Ironwood Gold Corp. - Exhibit 10.22 - Filed by newsfilecorp.com






NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS
SECURITY IS CONVERTIBLE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO BORROWER. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES. 

Original Issue Date: March 21, 2014 
Original
Conversion Price (subject to adjustment herein): $0.18 


$1,000,000 

SECURED CONVERTIBLE NOTE 
DUE March 21, 2016



             THIS
CONVERTIBLE NOTE is one of a series of duly authorized and validly issued Notes
of Ironwood Gold Corp., a Nevada corporation, (the “Borrower”), having
its principal place of business at Box 730 411 Brink Street, Ashcroft, BC V0K
1A0, due March 21, 2016 (this note, the “Note” and, collectively
with the other notes of such series, the “Notes”). 

             FOR
VALUE RECEIVED, Borrower promises to pay to Alpha Capital Anstalt or its
registered assigns (the “Holder”), or shall have paid pursuant to the
terms hereunder, the principal sum of $1,000,000 on March 21, 2016
(the “Maturity Date”) or such earlier date as this Note is required or
permitted to be repaid as provided hereunder, and to pay interest to the Holder
on the aggregate unconverted and then outstanding principal amount of this Note
in accordance with the provisions hereof. 

             
The Holder of this Note has been granted a security interest in assets of the
Borrower. 

            
This Note is subject to the following additional provisions: 

             Section
1.         Definitions. For
the purposes hereof, in addition to the terms defined elsewhere in this Note,
(a) capitalized terms not otherwise defined herein shall have the meanings set
forth in the Purchase Agreement and (b) the following terms shall have the
following meanings: 

            
“Alternate Consideration” shall have the meaning set forth in Section
5(e). 

             “Bankruptcy
Event” means any of the following events: (a) Borrower or any Subsidiary
thereof commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to
Borrower or any Subsidiary thereof, (b) there is commenced against Borrower or
any Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after
commencement, (c) Borrower or any Subsidiary thereof is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case or
proceeding is entered, (d) Borrower or any Subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial part of its
property that is not discharged or stayed within 60 calendar days after such
appointment, (e) Borrower or any Subsidiary thereof makes a general assignment
for the benefit of creditors, (f) Borrower or any Subsidiary thereof calls a
meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts or (g) Borrower or any Subsidiary thereof, by any act
or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action for
the purpose of effecting any of the foregoing. 

1




            
“Base Conversion Price” shall have the meaning set forth in Section 5(b).


            
“Beneficial Ownership Limitation” shall have the meaning set forth in
Section 4(d). 

             “Business
Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close. 

            
“Buy-In” shall have the meaning set forth in Section 4(c)(v). 

             “Change
of Control Transaction” means, other than by means of conversion or exercise
of the Notes and the Securities issued together with the Notes, the occurrence
after the date hereof of any of (a) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether through legal
or beneficial ownership of capital stock of Borrower, by contract or otherwise)
of in excess of 50% of the voting securities of Borrower, (b) Borrower merges
into or consolidates with any other Person, or any Person merges into or
consolidates with Borrower and, after giving effect to such transaction, the
stockholders of Borrower immediately prior to such transaction own less than 50%
of the aggregate voting power of Borrower or the successor entity of such
transaction, (c) Borrower sells or transfers all or substantially all of its
assets to another Person and the stockholders of Borrower immediately prior to
such transaction own less than 50% of the aggregate voting power of the
acquiring entity immediately after the transaction, (d) a replacement at one
time or within a three year period of more than one-half of the members of the
Board of Directors which is not approved by a majority of those individuals who
are members of the Board of Directors on the Original Issue Date (or by those
individuals who are serving as members of the Board of Directors on any date
whose nomination to the Board of Directors was approved by a majority of the
members of the Board of Directors who are members on the date hereof), or (e)
the execution by Borrower of an agreement to which Borrower is a party or by
which it is bound, providing for any of the events set forth in clauses (a)
through (d) above. 

            
“Conversion” shall have the meaning ascribed to such term in Section 4.


            
“Conversion Date” shall have the meaning set forth in Section 4(a). 

            
“Conversion Price” shall have the meaning set forth in Section 4(b). 

             “Conversion
Shares” means, collectively, the shares of Common Stock issuable upon
conversion of this Note in accordance with the terms hereof. 

            
“Dilutive Issuance” shall have the meaning set forth in Section 5(b).


2




            
“Dilutive Issuance Notice” shall have the meaning set forth in Section
5(b). 

             “Equity
Conditions” means, during the period in question, (a) Borrower shall have
duly honored all conversions scheduled to occur or occurring by virtue of one or
more Notices of Conversion of the applicable Holder on or prior to the dates so
requested or required, if any, (b) Borrower shall have paid all liquidated
damages and other amounts owing to the applicable Holder in respect of this Note
and the other Transaction Documents, (c)(i) there is an effective registration
statement pursuant to which the Holders are permitted to utilize the prospectus
thereunder to resell all of the Underlying Shares (and Borrower believes, in
good faith, that such effectiveness will continue uninterrupted for the
foreseeable future), or (ii) all of the Underlying Shares (and shares issuable
in lieu of cash payments of interest) may be resold pursuant to Rule 144 without
volume or manner-of-sale restrictions or current public information requirements
as determined by the counsel to Borrower as set forth in a written opinion
letter to such effect, addressed and acceptable to the Transfer Agent and the
affected Holders, (d) the Common Stock is trading on a Trading Market and all of
the shares issuable pursuant to the Transaction Documents are listed or quoted
for trading on such Trading Market (and Borrower believes, in good faith, that
trading of the Common Stock on a Trading Market will continue uninterrupted for
the foreseeable future), (e) there is a sufficient number of authorized, but
unissued and otherwise unreserved, shares of Common Stock for the issuance of
all of the shares then issuable pursuant to the Transaction Documents, (f) an
Event of Default has not occurred, whether or not such Event of Default has been
cured, (g) there is no existing Event of Default and no existing event which,
with the passage of time or the giving of notice, would constitute an Event of
Default, (h) the issuance of the shares in question to the applicable Holder
would not exceed the Beneficial Ownership Limitation, (i) there has been no
public announcement of a pending or proposed Fundamental Transaction or Change
of Control Transaction that has not been consummated, (j) the applicable Holder
is not in possession of any information provided by Borrower that constitutes,
or may constitute, material non-public information, and (k) for each Trading Day
during a period of 5 consecutive Trading Days prior to the Mandatory Conversion
Notice Date, the daily VWAP for the Common Stock on the principal Trading Market
is equal to or greater than the then in effect Conversion Price. 

