EX-10.3






THE SECURITIES REPRESENTED BY THIS DOCUMENT AND THE SHARES ISSUABLE UPON CONVERSION THEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OR AN EXEMPTION THEREFROM AS CONFIRMED BY AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT
REQUIRED UNDER SAID SECURITIES ACT, PROVIDED THAT NO SUCH OPINION WILL BE REQUIRED IN CONNECTION
WITH A SALE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT IF THE HOLDER PROVIDES TO THE MAKER A
CUSTOMARY REPRESENTATION LETTER. HEDGING TRANSACTIONS INVOLVING THOSE SECURITIES MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.



SENIOR SECURED CONVERTIBLE PROMISSORY NOTE 




$           , 2010



FOR VALUE RECEIVED, the undersigned TechniScan, Inc., a Delaware corporation
(“Maker”), does hereby promise, in accordance with the Note and Warrant Purchase Agreement
dated as of the date hereof (the “Purchase Agreement”), to pay to the order of
     (together with his heirs, successors and assigns, “Payee”) at the
address of Payee set forth in the Purchase Agreement (or at such other place as Payee may designate
from time to time in writing to Maker, in immediately available funds of official currency of the
United States, the principal sum of        Dollars ($     ), or so much as may be
outstanding hereunder from time to time, together with interest thereon from the date of this
Senior Secured Convertible Promissory Note (this “Note”), as provided herein. Capitalized
terms used and not otherwise defined herein have the meanings set forth in the Purchase Agreement.



This Note is one of a series of convertible promissory notes of like tenor and ranking (except
as otherwise provided in the Purchase Agreement and the Security Documents) (collectively, the
"Notes”) made by Maker in favor of certain investors (collectively, the
"Investors”). This Note is one of the Second Lien Notes referenced in the Purchase
Agreement.



By acceptance of this Note, Payee agrees that it will promptly deliver and surrender this Note
(or a lost Note affidavit in the form attached hereto as Exhibit A) to Maker upon full payment
thereof.



1. Principal Balance. This Note evidences a loan up to the maximum principal sum
specified above, less the aggregate amount of all principal repayments made under this Note by
Maker to Payee.



2. Interest Rate. Interest shall be payable on the unpaid principal balance of this
Note, as the same may exist from time to time, from the date of issuance until paid or converted in
full, in accordance with the terms herein and shall be payable (i) on the Maturity Date (as defined
below), (ii) on any earlier date of payment or conversion of principal (in whole or in part and, if
in part, as to the portion paid or converted) and (iii) following the Maturity Date or any earlier
date of demand for payment or conversion of principal in accordance with the terms hereof (each, an
“Initial Interest Payment Date”), on the last day of each calendar quarter (each of the foregoing
an “Interest Payment Date”), provided that if any such day is not a business day, the
interest payment due on such date shall be payable on (and shall include interest accrual through)
the next succeeding business day. Interest accruing on any portion of the principal of this Note
(from the date of issuance hereof) as to which Maker does not timely satisfy its payment or
conversion obligations in accordance with the terms hereof shall at the option of Payee be paid in
additional Notes (each of which, if Payee is a Priority Investor, shall be a First Lien Note)
having terms identical to this Note (and providing for immediate effectiveness of all provisions
hereof that are applicable hereunder on or after the Maturity Date), provided that Maker shall have
the right to satisfy the interest accrued through the Initial Interest Payment Date in cash,
provided that timely payment is made, notwithstanding any exercise of such option by Payee. Payee
may with respect to any Interest Payment Date after the Initial Interest Payment Date elect payment
of interest in additional Notes even if cash payment of such interest is tendered by Maker.
Interest shall accrue on the unpaid principal balance hereof at the rate of 10% per annum from and
including the date hereof to but excluding the Maturity Date. Interest shall accrue on any
principal balance that is not paid on the earlier of the Maturity Date and the date of an Event of
Default shall accrue at the rate of 24% per annum (the “Default Rate”) from and including
the Maturity Date or the date of such Event of Default to but excluding the date of payment.
Notwithstanding the foregoing, if any portion of the unpaid principal balance of this Note is
converted into shares (“Shares”) of Maker’s common stock, par value of $0.001 per share
(“Common Stock”) pursuant to the terms hereof, interest shall be payable with respect to
such principal portion at the rate of 12% per annum from and including the date hereof to but
excluding the earlier of the Maturity Date and the date of conversion, provided that any principal
amount that is not converted on or prior to the earlier of the Maturity Date and the date of an
Event of Default shall be payable at the Default Rate from and including the Maturity Date or the
date of such Event of Default to but excluding the date of conversion. In no event, however, shall
interest be payable at a rate higher than the highest rate permitted by applicable law. Interest
on the principal balance outstanding will be calculated on the basis of the actual number of days
elapsed over an assumed year consisting of 365 days, to the date of receipt by Payee at the place
of payment designated herein of any interest and/or principal.



3. Payment Terms. Any outstanding principal balance and accrued unpaid interest shall
be paid to Payee in full no later than September 30, 2010 (the “Maturity Date”).



