EXHIBIT 10.5

 

SENIOR CONVERTIBLE NOTE

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD
CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 17(a)
HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET
FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

 

MULTIMEDIA PLATFORMS, INC.,

 

Senior Convertible Note

 

Issuance Date: August 21, 2015

Original Principal Amount: $300,000.00

 

FOR VALUE RECEIVED, KONARED CORPORATION, a Nevada corporation (the “Company”),
hereby promises to pay to the order of LINCOLN PARK CAPITAL FUND, LLC or its
registered assigns (“Holder”) the amount set out above as the Original Principal
Amount (as reduced pursuant to the terms hereof pursuant to redemption,
conversion or otherwise, the “Principal”) when due, whether upon the Maturity
Date (as defined below), acceleration, redemption or otherwise (in each case in
accordance with the terms hereof) and to pay interest (“Interest”) on any
outstanding Principal (as defined below) (as such interest on any outstanding
Principal may be reduced pursuant to the terms hereof pursuant to redemption,
conversion or otherwise) at the applicable Interest Rate (as defined below) from
the date set out above as the Issuance Date (the “Issuance Date”) until the same
becomes due and payable, whether upon the Maturity Date or acceleration,
conversion, redemption or otherwise (in each case in accordance with the terms
hereof). This Senior Convertible Note (this “Note”, including all Senior
Convertible Notes issued in exchange, transfer or replacement hereof,
collectively, the “Notes”) is issued pursuant to the Securities Purchase
Agreement (as defined below) on the Closing Date (as defined below)
(collectively, the “Notes” and such other Senior Convertible Notes, the
“Other Notes”). Certain capitalized terms used herein are defined in Section 28
or in the Securities Purchase Agreement, as applicable.

 

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1. PAYMENTS OF PRINCIPAL. On the Maturity Date, the Company shall pay to the
Holder an amount in cash representing all outstanding Principal, accrued and
unpaid Interest and accrued and unpaid Late Charges (as defined in Section
23(c)) on such Principal and Interest. Other than as specifically permitted by
this Note, the Company may not prepay any portion of the outstanding Principal,
accrued and unpaid Interest or accrued and unpaid Late Charges on Principal and
Interest, if any.

 

2. INTEREST; INTEREST RATE.

 

(a) Interest on this Note shall commence accruing on the Issuance Date, shall be
computed on the basis of a 360-day year and twelve 30-day months, and shall be
payable quarterly in arrears on the last business day of each fiscal quarter of
the Company or any applicable Redemption Date, except that the entire unpaid
balance of accrued interest, if not sooner paid, shall be due and payable in
full on the Maturity Date (each, an “Interest Date”). Interest shall be payable
on each Interest Date, to the record holder of this Note on the applicable
Interest Date, in shares of Common Stock (“Interest Shares”) so long as there
has been no Equity Conditions Failure; provided, however, that the Company may,
at its option following written notice to the Holder, pay Interest on any
Interest Date in cash (“Cash Interest”) or in a combination of Cash Interest and
Interest Shares. The Company shall deliver a written notice (each, an “Interest
Election Notice”) to each holder of the Notes on or prior to the Interest Notice
Due Date (the date such notice is delivered to all of the holder, the “Interest
Notice Date”) which notice (i) either (A) confirms that Interest to be paid on
such Interest Date shall be paid entirely in Interest Shares or (B) elects to
pay Interest as Cash Interest or a combination of Cash Interest and Interest
Shares and specifies the amount of Interest that shall be paid as Cash Interest
and the amount of Interest, if any, that shall be paid in Interest Shares and
(ii) if any Interest is to be paid in Interest Shares, certifies that there has
been no Equity Conditions Failure. If an Equity Conditions Failure has occurred
as of the Interest Notice Date, then unless the Company has elected to pay such
Interest as Cash Interest, the Interest Notice shall indicate that unless the
Holder waives the Equity Conditions Failure, the Interest shall be paid as Cash
Interest. Notwithstanding anything herein to the contrary, if no Equity
Conditions Failure has occurred as of the Interest Notice Date but an Equity
Conditions Failure occurs at any time prior to the Interest Date, (A) the
Company shall provide the Holder a subsequent notice to that effect and (B)
unless the Holder waives the Equity Conditions Failure, the Interest shall be
paid in cash. Interest to be paid on an Interest Date in Interest Shares shall
be paid in a number of fully paid and nonassessable shares (rounded to the
nearest whole share in accordance with Section 3(a)) of Common Stock equal to
the quotient of (1) the amount of Interest payable on such Interest Date less
any Cash Interest paid and (2) the Conversion Price in effect on the applicable
Interest Date. If the Company fails to deliver an Interest Election Notice with
respect to an Interest Date on or prior to the applicable Interest Notice Due
Date, the Company shall be deemed to have delivered an Interest Election Notice
confirming that Interest to be paid on such Interest Date shall be paid entirely
in Interest Shares and certifying that no Equity Conditions Failure then exists.

 

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(b) When any Interest Shares are to be paid on an Interest Date, the Company
shall (i) (A) provided that the Company’s transfer agent (the “Transfer Agent”)
is participating in The Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program, credit such aggregate number of Interest Shares to
which the Holder shall be entitled to the Holder’s or its designee’s balance
account with DTC through its Deposit/Withdrawal at Custodian system, or (B) if
the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program or the shares of Common Stock may not be issued without
restrictive legend in accordance with Section 4.4 of the Securities Purchase
Agreement, issue and deliver on the applicable Interest Date, to the address set
forth in the register maintained by the Company for such purpose pursuant to the
Securities Purchase Agreement or to such address as specified by the Holder in
writing to the Company at least two (2) Business Days prior to the applicable
Interest Date, a certificate, registered in the name of the Holder or its
designee (and without any restrictive legend or stop transfer order maintained
against it unless required pursuant to Section 4.4 of the Securities Purchase
Agreement), for the number of Interest Shares to which the Holder shall be
entitled and (ii) with respect to each Interest Date, pay to the Holder, in cash
by wire transfer of immediately available funds, the amount of any Cash
Interest.

 

(c) Prior to the payment of Interest on any Interest Date, Interest on this Note
shall accrue at the Interest Rate and be payable by way of inclusion of the
Interest in the Conversion Amounton each Conversion Date in accordance with
Section 3(b)(i). From and after the occurrence and during the continuance of any
Event of Default, the Interest Rate shall automatically be increased to eighteen
percent (18.0%) per annum. In the event that such Event of Default is
subsequently cured, the adjustment referred to in the preceding sentence shall
cease to be effective as of the calendar day immediately following the date of
such cure; provided that the Interest as calculated and unpaid at such increased
rate during the continuance of such Event of Default shall continue to apply to
the extent relating to the days after the occurrence of such Event of Default
through and including the date of such cure of such Event of Default. The
Company shall pay any and all stamp or transfer taxes that may be payable with
respect to the issuance and delivery of Interest Shares.

 

3. CONVERSION OF NOTES. This Note shall be convertible into validly issued,
fully paid and non-assessable shares of Common Stock (as defined below), on the
terms and conditions set forth in this Section 3.

 

(a) Conversion Right. Subject to the provisions of Section 3(d), at any time or
times on or after the Issuance Date, the Holder shall be entitled to convert any
portion of the outstanding and unpaid Conversion Amount (as defined below) into
validly issued, fully paid and non-assessable shares of Common Stock in
accordance with Section 3(c), at the Conversion Rate (as defined below). The
Company shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
transfer, stamp, issuance and similar taxes that may be payable with respect to
the issuance and delivery of Common Stock upon conversion of any Conversion
Amount.

 

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(b) Conversion Rate. The number of shares of Common Stock issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) shall be determined
by dividing (x) such Conversion Amount by (y) the Conversion Price (the
“Conversion Rate”).

 

(i) “Conversion Amount” means the sum of (A) the portion of the Principal to be
converted, redeemed or otherwise with respect to which this determination is
being made, (B) all accrued and unpaid Interest with respect to such portion of
the Principal amount and accrued and unpaid Late Charges with respect to such
portion of such Principal and such Interest and (C) the applicable Make-Whole
Amount.

