading restrictions representing the number
      of
      Conversion Shares being acquired upon the conversion of this Debenture
      (including, if the Company has given continuous notice pursuant to Section
      2(b)
      for payment of interest in shares of Common Stock at least 20 Trading Days
      prior
      to the date on which the Conversion Notice is delivered to the Company, shares
      of Common Stock representing the payment of accrued interest otherwise
      determined pursuant to Section 2(a) but assuming that the Interest Notice Period
      is the 20 Trading Days period immediately prior to the date on which the
      Conversion Notice is delivered to the Company and excluding for such issuance
      the condition that the Company deliver Interest Conversion Shares as to such
      interest payment) and (B) a bank check in the amount of accrued and unpaid
      interest (if the Company has elected or is required to pay accrued interest
      in
      cash). On or after the Effective Date, the Company shall , if it is then a
      participant in such system, and subject to any applicable restrictive legend,
      use its best efforts to deliver any certificate or certificates required to
      be
      delivered by the Company under this Section 4 electronically through the
      Depository Trust Company 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 the Conversion Date, the Holder
      shall be entitled to elect by written notice to the Company at any time on
      or
      before its receipt of such certificate or certificates, to rescind such
      Conversion, in which event the Company shall promptly return to the Holder
      any
      original Debenture delivered to the Company and the Holder shall promptly return
      to the Company the Common Stock certificates representing the principal amount
      of this Debenture unsuccessfully tendered for conversion to the Company.

     

    iv. Obligation
      Absolute; Partial Liquidated Damages. 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, that 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 amount hereof, the Company may not refuse
      

    
      
        
        

      

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    conversion
      based on any claim that the Holder or anyone 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 to Holder, 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 outstanding principal amount of this Debenture,
      which is subject to the injunction, which bond shall remain in effect until
      the
      completion of arbitration/litigation of the underlying dispute and the proceeds
      of which shall be payable to the Holder to the extent it obtains judgment.
      In
      the absence of such injunction, the Company shall issue Conversion Shares or,
      if
      applicable, cash, upon a properly noticed conversion. 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 the 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 on the fifth Trading Day after such
      liquidated damages begin to accrue) for each Trading Day after the second
      (2nd) Trading Day after the Share Delivery Date until such
      certificates are delivered. Nothing herein shall limit a Holder’s right to
      pursue actual damages or declare an Event of Default pursuant to Section 8
      hereof for the Company’s failure to deliver Conversion Shares within the period
      specified herein and the Holder shall have the right to pursue all remedies
      available to it hereunder, 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 by the
      Share Delivery Date pursuant to Section 4(d)(ii), and if after the second
      (2nd) Trading Day after the Share Delivery Date the Holder is
      required by its brokerage firm to purchase (in an open market transaction or
      otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common
      Stock to deliver in satisfaction of a sale by the Holder of the Conversion
      Shares which the Holder was entitled to receive upon the conversion relating
      to
      such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in
      cash to the Holder (in addition to any other remedies available to or elected
      by
      the Holder) the amount by which (x) the Holder’s total purchase price (including
      any brokerage commissions) for the Common Stock so purchased exceeds (y) the
      product of (1) the aggregate number of shares of Common Stock that the Holder
      was entitled to receive from the conversion at issue multiplied by (2) the
      actual sale price at which the sell order giving rise to such purchase
      obligation was executed (including any brokerage commissions) 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 

    
      
        
        

      

        14

        
          

        

      

      
        
        

      

    

    attempted
      conversion or deliver to the Holder the number of shares of Common Stock that
      would have been issued if the Company had 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 (including any brokerage commissions) giving
      rise
      to such purchase obligation was a total of $10,000 under clause (A) of the
      immediately preceding sentence, 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 and, upon request of
      the
      Company, evidence of the amount of such loss. Nothing herein shall limit a
      Holder’s right to pursue any other remedies available to it hereunder, at law or
      in equity including, without limitation, a decree of specific performance and/or
      injunctive relief with respect to the Company’s failure to timely deliver
      certificates representing shares of Common Stock upon conversion of this
      Debenture as required pursuant to the terms hereof.

