EXHIBIT 10.8
 
FORM OF NOTE
 
THIS NOTE AND THE SHARES OF COMMON STOCK  ISSUABLE UPON  CONVERSION  HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED  OF IN THE ABSENCE OF SUCH  REGISTRATION  OR RECEIPT BY THE MAKER OF AN
OPINION OF COUNSEL IN THE FORM,  SUBSTANCE AND SCOPE REASONABLY  SATISFACTORY TO
THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF MAY BE SOLD,  TRANSFERRED,  OR OTHERWISE  DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.
 
KACHING KACHING, INC.
 
CONVERTIBLE PROMISSORY NOTE
 
No.: KK-10-_______________
 
$_____________
Dated: April ___, 2010
 
   

FOR VALUE RECEIVED, KaChing KaChing, Inc.,  a  Delaware  corporation  (the
“Maker”),  hereby  promises  to  pay  to the  order  of  _______________________
(together  with its  successors,  representatives,  and permitted  assigns,  the
“Holder”),  in accordance  with the terms  hereinafter  provided,  the principal
amount of  ________________________  ($______________),  together  with interest
thereon.  Concurrently  with the  issuance  of this  Note,  the Maker is issuing
separate convertible promissory notes (the “Other Notes”) to separate purchasers
(the “Other Holders”) pursuant to the Purchase Agreement (as defined in Section
1.01 hereof).
 
All  payments  under or  pursuant  to this Note  shall be made in United  States
Dollars  in  immediately  available  funds to the  Holder at the  address of the
Holder first set forth above or at such other place as the Holder may  designate
from time to time in  writing to the Maker or by wire  transfer of funds to the
Holder’s account, instructions for which are attached hereto as Exhibit A. The
outstanding principal balance of this Note shall be due and payable on October
[__], 2011 (the “Maturity Date”) or at such earlier time as provided herein.
 
ARTICLE I.
 
Section 1.01 Purchase Agreement. This Note has been executed and delivered
pursuant to the Securities Purchase Agreement dated as of April [__], 2010 (the
“Purchase Agreement”) by and among the Maker and the purchasers listed therein.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement.
 
 
1

--------------------------------------------------------------------------------

 
 
Section 1.02 Interest.
 
(a) Beginning on the issuance date of this Note (the “Issuance Date”), the
outstanding principal balance of this Note shall bear interest, in arrears, at a
rate per annum equal to ten  percent (10%), payable quarterly on January 1,
April 1, July 1 and October 1, beginning on July 1, 2010  in (A) cash or (B)
shares of the Maker’s common stock, $.001 par value per share (the “Common
Stock”). The Maker shall provide irrevocable written notice to the Holder of the
form of interest payment at least ten (10) days prior to an interest payment
date. If no such notice is provided at least ten (10) days prior to an interest
payment date, the Maker must make the interest payment in cash. The number of
shares of Common Stock to be issued as payment of accrued and unpaid interest
shall be determined by dividing (a) the total amount of accrued and unpaid
interest to be paid in Common Stock by (b) the lesser of (i) the Conversion
Price (as defined in Section 3.02 hereof) and (ii) 90% of the average of the
Closing Bid Price (as defined in Section 1.02(b) below) for the ten (10) Trading
Days immediately preceding the interest payment date. Interest shall be computed
on the basis of a 360-day year of twelve (12) 30-day months and shall accrue
commencing on the Issuance Date. Furthermore, upon the occurrence of an Event of
Default (as defined in Section 2.01 hereof), then to the extent permitted by
law, the Maker will pay interest to the Holder, payable on demand, on the
outstanding principal balance of the Note from the date of the Event of Default
until such Event of Default is cured at the annual rate of the lesser of
twenty-four percent (24%) and the maximum applicable legal rate per annum.
 
(b) The term “Closing Bid Price” shall mean, on any particular date (i) the last
closing bid price per share of the Common Stock on such date on any registered
national stock exchange on which the Common Stock is then listed, or if there is
no such price on such date, then the last closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (ii) if the Common
Stock is not listed then on a registered national stock exchange, the last
trading price for a share of Common Stock in the over-the-counter market, as
reported by the OTC Bulletin Board or in the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (iii) if the Common
Stock is not then reported by the OTC Bulletin Board or the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the “Pink Sheet” quotes on
such date, as determined in good faith by the Holder, or (iv) if the Common
Stock is not then publicly traded, the fair market value of a share of Common
Stock as determined by the Holder and reasonably acceptable to the Maker.
 
Section 1.03 Payment on Non-Business Days. Whenever any payment to be made shall
be due on a Saturday, Sunday or a public holiday under the laws of the State of
New York, such payment may be due on the next succeeding business day and such
next succeeding day shall be included in the calculation of the amount of
accrued interest payable on such date.
 
Section 1.04 Transfer. This Note may be transferred or sold, subject to the
provisions of Section 4.08 of this Note, or pledged, hypothecated or otherwise
granted as security by the Holder.
 