            
“Event of Default” shall have the meaning set forth in Section 8(a). 

            
“Fundamental Transaction” shall have the meaning set forth in Section
5(e). 

            
“Interest Conversion Price” shall have the meaning set forth in Section
2(a). 

            
“Interest Payment Date” shall have the meaning set forth in Section 2(a).


            
“Interest Share Amount” shall have the meaning set forth in Section 2(a).


             
“Mandatory Default Amount” means the sum of (a) the greater of (i) the
outstanding principal amount of this Note divided by the Conversion Price on the
date the Mandatory Default Amount is either (A) demanded (if demand or notice is
required to create an Event of Default) or otherwise due or (B) paid in full,
whichever has a lower Conversion Price, multiplied by the VWAP on the date the
Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in
full, whichever has a higher VWAP, or (ii) 115% of the outstanding principal
amount of this Note and (b) all other amounts, costs, expenses and liquidated
damages due in respect of this Note. 

3




            
“New York Courts” shall have the meaning set forth in Section 9(d). 

            
“Note Register” shall have the meaning set forth in Section 2(c). 

            
“Notice of Conversion” shall have the meaning set forth in Section 4(a).


             “Original
Issue Date” means the date of the first issuance of the Notes, regardless of
any transfers of any Note and regardless of the number of instruments which may
be issued to evidence such Notes. 

            
“Other Holders” means holders of Other Notes. 

             “Other
Notes” means Notes nearly identical to this Note issued to other Holders
pursuant to the Purchase Agreement. 

             “Permitted
Indebtedness” means (v) (A) Mortgage No. CA3349164 in favour of Kokanee
Mortgage MIC Ltd.; (B) Assignment of Rents No. CA3349165 in favour of Kokanee
Mortgage MIC Ltd.; (C) Mortgage No. CA3349298 in favour of Pioneer West Mortgage
Investment Corporation; and (D) Assignment of Rents No. Ca3349299 in favour of
Pioneer West Mortgage Investment Corporation, (w) trade payables in the ordinary
course of business, (x) any liabilities for borrowed money or amounts owed not
in excess of $100,000 in the aggregate (other than trade accounts payable
incurred in the ordinary course of business), (y) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of others, whether
or not the same are or should be reflected in the Company’s consolidated balance
sheet (or the notes thereto) not affecting more than $100,000 in the aggregate,
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and (z)
the present value of any lease payments not in excess of $100,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any Subsidiary is in default with respect to any Indebtedness. 

             “Permitted
Lien” means the individual and collective reference to the following: (a)
Liens for taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of Borrower) have been
established in accordance with GAAP, (b) Liens imposed by law which were
incurred in the ordinary course of Borrower’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of Borrower’s business, and which
(x) do not individually or in the aggregate materially detract from the value of
such property or assets or materially impair the use thereof in the operation of
the business of Borrower and its consolidated Subsidiaries or (y) are being
contested in good faith by appropriate proceedings, which proceedings have the
effect of preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien, and (c) Liens incurred in connection
with Permitted Indebtedness under clauses (a), (b) thereunder, and Liens
incurred in connection with Permitted Indebtedness under clause (c) thereunder,
provided that such Liens are not secured by assets of Borrower or its
Subsidiaries other than the assets so acquired or leased. 

             “Purchase
Agreement” means the Securities Purchase Agreement, dated as of March 21,
2014 among Borrower and the original Holders, as amended, modified or
supplemented from time to time in accordance with its terms. 

4




             “Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. 

            
“Share Delivery Date” shall have the meaning set forth in Section
4(c)(ii). 

            
“Successor Entity” shall have the meaning set forth in Section 5(e). 

            
“Threshold Period” shall have the meaning set forth in Section 6(b). 

            
“Trading Day” means a day on which the principal Trading Market is open
for trading. 

             “Trading
Market” means any of the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the NYSE MKT, the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange, the OTC Bulletin Board, the OTCQB or the
OTCQX (or any successors to any of the foregoing). 

             “Underlying
Shares” means all of the Conversion Shares and all of the Warrant Shares
issuable upon exercise of the Warrants issued pursuant to the Purchase
Agreement. 

             “VWAP”
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)
if the OTC Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on the
OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then
reported on the OTCQX, OTCQB or OTC Pink Marketplace maintained by the OTC
Markets Group, Inc. (or a similar organization or agency succeeding to its
functions of reporting prices), the volume weighted average price of the Common
Stock on the first such facility (or a similar organization or agency succeeding
to its functions of reporting prices), or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchasers of a majority in interest of
the Securities then outstanding and reasonably acceptable to Borrower, the fees
and expenses of which shall be paid by Borrower. 

Section
2.         Interest. 

