Exhibit 10.2

NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT
OR STATE LAW OR AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

$1,525,000              

 

Los Angeles, California

August 1, 2006

MFC DEVELOPMENT CORP.

ADSOUTH MARKETING, LLC.

CONVERTIBLE NOTE

FOR VALUE RECEIVED, MFC Development Corp., a Delaware corporation (“MFC”) and
Adsouth Marketing, LLC (“Purchaser,” and, together with MFC, the “Company”)
hereby jointly and severally promise to pay to the order of Adsouth Partners,
Inc., a Nevada corporation (“Payee”), the principal amount of one million five
hundred twenty five thousand dollars ($1,525,000) at the time and in the manner
set forth in Article 1 of this Note.  Interest on the outstanding principal
balance shall be paid monthly at the rate of interest set forth in Section 1(a),
1(b) and 1(d) of this Note, as the case may be. Accrued interest shall also be
payable at such time as any payment of principal of this Note is made.  Interest
shall be computed on the basis of a 360-day year, using the number of days
actually elapsed.

 

ARTICLE 1.

Payment of Principal and Interest on the Note

(a)

This Note shall bear interest as follows, subject to the provisions of Sections
1(b) and 1(d) of this Note.  

(i)

During the period ending on October 20, 2006 (the “first period”), this Note
shall bear interest at the rate of nine and one-half percent (9.5%) per annum.

(ii)

During the period commencing October 21, 2006 and ending on January    20, 2007
(the “second period”), this Note shall bear interest at the rate of ten and
one-half percent (10.5%) per annum.

(iii)

During the period commencing January 21, 2007 and ending on April 20, 2007 (the
“third period”), this Note shall bear interest at the rate of eleven and
one-half percent (11.5%) per annum.

(iv)

(x) Subsequent to April 20, 2007 or (y)  if the Company shall not have fulfilled
its obligations under the Registration Rights Agreement that relate to
registration of the Conversion Shares as hereinafter defined and the continuing
effectiveness of the registration statement,  this Note shall bear interest at
the rate of eighteen percent (18%) per annum; provided however, that a failure
to fulfill obligations can only be asserted if Payee has provided written notice
to the Company of a purported failure which remains uncured thirty (30) days
after Company’s receipt of such notice and provided further that no increase in
interest rate under this Section 1(a)(iv) shall be considered an Event of
Default hereunder.

(b)

Notwithstanding the provisions of Section 1(a) of this Note:

(i)

In the event that twenty five percent (25%) of the principal amount of this Note
that is outstanding at the beginning of the first period, together with accrued
interest, is paid prior to the end of the first period, the interest rate in
effect for the first period shall continue as the interest rate for the second
period.

(ii)

In the event that twenty five percent (25%) of the principal amount of this Note
that is outstanding at the beginning of the second period, together with accrued
interest, is paid prior to the end of the second period, the interest rate in
effect for the second period shall continue as the interest rate for the third
period.

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(c)

The principal amount of this Note shall be subject to adjustment as provided in
that certain asset purchase agreement (the “Purchase Agreement”) dated as of
June 22, 2006 by and between the Company, on the one hand, and Payee and certain
of its subsidiaries, on the other hand.  References to the principal amount of
this Note shall reflect any adjustments pursuant to this Section 2(c).  Further,
to the extent adjustments are pending pursuant to the Purchase Agreement, the
Company’s obligation to pay such disputed portion of the Note shall be suspended
until such dispute is resolved and any payments so deferred or suspended shall
be paid in full at such time as the dispute is resolved.

(d)

Payment of the principal amount of this Note, together with accrued interest,
shall be made on demand at any time commencing April 21, 2007; provided,
however, that  if at least fifty percent (50%) of the principal amount of this
Note, together with accrued interest thereon, shall have been paid by 5:00 P.M.
Eastern time on the last day of the second period the remaining principal (the
“Remaining Principal Amount”) and interest shall be payable as follows:

(i)

The date on which the Company shall have paid fifty percent (50%) of the
principal amount of this Note pursuant to Section 1(d) is referred to as the
“Section 1(d) Payment Date.”

