Unassociated Document


    NEITHER
      THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
      LAWS AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF SUCH
      REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND STATE SECURITIES
      LAWS
      OR SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
      APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
      REGISTRATION IS NOT REQUIRED.

     

    


    DRIFTWOOD
      VENTURES, INC.

    SENIOR
      SECURED CONVERTIBLE PROMISSORY NOTE

     

    
      	$______.00	
               July
                __ ,
                2008

            


    

     

    FOR
      VALUE
      RECEIVED, Driftwood Ventures, Inc., a Delaware corporation (the “Company”),
      hereby
      promises to pay to the order of _________ (or his or its successors or assigns,
      the “Holder”),
      the
      principal amount of _______ Dollars ($_______), plus interest in arrears from
      and including the date hereof on the principal balance from time to time
      outstanding, computed daily, at a rate per annum equal to five percent (5%)
      for
      the time period beginning on the date hereof and ending on the Maturity Date.
      This Senior Secured Convertible Secured Promissory Note (this “Note”)
      may not
      be prepaid in whole or in part without the consent of the Requisite Holders
      (as
      defined in Section 8 hereof). Interest shall be calculated on the basis of
      actual number of days elapsed over a year of 365 days. Notwithstanding any
      other
      provision of this Note, the Holder hereof does not intend to charge and the
      Company shall not be required to pay any interest or other fees or charges
      in
      excess of the maximum interest permitted by applicable law, and any payments
      in
      excess of such maximum shall be refunded to the Company or credited to reduce
      principal hereunder. All payments received by the Holder hereunder will be
      applied first to costs of collection, if any, then to interest and the balance
      to principal.

     

    This
      Note
      is one of a series of Senior Secured Convertible Promissory Notes of like tenor
      (collectively, the “Notes”)
      to be
      issued by the Company pursuant to the terms of that certain Note Purchase
      Agreement dated as of July __, 2008 (as may be amended and/or restated from
      time
      to time, the “Purchase
      Agreement”)
      among
      the Company and the purchasers set forth on the Schedule of Purchasers thereto.
      Capitalized terms not otherwise defined herein shall have the respective
      meanings ascribed to such terms in the Purchase Agreement. By
      acceptance of this Note, the Holder and the Company each hereby agree that
      each
      of the Notes shall rank equally and ratably without priority over one another,
      and the Company covenants and agrees that none of the Notes shall be paid,
      in
      whole or in part, unless a reasonably equivalent, pro rata payment is made
      with
      respect to all other Notes so as to maintain as near as possible the amount
      of
      the debt owing under the Notes pro rata according to the respective balances
      owed as of the date immediately prior to such payment. This
      Note
      will be registered on the books of the Company or its agent as to principal
      and
      interest. Any transfer of this Note may be effected only by surrender of this
      Note to the Company and reissuance of a new Note to the transferee. Payments
      of
      principal and interest will be made by wire transfer in immediately available
      United States funds transferred to the account of the Holder, which account
      information shall have been furnished to the Company by the Holder for that
      purpose. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    This
      Note
      is secured by, and entitled to the benefits of, a Security Agreement (the
“Security
      Agreement”),
      dated
      as of July __, 2008.

     

    1. Maturity.
      Unless
      earlier converted as provided in Section 2 herein, the entire
      outstanding principal balance hereof, together with all accrued and unpaid
      interest thereon, shall be due and payable on
      the
      earlier of (i) July
      __,
      2009,
      unless
      such date is extended to a later date in the sole discretion of the Requisite
      Holders (such
      original date or such later date, the “Maturity
      Date”)
      or
      (ii)
      the occurrence of an Event of Default (as defined in Section 3). In order to
      extend the Maturity Date, the Requisite Holders shall give written notice (an
      “Extension
      Notice”)
      to the
      Company of the election and the date to which they elect to extend the Maturity
      Date and, following such extension, every reference in the Note Purchase
      Agreement and the Notes to the Maturity Date shall be deemed to refer to the
      Maturity Date set forth in the Extension Notice. The Requisite Holders may
      elect
      to extend the Maturity date on successive occasions.