     

    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 for the sole purpose of issuance upon conversion of this
      Debenture and payment of interest on this Debenture, each as herein provided,
      free from preemptive rights or any other actual contingent purchase rights
      of
      Persons other than the Holder (and the other holders of the Debentures), not
      less than such aggregate 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 of Section 5) upon the conversion of the
      outstanding principal amount of this Debenture and payment of interest
      hereunder. The Company covenants that all shares of Common Stock that shall
      be
      so issuable shall, upon issue, be duly authorized, validly issued, fully paid
      and nonassessable and, if the Registration Statement is then effective under
      the
      Securities Act, shall be registered for public sale in accordance with such
      Registration Statement.

    

    vii. Fractional
      Shares. No fractional shares or scrip representing fractional shares shall
      be issued upon the conversion of this Debenture. As to any fraction of a share
      which Holder would otherwise be entitled to purchase upon such conversion,
      the
      Company shall at its election, either pay a cash adjustment in respect of such
      final fraction in an amount equal to such fraction multiplied by the Conversion
      Price or round up to the next whole share.

    

    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 certificates, provided that the Company

    
      
        
        

      

        15

        
          

        

      

      
        
        

      

    

    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 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.

     

    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 payable in shares of Common Stock on shares of Common Stock or
      any
      Common Stock Equivalents (which, for avoidance of doubt, shall not include
      any
      shares of Common Stock issued by the Company upon conversion of, or payment
      of
      interest on, the Debentures); (B) subdivides outstanding shares of Common Stock
      into a larger number of shares; (C) combines (including by way of a reverse
      stock split) outstanding shares of Common Stock into a smaller number of shares;
      or (D) issues, in the event of a 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 any treasury shares of the Company) 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, at any time while this Debenture is outstanding, the
      Company or any Subsidiary, as applicable, sells or grants any option to purchase
      or sells or grants any right to reprice, or otherwise disposes of or issues
      (or
      announces any 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 that is lower than the then
      Conversion Price (such lower price, the “Base Conversion Price” and such
      issuances, collectively, a “Dilutive Issuance”) (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 are issued in connection with such issuance, be entitled to
      receive shares of Common Stock at an effective price per share that is lower
      than the Conversion Price, such issuance shall be deemed to have occurred for
      less than the 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 

    
      
        
        

      

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    foregoing,
      no adjustment will be made under this Section 5(b) in respect of an Exempt
      Issuance. If the Company enters into a Variable Rate Transaction, despite the
      prohibition set forth in the Purchase Agreement, the Company shall be deemed
      to
      have issued Common Stock or Common Stock Equivalents at the lowest possible
      conversion price at which such securities may be converted or exercised. The
      Company shall notify the Holder in writing, no later than 1 Business Day
      following the issuance of any Common Stock or Common Stock Equivalents subject
      to this Section 5(b), indicating therein the applicable issuance price, or
      applicable reset price, exchange price, conversion price and other pricing
      terms
      (such notice, the “Dilutive Issuance Notice”). For purposes of
      clarification, whether or not the Company provides a Dilutive Issuance Notice
      pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance,
      the
      Holder is entitled to receive a number of Conversion Shares based upon the
      Base
      Conversion Price on or after the date of such Dilutive Issuance, regardless
      of
      whether the Holder accurately refers to the Base Conversion Price in the Notice
      of Conversion. For purposes of any adjustment in the Conversion Price made
      pursuant to this Section 5(b), the following shall apply: (i) in the case of
      the
      issuance of Common Stock for cash, the consideration shall be deemed to be
      the
      amount of cash paid; (ii) in the case of the issuance of Common Stock for a
      consideration in whole or in part other than cash, the consideration other
      than
      cash shall be deemed to be the fair value thereof as determined in good faith
      by
      the Board; (iii) the number of shares of Common Stock deliverable upon exercise
      of Common Stock Equivalents shall be deemed to have been issued at the time
      such
      Common Stock Equivalents were issued and for a consideration equal to the
      consideration (determined in the manner provided in (i) and (ii) above), if
      any,
      received by the Company upon the issuance of such Common Stock Equivalents
      plus
      the purchase price, if any, provided in such Common Stock Equivalents for the
      additional Common Stock covered thereby; (iv) the number of shares of Common
      Stock deliverable upon conversion of or in exchange for any Common Stock
      Equivalents and subsequent conversion or exchange thereof shall be deemed to
      have been issued at the time such Common Stock Equivalents were issued and
      for a
      consideration equal to the consideration, if any, received by the Company for
      any such Common Stock Equivalents, plus the additional consideration, if any,
      to
      be received by the Company upon the conversion or exchange of such securities
      or
      the exercise of any related Common Stock Equivalents (the consideration in
      each
      case to be determined in the manner provided in (i) and (ii) above); (v) in
      the
      event of any change in the number of shares of Common Stock deliverable or
      any
      increase or decrease in the consideration payable to the Company upon exercise
      of Common Stock Equivalents or upon conversion of or in exchange for such Common
      Stock Equivalents (including, but not limited to, a change resulting from the
      anti-dilution provisions thereof), the Conversion Price in effect at the time
      obtained with respect to the adjustment which was made upon the issuance of
      such
      Common Stock Equivalents, and any subsequent adjustments based thereon, shall
      be
      recomputed to reflect such change (assuming no exercise or conversion occurred
      of such Common Stock Equivalent), but no further adjustment shall be made for
      the actual issuance of Common Stock or any payment of such consideration upon
      the exercise of or the conversion or exchange of such Common Stock Equivalents,
      provided that the Company shall have 