 

(ii) “Conversion Price” means, for any date of determination, $0.30, as adjusted
for stock splits, stock dividends, stock combinations or other similar
transactions as provided herein.

 

(c) Mechanics of Conversion.

 

(i) Optional Conversion. To convert any Conversion Amount into shares of Common
Stock on any date (a “Conversion Date”), the Holder shall deliver (whether via
facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time,
on such date, a copy of an executed notice of conversion in the form attached
hereto as Exhibit I (the “Conversion Notice”) to the Company. If required by
Section 3(c)(iii), the Holder shall surrender this Note to a nationally
recognized overnight delivery service for delivery to the Company (or an
indemnification undertaking with respect to this Note in the case of its loss,
theft or destruction as contemplated by Section 17(b)). On or before the first
(1st) Trading Day following the date of receipt of a Conversion Notice, the
Company shall transmit by facsimile an acknowledgment of confirmation, in the
form attached hereto as Exhibit II, of receipt of such Conversion Notice to the
Holder and the Company’s transfer agent (the “Transfer Agent”) . On or before
the second (2nd) Trading Day following the date of receipt of a Conversion
Notice, the Company shall (1) provided that the Transfer Agent is participating
in the DTC Fast Automated Securities Transfer Program and such shares of Common
Stock may be issued without restrictive legend in accordance with Section 4.4 of
the Securities Purchase Agreement, credit such aggregate number of shares of
Common Stock to which the Holder shall be entitled to the Holder’s or its
designee’s balance account with DTC through its Deposit/Withdrawal at Custodian
system or (2) if the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program or such shares of Common Stock may not be
issued without restrictive legend in accordance with Section 4.4 of the
Securities Purchase Agreement, issue and deliver (via reputable overnight
courier) to the address as specified in the Conversion Notice, a certificate,
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. If this Note is
physically surrendered for conversion as required by Section 3(c)(iii) and the
outstanding Principal of this Note is greater than the Principal portion of the
Conversion Amount being converted, then the Company shall as soon as practicable
and in no event later than three (3) Trading Days after receipt of this Note and
at its own expense, issue and deliver to the Holder (or its designee) a new Note
(in accordance with Section 17(d)) representing the outstanding Principal not
converted. The Person or Persons entitled to receive the shares of Common Stock
issuable upon a conversion of this Note shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Conversion Date.

 

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(ii) Company’s Failure to Timely Convert. If the Company shall fail, for any
reason or for no reason, to issue to the Holder within three (3) Trading Days
after the Company’s receipt of a Conversion Notice (whether via facsimile or
otherwise) (the “Share Delivery Deadline”), a certificate for the number of
shares of Common Stock to which the Holder is entitled and register such shares
of Common Stock on the Company’s share register or to credit the Holder’s or its
designee’s balance account with DTC for such number of shares of Common Stock to
which the Holder is entitled upon the Holder’s conversion of any Conversion
Amount (as the case may be) (a “Conversion Failure”) then, in addition to all
other remedies available to the Holder, (1) the Company shall pay in cash to the
Holder on each day after such Share Delivery Deadline that the issuance of such
shares of Common Stock is not timely effected, an amount equal to 2.0% of the
product of (A) the sum of the number of shares of Common Stock not issued to the
Holder on a timely basis and to which the Holder is entitled multiplied by (B)
the Closing Sale Price of the Common Stock on the Trading Day immediately
preceding the last possible date which the Company could have issued such shares
of Common Stock to the Holder without violating Section 3(c)(i), and (2) the
Holder, upon written notice to the Company, may void its Conversion Notice with
respect to, and retain or have returned (as the case may be) any portion of this
Note that has not been converted pursuant to such Conversion Notice, provided
that the voiding of a Conversion Notice shall not affect the Company’s
obligations to make any payments which have accrued prior to the date of such
notice pursuant to this Section 3(c)(ii) or otherwise. In addition to the
foregoing, if on or prior to the Share Delivery Deadline, the Company shall fail
to issue and deliver a certificate to the Holder and register such shares of
Common Stock on the Company’s share register or credit the Holder’s or its
designee’s balance account with DTC for the number of shares of Common Stock to
which the Holder is entitled upon the Holder’s conversion hereunder (as the case
may be), and if on or after such Share Delivery Deadline the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of all or any portion of the number of
shares of Common Stock, or a sale of a number of shares of Common Stock equal to
all or any portion of the number of shares of Common Stock, issuable upon such
conversion that the Holder so anticipated receiving from the Company, then, in
addition to all other remedies available to the Holder, the Company shall,
within three (3) Business Days after receipt of the Holder’s request and in the
Holder’s discretion, either: (I) pay cash to the Holder in an amount equal to
the Holder’s total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so purchased
(including, without limitation, by any other Person in respect, or on behalf, of
the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so
issue and deliver such certificate or credit the Holder’s balance account with
DTC for the number of shares of Common Stock to which the Holder is entitled
upon the Holder’s conversion hereunder (as the case may be) (and to issue such
shares of Common Stock) shall terminate, or (II) promptly honor its obligation
to so issue and deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holder’s balance account with DTC for
the number of shares of Common Stock to which the Holder is entitled upon the
Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in
an amount equal to the excess (if any) of the Buy-In Price over the product of
(x) such number of shares of Common Stock multiplied by (y) the lowest Closing
Sale Price of the Common Stock on any Trading Day during the period commencing
on the date of the applicable Conversion Notice and ending on the date of such
issuance and payment under this clause (II).

 

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(iii) Book-Entry. Notwithstanding anything to the contrary set forth in this
Section 3, following conversion of any portion of this Note in accordance with
the terms hereof, the Holder shall not be required to physically surrender this
Note to the Company unless (A) the full Conversion Amount represented by this
Note is being converted (in which event this Note shall be delivered to the
Company following conversion thereof as contemplated by Section 3(c)(i)) or (B)
the Holder has provided the Company with prior written notice (which notice may
be included in a Conversion Notice) requesting reissuance of this Note upon
physical surrender of this Note. The Holder and the Company shall maintain
records showing the Principal, Interest and Late Charges converted and/or paid
and/or adjusted (as the case may be) and the dates of such conversions and/or
payments and/or adjustments (as the case may be) or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of this Note upon conversion.

 

(iv) Pro Rata Conversion; Disputes. In the event of a dispute as to the number
of shares of Common Stock issuable to the Holder in connection with a conversion
of this Note, the Company shall issue to the Holder the number of shares of
Common Stock not in dispute and resolve such dispute in accordance with Section
22.

 

(d) Limitations on Conversions. Notwithstanding anything to the contrary
contained in this Note, this Note shall not be convertible by the Holder hereof,
and the Company shall not effect any conversion of this Note or otherwise issue
any shares of Common Stock pursuant hereto, to the extent (but only to the
extent) that after giving effect to such conversion or other share issuance
hereunder the Holder (together with its affiliates) would beneficially own in
excess of 4.99% (the “Maximum Percentage”) of the Common Stock. To the extent
the above limitation applies, the determination of whether this Note shall be
convertible (vis-à-vis other convertible, exercisable or exchangeable securities
owned by the Holder or any of its affiliates) and of which such securities shall
be convertible, exercisable or exchangeable (as among all such securities owned
by the Holder and its affiliates) shall, subject to such Maximum Percentage
limitation, be determined on the basis of the first submission to the Company
for conversion, exercise or exchange (as the case may be). No prior inability to
convert this Note, or to issue shares of Common Stock, pursuant to this
paragraph shall have any effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of convertibility. For
purposes of this paragraph, beneficial ownership and all determinations and
calculations (including, without limitation, with respect to calculations of
percentage ownership) shall be determined in accordance with Section 13(d) of
the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and
regulations promulgated thereunder. The provisions of this paragraph shall be
implemented in a manner otherwise than in strict conformity with the terms of
this paragraph to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Maximum Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage
limitation. The limitations contained in this paragraph shall apply to a
successor Holder of this Note. The holders of Common Stock shall be third party
beneficiaries of this paragraph and the Company may not waive this paragraph
without the consent of holders of a majority of its Common Stock. For any reason
at any time, upon the written or oral request of the Holder, the Company shall
within one (1) Business Day confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding, including by virtue of any
prior conversion or exercise of convertible or exercisable securities into
Common Stock, including, without limitation, pursuant to this Note or securities
issued pursuant to the Securities Purchase Agreement. By written notice to the
Company, at any time the Holder may increase or decrease the Maximum Percentage
to any other percentage not in excess of 9.99% specified in such notice;
provided that (i) any such increase will not be effective until the 61st day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder sending such notice and not to any other
holder of Notes.