    


    2. Conversion
      upon Investor Sale.

    


    (a) General.
      Upon
      the occurrence of an Investor Sale (as defined below), the entire outstanding
      principal amount of this Note and any accrued interest thereon (the
“Note
      Balance”)
      shall
      automatically be converted into fully paid and non-assessable shares of capital
      stock of the Company. The type and class of capital stock of the Company to
      be
      issued to the holder of this Note upon conversion pursuant to this Section
      2(a)
      (and the rights and privileges of the holders thereof) shall be identical to
      the
      type and class of the capital stock issued by the Company in connection with
      the
      Investor Sale (the “Investor
      Stock”).
      Upon
      such conversion of this Note, subject to the provisions of Section 2(b) hereof,
      the holder of this Note shall be entitled to receive a number of shares of
      Investor Stock determined by dividing (A) the Note Balance as of the Investor
      Conversion Date (as defined below) by (B) the lesser of (i) an amount equal
      to
      the price per share of Investor Stock paid by the purchasers of such shares
      in
      connection with the Investor Sale, or (ii) $2.00, (such lesser amount, the
      “Investor
      Price”);
      provided, that in the event that the Investor Sale is for less than $1.00 per
      share, then this Note will only be automatically convertible with the consent
      of
      the Company.

    


    (b) Fractional
      Shares.
      No
      fractional shares of capital stock of the Company shall be issued upon
      conversion of this Note. In lieu of any fractional shares to which the holder
      would otherwise be entitled, the Company shall pay cash equal to such fraction
      multiplied by the Investor Price.

    


    (c) Mechanics
      of Conversion; Investor Sale.

    


    (i) Upon
      the
      closing of an Investor Sale (the “Investor
      Conversion Date”)
      this
      Note shall be converted automatically without any further action by the holder
      and whether or not this Note is surrendered to the Company or the transfer
      agent
      for this Note, provided, however, that the Company shall not be obligated to
      issue a certificate or certificates evidencing the shares of Investor Stock
      into
      which this Note is convertible unless this Note is delivered to the Company,
      or
      the holder notifies the Company that the Note has been lost, stolen, or
      destroyed and executes and delivers an agreement satisfactory to the Company
      to
      indemnify the Company from any loss incurred by it in connection therewith
      and,
      if the Company so elects, provides an appropriate indemnity.

     

    
      
        
        

      

      
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    (ii) The
      Company shall cause notice of the Investor Sale to be mailed to the registered
      holder of this Note, at such holder’s address appearing in the records of the
      Company, as promptly as practicable after the Investor Conversion Date.
      Thereafter, the holder shall surrender this Note at the place designated in
      such
      notice, together with a written notice by the holder of this Note stating such
      holder’s name or the names of his or its nominees in which such holder wishes
      the certificate or certificates for shares of Investor Stock to be issued.
      If
      required by the Company, the Note surrendered shall be endorsed or accompanied
      by a written instrument or instruments of surrender, in form satisfactory to
      the
      Company, duly executed by the registered holder or his or its attorney duly
      authorized in writing. The Company shall, as soon as practicable after such
      surrender, issue and deliver to such holder of this Note, or to his or its
      nominees, a certificate or certificates for the number of shares of Investor
      Stock to which such holder shall be entitled, together with cash in lieu of
      any
      fractional share.

    


    (iii) Upon
      authorization of the sale of shares of its capital stock in the Investor Sale,
      for the purpose of effecting the conversion of this Note as provided in Section
      2(a), the Company shall have (A) authorized a sufficient number of shares of
      Investor Stock to effect the conversion of the Note Balance, (B)
      reserved such stock as to which the Holder would be entitled upon conversion
      of
      such Investor Stock and (C) taken all other actions reasonably requested by
      the
      Holder to effect the foregoing. The Company shall take all such reasonable
      actions as may be necessary to assure that all Investor Stock which may be
      issuable upon the conversion of this Note and all shares of stock issuable
      upon
      conversion or exercise thereof may be issued without violation of any applicable
      law or governmental regulation.

    


    (iv) Immediately
      upon the Investor Conversion Date, this Note shall no longer be deemed to be
      outstanding and all rights with respect to this Note shall immediately cease
      and
      terminate on the Investor Conversion Date, except only the right of the holder
      to receive the shares of Investor Stock to which it is entitled as a result
      of
      the conversion on the Investor Conversion Date, together with any cash in lieu
      of fractional shares.

