vivakor_10k-ex1009.htm


    
      
        

      

    

    Exhibit
10.9

     

    Convertible
Note dated March 22, 2010

     

    


     

    NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

    


    


    
      	
              Principal
      Amount: $60,000.00

            	
              Issue
      Date: March 22, 2010

            


    

    Purchase
Price: $60,000.00

     

    CONVERTIBLE PROMISSORY
NOTE

    


    FOR VALUE RECEIVED, VIVAKOR INC., a Nevada
corporation (hereinafter called the “Borrower”), hereby promises to pay to the
order of ASHER ENTERPRISES,
INC., a Delaware corporation, or registered assigns (the “Holder”) the
sum of Sixty Thousand Dollars ($60,000.00) together with any interest as set
forth herein, on December 26, 2010 (the “Maturity Date”), and to pay interest on
the unpaid principal balance hereof at the rate of eight percent (8%) (the
“Interest Rate”) per annum from the date hereof (the “Issue Date”) until the
same becomes due and payable, whether at maturity or upon acceleration or by
prepayment or otherwise.  This Note may not be prepaid in whole or in
part except as otherwise explicitly set forth herein with the written consent of
the Holder which may be withheld for any reason or for no reason. Any amount of
principal or interest on this Note which is not paid when due shall bear
interest at the rate of twenty two percent (22%) per annum from the due date
thereof until the same is paid (“Default Interest”).  Interest shall
commence accruing on the Issue Date, shall be computed on the basis of a 365-day
year and the actual number of days elapsed.  All payments due
hereunder (to the extent not converted into common stock, $0.001 par value per
share (the “Common Stock”) in accordance with the terms hereof) shall be made in
lawful money of the United States of America.  All payments shall be
made at such address as the Holder shall hereafter give to the Borrower by
written notice made in accordance with the provisions of this
Note.  Whenever any amount expressed to be due by the terms of this
Note is due on any day which is not a business day, the same shall instead be
due on the next succeeding day which is a business day and, in the case of any
interest payment date which is not the date on which this Note is paid in full,
the extension of the due date thereof shall not be taken into account for
purposes of determining the amount of interest due on such date.  As
used in this Note, the term “business day” shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of New York, New
York are authorized or required by law or executive order to remain
closed.  Each capitalized term used herein, and not otherwise defined,
shall have the meaning ascribed thereto in that certain Securities Purchase
Agreement dated the date hereof, pursuant to which this Note was originally
issued (the “Purchase Agreement”).

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    This Note
is free from all taxes, liens, claims and encumbrances with respect to the issue
thereof and shall not be subject to preemptive rights or other similar rights of
shareholders of the Borrower and will not impose personal liability upon the
holder thereof.

    


    The
following terms shall apply to this Note:

    


    ARTICLE
V. CONVERSION RIGHTS

    


    5.1           Conversion
Right.  The Holder shall have the right from time to time, and
at any time on or prior to the later of: (i) the Maturity Date; and (ii) the
date of payment of the Default Amount (as defined in Article III) pursuant to
Section 1.6(a) or Article III, each in respect of the remaining outstanding
principal amount of this Note to convert all or any part of the outstanding and
unpaid principal amount of this Note into fully paid and non- assessable shares
of Common Stock, as such Common Stock exists on the Issue Date, or any shares of
capital stock or other securities of the Borrower into which such Common Stock
shall hereafter be changed or reclassified at the conversion
price  (the “Conversion Price”) determined as provided herein (a
“Conversion”); provided, however, that in no
event shall the Holder be entitled to convert any portion of this Note in excess
of that portion of this Note upon conversion of which the sum of (1) the number
of shares of Common Stock beneficially owned by the Holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Notes or the unexercised
or unconverted portion of any other security of the Borrower subject to a
limitation on conversion or exercise analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the
conversion of the portion of this Note with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock.  For purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of
such proviso.  The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing the Conversion
Amount (as defined below) by the applicable Conversion Price then in effect on
the date specified in the notice of conversion, in the form attached hereto as
Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder
in accordance with Section 1.4 below; provided that the Notice of Conversion is
submitted by facsimile (or by other means resulting in, or reasonably expected
to result in, notice) to the Borrower before 6:00 p.m., New York, New York time
on such conversion date (the “Conversion Date”).  The term “Conversion
Amount” means, with respect to any conversion of this Note, the sum of (1) the
principal amount of this Note to be converted in such conversion plus (2) at the
Borrower’s option, accrued and unpaid interest, if any, on such principal amount
at the interest rates provided in this Note to the Conversion Date, provided,
however, that the Company shall have the right to pay any or all interest in
cash plus (3)
at the Borrower’s option, Default Interest, if any, on the amounts referred to
in the immediately preceding clauses (1) and/or (2) plus (4) at the
Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and
1.4(g) hereof.

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
 

    5.2           Conversion
Price.

    


    (a)           Calculation of Conversion
Price.  The Conversion Price shall be the Variable Conversion
Price (as defined herein) (subject, in each case, to equitable adjustments for
stock splits, stock dividends or rights offerings by the Borrower relating to
the Borrower’s securities or the securities of any subsidiary of the Borrower,
combinations, recapitalization, reclassifications, extraordinary distributions
and similar events).  The “Variable Conversion Price” shall mean the
Applicable Percentage (as defined herein) multiplied by the Market Price (as
defined herein).  “Market Price” means the average of the lowest three
(3) Trading Prices (as defined below) for the Common Stock during the ten (10)
Trading Day period ending one Trading Day prior to the date the Conversion
Notice is sent by the Holder to the Borrower via facsimile (the “Conversion
Date”).  “Trading Price” means, for any security as of any date, the
closing bid price on the Over-the-Counter Bulletin Board, or applicable trading
market (the “OTCBB”) as reported by a reliable reporting service (“Reporting
Service”) mutually acceptable to Borrower and Holder and hereafter designated by
Holders of a majority in interest of the Notes and the Borrower or, if the OTCBB
is not the principal trading market for such security, the closing bid price of
such security on the principal securities exchange or trading market where such
security is listed or traded or, if no closing bid price of such security is
available in any of the foregoing manners, the average of the closing bid prices
of any market makers for such security that are listed in the “pink sheets” by
the National Quotation Bureau, Inc.  If the Trading Price cannot be
calculated for such security on such date in the manner provided above, the
Trading Price shall be the fair market value as mutually determined by the
Borrower and the holders of a majority in interest of the Notes being converted
for which the calculation of the Trading Price is required in order to determine
the Conversion Price of such Notes.  “Trading Day” shall mean any day
on which the Common Stock is traded for any period on the OTCBB, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded.  “Applicable Percentage” shall mean
58%.

    


    (b)           Conversion Price During
Major Announcements.  Notwithstanding anything contained in
Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public
announcement that it intends to consolidate or merge with any other corporation
(other than a merger in which the Borrower is the surviving or continuing
corporation and its capital stock is unchanged) or sell or transfer all or
substantially all of the assets of the Borrower or (ii) any person, group or
entity (including the Borrower) publicly announces a tender offer to purchase
50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the
date of the announcement referred to in clause (i) or (ii) is hereinafter
referred to as the  “Announcement Date”), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the Adjusted
Conversion Price Termination Date (as defined below), be equal to the lower of
(x) the Conversion Price which would have been applicable for a Conversion
occurring on the Announcement Date and (y) the Conversion Price that would
otherwise be in effect. From and after the Adjusted Conversion Price Termination
Date, the Conversion Price shall be determined as set forth in this Section
1.2(a).  For purposes hereof,  “Adjusted Conversion Price
Termination Date” shall mean, with respect to any proposed transaction or tender
offer (or takeover scheme) for which a public announcement as contemplated by
this Section 1.2(b) has been made, the date upon which the Borrower (in the case
of clause (i) above) or the person, group or entity (in the case of clause (ii)
above) consummates or publicly announces the termination or abandonment of the
proposed transaction or tender offer (or takeover scheme) which caused this
Section 1.2(b) to become operative.

    


    5.3           Authorized
Shares.  The Borrower covenants that during the period the
conversion right exists, the Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of
this Note issued pursuant to the Purchase Agreement.  The Borrower is
required at all times to have authorized and reserved two times the number of
shares that is actually issuable upon full conversion of the Note (based on the
Conversion Price of the Notes in effect from time to time; initially 3,154,980
shares) (the “Reserved Amount”).  The Reserved Amount shall be
increased from time to time in accordance with the Borrower’s obligations
pursuant to Section 4(g) of the Purchase Agreement.  The Borrower
represents that upon issuance, such shares will be duly and validly issued,
fully paid and non-assessable.  In addition, if the Borrower shall
issue any securities or make any change to its capital structure which would
change the number of shares of Common Stock into which the Notes shall be
convertible at the then current Conversion Price, the Borrower shall at the same
time make proper provision so that thereafter there shall be a sufficient number
of shares of Common Stock authorized and reserved, free from preemptive rights,
for conversion of the outstanding Notes.  The Borrower (i)
acknowledges that it has irrevocably instructed its transfer agent to issue
certificates for the Common Stock issuable upon conversion of this Note, and
(ii) agrees that its issuance of this Note shall constitute full authority
to its officers and agents who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock in accordance with the terms and conditions of this
Note.

