EXHIBIT 10.2
 
EXHIBIT A

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

Original Issue Date: February 9, 2009
Original Conversion Price (subject to adjustment herein): $0.50
$150,000
 
18% SECURED CONVERTIBLE PROMISSORY NOTE
DUE MAP 10, 2009

THIS 18% SECURED CONVERTIBLE PROMISSORY NOTE of BROADWEBASIA, INC. a Delaware
corporation, having a principal place of business at 9255 Sunset Boulevard,
Suite 1010, West Hollywood, CA 90069 (the “Company”), designated this its 18%
Secured Convertible Promissory Note due May 10, 2009 (the “Note”).
 
FOR VALUE RECEIVED, the Company promises to pay to Able Income Fund, LLC or its
registered assigns (the “Holder”), or shall have paid pursuant to the terms
hereunder, the principal sum of $150,000 by May 10, 2009, or such earlier date
as this Note 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 Note in accordance with the
provisions hereof.  This Note is subject to the following additional provisions:
 
Section 1.    Definitions.  For the purposes hereof, in addition to the terms
defined elsewhere in this Note: (a) capitalized terms not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement, and (b)
the following terms shall have the following meanings:

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

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

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

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

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

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

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

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

“Conversion Shares” means the shares of Common Stock issuable upon conversion of
this Note or as payment of interest in accordance with the terms.

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

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

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

“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 Notice of Conversions of the Holder, if any,
(ii) all liquidated damages and other amounts owing to the Holder in respect of
this Note shall have been paid, (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 the Trading Market and all of the shares issuable pursuant to the
Transaction Documents are listed for trading on a 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 then existing no Event of Default or 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 a redemption, the shares issuable upon conversion in full of the redemption
amount) to the Holder would not violate the limitations set forth in Section
4(c)(i) and Section 4(c)(ii) and (viii) no public announcement of a pending or
proposed Fundamental Transaction, Change of Control Transaction or acquisition
transaction has occurred that has not been consummated.

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

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
 
“Fundamental Transaction” shall have the meaning set forth in Section 5(d).

“Interest Conversion Rate” means the lesser of (a) the Conversion Price and (b)
the 90% of the lesser of (i) the average of the 20 VWAPs immediately prior to
the applicable Interest Payment Date or (ii) the average of the 20 VWAPs
immediately prior to the date the applicable interest payment shares are issued
and delivered if after the Interest Payment Date.
 
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“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”  shall equal the sum of (i) the greater of: (A) 130%
of the principal amount of this Note to be prepaid, plus all accrued and unpaid
interest thereon, or (B) the principal amount of this Note to be prepaid, plus
all other accrued and unpaid interest hereon, divided by the Conversion Price on
(x) the date the Mandatory Default Amount is demanded or otherwise due or (y)
the date the Mandatory Default Amount is paid in full, whichever is less,
multiplied by the VWAP on (x) the date the Mandatory Default Amount is demanded
or otherwise due or (y) the date the Mandatory Default Amount is paid in full,
whichever is greater, and (ii) all other amounts, costs, expenses and liquidated
damages due in respect of this Note.

“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” shall mean the sum of (i) 115% of the principal
amount of the Note then outstanding, (ii) accrued but unpaid interest and (iii)
all liquidated damages and other amounts due in respect of the Note.

“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” shall mean the date of the first issuance of the Notes
regardless of the number of transfers of any Note and regardless of the number
of instruments which may be issued to evidence such Note.

“Permitted Indebtedness” shall mean (a) the Indebtedness existing on the
Original Issue Date and (b) lease obligations and purchase money Indebtedness of
up to $1,000,000, in the aggregate, incurred in connection with the acquisition
of capital assets and lease obligations with respect to newly acquired or leased
assets.

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

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

“Purchase Agreement” means the Note Purchase Agreement, dated as of February 9,
2009 to which the Company and the original Holder are parties, as amended,
modified or supplemented from time to time in accordance with its terms.

