compliance with the Securities Act of 1933, as amended (the “Securities Act”), and applicablestate securities laws. In the event of any proposed transfer of this Note, the Company mayrequire, prior to issuance of a new Note in the name of such other person, that it receivereasonable transfer documentation including opinions of counsel that the issuance of the Note insuch other name does not and will not cause a violation of the Securities Act or any applicablestate securities laws. Prior to due presentment for transfer of this Note, the Company may treatthe person in whose name this Note is duly registered on the Company’s Note register as the ownerhereof for the purpose of receiving payment as herein provided and for all other purposes, whetheror not this Note is overdue, and the Company shall not be affected by notice to the contrary.     4. Rate and Payment of Interest.Interest shall be at the rate of 8% per annum, whichwill accrue monthly. All interest accrued to the Holder hereunder shall be either (i) added to theprincipal amount then outstanding and paid in shares of the Company’s common stock, par value$.0001 per share (“Common Stock”) at the time of conversion of the Note, in accordance with theterms hereof, or (ii) paid in cash on the Maturity Date along with the then outstanding principalamount.     5. Conversion.          A. MandatoryConversion. Upon the occurrence of a Qualified Funding Event (as definedherein), this Note shall automatically convert into (i) shares of Common Stock, at a conversionprice equal to the lesser of (a) $0.80 per share of Common Stock (the “Fixed Conversion Price”) or(b) 80% of the price per share of the Common Stock sold in the Qualified Funding Event. As usedherein, “Qualified Funding Event” shall mean the closing of the sale of debt or equity in aregistered offering or pursuant to a private placement, which sale results in at least threemillion dollars ($3,000,000.00) of gross proceeds to the Company.          B. Voluntary Conversion. The Holder shall have no right to voluntarily convert thisNote into Common Stock until such time that the holders of the Senior Notes have converted suchSenior Notes or have been repaid, which will be no later than September 16, 2011. Thereafter, theHolder of this Note shall be entitled to voluntarily convert the face value of this Note or anyportion thereof, plus any accrued but unpaid interest on the date of conversion, into shares ofCommon Stock, at the Fixed Conversion Price, during the term of this Note.          C. Notice ofVoluntary Conversion. In order to voluntarily convert the Note intoCommon Stock, the Holder must, in accordance with the terms and conditions set forth in Section5(B) above and all other applicable terms and conditions set forth herein, deliver a notice ofconversion (the “Notice of Voluntary Conversion”) to the Company, in the form attached hereto asExhibit A. Notices of Voluntary Conversion shall be deemed delivered on the date sent, ifpersonally delivered or sent by facsimile (with confirmation of transmission) to the Company, tothe Company’s Chief Executive Officer at the Company’s principal place of business, or whenactually received if sent by another method. The Notice of Voluntary Conversion shall beaccompanied by either a copy of (which shall be followed by an original within one (1) businessday) or the original Note to be converted.
