Document:

Filed by Bowne Pure Compliance

Exhibit 4.6

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:                     

Original Conversion Price (subject to adjustment herein): $3.00

$                    

9% CONVERTIBLE DEBENTURE

DUE BY                     

THIS CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued Secured
Convertible Debentures of Pure Earth, Inc., a Delaware corporation, having its principal place of
business at 6 North Baton Rouge Avenue, Ventnor, New Jersey 08406 (the “Company”),
designated as its 9% Secured Convertible Debenture, due                      (this debenture, the
“Debenture” and collectively with the other such series of debentures, the
“Debentures”).

FOR VALUE RECEIVED, the Company promises to pay to DD Growth Premium or its registered assigns
(the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of
$                     by                      or such earlier date as this Debenture is required or permitted to be
repaid as provided hereunder (the “Maturity Date”), 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
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).

 

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“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; (f) the Company or any Significant
Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (g) 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” shall have the meaning set forth in the Purchase Agreement.

“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 50% 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 50% 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 50% of the aggregate 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 execution by the Company of an
agreement to which the Company is a party or by which it is bound, providing for any of the
events set forth in clauses (i) through (iv) above.

 

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“Common Stock” means the common stock, par value $.001 per share, of the
Company and stock of any other class of securities into which such securities may hereafter
be reclassified or changed into.

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

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

“Conversion Shares” means, 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 3(c).

“Effectiveness Period” shall have the meaning set forth in the Registration
Rights Agreement.

“Equity Conditions” shall mean, 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 issuable
pursuant to the Transaction Documents (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 Transaction
Documents are listed 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 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 and (ix) the Holder is not in possession of any information
that constitutes, or may constitute, material non-public information.

 

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

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

“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 the lesser of (a) the Conversion Price or (b)
90% of the lesser of (i) the average of the VWAPs for the 10 consecutive Trading Days ending
on the Trading Day that is immediately prior to the applicable Interest Payment Date or (ii)
the average of the VWAPs for the 10 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 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).

“Mandatory Default Amount” means the sum of (i) the greater of (A) 115% of the
outstanding principal amount of this Debenture, plus all 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.

 

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“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) 100% of the principal amount
of the Debenture then outstanding, (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.

“Person” means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other entity of any kind.

“Purchase Agreement” means the Securities Purchase Agreement among the Company
and the original Holders, dated as of June 30, 2006, as amended, modified or supplemented
from time to time in accordance with its terms.

“Registration Rights Agreement” means the Registration Rights Agreement among
the Company and the original Holders, dated as of the date of the Purchase Agreement, 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, who shall be
named 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.

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

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

 

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“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 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 Common Stock is not then quoted for
trading on a Trading Market 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 (c) 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. 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, payable semiannually on April 1 and October 1, beginning on the
first such date after 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 (except that, if any such date is not a
Business Day, then such payment shall be due on the next succeeding Business Day) (each such
date, an “Interest Payment Date”), in cash or duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock at the Interest Conversion Rate (the amount
to be paid in shares, the “Interest Share Amount”), or a combination thereof;
provided, however, that (i) payment in shares of Common Stock may only occur
if 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 issued to the Holder all of the Equity

 

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Conditions have been met (unless
waived by the Holder in writing), (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 Kind. Subject to the terms and
conditions herein, the decision whether to pay interest hereunder in cash or shares of
Common Stock 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 provide
such written notice 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 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 and shall accrue daily commencing on the Original Issue Date until payment in
full of the principal sum, 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 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). 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
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.

 

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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 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 able to pay accrued interest in Common Stock because it fails to satisfy the
conditions for payment in Common Stock set forth above, 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 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 transfer or exchange.

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

c) Reliance on Debenture Register. Prior to due presentment 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.

 

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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 (a “Conversion Date”). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such
Notice of Conversion is 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 1 Business Day of delivery of such Notice of
Conversion. 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 $3.00 (subject to adjustment herein) (the “Conversion Price”).

c) Conversion Limitations.

i. 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, such Holder (together with such
Holder’s Affiliates, and any other person or entity acting as a group together with
such Holder or any of such 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 such
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 such 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 such Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for purposes of this
Section 4(c)(i), beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.