Section 1.05 Replacement. Upon receipt of a duly executed, notarized and
unsecured written statement from the Holder with respect to the loss, theft or
destruction of this Note (or any replacement hereof) and a standard indemnity,
or, in the case of a mutilation of this Note, upon surrender and cancellation of
such Note, the Maker shall issue a new Note, of like tenor and amount, in lieu
of such lost, stolen, destroyed or mutilated Note.
 
 
2

--------------------------------------------------------------------------------

 
 
ARTICLE II.                                
 
EVENTS OF DEFAULT; REMEDIES
 
Section 2.01 Events of Default. The occurrence of any of the following events
shall be an “Event of Default” under this Note:
 
(a) the Maker shall fail to make any principal or interest payments on the date
such payments are due and such default is not fully cured within three (3)
business days after the occurrence thereof; or
 
(b) the suspension from listing, without subsequent listing on any one of, or
the failure of the Common Stock to be listed on at least one of the OTC Bulletin
Board, the NYSE Amex Equities, the Nasdaq Capital Market, the Nasdaq Global
Market, the Nasdaq Global Select Market or The New York Stock Exchange, Inc. for
a period of seven (7) consecutive Trading Days; or
 
(c) the Maker’s notice to the Holder, including by way of public announcement,
at any time, of its inability to comply (for any reason or no reason) or its
intention not to comply with proper requests for conversion of this Note into
shares of Common Stock; or
 
(d) the Maker shall fail to (i) timely deliver the shares of Common Stock upon
conversion of the Note or any interest accrued and unpaid or (ii) make the
payment of any fees and/or liquidated damages under this Note, the Purchase
Agreement or the Warrants, which failure is not remedied within four (4)
business days after the incurrence thereof; or
 
(e)  default shall be made in the performance or observance of (i) any covenant,
condition or agreement contained in this Note and such default is not fully
cured within five (5) business days after the Holder delivers written notice to
the Maker of the occurrence thereof or (ii) any covenant, condition or agreement
contained in the Purchase Agreement, the Other Notes, the Warrants or any other
Transaction Document which is not covered by any other provisions of this
Section 2.01 and such default is not fully cured within five (5) business days
after the Holder delivers written notice to the Maker of the occurrence thereof;
or
 
(f) any representation or warranty made by the Maker herein or in the Purchase
Agreement, the Other Notes, the Warrants or any other Transaction Document shall
prove to have been false or incorrect or breached in any respect on the date as
of which made and the Holder delivers written notice to the Maker of the
occurrence thereof; or
 
(g) the Maker shall (A) default in any payment of any amount or amounts of
principal of or interest on any Indebtedness (other than the Indebtedness
hereunder) the aggregate principal amount of which Indebtedness is in excess of
$50,000 or (B) default in the observance or performance of any other agreement
or condition relating to any Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders or beneficiary or
beneficiaries of such Indebtedness to cause with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity; or
 
 
3

--------------------------------------------------------------------------------

 
 
(h) the failure of the Maker to instruct its transfer agent to remove any
legends from shares of Common Stock eligible to be sold under Rule 144 of the
Securities Act and issue such unlegended certificates to the Holder within three
(3) Trading Days of the Holder’s request so long as the Holder has provided
reasonable assurances to the Maker that such shares of Common Stock can be sold
pursuant to Rule 144; or
 
(i) the breach by the Maker of the terms of any subordination agreement to which
it is a party relating to the subordination of any Indebtedness to this Note; or
 
(j) one or more judgments, non-interlocutory orders or decrees shall be entered
by a U.S. state or federal or a foreign court or administrative agency of
competent jurisdiction against the Maker and/or any of its Subsidiaries
involving, in the aggregate, a liability as to any single or related series of
transactions, incidents or conditions, of $50,000 or more, and the same shall
remain unsatisfied, unvacated, unbonded or unstayed pending appeal for a period
of 30 days after the entry thereof; or
 
(k) any Lien created by any of the Security Documents shall at any time fail to
constitute a valid first priority perfected Lien on all of the Collateral (as
defined in the Security Agreement) and the Pledged Collateral (as defined in
each of the Shareholder Guaranties) purported to be secured thereby, or any
party thereto shall so assert; or
 
(l) the Maker fails to file, or is determined to have failed to file, in a
timely manner any Periodic Report or Current Report (other than a Current Report
that is required solely pursuant to Item 1.01, 1.02, 2.03, 2.04, 2.05, 2.06,
4.02(a) or 5.02(e) of Form 8-K as in effect on the Issuance Date) required to be
filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended;
or
 
(m) any bank at which any deposit account, blocked account, or lockbox account
of the Maker or any Subsidiary is maintained shall fail to comply with any
material term of any deposit account, blocked account, lockbox account or
similar agreement to which such bank is a party or any securities intermediary,
commodity intermediary or other financial institution at any time in custody,
control or possession of any investment property of the Maker or any Subsidiary
shall fail to comply with any of the terms of any investment property control
agreement to which such Person is a party (it being understood that only
accounts pursuant to which the Collateral Agent has requested account control
agreements should be subject to this clause (m)); or
 