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

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

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

“Threshold Period” shall have the meaning given to such term in Section 6(d).

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

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

“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 as reported by Bloomberg Financial L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b)  if the Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board, the
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
listed or quoted on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the “Pink Sheets” published by the Pink Sheets, LLC (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or (d) 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 Note at the rate of 18 % per annum, payable quarterly on January 5, April
5, July 5 and October 5, beginning on the first such date after the Original
Issue Date, (each such date, an “Interest Payment Date”), in cash or shares of
Common Stock at the Interest Conversion Rate, or a combination thereof  (the
amount to be paid in shares, the “Interest Share Amount”); provided, however,
(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 Conditions, unless waived by the
Holder in writing, have been met and the Company shall have given the Holder
notice in accordance with the notice requirements set forth below and (ii) as to
such Interest Payment Date, prior to the such Interest Notice Period (but not
more 5 Trading Days prior to the commencement of the 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”).
 
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b)    Company’s Election to Pay Interest in Kind.  Subject to the terms and
conditions herein, the decision whether to pay interest hereunder in shares of
Common Stock or cash shall be at the discretion of the Company.  Prior to the
commencement of an Interest Notice Period, the Company shall provide the Holder
with 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 (the Company may indicate in such notice that the election contained in
such notice shall continue for later periods until revised) and the Interest
Share Amount as to the applicable Interest Payment Date.  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 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 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) and only 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 in fact 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 Note is registered on the records of the
Company regarding registration and transfers of this Note (the “Note 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
Notes, then such payment shall be distributed ratably among the holders of the
Notes based on their (or their predecessor’s initial purchases of Notes pursuant
to the Purchase Agreement.
 
d)    Late Fee.  All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at the rate of 18% per annum (or such lower maximum
amount of interest permitted to be charged under applicable law) (“Late Fees”)
which will accrue daily, from the date such interest is due hereunder through
and including the date of payment. Notwithstanding anything to the contrary
contained herein, if on any Interest Payment Date the Company has elected to pay
interest in Common Stock and is not able to pay accrued interest in the form of
Common Stock because it does not then satisfy the conditions for payment in the
form of 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 cash interest payment, shall
deliver, within three Trading Days of each applicable Interest Payment Date, an
amount in cash equal to the product of 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 and 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 Note, the Company may
not prepay any portion of the principal amount of this Note without the prior
written consent of the Holder.
 
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Section 3.     Registration of Transfers and Exchanges.

a)    Different Denominations. This Note is exchangeable for an equal aggregate
principal amount of Notes of different authorized denominations, as requested by
the Holder surrendering the same.  No service charge will be made for such
registration of transfer or exchange.
 
b)    Investment Representations. This Note 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 Note Register. Prior to due presentment to the Company for
transfer of this Note, the Company and any agent of the Company may treat the
Person in whose name this Note is duly registered on the Note Register as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Note is overdue, and neither the Company nor
any such agent shall be affected by notice to the contrary.

Section 4.     Conversion.

a)    Voluntary Conversion. At any time after the Original Issue Date until this
Note is no longer outstanding, this Note shall be convertible into (i) shares of
Common Stock at the option of the Holder, in whole or in part at any time and
from time to time (subject to the limitations on conversion set forth in
Section 4(c) hereof).  The Holder shall effect conversion in part by delivering
to the Company the form of Notice of Conversion attached hereto as Annex A (a
“Notice of Conversion”), specifying therein the principal amount of this Note to
be converted and the date on which such conversion is to be effected (a
“Conversion Date”).  If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
is provided hereunder.  To effect conversion in part hereunder, the Holder shall
not be required to physically surrender this Note to the Company unless the
entire principal amount of this Note 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 Note in an amount equal to the
applicable conversion.  The Holder and the Company shall maintain records
showing the principal amount converted and the date of such conversions.  The
Company shall deliver any objection to any Notice of Conversion within 1
Business Day of receipt of such notice.  In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and determinative in
the absence of manifest error. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note may be less than the amount stated on
the face hereof.
 
b)    Conversion Price.  The conversion price in effect on any Conversion Date
shall be equal to $0.50 (subject to adjustment herein)(the “Conversion Price”).
 
c)    Conversion Limitations.

i.    Reserved.