 

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To the
extent that the limitation contained in this Section 4(c)(i) applies, the
determination of whether this Debenture is convertible (in relation to other
securities owned by such Holder together with any Affiliates) and of which principal
amount of this Debenture is convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be deemed to be such
Holder’s determination of whether this Debenture may be converted (in relation to
other securities owned by such Holder together with any Affiliates) and which
principal amount of this Debenture is convertible, in each case subject to such
aggregate percentage limitations. To ensure compliance with this restriction, each
Holder will be deemed to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no obligation to verify or
confirm the accuracy of such determination. 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)(i), in determining the number of outstanding
 shares of Common Stock, a 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 Form 10-QSB or Form 10-KSB, 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 such 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 such 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 Beneficial Ownership Limitation provisions of this Section
4(c)(i) may be waived by such Holder, at the election of such Holder, upon not less
than 61 days’ prior notice to the Company, to change the Beneficial Ownership
Limitation to 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)(i) shall continue to apply. Upon such a change by a Holder of the Beneficial
Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the
Beneficial Ownership Limitation may not be further waived by such Holder. 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)(i) 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.

 

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d) Mechanics of Conversion.

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

ii. Delivery of Certificate Upon Conversion. Not later than three
Trading Days after 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
Date, shall be free of restrictive legends and trading restrictions (other than
those which may then be required by the Purchase Agreement) representing the number
of shares of Common Stock 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 Payment 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 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 the Common Stock
certificates representing the principal amount of this Debenture tendered for
conversion to the Company.

 

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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 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 such 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 fifth Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, for each $1000 of principal amount being converted, $5 per Trading Day
(increasing to $10 per Trading Day on the fifth Trading Day after such liquidated
damages begin to accrue) for each Trading Day after such third Trading Day 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 such 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.

 

12

 

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 such Share Delivery Date the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such 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 such 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 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 and restrictions 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.

 

13

 

vii. Fractional Shares. Upon a conversion hereunder the Company shall
not be required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the VWAP at such time. If the Company elects
not, or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, 1 whole share of Common Stock.

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

Section 5. Certain Adjustments.

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, this Debenture);
(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.

 

14

 

b) 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 or any
compulsory share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent conversion of this Debenture, the Holder shall
have the right to receive, for each Conversion Share that would have been issuable upon such
conversion immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of 1 share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of 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 into Alternate Consideration. The terms of any agreement pursuant
to which a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this 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.

c) 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.

 

15

 

d) Notice to the Holder.

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

ii. Notice to Allow Conversion by Holder. If (A) the Company shall
declare a dividend (or any other distribution 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.

 

16

 

Section 6. Redemption and Forced Conversion.

a) Optional Redemption at Election of the Holder. Subject to the provisions
of this Section 6(a), at any time after the date hereof, in the event of a Change of Control
Transaction that results in an non-Affiliated third party acquiring more than 50% of
the voting securities of the Company in one transaction or a series of related transactions,
in addition to any other rights hereunder, the Holder may deliver a notice to the Company
(an “Optional Redemption Notice” and the date such notice is deemed delivered
hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to
cause the Company to redeem some or all of the then outstanding amounts owed under this
Debenture, for an amount, in cash, or, subject to the conditions set forth below, at the
Company’s option, in shares of registered Common Stock, equal to the Optional Redemption
Amount on the 20th Trading Day following the Optional Redemption Notice Date
(such date, the “Optional Redemption Date” and such redemption, the “Optional
Redemption”). The Company shall deliver notice of its election to pay the Optional
Redemption Amount in shares of Common Stock within 2 Trading Days of its receipt of an
Optional Redemption Notice. Failure to so deliver a notice to pay an Option Redemption
Amount in shares of Common Stock within 2 Trading Days shall be deemed an election by the
Company to pay such amount in cash. The Optional Redemption Amount is due in full on the
Optional Redemption Date. If the Company elects to pay an Optional Redemption Amount in
 shares of Common Stock, such shares shall be based on a conversion price equal to the lesser
of (i) the then Conversion Price and (ii) 90% of the average of the VWAPs for the 10
consecutive Trading Days ending on the Trading Day that is immediately prior to the
applicable Optional Redemption Date. The Company may only elect to pay the Optional
Redemption Amount in shares of Common Stock if during the period commencing on the Optional
Redemption Notice Date through to the Optional Redemption Date and through and including the
date such shares of Common Stock are issued to the Holder, each of the Equity Conditions
shall have been met. If any of the Equity Conditions shall cease to be satisfied at any
time during the required 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 or require the Company to pay such Optional Redemption Amount in cash.
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 pursuant to an Optional
Redemption shall be made on the Optional Redemption Date. If any portion of the cash
payment for an Optional Redemption shall not be paid by the Corporation by the respective
due date, interest shall accrue thereon at the rate of 15% per annum (or the maximum rate
permitted by applicable law, whichever is less) until the such payment, plus all amounts
owing thereon, is paid in full.