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    
 

    If, at
any time a Holder of this Note submits a Notice of Conversion, and the Borrower
does not have sufficient authorized but unissued shares of Common Stock
available to effect such conversion in accordance with the provisions of this
Article I (a “Conversion Default”), the Borrower shall issue to the Holder all
of the shares of Common Stock which are then available to effect such
conversion.  The portion of this Note which the Holder included in its
Conversion Notice and which exceeds the amount which is then convertible into
available shares of Common Stock (the “Excess Amount”) shall, notwithstanding
anything to the contrary contained herein, not be convertible into Common Stock
in accordance with the terms hereof until (and at the Holder’s option at any
time after) the date additional shares of Common Stock are authorized by the
Borrower to permit such conversion, at which time the Conversion Price in
respect thereof shall be the lesser of (i) the Conversion Price on the
Conversion Default Date (as defined below) and (ii) the Conversion Price on the
Conversion Date thereafter elected by the Holder in respect
thereof.  In addition, the Borrower shall pay to the Holder payments
(“Conversion Default Payments”) for a Conversion Default in the amount of (x)
the sum of (1)
the then outstanding principal amount of this Note plus (2) accrued and
unpaid interest on the unpaid principal amount of this Note through the
Authorization Date (as defined below) plus (3) Default
Interest, if any, on the amounts referred to in clauses (1) and/or (2), multiplied by (y)
..24, multiplied
by (z) (N/365), where N = the number of days from the day the holder
submits a Notice of Conversion giving rise to a Conversion Default (the
“Conversion Default Date”) to the date (the “Authorization Date”) that the
Borrower authorizes a sufficient number of shares of Common Stock to effect
conversion of the full outstanding principal balance of this
Note.  The Borrower shall use its best efforts to authorize a
sufficient number of shares of Common Stock as soon as practicable following the
earlier of (i) such time that the Holder notifies the Borrower or that the
Borrower otherwise becomes aware that there are or likely will be insufficient
authorized and unissued shares to allow full conversion thereof and (ii) a
Conversion Default.  The Borrower shall send notice to the Holder of
the authorization of additional shares of Common Stock, the Authorization Date
and the amount of Holder’s accrued Conversion Default Payments.  The
accrued Conversion Default Payments for each calendar month shall be paid in
cash or shall be convertible into Common Stock (at such time as there are
sufficient authorized shares of Common Stock) at the applicable Conversion
Price, at the Borrower’s option, as follows:

    


    (a)           In
the event Holder elects to take such payment in cash, cash payment shall be made
to Holder by the fifth (5th) day
of the month following the month in which it has accrued; and

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
 

    (b)           In
the event Holder elects to take such payment in Common Stock, the Holder may
convert such payment amount into Common Stock at the Conversion Price (as in
effect at the time of conversion) at any time after the fifth day of the month
following the month in which it has accrued in accordance with the terms of this
Article I (so long as there is then a sufficient number of authorized shares of
Common Stock).

    


    The
Holder’s election shall be made in writing to the Borrower at any time prior to
6:00 p.m., New York, New York time, on the third day of the month following the
month in which Conversion Default payments have accrued.  If no
election is made, the Holder shall be deemed to have elected to receive
cash.  Nothing herein shall limit the Holder’s right to pursue actual
damages (to the extent in excess of the Conversion Default Payments) for the
Borrower’s failure to maintain a sufficient number of authorized shares of
Common Stock, and each holder shall have the right to pursue all remedies
available at law or in equity (including degree of specific performance and/or
injunctive relief).

    


    5.4           Method of
Conversion.

    


    (a)           Mechanics of
Conversion.  Subject to Section 1.1, this Note may be converted
by the Holder in whole or in part at any time from time to time after the Issue
Date, by (A) submitting to the Borrower a Notice of Conversion (by
facsimile or other reasonable means of communication dispatched on the
Conversion Date prior to 6:00 p.m., New York, New York time) and
(B) subject to Section 1.4(b), surrendering this Note at the principal
office of the Borrower.

    


    (b)           Surrender of Note Upon
Conversion.  Notwithstanding anything to the contrary set forth
herein, upon conversion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to the Borrower
unless the entire unpaid principal amount of this Note is so
converted.  The Holder and the Borrower shall maintain records showing
the principal amount so converted and the dates of such conversions or shall use
such other method, reasonably satisfactory to the Holder and the Borrower, so as
not to require physical surrender of this Note upon each such
conversion.  In the event of any dispute or discrepancy, such records
of the Borrower shall, prima facie, be controlling and
determinative in the absence of manifest error.  Notwithstanding the
foregoing, if any portion of this Note is converted as aforesaid, the Holder may
not transfer this Note unless the Holder first physically surrenders this Note
to the Borrower, whereupon the Borrower will forthwith issue and deliver upon
the order of the Holder a new Note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of this
Note.  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 represented by this Note may be less than the
amount stated on the face hereof.

    


    (c)           Payment of
Taxes.  The Borrower shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
shares of Common Stock or other securities or property on conversion of this
Note in a name other than that of the Holder (or in street name), and the
Borrower shall not be required to issue or deliver any such shares or other
securities or property unless and until the person or persons (other than the
Holder or the custodian in whose street name such shares are to be held for the
Holder’s account) requesting the issuance thereof shall have paid to the
Borrower the amount of any such tax or shall have established to the
satisfaction of the Borrower that such tax has been paid.

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    
 

    (d)           Delivery of Common Stock
Upon Conversion.  Upon receipt by the Borrower from the Holder
of a facsimile transmission (or other reasonable means of communication) of a
Notice of Conversion meeting the requirements for conversion as provided in this
Section 1.4, the Borrower shall issue and deliver or cause to be issued and
delivered to or upon the order of the Holder certificates for the Common Stock
issuable upon such conversion within three (3) business days after such receipt
(and, solely in the case of conversion of the entire unpaid principal amount
hereof, surrender of this Note) (such second business day being hereinafter
referred to as the “Deadline”) in accordance with the terms hereof and the
Purchase Agreement (including, without limitation, in accordance with the
requirements of [Section 2(g)] of the Purchase Agreement that certificates for
shares of Common Stock issued on or after the effective date of the Registration
Statement upon conversion of this Note shall not bear any restrictive
legend).

    


    (e)         
  Obligation
of Borrower to Deliver Common Stock.  Upon receipt by the
Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder
of record of the Common Stock issuable upon such conversion, the outstanding
principal amount and the amount of accrued and unpaid interest on this Note
shall be reduced to reflect such conversion, and, unless the Borrower defaults
on its obligations under this Article I, all rights with respect to the portion
of this Note being so converted shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets, as herein
provided, on such conversion.  If the Holder shall have given a Notice
of Conversion as provided herein, the Borrower’s obligation to issue and deliver
the certificates for Common Stock shall be absolute and unconditional,
irrespective of the absence of any action by the Holder to enforce the same, any
waiver or consent with respect to any provision thereof, the recovery of any
judgment against any person or any action to enforce the same, any failure or
delay in the enforcement of any other obligation of the Borrower to the holder
of record, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder of any obligation to the Borrower,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Borrower to the Holder in connection with such
conversion.  The Conversion Date specified in the Notice of Conversion
shall be the Conversion Date so long as the Notice of Conversion is received by
the Borrower before 6:00 p.m., New York, New York time, on such
date.

    


    (f)    
       Delivery of Common Stock by
Electronic Transfer.  In lieu of delivering physical
certificates representing the Common Stock issuable upon conversion, provided
the Borrower’s transfer agent is participating in the Depository Trust Company
(“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the
Holder and its compliance with the provisions contained in Section 1.1 and in
this Section 1.4, the Borrower shall use its best efforts to cause its transfer
agent to electronically transmit the Common Stock issuable upon conversion to
the Holder by crediting the account of Holder’s Prime Broker with DTC through
its Deposit Withdrawal Agent Commission (“DWAC”) system.

    


    (g)           Failure to Deliver Common
Stock Prior to Deadline.  Without in any way limiting the
Holder’s right to pursue other remedies, including actual damages and/or
equitable relief, the parties agree that if delivery of the Common Stock
issuable upon conversion of this Note is more than three (3) business days after
the Deadline (other than a failure due to the circumstances described in Section
1.3 above, which failure shall be governed by such Section) the Borrower shall
pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that
the Borrower fails to deliver such Common Stock.  Such cash amount
shall be paid to Holder by the fifth day of the month following the month in
which it has accrued or, at the option of the Holder (by written notice to the
Borrower by the first day of the month following the month in which it has
accrued), shall be added to the principal amount of this Note, in which event
interest shall accrue thereon in accordance with the terms of this Note and such
additional principal amount shall be convertible into Common Stock in accordance
with the terms of this Note.

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
 

    5.5           Concerning the
Shares.  The shares of Common Stock issuable upon conversion of
this Note may not be sold or transferred unless  (i) such shares are
sold pursuant to an effective registration statement under the Act or (ii) the
Borrower or its transfer agent shall have been furnished with an opinion
of  counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (iii) such shares are sold or
transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule
144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule
144) of the Borrower who agrees to sell or otherwise transfer the shares only in
accordance with this Section 1.5 and who is an Accredited Investor (as defined
in the Purchase Agreement).  Except as otherwise provided in the
Purchase Agreement (and subject to the removal provisions set forth below),
until such time as the shares of Common Stock issuable upon conversion of this
Note have been registered under the Act or otherwise may be sold pursuant to
Rule 144 without any restriction as to the number of securities as of a
particular date that can then be immediately sold, each certificate for shares
of Common Stock issuable upon conversion of this Note that has not been so
included in an effective registration statement or that has not been sold
pursuant to an effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantially in the following form,
as appropriate:

    


    “NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.”

     

    The
legend set forth above shall be removed and the Borrower shall issue to the
Holder a new certificate therefor free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Common Stock
may be made without registration under the Act and the shares are so sold or
transferred, (ii) such Holder provides the Borrower or its transfer agent with
reasonable assurances that the Common Stock issuable upon conversion of this
Note (to the extent such securities are deemed to have been acquired on the same
date) can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock
issuable upon conversion of this Note, such security is registered for sale by
the Holder under an effective registration statement filed under the Act or
otherwise may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can then be immediately
sold.