(n) any material damage to, or loss, theft or destruction of, any Collateral,
whether or not insured, or any strike, lockout, labor dispute, embargo,
condemnation, act of God or public enemy, or other casualty which causes, for
more than fifteen (15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of the Maker or any
Subsidiary, if any such event or circumstance could reasonably be expected to
have a Material Adverse Effect; or
 
 
4

--------------------------------------------------------------------------------

 
 
(o) the failure of the Maker to pay any amounts due to the Holder herein or any
other Transaction Document within five (5) business days of the date such
payments are due and such default is not fully cured within two (2) business
days after the Holder delivers written notice to the Maker of the occurrence
thereof; or
 
(p) the occurrence of an Event of Default under the Other Notes; or
 
(q) the Maker shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property or assets, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the United States Bankruptcy Code (as now or hereafter in effect) or under
the comparable laws of any jurisdiction (foreign or domestic), (iv) file a
petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition filed against it in
an involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue a
press release regarding same, or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing; or
 
(r) a proceeding or case shall be commenced in respect of the Maker, without its
application or consent, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of its
assets in connection with the liquidation or dissolution of the Maker or (iii)
similar relief in respect of it under any law providing for the relief of
debtors, or any order for relief shall be entered in an involuntary case under
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Maker or
action under the laws of any jurisdiction (foreign or domestic) analogous to any
of the foregoing shall be taken with respect to the Maker; or
 
(s) Robert J. McNulty shall cease to be the President or Chief Executive Officer
of the Maker or otherwise become disabled or unable to perform his duties as the
Maker’s principal executive officer for any period of time; or
 
(t) the Maker shall fail to prepay 100% of the outstanding principal amount of
the Notes and all accrued and unpaid interest thereon on a Prepayment Date, as
provided in Section 3.06 hereof; or
 
(u) any representation or warranty made by any Shareholder Guarantor in either a
Shareholder Guaranty or Shareholder Pledge Agreement shall prove to have been
false or incorrect or breached in any respect on the date as of which made and
the Holder delivers written notice to the Maker of the occurrence thereof; or
 
 
5

--------------------------------------------------------------------------------

 
 
(v) any Shareholder Guarantor shall (A) default or be in default in any payment
of any amount or amounts of principal of or interest on any Indebtedness that is
secured by a Lien on any Pledged Collateral (“Secured Indebtedness”)
(notwithstanding the prohibition against incurring or permitting any Liens on
Pledged Collateral contained within the Shareholder Guaranties) or (B) default
in the observance or performance of any other agreement or condition relating to
any Secured Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders or beneficiary or beneficiaries of such Secured
Indebtedness to cause with the giving of notice if required, such Secured
Indebtedness to become due prior to its stated maturity.
 
Section 2.02 Remedies Upon An Event of Default. If an Event of Default shall
have occurred and shall be continuing, the Holder of this Note may at any time
at its option, (a) declare the entire unpaid principal balance of this Note,
together with all interest accrued hereon, due and payable, and thereupon, the
same shall be accelerated and so due and payable, without presentment, demand,
protest, or notice, all of which are hereby expressly unconditionally and
irrevocably waived by the Maker; provided, however, that upon the occurrence of
an Event of Default described in Sections 2.01(q) or (r), the outstanding
principal balance and accrued interest hereunder shall be automatically due and
payable, (b) demand that the principal amount of this Note then outstanding and
all accrued and unpaid interest thereon shall be converted into shares of Common
Stock at a Conversion Price per share calculated pursuant to Section 3.01 hereof
assuming that the date that the Event of Default occurs is the Conversion Date
(as defined in Section 3.01 hereof), or (c) exercise or otherwise enforce any
one or more of the Holder’s rights, powers, privileges, remedies and interests
under this Note, the Purchase Agreement, the Security Documents or applicable
law. No course of delay on the part of the Holder shall operate as a waiver
thereof or otherwise prejudice the right of the Holder. No remedy conferred
hereby shall be exclusive of any other remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise.
 
ARTICLE III.
 
CONVERSION; ANTIDILUTION; PREPAYMENT
 
Section 3.01 Conversion Option. At any time on or after the Issuance Date, this
Note shall be convertible (in whole or in part), at the option of the Holder
(the “Conversion Option”), into such number of fully paid and non-assessable
shares of Common Stock (the “Conversion Rate”) as is determined by dividing (x)
that portion of the outstanding principal balance plus any accrued but unpaid
interest under this Note as of such date that the Holder elects to convert by
(y) the Conversion Price (as defined in Section 3.02 hereof) then in effect on
the date on which the Holder faxes a notice of conversion (the “Conversion
Notice”), duly executed, to the Maker (facsimile number (702) 463-7007, Attn.:
Chief Executive Officer) (the “Conversion Date”); provided, however, that the
Conversion Price shall be subject to adjustment as described in Section 3.05
below. The Holder shall deliver this Note to the Maker at the address designated
in the Purchase Agreement at such time that this Note is fully converted. With
respect to partial conversions of this Note, the Maker shall keep written
records of the amount of this Note converted as of each Conversion Date.
 
 
6

--------------------------------------------------------------------------------

 
 
Section 3.02 Conversion Price. The term “Conversion Price” shall mean $0.30,
subject to adjustment under Section 3.05 hereof.
 