 

17

 

c) Forced Conversion. Notwithstanding anything herein to the contrary, if after
the Effective Date, the VWAPs for each of any 20 consecutive Trading Days, which period
shall have commenced only after the Effective Date, such period the “Threshold
Period”)) exceeds $6.00 (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) and daily trading volume for such Threshold Period,
which Threshold Period shall have commenced only after the Effective Date, exceeds 75,000
shares of Common Stock per Trading Day (subject to adjustment for forward and reverse stock
splits, recapitalizations, stock dividends and the like after the Initial Exercise Date),
the Company may, within 1 Trading Day after the end of any such Threshold Period, deliver a
written notice to the Holder (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 all or part of the then outstanding principal amount of Debentures plus, if so
specified in the Forced Conversion Notice, accrued but unpaid interest, liquidated damages
and other amounts owing to the Holder pursuant to Section 4, 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 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 such 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. As long as any portion of this Debenture
remains outstanding, the Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:

a) 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 (a) the Conversion Shares or Warrant Shares as permitted or required under
the Transaction Documents and (b) 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);

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

 

18

 

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

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 3 Trading Days;

ii. the Company shall fail to observe or perform any other 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 and (B) 12 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);

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;

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

 

19

 

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 (but not
including accounts payable being contested by the Company in good faith) that (a)
involves an obligation greater than $250,000, 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. after the Effective Date, 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 seven 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 $500,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.

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.

 

20

 

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 (215) 639-8756, Attn: Chief Financial Officer 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 such 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 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, customary indemnity and of the
ownership hereof, reasonably satisfactory to the Company.

 

21

 

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 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 

 

22

 

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, prior to such Fundamental Transaction, all of the
obligations of the Company under this Debenture and the other Transaction Documents pursuant
to written agreements in form and substance satisfactory to the Holder (such approval not to
be unreasonably withheld or delayed) 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.

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

 

23

 

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.

	 	 	 	 	 
	 	PURE EARTH, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

24

 

	 	 	 	 	 

ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the 9% Convertible Debenture of Pure
Earth, Inc., a Delaware corporation (the “Company”), due on                    , into shares of
common stock, par value $.001 per share (the “Common Stock”), of the Company according to
the conditions hereof, as of the date written below. If shares 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 determined in accordance
with Section 13(d) of the Exchange Act, specified under Section 4 of 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:
	 
	 	 	 	

 

25

 

Schedule 1

CONVERSION SCHEDULE

The 9% Convertible Debentures due on                     , in the aggregate principal amount of $                    
issued by Pure Earth, Inc. This Conversion Schedule reflects conversions made under Section 4 of
the above referenced Debenture.

Dated:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Aggregate	 	 	 	 
	 	 	 	 	 	 	Principal	 	 	 	 
	 	 	 	 	 	 	Amount	 	 	 	 
	 	 	 	 	 	 	Remaining	 	 	 	 
	 	 	 	 	 	 	Subsequent to	 	 	 	 
	 	 	 	 	 	 	Conversion	 	 	 	 
	Date of Conversion	 	 	 	 	 	(or original	 	 	 	 
	(or for first entry,	 	Amount of	 	 	Principal	 	 	 	 
	Original Issue Date)	 	Conversion	 	 	Amount)	 	 	Company Attest	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 

 

26Filed by Bowne Pure Compliance

Exhibit 4.7

EXHIBIT B

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of
June _____, 2006, among Pure Earth, Inc., a [_____ corporation (the “Company”), and the
several purchasers signatory hereto (each such purchaser is a “Purchaser” and collectively,
the “Purchasers”).