    


    5.6           Effect of Certain
Events.

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
 

    (a)           Effect of Merger,
Consolidation, Etc.  At the option of the Holder, the sale,
conveyance or disposition of all or substantially all of the assets of the
Borrower, the effectuation by the Borrower of a transaction or series of related
transactions in which more than 50% of the voting power of the Borrower is
disposed of, or the consolidation, merger or other business combination of the
Borrower with or into any other Person (as defined below) or Persons when the
Borrower is not the survivor shall either:  (i) be deemed to be an
Event of Default (as defined in Article III) pursuant to which the Borrower
shall be required to pay to the Holder upon the consummation of and as a
condition to such transaction an amount equal to the Default Amount (as defined
in Article III) or (ii) be treated pursuant to Section 1.6(b)
hereof.  “Person” shall mean any individual, corporation, limited
liability company, partnership, association, trust or other entity or
organization.

    


    (b)           Adjustment Due to Merger,
Consolidation, Etc.  If, at any time when this Note is issued
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 a result of which shares of Common Stock of the Borrower
shall be changed into the same or a different number of shares of another class
or classes of stock or securities of the Borrower or another entity, or in case
of any sale or conveyance of all or substantially all of the assets of the
Borrower other than in connection with a plan of complete liquidation of the
Borrower, then the Holder of this Note shall thereafter have the right to
receive upon conversion of this Note, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock, securities or
assets which the Holder would have been entitled to receive in such transaction
had this Note been converted in full immediately prior to such transaction
(without regard to any limitations on conversion set forth herein), and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Holder of this Note to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Note) shall
thereafter be applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion
hereof.  The Borrower shall not affect any transaction described in
this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty
(30) days prior written notice (but in any event at least fifteen (15) days
prior written notice) of the record date of the special meeting of shareholders
to approve, or if there is no such record date, the consummation of, such
merger, consolidation, exchange of shares, recapitalization, reorganization or
other similar event or sale of assets (during which time the Holder shall be
entitled to convert this Note) and (b) the resulting successor or acquiring
entity (if not the Borrower) assumes by written instrument the obligations of
this Section 1.6(b).  The above provisions shall similarly apply to
successive consolidations, mergers, sales, transfers or share
exchanges.

    


    (c)           Adjustment Due to
Distribution.  If the Borrower shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the Borrower’s shareholders
in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be
entitled, upon any conversion of this Note after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such assets which would have been payable to the Holder with respect to the
shares of Common Stock issuable upon such conversion had such Holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution.

    


    (d)           Adjustment Due to Dilutive
Issuance.  If, at any time when any Notes are issued and
outstanding, the Borrower issues or sells, or in accordance with this Section
1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for
no consideration or for a consideration per share (before deduction of
reasonable expenses or commissions or underwriting discounts or allowances in
connection therewith) less than the Conversion Price in effect on the date of
such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price
will be reduced to the amount of the consideration per share received by the
Borrower in such Dilutive Issuance.

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
 

    The
Borrower shall be deemed to have issued or sold shares of Common Stock if the
Borrower in any manner issues or grants any warrants, rights or options (not
including employee stock option plans), whether or not immediately exercisable,
to subscribe for or to purchase Common Stock or other securities convertible
into or exchangeable for Common Stock (“Convertible Securities”) (such warrants,
rights and options to purchase Common Stock or Convertible Securities are
hereinafter referred to as “Options”) and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the Conversion
Price then in effect, then the Conversion Price shall be equal to such price per
share.  For purposes of the preceding sentence, the “price per share
for which Common Stock is issuable upon the exercise of such Options” is
determined by dividing (i) the total amount, if any, received or receivable by
the Borrower as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Borrower upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the minimum
aggregate amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable).  No further
adjustment to the Conversion Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such
Options.

    


    Additionally,
the Borrower shall be deemed to have issued or sold shares of Common Stock if
the Borrower in any manner issues or sells any Convertible Securities, whether
or not immediately convertible (other than where the same are issuable upon the
exercise of Options), and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Conversion Price then in
effect, then the Conversion Price shall be equal to such price per
share.  For the purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon such conversion or exchange” is
determined by dividing (i) the total amount, if any, received or receivable by
the Borrower as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Borrower upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities.  No further adjustment
to the Conversion Price will be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities.

    


    (e)     
      Purchase
Rights.  If, at any time when any Notes are issued and
outstanding, the Borrower issues any convertible securities or rights to
purchase stock, warrants, securities or other property (the “Purchase Rights”)
pro rata to the record holders of any class of Common Stock, then the Holder of
this Note will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Note (without regard to any limitations on
conversion contained herein) 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 Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
 

    (f)      
     Notice of
Adjustments.  Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events described in this
Section 1.6, the Borrower, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to the Holder of a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based.  The
Borrower shall, upon the written request at any time of the Holder, furnish to
such Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon conversion of the
Note.

    


    5.7           Trading Market
Limitations.  Unless permitted by the applicable rules and
regulations of the principal securities market on which the Common Stock is then
listed or traded, in no event shall the Borrower issue upon conversion of or
otherwise pursuant to this Note and the other Notes issued pursuant to the
Purchase Agreement more than the maximum number of shares of Common Stock that
the Borrower can issue pursuant to any rule of the principal United States
securities market on which the Common Stock is then traded (the “Maximum Share
Amount”), which shall be 4.99% of the total shares outstanding on the Closing
Date (as defined in the Purchase Agreement), subject to equitable adjustment
from time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring after
the date hereof.  Once the Maximum Share Amount has been issued (the
date of which is hereinafter referred to as the “Maximum Conversion Date”), if
the Borrower fails to eliminate any prohibitions under applicable law or the
rules or regulations of any stock exchange, interdealer quotation system or
other self-regulatory organization with jurisdiction over the Borrower or any of
its securities on the Borrower’s ability to issue shares of Common Stock in
excess of the Maximum Share Amount (a “Trading Market Prepayment Event”), in
lieu of any further right to convert this Note, and in full satisfaction of the
Borrower’s obligations under this Note, the Borrower shall pay to the Holder,
within fifteen (15) business days of the Maximum Conversion Date (the “Trading
Market Prepayment Date”), an amount equal to 150% times the sum of (a) the then
outstanding principal amount of this Note immediately following the Maximum
Conversion Date, plus (b) accrued and
unpaid interest on the unpaid principal amount of this Note to the Trading
Market Prepayment Date, plus (c) Default
Interest, if any, on the amounts referred to in clause (a) and/or (b) above,
plus (d) any
optional amounts that may be added thereto at the Maximum Conversion Date by the
Holder in accordance with the terms hereof (the then outstanding principal
amount of this Note immediately following the Maximum Conversion Date, plus the amounts
referred to in clauses (b), (c) and (d) above shall collectively be referred to
as the “Remaining Convertible Amount”).  In the event that the sum of
(x) the aggregate number of shares of Common Stock issued upon conversion of
this Note and the other Notes issued pursuant to the Purchase Agreement plus (y) the
aggregate number of shares of Common Stock that remain issuable upon conversion
of this Note and the other Notes issued pursuant to the Purchase Agreement,
represents at least one hundred percent (100%) of the Maximum Share Amount (the
“Triggering Event”), the Borrower will use its best efforts to seek and obtain
Shareholder Approval (or obtain such other relief as will allow conversions
hereunder in excess of the Maximum Share Amount) as soon as practicable
following the Triggering Event and before the Maximum Conversion
Date.  As used herein, “Shareholder Approval” means approval by the
shareholders of the Borrower to authorize the issuance of the full number of
shares of Common Stock which would be issuable upon full conversion of the then
outstanding Notes but for the Maximum Share Amount.

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
 

    5.8           Status as
Shareholder.  Upon submission of a Notice of Conversion by a
Holder, (i) the shares covered thereby (other than the shares, if any, which
cannot be issued because their issuance would exceed such Holder’s allocated
portion of the Reserved Amount or Maximum Share Amount) shall be deemed
converted into shares of Common Stock and (ii) the Holder’s rights as a Holder
of such converted portion of this Note shall cease and terminate, excepting only
the right to receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity to such
Holder because of a failure by the Borrower to comply with the
terms  of this Note.  Notwithstanding the foregoing, if a
Holder has not received certificates for all shares of Common Stock prior to the
tenth (10th) business day after the expiration of the Deadline with respect to a
conversion of any portion of this Note for any reason, then (unless the Holder
otherwise elects to retain its status as a holder of Common Stock by so
notifying the Borrower) the Holder shall regain the rights of a Holder of this
Note with respect to such unconverted portions of this Note and the Borrower
shall, as soon as practicable, return such unconverted Note to the Holder or, if
the Note has not been surrendered, adjust its records to reflect that such
portion of this Note has not been converted.  In all cases, the Holder
shall retain all of its rights and remedies (including, without limitation, (i)
the right to receive Conversion Default Payments pursuant to Section 1.3 to the
extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with Section 1.3) for the
Borrower’s failure to convert this Note.

    


    ARTICLE
VI.  CERTAIN COVENANTS

    


    6.1           Distributions on Capital
Stock.  So long as the Borrower shall have any obligation under
this Note, the Borrower shall not without the Holder’s written consent (a) pay,
declare or set apart for such payment, any dividend or other distribution
(whether in cash, property or other securities) on shares of capital stock other
than dividends on shares of Common Stock solely in the form of additional shares
of Common Stock or (b) directly or indirectly or through any subsidiary make any
other payment or distribution in respect of its capital stock except for
distributions pursuant to any shareholders’ rights plan which is approved by a
majority of the Borrower’s disinterested directors.

    


    6.2           Restriction on Stock
Repurchases.  So long as the Borrower shall have any obligation
under this Note, the Borrower shall not without the Holder’s written consent
redeem, repurchase or otherwise acquire (whether for cash or in exchange for
property or other securities or otherwise) in any one transaction or series of
related transactions any shares of capital stock of the Borrower or any
warrants, rights or options to purchase or acquire any such shares.

    


    6.3           Borrowings.  So
long as the Borrower shall have any obligation under this Note, the Borrower
shall not, without the Holder’s written consent, create, incur, assume or suffer
to exist any liability for borrowed money, except (a) borrowings in existence or
committed on the date hereof and of which the Borrower has informed Holder in
writing prior to the date hereof, (b) indebtedness to trade creditors or
financial institutions incurred in the ordinary course of business or (c)
borrowings, the proceeds of which shall be used to repay this Note.