    


    (v) The
      Company shall pay any and all issue and other taxes that may be payable in
      respect of any issuance or delivery of shares of Investor Stock upon conversion
      of this Note pursuant to Section 2(a). The Company shall not, however, be
      required to pay any tax which may be payable in respect of any transfer involved
      in the issuance and delivery of shares of Investor Stock in a name other than
      that of the registered holder of this Note, and no such issuance or delivery
      shall be made unless and until the person or entity requesting such issuance
      has
      paid to the Company the amount of any such tax or has established, to the
      satisfaction of the Company, that such tax has been paid.

     

    
      
        
        

      

      
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    (d) Investor
      Sale. 
      An
“Investor
      Sale”
shall
      mean and include the sale of shares of capital stock of the Company (other
      than
      a sale of shares of the Company ‘s Common Stock, $0.001 par value per share (the
“Common
      Stock”),
      to
      officers, directors or employees of, or consultants to, the Company in
      connection with their provision of services to the Company), in one transaction
      or series of related transactions, which sale or sales result in gross proceeds
      to the Company of at least Ten Million Dollars ($10,000,000). 

     

    3. Events
      of Default.
      Notwithstanding any provision of this Note to the contrary, the outstanding
      principal and accrued interest under this Note shall become due and payable
      without notice or demand, upon the happening of any one of the following
      specified events (each, an “Event
      of Default”):

     

    (a) the
      Company fails to pay any amount of principal or interest due hereunder when
      due;

     

    (b) any
      representation or warranty made by the Company in the Purchase Agreement or
      the
      Security Agreement was untrue or inaccurate in any material respect when
      made;

     

    (c) the
      Company’s breach or violation of any other covenant, agreement or condition
      under this Note, the Warrant or under the Purchase Agreement or the Security
      Agreement, which breach or violation is not cured within ten (10) days after
      written notice of such default from the Requisite Holders;

     

    (d) any
      of
      the Company’s indebtedness for borrowed money in excess of $100,000 is
      accelerated as a result of a default or breach of or under any agreement or
      instrument evidencing or relating to such borrowed money;

     

    (e) the
      Company admits in writing its inability to pay its debts as they become due,
      or
      makes a general assignment for the benefit of creditors; 

     

    (f) the
      Company commences any case or other proceeding seeking reorganization,
      arrangement, adjustment, liquidation, dissolution or composition of its company
      structure or its debts under any law relating to bankruptcy, insolvency,
      reorganization or relief of debtors, or seeking appointment of a receiver,
      trustee, custodian or other similar official for it or for all or any part
      of
      its property, or shall take any action to authorize any of the foregoing;
      or

     

    (g) any
      case
      or proceeding is commenced against the Company to have an order for relief
      entered against it as debtor or seeking reorganization, arrangement, adjustment,
      liquidation, dissolution or composition of its structure or its debts under
      any
      law relating to bankruptcy, insolvency, reorganization or relief of debtors,
      or
      seeking other similar official relief for it or any part of its property, and
      such case or proceeding (x) results in the entry of an order for relief against
      it which is not fully stayed within five (5) business days after the entry
      thereof or (y) is not dismissed within sixty (60) days of
      commencement.

     

    4. New
      Note.
      Upon
      receipt of evidence reasonably satisfactory to the Company of the loss, theft,
      destruction or mutilation of this Note, the Company will issue a new promissory
      note, of like tenor and amount and dated the original date of this Note, in
      lieu
      of such lost, stolen, destroyed or mutilated Note, and in such event the Holder
      thereof agrees to indemnify and hold harmless the Company in respect of any
      such
      lost, stolen, destroyed or mutilated Note.

     

    
      
        
        

      

      
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    5. Expenses
      of Collection.
      The
      Company agrees to pay all of the Holder’s reasonable costs in collecting and
      enforcing this Note, including all attorney’s fees and
      disbursements.