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

The Company and each Purchaser hereby agrees as follows:

1. Definitions

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

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

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

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

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

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

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

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

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

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

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

 

1

 

“Registrable Securities” means (i) all of the shares of Common Stock issuable
upon conversion in full of the Debentures, (ii) all shares issuable as interest or principal
on the Debentures assuming all permissible interest and principal payments are made in
 shares of Common Stock and the Debentures are held until maturity, (iii) all Warrant Shares,
(iv) any additional shares issuable in connection with any anti-dilution provisions in the
Debentures or the Warrants (in each case, without giving effect to any limitations on
conversion set forth in the Debenture or limitations on exercise set forth in the Warrant),
(v) shares (including shares underlying warrants) issuable to the placement agent (or its
designees) and (vi) any securities issued or issuable upon any stock split, dividend or
other distribution, recapitalization or similar event with respect to the foregoing.

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

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

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

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

2. Shelf Registration

(a) On or prior to each Filing Date, the Company shall prepare and file with the
Commission a “Shelf” Registration Statement covering the resale of 130% of the Registrable
Securities on such Filing Date for an offering to be made on a continuous basis pursuant to
Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form S-3, in which case
such registration shall be on another appropriate form in accordance herewith) and shall
contain (unless otherwise directed by at least an 85% majority in interest of the Holders)
substantially the “Plan of Distribution” attached hereto as Annex 
A.

 

2

 

Subject to the terms of this Agreement, the Company shall use its best
efforts to cause a Registration Statement to be declared effective under the Securities Act
as promptly as possible after the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its best efforts to keep such Registration Statement
continuously effective under the Securities Act until all Registrable Securities covered by
such Registration Statement have been sold, or may be sold without volume restrictions
pursuant to Rule 144(k), as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and
the affected Holders (the “Effectiveness Period”). The Company shall telephonically
request effectiveness of a Registration Statement as of 5:00 pm Eastern Time on a Trading
Day. The Company shall immediately notify the Holders via facsimile of the effectiveness
of a Registration Statement on the same Trading Day that the Company telephonically confirms
effectiveness with the Commission, which shall be the date requested for effectiveness of a
Registration Statement. The Company shall, by 9:30 am Eastern Time on the Trading Day after
the Effective Date (as defined in the Purchase Agreement), file a final Prospectus with the
Commission as required by Rule 424. Failure to so notify the Holder within 1 Trading Day of
such notification of effectiveness or failure to file a final Prospectus as a foresaid shall
be deemed an Event under Section 2(b).

(b) If: (i) a Registration Statement is not filed on or prior to its Filing Date (if
the Company files a Registration Statement without affording the Holders the opportunity to
review and comment on the same as required by Section 3(a), the Company shall not be deemed
to have satisfied this clause (i)), or (ii) the Company fails to file with the Commission a
request for acceleration in accordance with Rule 461 promulgated under the Securities Act,
within five Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not be
“reviewed,” or not subject to further review, or (iii) prior to its Effectiveness Date, the
Company fails to file a pre-effective amendment and otherwise respond in writing to comments
made by the Commission in respect of such Registration Statement within 10 calendar days
after the receipt of comments by or notice from the Commission that such amendment is
required in order for a Registration Statement to be declared effective, or (iv) a
Registration Statement filed or required to be filed hereunder is not declared effective by
the Commission by its Effectiveness Date, or (v) after the Effectiveness Date, a
Registration Statement ceases for any reason to remain continuously effective as to all
Registrable Securities for which it is required to be effective, or the Holders are
otherwise not permitted to utilize the Prospectus therein to resell such Registrable
Securities for more than 10 consecutive calendar days or more than an aggregate of 15
calendar days during any 12-month period (which need not be consecutive calendar days) (any
such failure or breach being referred to as an “Event”, and for purposes of clause
(i) or (iv) the date on which such Event occurs, or for purposes of clause (ii) the date on
which such five Trading Day period is exceeded, or for purposes of clause (iii) the date
which such 10 calendar day period is exceeded, or for purposes of clause (v) the date on
which such 10 or 15 calendar day period, as applicable, is exceeded being referred to as
“Event Date”), then in addition to any other rights the Holders may have hereunder
or under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall not have been cured
by such date) until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as partial liquidated damages and not as a penalty, equal to 1% of the
aggregate purchase price paid by such