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

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 Note to be converted by (y) the Conversion Price.
 
ii.   Delivery of Certificate Upon Conversion. Not later than three Trading Days
after any Conversion Date, the Company will deliver or cause to be delivered to
the Holder (A) a certificate or certificates representing the Conversion Shares
which shall be free of restrictive legends and trading restrictions (other than
those required by the Purchase Agreement) representing the number of shares of
Common Stock being acquired upon the conversion of this Note (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 is
required to pay accrued interest in cash). The Company shall, if available and
if allowed under applicable securities laws, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions.
 
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iii.   Failure to Deliver Certificates.  If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed
by the applicable Holder by the third Trading Day after a Conversion Date, the
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
certificates representing the principal amount of this Note tendered for
conversion.
 
iv.   Obligation Absolute; Partial Liquidated Damages.  If the Company fails for
any reason to deliver to the Holder such certificate or certificates pursuant to
Section 4(d)(ii) by the third Trading Day after the Conversion Date, the Company
shall pay to such Holder, in cash, as liquidated damages and not as a penalty,
for each $1000 of principal amount being converted, $10 per Trading Day
(increasing to $20 per Trading Day after 5 Trading Days after such damages begin
to accrue) for each Trading Day after such third Trading Day until such
certificates are delivered.  The Company’s obligations to issue and deliver the
Conversion Shares upon conversion of this Note in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person or any action
to enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other Person
of any obligation to the Company or any violation or alleged violation of law by
the Holder or any other person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to the Holder in connection
with the issuance of such Conversion Shares; provided, however, such delivery
shall not operate as a waiver by the Company of any such action the Company may
have against the Holder.  In the event the Holder of this Note 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 any one associated
or affiliated with the Holder has been engaged in any violation of law,
agreement or for any other reason, unless, an injunction from a court, on
notice, restraining and or enjoining conversion of all or part of this Note
shall have been sought and obtained and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the principal amount of this Note
outstanding, which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Holder to the extent it obtains
judgment.  In the absence of an injunction precluding the same, the Company
shall issue Conversion Shares or, if applicable, cash, upon a properly noticed
conversion.  Nothing herein shall limit a Holder’s right to pursue actual
damages or declare an Event of Default pursuant to Section 8 herein for the
Company’s failure to deliver Conversion Shares within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.  The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any other
Section hereof or under applicable law.
 
v.    Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(d)(ii) by the third Trading Day after the
Conversion Date, and if after such third Trading Day the Holder is required by
its brokerage firm to purchase (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by such Holder of the
Conversion Shares which the Holder anticipated receiving upon such conversion (a
“Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to
any remedies available to or elected by the Holder) the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that such Holder anticipated receiving from the
conversion at issue multiplied by (2) the actual sale price of the Common Stock
at the time of the sale (including brokerage commissions, if any) giving rise to
such purchase obligation and (B) at the option of the Holder, either reissue (if
surrendered) this Note in a principal amount equal to the principal amount of
the attempted conversion or deliver to the Holder the number of shares of Common
Stock that would have been issued had the Company timely complied with its
delivery requirements under Section 4(d)(ii).  For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of this Note with respect to
which the actual sale price of the Conversion Shares at the time of the sale
(including brokerage commissions, if any) giving rise to such purchase
obligation was a total of $10,000 under clause (A) of the immediately preceding
sentence, 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.
 