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          D. Conversion Procedure.               (i) *Voluntary Conversion*. In the event of voluntary conversion of this Note, the Companyshall instruct the Transfer Agent to issue the Common Stock within six (6) business days after theCompany receives a fully executed Notice of Voluntary Conversion and original Note. The CommonStock shall be issued with a restrictive legend indicating that it was issued in a transactionwhich is exempt from registration under the Securities Act and that it cannot be transferred unlessit is so registered, or an exemption from registration is available in the opinion of counsel tothe Company. The Common Stock shall be issued in the same name as the person who is the Holder ofthis Note unless, in the opinion of counsel to the Company, such transfer can be made in compliancewith applicable securities laws. The person in whose name the certificates of Common Stock are soregistered shall be treated as a common stockholder of the Company on the date the Common Stockcertificates are so issued.               (ii) *Mandatory Conversion*. In the event of mandatory conversion of this Note, the Companyshall instruct the Transfer Agent to issue the Common Stock within six (6) business days after theQualified Funding Event and surrender of the original Note by Holder to the Company. The CommonStock shall be issued with a restrictive legend indicating that it was issued in a transactionwhich is exempt from registration under the Securities Act and that it cannot be transferred unlessit is so registered, or an exemption from registration is available in the opinion of counsel tothe Company. The Common Stock shall be issued in the same name as the person who is the Holder ofthis Note unless, in the opinion of counsel to the Company, such transfer can be made in compliancewith applicable securities laws. The person in whose name the certificates of Common Stock are soregistered shall be treated as a common stockholder of the Company on the date the Common Stockcertificates are so issued.     6. Effect of Certain Events.          A. Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note isissued and outstanding and prior to conversion of all of the Notes, there shall be any merger,consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as aresult of which shares of Common Stock of the Company shall be changed into the same or a differentnumber of shares of another class or classes of stock or securities of the Company or anotherentity, or in case of any sale or conveyance of all or substantially all of the assets of theCompany other than in connection with a plan of complete liquidation of the Company, then theHolder of this Note shall thereafter have the right to receive upon conversion of this Note, uponthe basis and upon the terms and conditions specified herein and in lieu of the shares of CommonStock immediately theretofore issuable upon conversion, such stock, securities or assets which theHolder would have been entitled to receive in such transaction had this Note been converted in fullimmediately prior to such transaction (without regard to any limitations on conversion set forthherein), and in any such case appropriate provisions shall be made with respect to the rights andinterests of the Holder of this Note to the end that the provisions hereof (including, withoutlimitation, provisions for adjustment of the applicable conversion price and of the number ofshares issuable upon conversion of the Note) shall thereafter be
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applicable, as nearly as may be practicable in relation to any securities or assets thereafterdeliverable upon the conversion hereof. The Company shall not effect any transaction described inthis Section 6(A) unless (a) it first gives, to the extent practicable, thirty (30) days priorwritten notice (but in any event at least fifteen (15) days prior written notice) of the recorddate of the special meeting of shareholders to approve, or if there is no such record date, theconsummation of, such merger, consolidation, exchange of shares, recapitalization, reorganizationor other similar event or sale of assets (during which time the Holder shall be entitled to convertthis Note) and (b) the resulting successor or acquiring entity (if not the Company) assumes bywritten instrument the obligations of this Section 6(A). The above provisions shall similarly applyto successive consolidations, mergers, sales, transfers or share exchanges.          B. Adjustment Due to Distribution. If the Company shall declare or make anydistribution of its assets (or rights to acquire its assets) to holders of Common Stock as adividend, stock repurchase, by way of return of capital or otherwise (including any dividend ordistribution to the Company’s shareholders in cash or shares (or rights to acquire shares) ofcapital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Noteshall be entitled, upon any conversion of this Note after the date of record for determiningshareholders entitled to such Distribution, to receive the amount of such assets which would havebeen payable to the Holder with respect to the shares of Common Stock issuable upon such conversionhad such Holder been the holder of such shares of Common Stock on the record date for thedetermination of shareholders entitled to such Distribution     7. Reservation of Common Stock IssuableUpon Conversion. The Company shall at alltimes reserve and keep available out of its authorized but unissued shares of Common Stock, suchnumber of its shares of Common Stock as shall from time to time be sufficient to effect theconversion of all then outstanding Notes.     