 

3

 

Holder pursuant to the Purchase Agreement for any
Registrable Securities then held by such Holder, up to a maximum of 6% per Holder of the
aggregate purchase price paid by such Holder pursuant to the Purchase Agreement.
If the Company fails to pay any partial liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay interest thereon at a rate of 18%
per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to
the Holder, accruing daily from the date such partial liquidated damages are due until such
amounts, plus all such interest thereon, are paid in full. The partial liquidated damages
pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a
month prior to the cure of an Event.

3. Registration Procedures.

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

(a) Not less than five Trading Days prior to the filing of each Registration Statement
and not less than one Trading Day prior to the filing of any related Prospectus or any
amendment or supplement thereto (including any document that would be incorporated or deemed
to be incorporated therein by reference), the Company shall, (i) furnish to each Holder
copies of all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the review of
such Holders, and (ii) cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the reasonable
opinion of respective counsel to each Holder to conduct a reasonable investigation within
the meaning of the Securities Act. The Company shall not file a Registration Statement or
any such Prospectus or any amendments or supplements thereto to which the Holders of a
majority of the Registrable Securities shall reasonably object in good faith, provided that,
the Company is notified of such objection in writing no later than 5 Trading Days after the
Holders have been so furnished copies of a Registration Statement or 1 Trading Day after the
Holders have been so furnished copies of any related Prospectus or amendments or supplements
thereto. Each Holder agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as Annex B (a “Selling Shareholder Questionnaire”) not
less than two Trading Days prior to the Filing Date or by the end of the fourth Trading Day
following the date on which such Holder receives draft materials in accordance with this
Section.

(b) (i) Prepare and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep a Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and file with the
Commission such additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the
related Prospectus to be amended or supplemented by any required Prospectus supplement
(subject to the terms of this Agreement), and as so supplemented or amended to be filed
pursuant to Rule 424;

 

4

 

(iii) respond as promptly as reasonably possible to any comments
received from the Commission with respect to a Registration Statement or any amendment
thereto and as promptly as reasonably possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to a Registration Statement
(provided that the Company may excise any information contained therein which would
constitute material non-public information as to any Holder which has not executed a
confidentiality agreement with the Company); and (iv) comply in all material respects with
the provisions of the Securities Act and the Exchange Act with respect to the disposition of
all Registrable Securities covered by a Registration Statement during the applicable period
in accordance (subject to the terms of this Agreement) with the intended methods of
disposition by the Holders thereof set forth in such Registration Statement as so amended or
in such Prospectus as so supplemented.

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

(d) Notify the Holders of Registrable Securities to be sold (which notice shall,
pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend
the use of the Prospectus until the requisite changes have been made) as promptly as
reasonably possible (and, in the case of (i)(A) below, not less than one Trading Day prior
to such filing) and (if requested by any such Person) confirm such notice in writing no
later than one Trading Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing on such Registration
Statement; and (C) with respect to a Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to a Registration
Statement or Prospectus or for additional information; (iii) of the issuance by the
Commission or any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; (v) of the occurrence of any
event or passage of time that makes the financial statements included in a Registration
Statement ineligible for inclusion therein or any statement made in a Registration Statement
or Prospectus or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to a Registration Statement,
Prospectus or other documents so that, in the case
of a Registration Statement or the Prospectus, as the case may be, it will not contain
any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances
under which they

 

5

 

were made, not misleading; and (vi) the occurrence or existence of any
pending corporate development with respect to the Company that the Company believes may be
material and that, in the determination of the Company, makes it not in the best interest of
the Company to allow continued availability of a Registration Statement or Prospectus;
provided that any and all of such information shall remain confidential to each Holder until
such information otherwise becomes public, unless disclosure by a Holder is required by law;
provided, further, notwithstanding each Holder’s agreement to keep such
information confidential, the Holders make no acknowledgement that any such information is
material, non-public information.