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vi.    Reservation of Shares Issuable Upon Conversion. The Company covenants
that it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock solely for the purpose of issuance upon
conversion of this Note and payment of interest on this Note, 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 Notes),
not less than such number of shares of the Common Stock as shall (subject to the
terms and conditions set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 5) upon the conversion
of the outstanding principal amount of this Note and payment of interest
hereunder.  The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and, if the Registration Statement is then effective under
the Securities Act, registered for public sale in accordance with such
Registration Statement.
 
vii.   Fractional Shares. Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the 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, one whole share
of Common Stock.
 
viii.   Transfer Taxes.  The issuance of certificates for shares of the Common
Stock on conversion of this Note shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificate, provided that the Company shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in
a name other than that of the Holder of this Note 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.
 
ix.    Piggy-Back Registration Rights.  If at any time after the date hereof
until such the date that the Conversion Shares may be sold pursuant to Rule 144
without volume or manner of sale restrictions, the Company shall determine to
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act), or their then equivalents (a “Registration Statement”),
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send a written notice of such determination to the Holder and, if within
ten calendar days after the date of delivery of such notice, any such Holder
shall so request in writing, the Company shall include in such Registration
Statement all or any part of the Conversion Shares as the Holder requests to be
registered so long as such Conversion Shares are proposed to be disposed in the
same manner as those securities set forth in the Registration Statement;
provided, however, if the inclusion of Conversion Shares requested to be
included in the Registration Statement would cause an adverse effect on the
success of any such offering, based on market conditions or otherwise (an
“Adverse Effect”), then the Company shall be required to include in such
Registration Statement only that number of Conversion Shares to the extent that
such inclusion shall not cause and Adverse Effect; provided, further, if such
number of Conversion Shares is limited hereunder, any cutbacks of a Holder’s
Conversion Shares shall be done on a pro rata basis among all Holders based on
their respective number of shares to be registered hereunder.  To the extent
that all of the
 
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Conversion Shares are not included in the initial Registration Statement, the
Holders shall have the right to request the inclusion of its Conversion Shares
in subsequent Registration Statements until all such Conversion Shares have been
registered in accordance with the terms hereof.  If the offering in which the
Conversion Shares is being included in a Registration Statement is a firm
commitment underwritten offering, unless otherwise agreed by the Company, the
Holder shall sell its Conversion Shares in such offering using the same
underwriters and, subject to the provisions hereof, on the same terms and
conditions as the other shares of Common Stock that are included in such
underwritten offering.  The Company shall use its best efforts to cause any
Registration Statement to be declared effective by the Commission as promptly as
is possible following it being filed with the Commission and to remain effective
until all Conversion Shares subject thereto have been sold or may be sold
without volume or manner of sale restrictions.  All fees and expenses incident
to the performance of or compliance with this Section by the Company shall be
borne by the Company whether or not any Conversion Shares are sold pursuant to
the Registration Statement.  The Company shall indemnify and hold harmless the
Holder, the officers, directors, members, partners, agents, brokers, investment
advisors and employees of each of them, each person who controls the 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 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, the “Losses”), as incurred, arising
out of or relating to (i) any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any prospectus included therein or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading or (ii) 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 Section, except to the extent, but only to the extent, that such
untrue statements or omissions referred to in (i) above are based solely upon
information regarding the Holder furnished in writing to the Company by the
Holder expressly for use therein, or (ii) to the extent that such information
relates to such Holder’s proposed method of distribution of Conversion Shares
and was reviewed and expressly approved in writing by such Holder expressly for
use in a Registration Statement, the prospectus included therein or in any
amendment or supplement thereto.  The rights of the Holder under this Section
1.4 shall survive until all Conversion Shares have been either registered under
a Registration Statement or been sold pursuant to an exemption to the
registration requirements of the Securities Act.  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 included therein, 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 (ii)
to the extent that such information relates to such Holder’s proposed method of
distribution of Conversion Shares and was reviewed and expressly approved in
writing by such Holder expressly for use in a Registration Statement, the
prospectus included therein or in any amendment or supplement thereto.  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 Conversion Shares giving rise to such indemnification obligation
 
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Section 5.    Certain Adjustments.