    
      
        
        

      

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    provided
      the Holder at least 5 days’ prior written notice of any such adjustment during
      which the Holder may convert at the prevailing exercise rate; and (vi) upon
      the
      expiration or termination of any such Common Stock Equivalents, assuming no
      exercise or conversion thereof, in whole or in part, the Conversion Price in
      effect at the time obtained with respect to the adjustment which was made upon
      the issuance of such Common Stock Equivalents shall be adjusted to the price
      that would have been in effect had the adjustment not occurred, subject to
      other
      adjustments in the interim, provided that the Company shall have provided the
      Holder at least 5 days’ prior written notice of any such adjustment during which
      the Holder may convert at the prevailing conversion rate.

     

    c) Subsequent
      Rights Offerings. If the Company, at any time while the Debenture is
      outstanding, shall issue rights, options or warrants to all holders of Common
      Stock (and not to Holders) entitling them to subscribe for or purchase shares
      of
      Common Stock at a price per share that is lower than the VWAP on the record
      date
      referenced below, then the Conversion Price shall be multiplied by a fraction
      of
      which the denominator shall be the number of shares of the Common Stock
      outstanding on the date of issuance of such rights or warrants plus the number
      of additional shares of Common Stock offered for subscription or purchase,
      and
      of which the numerator shall be the number of shares of the Common Stock
      outstanding on the date of issuance of such rights or warrants plus the number
      of shares which the aggregate offering price of the total number of shares
      so
      offered (assuming delivery to the Company in full of all consideration payable
      upon exercise of such rights, options or warrants) would purchase at such VWAP.
      Such adjustment shall be made whenever such rights or warrants are issued,
      and
      shall become effective immediately after the record date for the determination
      of stockholders entitled to receive such rights, options or warrants.

     

    d) Pro
      Rata Distributions. If the Company, at any time while this Debenture is
      outstanding, distributes to all holders of Common Stock (and not to the Holders)
      evidences of its indebtedness or assets (including cash and cash dividends)
      or
      rights or warrants to subscribe for or purchase any security (other than the
      Common Stock, which shall be subject to Section 5(b)), 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 VWAP determined as of the record date mentioned above,
      and of which the numerator shall be such VWAP 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 1 outstanding share of the Common
      Stock as determined by the Board of Directors of the Company in good faith.
      In
      either case the adjustments shall be described in a statement delivered to
      the
      Holder describing the portion of assets or evidences of indebtedness so
      distributed or such subscription rights applicable to 1 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.

