Document:

ex105.htm

    Exhibit
      10.5

     

    REGISTRATION
      RIGHTS TERMINATION
      AGREEMENT

    

    REGISTRATION
      RIGHTS TERMINATION AGREEMENT (this “Agreement”), dated as of December 11, 2007,
      by and among SpiralFrog, Inc. (f/k/a/ Mohen, Inc.), a Delaware corporation
      (the
“Company”), and the
      undersigned buyers (each, a “Buyer”, and collectively,
      the
“Buyers”).

    

    WHEREAS:

    

    A.           In
      connection with an Amended and Restated Securities Purchase Agreement by and
      among the Company and the Buyers dated as of August 7, 2007, including the
      Addendum thereto dated as of December 11, 2007 (the “Purchase Agreement”), the
      Company, upon the terms and subject to the conditions set forth in the Purchase
      Agreement, has issued and sold to each Buyer, common stock purchase warrants
      of
      the Company (the “Warrants”) exercisable to
      purchase shares of common stock of the Company, $0.001 par value per share
      (the
“Common Stock”) (as
      exercised the “Warrants
      Shares”) and convertible notes of the Company (the “Notes”) which are,
      among other
      things, be convertible into shares of the Company’s Common Stock (as converted,
      the “Exchange Shares”)
      in accordance with the terms of the Notes.

    

    B.  To
      induce
      the Buyers to execute and deliver the Purchase Agreement, the Company and the
      Buyers entered into a Registration Rights Agreement dated as of April 19, 2007
      which was amended and restated as of August 7, 2007 (the “Registration Rights
      Agreement”).

    

    C.           The
      Company and the Buyers wish to terminate their respective rights under the
      Registration Rights Agreement and have this Agreement supersede and replace
      the
      Registration Rights Agreement and all subsequent oral and written agreements
      between the Company and the Buyers through the date hereof involving the subject
      matter of the Registration Rights Agreement.

    

    NOW,
      THEREFORE, in consideration of the premises and the mutual covenants contained
      herein and other good and valuable consideration, the receipt and sufficiency
      of
      which are hereby acknowledged, the Company, and each of the Buyers hereby agree
      as follows:

    

    1.           TERMINATION
      OF REGISTRATION
      RIGHTS AGREEMENT

    

    The
      Company and the Buyers agree that
      this Agreement supersedes and replaces the Registration Rights Agreement which
      is hereby terminated and of no further force or effect.  The Company
      and the Buyers further agree that this Agreement supersedes and replaces all
      registration rights granted to Buyers under the Purchase Agreement, Warrants
      and
      Notes. The Company and the Buyers also agree that the rights granted to the
      Buyers hereunder, with the exception of the rights contained in Section 2
      hereof, extend to the Buyers of the last $2,000,000  of Notes and
      1,090,910 Warrants sold under the Purchase Agreement.

     

     

    
      
        
        

      

      
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    2.  PAYMENT
      OF
      DAMAGES

    

    The
      Company failed to meet the filing deadline requirement under the Registration
      Rights Agreement.  In connection therewith, the Company shall issue
      Senior Secured Promissory Notes (the “New Notes”) in the aggregate principal
      amount of $575,666.67 to the Buyers, on a pro-rata basis.  The New
      Notes shall have a maturity date of April 19, 2008 and shall be identical,
      in
      all material respects, to the Notes.

    

    3.           DEMAND
      AND PIGGYBACK
      REGISTRATION RIGHTS.

    

    Until
      the Notes, including the New
      Notes, are paid in full or until the underlying Exchange Shares and Warrant
      Shares are saleable, in full, under Rule 144 (the “Effective Period”), the
      Buyers shall have a one time demand registration right and unlimited piggyback
      registration rights with respect to the Warrant Shares and Exchange Shares,
      including the Exchange Shares underlying the New Notes.  Until the
      Registrable Securities (as such term is defined in Section 4(a) below) are
      registered for resale or are otherwise freely tradeable, the Company should
      not
      file any registration statements without the prior written consent of the
      holders of a majority of the principal amount of the Notes, including the New
      Notes, which consent shall not be unreasonably withheld.  In
      connection with the demand right, upon written notice from persons holding
      a
      majority of the principal amount of the Notes, including the New Notes, the
      Company shall, within 60 days thereafter (the “Filing Deadline”) prepare and
      file a registration statement on Form SB-2, or such other form as shall be
      available, registering the Warrant Shares and Exchange Shares and shall use
      its
      best efforts to have such registration statement declared effective as soon
      as
      practicable thereafter.  If (i) a registration statement covering all
      of the Registrable Securities (as such term is defined in Section 4(2) below)
      required to be covered thereby and required to be filed by the Company pursuant
      to the demand right granted under this Agreement is (A) not filed with the
      SEC
      on or before the Filing Deadline (a “Filing Failure”) or (B) not
      declared effective by the SEC on or before the nintieth (90th)
      day after the
      date such registration statement is filed with the SEC  (the
“Effectiveness Deadline”) (an “Effectiveness
      Failure”; provided, however, that for thirty (30) days following the
      Effectiveness Deadline there will be no Effectiveness Failure if the SEC is
      reviewing the Registration Statement and the Company is using its best efforts
      to have the Registration Statement declared effective; and there will be no
      Effectiveness Failure for an indefinite period of time if the primary reason
      for
      the failure to meet the Filing Deadline is a Rule 415 comment from the SEC)
      or
      (ii) on any day after the effective date, sales of all of the Registrable
      Securities required to be included on such registration statement cannot be
      made
      (other than during an Allowable Grace Period (as defined in Section 4(r))
      pursuant to such registration statement (including, without limitation, because
      of a failure to keep such registration statement effective, to disclose such
      information as is necessary for sales to be made pursuant to such registration
      statement or to register a sufficient number of shares of Common Stock) (a
      “Maintenance Failure”)
      then, as partial relief for the damages to any holder by reason of any such
      delay in or reduction of its ability to sell the underlying shares of common
      stock (which remedy shall not be exclusive of any other remedies available
      at
      law or in equity), the Company shall pay to each holder of Registrable
      Securities relating to such registration statement an amount in cash equal
      to
      (i) one and one-half percent (1.5%) of the aggregate Purchase Price (as such
      term is defined in the Purchase Agreement) of such Buyer's Notes relating to
      the
      Registrable Securities included in such Registration Statement three (3)
      business days following the thirtieth (30th)
      day after the
      occurrence of a Filing Failure and (ii) two percent (2%) of the aggregate
      Purchase Price (as such term is defined in the Purchase Agreement) of such
      Buyer’s Notes relating to the Registrable Securities included in such
      Registration Statement on each of the following dates: (A) three (3) business
      days following the 60th day after an uncured Filing Failure has occurred, (which
      covers the default period that commences on the 31st
      day after the
      occurrence of an uncured Filing Failure and concludes on the 60th
      day after the
      occurrence of an uncured Filing Failure) and on every thirtieth (30th) day
      thereafter until such Filing Failure is cured; and (B) three (3) business days
      following the thirtieth (30th)
      day after the
      occurrence of an Effectiveness Failure has occurred and on every thirtieth
      (30th) day thereafter until such Effectiveness Failure is cured (provided that
      the Company shall pay a pro-rata amount of any Registration Delay Payment for
      any partial period covered in clause (A) or (B)). The payments to which a holder
      shall be entitled pursuant to this Section 3(f) are referred to herein as “Registration Delay
      Payments”.  In the event the Company fails to make Registration
      Delay Payments in a timely manner, such Registration Delay Payments shall bear
      interest at the rate of one and one-half percent (1.5%) per month (prorated
      for
      partial months) until paid in full. Notwithstanding anything herein to the
      contrary, in no event shall the Registration Delay Payments exceed ten percent
      (10%) of the aggregate Purchase Price for all Buyers (the "Registration Delay Payments
      Cap"). Any amount in excess of the Registration Delay Payments Cap (the
      "Excess Registration Delay
      Payments") shall cause the Exchange Price of the Notes to be lowered by
      an amount equal to the quotient of the amount of such Buyers Excess Registration
      Delay Payments divided by the then outstanding amount of such Notes.
      Notwithstanding anything to the contrary contained herein no Registration Delay
      Payments shall be payable with respect to any Registrable Securities excluded
      from a Registration Statement by election of a Buyer.