(ii)

This Note shall bear interest, from and after the Section 1(d) Payment Date, at
the rate of interest equal to the interest rate announced by JP Morgan Chase
Bank as its prime rate (regardless of whether that rate is the lowest rate
charged by said bank) (the “Prime Rate”) plus 400 basis points, subject to
Section 2(c) of this Note.

(iii)

The Company shall make a monthly payment of principal in the amount equal to
three percent (3%) of the Remaining Principal Amount.  Such payment shall be
made on the same day of the month that is the calendar day prior to the Section
1(d) Payment Date, commencing with the calendar month immediately following the
Section 1(d) Payment Date and concluding with the twenty fourth (24th) month
thereafter.  For example, if the Section 1(d) Payment Date is January 8, 2007,
the payments pursuant to this Section 1(d) (iii) shall be made on seventh (7th)
day of each month thereafter, commencing February 7, 2007 through and including
January 7, 2009.

(iv)

The twelfth (12th) payment pursuant to Section 1(d) (ii) shall be accompanied by
a payment of principal equal to twenty eight percent (28%) of the Remaining
Principal Amount.

(v)

The Company may, at any time, make an additional payment on account of the
Remaining Principal Amount, without penalty or premium; provided, that (x) such
payment shall be accompanied by accrued interest to the date of such payment and
(y) the remaining payments due pursuant to this Section 1(d) shall be reduced on
a pro rata basis.

(e)

In the event that MFC, Purchaser or any of their respective subsidiaries
completes a Qualified Financing, as hereinafter defined, the Company shall,
contemporaneously with the Qualified Financing, make a payment equal to not less
fifty percent (50%) of the then outstanding principal amount of this Note;
provided, however, that if the Qualified Financing is received in installments,
the payments due pursuant to this Section 1(e) shall be made pro rata, based on
the percentage that the amount received in each installment bears to the total
amount to be received.

(f)

A Qualified Financing shall mean the sale by MFC, Purchaser or any of its their
respective subsidiaries, at any time during the one hundred eighty (180) days
following the date of this Note, whether in one transaction or a series of
transactions which need not be related transactions, of the Company’s capital
stock, or other securities convertible into the Company’s capital stock, from
which the gross proceeds received by the Company and its subsidiaries, prior to
any underwriting, brokerage or finders’ fee or commission or other offering
expenses, in such transaction(s) total at least five million dollars
($5,000,000).

(g)

The term Qualified Financing Price shall mean (i) with respect to a Qualified
Financing involving the sale of MFC’s common stock, par value $.001 per share
(“Common Stock”) the price per share (or weighted average price per share in a
series of transactions) at which Common Stock is sold, or (ii) with respect to a
Qualified Financing involving the sale of MFC’s convertible securities, the
amount determined by dividing (x) the proceeds received by MFC from the
Qualified Financing by (y) the number of shares of Common Stock which would be
be issuable upon such conversion or exercise on the date of the Qualified
Financing.  If the Qualified Financing involves both Common Stock and
convertible securities, the weighted average price per share of

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Common Stock, determined in provided in this Section 1(g), shall be used. There
shall only be a single Qualified Financing.

(h)

As used in this Note, obligations and covenants of the Company are the joint and
several obligations of MFC and Purchaser.

ARTICLE 2.

Events of Default and Acceleration

(a)

Events of Default Defined.  The entire unpaid principal amount of this Note,
together with interest thereon shall, on written notice to the Company given by
the holders of this Note, forthwith become and be due and payable if any one or
more the following events (“Events of Default”) shall have occurred (for any
reason whatsoever and whether such happening shall be voluntary or involuntary
or be affected or come about by operation of law pursuant to or in compliance
with any judgment, decree, or order of any court or any order, rule or
regulation of any administrative or governmental body) and be continuing.  An
Event of Default shall occur:

(i)

if failure shall be made in the payment of the principal of or interest on this
Note when and as the same shall become due and such failure shall continue for a
period of ten (10) business days after such payment is due; or