    
      
        
        

      

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    e) 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 transaction 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 (which reclassification shall not
      include the Reverse Stock Split required pursuant to Section 4.19 of the
      Purchase Agreement) 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 kind and number of shares of stock or other securities or
      property (the “Alternate Consideration”) receivable as a result of such
      Fundamental Transaction by a holder of the number of shares of Common Stock
      for
      which this Debenture is convertible immediately prior to such event. 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 1 share of Common
      Stock
      in such Fundamental Transaction, and the Company shall apportion the Conversion
      Price among the Alternate Consideration in a reasonable manner reflecting the
      relative value of any different components of the Alternate Consideration.
      If
      holders of Common Stock are given any choice as to the securities, cash or
      property to be received in a Fundamental Transaction, then the Holder shall
      be
      given the same choice as to the Alternate Consideration it receives upon any
      conversion of this Debenture following such Fundamental Transaction. To the
      extent necessary to effectuate the foregoing provisions, any successor to the
      Company or surviving entity in such Fundamental Transaction shall issue to
      the
      Holder a new debenture consistent with the foregoing provisions and evidencing
      the Holder’s right to convert such debenture as described above. 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 Section 5(e) and insuring that this Debenture (or any
      such replacement security) will be similarly adjusted upon any subsequent
      transaction analogous to a Fundamental Transaction.

     

    f) 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
      any treasury shares of the Company) issued and outstanding.

    

    g) Notice
      to the Holder.

    
      
        
        

      

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    i. Adjustment
      to Conversion Price. Whenever the Conversion Price is adjusted pursuant to
      any provision of this Section 5, the Company shall promptly deliver 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.

     

    ii. Notice
      to Allow Conversion by Holder. If (A) the Company shall declare a dividend
      (or any other distribution in whatever form) 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 of 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 or (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 delivered to the Holder at its last address
      as
      it shall appear upon the Debenture Register, 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 deliver such notice or any defect therein or in the delivery 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 on the date of such notice through the effective date
      of the event triggering such notice. 

     

    Section
      6. Optional Redemption and Forced Conversion.

    

    a) Optional
      Redemption at Election of Company. Subject to the provisions of this Section
      6, at any time after the 12 month anniversary of the Closing Date, the Company
      may deliver a notice to the Holder (an “Optional Redemption Notice” and
      the date such notice is deemed delivered hereunder, the “Optional Redemption
      Notice Date”) 

    
      
        
        

      

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    of
      its
      irrevocable election to redeem some or all of the then outstanding principal
      amount of this Debenture for cash in an amount equal to the Optional Redemption
      Amount on the 15th Trading Day following the Optional Redemption
      Notice Date (such date, the “Optional Redemption Date” and such
      redemption, the “Optional Redemption”). The Optional Redemption Amount is
      payable in full on the Business Day following the Optional Redemption Date.
      The
      Company may only effect an Optional Redemption if each of the Equity Conditions
      shall have been met (unless waived in writing by the Holder) on each Trading
      Day
      during the period commencing on the Optional Redemption Notice Date through
      to
      the Optional Redemption Date and through and including the date payment of
      the
      Optional Redemption Amount is actually made in full. If any of the Equity
      Conditions shall cease to be satisfied at any time during the 20 Trading Day
      period, then the Holder may elect to nullify the Optional Redemption Notice
      by
      notice to the Company within 3 Trading Days after the first day on which any
      such Equity Condition has not been met (provided that if, by a provision of
      the
      Transaction Documents, the Company is obligated to notify the Holder of the
      non-existence of an Equity Condition, such notice period shall be extended
      to
      the third Trading Day after proper notice from the Company) in which case the
      Optional Redemption Notice shall be null and void, ab initio. The Company
      covenants and agrees that it will honor all Notices of Conversion tendered
      from
      the time of delivery of the Optional Redemption Notice through the date all
      amounts owing thereon are due and paid in full. 