                             
a)         Interest in Cash or in
Kind. Holders shall be entitled to receive, and Borrower shall pay,
cumulative interest on the outstanding principal amount of this Note compounded
annually at the annual rate of 8% (all subject to increase as set forth in this
Note), payable quarterly on March 31, June 30, September 30, and December
31, beginning on the second such date after the Original Issue Date and on each
Conversion Date (with respect only to Note principal being converted) (each such
date, an “Interest Payment Date”) (if any Interest Payment Date is not a
Trading Day, the applicable payment shall be due on the next succeeding Trading
Day) in cash only, through six months after the Original Issue Date. Subsequent
to six (6) months after the Original Issue Date, such interest may be paid, at
the option of Borrower, in cash, in duly authorized, validly issued, fully paid
and non-assessable shares of Common Stock as set forth in this Section 2(a), or
a combination thereof in each case as provided in the next sentence (the amount
to be paid in shares of Common Stock, the “Interest Share Amount”). The
Common Stock to be paid in satisfaction of the Interest Share Amount shall be
valued solely for such purpose at the lower of (A) the Conversion Price in effect on
the Interest Payment Date, or (B) 90% of the VWAPs for the 10 consecutive
Trading Days ending on the Trading Day that is immediately prior to the Interest
Payment Date (the “Interest Conversion Price”). The Holders shall have
the same rights and remedies with respect to the delivery of any such shares as
if such shares were being issued pursuant to Section 6. Borrower may not pay
interest by delivery of Common Stock without the consent of the Holder in the
event that the Equity Conditions are not in effect on each day from the relevant
Interest Payment Date through the date the Interest Share Amount is delivered to
the Holder. Borrower must notify the Holder not less than ten (10) Trading Days
prior to an Interest Payment Date if it intends to pay interest due on such
Interest Payment Date by delivery of an Interest Share Amount. If Borrower fails
to provide such notice, the Holder may elect to receive the Interest Share
Amount in lieu of cash by notifying Borrower any time prior to the relevant
Interest Payment Date. Borrower may not pay any Interest Share Amount in excess
of the Beneficial Ownership Limitation, unless waived by Holder pursuant to
Section 4(d) hereof which waiver may not be effective with respect to the
Interest Share Amount prior to one year after the issue date of this Note. 

5




                             
b)         Payment Grace Period.
The Borrower shall have a ten (10) calendar day grace period to pay monetary
amounts due under this Note. Unless this Note specifically requires prior notice
or demand for a payment no notice will be required to be given and the grace
period shall commence from the date such monetary payment is due. 

                            
c)         Conversion Privileges.
The Conversion Rights set forth in Section 4 shall remain in full force and
effect immediately from the date hereof and until the Note is paid in full
regardless of the occurrence of an Event of Default. This Note shall be payable
in full on the Maturity Date, unless previously converted into Common Stock in
accordance with Section 4 hereof. 

                            
d)         Application of
Payments. Interest on this Note shall be calculated on the basis of a
360-day year and the actual number of days elapsed. Payments made in connection
with this Note shall be applied first to amounts due hereunder other than
principal and interest, thereafter to interest and finally to principal. 

                            
e)         Pari Passu. Except as
otherwise set forth herein, all payments made on this Note and the Other Notes
and all actions taken by the Borrower with respect to this Note and the Other
Notes, including but not limited to Mandatory Conversion, shall be made and
taken pari passu with respect to this Note and the Other Notes.
Notwithstanding anything to the contrary contained herein or in the Transaction
Documents, it shall not be considered non-pari passu for a Holder or Other
Holder to elect to receive interest paid in shares of Common Stock or for the
Borrower to actually pay interest in shares of Common Stock to such electing
Holder or Other Holder. 

                             
f)         Manner and Place of
Payment. Principal and interest on this Note and other payments in
connection with this Note shall be payable at the Holder’s offices as designated
above in lawful money of the United States of America in immediately available
funds without set-off, deduction or counterclaim. Upon assignment of the
interest of Holder in this Note, Borrower shall instead make its payment
pursuant to the assignee’s instructions upon receipt of written notice thereof.
Except as set forth herein, this Note may not be prepaid or mandatorily
converted without the consent of the Holder. 

Section
3.         Registration of
Transfers and Exchanges. 

             a)        
Different Denominations. This Note is exchangeable for an equal aggregate
principal amount of Notes of different authorized denominations, as requested by
the Holder surrendering the same. No service charge will be payable for such
registration of transfer or exchange. 

6




             b)        
Investment Representations. This Note has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the
Purchase Agreement and applicable federal and state securities laws and
regulations. 

             c)        
Reliance on Note Register. Prior to due presentment for transfer to
Borrower of this Note, Borrower and any agent of Borrower may treat the Person
in whose name this Note is duly registered on the Note Register as the owner
hereof for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Note is overdue, and neither Borrower nor any such
agent shall be affected by notice to the contrary. 

Section
4.         Conversion. 

             a)        
Voluntary Conversion. At any time after the Original Issue Date until
this Note is no longer outstanding, this Note shall be convertible, in whole or
in part, into shares of Common Stock at the option of the Holder, at any time
and from time to time (subject to the conversion limitations set forth in
Section 4(d) hereof). The Holder shall effect conversions by delivering to
Borrower a Notice of Conversion, the form of which is attached hereto as
Annex A (each, a “Notice of Conversion”), specifying therein the
principal amount of this Note to be converted and the date on which such
conversion shall be effected (such date, the “Conversion Date”).
If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion is deemed delivered
hereunder. To effect conversions hereunder, the Holder shall not be required to
physically surrender this Note to Borrower unless the entire principal amount of
this Note has been so converted. Conversions hereunder shall have the effect of
lowering the outstanding principal amount of this Note in an amount equal to the
applicable conversion. The Holder and Borrower shall maintain records showing
the principal amount(s) converted and the date of such conversion(s). Borrower
may deliver an objection to any Notice of Conversion within one (1) Business Day
of delivery of such Notice of Conversion. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and determinative in
the absence of manifest error. The Holder, and any assignee by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note may be less than the amount stated on
the face hereof. 

             b)        
Conversion Price. The conversion price for the principal and interest in
connection with voluntary conversions by the Holder shall equal $0.18,
subject to adjustment herein (the “Conversion Price”). 

            
c)         Mechanics of
Conversion. 

             i.        
Conversion Shares Issuable Upon Conversion of Principal Amount. The
number of Conversion Shares issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal
amount of this Note to be converted plus interest elected by the Holder to be
converted by (y) the Conversion Price. 

             ii.        
Delivery of Certificate Upon Conversion. Not later than three (3) Trading
Days after each Conversion Date (the “Share Delivery Date”), Borrower
shall deliver, or cause to be delivered, to the Holder a certificate or
certificates representing the Conversion Shares which, on or after the earlier
of (i) the six month anniversary of the Original Issue Date or (ii) the
Effective Date, shall be free of restrictive legends and trading restrictions
(other than those which may then be required by the Purchase Agreement)
representing the number of Conversion Shares being acquired upon the conversion
of this Note. On or after the earlier of (i) the six month anniversary of the
Original Issue Date or (ii) the Effective Date, Borrower shall use its best
efforts to deliver any certificate or certificates required to be delivered by
Borrower under this Section 4(c) electronically through the Depository Trust
Company or another established clearing corporation performing similar
functions. 