(ii)

if the Company shall violate or breach any of the  covenants contained in the
Note or any of the covenants in the Purchase Agreement that relate to a payment
obligation of the Company and such violation or breach shall continue for thirty
(30) days after written notice of such breach shall have been received by the
Company from Payee; or

(iii)

if the Company or any Material Subsidiary shall consent to the appointment of a
receiver, trustee or liquidator of itself or of a substantial part of its
property or shall make a general assignment for the benefit of creditors, or
shall file a voluntary petition in bankruptcy, or an answer seeking
reorganization in a proceeding under any bankruptcy law (as now or hereafter in
effect) or an answer admitting the material allegations of a petition filed
against the Company or any Material Subsidiary, in any such proceeding, or shall
by voluntary petition, answer or consent, seek relief under the provisions of
any other now existing or future bankruptcy or other similar law providing for
the reorganization or winding up of corporations, or an arrangement,
composition, extension or adjustment with its or their creditors, or shall, in a
petition in bankruptcy filed against it or them be adjudicated a bankrupt, or
the Company or any Material Subsidiary or their directors or a majority of its
stockholders shall vote to dissolve or liquidate the Company or any Material
Subsidiary other than a liquidation involving a transfer of assets from a
Subsidiary to the Company or another Subsidiary; or

(iv)

if an involuntary petition shall be filed against the Company or any Material
Subsidiary seeking relief against the Company or any Material Subsidiary under
any now existing or future bankruptcy, insolvency or other similar law providing
for the reorganization or winding up of corporations, or an arrangement,
composition, extension or adjustment with its or their creditors, and such
petition shall not be vacated or set aside within ninety (90) days from the
filing thereof; or

(v)

if a court of competent jurisdiction shall enter an order, judgment or decree
appointing, without consent of the Company or any Material Subsidiary, a
receiver, trustee or liquidator of the Company or any Material Subsidiary, or of
all or any substantial part of the property of the Company or any Material
Subsidiary, or approving a petition filed against the Company or any Material
Subsidiary seeking a reorganization or arrangement of the Company or any
Material Subsidiary under the Federal bankruptcy laws or any other applicable
law or statute of the United States of America or any State thereof, or any
substantial part of the property of the Company or any Material Subsidiary shall
be sequestered;  and such order, judgment or decree shall not be vacated or set
aside within ninety (90) days from the date of the entry thereof; or

(vi)

if, under the provisions of any law for the relief or aid of debtors, any court
of competent jurisdiction shall assume custody or control of the Company or any
Material Subsidiary or of all or any substantial part of the property of the
Company or any Material Subsidiary and such custody or control shall not be
terminated within ninety (90) days from the date of assumption of such custody
or control.

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(b)

Rights of Note Holder.  Nothing in this Note shall be construed to modify, amend
or limit in any way the right of the holder of this Note to bring an action
against the Company.

(c)

Default Interest Rate.  If there shall occur an Event or Default,  the interest
rate shall, from and after the date of such Event of Default, be the greater of
(i) eighteen percent (18%) per annum or (ii) the Prime Rate plus 400 basis
points.

ARTICLE 3.

Conversion

(a)

Right of Conversion.

(i)

At any time after the last day of the second period, the holder of this Note
shall have the right to convert all or any part of the principal amount of this
Note outstanding from time to time and accrued interest thereon into such number
of shares of Common Stock at the conversion price hereinafter defined (the
“Conversion Price”);.  The Conversion Shares shall be restricted securities, as
defined in Rule 144 of the Securities and Exchange Commission (the “Commission”)
pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and
shall bear a restrictive legend similar to the legend appearing on this Note.
 The holders of the Conversion Shares shall have the rights set forth in the
Registration Rights Agreement.

(ii)

Notwithstanding any other provision of this Note, if the Company shall pay fifty
percent (50%) of the principal amount of this Note, together with accrued
interest, before the commencement of the Third Period, the holder of this Note
shall have no right to convert this Note unless an Event of Default shall occur.
  If an Event of Default shall occur, the holder of this Note shall have all
rights of conversion set forth in this Article 3.