Section 3.03 Mechanics of Conversion.
 
(a) Not later than three (3) Trading Days after any Conversion Date (the
“Delivery Date”), the Maker or its designated transfer agent, as applicable,
shall issue and deliver to the Holder or, at the request of the Holder (provided
that a registration statement under the Securities Act providing for the resale
of the Common Stock to which the Holder shall be entitled is then in effect or
such shares may be sold without the requirement to be in compliance with Rule
144(c)(1) of the Securities Act and otherwise without restriction or limitation
pursuant to Rule 144 of the Securities Act), to the Depository Trust Company
(“DTC”) account on the Holder’s behalf via the Deposit Withdrawal Agent
Commission System (“DWAC”) as specified in the Conversion Notice, registered in
the name of the Holder or its designee, for the number of shares of Common Stock
to which the Holder shall be entitled. Notwithstanding the foregoing to the
contrary, the Maker or its transfer agent shall only be obligated to issue and
deliver the shares to DTC on a Holder’s behalf via DWAC if (i) such shares may
be issued without restrictive legends and (ii) the Maker and the transfer agent
are participating in DTC through the DWAC system. If all of the conditions set
forth in clauses (i) and (ii) above are not satisfied, the Maker or its
designated transfer agent, as the case may be, shall deliver physical
certificates representing the number of shares of Common Stock being acquired
upon the conversion of this Note. If in the case of any Conversion Notice, any
shares of Common Stock to which a Holder is entitled to receive thereunder are
not delivered to or as directed by the applicable Holder by the Delivery Date,
the Holder shall be entitled by written notice to the Maker at any time on or
before its receipt of such shares of Common Stock thereafter, to rescind such
conversion, in which event the Maker shall immediately return this Note tendered
for conversion, whereupon the Maker and the Holder shall each be restored to
their respective positions immediately prior to the delivery of such notice of
revocation, except that any amounts described in Sections 3.03(b) and (c) shall
be payable through the date notice of rescission is given to the Maker.
 
(b) The Maker understands that a delay in the delivery of the shares of Common
Stock upon conversion of this Note beyond the Delivery Date could result in
economic loss to the Holder. If the Maker fails to deliver to the Holder such
shares via DWAC or a certificate or certificates pursuant to this Section
hereunder by the Delivery Date, the Maker shall pay to such Holder, in cash, an
amount per Trading Day for each Trading Day until such shares are delivered via
DWAC or certificates are delivered, together with interest on such amount at a
rate of 10% per annum, accruing until such amount and any accrued interest
thereon is paid in full, equal to the greater of (A) (i) 1% of the aggregate
principal amount of the Notes requested to be converted for the first five (5)
Trading Days after the Delivery Date and (ii) 2% of the aggregate principal
amount of the Notes requested to be converted for each Trading Day thereafter
and (B) $2,000 per day (which amount shall be paid as liquidated damages and not
as a penalty). Nothing herein shall limit a Holder’s right to pursue actual
damages for the Maker’s failure to deliver any shares of Common Stock upon
conversion 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).
Notwithstanding anything to the contrary contained herein, the Holder shall be
entitled to withdraw a Conversion Notice, and upon such withdrawal the Maker
shall only be obligated to pay the liquidated damages accrued in accordance with
this Section 3.03(b) through the date the Conversion Notice is withdrawn.
 
 
7

--------------------------------------------------------------------------------

 
 
(c) In addition to any other rights available to the Holder, if the Maker fails
to cause its transfer agent to transmit to the Holder a certificate or
certificates representing the shares of Common Stock issuable upon conversion of
this Note on or before the Delivery Date, and if after such date the Holder is
required by its broker to purchase (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
shares of Common Stock issuable upon conversion of this Note which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the Maker shall (1)
pay in cash to the Holder the amount by which (x) the Holder’s total purchase
price (including brokerage commissions, if any) for the shares of Common Stock
so purchased exceeds (y) the amount obtained by multiplying (A) the number of
shares of Common Stock issuable upon conversion of this Note that the Maker was
required to deliver to the Holder in connection with the conversion at issue
times (B) the price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder, either reinstate
the portion of the Note and equivalent number of shares of Common Stock for
which such conversion was not honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Maker timely complied
with its conversion and delivery obligations hereunder. 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 shares of Common Stock with
an aggregate sale price giving rise to such purchase obligation of $10,000,
under clause (1) of the immediately preceding sentence the Maker shall be
required to pay the Holder $1,000. The Holder shall provide the Maker written
notice indicating the amounts payable to the Holder in respect of the Buy-In,
together with applicable confirmations and other evidence reasonably requested
by the Maker. Nothing herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Maker’s failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Note as required pursuant to the
terms hereof.
 