7




             iii.        
Failure to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to or as directed
by the applicable Holder by the Share Delivery Date, the Holder shall be
entitled to elect by written notice to Borrower at any time on or before its
receipt of such certificate or certificates, to rescind such Conversion, in
which event Borrower shall promptly return to the Holder any original Note
delivered to Borrower and the Holder shall promptly return to Borrower the
Common Stock certificates issued to such Holder pursuant to the rescinded
Conversion Notice. 

             iv.        
Obligation Absolute; Partial Liquidated Damages. Borrower’s obligations to issue
and deliver the Conversion Shares upon conversion of this Note in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any
other Person of any obligation to Borrower or any violation or alleged violation
of law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of Borrower to the
Holder in connection with the issuance of such Conversion Shares;
provided, however, that such delivery shall not operate as a
waiver by Borrower of any such action Borrower may have against the Holder. In
the event the Holder of this Note shall elect to convert any or all of the
outstanding principal amount hereof, Borrower may not refuse conversion based on
any claim that the Holder or anyone associated or affiliated with the Holder has
been engaged in any violation of law, agreement or for any other reason, unless
an injunction from a court, on notice to Holder, restraining and or enjoining
conversion of all or part of this Note shall have been sought and obtained, and
Borrower posts a surety bond for the benefit of the Holder in the amount of 125%
of the outstanding principal amount of this Note, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to the Holder to the extent it obtains judgment. In the absence of
such injunction, Borrower shall issue Conversion Shares or, if applicable, cash,
upon a properly noticed conversion. If Borrower fails for any reason to deliver
to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by
the Share Delivery Date, Borrower shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of principal amount
being converted, $10 per Trading Day (increasing to $20 per Trading Day on the
fifth (5th) Trading Day after such liquidated damages being to
accrue) for each Trading Day after such Share Delivery Date until such
certificates are delivered or Holder rescinds such conversion. Nothing herein
shall limit a Holder’s right to pursue actual damages or declare an Event of
Default pursuant to Section 8 hereof for Borrower’s failure to deliver
Conversion Shares within the period specified herein and the Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or injunctive
relief. The exercise of any such rights shall not prohibit the Holder from
seeking to enforce damages pursuant to any other Section hereof or under
applicable law. 

8




             v.        
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if
Borrower fails for any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if
after such Share Delivery Date the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise), or the Holder or Holder’s
brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Conversion Shares which the Holder
was entitled to receive upon the conversion relating to such Share Delivery Date
(a “Buy-In”), then Borrower shall (A) pay in cash to the Holder (in
addition to any other remedies available to or elected by the Holder) the
amount, if any, by which (x) the Holder’s total purchase price (including any
brokerage commissions) for the Common Stock so purchased exceeds (y) the product
of (1) the aggregate number of shares of Common Stock that the Holder was
entitled to receive from the conversion at issue multiplied by (2) the actual
sale price at which the sell order giving rise to such purchase obligation was
executed (including any brokerage commissions) and (B) at the option of the
Holder, either reissue (if surrendered) this Note in a principal amount equal to
the principal amount of the attempted conversion (in which case such conversion
shall be deemed rescinded) or deliver to the Holder the number of shares of
Common Stock that would have been issued if Borrower had timely complied with
its delivery requirements under Section 4(c)(ii). For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of this Note with respect to
which the actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of $10,000
under clause (A) of the immediately preceding sentence, Borrower shall be
required to pay the Holder $1,000. The Holder shall provide Borrower written
notice indicating the amounts payable to the Holder in respect of the Buy-In
and, upon request of Borrower, evidence of the amount of such loss. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to Borrower’s failure
to timely deliver certificates representing shares of Common Stock upon
conversion of this Note as required pursuant to the terms hereof. 

             vi.        
Reservation of Shares Issuable Upon Conversion. Borrower covenants that
it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock for the sole purpose of issuance upon conversion
of this Note as herein provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holder (and the other
holders of the Notes), not less than such aggregate number of shares of the
Common Stock as shall (subject to the terms and conditions set forth in the
Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 5) upon the conversion of the then outstanding principal
amount of this Note and interest which has accrued and would accrue on such
principal amount, assuming such principal amount was not converted through the
Maturity Date. Borrower covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly authorized, validly issued, fully paid
and nonassessable. 

9




             vii.        
Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of this Note. As to any fraction of a
share which the Holder would otherwise be entitled to purchase upon such
conversion, Borrower shall at its election, either pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Conversion Price or round up to the next whole share. 

             viii.        
Transfer Taxes and Expenses. The issuance of certificates for shares of
the Common Stock on conversion of this Note shall be made without charge to the
Holder hereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificates, provided that, Borrower
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of this Note so converted and
Borrower shall not be required to issue or deliver such certificates unless or
until the Person or Persons requesting the issuance thereof shall have paid to
Borrower the amount of such tax or shall have established to the satisfaction of
Borrower that such tax has been paid. Borrower shall pay all Transfer Agent fees
required for same-day processing of any Notice of Conversion. 