     

     

    
      
        
        

      

      
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    The
      piggyback registration rights will not apply to registration statements relating
      solely to employee benefit plans or business combinations.  Except as
      otherwise provided herein, during the Effective Period, the Company shall not
      file a registration statement without first offering to the Buyers the right
      to
      participate on a piggyback basis.  For purposes of the majority
      notices discussed in the preceding paragraph, a Buyer holding Exchange Shares
      and/or Warrant Shares will be treated as still owning the principal amount
      of
      the Notes against which such Exchange Shares and Warrant Shares were
      issued.

    

    In
      connection with the demand and piggyback registration rights provided for
      herein, the Buyers acknowledge and agree that their participation may be cut
      back due to underwriter or Rule 415 requirements.  In such event, to
      the extent practicable, the Buyer’s shall be treated in the same manner as all
      other participants.

    

    4.  RELATED
      OBLIGATIONS.

     

    At
      such time as the Company is
      obligated to file a Registration Statement with the SEC pursuant to this
      Agreement, the Company will use its commercially reasonable best efforts to
      effect the registration of the Buyers’ Registrable Securities (as such term is
      defined in Section 4(a) below) in accordance with the intended method of
      disposition thereof and, pursuant thereto, the Company shall have the following
      obligations:

     

    a.  The
      Company shall prepare and file with the SEC a registration statement with
      respect to the Buyers’ Registrable Securities and use its best efforts to cause
      such registration statement relating to the Buyers’ Registrable Securities to
      become effective as soon as practicable after such
      filing.  Registrable Securities means (i) the Exchange Shares issued
      or issuable upon exchange of the Notes, (ii) the Warrant Shares issued or
      issuable upon exercise of the Warrants, and (iii) any capital stock of the
      Company issued or issuable with respect to the Exchange Shares, the Warrant
      Shares, the Notes or the Warrants as a result of any stock split, stock
      dividend, recapitalization, exchange or similar event or otherwise, without
      regard to any limitations on exchanges of the Notes or exercise of the Warrants.
      The Company shall keep each registration statement effective pursuant to
      Rule 415 at all times until the earlier of (i) the date as of which
      the Buyers may sell all of the Buyers’ Registrable Securities covered by such
      registration statement without restriction pursuant to Rule 144(k) (or any
      successor thereto) promulgated under the 1933 Act or (ii) the date on which
      the Buyers shall have sold all of the Buyers’ Registrable Securities covered by
      such registration statement (the “Registration Period”). The Company shall
      ensure that each registration statement (including any amendments or supplements
      thereto and prospectuses contained therein) shall not contain any untrue
      statement of a material fact or omit to state a material fact required to be
      stated therein, or necessary to make the statements therein (in the case of
      prospectuses, in the light of the circumstances in which they were made) not
      misleading. The term “best efforts” shall mean, among other things, that the
      Company shall submit to the SEC, within two (2) business days after the later
      of
      the date that (i) the Company learns that no review of a particular
      registration statement will be made by the staff of the SEC or that the staff
      has no further comments on a particular registration statement, as the case
      may
      be, and (ii) the approval of Buyer’s legal counsel has been obtained (which
      approval shall be immediately sought), a request for acceleration of
      effectiveness of such registration statement to a time and date not later than
      48 hours after the submission of such request.  Buyers shall have the
      right to select one legal counsel (the “Legal Counsel”) to review and oversee,
      as counsel for the Buyers, any registration pursuant to this Agreement, which
      shall be Moomjian, Waite, Wactlar & Coleman, LLP or such other counsel as
      designated by the holders of a majority of the Registrable
      Securities.

    

    b.  The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a registration statement and
      the
      prospectus used in connection with such registration statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
      be necessary to keep such registration statement effective at all times (subject
      to any Allowable Grace Period, as such term is defined in Section 4(r) hereof)
      during the Registration Period, and, during such period, comply with the
      provisions of the 1933 Act with respect to the disposition of all Registrable
      Securities of the Company covered by such registration statement until such
      time
      as all of such Registrable Securities shall have been disposed of in accordance
      with the intended methods of disposition by the seller
      or
      sellers thereof as set forth in such registration statement.