 

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4. RIGHTS UPON EVENT OF DEFAULT.

 

(a) Event of Default. Each of the following events shall constitute an “Event of
Default”:

 

(i) the suspension from trading or the failure of the Common Stock to be trading
or listed (as applicable) on an Eligible Market for a period of ten (10)
consecutive days or for more than an aggregate of thirty (30) days in any
365-day period;

 

(ii) the Company’s failure to pay to the Holder any amount of Principal,
Interest, Late Charges or other amounts when and as due under this Note
(including, without limitation, the Company’s failure to pay any redemption
payments or amounts hereunder), the Securities Purchase Agreement, the Warrant
(as defined in the Securities Purchase Agreement) or any other agreement,
document, certificate or other instrument delivered in connection with the
transactions contemplated hereby and thereby, except, in the case of a failure
to pay Interest and Late Charges when and as due, in which case only if such
failure remains uncured for a period of at least five (5) calendar days after
written notice to the Company of such default;

 

(iii) the occurrence of any default under, redemption of or acceleration prior
to maturity of any Indebtedness (as defined in the Securities Purchase
Agreement) of the Company or any Subsidiary, only if such acceleration or
redemption obligation remains in effect for a period of five (5) calendar days
following the occurrence thereof;

 

(iv) bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings for the relief of debtors shall be instituted by or against the
Company or any Subsidiary and, if instituted against the Company or any
Subsidiary by a third party, shall not be dismissed within forty-five (45) days
of their initiation;

 

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(v) the commencement by the Company or any Subsidiary of a voluntary case or
proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree, order, judgment or other similar document in respect of
the Company or any Subsidiary in an involuntary case or proceeding under any
applicable federal, state or foreign bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable federal, state or foreign
law, or the consent by it to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Subsidiary or of
any substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the execution of a composition of debts, or the
occurrence of any other similar federal, state or foreign proceeding, or the
admission by it in writing of its inability to pay its debts generally as they
become due, the taking of corporate action by the Company or any Subsidiary in
furtherance of any such action or the taking of any action by any Person to
commence a Uniform Commercial Code foreclosure sale or any other similar action
under federal, state or foreign law;

 

(vi) the entry by a court of (i) a decree, order, judgment or other similar
document in respect of the Company or any Subsidiary of a voluntary or
involuntary case or proceeding under any applicable federal, state or foreign
bankruptcy, insolvency, reorganization or other similar law or (ii) a decree,
order, judgment or other similar document adjudging the Company or any
Subsidiary as bankrupt or insolvent, or approving as properly filed a petition
seeking liquidation, reorganization, arrangement, adjustment or composition of
or in respect of the Company or any Subsidiary under any applicable federal,
state or foreign law or (iii) a decree, order, judgment or other similar
document appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Subsidiary or of
any substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree, order, judgment or other
similar document or any such other decree, order, judgment or other similar
document unstayed and in effect for a period of thirty (30) consecutive days;

 

(vii) a final judgment or judgments for the payment of money aggregating in
excess of $100,000 are rendered against the Company and/or any Subsidiary and
which judgments are not, within thirty (30) days after the entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged within
forty-five (45) days after the expiration of such stay; provided, however, any
judgment which is covered by insurance or an indemnity from a credit worthy
party shall not be included in calculating the $100,000 amount set forth above
so long as the Company provides the Holder a written statement from such insurer
or indemnity provider (which written statement shall be reasonably satisfactory
to the Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company or such Subsidiary (as the case may be) will receive
the proceeds of such insurance or indemnity within thirty (30) days of the
issuance of such judgment;

 

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(viii) other than as specifically set forth in another clause of this Section
4(a), the Company and/or any Subsidiary, individually or in the aggregate, fails
to pay, when due, or within any applicable grace period, any payment with
respect to any Indebtedness in excess of $100,000 due to any third party (other
than (A) Permitted Indebtedness and (B) with respect to unsecured Indebtedness
only, payments contested by the Company and/or such Subsidiary (as the case may
be) in good faith by proper proceedings and with respect to which adequate
reserves have been set aside for the payment thereof in accordance with GAAP) or
is otherwise in breach or violation of any agreement for monies owed or owing in
an amount in excess of $100,000, which breach or violation permits the other
party thereto to declare a default or otherwise accelerate amounts due
thereunder (other than Permitted Indebtedness);

 

(ix) other than as specifically set forth in another clause of this Section
4(a), the Company or any Subsidiary breaches any representation, warranty,
covenant or other term or condition of the Securities Purchase Agreement, the
Warrant or any other agreement, document, certificate or other instrument
delivered in connection with the transactions contemplated hereby and thereby,
except, in the case of a breach of a covenant or other term or condition that is
curable, only if such breach remains uncured for a period of three (3)
consecutive Trading Days after written notice to the Company of such breach;

 

(x) any Event of Default (as defined in the Other Notes) occurs with respect to
any Other Notes;

 

(xi) any Material Adverse Effect (as defined in the Securities Purchase
Agreement) occurs; or

 

(xii) any Change of Control occurs.

 

(b) Notice of an Event of Default; Redemption Right. Upon the occurrence of an
Event of Default with respect to this Note, the Company shall within one (1)
Business Day deliver written notice thereof via facsimile and overnight courier
(with next day delivery specified) (an “Event of Default Notice”) to the Holder.
At any time after the earlier of the Holder’s receipt of an Event of Default
Notice and the Holder becoming aware of an Event of Default, the Holder may
require the Company to redeem, at any time during the period commencing on the
date the Holder first becomes aware of such Event of Default through and
including the twentieth (20th) Trading Day after the later of (x) the date the
Holder receives the applicable Event of Default Notice with respect thereto and
(y) the date such Event of Default has been cured, all or any portion of this
Note by delivering written notice thereof (the “Event of Default Redemption
Notice”) to the Company, which Event of Default Redemption Notice shall indicate
the portion of this Note the Holder is electing to redeem. Each portion of this
Note subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the Company at a price equal to the greater of (i) the product of
(A) the Conversion Amount to be redeemed multiplied by (B) the Redemption
Premium and (ii) the product of (X) the Conversion Rate with respect to the
Conversion Amount in effect at such time as the Holder delivers an Event of
Default Redemption Notice multiplied by (Y) the product of (1) the Redemption
Premium multiplied by (2) the greatest Closing Sale Price of the Common Stock on
any Trading Day during the period commencing on the date immediately preceding
such Event of Default and ending on the date the Company makes the entire
payment required to be made under this Section 4(b) (the “Event of
Default Redemption Price”). Redemptions required by this Section 4(b) shall be
made in accordance with the provisions of Section 10. To the extent redemptions
required by this Section 4(b) are deemed or determined by a court of competent
jurisdiction to be prepayments of this Note by the Company, such redemptions
shall be deemed to be voluntary prepayments. Notwithstanding anything to the
contrary in this Section 4, but subject to Section 3(d), until the Event of
Default Redemption Price (together with any Late Charges thereon) is paid in
full, the Conversion Amount submitted for redemption under this Section 4(b)
(together with any Late Charges thereon) may be converted, in whole or in part,
by the Holder into Common Stock pursuant to the terms of this Note. In the event
of the Company’s redemption of any portion of this Note under this Section 4(b),
the Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any redemption premium due under this Section 4(b) is intended by
the parties to be, and shall be deemed, a reasonable estimate of the Holder’s
actual loss of its investment opportunity and not as a penalty.