    

    b) Redemption
      Procedure. The payment of cash or issuance of Common Stock, as applicable,
      pursuant to an Optional Redemption shall be payable on the Optional Redemption
      Date. If any portion of the payment pursuant to an Optional Redemption shall
      not
      be paid by the Company by the applicable due date, interest shall accrue thereon
      at an interest rate equal to the lesser of 15% per annum or the maximum rate
      permitted by applicable law until such amount is paid in full. Notwithstanding
      anything herein contained to the contrary, if any portion of the Optional
      Redemption Amount remains unpaid after such date, the Holder may elect, by
      written notice to the Company given at any time thereafter, to invalidate such
      Optional Redemption, ab initio, and, with respect to the Company’s failure to
      honor the Optional Redemption, the Company shall have no further right to
      exercise such Optional Redemption. Notwithstanding anything to the contrary
      in
      this Section 6, the Company’s determination to redeem in cash or its elections
      under Section 6(b) shall be applied ratably among the Holders of Debentures.
      The
      Holder may elect to convert the outstanding principal amount of the Debenture
      pursuant to Section 4 prior to actual payment in cash for any redemption under
      this Section 6 by the delivery of a Notice of Conversion to the
      Company.

    

    c) Forced
      Conversion. Notwithstanding anything herein to the contrary, if after the
      Closing Date, (i) the VWAP for each of any 20 consecutive Trading Days, which
      period shall have commenced only after the Closing Date (such period the
“Threshold Period”), exceeds $0.60 (subject to adjustment for reverse and
      forward stock splits, stock dividends, stock combinations and other similar
      transactions of the Common Stock that occur after the Original Issue Date),
      the
      Company may, within 2 Trading Days 

    
      
        
        

      

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    after
      the
      end of any such Threshold Period, deliver a written notice to the Holder, which
      notice shall specify the principal amount of this Debenture to be converted
      (a
“Forced Conversion Notice” and the date such notice is delivered to the
      Holder, the “Forced Conversion Notice Date”) to cause the Holder to
      convert up to 25% of the then outstanding principal amount of this Debenture
      plus, if so specified in the Forced Conversion Notice, accrued but unpaid
      interest, liquidated damages and other amounts owing to the Holder under this
      Debenture, (ii) the VWAP during the Threshold Period exceeds $0.75 (subject
      to
      adjustment for reverse and forward stock splits, stock dividends, stock
      combinations and other similar transactions of the Common Stock that occur
      after
      the Original Issue Date), the Company may, within 2 Trading Days after the
      end
      of any such Threshold Period, deliver a Conversion Notice to cause the Holder
      to
      convert up to 25% of the then outstanding principal amount of this Debenture
      plus, if so specified in the Forced Conversion Notice, accrued but unpaid
      interest, liquidated damages and other amounts owing to the Holder under this
      Debenture and (iii) the VWAP during the Threshold Period exceeds $0.90 (subject
      to adjustment for reverse and forward stock splits, stock dividends, stock
      combinations and other similar transactions of the Common Stock that occur
      after
      the Original Issue Date), the Company may, within 2 Trading Days after the
      end
      of any such Threshold Period, deliver a Conversion Notice to cause the Holder
      to
      convert the remaining 50% of the then outstanding principal amount of this
      Debenture plus, if so specified in the Forced Conversion Notice, accrued but
      unpaid interest, liquidated damages and other amounts owing to the Holder under
      this Debenture, it being agreed that the “Conversion Date” for purposes of
      Section 4 shall be deemed to occur on the third Trading Day following the Forced
      Conversion Notice Date (such third Trading Day, the “Forced Conversion
      Date”). The Company may not deliver a Forced Conversion Notice, and any
      Forced Conversion Notice delivered by the Company shall not be effective, unless
      all of the Equity Conditions are met (unless waived in writing by the Holder)
      on
      each Trading Day occurring during the applicable Threshold Period through and
      including the later of the Forced Conversion Date and the Trading Day after
      the
      date such Conversion Shares pursuant to such conversion are delivered to the
      Holder. Any Forced Conversion shall be applied ratably to all Holders based
      on
      their initial purchases of Debentures pursuant to the Purchase Agreement,
      provided that any voluntary conversions by a Holder shall be applied against
      the
      Holder’s pro rata allocation, thereby decreasing the aggregate amount forcibly
      converted hereunder if only a portion of this Debenture is forcibly converted.
      For purposes of clarification, a Forced Conversion shall be subject to all
      of
      the provisions of Section 4, including, without limitation, the provision
      requiring payment of liquidated damages and limitations on
      conversions.