     

    6. Notices.
      All
      notices required or permitted hereunder shall be in writing and shall be deemed
      effectively given: (a) upon personal delivery to the party to be notified,
      (b)
      when sent by confirmed telex, electronic mail or facsimile if sent during normal
      business hours of the recipient, if not, then on the next business day, (c)
      five
      (5) days after having been sent by registered or certified mail, return receipt
      requested, postage prepaid, or (d) one (1) day after deposit with a nationally
      recognized overnight courier, specifying next day delivery, with written
      verification of receipt. All communications shall be sent to the Company at
      Driftwood Ventures, Inc. 2121 Avenue of the Stars, Suite 2550, Los Angeles,
      CA,
      and to Holder at the address(es) set forth on the Schedule of Purchasers
      attached to the Purchase Agreement or at such other address(es) as the Company
      or Holder may designate by ten (10) days advance written notice to the other
      parties hereto.
      In
      addition to any notice otherwise required or permitted hereunder, the Company
      shall give the Holder written notice not less than ten business days prior
      to
      the consummation of any Investor Sale.

     

    7. Waiver
      by Company.
      The
      Company hereby expressly waives presentment, demand, and protest, notice of
      demand, dishonor and nonpayment of this Note, and all other notices or demands
      of any kind in connection with the delivery, acceptance, performance, default
      or
      enforcement hereof, and hereby consents to any delays, extensions of time,
      renewals, waivers or modifications that may be granted or consented to by the
      Holder hereof with respect to the time of payment or any other provision
      hereof.

     

    8. Amendment
      and Waiver.
      Any
      term, covenant, agreement or condition of the Notes may, with the consent of
      the
      Company, be amended or compliance therewith may be waived (either generally
      or
      in a particular instance and either retroactively or prospectively), by one
      or
      more substantially concurrent written instruments signed by the holders of
      Notes
      representing at least a seventy-five percent (75%) of the aggregate principal
      amount then outstanding under all Notes (the “Requisite
      Holders”),
      provided
      that (a)
      without the consent of the holders of all of the Notes at the time outstanding
      no such amendment or waiver shall (i) decrease the principal amount due under
      or
      the rate of interest on any Note, (ii) change the pro rata payment terms of
      the
      Notes or (iii) lower the percentage of holders of Notes required to approve
      any
      such amendment or effect any such waiver and (b) no such amendment or waiver
      shall extend to or affect any obligation not expressly amended or waived or
      impair any right consequent thereto. Originals or true and correct copies of
      any
      amendment, waiver or consent effected pursuant to this Section 8 shall be
      delivered by the Company to each holder of Note promptly (but in any event
      not
      later than five days) following the effective date thereof.

     

    9. Delays
      or Omissions.
      It is
      agreed that no delay or omission to exercise any right, power or remedy accruing
      to the Holder, upon any breach or default of the Company under this Note shall
      impair any such right, power or remedy, nor shall it be construed to be a waiver
      of any such breach or default, or any acquiescence therein, or of or in any
      similar breach or default thereafter occurring; nor shall any waiver of any
      single breach or default be deemed a waiver of any other breach or default
      theretofore or thereafter occurring.

     

    
      
        
        

      

      
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    10. Severability.
      In the
      event any one or more of the provisions of this Note shall for any reason be
      held to be invalid, illegal or unenforceable, in whole or in part or in any
      respect, or in the event that any one or more of the provisions of this Note
      operate or would prospectively operate to invalidate this Note, then and in
      any
      such event, such provision(s) only shall be deemed null and void and shall
      not
      affect any other provision of this Note and the remaining provisions of this
      Note shall remain operative and in full force and effect and in no way shall
      be
      affected, prejudiced, or disturbed thereby.

     

    11. Descriptive
      Headings.
      Section
      headings appearing in this Note have been inserted for convenience of reference
      only and shall be given no substantive meaning or significance whatsoever in
      construing the terms and provisions of this Note.

     

    12. Governing
      Law.
      This
      Note shall be governed by and construed and enforced in accordance with the
      laws
      of the State of Delaware, without regard to its conflicts of laws
      provisions.

     

    [Remainder
      of Page Intentionally Left Blank]

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the Company has signed this Note as an instrument under seal
      as
      of the date written above.

    
      	 	 	 
	 	DRIFTWOOD
              VENTURES, INC.
	 
 	 
 	 
 
	 	By:  	 
              
	 	Name: 	  
	 	Title: 	 



    

     

     

    
      
        
        

      

      
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