    

    c.  The
      Company shall (A) permit Legal Counsel to review and comment upon
      (i) a registration statement at least five (5) business days prior to
      its filing with the SEC and (ii) all amendments and supplements to all
      registration statements (except for Annual Reports on Form 10-K or Form 10-KSB,
      and Quarterly Reports on Form 10-Q or Form 10-QSB and any similar or successor
      reports) within a reasonable number of days prior to their filing with the
      SEC,
      and (B) not file any registration statement or amendment or supplement
      thereto in a form to which Legal Counsel reasonably objects. The Company shall
      not submit a request for acceleration of the effectiveness of a registration
      statement or any amendment or supplement thereto without the prior approval
      of
      Legal Counsel, which consent shall not be unreasonably withheld. The Company
      shall furnish to Legal Counsel, without charge, (i) copies of any
      correspondence from the staff of the SEC to the Company or its representatives
      relating to any registration statement, (ii) promptly after the same is
      prepared and filed with the SEC, one copy of any registration statement and
      any
      amendment(s) thereto, including financial statements and schedules, all
      documents incorporated therein by reference, if requested by a Buyer, and all
      exhibits and (iii)  if the Company shall not have filed a final prospectus
      in accordance with Rule 424 per Section 2(a), upon the effectiveness of any
      registration statement, one copy of the prospectus included in such registration
      statement and all amendments and supplements thereto. The Company shall
      reasonably cooperate with Legal Counsel in performing the Company’s obligations
      pursuant to this Section 4.

     

    
 

    
      
        
        

      

      
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    d.  The
      Company shall furnish to each Buyer whose Registrable Securities are included
      in
      any registration statement, without charge, (i) if the Company shall not
      have filed a final prospectus in accordance with Rule 424 per
      Section 2(a), upon the effectiveness of any registration statement, copies
      of the prospectus included in such registration statement and all amendments
      and
      supplements thereto (in such number as such Buyer may reasonably request) and
      (ii) such other documents, including copies of any preliminary or final
      prospectus, as such Buyer may reasonably request from time to time in order
      to
      facilitate the disposition of the Registrable Securities owned by such
      Buyer.

    

    e.  The
      Company shall use its best efforts to (i) register and qualify, unless an
      exemption from registration and qualification applies, the resale by Buyers
      of
      the Registrable Securities covered by a registration statement under such other
      securities or “blue sky” laws of all applicable jurisdictions in the United
      States, (ii) prepare and file in those jurisdictions, such amendments
      (including post-effective amendments) and supplements to such registrations
      and
      qualifications as may be necessary to maintain the effectiveness thereof during
      the registration period, (iii) take such other actions as may be necessary
      to maintain such registrations and qualifications in effect at all times during
      the registration period, and (iv) take all other actions reasonably necessary
      or
      advisable to qualify the Registrable Securities for sale in
      such jurisdictions; provided, however, that the Company shall not be required
      in
      connection therewith or as a condition thereto to (x) qualify to do
      business in any jurisdiction where it would not otherwise be required to qualify
      but for this Section 4(e), (y) subject itself to general taxation in
      any such jurisdiction, or (z) file a general consent to service of process
      in any such jurisdiction. The Company shall promptly notify Legal Counsel and
      each Buyer who holds Registrable Securities of the receipt by the Company of
      any
      notification with respect to the suspension of the registration or qualification
      of any of the Registrable Securities for sale under the securities or “blue sky”
laws of any jurisdiction in the United States or its receipt of actual notice
      of
      the initiation or threatening of any proceeding for such
      purpose.

    

    f.  The
      Company shall notify Legal Counsel and each Buyer in writing of the happening
      of
      any event, as promptly as practicable after becoming aware of such event, as
      a
      result of which the prospectus included in a registration statement, as then
      in
      effect, includes an untrue statement of a material fact or omission to state
      a
      material fact required to be stated therein or necessary to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading (provided that in no event shall such notice contain any material,
      nonpublic information), and, subject to Section 4(r), promptly prepare a
      supplement or amendment to such registration statement to correct such untrue
      statement or omission.  The Company shall also promptly notify Legal
      Counsel and each Buyer in writing (i) when a prospectus or any prospectus
      supplement or post-effective amendment has been filed, and when a registration
      statement or any post-effective amendment has become effective (notification
      of
      such effectiveness shall be delivered to Legal Counsel and each Buyer by
      facsimile or e-mail on the same day of such effectiveness and by overnight
      mail), (ii) of any request by the SEC for amendments or supplements to a
      registration statement or related prospectus or related information, and
      (iii) of the Company’s reasonable determination that a post-effective
      amendment to a registration statement would be appropriate.

    

    g.  The
      Company shall use its best efforts to prevent the issuance of any stop order
      or
      other suspension of effectiveness of a registration statement, or the suspension
      of the qualification of any of the Registrable Securities for sale in any
      jurisdiction and, if such an order or suspension is issued, to obtain the
      withdrawal of such order or suspension at the earliest possible moment and
      to
      notify Legal Counsel and each Buyer who holds Registrable Securities being
      sold
      of the issuance of such order and the resolution thereof or its receipt of
      actual notice of the initiation or threat of any proceeding for such
      purpose.

    

    h.  At
      the
      reasonable request of any Buyer with respect to an underwritten offering
      pursuant to a registration statement, the Company shall furnish, on the date
      of
      the effectiveness of the registration statement and thereafter from time to
      time
      on such dates as the managing underwriter may reasonably request (i) a
      letter, dated such date, from the Company’s independent certified public
      accountants in form and substance as is customarily given by independent
      certified public accountants to underwriters in an underwritten public offering,
      and (ii) an opinion, dated as of such date, of counsel representing the
      Company for purposes of such registration statement, in form, scope and
      substance as is customarily given in an underwritten public
      offering.

    

    
      
        
        

      

      
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    i.  If
      any Buyer may be required under applicable securities law to
      be described in the registration statement as an underwriter, the Company shall
      make available for inspection by (i) any Buyer, (ii) Legal Counsel and
      (iii) one firm of accountants or other agents retained by the Buyer
      (collectively, the “Inspectors”), all pertinent
      financial and other records, and pertinent corporate documents and properties
      of
      the Company (collectively, the “Records”), as shall be
      reasonably deemed necessary by each Inspector, and cause the Company’s officers,
      directors and employees, counsel and the Company’s independent certified public
      accountants to supply all information which may be necessary and any Inspector
      may reasonably request; provided, however, that each Inspector shall agree
      to
      hold in strict confidence and shall not make any disclosure (except to a Buyer)
      or use of any Record or other information which the Company determines in good
      faith to be confidential, and of which determination the Inspectors are so
      notified, unless (a) the release of such Records is ordered pursuant to a
      final, non-appealable subpoena or order from a court or government body of
      competent jurisdiction or (b) the information in such Records has been made
      generally available to the public other than by disclosure in violation of
      this
      or any other agreement of which the Inspector has knowledge. Each Buyer agrees
      that it shall, upon learning that disclosure of such Records is sought in or
      by
      a court or governmental body of competent jurisdiction or through other means,
      give prompt written notice to the Company and allow the Company, at its expense,
      to undertake appropriate action to prevent disclosure of, or to obtain a
      protective order for, the Records deemed confidential. Nothing herein (or in
      any
      other confidentiality agreement between the Company and any Buyer) shall be
      deemed to limit the Buyers’ ability to sell Registrable Securities in a manner
      which is otherwise consistent with applicable laws and
      regulations.

