The Company shall make weekly scheduled payments (“Scheduled Payments”) consisting of at least $125,000 of principal, commencing with the first Scheduled Payment which shall be due and payable on January 1, 2008. Interest payments on the outstanding principal balance hereof shall be due and payable with the principal payment installments above (accruing from the date hereof in accordance with the terms of the Convertible Debentures); provided that subject to Cornell Capital and/or the Company receiving a legal opinion that it can sell shares of the Company’s Common Stock under Rule 144 of the Securities and Exchange Commission (the “Commission”), the Company shall exercise conversions of the outstanding Convertible Debentures commencing on September 1, 2007 at the Payment Conversion Price set forth herein in the maximum amount permitted in accordance with the volume limits under Rule 144 to the extent that they apply and equal to the Scheduled Payments to the extent that such volume limits do not apply. Upon exercise of such conversions by the Company, Cornell Capital may commence sales of the Company’s Common Stock to reduce the outstanding principal and interest due under this Debenture. The Company shall have the right to make each Scheduled Payment in shares of Common Stock, which shares shall be valued at the lower of the Conversion Price then in effect or a price equal to a seven percent (7%) discount to the average of the two lowest daily volume weighted average prices of the Common Stock as quoted by Bloomberg, LP for the five (5) trading days immediately following the Scheduled Payment date (the “Payment Conversion Price”), provided that such shares are either (i) freely tradeable under Rule 144 of the Commission, (ii) registered for sale under the Securities Act of 1933, or (iii) freely tradeable without restriction in the hands of the Holder. All payments in respect of the indebtedness evidenced hereby shall be made in collected funds (unless paid in shares of Common Stock) and shall be applied to principal, accrued interest and charges and expenses owing under or in connection with this Debenture in such order as the Holder elects, except that payments shall be applied to accrued interest before principal. Notwithstanding the foregoing, this Debenture shall become due and immediately payable, including all accrued but unpaid interest, upon an Event of Default (as defined in Section 3.01 hereof). 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. Time is of the essence of this Debenture. The Company shall be permitted to prepay any amounts owed under this Debenture if the price of the shares of the Company’s Common Stock is less than $0.275 per share and also may, at its option, increase any scheduled payment to $750,000 (payable in cash or Common Stock as set forth above) without incurring any penalties or fees. Nothing contained in this paragraph shall limit the amount that the Holder can convert at any time.
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