 

  9

 

 

5. RIGHTS UPON FUNDAMENTAL TRANSACTION; OTHER CORPORATE EVENTS.

 

(a) Assumption. The Company shall not enter into or be party to a Fundamental
Transaction unless (i) the Successor Entity assumes in writing all of the
obligations of the Company under this Note and the other Transaction Documents
in accordance with the provisions of this Section 5(a) pursuant to written
agreements in form and substance satisfactory to the Holder and approved by the
Holder prior to such Fundamental Transaction, including agreements to deliver to
each holder of Notes in exchange for such Notes a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to the Notes, including, without limitation, having a principal amount
and interest rate equal to the principal amounts then outstanding and the
interest rates of the Notes held by such holder, having similar conversion
rights as the Notes and having similar ranking to the Notes, and satisfactory to
the Holder and (ii) the Successor Entity (including its Parent Entity) is a
publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Note and the other Transaction Documents referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Note and the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein. Upon consummation of a
Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this
Note at any time after the consummation of such Fundamental Transaction, in lieu
of the shares of the Company’s Common Stock (or other securities, cash, assets
or other property (except such items still issuable under Section 14, which
shall continue to be receivable thereafter) issuable upon the conversion or
redemption of the Notes prior to such Fundamental Transaction, such shares of
the publicly traded common stock (or their equivalent) of the Successor Entity
(including its Parent Entity) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Note been
converted immediately prior to such Fundamental Transaction (without regard to
any limitations on the conversion of this Note), as adjusted in accordance with
the provisions of this Note. Notwithstanding the foregoing, the Holder may
elect, at its sole option, by delivery of written notice to the Company to waive
this Section 5(a) to permit the Fundamental Transaction without the assumption
of this Note.

 

  10

 

 

(b) Other Corporate Events. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a “Corporate Event”), the Company shall make appropriate provision to
insure that the Holder will thereafter have the right to receive upon a
conversion of this Note (i) in addition to the shares of Common Stock receivable
upon such conversion, such securities or other assets to which the Holder would
have been entitled with respect to such shares of Common Stock had such shares
of Common Stock been held by the Holder upon the consummation of such Corporate
Event (without taking into account any limitations or restrictions on the
convertibility of this Note) or (ii) in lieu of the shares of Common Stock
otherwise receivable upon such conversion, such securities or other assets
received by the holders of shares of Common Stock in connection with the
consummation of such Corporate Event in such amounts as the Holder would have
been entitled to receive had this Note initially been issued with conversion
rights for the form of such consideration (as opposed to shares of Common Stock)
at a conversion rate for such consideration commensurate with the Conversion
Rate. Provision made pursuant to the preceding sentence shall be in a form and
substance satisfactory to the Holder.

 

(c) The provisions of this Section 5 shall apply similarly and equally to
successive Fundamental Transactions and Corporate Events and shall be applied
without regard to any limitations on the conversion of this Note.

 

6. CERTAIN ADJUSTMENTS. If the Company at any time on or after the Issuance Date
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time on or
after the Issuance Date combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination will be proportionately increased.

 

7. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its certificate of incorporation, bylaws or through
any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, 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
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note. Without limiting the generality of the
foregoing, the Company (i) shall not increase the par value of any shares of
Common Stock receivable upon conversion of this Note above the Conversion Price
then in effect, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the conversion of this Note, and
(iii) shall, so long as any of the Notes are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Notes, the maximum number of shares of Common Stock as shall from time to
time be necessary to effect the conversion of the Notes then outstanding
(without regard to any limitations on conversion).

 

  11

 

 

8. RESERVATION OF AUTHORIZED SHARES.

 

(a) Reservation. So long as any of the Notes are outstanding, the Company shall
take all action necessary to reserve and keep available out of its authorized
and unissued Common Stock, solely for the purpose of effecting the conversion of
the Notes, a number of shares of Common Stock, as of any date of determination,
for each of the Notes in accordance with the following formula:

 

 

 

 

P

 x 1.50 = Share Reserve 

 

(T x B)

 

P = The aggregate principal amount of the Notes issued on or prior to such date
of determination;

 

T = The applicable Conversion Price as of such date of determination;

 

B = 0.85;

 

provided, that, the Share Reserve shall in no event be less than 150% of the
number of shares of Common Stock as shall from time to time be necessary to
effect the conversion of all of the Notes then outstanding (without regard to
any limitations on conversions) (the “Required Reserve Amount”).

 

(b) Insufficient Authorized Shares. If, notwithstanding Section 8(a), and not in
limitation thereof, at any time while any of the Notes remain outstanding the
Company does not have a sufficient number of authorized and unreserved shares of
Common Stock to satisfy its obligation to reserve for issuance upon conversion
of the Notes at least a number of shares of Common Stock equal to the Required
Reserve Amount (an “Authorized Share Failure”), then the Company shall
immediately take all action necessary to increase the Company’s authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the Notes then outstanding. Without limiting the
generality of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event later than sixty
(60) days after the occurrence of such Authorized Share Failure, the Company
shall hold a meeting of its stockholders for the approval of an increase in the
number of authorized shares of Common Stock. In connection with such meeting,
the Company shall provide each stockholder with a proxy statement and shall use
its best efforts (including, without limitation, retaining a proxy solicitation
firm reasonably acceptable to the Holder, at the Company’s expense) to solicit
its stockholders’ approval of such increase in authorized shares of Common Stock
and to cause its board of directors to recommend to the stockholders that they
approve such proposal. In the event that the Company is prohibited from issuing
shares of Common Stock upon any conversion due to the failure by the Company to
have sufficient shares of Common Stock available out of the authorized but
unissued shares of Common Stock (such unavailable number of shares of Common
Stock, the “Authorization Failure Shares”), in lieu of delivering such
Authorization Failure Shares to the Holder, the Company shall pay cash in
exchange for the redemption of such portion of the Conversion Amount convertible
into such Authorized Failure Shares at a price equal to the sum of (i) the
product of (x) such number of Authorization Failure Shares and (y) the greatest
Closing Sale Price of the Common Stock on any Trading Day during the period
commencing on the date the Holder delivers the applicable Conversion Notice with
respect to such Authorization Failure Shares to the Company and ending on the
date of such issuance and payment under this Section 8(b) and (ii) to the extent
the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of Authorization
Failure Shares, any brokerage commissions and other out-of-pocket expenses, if
any, of the Holder incurred in connection therewith (the foregoing sum of clause
(i) and (ii), an “Additional Amount”). Notwithstanding the foregoing, the Holder
shall have the option to require that, in lieu of the Company’s obligation to
pay an Additional Amount in cash to the Holder, such Additional Amount shall be
added to the outstanding Principal amount of this Note. Nothing contained in
Section 8(a) or this Section 8(b) shall limit any obligations of the Company
under any provision of the Securities Purchase Agreement.