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

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

(g) Subject to the terms of this Agreement, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto, except after the giving of any notice
pursuant to Section 3(d).

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

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

 

6

 

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

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

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

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

 

7

 

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

5. Indemnification

(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the officers,
directors, members, partners, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees (and any other Persons
with a functionally equivalent role of a Person holding such titles, notwithstanding a lack
of such title or any other title) of each of them, each Person who controls any such Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, members, shareholders, partners, agents and employees (and any
other Persons with a functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title) of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and
expenses (collectively, “Losses”), as incurred, arising out of or relating to (1)
any untrue or alleged untrue statement of a material fact contained in a Registration
Statement, any Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances

 

8

 

under which they were made) not misleading or (2) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act or any state securities law, or any rule or regulation
thereunder, in connection with the performance of its obligations under this Agreement,
except to the extent, but only to the extent, that (i) such untrue statements or omissions
are based solely upon information regarding such Holder furnished in writing to the Company
by such Holder expressly for use therein, or to the extent that such information relates to
such Holder or such Holder’s proposed method of distribution of Registrable Securities and
was reviewed and expressly approved in writing by such Holder expressly for use in a
Registration Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto (it being understood that the Holder has approved Annex A hereto for this
purpose) or (ii) in the case of an occurrence of an event of the type specified in Section
3(d)(iii)-(vi), the use by such Holder of an outdated or defective Prospectus after the
Company has notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 6(d). The Company
shall notify the Holders promptly of the institution, threat or assertion of any Proceeding
arising from or in connection with the transactions contemplated by this Agreement of which
the Company is aware.

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

 

9

 

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

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

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

 

10

 

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

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

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

6. Miscellaneous

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

 

11

 

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

(c) Discontinued Disposition. Each Holder agrees by its acquisition of Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under a Registration Statement until it is advised in
writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may
have been supplemented or amended) may be resumed. The Company will use its best efforts to ensure
that the use of the Prospectus may be resumed as promptly as it practicable. The Company agrees
and acknowledges that any periods during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to the provisions of Section
2(b).

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

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

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

(g) Execution and Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and delivered to the other
party, it being understood that both parties need not sign the same counterpart. In the event that
any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data
file, such signature shall create a valid and binding obligation of the party executing (or on
whose behalf such signature is executed) with the same force and effect as if such facsimile or
”.pdf” signature page were an original thereof.

 

12

 

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

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

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

(k) Headings. The headings in this Agreement are for convenience only, do not
constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

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

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

 

13

 

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

	 	 	 	 	 
	 	PURE EARTH, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 

14

 

[SIGNATURE PAGE OF HOLDERS TO PREA RRA]

	 	 	 
	Name of Holder:
	 	 
	 

	 	 

	 	 	 
	Signature of Authorized Signatory of Holder: 
	 	 
	 

	 	 

	 	 	 
	Name of Authorized Signatory:
	 	 
	 

	 	 

	 	 	 
	Title of Authorized Signatory:
	 	 
	 

	 	 

[SIGNATURE PAGES CONTINUE]

 

15

 

Plan of Distribution

Each Selling Stockholder (the “Selling Stockholders”) of the common stock and any of
their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on the [principal Trading Market] or any other stock exchange, market
or trading facility on which the shares are traded or in private transactions. These sales may be
at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following
methods when selling shares:

	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate the
transaction;

	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable
exchange;

	 
	 	•	 	privately negotiated transactions;

	 
	 	•	 	settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;

	 
	 	•	 	broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;

	 
	 	•	 	through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;

	 
	 	•	 	a combination of any such methods of sale; or

	 
	 	•	 	any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the Selling
Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this
Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with NASDR IM-2440.

 

16

 

In connection with the sale of the common stock or interests therein, the Selling Stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The Selling Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The Selling Stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).

The Selling Stockholders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it
does not have any written or oral agreement or understanding, directly or indirectly, with any
person to distribute the Common Stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent (8%).

The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.

Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act
including Rule 172 thereunder. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than under this prospectus. There is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale shares by the Selling Stockholders.