    


    6.4           Sale of
Assets.  So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder’s written consent,
sell, lease or otherwise dispose of any significant portion of its assets
outside the ordinary course of business.  Any consent to the
disposition of any assets may be conditioned on a specified use of the proceeds
of disposition.

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
 

    6.5           Advances and
Loans.  So long as the Borrower shall have any obligation under
this Note, the Borrower shall not, without the Holder’s written consent, lend
money, give credit or make advances to any person, firm, joint venture or
corporation, including, without limitation, officers, directors, employees,
subsidiaries and affiliates of the Borrower, except loans, credits or advances
(a) in existence or committed on the date hereof and which the Borrower has
informed Holder in writing prior to the date hereof, (b) made in the ordinary
course of business or (c) not in excess of $50,000.

    


    6.6           Contingent
Liabilities.  So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder’s written consent,
which shall not be unreasonably withheld, assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the obligation of
any person, firm, partnership, joint venture or corporation, except by the
endorsement of negotiable instruments for deposit or collection and except
assumptions, guarantees, endorsements and contingencies (a) in existence or
committed on the date hereof and which the Borrower has informed Holder in
writing prior to the date hereof, and (b) similar transactions in the ordinary
course of business.

     
 

    ARTICLE
VII.  EVENTS OF DEFAULT

    


    If any of
the following events of default (each, an “Event of Default”) shall
occur:

    


    7.1           Failure to Pay Principal or
Interest.  The Borrower fails to pay the principal hereof or
interest thereon when due on this Note, whether at maturity, upon a Trading
Market Prepayment Event pursuant to Section 1.7, upon acceleration or
otherwise;

    


    7.2           Conversion and the
Shares.  The Borrower fails to issue shares of Common Stock to
the Holder (or announces or threatens that it will not honor its obligation to
do so) upon exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Note, fails to transfer or cause its transfer
agent to transfer (electronically or in certificated form) any certificate for
shares of Common Stock issued to the Holder upon conversion of or otherwise
pursuant to this Note as and when required by this Note, or fails to remove any
restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when required by
this Note (or makes any announcement, statement or threat that it does not
intend to honor the obligations described in this paragraph) and any such
failure shall continue uncured (or any announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for three (3) days
after the Borrower shall have been notified thereof in writing by the
Holder;

    


    7.3           Breach of
Covenants.  The Borrower breaches any material covenant or
other material term or condition contained in this Note and any collateral
documents including but not limited to the Purchase Agreement and such breach
continues for a period of ten (10) days after written notice thereof to the
Borrower from the Holder;

    


    7.4           Breach of Representations
and Warranties.  Any representation or warranty of the Borrower
made herein or in any agreement, statement or certificate given in writing
pursuant hereto or in connection herewith (including, without limitation, the
Purchase Agreement), shall be false or misleading in any material respect when
made and the breach of which has (or with the passage of time will have) a
material adverse effect on the rights of the Holder with respect to this Note or
the Purchase Agreement;

    


    7.5           Receiver or
Trustee.  The Borrower or any subsidiary of the Borrower shall
make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise be
appointed;

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
 

    7.6           Judgments.  Any
money judgment, writ or similar process shall be entered or filed against the
Borrower or any subsidiary of the Borrower or any of its property or other
assets for more than $50,000, and shall remain unvacated, unbonded or unstayed
for a period of twenty (20) days unless otherwise consented to by the Holder,
which consent will not be unreasonably withheld;

    


    7.7           Bankruptcy.  Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings,
voluntary or involuntary, for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Borrower or any
subsidiary of the Borrower;

    


    7.8           Delisting of Common
Stock.  The Borrower shall fail to maintain the listing of the
Common Stock on at least one of the OTCBB or an equivalent replacement exchange,
the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock
Exchange, or the American Stock Exchange;

    


    7.9           Failure to Comply with the
Exchange Act.  The Borrower shall fail to comply with the
reporting requirements of the Exchange Act; and/or the Borrower shall cease to
be subject to the reporting requirements of the Exchange Act; or

    


    7.10           Liquidation.  Any
dissolution, liquidation, or winding up of Borrower or any substantial portion
of its business.

    


    7.11           Cessation of
Operations.  Any cessation of operations by Borrower or
Borrower admits it is otherwise generally unable to pay its debts as such debts
become due, provided, however, that any disclosure of the Borrower’s ability to
continue as a “going concern” shall not be an admission that the Borrower cannot
pay its debts as they become due.

    


    7.12           Maintenance of
Assets.  The failure by Borrower to maintain any material
intellectual property rights, personal, real property or other assets which are
necessary to conduct its business (whether now or in the future).

    


    7.13           Financial Statement
Restatement.  The restatement of any financial statements filed
by the Borrower with the SEC for any date or period from two years prior to the
Issue Date of this Note and until this Note is no longer outstanding, if the
result of such restatement would, by comparison to the unrestated financial
statement, have constituted a material adverse effect on the rights of the
Holder with respect to this Note or the Purchase Agreement.

    


    7.14           Reverse
Splits.  The Borrower effectuates a reverse split of its Common
Stock without twenty (20) days prior written notice to the Holder.

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    
 

    Upon the
occurrence and during the continuation of any Event of Default specified in
Section 3.1 (solely with respect to failure to pay the principal hereof or
interest thereon when due at the Maturity Date), the Borrower shall pay to the
Holder, in full satisfaction of its obligations hereunder, an amount equal to
the Default Sum (as defined herein).  Upon the occurrence and during
the continuation of any Event of Default specified in Sections 3.1 (solely with
respect to failure to pay the principal hereof or interest thereon when due on
this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon
acceleration), 3.2, 3.3, 3.4, 3.6, 3.8, or 3.8 exercisable through the delivery
of written notice to the Borrower by such Holders (the “Default Notice”), and
upon the occurrence of an Event of Default specified the remaining sections of
Articles III (other than failure to pay the principal hereof or interest thereon
at the Maturity Date specified in Section 3,1 hereof), the Note shall become
immediately due and payable and the Borrower shall pay to the Holder, in full
satisfaction of its obligations hereunder, an amount equal to the greater of (i)
150% times the
sum of (w) the
then outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note to the date of
payment (the “Mandatory Prepayment Date”) plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts
owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then
outstanding principal amount of this Note to the date of payment plus the amounts
referred to in clauses (x), (y) and (z) shall collectively be known as the
“Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid,
where parity value means (a) the highest number of shares of Common Stock
issuable upon conversion of or otherwise pursuant to such Default Sum in
accordance with Article I, treating the Trading Day immediately preceding the
Mandatory Prepayment Date as the “Conversion Date” for purposes of determining
the lowest applicable Conversion Price, unless the Default Event arises as a
result of a breach in respect of a specific Conversion Date in which case such
Conversion Date shall be the Conversion Date), multiplied by (b) the
highest Closing Price for the Common Stock during the period beginning on the
date of first occurrence of the Event of Default and ending one day prior to the
Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable
hereunder shall immediately become due and payable, all without demand,
presentment or notice, all of which hereby are expressly waived, together with
all costs, including, without limitation, legal fees and expenses, of
collection, and the Holder shall be entitled to exercise all other rights and
remedies available at law or in equity.

     

    If the
Borrower fails to pay the Default Amount within five (5) business days of
written notice that such amount is due and payable, then the Holder shall have
the right at any time, so long as the Borrower remains in default (and so long
and to the extent that there are sufficient authorized shares), to require the
Borrower, upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Borrower equal to the
Default Amount divided by the Conversion Price then in effect.

    


    ARTICLE
VIII. MISCELLANEOUS

    


    8.1           Failure or Indulgence Not
Waiver.  No failure or delay on the part of the Holder in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privileges.  All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.

    


    8.2           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:

    


     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    
 

    If to the
Borrower, to:

    VIVAKOR
INC.

    2590
Holiday Road, Suite 100

    Coralville,
IA 52241

    Attn:
Tannin Fuja, Ph.D., Chief Executive Officer

    facsimile:
[enter fax number]

    


    With a
copy by fax only to (which copy shall not constitute notice):

    [enter
name of law firm]

    Attn:
[attorney name]

    [enter
address line 1]

    [enter
city, state, zip]

    facsimile:
[enter fax number]

    


    If to the
Holder:

    ASHER ENTERPRISES, INC.

    1 Linden
Pl., Suite 207

    Great
Neck, NY. 11021

    facsimile: [enter fax
number]

    


    With a
copy by fax only to (which copy shall not constitute notice):


    Naidich Wurman Birnbaum & Mayday
LLP

    80 Cuttermill Road, Suite
410

    Great Neck, NY 11021

    Attn: Bernard S. Feldman,
Esq.

    facsimile:
[enter fax number]

    


    8.3           Amendments.  This
Note and any provision hereof may only be amended by an instrument in writing
signed by the Borrower and the Holder.  The term “Note” and all
reference thereto, as used throughout this instrument, shall mean this
instrument (and the other Notes issued pursuant to the Purchase Agreement) as
originally executed, or if later amended or supplemented, then as so amended or
supplemented.

    


    8.4           Assignability.  This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to be the benefit of the Holder and its successors and
assigns.  Each transferee of this Note must be an “accredited
investor” (as defined in Rule 501(a) of the 1933
Act).  Notwithstanding anything in this Note to the contrary, this
Note may be pledged as collateral in connection with a bona fide margin account
or other lending arrangement.

    


    8.5           Cost of
Collection.  If default is made in the payment of this Note,
the Borrower shall pay the Holder hereof costs of collection, including
reasonable attorneys’ fees.