             d)        
Holder’s Conversion Limitations. Borrower shall not effect any conversion
of this Note, and a Holder shall not have the right to convert any portion of
this Note, to the extent that after giving effect to the conversion set forth on
the applicable Notice of Conversion, the Holder (together with the Holder’s
Affiliates, and any Persons acting as a group together with the Holder or any of
the Holder’s Affiliates) would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below). For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by the Holder and its
Affiliates shall include the number of shares of Common Stock issuable upon
conversion of this Note with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which are issuable upon
(i) conversion of the remaining, unconverted principal amount of this Note
beneficially owned by the Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
Borrower subject to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, any other Notes or
the Warrants) beneficially owned by the Holder or any of its Affiliates. Except
as set forth in the preceding sentence, for purposes of this Section 4(d),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. To the extent
that the limitation contained in this Section 4(d) applies, the determination of
whether this Note is convertible (in relation to other securities owned by the
Holder together with any Affiliates) and of which principal amount of this Note
is convertible shall be in the sole discretion of the Holder, and the submission
of a Notice of Conversion shall be deemed to be the Holder’s determination of
whether this Note may be converted (in relation to other securities owned by the
Holder together with any Affiliates) and which principal amount of this Note is
convertible, in each case subject to the Beneficial Ownership Limitation. To
ensure compliance with this restriction, the Holder will be deemed to represent
to Borrower each time it delivers a Notice of Conversion that such Notice of
Conversion has not violated the restrictions set forth in this paragraph and
Borrower shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this Section 4(d), in determining the number of outstanding shares of Common
Stock, the Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (i) Borrower’s most recent
periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public
announcement by Borrower, or (iii) a more recent written notice by Borrower or
Borrower’s transfer agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, Borrower shall within
two Trading Days confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion
or exercise of securities of Borrower, including this Note, by the Holder or its
Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership Limitation” shall be
9.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable upon conversion
of this Note held by the Holder. The Holder may decrease the Beneficial
Ownership Limitation at any time and the Holder, upon not less than 61 days’
prior notice to Borrower, may increase the Beneficial Ownership Limitation
provisions of this Section 4(d), provided that the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock upon conversion of this Note held by the Holder and the Beneficial
Ownership Limitation provisions of this Section 4(d) shall continue to apply.
Any such increase will not be effective until the 61st day after such
notice is delivered to Borrower. The Beneficial Ownership Limitation provisions
of this paragraph shall be construed and implemented in a manner otherwise than
in strict conformity with the terms of this Section 4(d) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with
the intended Beneficial Ownership Limitation contained herein or to make changes
or supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Note. 

10




Section
5.         Certain
Adjustments. 

             a)        
Stock Dividends and Stock Splits. If Borrower, at any time while this
Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution
or distributions payable in shares of Common Stock on shares of Common Stock or
any Common Stock Equivalents (which, for avoidance of doubt, shall not include
any shares of Common Stock issued by Borrower upon conversion of the Notes),
(ii) subdivides outstanding shares of Common Stock into a larger number of
shares, (iii) combines (including by way of a reverse stock split) outstanding
shares of Common Stock into a smaller number of shares or (iv) issues, in the
event of a reclassification of shares of the Common Stock, any shares of capital
stock of Borrower, then the Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
any treasury shares of Borrower) outstanding immediately before such event, and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to this
Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification. 

             b)        
Subsequent Equity Sales. If, at any time while this Note is outstanding,
Borrower or any Subsidiary, as applicable, sells or grants any option to
purchase or sells or grants any right to reprice, or otherwise disposes of or
issues (or announces any sale, grant or any option to purchase or other
disposition), any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock at an effective price per share that is lower
than the then Conversion Price (such lower price, the “Base Conversion
Price” and such issuances, collectively, a “Dilutive Issuance”) (if
the holder of the Common Stock or Common Stock Equivalents so issued shall at
any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are
issued in connection with such issuance, be entitled to receive shares of Common
Stock at an effective price per share that is lower than the Conversion Price,
such issuance shall be deemed to have occurred for less than the Conversion
Price on such date of the Dilutive Issuance), then the Conversion Price shall be
reduced to equal the Base Conversion Price. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued.
Notwithstanding the foregoing, no adjustment will be made under this Section
5(b) in respect of an Exempt Issuance. If Borrower enters into a Variable Rate
Transaction, despite the prohibition set forth in the Purchase Agreement,
Borrower shall be deemed to have issued Common Stock or Common Stock Equivalents
at the lowest possible conversion price at which such securities may be
converted or exercised. Borrower shall notify the Holder in writing, no later
than the Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 5(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice, the “Dilutive Issuance Notice”). For
purposes of clarification, whether or not Borrower provides a Dilutive Issuance
Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive
Issuance, the Holder is entitled to receive a number of Conversion Shares based
upon the Base Conversion Price on or after the date of such Dilutive Issuance,
regardless of whether the Holder accurately refers to the Base Conversion Price
in the Notice of Conversion. 

11




             c)        
Subsequent Rights Offerings. In addition to any adjustments pursuant to
Section 5(a) above, if at any time Borrower grants, issues or sells any Common
Stock Equivalents or rights to purchase stock, warrants, securities or other
property pro rata to the record holders of any class of shares of Common Stock
(the “Purchase Rights”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete conversion of this Note (without regard
to any limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any
such Purchase Right would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such shares of
Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation). 

             d)        
Pro Rata Distributions. During such time as this Note is outstanding, if
Borrower shall declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of shares of Common Stock, by way
of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”), at any time
after the issuance of this Note, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Note (without regard to
any limitations on exercise hereof, including without limitation, the Beneficial
Ownership Limitation) immediately before the date of which a record is taken for
such Distribution, or, if no such record is taken, the date as of which the
record holders of shares of Common Stock are to be determined for the
participation in such Distribution (provided, however, to the
extent that the Holder's right to participate in any such Distribution would
result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Distribution to such extent (or in
the beneficial ownership of any shares of Common Stock as a result of such
Distribution to such extent) and the portion of such Distribution shall be held
in abeyance for the benefit of the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation). 