    

    j.  The
      Company shall hold in confidence and not make any disclosure of information
      concerning a Buyer provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws,
      (ii) the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in any registration statement, (iii) the release
      of such information is ordered pursuant to a subpoena or other final,
      non-appealable order from a court or governmental body of competent
      jurisdiction, or (iv) such information has been made generally available to
      the public other than by disclosure in violation of this Agreement or any other
      agreement. The Company agrees that it shall, upon learning that disclosure
      of
      such information concerning a Buyer sought in or by a court or governmental
      body
      of competent jurisdiction or through other means, give prompt written notice
      to
      such Buyer and allow such Buyer, at the Buyer’s expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, such information.

    

    k.  The
      Company shall use its best efforts either to (i) cause all of the
      Registrable Securities covered by a registration statement to be listed or
      quoted on each securities exchange or quotation service on which securities
      of
      the same class or series issued by the Company are then listed or quoted (which
      shall include the OTC Bulletin Board), if any, if the listing or quotation
      of
      such Registrable Securities is then permitted under the rules of such exchange,
      or (ii) secure designation and quotation of all of the Registrable
      Securities covered by a registration statement on the OTC Bulletin Board and,
      without limiting the generality of the foregoing, to use its commercially
      reasonable best efforts to arrange for at least two market makers to register
      with the National Association of Securities Dealers, Inc. (“NASD”) as such with respect
      to
      the Company’s common stock. The Company shall pay all fees and expenses in
      connection with satisfying its obligation under this
      Section 4(k).

    

    l.  The
      Company shall cooperate with the Buyers who hold the Buyer’s Registrable
      Securities being offered and, to the extent applicable, facilitate the timely
      preparation and delivery of certificates representing the Registrable Securities
      to be offered pursuant to a registration statement and enable such certificates
      to be in such denominations or amounts, as the case may be, as the Buyers may
      reasonably request and registered in such names as the Buyer may
      request.

    

    m.  If
      requested by a Buyer, the Company shall within ten (10) business days of
      receipt of notice from such Buyer (i) incorporate in a prospectus
      supplement or post-effective amendment such information as a Buyer reasonably
      requests to be included therein relating to the sale and distribution of
      Registrable Securities, including, without limitation, information with respect
      to the number of Registrable Securities being offered or sold, the purchase
      price being paid therefor and any other terms of the offering of the Buyer
      Registrable Securities to be sold in such offering; (ii) make all required
      filings of such prospectus supplement or post-effective amendment after being
      notified of the matters to be incorporated in such prospectus supplement or
      post-effective amendment; and (iii) supplement or make amendments to any
      Registration Statement if reasonably requested by a Buyer holding any
      Registrable Securities.

     

     

    
      
        
        

      

      
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    n.  The
      Company shall reasonably cooperate with the Buyers as may be necessary to
      consummate the disposition of such Buyer’s Registrable Securities.

    

    o.  [Intentionally
      left blank.]

    

    p.  The
      Company shall otherwise use its best efforts to comply with all applicable
      rules
      and regulations of the SEC in connection with any registration
      hereunder.

    

    q.  Within
      two (2) business days after a registration statement which covers Buyer’s
      Registrable Securities is ordered effective by the SEC, the Company shall
      deliver, and shall cause legal counsel for the Company to deliver, to the
      transfer agent for such Buyer’s Registrable Securities (with copies to the Buyer
      whose Registrable Securities are included in such registration statement)
      confirmation that such registration statement has been declared effective by
      the
      SEC.

    

    r.  Notwithstanding
      anything to the contrary herein, at any time after the effective date, the
      Company may delay the disclosure of material, non-public information concerning the Company the disclosure
      of which at the time is
      not, in the good faith opinion of the Board of Directors of the Company, in
      the
      best interest of the Company and otherwise required (a “Grace Period”); provided, that
      the Company shall promptly (i) notify the Buyers in writing of the
      existence of material, non-public information giving rise to a Grace Period
      (provided that in each notice the Company will not disclose the content of
      such
      material, non-public information to the Buyers) and the date on which the Grace
      Period will begin, and (ii) notify the Buyers in writing of the date on
      which the Grace Period ends; and, provided further, that no Grace Period shall
      exceed thirty (30) consecutive days and during any three hundred sixty five
      (365) day period such Grace Periods shall not exceed an aggregate of sixty
      (60) days and the first day of any Grace Period must be at least two
      (2) Trading Days after the last day of any prior Grace Period (each, an
“Allowable Grace
      Period”). For purposes of determining the length of a Grace Period above,
      the Grace Period shall begin on and include the date the Buyers receive the
      notice referred to in clause (i) and shall end on and include the later of
      the date the Buyers receive the notice referred to in clause (ii) and the
      date referred to in such notice. The provisions of Section 4(g) hereof shall
      not
      be applicable during the period of any Allowable Grace Period. Upon expiration
      of the Grace Period, the Company shall again be bound by the first sentence
      of
      Section 4(f) with respect to the information giving rise thereto unless such
      material, non-public information is no longer
      applicable.  Notwithstanding anything to the contrary, the Company
      shall cause its transfer agent to deliver unlegended shares of common stock
      to a
      transferee of a Buyer in accordance with the terms of the Purchase Agreement
      in
      connection with any sale of Registrable Securities with respect to which a
      Buyer
      has entered into a contract for sale, and delivered a copy of the prospectus
      included as part of the applicable registration statement (unless an exemption
      from such prospectus delivery requirement exists), prior to the Buyer’s receipt
      of the notice of a Grace Period and for which the Buyer has not yet
      settled.