a)    Stock Dividends and Stock Splits.  If the Company, at any time while this
Note is outstanding: (A) pays a stock dividend or otherwise makes a distribution
or distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company
pursuant to this Note, including as interest thereon), (B) subdivides
outstanding shares of Common Stock into a larger number of shares, (C) combines
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (D) issues by reclassification of shares of
the Common Stock any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event.  Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
 
b)    Subsequent Equity Sales.  If the Company or any Subsidiary thereof, as
applicable, at any time while this Note is outstanding, shall offer, sell, grant
any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at an
effective price per share less than the then Conversion Price (such lower price,
the “Base Conversion Price” and such issuances collectively, a “Dilutive
Issuance”), as adjusted hereunder (if the holder of the Common Stock or Common
Stock Equivalents so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares of Common
Stock at an effective price per share which is less than the Conversion Price,
such issuance shall be deemed to have occurred for less than the Conversion
Price on such date of the Dilutive Issuance), then the Conversion Price shall be
reduced to equal the Base Conversion Price.  Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are
issued.  Notwithstanding the foregoing, no adjustment will be made under this
Section 5(b) in respect of an Exempt Issuance.  The Company shall notify the
Holder in writing, no later than the Business Day following the issuance of any
Common Stock or Common Stock Equivalents subject to this section, indicating
therein the applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms (such notice the “Dilutive
Issuance Notice”).  For purposes of clarification, whether or not the Company
provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the
occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance
the Holder is entitled to receive a number of Conversion Shares based upon the
Base Conversion Price regardless of whether the Holder accurately refers to the
Base Conversion Price in the Notice of Conversion.
 
c)    Pro Rata Distributions. If the Company, at any time while this Note is
outstanding, shall distribute to all holders of Common Stock (and not to the
holders of the Note) evidences of its indebtedness or assets (including cash and
cash dividends) or rights or warrants to subscribe for or purchase any security,
then in each such case the Conversion Price shall be adjusted by multiplying
such Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of Directors in
good faith.  In either case the adjustments shall be described in a statement
provided to the Holder of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common
Stock.  Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.
 
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d)    Fundamental Transaction. If, at any time while this Note is outstanding,
(A) the Company effects any merger or consolidation of the Company with or into
another Person, (B) the Company effects any sale of all or substantially all of
its assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”),
then upon any subsequent conversion of this Note, the Holder shall have the
right to receive, for each Conversion Share that would have been issuable upon
such conversion immediately prior to the occurrence of such Fundamental
Transaction, the same kind and amount of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of one share of Common Stock (the “Alternate Consideration”).  For
purposes of any such conversion, the determination of the Conversion Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any conversion of this Note 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 Note consistent with the foregoing provisions
and evidencing the Holder’s right to convert such Note into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (d) and
insuring that this Note (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction.
 
e)    Calculations.  All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.  For
purposes of this Section 5, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding treasury shares, if any) issued and
outstanding.
 
f)    Notice to the Holder.

i.    Adjustment to Conversion Price.  Whenever the Conversion Price is adjusted
pursuant to any of this Section 5, the Company shall promptly mail to each
Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. If the
Company issues a variable rate security, despite the prohibition thereon in the
Purchase Agreement, the Company shall be deemed to have issued Common Stock or
Common Stock Equivalents at the lowest possible conversion or exercise price at
which such securities may be converted or exercised in the case of a Variable
Rate Transaction (as defined in the Purchase Agreement).
 
ii.   Notice to Allow Conversion by Holder.  If (A) the Company shall declare a
dividend (or any other distribution) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Note, and shall cause
to be mailed to the Holder at its last addresses as it shall appear upon
the  stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled to convert this Note during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.