    

    Section
      7. Negative Covenants. Prior to the earlier of either (a) the
      Maturity Date or (b) the date on which Holders of at least 81% of the principal
      amount of Debentures originally issued pursuant to the Purchase Agreement are
      no
      longer outstanding as a result of Section 4 or Section 6 hereof or (c)
      obtaining the written consent of at least 60% of the non-Affiliate Holders
      of
      the outstanding Debenture, the Company shall not, and shall not permit any
      of
      its subsidiaries (whether or not a Subsidiary on the Original Issue Date) to,
      directly or indirectly:

    
      
        
        

      

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    a) other
      than Permitted Indebtedness, enter into, create, incur, assume, guarantee or
      suffer to exist any indebtedness for borrowed money of any kind, including
      but
      not limited to, a guarantee, on or with respect to any of its property or assets
      now owned or hereafter acquired or any interest therein or any income or profits
      therefrom;

     

    b) other
      than Permitted Liens, 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 hereafter acquired or any interest therein or any income or profits
      therefrom;

    

    c) amend
      its charter documents, including, without limitation, its certificate of
      incorporation and bylaws, in any manner that materially and adversely affects
      any rights of the Holder;

    

    d) except
      as set forth on Schedule 4.6 to the Purchase Agreement, 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 (i) the Conversion Shares or Warrant Shares
      as permitted or required under the Transaction Documents and (ii) repurchases
      of
      Common Stock or Common Stock Equivalents of departing officers and directors
      of
      the Company, provided that such repurchases shall not exceed an aggregate of
      $100,000 for all officers and directors during the term of this Debenture;
      

    

    e) repay,
      repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness,
      other than the Debentures if on a pro-rata basis, other than (i) regularly
      scheduled principal and interest payments as such terms are in effect as of
      the
      Original Issue Date, provided that at such time of payment, no Event of Default
      exists uncured under this Debenture, or (ii) with respect to the payment of
      principal and/or interest on the Line of Credit, as may be required under the
      terms thereof, provided that at such time of payment, no Event of Default then
      exists uncured under this Debenture;

    

    f) pay
      cash dividends or distributions on any equity securities of the
      Company;

    

    g) enter
      into any transaction with any Affiliate of the Company which would be required
      to be disclosed in any public filing with the Commission, unless such
      transaction is made on an arm’s-length basis and expressly approved by a
      majority of the disinterested directors of the Company (even if less than a
      quorum otherwise required for board approval); 

    

    h) except
      for a Permitted Sale, effect any sale or license of all or substantially all
      of
      the Company’s assets or effect any merger or consolidation of the Company with
      or into another Person;

    
      
        
        

      

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    i) effect
      an acquisition of an Affiliate in which the Company’s valuation as of the
      consummation of such transaction is less than the Company’s valuation as of the
      Closing Date;

    

    j) other
      than in the ordinary course of business, incur any expenditures that have not
      been previously approved by the Board of Directors;

    

    k) terminate
      Jeffrey Binder as Chief Executive Officer of the Company; 

    

    l) increase
      the cash compensation payable to the Company’s Chief Executive Officer in effect
      immediately prior to the Closing Date; and

    

    m) enter
      into any agreement with respect to any of the foregoing.

    

    Section
      8. Events of
      Default. 

    

    a) “Event
      of Default” means, wherever used herein, any of the following events
      (whatever the reason for such event and whether such event shall be voluntary
      or
      involuntary or effected by operation of law or pursuant to any judgment, decree
      or order of any court, or any order, rule or regulation of any administrative
      or
      governmental body):

    

    i. any
      default in the payment of (A) the principal amount of any Debenture or (B)
      interest, liquidated damages and other amounts owing to a Holder on any
      Debenture, as and when the same shall become due and payable (whether on a
      Conversion Date or the Maturity Date or by acceleration or otherwise) which
      default, solely in the case of an interest payment or other default under clause
      (B) above, is not cured within 5 Trading Days after notice thereof to the
      Company;

     

    ii. the
      Company shall fail to observe or perform any other material covenant or
      agreement contained in the Debentures (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) 7 Trading Days after notice
      of such failure sent by the Holder or by any other Holder to the Company and
      (B)
      10 Trading Days after the Company has become or should have become aware of
      such
      failure;