    

    s.  To
      the
      extent not inconsistent with applicable law, in connection with a public
      offering of securities of the Company, upon the reasonable request of the
      Company or, in the case of an underwritten public offering of the Company's
      securities, the managing underwriters, each Buyer who beneficially owns (as
      defined in Rule 13d-3 adopted by the SEC under the 1934 Act) at least 5% of
      the
      outstanding capital stock of the Company will not effect any sale or
      distribution (other than those included in the registration statement being
      filed with respect to such public offering) of, or any short sale of, or any
      grant of option to purchase, or any hedging or similar transaction with respect
      to, any securities of the Company, or any securities, options or rights
      convertible into or exchangeable or exercisable for such securities during
      the
      14 days prior to and the 90-day period beginning on the effective date of such
      public offering, unless the Company, or in the case of an underwritten public
      offering, the managing underwriters otherwise agree to a shorter period of
      time.  At the request of the Company or the managing underwriters,
      each such Buyer shall execute a customary "lock-up" agreement consistent with
      the provisions of this Section 4(s); provided, however,
      that no
      Buyer shall be required to enter into such "lock-up" agreement unless and until
      all of the Company's executive officers and directors execute substantially
      similar "lock-up" agreements and the Company uses commercially reasonable
      efforts to cause each holder of more than 5% of its outstanding capital stock
      to
      execute substantially similar "lock-up" agreements.  Neither the
      Company nor the managing underwriter shall terminate, materially amend or waive
      the enforcement of any material provision under a "lock-up" agreement unless
      each "lock-up" agreement with a Buyer is also amended or waived in a similar
      manner or terminated, as the case may be.  Notwithstanding anything
      contained in this Agreement or the Purchase Agreement to the contrary, the
      Company may impose stop-transfer instructions to enforce the restrictions
      imposed by this Section 4(s).

    

    5.  OBLIGATIONS
      OF THE
      BUYERS.

     

    a.  At
      least
      ten (10) business days prior to the first anticipated filing date of a
      registration statement, the Company shall notify each Buyer in writing of the
      information the Company requires from each such Buyer if such Buyer elects
      to
      have any of such Buyer’s Registrable Securities included in such registration
      statement. It shall be a condition precedent to the obligations of the Company
      to complete the registration pursuant to this Agreement with respect to the
      Registrable Securities of a particular Buyer that such Buyer shall furnish
      to
      the Company such information regarding itself, the Registrable Securities held
      by it and the intended method of disposition of the Registrable Securities
      held
      by it, as shall be reasonably required to effect and maintain the effectiveness
      of the registration of such Registrable Securities and shall execute such
      documents in connection with such registration as the Company may reasonably
      request.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    b.  Each
      Buyer, by such Buyer’s acceptance of the Registrable Securities, agrees to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any registration statement hereunder, unless
      such Buyer has
      notified the Company in writing of such Buyer’s election to exclude all of such
      Buyer’s Registrable Securities from such registration statement.

    

    c.  Each
      Buyer agrees that, upon receipt of any notice from the
      Company of the happening of any event of the kind described in Section 4(g)
      or
      the first sentence of 4(f), such Buyer will immediately discontinue disposition
      of Registrable Securities pursuant to any registration statement(s) covering
      such Registrable Securities until such Buyer’s receipt of the copies of the
      supplemented or amended prospectus contemplated by Section 4(g) or the first
      sentence of 4(f) or receipt of notice that no supplement or amendment is
      required.

    

    d.  Each
      Buyer covenants and agrees that it will comply with the prospectus delivery
      requirements of the 1933 Act as applicable to or an exemption therefrom it
      in
      connection with sales of Registrable Securities pursuant to the registration
      statement.

    

    
      	
              6.

            	
              INDEMNIFICATION.

            

    

     

    In
      the event any Registrable Securities
      are included in a registration statement under this Agreement:

     

    a.  To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Buyer, the directors, officers, members, partners,
      employees, agents and representatives of, and each Person, if any, who controls
      any Buyer within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against
      any losses, claims, damages, liabilities, judgments, fines, penalties, charges,
      costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint
      or several, (collectively, “Claims”) incurred in
      investigating, preparing or defending any action, claim, suit, inquiry,
      proceeding, investigation or appeal taken from the foregoing by or before any
      court or governmental, administrative or other regulatory agency, body or the
      SEC, whether pending or threatened, whether or not an indemnified party is
      or
      may be a party thereto (“Indemnified Damages”), to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement of a material fact in a
      registration statement or any post-effective amendment thereto or in any filing
      made in connection with the qualification of the offering under the securities
      or other “blue sky” laws of any jurisdiction in which
      Registrable Securities are offered, or the omission to state a material fact
      required to be stated therein or necessary to make the statements therein not
      misleading, (ii) any untrue statement of a material fact contained in any
      preliminary prospectus if used prior to the effective date of such registration
      statement, or contained in the final prospectus (as amended or supplemented,
      if
      the Company files any amendment thereof or supplement thereto with the SEC)
      or
      the omission to state therein any material fact necessary to make the statements
      made therein, in light of the circumstances under which the statements therein
      were made, not misleading, (iii) any violation by the Company of the 1933
      Act, the 1934 Act, any other law, including, without limitation, any state
      securities law, or any rule or regulation thereunder relating to the offer
      or
      sale of the Registrable Securities pursuant to a registration statement or
      (iv) any violation of this Agreement (the matters in the foregoing clauses
      (i) through (iv) being, collectively, “Violations”). Subject to
      Section 6(c), the Company shall reimburse the Indemnified Persons, promptly
      as such expenses are incurred and are due and payable, for any reasonable legal
      fees or other reasonable expenses incurred by them in connection with
      investigating or defending any such Claim. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 6(a) (i) shall not apply to a Claim by an Indemnified Person
      arising out of or based upon a Violation which occurs in conformity with
      information furnished in writing to the Company by such Indemnified Person
      expressly for use in connection with the preparation of the Registration
      Statement or any such amendment thereof or supplement thereto, and
      (ii) shall not apply to amounts paid in settlement of any Claim if such
      settlement is effected without the prior written consent of the Company, which
      consent shall not be unreasonably withheld or delayed. Such indemnity shall
      remain in full force and effect regardless of any investigation made by or
      on
      behalf of the Indemnified Person and shall survive the assignment of the
      Registrable Securities by the Buyers.

     

    b.  In
      connection with any registration statement in which a Buyer is participating,
      each such Buyer agrees to severally and not jointly indemnify, hold harmless
      and
      defend, to the same extent and in the same manner as is set forth in
      Section 6(a), the Company, its directors, officers employees, agents and
      representatives and each Person, if any, who controls the Company within the
      meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against
      any Claim for Indemnified Damages to which any of them may become subject,
      under
      the 1933 Act, the 1934 Act or otherwise, insofar as such Claim for Indemnified
      Damages arises out of or is based upon any Violation, in each case to the
      extent, and only to the extent, that such Violation occurs in reliance upon
      and
      in conformity with written information furnished to the Company by such Buyer
      expressly for use in connection with such registration statement; and, subject
      to Section 6(c), such Buyer will reimburse any reasonable legal or other
      expenses reasonably incurred by Indemnified Party in connection with
      investigating or defending any such Claim; provided, however,
      that the
      indemnity agreement contained in this Section 6(b) and the agreement with
      respect to contribution contained in Section 7 shall not apply to amounts
      paid in settlement of any Claim if such settlement is effected without the
      prior
      written consent of such Buyer, which consent shall not be unreasonably withheld
      or delayed; provided, further,
however,
      that each
      Buyer shall be liable under this Section 6(b) for only that amount of a Claim
      or
      Indemnified Damages as does not exceed the net proceeds to such Buyer as a
      result of the sale of Registrable Securities pursuant to such registration
      statement.  Such indemnity shall remain in full
      force and effect regardless of any investigation made by or on behalf of such
      Indemnified Party and shall survive the assignment of the Registrable Securities
      by the Buyer. Notwithstanding anything to the contrary contained herein, the
      indemnification agreement contained in this Section 6(b) with respect to any
      preliminary prospectus shall not inure to the benefit of any Indemnified Party
      if the untrue statement or omission of material fact contained in the
      preliminary prospectus was corrected on a timely basis in the prospectus, as
      then amended or supplemented.