12




             e)        
Fundamental Transaction. If, at any time while this Note is outstanding,
(i) Borrower, directly or indirectly, in one or more related transactions
effects any merger or consolidation of Borrower with or into another Person,
(ii) Borrower, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct
or indirect, purchase offer, tender offer or exchange offer (whether by Borrower
or another Person) is completed pursuant to which holders of Common Stock are
permitted to sell, tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the outstanding
Common Stock, (iv) Borrower, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or recapitalization of
the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or
property, (v) Borrower, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including
any shares of Common Stock 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) (each a
“Fundamental Transaction”), then, upon any subsequent conversion of this
Note, the Holder shall have the right to receive, for each Conversion Share that
would have been issuable upon such conversion immediately prior to the
occurrence of such Fundamental Transaction (without regard to any limitation in
Section 4(d) and Section 4(e) on the conversion of this Note), the number of
shares of Common Stock of the successor or acquiring corporation or of Borrower,
if it is the surviving corporation, and any additional consideration (the
“Alternate Consideration”) receivable as a result of such Fundamental
Transaction by a holder of the number of shares of Common Stock for which this
Note is convertible immediately prior to such Fundamental Transaction (without
regard to any limitation in Section 4(d) and Section 4(e) on the conversion of
this Note). For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one (1) share of Common Stock in such Fundamental Transaction, and Borrower
shall apportion the Conversion Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any conversion of this Note following such Fundamental
Transaction. Borrower shall cause any successor entity in a Fundamental
Transaction in which Borrower is not the survivor (the “Successor
Entity”) to assume in writing all of the obligations of Borrower under this
Note and the other Transaction Documents (as defined in the Purchase Agreement)
in accordance with the provisions of this Section 5(e) pursuant to written
agreements in form and substance reasonably satisfactory to the Holder and
approved by the Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the holder of this Note, deliver to the
Holder in exchange for this Note a security of the Successor Entity evidenced by
a written instrument substantially similar in form and substance to this Note
which is convertible for a corresponding number of shares of capital stock of
such Successor Entity (or its parent entity) equivalent to the
shares of Common Stock acquirable and receivable upon conversion of this Note
(without regard to any limitations on the conversion of this Note) prior to such
Fundamental Transaction, and with a conversion price which applies the
conversion price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such conversion price being for the
purpose of protecting the economic value of this Note immediately prior to the
consummation of such Fundamental Transaction), and which is reasonably
satisfactory in form and substance to the Holder. Upon the occurrence of any
such 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 Borrower and shall assume all of the
obligations of Borrower under this Note and the other Transaction Documents with
the same effect as if such Successor Entity had been named as Borrower herein. 

13




             f)        
Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 5, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding any treasury shares of Borrower) issued and outstanding.


            
g)         Notice to the Holder.


             i.        
Adjustment to Conversion Price. Whenever the Conversion Price is adjusted
pursuant to any provision of this Section 5, Borrower shall promptly deliver to
each Holder a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment. 

             ii.        
Notice to Allow Conversion by Holder. If (A) Borrower shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
Borrower shall declare a special nonrecurring cash dividend on or a redemption
of the Common Stock, (C) Borrower shall authorize the granting to all holders of
the Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any
stockholders of Borrower shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which
Borrower is a party, any sale or transfer of all or substantially all of the
assets of Borrower, or any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property or (E) Borrower shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of Borrower, then, in each case, Borrower shall cause to be filed at
each office or agency maintained for the purpose of conversion of this Note, and
shall cause to be delivered to the Holder at its last address as it shall appear
upon the Note Register, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange, provided that the failure to deliver such notice or any defect
therein or in the delivery thereof shall not affect the validity of the
corporate action required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or contains, material, non-public
information regarding Borrower or any of the Subsidiaries, Borrower shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. The Holder shall remain entitled to convert this Note during the
20-day period commencing on the date of such notice through the effective date
of the event triggering such notice except as may otherwise be expressly set
forth herein. 

14




             Section
6.         Redemption. Except
as otherwise provided herein, Borrower shall have no right to require the Holder
to surrender the Note for redemption, nor convert any part or all of this Note
without the consent of the Holder except with respect to the interest hereon
pursuant to Section 2(a) hereof.

             Section
7.         Negative
Covenants. As long as any portion of this Note remains outstanding, unless
the holders of at least 51% in principal amount of the then outstanding Notes
shall have otherwise given prior written consent, Borrower shall not, and shall
not permit any of the Subsidiaries to, directly or indirectly: 

             a)        
other than Permitted Indebtedness, enter into, create, incur, assume, guarantee
or suffer to exist any indebtedness for borrowed money of any kind, including,
but not limited to, a guarantee, on or with respect to any of its property or
assets now owned or hereafter acquired or any interest therein or any income or
profits therefrom;

             b)        
other than Permitted Liens, enter into, create, incur, assume or suffer to exist
any Liens of any kind, on or with respect to any of its property or assets now
owned or hereafter acquired or any interest therein or any income or profits
therefrom; 

             c)        
amend its charter documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder; 

             d)        
repay, repurchase or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares of its Common Stock or Common Stock
Equivalents other than as to the Conversion Shares or Warrant Shares as
permitted or required under the Transaction Documents; 

             e)        
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 if on a pro-rata basis),
whether by way of payment in respect of principal of (or premium, if any) or
interest on, such Indebtedness; 

            
f)         pay cash dividends or
distributions on any equity securities of Borrower; 

             g)        
enter into any transaction with any Affiliate of Borrower which would be
required to be disclosed in any public filing with the Commission, unless such
transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of Borrower (even if less than a quorum
otherwise required for board approval); 

15




             h)             any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, or other casualty which causes,
for more than fifteen (15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of Borrower or any
Subsidiary, if any such event or circumstance could have a Material Adverse
Effect; or 

             i)         enter into any
agreement with respect to any of the foregoing. 