    

    iii. a
      default or event of default (subject to any grace or cure period provided 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 obligated (and not covered
      by clause (vi) below);

    
      
        
        

      

        24

        
          

        

      

      
        
        

      

    

    iv. any
      representation or warranty made in this Debenture, any other Transaction
      Documents, any written statement pursuant hereto or thereto or any other report,
      financial statement or certificate made or delivered to the Holder or any other
      Holder shall be untrue or incorrect in any material respect as of the date
      when
      made or deemed made, except to the extent same was corrected prior to the
      issuance of this Debenture;

    

    v. the
      Company or any Significant Subsidiary shall be subject to a Bankruptcy
      Event;

     

    vi. the
      Company or any Subsidiary shall default on 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 that (a) involves an
      obligation greater than $200,000, whether such indebtedness now exists or shall
      hereafter be created, and (b) results 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 listing or quotation for trading on
      a
      Trading Market and shall not be eligible to resume listing or quotation for
      trading thereon within 10 Trading Days;

    

    viii. the
      Company shall be a party to any Change of Control Transaction or Fundamental
      Transaction or shall agree to sell or dispose of all or in excess of 40% of
      its
      assets in one transaction or a series of related transactions (whether or not
      such sale would constitute a Change of Control Transaction);

    

    ix. 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 Section 4(d) or the Company shall provide at any time notice to
      the
      Holder, including by way of public announcement, of the Company’s intention to
      not honor requests for conversions of any Debentures in accordance with the
      terms hereof; or

    

    x. any
      monetary judgment, writ or similar final process shall be entered or filed
      against the Company, any subsidiary or any of their respective property or
      other
      assets for more than $100,000, and such judgment, writ or similar final process
      shall remain unvacated, unbonded or unstayed for a period of 45 calendar
      days.

    
      
        
        

      

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    Notwithstanding
      anything herein or in the Transaction Documents (including without limitation,
      Section 2(b)(v) of the Registration Rights Agreement) to the contrary, the
      failure to have a Registration Statement declared effective by the Commission
      as
      of any Effectiveness Date (as defined in the Registration Rights Agreement)
      shall not, by itself, constitute an Event of Default hereunder or under any
      Transaction Document.

     

    b) Remedies
      Upon Event of Default. If any Event of Default occurs, the outstanding
      principal amount of this Debenture, plus accrued but unpaid interest, liquidated
      damages and other amounts owing in respect thereof through the date of
      acceleration, shall become, at the Holder’s election, immediately due and
      payable in cash at 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 an interest
      rate equal to the lesser of 15% per annum or the maximum rate permitted under
      applicable law. Upon the payment in full of the Mandatory Default Amount, the
      Holder shall promptly surrender this Debenture to or as directed by the Company.
      In connection with such acceleration described herein, 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 acceleration
      may
      be rescinded and annulled by Holder at any time prior to payment hereunder
      and
      the Holder shall have all rights as a holder of the Debenture until such time,
      if any, as the Holder receives full payment pursuant to this Section 8(b).
      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, or sent by a nationally
      recognized overnight courier service, addressed to the Company, at the address
      set forth above, facsimile number (305) 674-1311, Att: Jeffrey Binder, CEO
      or
      such other facsimile number or address as the Company may specify for such
      purpose by notice to the Holder delivered in accordance with this Section 9.
      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,
      or
      sent by a nationally recognized overnight courier service addressed to each
      Holder at the facsimile number or address of the Holder appearing on the books
      of the Company, or if no such facsimile 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 number specified in this Section 9 prior to 5:30
      p.m.
      (New York City time), (ii) the date immediately following the date of
      transmission, if such notice or communication is delivered via facsimile at
      the
      facsimile number specified in this Section 

    
      
        
        

      

        26

        
          

        

      

      
        
        

      

    

    9
      between
      5:30 p.m. (New York City time) and 11:59 p.m. (New York City time) on any 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.