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
 

    c.  Promptly
      after receipt by an Indemnified Person or Indemnified Party under this
      Section 6 of notice of the commencement of any action or proceeding
      (including any governmental action or proceeding) involving a Claim, such
      Indemnified Person or Indemnified Party shall, if a Claim in respect thereof
      is
      to be made against any indemnifying party under this Section 6, deliver to
      the indemnifying party a written notice of the commencement thereof, and the
      indemnifying party shall have the right to participate in, and, to the extent
      the indemnifying party so desires, jointly with any other indemnifying party
      similarly noticed, to assume control of the defense thereof with counsel
      mutually satisfactory to the indemnifying party and the Indemnified Person
      or
      the Indemnified Party, as the case may be; provided, however, that an
      Indemnified Person or Indemnified Party shall have the right to retain its
      own
      counsel with the fees and expenses of not more than one counsel for such
      Indemnified Person or Indemnified Party to be paid by the indemnifying party,
      if, in the reasonable opinion of counsel retained by the indemnifying party,
      the
      representation by such counsel of the Indemnified Person or Indemnified Party
      and the indemnifying party would be inappropriate due to actual or potential
      differing interests between such Indemnified Person or Indemnified Party and
      any
      other party represented by such counsel in such proceeding. In the case of
      an
      Indemnified Person, legal counsel referred to in the immediately preceding
      sentence shall be selected by the Buyers holding at least a majority in interest
      of the Registrable Securities included in the registration statement to which
      the Claim relates. The Indemnified Party or Indemnified Person shall cooperate
      reasonably with the indemnifying party in connection with any negotiation or
      defense of any such action or Claim by the indemnifying party and shall furnish
      to the indemnifying party all information reasonably available to the
      Indemnified Party or Indemnified Person which relates to such action or Claim.
      The indemnifying party shall keep the Indemnified Party or Indemnified Person
      fully apprised at all times as to the status of the defense or any settlement
      negotiations with respect thereto. No indemnifying party shall be liable for
      any
      settlement of any action, claim or proceeding effected without its prior written
      consent, provided, however, that the indemnifying party shall not unreasonably
      withhold, delay or condition its consent. No indemnifying party shall, without
      the prior written consent of the Indemnified Party or Indemnified Person,
      consent to entry of any judgment or enter into any settlement or other
      compromise which does not include as an unconditional term thereof the giving
      by
      the claimant or plaintiff to such Indemnified Party or Indemnified Person of
      a
      release from all liability in respect to such Claim or litigation. Following
      indemnification as provided for hereunder, the indemnifying party shall be
      subrogated to all rights of the Indemnified Party or Indemnified Person with
      respect to all third parties, firms or corporations relating to the matter
      for
      which indemnification has been made. The failure to deliver written notice
      to
      the indemnifying party within a reasonable time of the commencement of any
      such
      action shall not relieve such indemnifying party of any liability to the
      Indemnified Person or Indemnified Party under this Section 6, except to the
      extent that the indemnifying party is prejudiced in its ability to defend such
      action.

    

    d.  The
      indemnification required by this Section 6 shall be
      made by periodic payments of the amount thereof during the course of the
      investigation or defense, as and when bills are received or Indemnified Damages
      are incurred.

    

    e.  The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of action or similar right of the Indemnified Party or Indemnified Person
      against the indemnifying party or others and (ii) any liabilities the
      indemnifying party may be subject to pursuant to the law.

    

    7.  CONTRIBUTION.

    To
      the extent any indemnification by an
      indemnifying party is prohibited or limited by law, the indemnifying party
      agrees to make the maximum contribution with respect to any amounts for which
      it
      would otherwise be liable under Section 6 to the fullest extent permitted
      by law; provided, however, that: (i) no person involved in the sale of
      Registrable Securities which person is guilty of fraudulent misrepresentation
      (within the meaning of Section 11(f) of the 1933 Act) in connection with such
      sale shall be entitled to contribution from any Person involved in such sale
      of
      Registrable Securities who was not guilty of fraudulent misrepresentation;
      and
      (ii) contribution by any seller of Registrable Securities shall be limited
      in amount to the net amount of proceeds received by such seller from the sale
      of
      such Registrable Securities pursuant to such Registration
      Statement.

    

    
      	
              8.

            	
              REPORTS
                UNDER THE 1934
                ACT.

            

    

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    With
      a view to making available to the
      Buyers the benefits of Rule 144 promulgated under the 1933 Act or any other
      similar rule or regulation of the SEC that may at any time permit the Investors
      to sell securities of the Company to the public without registration (“Rule 144”), the Company
      agrees to:

     

    a.  make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144;

     

    b.  file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the 1933 Act and the 1934 Act so long as the Company remains
      subject to such requirements (it being understood that nothing herein shall
      limit the Company’s obligations under Section 4(c) of the Purchase Agreement)
      and the filing of such reports and other documents is required for the
      applicable provisions of Rule 144; and

    

    c.  furnish
      to each Buyer so long as such Buyer owns Registrable Securities, promptly upon
      request, (i) a written statement by the Company, if true, that it has
      complied with the reporting requirements of Rule 144, the 1933 Act and the
      1934 Act, (ii) a copy of the most recent annual or quarterly report of the
      Company and such other reports and documents so filed by the Company, and
      (iii) such other information as may be reasonably requested to permit the
      Buyer to sell such securities pursuant to Rule 144 without registration.

    

    
      	
              9.

            	
              ASSIGNMENT
                OF
                REGISTRATION RIGHTS.