Section 3.04 Ownership Cap and Certain Conversion Restrictions. Notwithstanding
anything to the contrary set forth in Article III of this Note, at no time may
the Holder convert this Note if the number of shares of Common Stock to be
issued pursuant to such conversion would cause the Holder to be directly or
indirectly the beneficial owner (as determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended, and the rules thereunder) of
more than 4.99% of the Common Stock; provided, however, that upon the Holder
providing the Maker with sixty-one (61) days notice (pursuant to Section 4.01
hereof) (the “Waiver Notice”) that the Holder would like to waive this Section
3.04 with regard to any or all shares of Common Stock issuable upon conversion
of this Note, this Section 3.04 will be of no force or effect with regard to all
or a portion of the Note referenced in the Waiver Notice. For purposes of this
section, the number of shares of Common Stock owned by the Holder shall include
the number of shares of Common Stock issuable upon exercise of this Note but
shall exclude the number of shares of Common Stock which are issuable upon the
exercise or conversion of the unexercised or unconverted portion of any other
securities of the Maker subject to a limitation on exercise or conversion
analogous to the limitation contained herein owned by the Holder.
 
 
8

--------------------------------------------------------------------------------

 
 
Section 3.05 Adjustment of Conversion Price.
 
(a) The Conversion Price shall be subject to adjustment from time to time as
follows:
 
(i) Adjustments for Stock Splits and Combinations. If the Maker shall at any
time or from time to time after the Issuance Date, effect a stock split of the
outstanding Common Stock, the applicable Conversion Price in effect immediately
prior to the stock split shall be proportionately decreased. If the Maker shall
at any time or from time to time after the Issuance Date, combine the
outstanding shares of Common Stock, the applicable Conversion Price in effect
immediately prior to the combination shall be proportionately increased. Any
adjustments under this Section 3.05(a)(i) shall be effective at the close of
business on the date the stock split or combination occurs.
 
(ii) Adjustments for Certain Dividends and Distributions. If the Maker shall at
any time or from time to time after the Issuance Date, make or issue or set a
record date for the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in shares of Common Stock, then, and in
each event, the applicable Conversion Price in effect immediately prior to such
event shall be decreased as of the time of such issuance or, in the event such
record date shall have been fixed, as of the close of business on such record
date, by multiplying, the applicable  Conversion Price then in effect by a
fraction: (1) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date; and (2) the denominator
of which shall be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution.
 
(iii) Adjustment for Other Dividends and Distributions. If the Maker shall at
any time or from time to time after the Issuance Date, make or issue or set a
record date for the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in other than shares of Common Stock,
then, and in each event, an appropriate revision to the applicable Conversion
Price shall be made and provision shall be made (by adjustments of the
Conversion Price or otherwise) so that the holder of this Note shall receive
upon conversions thereof, in addition to the number of shares of Common Stock
receivable thereon, the number of securities of the Maker that such holder would
have received had this Note been converted into Common Stock on the date of such
event and had thereafter, during the period from the date of such event to and
including the Conversion Date, retained such securities (together with any
distributions payable thereon during such period), giving application to all
adjustments called for during such period under this Section 3.05(a)(iii) with
respect to the rights of the holders of this Note and the Other Notes; provided,
however, that if such record date shall have been fixed and such dividend is not
fully paid or if such distribution is not fully made on the date fixed therefor,
the Conversion Price shall be adjusted pursuant to this paragraph as of the time
of actual payment of such dividends or distributions.
 
 
9

--------------------------------------------------------------------------------

 
 
(iv) Adjustments for Reclassification, Exchange or Substitution. If the Common
Stock issuable upon conversion of this Note at any time or from time to time
after the Issuance Date shall be changed to the same or different number of
shares of any class or classes of stock, whether by reclassification, exchange,
substitution or otherwise (other than by way of a stock split or combination of
shares or stock dividends provided for in Sections 3.05(a)(i), (ii) and (iii),
or a reorganization, merger, consolidation, or sale of assets provided for in
Section 3.05(a)(v)), then, and in each event, an appropriate revision to the
Conversion Price shall be made and provisions shall be made (by adjustments of
the Conversion Price or otherwise) so that the Holder shall have the right
thereafter to convert this Note into the kind and amount of shares of stock and
other securities receivable upon reclassification, exchange, substitution or
other change, by holders of the number of shares of Common Stock into which such
Note might have been converted immediately prior to such reclassification,
exchange, substitution or other change, all subject to further adjustment as
provided herein.
 