 

  12

 

 

9. COMPANY OPTIONAL REDEMPTION. At any time after the Issuance Date, if no
Equity Conditions Failure exists, the Company shall have the right to redeem
all, but not less than all, of the Conversion Amount then remaining under this
Note (the “Company Optional Redemption Amount”) on the Company Optional
Redemption Date (as defined below) (a “Company Optional Redemption”). The
portion of this Note subject to redemption pursuant to this Section 9 shall be
redeemed by the Company in cash at a price (the “Company Optional Redemption
Price”) equal to 120% of the Conversion Amount of this Note then outstanding.
The Company may exercise its right to require redemption under this Section 9 by
delivering an irrevocable written notice thereof by facsimile and overnight
courier to the Holder (the “Company Optional Redemption Notice” and the date the
Holder receives such notice is referred to as the “Company Optional Redemption
Notice Date”). The Company Optional Redemption Notice shall (a) state the date
on which the Company Optional Redemption shall occur (the “Company Optional
Redemption Date”) which date shall not be less than thirty (30) calendar days
nor more than ninety (90) calendar days following the Company Optional
Redemption Notice Date, (b) state the aggregate Conversion Amount of the Notes
which is being redeemed in such Company Optional Redemption from the Holder
pursuant to this Section 9 on the Company Optional Redemption Date, (c) if any
Interest portion of the Company Optional Redemption Amount is being paid in
Interest Shares, state the information required in an Interest Election Notice
in accordance with Section 2(a) and (d) certify that there has been no Equity
Conditions Failure. Notwithstanding anything herein to the contrary, (i) if an
Equity Conditions Failure occurs at any time prior to the Company Optional
Redemption Date, (A) the Company shall provide the Holder a subsequent notice to
that effect and (B) unless the Holder waives the applicable Equity Conditions
Failure, the Company Optional Redemption shall be cancelled and the applicable
Company Optional Redemption Notice shall be null and void and (ii) at any time
prior to the date the Company Optional Redemption Price is paid, in full, the
Company Optional Redemption Amount may be converted, in whole or in part, by the
Holder into shares of Common Stock pursuant to Section 3. All Conversion Amounts
converted by the Holder after the Company Optional Redemption Notice Date shall
reduce the Company Optional Redemption Amount of this Note required to be
redeemed on the Company Optional Redemption Date. The parties hereto agree that
in the event of the Company's redemption of any portion of the Note under this
Section 9, the Holder's damages would be uncertain and difficult to estimate
because of the parties' inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment opportunity
for the Holder. Accordingly, any redemption premium due under this Section 9 is
intended by the parties to be, and shall be deemed, a reasonable estimate of the
Holder's actual loss of its investment opportunity and not as a penalty.
Redemptions made pursuant to this Section 9 shall be made in accordance with
Section 10 and any payments of any Interest portion of the Company Optional
Redemption Amount in Interest Shares shall be made in accordance with Section 2.

 

  13

 

 

10. REDEMPTIONS.

 

(a) Mechanics. The Company shall deliver the applicable Event of Default
Redemption Price to the Holder in cash within five (5) Business Days after the
Company’s receipt of the Holder’s Event of Default Redemption Notice. The
Company shall deliver the applicable Company Optional Redemption Price to the
Holder in cash on the applicable Company Optional Redemption Date. In the event
of a redemption of less than all of the Conversion Amount of this Note, the
Company shall promptly cause to be issued and delivered to the Holder a new Note
(in accordance with Section 17(d)) representing the outstanding Principal which
has not been redeemed. The Holder’s delivery of a notice voiding a Redemption
Notice and exercise of its rights following such notice shall not affect the
Company’s obligations to make any payments of Late Charges which have accrued
prior to the date of such notice with respect to the Conversion Amount subject
to such notice.

 

11. VOTING RIGHTS. The Holder shall have no voting rights as the holder of this
Note, except as required by law (including, without limitation, the Nevada
Revised Statutes) and as expressly provided in this Note.

 

12. [INTENTIONALLY OMITTED]

 

13. COVENANTS. Until all of the Notes have been converted, redeemed or otherwise
satisfied in accordance with their terms:

 

(a) Rank. All payments due under this Note shall be senior to all other
Indebtedness of the Company and its Subsidiaries.

 

(b) Incurrence of Indebtedness. The Company shall not, and the Company shall
cause each of its Subsidiaries to not, directly or indirectly, incur or
guarantee, assume or suffer to exist any Indebtedness (other than (i) the
Indebtedness evidenced by this Note and the Other Notes and (ii) other Permitted
Indebtedness).

 

  14

 

 

(c) Existence of Liens. The Company shall not, and the Company shall cause each
of its Subsidiaries to not, directly or indirectly, allow or suffer to exist any
mortgage, lien, pledge, charge, security interest or other encumbrance upon or
in any property or assets (including accounts and contract rights) owned by the
Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted
Liens.

 

(d) Restricted Payments. The Company shall not, and the Company shall cause each
of its Subsidiaries to not, directly or indirectly, redeem, defease, repurchase,
repay or make any payments in respect of, by the payment of cash or cash
equivalents (in whole or in part, whether by way of open market purchases,
tender offers, private transactions or otherwise), all or any portion of any
Indebtedness (other than the Notes and Other Notes), whether by way of payment
in respect of principal of (or premium, if any) or interest on, such
Indebtedness if at the time such payment is due or is otherwise made or, after
giving effect to such payment, (i) an event constituting an Event of Default has
occurred and is continuing or (ii) an event that with the passage of time and
without being cured would constitute an Event of Default has occurred and is
continuing.

 

(e) Restricted Issuances. The Company shall not, directly or indirectly, without
the prior written consent of the holders of a majority in aggregate principal
amount of the Notes then outstanding, (i) issue any Notes (other than as
contemplated by the Securities Purchase Agreement and the Notes) or (ii) issue
any other securities that would cause a breach or default under the Notes.

 

(f) Restriction on Redemption and Cash Dividends. The Company shall not, and the
Company shall cause each of its Subsidiaries to not, directly or indirectly,
redeem, repurchase or declare or pay any cash dividend or distribution on any of
its capital stock.

 

(g) Restriction on Transfer of Assets. The Company shall not, and the Company
shall cause each of its Subsidiaries to not, directly or indirectly, sell,
lease, license, assign, transfer, spin-off, split-off, close, convey or
otherwise dispose of any assets or rights of the Company or any Subsidiary owned
or hereafter acquired whether in a single transaction or a series of related
transactions, other than (i) sales, leases, licenses, assignments, transfers,
conveyances and other dispositions of such assets or rights by the Company and
its Subsidiaries in the ordinary course of business and (ii) sales of inventory
in the ordinary course of business.

 

(h) Maturity of Indebtedness. The Company shall not, and the Company shall cause
each of its Subsidiaries to not, directly or indirectly, permit any Indebtedness
of the Company or any of the Subsidiaries to mature or accelerate prior to the
Maturity Date.

 

  15

 

 

(i) Change in Nature of Business. The Company shall not, and the Company shall
cause each of its Subsidiaries to not, directly or indirectly, engage in any
material line of business substantially different from those lines of business
conducted by the Company and each of its Subsidiaries on the Issuance Date or
any business substantially related or incidental thereto. The Company shall not,
and the Company shall cause each of its Subsidiaries to not, directly or
indirectly, modify its or their corporate structure or purpose.

 

(j) Preservation of Existence, Etc. The Company shall maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, its existence, rights
and privileges, and become or remain, and cause each of its Subsidiaries to
become or remain, duly qualified and in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary.

 

(k) Maintenance of Properties, Etc. The Company shall maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its properties
which are necessary or useful in the proper conduct of its business in good
working order and condition, ordinary wear and tear excepted, and comply, and
cause each of its Subsidiaries to comply, at all times with the provisions of
all leases to which it is a party as lessee or under which it occupies property,
so as to prevent any loss or forfeiture thereof or thereunder.

 

(l) Maintenance of Intellectual Property. The Company will, and will cause each
of its Subsidiaries to, take all action necessary or advisable to maintain all
of the Intellectual Property Rights of the Company and/or any of its
Subsidiaries that are necessary or material to the conduct of its business in
full force and effect.

 

(m) Maintenance of Insurance. The Company shall maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to its
properties (including all real properties leased or owned by it) and business,
in such amounts and covering such risks as is required by any governmental
authority having jurisdiction with respect thereto or as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated.

 

(n) Transactions with Affiliates. The Company shall not, nor shall it permit any
of its Subsidiaries to, enter into, renew, extend or be a party to, any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease, transfer or exchange of property or assets of any
kind or the rendering of services of any kind) with any affiliate, except in the
ordinary course of business in a manner and to an extent consistent with past
practice and necessary or desirable for the prudent operation of its business,
for fair consideration and on terms no less favorable to it or its Subsidiaries
than would be obtainable in a comparable arm’s length transaction with a Person
that is not an affiliate thereof.