    
        Section
8.         Events of Default.


             a)        
“Event of Default” means, wherever used herein, any of the following
events (whatever the reason for such event and whether such event shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of any
administrative or governmental body): 

             i.        
any default in the payment of (A) the principal amount of any Note or (B)
liquidated damages and other amounts owing to a Holder on any Note, as and when
the same shall become due and payable (whether on a Conversion Date or the
Maturity Date or by acceleration or otherwise) which default, solely in the case
of a default under clause (B) above, is not cured within 7 Trading Days after
Borrower has become or should have become aware of such default; 

             ii.        
Borrower shall fail to observe or perform any other covenant or agreement
contained in the Notes (other than a breach by Borrower of its obligations to
deliver shares of Common Stock to the Holder upon conversion, which breach is
addressed in clause (x) below) which failure is not cured, if possible to cure,
within the earlier to occur of (A) 5 Trading Days after notice of such failure
sent by the Holder or by any Other Holder to Borrower and (B) 10 Trading Days
after Borrower has become or should have become aware of such failure; 

             iii.        
a default or event of default (subject to any grace or cure period provided in
the applicable agreement, document or instrument) shall occur under (A) any of
the Transaction Documents, including but not limited to failure to strictly
comply with the provisions of the Warrants, or (B) any other material agreement,
lease, document or instrument to which Borrower or any Subsidiary is obligated
(and not covered by clause (vi) below); 

             iv.        
any representation or warranty made in this Note, any other Transaction
Documents, any written statement pursuant hereto or thereto or any other report,
financial statement or certificate made or delivered to the Holder or any Other
Holder shall be untrue or incorrect in any material respect as of the date when
made or deemed made; 

             v.        
Borrower or any Subsidiary (as such term is defined in Rule 1-02(w) of
Regulation S-X) shall be subject to a Bankruptcy Event; 

             vi.        
Borrower or any Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced, any indebtedness for borrowed money or money due
under any long term leasing or factoring
arrangement that (a) involves an obligation greater than $250,000, whether such
indebtedness now exists or shall hereafter be created, and (b) results in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable; 

16




             vii.        
Borrower shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 40% of its
assets in one transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction); 

             viii.        
Borrower does not meet the current public information requirements under Rule
144; 

             ix.        
Borrower shall fail for any reason to deliver certificates to a Holder prior to
the fifth Trading Day (or if not DTC eligible, the seventh Trading Day) after a
Conversion Date pursuant to Section 4(c) or Borrower shall provide at any time
notice to the Holder, including by way of public announcement, of Borrower’s
intention to not honor requests for conversions of any Notes in accordance with
the terms hereof; 

             x.        
any Person shall breach any agreement delivered to the initial Holders pursuant
to Section 2.2 or 2.5 of the Purchase Agreement; 

             xi.        
any monetary judgment, writ or similar final process shall be entered or filed
against Borrower, any subsidiary or any of their respective property or other
assets for more than $100,000, and such judgment, writ or similar final process
shall remain unvacated, unbonded or unstayed for a period of 90 calendar days;


            
xii.         any dissolution,
liquidation or winding up by Borrower or a material Subsidiary of a substantial
portion of their business; 

            
xiii.         cessation of operations by
Borrower or a material Subsidiary; 

            
xiv.         The failure by Borrower or
any material Subsidiary to maintain any material intellectual property rights,
personal, real property, equipment, leases or other assets which are necessary
to conduct its business (whether now or in the future) and such breach is not
cured with twenty (20) days after written notice to the Borrower from the
Holder; 

            
xv.         An event resulting in the
Common Stock no longer being listed or quoted on a Trading Market, or
notification from a Trading Market that the Borrower is not in compliance with
the conditions for such continued quotation and such non-compliance continues
for twenty (20) Trading Days following such notification; 

            
xvi.         a Commission or judicial
stop trade order or suspension from its Principal Trading Market; 

            
xvii.         the restatement after the
date hereof of any financial statements filed by the Borrower with the
Commission for any date or period from two years prior to the Original Issue
Date and until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the unrestated financial statements, have
constituted a Material Adverse Effect. For the avoidance of doubt, any
restatement related to new accounting pronouncements shall not constitute a
default under this Section; 

17




            
xviii.         the Borrower effectuates
a reverse split of its Common Stock without ten (10) days prior written notice
to the Holder; 

            
xix.         a failure by Borrower to
notify Holder of any material event of which Borrower is obligated to notify
Holder pursuant to the terms of this Note or any other Transaction Document;


             
xx.         a default by the Borrower of
a material term, covenant, warranty or undertaking of any other agreement to
which the Borrower and Holder are parties, or the occurrence of an event of
default under any such other agreement to which Borrower and Holder are parties
which is not cured after any required notice and/or cure period; 

            
xxi.         the occurrence of an Event
of Default under any Other Note; or 

            
xxii.         any provision of any
Transaction Document shall at any time for any reason (other than pursuant to
the express terms thereof) cease to be valid and binding on or enforceable
against the parties thereto, or the validity or enforceability thereof shall be
contested by any party thereto, or a proceeding shall be commenced by Borrower
or any Subsidiary or any governmental authority having jurisdiction over any of
them, seeking to establish the invalidity or unenforceability thereof, or
Borrower or any Subsidiary shall deny in writing that it has any liability or
obligation purported to be created under any Transaction Document (including,
without limitation, the Security Documents and the Subsidiary Guaranties); 

             b)        
Remedies Upon Event of Default, Fundamental Transaction and Change of
Control Transaction. If any Event of Default or a Fundamental Transaction
or a Change of Control Transaction occurs, the outstanding principal amount of
this Note, liquidated damages and other amounts owing in respect thereof through
the date of acceleration, shall become, at the Holder’s election, immediately
due and payable in cash at the Mandatory Default Amount. Commencing on the
Maturity Date and also five (5) days after the occurrence of any Event of
Default interest on this Note shall accrue at an interest rate equal to the
lesser of 15% per annum or the maximum rate permitted under applicable law. Upon
the payment in full of the Mandatory Default Amount, the Holder shall promptly
surrender this Note to or as directed by Borrower. In connection with such
acceleration described herein, the Holder need not provide, and Borrower hereby
waives, any presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period enforce any
and all of its rights and remedies hereunder and all other remedies available to
it under applicable law. Such acceleration may be rescinded and annulled by
Holder at any time prior to payment hereunder and the Holder shall have all
rights as a holder of the Note until such time, if any, as the Holder receives
full payment pursuant to this Section 8(b). No such rescission or annulment
shall affect any subsequent Event of Default or impair any right consequent
thereon. 