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    
 

    8.6           Governing
Law.  This Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws.  Any action brought by either party against the
other concerning the transactions contemplated by this Note shall be brought
only in the state courts of New York or in the federal courts located in the
state and county of Nassau.  The parties to this Note hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non
conveniens.  The Company and Holder waive trial by
jury.  The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs.  In the event
that any provision of this Note or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law.  Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.   Each party hereby
irrevocably waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this Agreement or
any other Transaction Document 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 Agreement 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 law.

    


    8.7           Certain
Amounts.  Whenever pursuant to this Note the Borrower is
required to pay an amount in excess of the outstanding principal amount (or the
portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest on such interest, the Borrower and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on
this Note may be difficult to determine and the amount to be so paid by the
Borrower represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this Note
and to earn a return from the sale of shares of Common Stock acquired upon
conversion of this Note at a price in excess of the price paid for such shares
pursuant to this Note.  The Borrower and the Holder hereby agree that
such amount of stipulated damages is not plainly disproportionate to the
possible loss to the Holder from the receipt of a cash payment without the
opportunity to convert this Note into shares of Common Stock.

    


    8.8           Purchase
Agreement.  By its acceptance of this Note, each party agrees
to be bound by the applicable terms of the Purchase Agreement.

    


    8.9           Notice of Corporate
Events.  Except as otherwise provided below, the Holder of this
Note shall have no rights as a Holder of Common Stock unless and only to the
extent that it converts this Note into Common Stock. The Borrower shall provide
the Holder with prior notification of any meeting of the Borrower’s shareholders
(and copies of proxy materials and other information sent to
shareholders).  In the event of any taking by the Borrower of a record
of its shareholders for the purpose of determining shareholders who are entitled
to receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Borrower or any proposed liquidation, dissolution or winding up of the
Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20)
days prior to the record date specified therein (or thirty (30) days prior to
the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the extent
known at such time.  The Borrower shall make a public announcement of
any event requiring notification to the Holder hereunder substantially
simultaneously with the notification to the Holder in accordance with the terms
of this Section 4.9.

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    
 

    8.10           Remedies.  The
Borrower acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holder, by vitiating the intent and purpose of the
transaction contemplated hereby.  Accordingly, the Borrower
acknowledges that the remedy at law for a breach of its obligations under this
Note will be inadequate and agrees, in the event of a breach or threatened
breach by the Borrower of the provisions of this Note, that the Holder shall be
entitled, in addition to all other available remedies at law or in equity, and
in addition to the penalties assessable herein, to an injunction or injunctions
restraining, preventing or curing any breach of this Note and to enforce
specifically the terms and provisions thereof, without the necessity of showing
economic loss and without any bond or other security being
required.

    


    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its
duly authorized officer this March 22, 2010.

    


    VIVAKOR
INC.

    


    


    By: /s/ Tannin
Fuja        
                                       


    Tannin Fuja, Ph.D.

    Chief
Executive Officer

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
A

    


    NOTICE OF
CONVERSION

    


    (To be
Executed by the Registered Holder

    in order
to Convert the Notes)

    


    The
undersigned hereby irrevocably elects to convert $__________ principal amount of
the Note (defined below) into shares of common stock, $0.001 par value per share
(“Common Stock”), of VIVAKOR INC., a Nevada corporation (the “Borrower”)
according to the conditions of the convertible note of the Borrower dated as of
___________ (the “Notes”), as of the date written below.  If
securities 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.  No fee will be charged to the
Holder for any conversion, except for transfer taxes, if any.  A copy
of each Note is attached hereto (or evidence of loss, theft or destruction
thereof).

    


    The
Borrower shall electronically transmit the Common Stock issuable pursuant to
this Notice of Conversion to the account of the undersigned or its nominee with
DTC through its Deposit Withdrawal Agent Commission system (“DWAC
Transfer”).

    


    
      Name of
DTC Prime
Broker:  _______________________________________

      Account
Number: 
______________________________________________



    In lieu
of receiving shares of Common Stock issuable pursuant to this Notice of
Conversion by way of a DWAC Transfer, the undersigned hereby requests that the
Borrower issue a certificate or certificates for the number of shares of Common
Stock set forth below (which numbers are based on the Holder’s calculation
attached hereto) in the name(s) specified immediately below or, if additional
space is necessary, on an attachment hereto:

    
      


      Name: 
______________________________________________________________________________

      Address: 
____________________________________________________________________________

       

    

    The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable to the undersigned upon conversion of the Notes shall
be made pursuant to registration of the securities under the Securities Act of
1933, as amended (the “Act”), or pursuant to an exemption from registration
under the Act.

    


    Date of
Conversion: ___________________________

    Applicable
Conversion Price: ____________________

    Number of
Shares of Common Stock to be Issued Pursuant to

    Conversion
of the Notes: ______________

    Signature:
___________________________________

    Name:
______________________________________

    Address:
____________________________________

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    The
Borrower shall issue and deliver shares of Common Stock to an overnight courier
not later than three business days following receipt of the original Note(s) to
be converted, and shall make payments pursuant to the Notes for the number of
business days such issuance and delivery is late.

     

    


     

    SECURITIES
PURCHASE AGREEMENT

    


    This
SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of March 22, 2010, by and among
VIVAKOR INC., a Nevada
corporation, with headquarters located at 2590 Holiday Road, Suite 100,
Coralville, IA 52241 (the “Company”), and ASHER ENTERPRISES, INC., a
Delaware corporation, with its address at 1 Linden Place, Suite 207, Great Neck,
NY 11021 (the “Buyer”).

    


    WHEREAS:

    


    8.1          
The Company and the Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by the rules and
regulations as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”);

    


    8.2     
      Buyer desires to purchase and the Company
desires to issue and sell, upon the terms and conditions set forth in this
Agreement an 8% secured convertible note of the Company, in the form attached
hereto as Exhibit A, in the aggregate principal amount of Sixty Thousand Dollars
($60,000.00)(together with any note(s) issued in replacement thereof or as a
dividend thereon or otherwise with respect thereto in accordance with the terms
thereof, the “Note”), convertible into shares of common stock, $0.001 par value
per share, of the Company (the “Common Stock”), upon the terms and subject to
the limitations and conditions set forth in such Note.

    


    8.3           The
Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, such principal amount of Note as is set forth immediately below its
name on the signature pages hereto; and

    


    NOW THEREFORE, the Company and
the Buyer severally (and not jointly) hereby agree as follows:

    


    (a)           Purchase and Sale of
Note.

    


    (i)           Purchase of
Note.  On the Closing Date (as defined below), the Company
shall issue and sell to the Buyer and the Buyer agrees to purchase from the
Company such principal amount of Note as is set forth immediately below the
Buyer’s name on the signature pages hereto.

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    
 

    (ii)           Form of
Payment.  On the Closing Date (as defined below), (i) the Buyer
shall pay the purchase price for the Note to be issued and sold to it at the
Closing (as defined below) (the “Purchase Price”) by wire transfer of
immediately available funds to the Company, in accordance with the Company’s
written wiring instructions, against delivery of the Note in the principal
amount equal to the Purchase Price as is set forth immediately below the Buyer’s
name on the signature pages hereto, and (ii) the Company shall deliver such
duly executed on behalf of the Company, to the Buyer, against delivery of such
Purchase Price.

    


    (iii)           Closing
Date.  Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Note pursuant to this Agreement (the “Closing
Date”) shall be 12:00 noon, Eastern Standard Time on March 24, 2010, or such
other mutually agreed upon time.  The closing of the transactions
contemplated by this Agreement (the “Closing”) shall occur on the Closing Date
at such location as may be agreed to by the parties.

    


    (b)           Buyer’s Representations and
Warranties.  The Buyer represents and warrants to the Company
that:

    


    (i)   
        Investment
Purpose.  As of the date hereof, the Buyer is purchasing the
Note and the shares of Common Stock issuable upon conversion of or otherwise
pursuant to the Note (including, without limitation, such additional shares of
Common Stock, if any, as are issuable (i) on account of interest on the
Note, (ii) as a result of the events described in Sections 1.3 and 1.4(g)
of the Note or (iii) in payment of the Standard Liquidated Damages Amount
(as defined in Section 2(f) below) pursuant to this Agreement, such shares of
Common Stock being collectively referred to herein as the “Conversion Shares”
and, collectively with the Note, the “Securities”) for its own account and not
with a present view towards the public sale or distribution thereof, except
pursuant to sales registered or exempted from registration under the 1933 Act;
provided, however, that by
making the representations herein, the Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.

    


    (ii)           Accredited Investor
Status.  The Buyer is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

    


    (iii)           Reliance on
Exemptions.  The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.

    


    (iv)           Information.  The
Buyer and its advisors, if any, have been, and for so long as the Note remain
outstanding will continue to be, furnished with all materials relating to the
business, finances and operations of the Company and materials relating to the
offer and sale of the Securities which have been requested by the Buyer or its
advisors.  The Buyer and its advisors, if any, have been, and for so
long as the Note remain outstanding will continue to be, afforded the
opportunity to ask questions of the Company.  Notwithstanding the
foregoing, the Company has not disclosed to the Buyer any material nonpublic
information and will not disclose such information unless such information is
disclosed to the public prior to or promptly following such disclosure to the
Buyer.  Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer’s right to rely on the Company’s representations
and warranties contained in Section 3 below.  The Buyer understands
that its investment in the Securities involves a significant degree of risk. The
Buyer is not aware of any facts that may constitute a breach of any of the
Company's representations and warranties made herein.

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    
 

    (v)           Governmental
Review.  The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Securities.