 

14. PARTICIPATION. Upon any conversion of this Note, the Holder shall be
entitled to receive such dividends paid and distributions made to the holders of
Common Stock from and after the initial Issuance Date to the same extent as if
the Holder had effected such conversion and had held such shares of Common Stock
(issued or to be issued in such conversion) on the record date for such
dividends and distributions. Payments under the preceding sentence shall be made
on or prior to the applicable Share Delivery Deadline with respect to such
conversion.

 

  16

 

 

15. AMENDING THE TERMS OF THIS NOTE. The prior written consent of the Holder
shall be required for any change or amendment to this Note.

 

16. TRANSFER. This Note and any shares of Common Stock issued upon conversion of
this Note may be offered, sold, assigned or transferred by the Holder without
the consent of the Company, subject only to the provisions of Section 4.4 of the
Securities Purchase Agreement.

 

17. REISSUANCE OF THIS NOTE.

 

(a) Transfer. If this Note is to be transferred, the Holder shall surrender this
Note to the Company, whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new Note (in accordance with Section 17(d)),
registered as the Holder may request, representing the outstanding Principal
being transferred by the Holder and, if less than the entire outstanding
Principal is being transferred, a new Note (in accordance with Section 17(d)) to
the Holder representing the outstanding Principal not being transferred. The
Holder and any assignee, by acceptance of this Note, acknowledge and agree that,
by reason of the provisions of Section 3(c)(iii) following conversion or
redemption of any portion of this Note, the outstanding Principal represented by
this Note may be less than the Principal stated on the face of this Note.

 

(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence), and, in the
case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable form and, in the case of
mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver to the Holder a new Note (in accordance with Section 17(d))
representing the outstanding Principal.

 

(c) Note Exchangeable for Different Denominations. This Note is exchangeable,
upon the surrender hereof by the Holder at the principal office of the Company,
for a new Note or Notes (in accordance with Section 17(d) and in principal
amounts of at least $1,000) representing in the aggregate the outstanding
Principal of this Note, and each such new Note will represent such portion of
such outstanding Principal as is designated by the Holder at the time of such
surrender.

 

(d) Issuance of New Notes. Whenever the Company is required to issue a new Note
pursuant to the terms of this Note, such new Note (i) shall be of like tenor
with this Note, (ii) shall represent, as indicated on the face of such new Note,
the Principal remaining outstanding (or in the case of a new Note being issued
pursuant to Section 17(a) or Section 17(c), the Principal designated by the
Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest and Late Charges on the Principal and Interest of this Note, from the
Issuance Date.

 

  17

 

 

18. 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 and any of the other Transaction
Documents at law or in equity (including a decree of specific performance and/or
other injunctive relief), and nothing herein shall limit the Holder’s right to
pursue actual and consequential damages for any failure by the Company to comply
with the terms of this Note. The Company covenants to the Holder that there
shall be no characterization concerning this instrument other than as expressly
provided herein. 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 and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the Holder shall be entitled, in
addition to all other available remedies, to an injunction restraining any such
breach or any such threatened breach, without the necessity of showing economic
loss and without any bond or other security being required. The Company shall
provide all information and documentation to the Holder that is requested by the
Holder to enable the Holder to confirm the Company’s compliance with the terms
and conditions of this Note.

 

19. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is
placed in the hands of an attorney for collection or enforcement or is collected
or enforced through any legal proceeding or the Holder otherwise takes action to
collect amounts due under this Note or to enforce the provisions of this Note or
(b) there occurs any bankruptcy, reorganization, receivership of the Company or
other proceedings affecting Company creditors’ rights and involving a claim
under this Note, then the Company shall pay the costs incurred by the Holder for
such collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, without limitation,
attorneys’ fees and disbursements. The Company expressly acknowledges and agrees
that no amounts due under this Note shall be affected, or limited, by the fact
that the purchase price paid for this Note was less than the original Principal
amount hereof.

 

20. CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by
the Company and the Holder and shall not be construed against any Person as the
drafter hereof. The headings of this Note are for convenience of reference and
shall not form part of, or affect the interpretation of, this Note. Terms used
in this Note but defined in the other Transaction Documents shall have the
meanings ascribed to such terms on the Closing Date in such other Transaction
Documents unless otherwise consented to in writing by the Holder.

 

21. 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. No waiver shall be effective unless it is in writing
and signed by an authorized representative of the waiving party.

 

  18

 

 

22. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Conversion Price (including, without limitation, any disputed adjustment
thereto), any Redemption Price, the Closing Bid Price, the Closing Sale Price or
fair market value (as the case may be) or the arithmetic calculation of the
Conversion Rate or the applicable Redemption Price (as the case may be), the
Company or the Holder (as the case may be) shall submit the disputed
determinations or arithmetic calculations (as the case may be) via facsimile (i)
within two (2) Business Days after receipt of the applicable notice giving rise
to such dispute to the Company or the Holder (as the case may be) or (ii) if no
notice gave rise to such dispute, at any time after the Holder learned of the
circumstances giving rise to such dispute. If the Holder and the Company are
unable to agree upon such determination or calculation within two (2) Business
Days of such disputed determination or arithmetic calculation (as the case may
be) being submitted to the Company or the Holder (as the case may be), then the
Company shall, within two (2) Business Days, submit via facsimile (a) the
disputed determination of the Conversion Price, any Redemption Price, the
Closing Bid Price, the Closing Sale Price or fair market value (as the case may
be) to an independent, reputable investment bank selected by the Company and
approved by the Holder or (b) the disputed arithmetic calculation of the
Conversion Rate or any Redemption Price (as the case may be) to an independent,
outside accountant selected by the Holder that is reasonably acceptable to the
Company. The Company shall cause at its expense the investment bank or the
accountant (as the case may be) to perform the determinations or calculations
(as the case may be) and notify the Company and the Holder of the results no
later than ten (10) Business Days from the time it receives such disputed
determinations or calculations (as the case may be). Such investment bank’s or
accountant’s determination or calculation (as the case may be) shall be binding
upon all parties absent demonstrable error.

 

23. NOTICES; CURRENCY; PAYMENTS.

 

(a) Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with Section
8.4 of the Securities Purchase Agreement. The Company shall provide the Holder
with prompt written notice of all actions taken pursuant to this Note, including
in reasonable detail a description of such action and the reason therefore.
Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) immediately upon any adjustment of the Conversion
Price, setting forth in reasonable detail, and certifying, the calculation of
such adjustment and (ii) at least fifteen (15) days prior to the date on which
the Company closes its books or takes a record (A) with respect to any dividend
or distribution upon the Common Stock or (B) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder.

 

(b) Currency. All dollar amounts referred to in this Note are in United States
Dollars (“U.S. Dollars”), and all amounts owing under this Note shall be paid in
U.S. Dollars. All amounts denominated in other currencies (if any) shall be
converted into the U.S. Dollar equivalent amount in accordance with the Exchange
Rate on the date of calculation. “Exchange Rate”means, in relation to any amount
of currency to be converted into U.S. Dollars pursuant to this Note, the U.S.
Dollar exchange rate as published in the Wall Street Journal on the relevant
date of calculation (it being understood and agreed that where an amount is
calculated with reference to, or over, a period of time, the date of calculation
shall be the final date of such period of time).

 

  19

 

 

(c) Payments. Whenever any payment of cash is to be made by the Company to any
Person pursuant to this Note, unless otherwise expressly set forth herein, such
payment shall be made in lawful money of the United States of America by a
certified check drawn on the account of the Company and sent via overnight
courier service to such Person at such address as previously provided to the
Company in writing, provided that the Holder may elect to receive a payment of
cash via wire transfer of immediately available funds by providing the Company
with prior written notice setting out such request and the Holder’s wire
transfer instructions. Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day. Any amount of
Principal or other amounts due under the Transaction Documents which is not paid
when due (solely to the extent such amount is not then accruing interest at the
Default Rate) shall result in a late charge being incurred and payable by the
Company in an amount equal to interest on such amount at the rate of eighteen
percent (18%) per annum from the date such amount was due until the same is paid
in full (“Late Charge”).