(v) Adjustments for Reorganization, Merger, Consolidation or Sales of Assets. If
at any time or from time to time after the Issuance Date there shall be a
capital reorganization of the Maker (other than by way of a stock split or
combination of shares or stock dividends or distributions provided for in
Section 3.05(a)(i), (ii) and (iii), or a reclassification, exchange or
substitution of shares provided for in Section 3.05(a)(iv)), or a merger or
consolidation of the Maker with or into another corporation where the holders of
outstanding voting securities of the Maker prior to such merger or consolidation
do not own over fifty percent (50%) of the outstanding voting securities of the
merged or consolidated entity, immediately after such merger or consolidation,
or the sale of all or substantially all of the Maker’s properties or assets to
any other person (an “Organic Change”), then as a part of such Organic Change,
(A) if the surviving entity in any such Organic Change is a public company that
is registered pursuant to the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and its common stock is listed or quoted on a national exchange
or the OTC Bulletin Board, an appropriate revision to the Conversion Price shall
be made and provision shall be made (by adjustments of the Conversion Price or
otherwise) so that the Holder shall have the right thereafter to convert such
Note into the kind and amount of shares of stock and other securities or
property of the Maker or any successor corporation resulting from Organic
Change, and (B) if the surviving entity in any such Organic Change is not a
public company that is registered pursuant to the Exchange Act, or its common
stock is not listed or quoted on a national exchange or the OTC Bulletin Board,
the Holder shall have the right to demand that the unpaid principal of this Note
and any accrued interest thereon be immediately prepaid by the Maker. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3.05(a)(v) with respect to the rights of the Holder
after the Organic Change to the end that the provisions of this Section
3.05(a)(v) (including any adjustment in the applicable Conversion Price then in
effect and the number of shares of stock or other securities deliverable upon
conversion of this Note and the Other Notes) shall be applied after that event
in as nearly an equivalent manner as may be practicable.
 
(vi) Adjustments for Issuance of Additional Shares of Common Stock. In the event
the Maker shall at any time following the Issuance Date issue or sell any share
of Common Stock (otherwise than as provided in the foregoing subsections (i)
through (v) of this Section 3.05(a) or pursuant to Common Stock Equivalents
(hereafter defined) granted or issued prior to the Issuance Date) (an
“Additional Share of Common Stock”) at a price per share less than the
Conversion Price then in effect, or without consideration (in which case such
Additional Shares of Common Stock shall be deemed to have been issued at a price
per share of $.001), the Conversion Price then in effect upon each such issuance
shall be decreased to the price equal to the consideration per share paid for
such Additional Share of Common Stock.
 
 
10

--------------------------------------------------------------------------------

 
 
(vii) Issuance of or Modification of Common Stock Equivalents. In the event the
Maker shall, at any time following the Issuance Date: (i) issue or sell any
securities convertible into or exchangeable for, directly or indirectly, Common
Stock (“Convertible Securities”), or any rights or warrants or options to
purchase any such Common Stock or Convertible Securities (collectively, the
“Common Stock Equivalents”) with an exercise or conversion price less than the
Conversion Price then in effect, or (ii) modify the conversion or exercise price
of any Common Stock Equivalent issued prior to, on or after the Issuance Date,
to an exercise or conversion price less than the Conversion Price then in
effect, the Conversion Price then in effect shall be decreased to the exercise
or conversion price of such Common Stock Equivalent.
 
(b) Record Date. In case the Maker shall take record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or purchase
Common Stock or Convertible Securities, then the date of the issue or sale of
the shares of Common Stock shall be deemed to be such record date.
 
(c) Certain Issues Excepted. Anything herein to the contrary notwithstanding,
the Maker shall not be required to make any adjustment to the Conversion Price
pursuant to Sections 3.05(a)(vi) or (vii) hereof upon (i) securities issued
(other than for cash) in connection with a merger, acquisition, or
consolidation, (ii) securities issued pursuant to the exercise or conversion of
Common Stock Equivalents issued prior to the Issuance Date (but such exception
shall not affect the obligation to decrease the Conversion Price if required by
Section 3.05(a)(vii) hereof), (iii) securities issued in connection with bona
fide strategic license agreements or other partnering arrangements so long as
such issuances are not for the purpose of raising capital and (iv) Common Stock
issued or options to purchase Common Stock granted, in each case, pursuant to
the Maker’s stock option plans and employee stock purchase plans outstanding as
they exist on the date of the Purchase Agreement.
 
(d) No Impairment. The Maker shall not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Maker, but will at all times in good
faith, assist in the carrying out of all the provisions of this Section 3.05 and
in the taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the Holder hereunder against impairment. In the
event a Holder shall elect to convert any Notes as provided herein, the Maker
cannot refuse conversion based on any claim that such Holder or any one
associated or affiliated with such Holder has been engaged in any violation of
law, violation of an agreement to which such Holder is a party or for any reason
whatsoever, unless, an injunction from a court, or notice, restraining and or
adjoining conversion of all or of said Notes shall have issued and the Maker
posts a surety bond for the benefit of such Holder in an amount equal to one
hundred thirty percent (130%) of the amount of the Notes the Holder has elected
to convert, 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 (as liquidated damages) in the event it obtains judgment.
 
 
11

--------------------------------------------------------------------------------

 
 
(e) Certificates as to Adjustments. Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock
issuable upon conversion of this Note pursuant to this Section 3.05, the Maker
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment and readjustment, showing in detail the facts upon which
such adjustment or readjustment is based. The Maker shall, upon written request
of the Holder, at any time, furnish or cause to be furnished to the Holder a
like certificate setting forth such adjustments and readjustments, the
applicable Conversion Price in effect at the time, and the number of shares of
Common Stock and the amount, if any, of other securities or property which at
the time would be received upon the conversion of this Note. Notwithstanding the
foregoing, the Maker shall not be obligated to deliver a certificate unless such
certificate would reflect an increase or decrease of at least one percent (1%)
of such adjusted amount.
 