 

17

 

We agreed to keep this prospectus effective until the earlier of (i) the date on which the
shares may be resold by the Selling Stockholders without registration and without regard to any
volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state securities laws. In
addition, in certain states, the resale shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in Regulation
M, prior to the commencement of the distribution. In addition, the Selling Stockholders will
be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder,
including Regulation M, which may limit the timing of purchases and sales of shares of the common
stock by the Selling Stockholders or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).

 

18

 

Annex B

PURE EARTH, INC.

Selling Securityholder Notice and Questionnaire

The undersigned beneficial owner of common stock,
par value $[____ per share (the “Common Stock”), of Pure Earth, Inc., a [____ corporation (the “Company”), (the
“Registrable Securities”) understands that the Company has filed or intends to file with
the Securities and Exchange Commission (the “Commission”) a registration statement on Form
S_____ (the “Registration Statement”) for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities,
in accordance with the terms of the Registration Rights Agreement, dated as of
June _____, 2006 (the
“Registration Rights Agreement”), among the Company and the Purchasers named therein. A
copy of the Registration Rights Agreement is available from the Company upon request at the address
set forth below. All capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Registration Rights Agreement.

Certain legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel regarding the
consequences of being named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.

NOTICE

The undersigned beneficial owner (the “Selling Securityholder”) of Registrable
Securities hereby elects to include the Registrable Securities owned by it and listed below in Item
3 (unless otherwise specified under such Item 3) in the Registration Statement.

 

19

 

The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:

QUESTIONNAIRE

	1.	 	Name.

	 	(a)	 	Full Legal Name of Selling Securityholder

	 
	 	 	 	 

	 	(b)	 	Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are held:

	 
	 	 	 	 

	 	(c)	 	Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):

	 
	 	 	 	 

	2.	 	Address for Notices to Selling Securityholder:

	 	 	 
	 
	 	 
	 
	 
	 	 
	 
	 
	 	 
	 
	Telephone:
	 	 
	 

	 
	Fax:   
	 	 
	 

	 
	Contact Person: 
	 
	 

	 	 

	3.	 	Beneficial Ownership of Registrable Securities:

	 	(a)	 	Type and Principal Amount of Registrable Securities beneficially owned (not
including the Registrable Securities that are issuable pursuant to the Purchase
Agreement):

	 
	 	 	 	 

	 	 	 	 

	 	 	 	 

 

20

 

	4.	 	Broker-Dealer Status:

	 	(a)	 	Are you a broker-dealer?

	 	 	 	 	 	 	 
	 
	 	Yes o
	 	No o
	 	 

	 	(b)	 	If “yes” to Section 4(a), did you receive your Registrable Securities as
compensation for investment banking services to the Company.

	 	 	 	 	 	 	 
	 
	 	Yes o
	 	No o
	 	 

	 	Note:	 	If no, the Commission’s staff has indicated
that you should be identified as an
underwriter in the Registration Statement.

	 	(c)	 	Are you an affiliate of a broker-dealer?

	 	 	 	 	 	 	 
	 
	 	Yes o
	 	No o
	 	 

	 	(d)	 	If you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of the
purchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the Registrable
Securities?

	 	 	 	 	 	 	 
	 
	 	Yes o
	 	No o
	 	 

	 	Note:	 	 If no, the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.

	5.	 	Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder.

	 
	 	 	Except as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable Securities
listed above in Item 3.

	 	(a)	 	Type and Amount of Other Securities beneficially owned by the Selling
Securityholder:

	 
	 	 	 	 

	 	 	 	 

 

21

 

	6.	 	Relationships with the Company:

	 
	 	 	Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.

	 
	 	 	State any exceptions here:

	 
	 	 	 

	 	 	 

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date hereof at any time while the
Registration Statement remains effective.

By signing below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 6 and the inclusion of such information in the
Registration Statement and the related prospectus and any amendments or supplements thereto. The
undersigned understands that such information will be relied upon by the Company in connection with
the preparation or amendment of the Registration Statement and the related prospectus.

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly authorized agent.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Beneficial Owner:
	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 

	 	 	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL
BY OVERNIGHT MAIL, TO:

 

22

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