            

    

     

    The
      rights under this Agreement shall
      be automatically assignable by the Buyers to any transferee of all or any
      portion of such Buyer’s Registrable Securities if (i) the Buyer agrees in
      writing with the transferee or assignee to assign such rights, and a copy of
      such agreement is furnished to the Company within a reasonable time after such
      assignment; (ii) the Company is, within a reasonable time after such
      transfer or assignment, furnished with written notice of (a) the name and
      address of such transferee or assignee, and (b) the securities with respect
      to which such registration rights are being transferred or assigned;
      (iii) immediately following such transfer or assignment the further
      disposition of such securities by the transferee or assignee is restricted
      under
      the 1933 Act and applicable state securities laws; (iv) at or before the
      time the Company receives the written notice contemplated by clause (ii) of
      this sentence the transferee or assignee agrees in writing with the Company
      to
      be bound by all of the provisions contained herein; and (v) such transfer
      shall have been made in accordance with the applicable requirements of the
      Purchase Agreement.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
 

    10.           EXPENSES
      OF
      REGISTRATION.

    

    All
      reasonable expenses, other than underwriting discounts and commissions, incurred
      in connection with registrations, including, without limitation, all
      registration, listing and qualifications fees, printers and accounting fees,
      and
      fees and disbursements of counsel for the Company related to registrations
      shall
      be paid by the Company.

    

    11.           GENERAL.

    

    a.  Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

    

    b.  All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in The City of New York, Borough of
      Manhattan, for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, and
      hereby irrevocably waives, and agrees not to assert in any suit, action or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such suit, action or proceeding is brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. 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 to such party at the address for such notices to it
      under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      If any provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
      AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
      HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
      TRANSACTION CONTEMPLATED HEREBY.

    

    c.  This
      Agreement and the instruments referenced herein and therein constitute the
      entire agreement among the parties hereto with respect to the subject matter
      hereof and thereof. There are no restrictions, promises, warranties or
      undertakings, other than those set forth or referred to herein and therein.
      This
      Agreement and the instruments referenced herein supersede all prior agreements
      and understandings among the parties hereto with respect to the subject matter
      hereof.

    

    d.  This
      Agreement shall inure to the benefit of and be binding upon the permitted
      successors and assigns of each of the parties hereto.

    

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

    

    f.  This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

    

    g.  Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as any other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

    

    h.  The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

     

     

     

    i.  Except
      as
      otherwise provided herein, the obligations of each Buyer hereunder are several
      and not joint with the obligations of any other Buyer, and no provision of
      this
      Agreement is intended to confer any obligations on any Buyer vis-à-vis any other
      Buyer. Nothing contained herein, and no action taken by any Buyer pursuant
      hereto, shall be deemed to constitute the Buyers as a partnership, an
      association, a joint venture or any other kind of entity, or create a
      presumption that the Buyers are in any way acting in concert or as a group
      with
      respect to such obligations or the transactions contemplated
      herein.

     

     

     

    
 

    [
      SIGNATURE PAGE FOLLOWS
      ]

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

     

     

     

    IN
      WITNESS WHEREOF, each Buyer and the Company have caused their respective
      signature page to this Registration Rights Termination Agreement to be duly
      executed as of the date first written above.

    

    COMPANY:

    

    SPIRALFROG,
      INC.

    

    /s/
      Orville Hagler

    Name:
      Orville Hagler

    Title:
      Corporate Secretary

    

    BUYERS:

    
      	 	 	 	
              AGAPE
                WORLD, INC.

            
	/s/
              Scott A. Stagg	 	 	 
	
              Scott
                A. Stagg

            	 	 	
              By:                                                      

            
	 	 	 	
              Name:

            
	 	 	 	
              Title:

            
	/s/
              Amir Khan	 	 	 
	
              Amir
                Khan

            	 	 	 
	 	 	 	 
	 	 	 	
              Mark
                P. Stagg

            
	/s/
              Mark Focht	 	 	 
	
              Mark
                Focht

            	 	 	 
	 	 	 	 
	 	 	 	
              Michael
                Miller

            
	/s/
              Robert A. Noble	 	 	 
	
              Robert
                A. Noble

            	 	 	 
	 	 	 	/s/
              Derek A. Jerina
	 	 	 	
              Derek
                A. Jerina

            
	 	 	 	 
	
              Paul
                Schulman

            	 	 	 
	 	 	 	 
	 	 	 	
              Robert
                DiForio

            
	
              ANTAEUS
                CAPITAL, INC.

            	 	 	 
	 	 	 	 
	
              By:                                                      

            	 	 	
              Kevin
                A. Stagg

            
	
              Name:

            	 	 	 
	
              Title:

            	 	 	 
	 	 	 	 
	 	 	 	
              Thomas
                E. Stagg

            
	 	 	 	 
	
              Lionel
                Amron

            	 	 	 
	 	 	 	
              DISTRESSED
                HIGH YIELD TRADING OPPORTUNITIES FUND, LTD.

            
	
              GOLDEN
                DEN CORP.

            	 	 	 
	 	 	 	
              By: Scott
                A.
                Stagg                                                     

            
	 	 	 	
              Name:
                Scott A. Stagg

            
	
              By:                                                      

            	 	 	
              Title:
                Trading Advisor

            
	
              Name:

            	 	 	 
	
              Title:

            	 	 	 

    

    
 

     

    12Converted by EDGARwiz

THIS DEBENTURE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY, THE “SECURITIES”), HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE.  THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S AND/OR REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMEMDED (THE “ACT”). THE SECURITIES ARE “RESTRICTED” AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO REGULATION S AND/OR REGULATION D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND THE COMPANY WILL BE PROVIDED WITH OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH EXEMPTIONS ARE AVAILABLE.  FURTHER HEDGING TRANSACTION INVOLVING THE SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.

DEBENTURE

UNICO, INCORPORATED

8% Convertible Debenture

Due March 10, 2008

No. 58

$50,000.00

This Debenture is issued by Unico, Incorporated, an Arizona corporation (the “Company”), and Compass Capital Group, Inc. (together with its permitted successors and assigns, the “Holder”) pursuant to exemptions from registration under the Securities Act of 1933, as amended.

ARTICLE I.

Section 1.01

Principal and Interest.  For value received on September 10, 2007, the Company hereby promises to pay to the order of Holder in lawful money of the United States of America and in immediately available funds the principal sum of $50,000.00, together with interest on the unpaid principal of this Debenture at the rate of eight percent (8%) per year (computed on the basis of the 365-day year and the actual days elapsed) from the date of this Debenture until paid.  At the Company’s option, the entire principal amount and all accrued interest shall be either (a) paid to the Holder on or before the due date of this Debenture or (b) converted in accordance with Section 1.02 herein.