(f) Issue Taxes. The Maker shall pay any and all issue and other taxes,
excluding federal, state or local income taxes, that may be payable in respect
of any issue or delivery of shares of Common Stock on conversion of this Note
pursuant thereto; provided, however, that the Maker shall not be obligated to
pay any transfer taxes resulting from any transfer requested by the Holder in
connection with any such conversion.
 
(g) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of this Note. In lieu of any fractional shares to which the Holder
would otherwise be entitled, the Maker shall pay cash equal to the product of
such fraction multiplied by the average of the Closing Bid Prices of the Common
Stock for the five (5) consecutive Trading Days immediately preceding the
Conversion Date.
 
(h) Reservation of Common Stock. The Maker shall at all times when this Note
shall be outstanding, reserve and keep available out of its authorized but
unissued Common Stock, such number of shares of Common Stock as shall from time
to time be sufficient to effect the conversion of this Note and all interest
accrued thereon; provided that the number of shares of Common Stock so reserved
shall at no time be less than one hundred twenty percent (120%) of the number of
shares of Common Stock for which this Note and all interest accrued thereon is
at any time convertible. The Maker shall, from time to time in accordance with
Delaware law, increase the authorized number of shares of Common Stock if at any
time the unissued number of authorized shares shall not be sufficient to satisfy
the Maker’s obligations under this Section 3.05(h).
 
(i) Regulatory Compliance. If any shares of Common Stock to be reserved for the
purpose of conversion of this Note or any interest accrued thereon require
registration or listing with or approval of any governmental authority, stock
exchange or other regulatory body under any federal or state law or regulation
or otherwise before such shares may be validly issued or delivered upon
conversion, the Maker shall, at its sole cost and expense, in good faith and as
expeditiously as possible, endeavor to secure such registration, listing or
approval, as the case may be.
 
 
12

--------------------------------------------------------------------------------

 
 
Section 3.06 Prepayment. Subject to the terms set forth herein, at any time,
provided there is not an Event of Default, the Maker shall have the right to
prepay 100%, and not less than 100%, of the outstanding principal amount of this
Note and all accrued and unpaid interest thereon prior to the Maturity Date. The
Maker may exercise its prepayment right under this Section 3.06 by delivering a
written notice thereof by confirmed facsimile and overnight courier to all, but
not less than all, of the holders of the Notes (the “Prepayment Notice” and the
date such notice is delivered to all the holders is referred to as the
“Prepayment Notice Date”) specifying the date of prepayment, which date shall be
no earlier than twenty (20) days, and no later than thirty (30) days, following
the Prepayment Notice Date (such specified date of prepayment being the
“Prepayment Date”). A Prepayment Notice shall be irrevocable. If the Maker
elects to prepay this Note pursuant to this Section 3.06, then it must
simultaneously take the same action with respect to the Other Notes. During the
period between the Prepayment Notice Date and the Prepayment Date, the Holder
shall be entitled to all of its rights under this Note, including, without
limitation, its rights of conversion and antiduliton set forth in this Article
III. In the event that the Maker fails to prepay, in full, the then outstanding
principal amount of this Note and the Other Notes and all accrued and unpaid
interest thereon on the Prepayment Date, the Maker shall subsequently be
prohibited from prepaying any portion of the principal amount of this Note
without the prior written consent of the Holder.
 
Section 3.07 No Rights as Stockholder. Nothing contained in this Note shall be
construed as conferring upon the Holder, prior to the conversion of this Note,
the right to vote or to receive dividends or to consent or to receive notice as
a stockholder in respect of any meeting of stockholders for the election of
directors of the Maker or of any other matter, or any other rights as a
stockholder of the Maker.
 
ARTICLE IV.
 
MISCELLANEOUS
 
Section 4.01 Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery, telecopy or facsimile at the address or number
designated in the Purchase Agreement (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The Maker will give written notice to the
Holder at least ten (10) days prior to the date on which the Maker takes a
record (x) with respect to any dividend or distribution upon the Common Stock,
(y) with respect to any pro rata subscription offer to holders of Common Stock
or (z) for determining rights to vote with respect to any Organic Change,
dissolution, liquidation or winding-up and in no event shall such notice be
provided to such holder prior to such information being made known to the
public. The Maker will also give written notice to the Holder at least ten (10)
days prior to the date on which any Organic Change, dissolution, liquidation or
winding-up will take place and in no event shall such notice be provided to the
Holder prior to such information being made known to the public. The Maker shall
promptly notify the Holder of this Note of any notices sent or received, or any
actions taken with respect to the Other Notes.
 
 
13

--------------------------------------------------------------------------------

 
 
Section 4.02 Governing Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Note shall not
be interpreted or construed with any presumption against the party causing this
Note to be drafted.
 
Section 4.03 Headings. Article and section headings in this Note are included
herein for purposes of convenience of reference only and shall not constitute a
part of this Note for any other purpose.
 