    
        Section
9.         Miscellaneous.


             a)        
Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to Borrower, to: Ironwood Gold Corp., Box
730-411-Brink Street, Ashcroft BC, V0K 1A0, Attn: Andrew McKinnon, Chief
Executive Officer, facsimile: (250) 453–0088, with a copy by fax only to (which
shall not constitute notice): Jolie Kahn, Esq., 2 Liberty Place, 50 South
16th Street, Suite 3401, Philadelphia, PA 19102, facsimile: (866)
705-3071, and (ii) if to the Holder, to: the address and fax number indicated on
the front page of this Note, with an additional copy by fax only to (which shall
not constitute notice): Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley
Stream, New York 11581, facsimile: (212) 697-3575. 

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             b)        
Absolute Obligation. Except as expressly provided herein, no provision of
this Note shall alter or impair the obligation of Borrower, which is absolute
and unconditional, to pay the principal of, liquidated damages and accrued
interest, as applicable, on this Note at the time, place, and rate, and in the
coin or currency, herein prescribed. This Note is a direct debt obligation of
Borrower. This Note ranks pari passu with all other Notes now or
hereafter issued under the terms set forth herein.

             c)        
Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or
destroyed, Borrower shall execute and deliver, in exchange and substitution for
and upon cancellation of a mutilated Note, or in lieu of or in substitution for
a lost, stolen or destroyed Note, a new Note for the principal amount of this
Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence
of such loss, theft or destruction of such Note, and of the ownership hereof,
reasonably satisfactory to Borrower. 

             d)        
Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflict of laws thereof. Each party agrees
that all legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the
“New York Courts”). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), 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 such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. 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 via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Note and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by applicable law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding arising
out of or relating to this Note or the transactions contemplated hereby. If any
party shall commence an action or proceeding to enforce any provisions of this
Note, then the prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys fees and other costs and expenses incurred
in the investigation, preparation and prosecution of such action or proceeding.
This Note shall be deemed an unconditional obligation of Borrower for the
payment of money and, without limitation to any other remedies of Holder, may be
enforced against Borrower by summary proceeding pursuant to New York Civil
Procedure Law and Rules Section 3213 or any similar rule or statute in the
jurisdiction where enforcement is sought. For purposes of such rule or statute,
any other document or agreement to which Holder and Borrower are parties or
which Borrower delivered to Holder, which may be convenient or necessary to
determine Holder’s rights hereunder or Borrower’s obligations to Holder are
deemed a part of this Note, whether or not such other document or agreement was
delivered together herewith or was executed apart from this Note. 

19




             e)        
Waiver. Any waiver by Borrower or the Holder of a breach of any provision
of this Note shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Note.
The failure of Borrower or the Holder to insist upon strict adherence to any
term of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Note on any other occasion. Any waiver by
Borrower or the Holder must be in writing. 

             f)        
Severability. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. 

             g)        
Usury. If it shall be found that any interest or other amount deemed
interest due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum rate of interest permitted under applicable law. Borrower
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay, extension or usury law or other law which would
prohibit or forgive Borrower from paying all or any portion of the principal of
or interest on this Note as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Note, and Borrower (to the extent it may lawfully do so) hereby expressly
waives all benefits or advantage of any such law, and covenants that it will
not, by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Holder, but will suffer and permit the execution of
every such as though no such law has been enacted. 

             h)        
Next Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day. 

             i)        
Headings. The headings contained herein are for convenience only, do not
constitute a part of this Note and shall not be deemed to limit or affect any of
the provisions hereof. 

             j)        
Amendment. Unless otherwise provided for hereunder, this Note may not be
modified or amended or the provisions hereof waived without the written consent
of Borrower and the Holder. 

20




             k)        
Facsimile Signature. In the event that the Borrower’s signature is
delivered by facsimile transmission, PDF, electronic signature or other similar
electronic means, such signature shall create a valid and binding obligation of
the Borrower with the same force and effect as if such signature page were an
original thereof. 

********************* 

(Signature Pages Follow) 

 

 

21




             IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by
an authorized officer as of the 21st day of March, 2014. 

IRONWOOD GOLD CORP. 

 

By:  
___________________________________
        
Name:
         Title:


WITNESS: 

 

______________________________________ 

22




ANNEX A 

NOTICE OF CONVERSION 

       
     The undersigned hereby elects to convert principal
under the Convertible Note due March 21, 2016 of Ironwood Gold Corp., a
Nevada corporation (the “Company”), into shares of common stock (the
“Common Stock”), of Borrower according to the conditions hereof, as of
the date written below. If shares of Common Stock are to be issued in the name
of a person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto and is delivering herewith such certificates
and opinions as reasonably requested by Borrower in accordance therewith. No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any. 

             By
the delivery of this Notice of Conversion the undersigned represents and
warrants to Borrower that its ownership of the Common Stock does not exceed the
amounts specified under Section 4 of this Note, as determined in accordance with
Section 13(d) of the Exchange Act. 

             The
undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock. 

Conversion calculations: 

Date to Effect Conversion:
____________________________

Principal Amount of Note to be
Converted: $__________________

Number of shares of Common Stock to be
issued: ______________

Signature:
_________________________________________

Name:
____________________________________________


Address for Delivery of Common Stock
Certificates:  ____________

_____________________________________________________

_____________________________________________________


Or 

DWAC Instructions:
_________________________________


Broker No:_____________
Account No:
_______________

23