    


    (vi)           Transfer or
Re-sale.  The Buyer understands that (i) the sale or re-sale of
the Securities has not been and is not being registered under the 1933 Act or
any applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the
Company, at the cost of the Company, an opinion of counsel that shall be in
form, substance and scope customary for opinions of counsel in comparable
transactions to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration, which
opinion shall be accepted by the Company, (c) the Securities are sold or
transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933
Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or
otherwise transfer the Securities only in accordance with this Section 2(f) and
who is an Accredited Investor, (d) the Securities are sold pursuant to Rule
144, or (e) the Securities are sold pursuant to Regulation S under the 1933
Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered
to the Company, at the cost of the Company, an opinion of counsel that shall be
in form, substance and scope customary for opinions of counsel in corporate
transactions, which opinion shall be accepted by the Company; (ii) any sale of
such Securities made in reliance on Rule 144 may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable, any re-sale
of such Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each
case).  Notwithstanding the foregoing or anything else contained
herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account
or other lending arrangement.  In the event that the Company does not
accept the opinion of counsel provided by the Buyer with respect to the transfer
of Securities pursuant to an exemption from registration, such as Rule 144 or
Regulation S, within three (3) business days of delivery of the opinion to the
Company, the Company shall pay to the Buyer liquidated damages of five percent
(5%) of the outstanding amount of the Note per day plus accrued and unpaid
interest on the Note, prorated for partial months, in cash or shares at the
option of the Buyer (“Standard Liquidated Damages Amount”).  If the
Buyer elects to be pay the Standard Liquidated Damages Amount in shares of
Common Stock, such shares shall be issued at the Conversion Price (as defined in
the Note) at the time of payment.

    


    (vii)           Legends.  The
Buyer understands that the Note and, until such time as the Conversion Shares
have been registered under the 1933 Act may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, the Conversion Shares may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities):

     

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    
 

    “NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.”

    


    The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public
sale or transfer of such Security may be made without registration under the
1933 Act, which opinion shall be accepted by the Company so that the sale or
transfer is effected or (c) such holder provides the Company with reasonable
assurances that such Security can be sold pursuant to Rule 144 or Regulation
S.  The Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if
any.

    


    (viii)           Authorization;
Enforcement. This Agreement has been duly and validly
authorized.  This Agreement has been duly executed and delivered on
behalf of the Buyer, and this Agreement constitutes a valid and binding
agreement of the Buyer enforceable in accordance with its terms.

     

    (ix)           Residency.  The
Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s
name on the signature pages hereto.

    


    (c)           Representations and
Warranties of the Company.  The Company represents and warrants
to the Buyer that:

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    
 

    (i)     
       Organization and
Qualification.  The Company and each of its Subsidiaries (as
defined below), if any, is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
with full power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted.  Schedule 3(a) sets forth a list
of all of the Subsidiaries of the Company and the jurisdiction in which each is
incorporated.  The Company and each of its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect.  “Material Adverse Effect” means any material adverse effect
on the business, operations, assets, financial condition or prospects of the
Company or its Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be entered into in
connection herewith.  “Subsidiaries” means any corporation or other
organization, whether incorporated or unincorporated, in which the Company owns,
directly or indirectly, any equity or other ownership interest.

    


    (ii)     
      Authorization;
Enforcement.  (i) The Company has all requisite corporate power
and authority to enter into and perform this Agreement, the Note and to
consummate the transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Note by the Company and the consummation by
it of the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Note and the issuance and reservation for
issuance of the Conversion Shares issuable upon conversion or exercise thereof)
have been duly authorized by the Company’s Board of Directors and no further
consent or authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly executed and
delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign
this Agreement and the other documents executed in connection herewith and bind
the Company accordingly, and (iv) this Agreement constitutes, and upon execution
and delivery by the Company of the Note, each of such instruments will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.

    


    (iii)           Capitalization.  Capitalization.  As
of the date hereof, the authorized capital stock of the Company consists of: (i)
242,500,000 shares of Common Stock, $0.001 par value per share, of which
66,719,623 shares are issued and outstanding, and of which approximately
13,780,000 common shares are reserved for (a) 6,850,000 stock options issued to
employees and directors, (b) 6,650,000 unissued options under the Company’s
stock option plan and (c) 280,000 shares to be payable under consulting services
agreements and (ii) 10,000,000 shares of preferred stock, $0.001 par value per
share, of which no shares are issued and outstanding, no shares are reserved for
issuance pursuant to the Company’s stock option plans; no shares are reserved
for issuance pursuant to securities (other than the Note) exercisable for, or
convertible into or exchangeable for shares of Common Stock and 3,154,980 and
2,105,265 shares, respectively are reserved for issuance upon conversion of the
Note and a related note payable to Buyer (subject to adjustment pursuant to the
Company’s covenant set forth in Section 4(g) below).  All of such
outstanding shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and non-assessable.  No shares
of capital stock of the Company are subject to preemptive rights or any other
similar rights of the shareholders of the Company or any liens or encumbrances
imposed through the actions or failure to act of the Company.  Except
as disclosed in Schedule 3(c), as of the effective date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company or any of its Subsidiaries, or arrangements by which the
Company or any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries, (ii) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their securities
under the 1933 Act and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any agreement
providing rights to security holders) that will be triggered by the issuance of
the Note or the Conversion Shares.  The Company has furnished to the
Buyer true and correct copies of the Company’s Certificate of Incorporation as
in effect on the date hereof (“Certificate of Incorporation”), the Company’s
By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all
securities convertible into or exercisable for Common Stock of the Company and
the material rights of the holders thereof in respect thereto.  The
Company shall provide the Buyer with a written update of this representation
signed by the Company’s Chief Executive on behalf of the Company as of the
Closing Date.

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    
 

    (iv)           Issuance of
Shares.  The Conversion Shares are duly authorized and reserved
for issuance and, upon conversion of the Note in accordance with its respective
terms, will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability upon the
holder thereof.

    


    (v)           Acknowledgment of
Dilution.  The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares upon conversion of the Note.  The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Note in accordance with this Agreement, the Note is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other shareholders of the Company.

    


    (vi)           No
Conflicts.  The execution, delivery and performance of this
Agreement, the Note by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance of the Conversion Shares) will not (i)
conflict with or result in a violation of any provision of the Certificate of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii)  result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect).  Neither the Company nor any of its Subsidiaries is
in violation of its Certificate of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its Subsidiaries is
in default (and no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or failed to take
any action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party or by which any property or
assets of the Company or any of its Subsidiaries is bound or affected, except
for possible defaults as would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its Subsidiaries, if
any, are not being conducted, and shall not be conducted so long as a Buyer owns
any of the Securities, in violation of any law, ordinance or regulation of any
governmental entity.  Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable state securities
laws, the Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court, governmental agency,
regulatory agency, self regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Note in accordance with the terms hereof or thereof or
to issue and sell the Note in accordance with the terms hereof and to issue the
Conversion Shares upon conversion of the Note.  All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof.  The Company is not in violation of the
listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”) and
does not reasonably anticipate that the Common Stock will be delisted by the
OTCBB in the foreseeable future.  The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise to any of the
foregoing.

     

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    
 

    (vii)           SEC Documents; Financial
Statements.  The Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits to such documents) incorporated by
reference therein, being hereinafter referred to herein as the “SEC
Documents”).  The Company has delivered to the Buyer true and complete
copies of the SEC Documents, except for such exhibits and incorporated
documents.  As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.  None of the statements made in any such SEC Documents is,
or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings prior the
date hereof).  As of their respective dates, the financial statements
of the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles, consistently applied, during the periods
involved  and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments).  Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to September 30, 2009, and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
The Company is subject to the reporting requirements of the 1934
Act.

    


    (viii)         Absence of Certain
Changes.  Since September 30, 2009, there has been no material
adverse change and no material adverse development in the assets, liabilities,
business, properties, operations, financial condition, results of operations,
prospects or 1934 Act reporting status of the Company or any of its
Subsidiaries.

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    
 

    (ix)           Absence of
Litigation.  There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company
or any of its Subsidiaries, or their officers or directors in their capacity as
such, that could have a Material Adverse Effect.  Schedule 3(i)
contains a complete list and summary description of any pending or, to the
knowledge of the Company, threatened proceeding against or affecting the Company
or any of its Subsidiaries, without regard to whether it would have a Material
Adverse Effect.  The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the
foregoing.

    


    (x)       
    Patents, Copyrights,
etc.  The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
(“Intellectual Property”) necessary to enable it to conduct its business as now
operated (and, as presently contemplated to be operated in the future); there is
no claim or action by any person pertaining to, or proceeding pending, or to the
Company’s knowledge threatened, which challenges the right of the Company or of
a Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, as presently contemplated to be
operated in the future); to the best of the Company’s knowledge, the Company’s
or its Subsidiaries’ current and intended products, services and processes do
not infringe on any Intellectual Property or other rights held by any person;
and the Company is unaware of any facts or circumstances which might give rise
to any of the foregoing.  The Company and each of its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of their Intellectual Property.

    


    (xi)           No Materially Adverse
Contracts, Etc.  Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a Material Adverse
Effect.  Neither the Company nor any of its Subsidiaries is a party to
any contract or agreement which in the judgment of the Company’s officers has or
is expected to have a Material Adverse Effect.

    


    (xii)           Tax
Status.  The Company and each of its Subsidiaries has made or
filed all federal, state and foreign income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply.  There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.  The
Company has not executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal, state or local
tax.  None of the Company’s tax returns is presently being audited by
any taxing authority.

    


    (xiii)           Certain
Transactions.  Except for arm’s length transactions pursuant to
which the Company or any of its Subsidiaries makes payments in the ordinary
course of business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.

     

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    
 

    (xiv)           Disclosure.  All
information relating to or concerning the Company or any of its Subsidiaries set
forth in this Agreement and provided to the Buyer pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading.  No event or circumstance has occurred or exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company’s reports filed under the 1934 Act
are being incorporated into an effective registration statement filed by the
Company under the 1933 Act).

    


    (xv)          Acknowledgment Regarding
Buyer’ Purchase of Securities.  The Company acknowledges and
agrees that the Buyer is acting solely in the capacity of arm’s length
purchasers with respect to this Agreement and the transactions contemplated
hereby.  The Company further acknowledges that no Buyer is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement and the transactions contemplated hereby and any
statement made by any Buyer or any of their respective representatives or agents
in connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to the Buyer’ purchase
of the Securities.  The Company further represents to the Buyer that
the Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.