Section 4.04 Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, at law or in equity
(including, without limitation, a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a holder’s right to pursue actual damages for any failure by the
Maker to comply with the terms of this Note. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the holder thereof and shall
not, except as expressly provided herein, be subject to any other obligation of
the Maker (or the performance thereof). The Maker acknowledges that a breach by
it of its obligations hereunder will cause irreparable and material harm to the
Holder and that the remedy at law for any such breach may be inadequate.
Therefore the Maker agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available rights
and remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.
 
Section 4.05 Enforcement Expenses. The Maker agrees to pay all costs and
expenses of enforcement of this Note, including, without limitation, reasonable
attorneys’ fees and expenses.
 
Section 4.06 Binding Effect. The obligations of the Maker and the Holder set
forth herein shall be binding upon the successors and assigns of each such
party, whether or not such successors or assigns are permitted by the terms
hereof.
 
Section 4.07 Amendments. This Note may not be modified or amended in any manner
except in writing executed by the Maker and the Holder.
 
Section 4.08 Compliance with Securities Laws. The Holder of this Note
acknowledges that this Note is being acquired solely for the Holder’s own
account and not as a nominee for any other party, and for investment, and that
the Holder shall not offer, sell or otherwise dispose of this Note. This Note
and any Note issued in substitution or replacement therefor shall be stamped or
imprinted with a legend in substantially the following form:
 
“THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN  OPINION OF COUNSEL
IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE MAY BE
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.”
 
 
14

--------------------------------------------------------------------------------

 
 
Section 4.09 Consent to Jurisdiction. Each of the Maker and the Holder (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court sitting in the Southern District of New York and the courts of
the State of New York located in New York county for the purposes of any suit,
action or proceeding arising out of or relating to this Note and (ii) hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the Maker and the
Holder consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices to
it under the Purchase Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 4.09 shall affect or limit any right to serve process in any other
manner permitted by law.
 
Section 4.10 Parties in Interest. This Note shall be binding upon, inure to the
benefit of and be enforceable by the Maker, the Holder and their respective
successors and permitted assigns.
 
Section 4.11 Failure or Indulgence Not Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
 
Section 4.12 Excessive Interest. Notwithstanding any other provision herein to
the contrary, this Note is hereby expressly limited so that the interest rate
charged hereunder shall at no time exceed the maximum rate permitted by
applicable law. If, for any circumstance whatsoever, the interest rate charged
exceeds the maximum rate permitted by applicable law, the interest rate shall be
reduced to the maximum rate permitted, and if the Holder shall have received an
amount that would cause the interest rate charged to be in excess of the maximum
rate permitted, such amount that would be excessive interest shall be applied to
the reduction of the principal amount owing hereunder (without charge for
prepayment) and not to the payment of interest, or if such excessive interest
exceeds the unpaid balance of principal, such excess shall be refunded to the
Maker.
 
Section 4.13 Maker Waivers. Except as otherwise specifically provided herein,
the Maker and all others that may become liable for all or any part of the
obligations evidenced by this Note, hereby waive presentment, demand, notice of
nonpayment, protest and all other demands’ and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, and do hereby
consent to any number of renewals of extensions of the time or payment hereof
and agree that any such renewals or extensions may be made without notice to any
such persons and without affecting their liability herein and do further consent
to the release of any person liable hereon, all without affecting the liability
of the other persons, firms or Maker liable for the payment of this Note, AND DO
HEREBY WAIVE TRIAL BY JURY.
 
 
15

--------------------------------------------------------------------------------

 
 
(a) No delay or omission on the part of the Holder in exercising its rights
under this Note, or course of conduct relating hereto, shall operate as a waiver
of such rights or any other right of the Holder, nor shall any waiver by the
Holder of any such right or rights on any one occasion be deemed a waiver of the
same right or rights on any future occasion.
 
(b) THE MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS
A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY
WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
 
Section 4.14 Definitions. For the purposes hereof, the following terms shall
have the following meanings:
 
(a) “Person” means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
 
(b) “Trading Day” means (a) a day on which the Common Stock is traded on the OTC
Bulletin Board, or (b) if the Common Stock is not traded on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Common Stock is not listed or quoted as set
forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday,
Sunday and any day which shall be a legal holiday 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..
 
[SIGNATURE PAGE FOLLOWS]
 
 
16

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the Issuer has executed this Note as of the day and year
first above written.
 

  KACHING KACHING, INC.          
Date
By:
/s/        Name        Title           

 
 
 
17

--------------------------------------------------------------------------------

 
 
FORM OF
 
NOTICE OF CONVERSION
 
(To be Executed by the Registered Holder in order to Convert the Note)
 
The undersigned hereby  irrevocably elects to convert $ ________________  of the
principal  amount and accrued but unpaid interest of the above  Note No.  ___
into  shares  of Common  Stock of KaChing KaChing,  Inc. (the
“Maker”)  according to the conditions hereof, as of the date written below.
 
Date of Conversion:
___________________________________________________________________
 
Applicable Conversion Price:
____________________________________________________________
 
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the
 
Holder on the Date of
Conversion:_________________________________________________________
 
Number of shares of Common Stock to be issued upon
Conversion:________________________________
 
Signature:
___________________________________________________________________________
 
Address:____________________________________________________________________________
 
 
 
18

--------------------------------------------------------------------------------