1

Section 1.02

Optional Conversion.  The Holder is entitled, at its option, to convert, at any time and from time to time, until payment in full of this Debenture, all or any part of the principal amount of this Debenture, plus accrued interest, into shares (the “Conversion Shares”) of the Company’s common stock, par value $0.0010 per share (“Common Stock”), at a price per share equal to fifty percent (50%) of the closing bid price of the Common Stock on the date that the Company receives notice of conversion. To convert this debenture, the Holder shall deliver written notice (the “Conversion Notice”) thereof, such Conversion Notice containing such information necessary including amount of conversion and number of shares, to the Company at its address set forth herein.  The date upon which the conversion shall be effective (the “Conversion Date”) shall be deemed to be the date set forth in the Conversion Notice.  The Conversion Shares shall be delivered to the Holder at the address indicated herein.

The Company is entitled, at its option, to convert, at any time and from time to time, until payment in full of this Debenture, all or any part of the principal amount of this Debenture, plus accrued interest, into shares (the “Conversion Shares”) of the Company’s common stock, par value $0.0010 per share (“Common Stock”), at a price per share equal to fifty percent (50%) of the closing bid price of the Common Stock on the date that the Company issues such notice of conversion. To convert this debenture, the Company shall deliver written notice (the “Conversion Notice”) thereof, such Conversion Notice containing such information necessary including amount of conversion and number of shares, to the Holder at its address set forth herein.  The date upon which the conversion shall be effective (the “Conversion Date”) shall be deemed to be the date set forth in the Conversion Notice.  The Conversion Shares shall be delivered to the Holder at the address indicated herein.

Section 1.03

Reservation of Common Stock.  The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of this Debenture, such number of shares of Common Stock as shall from time to time be sufficient to effect such conversion, based on the Conversion Price.  If at any time the Company does not have a sufficient number of Conversion Shares authorized and available, then the Company shall call and hold a special meeting of its stockholders within sixty (60) days of that time for the sole purpose of increasing the number of authorized shares of Common Stock.

Section 1.04

Registration Rights.  The Company is obligated to register the resale of the Conversion Shares under the Securities Act of 1933, as amended, or provide Holder with an appropriate exemption from registration.

Section 1.05

Interest Payments.  The interest so payable will be paid at the time of maturity or conversion to the person in whose name this Debenture is registered.  At the time such interest is payable, the Company, in its sole discretion, may elect to pay interest in cash or in the form of Common Stock.  If paid in Common Stock, the amount of stock to be issued shall be calculated in accordance with the formula and procedure set forth in Section 1.02 above. 

2

Section 1.06

Right of Redemption.  The Company shall have the right to redeem, with thirty (30) business days advance notice to the Holder, any or all outstanding Debentures remaining in its sole discretion (“Right of Redemption”).  The redemption price shall be equal to 100% of the face amount of the Debenture redeemed plus all accrued interest (“Redemption Price”).   

Section 1.07

Subordinated Nature of Debenture.  This Debenture and all payments hereon, including principal or interest, shall be subordinated and junior in right of payment to all accounts payable of the Company incurred in the ordinary course of business and/or bank debt of the Company not to exceed $30,000.

ARTICLE II.

Section 2.01

Amendments and Waiver of Default.  The Debenture may be amended with the consent of Holder.  Without the consent of Holder, the Debenture may be amended to cure any ambiguity, defect or inconsistency, to provide assumption of the Company obligations to the Holder or to make any change that does not adversely affect the rights of the Holder.

ARTICLE III.

Section 3.01

Events of Default.  An Event of Default is defined as follows: (a) failure by the Company to pay amounts due hereunder within fifteen (15) days of the date of maturity of this Debenture; (b) failure by the Company for thirty (30) days after notice to it to comply with any of its other agreements in the Debenture; (c) events of bankruptcy or insolvency; (d) a breach by the Company of its obligations under the Registration Rights Agreement which is not cured by the Company within ten (10) days after receipt of written notice thereof.  The Holder may not enforce the Debenture except as provided herein.

Section 3.02

Failure to Issue Unrestricted Common Stock. As indicated above, a breach by the Company under its obligation under the Registration Rights Agreement shall be deemed an Event of Default, which if not cured with ten (10) days, shall entitle the Holder accelerated full payment of all debentures outstanding.  The Company acknowledges that failure to honor a Notice of Conversion shall cause hardship to the Holder.

ARTICLE IV.

Section 4.01

Anti-dilution.  In the event that the Company shall at any time subdivide the outstanding shares of Common Stock, or shall issue a stock dividend on the outstanding Common Stock, the Conversion Price in effect immediately prior to such subdivision of the issuance of such dividend shall be proportionately decreased and, in the event that the Company shall at any time combine the outstanding shares of Common stock, the Conversion price in effect immediately prior to such combination shall be 

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proportionally increased, effective at the close of business on the date of such subdivision, dividend or combination as the case may be.

ARTICLE V.

Section 5.01

Notice.  Notices regarding this debenture shall send to the parties at the following addresses, unless a party notifies the other parties, in writing, of a change of address:

If to the Company:

Unico, Incorporated

8880 Rio San Diego Drive, 8th Foor

San Diego, CA 92108

Telephone: (619) 209-6124 

Attn:  Mark A. Lopez, CEO

If to the Holder:

Compass Capital Group, Inc.

132 Heulitt Road

Colts Neck, NJ  07722

Telephone: (917) 405-7641

Attn: Mark Lefkowitz

Section 5.02

Governing Law.  This Debenture shall be deemed to be made under and shall be construed in accordance with the laws of the State of California without giving effect to the principals of conflict of the laws thereof.  Each of the parties consents to the jurisdiction of the U.S. District Court sitting in the District of the State of California or the state courts of the State of California sitting in Riverside in connection with any dispute arising under this debenture and hereby waives, to the maximum extent permitted by law, any objection, including the objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.

Section 5.03

Severability.  The invalidity of any of the provisions of this Debenture shall not invalidate or otherwise affect any of the other provisions of this Debenture, which shall remain in full force effect.

Section 5.04

Entire Agreement and Amendments.  This Debenture represents the entire agreement between the parties hereto with respect to the subject matter hereof and there are no representations, warranties or commitments, except as set forth herein.  This Debenture may be amended only by an instrument in writing executed by the parties hereto.

Section 5.05

Counterparts.  This Debenture may be executed in multiple counterparts, each of which shall be an original, but all of which shall be deemed to constitute and instrument.

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IN WITNESS WHEREOF, with the intent to legally bound hereby, the Company has executed this Debenture as of the date first written above.

UNICO, INCORPORATED

By:/s/ Mark A. Lopez             

Name: Mark A. Lopez

Title: Chief Executive Officer

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