 

24. CANCELLATION. After all Principal, accrued Interest, Late Charges and other
amounts at any time owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

 

25. WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
irrevocably waives demand, notice, presentment, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note and the Securities Purchase Agreement.

 

26. GOVERNING LAW. This Note shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the internal laws of the State of
Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. The Company hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the State of Illinois,
County of Cook, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, 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, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. 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 by certified mail, return receipt requested, postage
prepaid to such party at the address for such notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision of this
Note. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
HEREBY.

 

  20

 

 

27. MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Holder and thus refunded to the Company.

 

28. CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall
have the following meanings:

 

(a) “Bloomberg” means Bloomberg, L.P.

 

(b) “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.

 

(c) “Change of Control” means any Fundamental Transaction other than (i) any
merger of the Company or any of its, direct or indirect, wholly-owned
Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization,
recapitalization or reclassification of the shares of Common Stock in which
holders of the Company’s voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, are, in all material respects, the holders of the voting
power of the surviving entity (or entities with the authority or voting power to
elect the members of the board of directors (or their equivalent if other than a
corporation) of such entity or entities) after such reorganization,
recapitalization or reclassification, (iii) pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Company or any of its Subsidiaries.

 

(d) “Closing Bid Price” and “Closing Sale Price” means, for any security as of
any date, the last closing bid price and last closing trade price, respectively,
for such security on the Principal Market, as reported by Bloomberg, or, if the
Principal Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price (as the case may be)
then the last bid price or last trade price, respectively, of such security
prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the last closing bid price or last trade price, respectively, of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by OTC Markets Group Inc.
(formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of
such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and Holder are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
in accordance with the procedures in Section 22. All such determinations shall
be appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during such period.

 

  21

 

 

(e) “Closing Date” shall have the meaning set forth in the Securities Purchase
Agreement, which date is the date the Company initially issued the Note pursuant
to the terms of the Securities Purchase Agreement.

 

(f) “Common Stock” means (i) the Company’s common stock, $0.001 par value per
share, and (ii) any capital stock into which such common stock shall have been
changed or any share capital resulting from a reclassification of such common
stock.

 

(g) “Eligible Market” means the The NASDAQ Global Market, The NASDAQ Global
Select Market, The NASDAQ Capital Market, the New York Stock Exchange, NYSE
Arca, the NYSE MKT, OTC Bulletin Board, the OTCQX Marketplace or the OTCQB
Marketplace operated by OTC Markets Group Inc. (or any successor to any of the
foregoing).

 

(h) “Equity Conditions” means that each of the following conditions is
satisfied: (i) on each day during the period beginning sixty (60) calendar days
prior to the applicable date of determination and ending on and including the
applicable date of determination (the “Equity Conditions Measuring Period”),
either (x) a registration statement shall be effective and the prospectus
contained therein, as supplemented, shall be available for the resale by the
Holder of all shares of Common Stock issuable upon conversion of the Notes and
as Interest Shares or (y) all shares of Common Stock issuable upon conversion of
the Notes and as Interest Shares shall be eligible for resale by the Holder
without restriction and without the need for registration under any applicable
federal or state securities laws (in each case, disregarding any limitation on
conversion of the Notes and other issuance of securities with respect to the
Notes); (ii) on each day during the Equity Conditions Measuring Period, the
Common Stock (including all shares of Common Stock issuable upon conversion of
this Note and as Interest Shares) is listed or designated for quotation (as
applicable) on an Eligible Market and shall not have been suspended from trading
on an Eligible Market (other than suspensions of not more than two (2) days and
occurring prior to the applicable date of determination due to business
announcements by the Company) nor shall delisting or suspension by an Eligible
Market have been threatened (with a reasonable prospect of delisting occurring)
or pending either (A) in writing by such Eligible Market or (B) by falling below
the minimum listing maintenance requirements of the Eligible Market on which the
Common Stock is then listed or designated for quotation (as applicable); (iii)
on each day during the Equity Conditions Measuring Period, the Company shall
have delivered all shares of Common Stock issuable upon conversion of this Note
and as Interest Shares on a timely basis as set forth in Section 3 hereof and
all other shares of capital stock required to be delivered by the Company on a
timely basis as set forth in the other Transaction Documents; (iv) any shares of
Common Stock to be issued in connection with the event requiring determination
may be issued in full without violating Section 3(d) hereof; (v) on each day
during the Equity Conditions Measuring Period, no public announcement of a
pending, proposed or intended Fundamental Transaction shall have occurred which
has not been abandoned, terminated or consummated; (vi) the Company shall have
no knowledge of any fact that would reasonably be expected to cause (1) any
registration statement covering the resale by the Holder of all shares of Common
Stock issuable upon conversion of the Notes and as Interest Shares to not be
effective or the prospectus contained therein, as supplemented, to not be
available for the resale by the Holder of all shares of Common Stock issuable
upon conversion of the Notes and as Interest Shares or (2) any shares of Common
Stock issuable upon conversion of the Notes or as Interest Shares to not be
eligible for resale by the Holder without restriction and without the need for
registration under any applicable federal or state securities laws (in each
case, disregarding any limitation on conversion of the Notes and other issuance
of securities with respect to the Notes); (vii) the Holder shall not be in
possession of any material, non-public information provided to any of them by
the Company, any of its Subsidiaries or any of their respective affiliates,
employees, officers, directors, representatives, agents or the like (unless
consented to by Holder); (viii) on each day during the Equity Conditions
Measuring Period, the Company otherwise shall have been in compliance with each,
and shall not have breached any provision, covenant, representation or warranty
of the Notes, the Securities Purchase Agreement, the Warrant or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated hereby and thereby; and (ix) on each day
during the Equity Conditions Measuring Period, there shall not have occurred an
Event of Default or an event that with the passage of time or giving of notice
would constitute an Event of Default.

 

  22

 

 

(i) “Equity Conditions Failure” means, for any determination date, that on any
day during the period commencing ten (10) Trading Days prior to such date of
determination through such date of determination, the Equity Conditions have not
been satisfied (or waived in writing by the Holder).

 

(j) “Fundamental Transaction” means that (i) the Company or any of its
Subsidiaries shall, directly or indirectly, in one or more related transactions,
(1) consolidate or merge with or into (whether or not the Company or any of its
Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease,
license, assign, transfer, convey or otherwise dispose of all or substantially
all of its respective properties or assets to any other Person, or (3) allow any
other Person to make a purchase, tender or exchange offer that is accepted by
the holders of more than 50% of the outstanding shares of Voting Stock of the
Company (not including any shares of Voting Stock of the Company held by the
Person or Persons making or party to, or associated or affiliated with the
Persons making or party to, such purchase, tender or exchange offer), or (4)
consummate a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with any other Person whereby such other Person acquires
more than 50% of the outstanding shares of Voting Stock of the Company (not
including any shares of Voting Stock of the Company held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock or share purchase agreement or other
business combination), or (ii) any “person” or “group” (as these terms are used
for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and
regulations promulgated thereunder) is or shall become the “beneficial owner”
(as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of
the aggregate ordinary voting power represented by issued and outstanding Voting
Stock of the Company.

 

(k) “GAAP” means United States generally accepted accounting principles,
consistently applied.

 

(l) “Interest Notice Due Date” means the third (3rd) Trading Day immediately
prior to the applicable Interest Date

 

(m) “Interest Rate” means five percent (5.0%) per annum, as may be adjusted from
time to time in accordance with Section 2.