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Section 6.    Negative Covenants. So long as any portion of this Note is
outstanding, the Company will not and will not permit any of its Subsidiaries to
directly or indirectly

a)    other than Permitted Liens, enter into, create, incur, assume or suffer to
exist any liens of any kind, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits
therefrom;
 
b)    amend its certificate of incorporation, bylaws or other charter documents
so as to materially and adversely affect any rights of the Holder;
 
c)    repay, repurchase or offer to repay, repurchase or otherwise acquire more
than a de minimis number of shares of its Common Stock or Common Stock
Equivalents other than as to the Conversion Shares to the extent permitted or
required under the Transaction Documents or as otherwise permitted by the
Transaction Documents;
 
d)    enter into any agreement with respect to any of the foregoing; or
 
e)    pay cash dividends or distributions on any equity securities of the
Company.

Section 7.    Events of Default.

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

i.    any default in the payment of (A) the principal amount of any Note, or (B)
interest (including Late Fees) on, or liquidated damages in respect of, any
Note, 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 this Note or any other Note which failure is not cured,
if possible to cure, within the earlier to occur of (A) 5 Trading Days after
notice of such default sent by the Holder or by any other Holder and (B)10
Trading Days after the Company shall become or should have become aware of such
failure;
 
iii.   a default or event of default (subject to any grace or cure period
provided for in the applicable agreement, document or instrument) shall occur
under (A) any of the Transaction Documents, or (B) any other material agreement,
lease, document or instrument to which the Company or any Subsidiary is bound;
 
iv.   any representation or warranty made herein, in any other Transaction
Documents, in any written statement pursuant hereto or thereto, or in any other
report, financial statement or certificate made or delivered to the Holder or
any other holder of Notes shall be untrue or incorrect in any material respect
as of the date when made or deemed made;
 
v.    (i) the Company or any of its Subsidiaries shall commence a case, as
debtor, a case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company or any Subsidiary
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Company or any Subsidiary thereof or (ii) there is commenced a case against the
Company or any Subsidiary thereof, under any applicable bankruptcy or insolvency
laws, as now or hereafter in effect or any successor thereto which remains
undismissed for a period of 60 days; or (iii) the Company or any Subsidiary
thereof is adjudicated by a court of competent jurisdiction insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or (iv) the Company or any Subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial part of its
property which continues undischarged or unstayed for a period of 60 days; or
(v) the Company or any Subsidiary thereof makes a general assignment for the
benefit of creditors; or (vi) the Company shall fail to pay, or shall state that
it is unable to pay, or shall be unable to pay, its debts generally as they
become due; or (vii) the Company or any Subsidiary thereof shall call a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (viii) the Company or any Subsidiary thereof
shall by any act or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or (ix) any corporate or other
action is taken by the Company or any Subsidiary thereof for the purpose of
effecting any of the foregoing;
 
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vi.   the Company or any Subsidiary shall default in any of its obligations
under any mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be issued, or by
which there may be secured or evidenced any indebtedness for borrowed money or
money due under any long term leasing or factoring arrangement of the Company in
an amount exceeding $1,000,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would otherwise
become due and payable;
 
vii.   the Common Stock shall not be eligible for quotation on or quoted for
trading on a Trading Market and shall not again be eligible for and quoted or
listed for trading thereon within five Trading Days;
 
viii.   the Company shall be a party to any Change of Control Transaction or
Fundamental Transaction, shall agree to sell or dispose of all or in excess of
33% of its assets in one or more transactions (whether or not such sale would
constitute a Change of Control Transaction) or shall redeem or repurchase more
than a de minimis number of its outstanding shares of Common Stock or other
equity securities of the Company (other than redemptions of Conversion Shares
and repurchases of shares of Common Stock or other equity securities of
departing officers and directors of the Company; provided such repurchases shall
not exceed $100,000, in the aggregate, for all officers and directors during the
term of this Note).  The Company’s acquisition of the American Auction Network
shall not be considered an Event of Default under this Section 7;
 