(iii)

In order to exercise the conversion right, the holder of this Note shall
surrender this Note at the office of the Company together with written
instructions specifying the portion of the principal amount of and accrued
interest on this Note which the holder elects to convert and the registration
and delivery of certificates for shares of Common Stock issuable upon such
conversion.  The shares of Common Stock issuable upon conversion of principal
and interest on this Note are referred to as the “Conversion Shares.”  The
number of Conversion Shares to be issued upon any whole or partial conversion of
this Note shall be determined by dividing the amount of principal and interest
being converted by the Conversion Price in effect on the date of such
conversion, which shall be the date this Note is delivered to the Company for
conversion.  The holder shall thereupon be deemed the holder of the shares of
Common Stock so issued.  If this Note shall have been converted in part, the
holder of this Note shall be entitled to a new Note representing the unpaid
principal balance of such Note remaining after deducting the principal amount of
the Note converted.

(b)

At any such time as the Company has made the fifty percent (50%) payment
pursuant to f Section 1(d) , the Company shall have the right to force
conversion of this Note into Common Stock by issuing to the holder of this Note
such number of shares of Common Stock determined by dividing one hundred fifteen
percent (115%) of the total amount of principal and interest being converted
pursuant to this Section 1(h) by the Conversion Price, as hereinafter defined;
provided, however, that the Company shall only exercise this right if, at such
the time of such exercise, the shares of Common Stock to be so issued shall be
subject to a current and effective registration statement or all of such shares
may be sold pursuant to Rule 144(k) of the Commission pursuant to the Securities
Act, or any subsequent similar rule.

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(c)

Conversion Price.  The Conversion Price shall mean the lesser of (i) one dollar
($1.00) per share or (ii) the greater of (x) the Qualified Financing Price or
(y) fifty cents ($.50), subject to adjustment as hereinafter provided.

(d)

Adjustment in Conversion Price.  If the Company shall, subsequent to the date of
initial issuance of this Note, (A) pay a dividend or make a distribution on its
shares of Common Stock in shares of Common Stock, (B) subdivide or reclassify
its outstanding Common Stock into a greater number of shares, or (C) combine or
reclassify its outstanding Common Stock into a smaller number of shares or
otherwise effect a reverse split, the Conversion Price in effect at the time of
the record date for such dividend or distribution or of the effective date of
such subdivision or other  combination or reclassification shall be
proportionately adjusted upward or downward, as the case may be in accordance
with generally accepted accounting principles.  Such adjustment shall be made
successively whenever any event listed in this Section 3(d) shall occur.

(e)

Reclassification, Reorganization or Merger.  In case of any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the Company, or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which merger
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock or the class issuable upon conversion of this Note) or in case
of any sale, lease or conveyance to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the holder of this
Note shall have the right thereafter by converting this Note, to purchase the
kind and amount of shares of stock and other securities and property receivable
upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock which might have been purchased upon conversion of this Note
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance.  Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Note.  The foregoing provisions of this Section 3(e) shall similarly
apply to successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.  In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole in part, for a security of the Company other
than Common Stock, such transaction shall be treated as a reclassification or
reorganization pursuant to this Section 3(e).

(f)

Fractional Shares.  No fractional shares or script representing fractional
shares shall be issued upon the conversion of any Notes.  If, upon any full or
partial conversion of this Note, the holder would, except for the provisions of
this Section 3(f), be entitled to receive a fractional share of Common Stock,
then the number of shares to be issued on such conversion shall be rounded up to
the nearest whole number of shares.

(g)

Registration Rights Agreement. The holders of the Conversion Shares shall have
all rights provided to Payee pursuant to the registration rights agreement (the
“Registration Agreement”) dated the date of this Note between the Company and
Payee.

ARTICLE 4.

Miscellaneous

(a)

Transferability.  The holder of this Note may transfer this Note with the
consent of  MFC, which consent shall not be unreasonably withheld or delayed.
 Any such transfer will be made  in a transaction exempt from registration
pursuant to the Securities Act and applicable state securities law.  The Company
shall treat as the owner of this Note the person shown as the owner on its books
and records.