    


    (xvi)          No Integrated
Offering.  Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any
offers or sales in any security or solicited any offers to buy any security
under circumstances that would require registration under the 1933 Act of the
issuance of the Securities to the Buyer.  The issuance of the
Securities to the Buyer will not be integrated with any other issuance of the
Company’s securities (past, current or future) for purposes of any shareholder
approval provisions applicable to the Company or its securities.

    


    (xvii)        No
Brokers.  The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, transaction fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.

    


    (xviii)        Permits;
Compliance.  The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the “Company Permits”), and there is
no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits.  Neither the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.  Since
September 30, 2009, neither the Company nor any of its Subsidiaries has received
any notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.

     

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    
 

    (xix)          Environmental
Matters.

    


    (A)              There
are, to the Company’s knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present violations of
Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local or
foreign laws and neither the Company nor any of its Subsidiaries has received
any notice with respect to any of the foregoing, nor is any action pending or,
to the Company’s knowledge, threatened in connection with any of the
foregoing.  The term “Environmental Laws” means all federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

    


    (B)              Other
than those that are or were stored, used or disposed of in compliance with
applicable law, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company’s
or any of its Subsidiaries’ business.

    


    (C)              There
are no underground storage tanks on or under any real property owned, leased or
used by the Company or any of its Subsidiaries that are not in compliance with
applicable law.
 

    (xx)           Title to
Property.  The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(t) or such
as would not have a Material Adverse Effect.  Any real property and
facilities held under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.

    


    (xxi)          Insurance.  The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged.  Neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse
Effect.  The Company has provided to Buyer true and correct copies of
all policies relating to directors’ and officers’ liability coverage, errors and
omissions coverage, and commercial general liability coverage.

     

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    
 

    (xxii)         Internal Accounting
Controls.  The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company’s board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

    


    (xxiii)        Foreign Corrupt
Practices.  Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other person acting on behalf of
the Company or any Subsidiary has, in the course of his actions for, or on
behalf of, the Company, used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.

    


    (xxiv)        Solvency.  The
Company (after giving effect to the transactions contemplated by this Agreement)
is solvent (i.e., its assets have
a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not, after giving effect to the transaction
contemplated by this Agreement, have the ability to, nor does it intend to take
any action that would impair its ability to, pay its debts from time to time
incurred in connection therewith as such debts mature.  The Company
did not receive a qualified opinion from its auditors with respect to its most
recent fiscal year end and, after giving effect to the transactions contemplated
by this Agreement, does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal
year.

    


    (xxv)         No Investment
Company.  The Company is not, and upon the issuance and sale of
the Securities as contemplated by this Agreement will not be an “investment
company” required to be registered under the Investment Company Act of 1940 (an
“Investment Company”).  The Company is not controlled by an Investment
Company.

    


    (xxvi)           Breach of Representations
and Warranties by the Company.  If the Company breaches any of
the representations or warranties set forth in this Section 3, and in addition
to any other remedies available to the Buyer pursuant to this Agreement, the
Company shall pay to the Buyer the Standard Liquidated Damages Amount in cash or
in shares of Common Stock at the option of the Company, until such breach is
cured.  If the Company elects to pay the Standard Liquidated Damages
Amounts in shares of Common Stock, such shares shall be issued at the Conversion
Price at the time of payment.

     

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    
 

    (d)           COVENANTS.

    


    (i)        
   Best
Efforts.  The parties shall use their best efforts to satisfy
timely each of the conditions described in Section 6 and 7 of this
Agreement.

    


    (ii)           Form D; Blue Sky
Laws.  The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the
Buyer promptly after such filing.  The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for sale to the Buyer at the applicable
closing pursuant to this Agreement under applicable securities or “blue sky”
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Buyer on or prior to the Closing Date.

    


    (iii)           Use of
Proceeds.  The Company shall use the proceeds from the sale of
the Note in the manner set forth in Schedule 4(d) attached hereto and made a
part hereof and shall not, directly or indirectly, use such proceeds for any
loan to or investment in any other corporation, partnership, enterprise or other
person (except in connection with its currently existing direct or indirect
Subsidiaries).

    


    (iv)           Right of First
Refusal.  Unless it shall have first delivered to the Buyer, at
least seventy two (72) hours prior to the closing of such Future Offering (as
defined herein), written notice describing the proposed Future Offering,
including the terms and conditions thereof and proposed definitive documentation
to be entered into in connection therewith, and providing the Buyer an option
during the seventy two (72) hour period following delivery of such notice to
purchase the securities being offered in the Future Offering on the same terms
as contemplated by such Future Offering (the limitations referred to in this
sentence and the preceding sentence are collectively referred to as the “Right
of First Refusal”) (and subject to the exceptions described below), the Company
will not conduct any equity financing (including debt with an equity component)
(“Future Offerings”) during the period beginning on the Closing Date and ending
twelve (12) months following the Closing Date.  In the event the terms
and conditions of a proposed Future Offering are amended in any respect after
delivery of the notice to the Buyer concerning the proposed Future Offering, the
Company shall deliver a new notice to the Buyer describing the amended terms and
conditions of the proposed Future Offering and the Buyer thereafter shall have
an option during the seventy two (72) hour period following delivery of such new
notice to purchase its pro rata share of the securities being offered on the
same terms as contemplated by such proposed Future Offering, as
amended.  The foregoing sentence shall apply to successive amendments
to the terms and conditions of any proposed Future Offering.  The
Right of First Refusal shall not apply to any transaction involving (i)
issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 1933 Act) or
(ii) issuances of securities as consideration for a merger, consolidation or
purchase of assets, or in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity capital), or in
connection with the disposition or acquisition of a business, product or license
by the Company.  The Right of First Refusal also shall not apply to
the issuance of securities upon exercise or conversion of the Company’s options,
warrants or other convertible securities outstanding as of the date hereof or to
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option or restricted stock plan approved by
the shareholders of the Company.

    


    (v)           Expenses.  At
the Closing, the Company shall reimburse Buyer for expenses incurred by them in
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the other agreements to be executed in
connection herewith (“Documents”), including, without limitation, reasonable
attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for
stock quotation services, fees relating to any amendments or modifications of
the Documents or any consents or waivers of provisions in the Documents, fees
for the preparation of opinions of counsel, escrow fees, and costs of
restructuring the transactions contemplated by the Documents.  When
possible, the Company must pay these fees directly, otherwise the Company must
make immediate payment for reimbursement to the Buyer for all fees and expenses
immediately upon written notice by the Buyer or the submission of an invoice by
the Buyer Notwithstanding anything herein to the contrary, the Company’s
obligation to reimburse Buyer’ expenses shall be $2,500.

     

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    
 

    (vi)           Financial
Information.  The Company agrees to send or make available the
following reports to the Buyer until the Buyer transfers, assigns, or sells all
of the Securities: (i) within ten (10) days after the filing with the SEC,
a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and
any Current Reports on Form 8-K; (ii) within one (1) day after release,
copies of all press releases issued by the Company or any of its Subsidiaries;
and (iii) contemporaneously with the making available or giving to the
shareholders of the Company, copies of any notices or other information the
Company makes available or gives to such shareholders.

    


    (vii)          Authorization and
Reservation of Shares.  The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion or exercise of the
outstanding Note and issuance of the Conversion Shares in connection therewith
(based on the Conversion Price of the Note in effect from time to time) and as
otherwise required by the Note.  The Company shall not reduce the
number of shares of Common Stock reserved for issuance upon conversion of Note
without the consent of the Buyer.  The Company shall at all times
maintain the number of shares of Common Stock so reserved for issuance at an
amount (“Reserved Amount”) equal to two times the number that is then actually
issuable upon full conversion of the Note and Additional Note (based on the
Conversion Price of the Note in effect from time to time).  If at any
time the number of shares of Common Stock authorized and reserved for issuance
(“Authorized and Reserved Shares”) is below the Reserved Amount, the Company
will promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of shareholders to authorize additional shares to meet the Company’s
obligations under this Section 4(g), in the case of an insufficient number of
authorized shares, obtain shareholder approval of an increase in such authorized
number of shares, and voting the management shares of the Company in favor of an
increase in the authorized shares of the Company to ensure that the number of
authorized shares is sufficient to meet the Reserved Amount.  If the
Company fails to obtain such shareholder approval within thirty (30) days
following the date on which the number of Reserved Amount exceeds the Authorized
and Reserved Shares, the Company shall pay to the Borrower the Standard
Liquidated Damages Amount, in cash or in shares of Common Stock at the option of
the Buyer.  If the Buyer elects to be paid the Standard Liquidated
Damages Amount in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment.  In order to ensure that the
Company has authorized a sufficient amount of shares to meet the Reserved Amount
at all times, the Company must deliver to the Buyer at the end of every month a
list detailing (1) the current amount of shares authorized by the Company and
reserved for the Buyer; and (2) amount of shares issuable upon conversion of the
Note and as payment of interest accrued on the Note for one year.  If
the Company fails to provide such list within five (5) business days of the end
of each month, the Company shall pay the Standard Liquidated Damages Amount, in
cash or in shares of Common Stock at the option of the Buyer, until the list is
delivered.  If the Buyer elects to be paid the Standard Liquidated
Damages Amount in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment.

     

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    
 

    (viii)         Listing.  The
Company shall promptly secure the listing of the Conversion Shares upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and, so long as any Buyer owns any of the Securities, shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable upon conversion of the
Note.  The Company will obtain and, so long as any Buyer owns any of
the Securities, maintain the listing and trading of its Common Stock on the
OTCBB or any equivalent replacement exchange, the Nasdaq National Market
(“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock
Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in
all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and
such exchanges, as applicable.  The Company shall promptly provide to
the Buyer copies of any notices it receives from the OTCBB and any other
exchanges or quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing on such
exchanges and quotation systems.