b)    Remedies Upon Event of Default. If any Event of Default occurs, the full
principal amount of this Note, together with interest and other amounts owing in
respect thereof, to the date of acceleration shall become, at the Holder’s
election, immediately due and payable in cash.   The aggregate amount payable
upon an Event of Default shall be equal to the Mandatory Default
Amount.  Commencing 5 days after the occurrence of any Event of Default that
results in the eventual acceleration of this Note, the interest rate on this
Note shall accrue at the rate of 18% per annum, or such lower maximum amount of
interest permitted to be charged under applicable law.  Upon the payment in full
of the Mandatory Default Amount on this entire Note the Holder shall promptly
surrender this Note to or as directed by the Company.  The Holder need not
provide and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law.  Such declaration may be
rescinded and annulled by Holder at any time prior to payment hereunder and the
Holder shall have all rights as a Note holder until such time, if any, as the
full payment under this Section shall have been received by it.  No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.

Section 9.    Miscellaneous.

a)    Notices.  Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, sent by
a nationally recognized overnight courier service, addressed to the Company, at
the address set forth above, Attn: Peter Schloss or such other address or
facsimile number as the Company may specify for such purposes by notice to the
Holder delivered in accordance with this Section.  Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile telephone
number or address of such Holder appearing on the books of the Company, or if no
such facsimile telephone number or address appears, at the principal place of
business of the Holder.  Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 5:30 p.m. (New
York City time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 5:30 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date, (iii) the second
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
 
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b)    Absolute Obligation. Except as expressly provided herein, no provision of
this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, interest and liquidated damages (if
any) on, this Note at the time, place, and rate, and in the coin or currency,
herein prescribed.  This Note is a direct debt obligation of the Company.  This
Note ranks pari passu with all other Notes now or hereafter issued under the
terms set forth herein.
 
c)    Lost or Mutilated Note.  If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal amount of
this Note so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of the ownership
hereof, and indemnity, if requested, all reasonably satisfactory to the Company.
 
d)    Governing Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof.  Each party agrees
that all legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the “New
York Courts”).  Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding.  Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Note and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Note or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Note, then
the prevailing party in such action or proceeding shall be reimbursed by the
other party for its attorneys fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such action or proceeding.
 
e)    Waiver.  Any waiver by the Company or the Holder of a breach of any
provision of this Note 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 Note.  The failure of the Company or the Holder to insist upon strict
adherence to any term of this Note 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 Note.  Any waiver must
be in writing.
 
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f)    Severability.  If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.  If it shall be found
that any interest or other amount deemed interest due hereunder violates
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on this Note 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 Note and shall not be deemed to limit or affect any of
the provisions hereof.
 
i)    Assumption.  Any successor to the Company or surviving entity in a
Fundamental Transaction shall (i) assume in writing all of the obligations of
the Company under this Note and the other Transaction Documents pursuant to
written agreements in form and substance satisfactory to the Holder (such
approval not to be unreasonably withheld or delayed) prior to such Fundamental
Transaction and (ii) to issue to the Holder a new Note of such successor entity
evidenced by a written instrument substantially similar in form and substance to
this Note, including, without limitation, having a principal amount and interest
rate equal to the principal amounts and the interest rates of the Notes held by
the Holder and having similar ranking to this Note, and satisfactory to the
Holder (any such approval not to be unreasonably withheld or delayed).  The
provisions of this Section 9(i) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
of this Note.

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

  BroadWebAsia, Inc.          
 
By:
/s/ Peter Schloss        Name: Peter Schloss       Title: Chief Executive
Officer          

 
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ANNEX A
 
NOTICE OF CONVERSION
 
The undersigned hereby elects to convert principal under the 18% Convertible
Note of BroadWebAsia, Inc., a Delaware corporation (the “Company”), due on May
10, 2009, into shares of common stock, par value $0.001 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 Note.
 
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 Note 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: 

 
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Schedule 1
 
CONVERSION SCHEDULE

The 18% Convertible Notes due on May 10, 2009, in the aggregate principal amount
of $150,000 issued by BroadWebAsia, Inc.  This Conversion Schedule reflects
conversions made under Section 4 of the above referenced Note.
 

  Dated: 

 

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

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