     

    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, liquidated damages and accrued
      interest, as applicable, 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, the ownership hereof, and reasonable and customary indemnity
      or security, all as 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 conflict of laws thereof. Each party agrees that all legal
      proceedings concerning the interpretation, 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 such New York Courts, 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 other manner permitted by applicable
      law. Each party hereto hereby irrevocably waives, to the fullest extent
      permitted by applicable law, any and all right to trial by jury

    
      
        
        

      

        27

        
          

        

      

      
        
        

      

    

    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 in the investigation,
      preparation and prosecution of such action or proceeding.

     

    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
      by
      the Company or the Holder 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 the applicable
      law governing usury, the applicable rate of interest due hereunder shall
      automatically be lowered to equal the maximum rate of interest permitted under
      applicable law. 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.

    

    i) Assumption. 
      Any successor to the Company or any surviving entity in a Fundamental
      Transaction shall (i) assume, contemporaneously with the consummation of such
      Fundamental Transaction, all of the obligations of the Company under this
      Debenture and the other Transaction Documents pursuant to written agreements
      in
      form 

    
      
        
        

      

        28

        
          

        

      

      
        
        

      

    

    and
      substance satisfactory to the Holder (such approval not to be unreasonably
      withheld or delayed) and (ii) 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 amount and the
      interest rate of this Debenture and having similar ranking to this Debenture,
      which shall be 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.

    

    j) Secured
      Obligation. The obligations of the Company under this Debenture are secured
      by the assets of the Company and each Subsidiary pursuant to the Security
      Agreement, dated as of February ___, 2008 between the Company, the Subsidiaries
      of the Company and the Secured Parties (as defined therein).

    

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

    
      
        
        

      

        29

        
          

        

      

      
        
        

      

    
    

    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.

    

    
      	FEARLESS
              INTERNATIONAL, INC.
	 
	 
	
              By:

            	
               

            
	 	Name:
              Jeffrey Binder 
              Title:
                Chief Executive Officer

              Facsimile
                No. for delivery of Notices:
                305.674.1311

            

    

    
      
        
        

      

        30

        
          

        

      

      
        
        

      

    

    ANNEX
      A

    

    NOTICE
      OF CONVERSION

    

    The
      undersigned hereby elects to
      convert principal under the 9% Senior Secured Convertible Debenture due February
      ___, 2011 of Fearless International, Inc., a Nevada corporation (the
“Company”), into shares of common stock (the “Common Stock”), of
      the Company according to the conditions hereof, as of the date written below.
      If
      shares of Common Stock are to be issued in the name of a person other than
      the
      undersigned, the undersigned will pay all transfer taxes payable with respect
      thereto and is delivering herewith such certificates and opinions as reasonably
      requested by the Company in accordance therewith. No fee will be charged to
      the
      holder for any conversion, except for such transfer taxes, if any.

    

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

    

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

    

    Conversion
      calculations:   

    Date
      to
      Effect Conversion:

    

    Principal
      Amount of Debenture to be Converted:

    

    Payment
      of Interest in Common Stock __ yes __ no

    If
      yes,
      $_____ of Interest Accrued on Account of Conversion at Issue.

     

    Number
      of
      shares of Common Stock to be issued:

     

    Signature:

     

    Name:

     

    Address
      for Delivery of Common Stock Certificates:

    

    Or

    

    DWAC
      Instructions:

    

    Broker
      No:                                    
 

    Account
      No:                                
 

     

    
      
        
        

      

        31

        
          

        

      

      
        
        

      

    
     

    Schedule
      1

    

    CONVERSION
      SCHEDULE

    

    The
      9%
      Senior Secured Convertible Debentures due on February ___, 2011 in the aggregate
      principal amount of $_____________ are issued by Fearless International, Inc.
      This Conversion Schedule reflects conversions made under Section 4 of the above
      referenced Debenture.

    

    Dated:

    

    
      	
               

              Date
                of Conversion

              (or
                for first entry,

               Original
                Issue Date)

            	 	
               

              Amount
                of 

              Conversion

            	 	
              Aggregate
                

              Principal
                

              Amount
                

              Remaining
                

              Subsequent
                to 

              Conversion

              (or
                original 

              Principal
                

              Amount)

            	 	
               

              Company
                Attest

            
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	
               

            	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

    

     

    
      
         

      

        32

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