 

  23

 

 

(n) “Make-Whole Amount” means, as to any Conversion Amount on any Conversion
Date, as to any Event of Default Redemption on any Event of Default Redemption
Date, or as to any Company Optional Redemption on any Company Optional
Redemption Date, the amount of any Interest that, but for (i) the Holder’s
exercise of its conversion right pursuant to Section 3(c)(i); (ii) an Event of
Default Redemption pursuant to Section 4(b), or (ii) a Company Optional
Redemption pursuant to Section 9, would have accrued with respect to the
Conversion Amount being converted or redeemed under this Note at the Interest
Rate for the period from the applicable Conversion Date, Event of Default
Redemption Date or Company Optional Redemption Date, as the case may be, through
the Maturity Date.

 

(o) “Maturity Date” shall mean December 31, 2016 provided, however, the Maturity
Date may be extended at the option of the Holder (i) in the event that, and for
so long as, an Event of Default shall have occurred and be continuing or any
event shall have occurred and be continuing that with the passage of time and
the failure to cure would result in an Event of Default or (ii) through the date
that is twenty (20) Business Days after the consummation of a Fundamental
Transaction in the event that a Fundamental Transaction is publicly announced or
a Fundamental Transaction Notice is delivered prior to the Maturity Date,
provided further that if a Holder elects to convert some or all of this Note
pursuant to Section 3 hereof, and the Conversion Amount would be limited
pursuant to Section 3(d) hereunder, the Maturity Date shall automatically be
extended until such time as such provision shall not limit the conversion of
this Note.

 

(p) “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the Fundamental
Transaction.

 

(q) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity or a government or any department or agency thereof.

 

(r) “Permitted Indebtedness” means (i) Indebtedness evidenced by this Note and
the Other Notes, (ii) Indebtedness described on Schedule 13(b) attached hereto,
(iii) Indebtedness secured by Permitted Liens described in clauses (iv) and (v)
of the definition of Permitted Liens, in an aggregate amount not to exceed
$250,000, and (iv) Indebtedness incurred by the Company that is made expressly
subordinate in right of payment to the Notes and Other Notes.

 

  24

 

 

(s) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or
being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP, (ii) any statutory Lien
arising in the ordinary course of business by operation of law with respect to a
liability that is not yet due or delinquent, (iii) any Lien created by operation
of law, such as materialmen’s liens, mechanics’ liens and other similar liens,
arising in the ordinary course of business with respect to a liability that is
not yet due or delinquent or that are being contested in good faith by
appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or
held by the Company or any of its Subsidiaries to secure the purchase price of
such equipment or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment at the
time of its acquisition, provided that the Lien is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
equipment, and (v) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in clause
(iv) above, provided that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and the principal amount
of the indebtedness being extended, renewed or refinanced does not increase.

 

(t) “Principal Market” means, as of any date of determination, the principal
securities exchange or securities market on which the Common Stock is then
traded.

 

(u) “Redemption Notices” means, collectively, the Event of Default Redemption
Notices and the Company Optional Redemption Notice, and each of the foregoing,
individually, a “Redemption Notice.”

 

(v) “Redemption Premium” means (i) in the case of the Events of Default
described in Section 4(a) (other than Sections 4(a)(iv) through 4(a)(vi)), 135%
or (ii) in the case of the Events of Default described in Sections 4(a)(iv)
through 4(a)(vi), 100%.

 

(w) “Redemption Prices” means, collectively, Event of Default Redemption Prices
and the Company Optional Redemption Price and each of the foregoing,
individually, a “Redemption Price.”

 

(x) “SEC” means the United States Securities and Exchange Commission or the
successor thereto.

 

(y) “Securities Purchase Agreement” means that certain Securities Purchase
Agreement, dated as of the Closing Date, by and between the Company and the
Holder pursuant to which, among other things, the Company issued this Note, as
may be amended from time to time.

 

(z) “Subsidiary” means any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the Company and/or any
of its other Subsidiaries.

 

(aa) “Successor Entity” means the Person (or, if so elected by the Holder, the
Parent Entity) formed by, resulting from or surviving any Fundamental
Transaction or the Person (or, if so elected by the Holder, the Parent Entity)
with which such Fundamental Transaction shall have been entered into.

 

  25

 

 

(bb) “Trading Day” means any day on which the Common Stock is traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded, provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time) unless such day is otherwise designated
as a Trading Day in writing by the Holder.

 

(cc) “Voting Stock” of a Person means capital stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power
to elect, or the general power to appoint, at least a majority of the board of
directors, managers, trustees or other similar governing body of such Person
(irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).

 

(dd) “VWAP” means, for any security as of any date, the dollar volume-weighted
average price for such security on the Principal Market (or, if the Principal
Market is not the principal trading market for such security, then on the
principal securities exchange or securities market on which such security is
then traded) during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its
“AQR” function or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m.,
New York time, and ending at 4:00:00 p.m., New York time, as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported for such
security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly
Pink Sheets LLC). If VWAP cannot be calculated for such security on such date on
any of the foregoing bases, the VWAP of such security on such date shall be the
fair market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved in accordance with the procedures
in Section 22. All such determinations shall be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during such period.

 

29. DISCLOSURE. Upon receipt or delivery by the Company of any notice in
accordance with the terms of this Note, unless the Company has in good faith
determined that the matters relating to such notice do not constitute material,
non-public information relating to the Company or any of its Subsidiaries, the
Company shall within one (1) Business Day after any such receipt or delivery
publicly disclose such material, non-public information on a Current Report on
Form 8-K or otherwise. In the event that the Company believes that a notice
contains material, non-public information relating to the Company or any of its
Subsidiaries, the Company so shall indicate to such Holder contemporaneously
with delivery of such notice, and in the absence of any such indication, the
Holder shall be allowed to presume that all matters relating to such notice do
not constitute material, non-public information relating to the Company or its
Subsidiaries. Nothing contained in this Section 29 shall limit any obligations
of the Company, or any rights of the Holder, under Section 4.3 of the Securities
Purchase Agreement.

 

[Signature page follows]

 

  26

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
the Issuance Date set out above.

 

 

MULTIMEDIA PLATFORMS, INC.

 

        By: /s/ Robert Blair

 

 

Name:

Robert Blair

 

 

Title:

Chief Executive Officer

 

 

  27

 

 

EXHIBIT I

 

MULTIMEDIA PLATFORMS, INC.

CONVERSION NOTICE

 

Reference is made to the Senior Convertible Note (the “Note”) issued to the
undersigned by Multimedia Platforms, Inc., a Nevada corporation (the “Company”).
In accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the Note indicated
below into shares of Common Stock, $0.001 par value per share (the “Common
Stock”), of the Company, as of the date specified below. Capitalized terms not
defined herein shall have the meaning as set forth in the Note.

 

Date of Conversion:

 

Aggregate Principal to be converted:

 

Aggregate accrued and unpaid Interest and accrued and unpaid Late Charges with
respect to such portion of the Aggregate Principal and such Aggregate Interest
to be converted:

 

AGGREGATE CONVERSION AMOUNT TO BE CONVERTED:

 

Please confirm the following information:

 

Conversion Price:

 

Number of shares of Common Stock to be issued:

 

Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:

 

Issue to:

                               

 

Facsimile Number:

 

Holder:

 

By:

 

Title:

 

Dated:

 

Account Number:

 (if electronic book entry transfer)

 

Transaction Code Number:

 (if electronic book entry transfer)

 

  28

 

 

EXHIBIT II

 

MULTIMEDIA PLATFORMS, INC.

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Conversion Notice and hereby directs
_________________ to issue the above indicated number of shares of Common Stock
in accordance with the Transfer Agent Instructions dated _____________, 20__
from the Company and acknowledged and agreed to by ________________________.

 

 

 

MULTIMEDIA PLATFORMS, INC.

 

        By:

 

 

 

Name:

 

 

 

Title:

 

 

  29

 

 

Schedule 13(b)

 

MULTIMEDIA PLATFORMS, INC.

 

PERMITTED INDEBTEDNESS

 

As of the date hereof, the Company incurred an aggregate indebtedness of
$2,150,000 with various individuals and institutional investors, pursuant to
that certain securities purchase agreement for the purchase of certain 9%
convertible promissory notes and warrants.

 

 

29

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