(b)

Right to Encumber.  Nothing in this Note shall restrict the ability of the
holder of this Note to pledge or hypothecate this Note or otherwise use this
Note as collateral for any obligation of the holder.

(c)

WAIVER OF TRIAL BY JURY.  IN ANY LEGAL PROCEEDING TO ENFORCE PAYMENT OF THIS
NOTE, THE COMPANY WAIVES TRIAL BY JURY.

(d)

WAIVER OF ANY RIGHT OF COUNTERCLAIM.  EXCEPT AS PROHIBITED BY LAW, THE COMPANY
HEREBY WAIVES ANY RIGHT TO ASSERT ANY CLAIM IT MAY HAVE AGAINST THE HOLDER

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OF THIS NOTE BY WAY OF A COUNTERCLAIM (OTHER THAN A COMPULSORY COUNTERCLAIM) IN
ANY ACTION ON THIS NOTE.

(e)

Usury Saving Provision.  All payment obligations arising under this Note are
subject to the express condition that at no time shall the Company be obligated
or required to pay interest at a rate which could subject the holder of this
Note to either civil or criminal liability as a result of being in excess of the
maximum rate which the Company is permitted by law to contract or agree to pay.
 If by the terms of this Note, the Company is at any time required or obligated
to pay interest at a rate in excess of such maximum rate, the applicable rate of
interest shall be deemed to be immediately reduced to such maximum rate, and
interest thus payable shall be computed at such maximum rate, and the portion of
all prior interest payments in excess of such maximum rate shall be applied and
shall be deemed to have been payments in reduction of principal.

(f)

Notice to Company.  Notice to the Company shall be given to the Company in the
manner set forth in the Purchase Agreement.

(g)

Governing Law.  This Note shall be governed by the laws of the State of
California applicable to agreements executed and to be performed wholly within
such State.  The Company hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Central District of
California or any court of the State of California located in the County of Los
Angeles in any action, suit or proceeding arising out of or relating to this
Note or any of the transactions contemplated hereby or thereby, and agrees that
any such action, suit or proceeding shall be brought only in such court,
provided, however, that such consent to jurisdiction is solely for the purpose
referred to in this Section and shall not be deemed to be a general submission
to the jurisdiction of said courts or in the State of California other than for
such purpose.  Each party hereby irrevocably waives, to the fullest extent
permitted by Law, any objection that it may now or hereafter have to the laying
of the venue of any such action, suit or proceeding brought in such a court and
any claim that any such action, suit or proceeding brought in such a court has
been brought in an inconvenient forum.

(h)

Expenses.  In the event that either party commences a legal proceeding in order
to enforce its rights under this Note, the losing party shall pay all reasonable
legal fees and expenses incurred by the prevailing party with respect thereto.

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IN WITNESS WHEREOF, the Company has executed this Note as of the date and year
first aforesaid.

 

MFC DEVELOPMENT CORP.

 

By:

 

Nancy Duitch, CEO

 

ADSOUTH MARKETING, LLC

 

 

 

By: MFC DEVELOPMENT CORP.

 

Its: Manager     

 

By:

 

Nancy Duitch, CEO

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NOTICE OF CONVERSION

[To be Signed Only Upon Conversion

of Part or All of Notes]

MFC DEVELOPMENT CORP.

The undersigned, the holder of the foregoing Note, hereby surrenders such Note
for conversion into shares of Common Stock of MFC Development Corp. to the
extent of $       * unpaid principal amount of and interest due on such Note,
and requests that the certificates for such shares be issued in the name of
            , and delivered to           , whose address is           .

Dated:

                                                                  

(Signature)

(Signature must conform in all respects to name of holder as specified on the
face of the Note.)

*

Insert here the unpaid principal amount of the Note (or, in the case of a
partial conversion, the portion thereof as to which the Note is being
converted).  In the case of a partial conversion, a new Note will be issued and
delivered, representing the unconverted portion of the unpaid principal amount
of this Note, to or upon the order of the holder surrendering such Note.

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