    


    (ix)           Corporate
Existence.  So long as a Buyer beneficially owns any Note, the
Company shall maintain its corporate existence and shall not sell all or
substantially all of the Company’s assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company’s assets, where
the surviving or successor entity in such transaction (i) assumes the Company’s
obligations hereunder and under the agreements and instruments entered into in
connection herewith and (ii) is a publicly traded corporation whose Common Stock
is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or
AMEX.

    


    (x)           No
Integration.  The Company shall not make any offers or sales of
any security (other than the Securities) under circumstances that would require
registration of the Securities being offered or sold hereunder under the 1933
Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.

    


    (xi)           Breach of
Covenants.  If the Company breaches any of the covenants set
forth in this Section 4, and in addition to any other remedies available to the
Buyer pursuant to this Agreement, the Company shall pay to the Buyer the
Standard Liquidated Damages Amount, in cash or in shares of Common Stock at the
option of Buyer, until such breach is cured.  If the Buyer elects to
pay the Standard Liquidated Damages Amount in shares, such shares shall be
issued at the Conversion Price at the time of payment.

    


    (xii)           Failure to Comply with the
1934 Act.  So long as the Buyer beneficially owns the Note, the
Company shall comply with the reporting requirements of the 1934 Act; and the
Company shall continue to be subject to the reporting requirements of the 1934
Act.

    


    (xiii)          Trading
Activities.  Neither the Buyer nor their affiliates has an open
short position in the common stock of the Company and the Buyer agree that they
shall not, and that they will cause their affiliates not to, engage in any short
sales of or hedging transactions with respect to the common stock of the
Company.

     

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    
 

    (e)           Transfer Agent
Instructions.  The Company shall issue irrevocable instructions
to its transfer agent to issue certificates, registered in the name of the Buyer
or its nominee, for the Conversion Shares in such amounts as specified from time
to time by the Buyer to the Company upon conversion of the Note in accordance
with the terms thereof (the “Irrevocable Transfer Agent
Instructions”).  Prior to registration of the Conversion Shares under
the 1933 Act or the date on which the Conversion Shares may be sold pursuant to
Rule 144 without any restriction as to the number of Securities as of a
particular date that can then be immediately sold, all such certificates shall
bear the restrictive legend specified in Section 2(g) of this
Agreement.  The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof (in the case of the
Conversion Shares, prior to registration of the Conversion Shares under the 1933
Act or the date on which the Conversion Shares may be sold pursuant to Rule 144
without any restriction as to the number of Securities as of a particular date
that can then be immediately sold), will be given by the Company to its transfer
agent and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement.  Nothing in this Section shall affect in any way the
Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply
with all applicable prospectus delivery requirements, if any, upon re-sale of
the Securities.  If a Buyer provides the Company, at the cost of the
Company, with (i) an opinion of counsel in form, substance and scope customary
for opinions in comparable transactions, to the effect that a public sale or
transfer of such Securities may be made without registration under the 1933 Act
and such sale or transfer is effected or (ii) the Buyer provides reasonable
assurances that the Securities can be sold pursuant to Rule 144, the Company
shall permit the transfer, and, in the case of the Conversion Shares, promptly
instruct its transfer agent to issue one or more certificates, free from
restrictive legend, in such name and in such denominations as specified by the
Buyer.  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer, by vitiating the
intent and purpose of the transactions contemplated
hereby.  Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Section 5 may be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section, that the Buyer shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring
immediate transfer, without the necessity of showing economic loss and without
any bond or other security being required.

    


    (f)          
 Conditions to
the Company’s Obligation to Sell.  The obligation of the
Company hereunder to issue and sell the Note to a Buyer at the Closing is
subject to the satisfaction, at or before the Closing Date of each of the
following conditions thereto, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion:

    


    (i)   
        The Buyer shall have executed
this Agreement and delivered the same to the Company.

    


    (ii)           The
Buyer shall have delivered the Purchase Price in accordance with Section 1(b)
above.

    


    (iii)          The
representations and warranties of the applicable Buyer shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date), and the applicable Buyer shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the applicable Buyer at or prior to the Closing Date.

    


    (iv)           No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

     

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    
 

    (g)           Conditions to The Buyer’s
Obligation to Purchase.  The obligation of the Buyer hereunder
to purchase the Note at the Closing is subject to the satisfaction, at or before
the Closing Date of each of the following conditions, provided that these
conditions are for the Buyer’s sole benefit and may be waived by the Buyer at
any time in its sole discretion:

    


    (i)     
      The Company shall have executed this
Agreement and delivered the same to the Buyer.

    


    (ii)           The
Company shall have delivered to the Buyer duly executed Note (in such
denominations as the Buyer shall request) in accordance with Section 1(b)
above.

    


    (iii)           The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a
majority-in-interest of the Buyer, shall have been delivered to and acknowledged
in writing by the Company’s Transfer Agent.

    


    (iv)           The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at such time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date.  The Buyer shall have received a
certificate or certificates, executed by the chief executive officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by the Buyer including, but not
limited to certificates with respect to the Company’s Certificate of
Incorporation, By-laws and Board of Directors’ resolutions relating to the
transactions contemplated hereby.

    


    (v)     
      No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.

    


    (vi)           No
event shall have occurred which could reasonably be expected to have a Material
Adverse Effect on the Company including but not limited to a change in the 1934
Act reporting status of the Company or the failure of the Company to be timely
in its 1934 Act reporting obligations.

    


    (vii)          The
Conversion Shares shall have been authorized for quotation on the OTCBB and
trading in the Common Stock on the OTCBB shall not have been suspended by the
SEC or the OTCBB.

    


    (viii)         The
Buyer shall have received an officer’s certificate described in Section 3(c)
above, dated as of the Closing Date.

     

    
 

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    (h)           Governing Law;
Miscellaneous.

    


    (i)        
   Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws.  Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state and county of Nassau.  The parties to this Agreement hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non
conveniens.  The Company and Holder waive trial by
jury.  The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs.  In the event
that any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law.  Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.   Each party hereby
irrevocably waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this Agreement or
any other Transaction Document 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 Agreement 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 law.

    


    (ii)           Counterparts; Signatures by
Facsimile.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party.  This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

    


    (iii)           Headings.  The
headings of this Agreement are for convenience of reference only and shall not
form part of, or affect the interpretation of, this Agreement.

    


    (iv)           Severability.  In
the event that any provision of this Agreement is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law.  Any provision
hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.

    


    (v)           Entire Agreement;
Amendments.  This Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters.  No
provision of this Agreement may be waived or amended other than by an instrument
in writing signed by the majority in interest of the Buyer.

    


    (vi)           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:

     

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

    
 

    If to the
Company, to:

    VIVAKOR
INC.

    2590
Holiday Road, Suite 100

    Coralville,
IA 52241

    Attn:
Tannin Fuja, Ph.D., Chief Executive Officer

    facsimile:
[enter fax number]

    


    With a
copy by fax only to (which copy shall not constitute notice):

    [enter
name of law firm]

    Attn:
[attorney name]

    [enter
address line 1]

    [enter
city, state, zip]

    facsimile:
[enter fax number]

    


    If to the
Buyer:

    ASHER ENTERPRISES, INC.

    1 Linden
Pl., Suite 207

    Great
Neck, NY.
11021                                                      

    facsimile:
[enter fax number]

    


    With a
copy by fax only to (which copy shall not constitute notice):


    Naidich Wurman Birnbaum & Mayday
LLP

    80 Cuttermill Road, Suite
410

    Great Neck, NY 11021

    Attn: Bernard S. Feldman,
Esq.

    facsimile:
[enter fax number]

    


    Each
party shall provide notice to the other party of any change in
address.

    


    (vii)          Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns.  Neither the
Company nor any Buyer shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the
other.  Notwithstanding the foregoing, subject to Section 2(f),
any Buyer may assign its rights hereunder to any person that purchases
Securities in a private transaction from a Buyer or to any of its “affiliates,”
as that term is defined under the 1934 Act, without the consent of the
Company.

     

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

    
 

    (viii)         Third Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.

    


    (ix)           Survival.  The
representations and warranties of the Company and the agreements and covenants
set forth in this Agreement shall survive the closing hereunder notwithstanding
any due diligence investigation conducted by or on behalf of the
Buyer.  The Company agrees to indemnify and hold harmless each of the
Buyer and all their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach by the Company
of any of its representations, warranties and covenants set forth in this
Agreement or any of its covenants and obligations under this Agreement,
including advancement of expenses as they are incurred.

    


    (x)        
   Publicity.  The
Company, and each of the Buyer shall have the right to review a reasonable
period of time before issuance of any press releases, SEC, OTCBB or FINRA
filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of each of the Buyer, to
make any press release or SEC, OTCBB (or other applicable trading market) or
FINRA filings with respect to such transactions as is required by applicable law
and regulations (although each of the Buyer shall be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment
thereon).

    


    (xi)           Further
Assurances.  Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

    


    (xii)           No Strict
Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.

    


    (xiii)          Remedies.  The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyer by vitiating the intent and purpose of the
transaction contemplated hereby.  Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Agreement will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement, that the Buyer shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Agreement and
to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being
required.

     

     

    
 

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    IN WITNESS
WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be
duly executed as of the date first above written.

    
 

    VIVAKOR
INC.

    


    By: /s/ Tannin
Fuja                                    


    Tannin Fuja, Ph.D.

    Chief
Executive Officer

    


    ASHER
ENTERPRISES, INC.

    


    


    By:    
                                                          

    


    1 Linden
Pl., Suite 207

    Great
Neck, NY. 11021

    


    


    AGGREGATE
SUBSCRIPTION AMOUNT:

     

                                                                                                             

       

      
        	 	Aggregate Principal
      Amount of Note:  	$60,000.00
	 	Aggregate Purchase
      Price:  	$60,000.00


      

       

    

                                                                                                            

     

     

    
39