8. Unsecured Obligation. This Noteshall be unsecured. The Holder shall have norecourse against any specific assets of the Company in the event of nonpayment of the Note.     9. Direct Obligation. Subject toprior conversion, no provision of this Note shallalter or impair the obligation of the Company, which is absolute and unconditional, to pay theprincipal of, and interest on, this Note at the time, place, and rate, and in the manner hereinprescribed. This Note is a direct obligation of the Company.     10. Investment Representations.The Holder of the Note, by acceptance hereof,represents that the Holder is an “accredited investor” as defined in the Securities Act and therules promulgated thereunder, and agrees that this Note is being acquired for investment and notwith a view to the distribution thereof, and that such Holder will not offer, sell or otherwisedispose of this Note or the shares of Common Stock issuable upon conversion thereof except undercircumstances which will not result in a violation of the Securities Act or any applicable state“blue sky” laws or similar state laws relating to the sale of securities. Unless the issuance ofthe shares of Common Stock issuable upon conversion of this Note shall have been registered underthe Securities Act, the Holder of this Note, by tendering notice to the Company of the Holder’sintent to convert all or part of this Note pursuant to Section 5(B) hereof, shall be
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deemed to represent to the Company that the Holder is acquiring such shares of Common Stockfor investment and not with a view to the distribution thereof     11. Governing Law; Jurisdiction.This Note shall be governed by and construed inaccordance with the laws of the State of Florida. Each of the parties consents to the jurisdictionof the federal courts whose districts encompass any part of Palm Beach County, Florida or the statecourts of the State of Florida sitting in Palm Beach County in connection with any dispute arisingunder this Note and hereby waives, to the maximum extent permitted by law, any objection, includingany objection based on *forum non conveniens,*to the bringing of any such proceeding in suchjurisdictions.     12. Default. Each of the followingshall constitute an “Event of Default”:               (i) the Company fails to pay the principal or accrued interest on this Note on the MaturityDate;               (ii) the Company commences any voluntary proceeding under any bankruptcy, reorganization,insolvency, readjustment of debt, receivership, dissolution, or liquidation law or statute, of anyjurisdiction, whether now or subsequently in effect; or the Company is adjudicated insolvent orbankrupt by a court of competent jurisdiction; or the Company petitions or applies for, acquiescesin, or consents to, the appointment of any receiver or trustee of the Company for all orsubstantially all of its property or assets; or the Company makes an assignment for the benefit ofits creditors; or the Company is unable to pay its debts as they mature;               (iii) there is commenced against the Company any proceeding relating to the Company under anybankruptcy, reorganization, insolvency, readjustment of debt, receivership, dissolution, orliquidation law or statute, of any jurisdiction, whether now or subsequently in effect, and theproceeding remains undismissed for a period of sixty (60) days or the Company by any act indicatesits consent to, approval of, or acquiescence in, the proceedings; or a receiver or trustee isappointed for the Company for all or substantially all of its property or assets, and thereceivership or trusteeship remains undischarged for a period of sixty (60) days; or a warrant ofattachment, execution or similar process is issued against any substantial part of the property orassets of the Company, and the warrant or similar process is not dismissed or bonded within sixty(60) days after the levy;               (iv) the Company shall fail to perform or observe, in any material respect, any covenant,term, provision, condition, agreement or obligation of the Company under this Note and such failureshall continue uncured for a period of thirty (30) days after notice from the Holder of suchfailure;               (v) any governmental agency or any court of competent jurisdiction at the instance of anygovernmental agency shall assume custody or control of the whole or substantially all of theproperties or assets of the Company;then, or at any time thereafter, and in each and every such case, unless such Event of Defaultshall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver ofany subsequent default), this Note shall bear interest at a rate of fifteen percent (15%)
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(the “Default Rate”) and at the option of the Holderand in the Holder’s sole discretion, theHolder may consider this Note immediately due and payable, without presentment, demand, protest ornotice of any kind, all of which are hereby expressly waived, anything herein or in any otherinstruments to the contrary notwithstanding, and the Holder may immediately enforce any and all ofthe Holder’s rights and remedies provided herein or any other rights or remedies afforded by law.     13. Collection Costs.In the event an Event of Default has occurred and is ongoingand has not been waived by Holder, the Holder shall be entitled to collect from the Company allcosts and expenses incurred by Holder in enforcing its rights hereunder, including reasonableattorneys’ fees.[SIGNATURES FOLLOW ON NEXT PAGE]
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     **IN WITNESS WHEREOF**, the Company has caused this instrument to be duly executed by an officerthereunto duly authorized.Effective as of this                      day of                                          ,      **VICOR TECHNOLOGIES, INC.**