4. Conversion Rights.



(a) In the event Maker consummates a Qualified Financing, Maker shall provide notice
(“Maker’s Notice”) to Payee within three business days after the first closing of the
Qualified Financing and within three business days after each subsequent closing of the Qualified
Financing, and Payee shall, without limitation of Payee’s rights under the remaining provisions of
this Section 4, have the right by notice to Maker to elect in connection with each such closing to:
(i) convert the principal amount of this Note and accrued and unpaid interest thereon (the
"Convertible Amount”) in whole or in part into QF Securities (as defined below) at the same
price and on the same terms as other investors in the Qualified Financing in lieu of having Maker
repay this Note pursuant to Section 3 above; (ii) require Maker to immediately repay any portion of
the unconverted principal amount of this Note and pay accrued and unpaid interest thereon to the
date of payment (the “Payoff Amount”); and/or (iii) continue to hold the portion of this
Note that is not required to be converted or repaid. For purposes herein, a “Qualified
Financing” shall mean the sale by Maker of either Shares and/or other securities that are
convertible into or exercisable for Shares (collectively, “QF Securities”) for cash for
investment purposes, pursuant to which Maker receives gross proceeds (subject only to customary
selling commissions and transaction expenses) of not less than FIVE MILLION DOLLARS ($5,000,000) at
the first closing thereof (of which a majority of the amount invested at such first closing and in
the aggregate must be invested by persons unaffiliated with Maker). For the avoidance of doubt, if
Payee elects to convert any portion of the Convertible Amount pursuant to clause (i) above, Payee
shall be entitled to receive the number and type of QF Securities as would be received in exchange
for a cash investment in the Qualified Financing equal to the Convertible Amount and shall be
entitled to retain the warrants being acquired by Payee pursuant to the Purchase Agreement. If
Payee does not provide written notice to Maker of Payee’s election to covert any portion of the
Note in accordance with clause (i) above or have Maker repay any unconverted portion of this Note
in accordance with clause (ii) above within 20 days of receipt of Maker’s Notice, Payee shall be
deemed to have elected to continue to hold such unpaid and unconverted portion of this Note as
provided in clause (iii) above, in which event Maker shall repay Payee pursuant to Section 3 or as
otherwise provided herein. Maker shall deliver to Payee the applicable number and type of QF
Securities within three Trading Days of receipt of Payee’s election pursuant to clause (i) above
and shall deliver to Payee the Payoff Amount within five business days of receipt of Payee’s
election pursuant to clause (ii) above. No fractional QF Securities will be issued in connection
with any conversion of the Conversion Amount, but instead will be rounded up to the nearest whole
QF Security. The date notice of conversion of all or any portion of the Note is given by Payee to
Maker (pursuant to this Section 4(a) or as elsewhere provided in the Note) is referred to as the
“Conversion Date”.



(b) The Convertible Amount is convertible at any time at the option of Payee by notice to
Maker into that number of Shares equal to the Convertible Amount divided by $0.67, subject to
adjustment as provided in the remaining provisions of this Note (the “Conversion Price”).
The Shares or other securities into which this Note is convertible (and any Shares issued upon
conversion or exercise of any such other securities) are referred to as the “Conversion
Securities”. Except in connection with a Qualified Financing, Payee may elect to convert this
Note in part under any provision hereof permitting conversion and may elect multiple conversions,
provided that Payee shall not without Maker’s consent be permitted to convert less than the lesser
of (i) $100,000 in principal and (ii) the remaining unconverted principal amount of this Note, in
each case together with all accrued and unpaid interest on such principal amount to be converted.



(c) Beginning on the day following the Maturity Date, in the event that the Maker’s Shares, on
the Trading Day prior to any Conversion Date, closed at a price per Share that is lower than ten
percent (10%) higher than the then applicable Conversion Price, then Payee shall have the right
exercisable by notice to Maker to convert the Convertible Amount into Shares at the lower of the
then applicable Conversion Price and a price per Share that is twenty percent (20%) lower than the
arithmetic mean of the three lowest prices at which any Shares are traded during ten consecutive
Trading Days ending on the Trading Day prior to the Conversion Date (or, if the Shares did not
trade on any such Trading Day, the arithmetic mean of the three lowest prices at which any Shares
are traded during the most recent ten Trading Days on which the Shares traded, provided that no
Trading Day that is more than 20 Trading Days prior to the Conversion Date shall be taken into
account). If there has been no trading in the Shares during the 20 Trading Days prior to the
Conversion Date, in the event that the Maker’s Shares, on the Trading Day prior to the Conversion
Date, closed at a price per Share that is lower than ten percent (10%) higher than the then
applicable Conversion Price, then Payee shall have the right exercisable by notice to Maker to
convert the Convertible Amount into Shares at the lower of the then applicable Conversion Price and
a price per Share that is twenty percent (20%) lower than the fair market value of one Share as
determined in good faith by the Board and the Lead Investor. As used herein, “Trading Day”
means (i) a day on which the Common Stock is traded on a national securities exchange or quoted on
the OTC Bulletin Board, or (ii) if the Common Stock is not traded on a national securities exchange
or quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices) or in the “pink sheets”;
provided, however, that in the event that the Common Stock is not listed or quoted as set forth in
(i) or (ii) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.



(d) Upon conversion of any portion of this Note and delivery of the Conversion Securities in
accordance with the terms hereof, the portion of the principal balance of this Note so converted
and all accrued interest due thereon as of the date of conversion will be deemed paid in full, and
upon conversion of all outstanding principal and interest the Note will be deemed cancelled and of
no force or effect.



(e) Not later than three (3) Trading Days after any Conversion Date, Maker or its designated
transfer agent, as applicable, shall, if requested by Payee, issue and deliver to the Depository
Trust Company (“DTC”) account on Payee’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”) as specified in the conversion notice, registered in the name of Payee or
its designee, the number of Conversion Securities to which Payee shall be entitled.  Otherwise, not
later than three (3) Trading Days after any Conversion Date, Maker shall deliver to Payee by
express courier a certificate or certificates representing the number of Conversion Securities
being acquired upon the conversion (the “Delivery Date”), which shall be free of
restrictive legends unless the Conversion Securities have not been registered for resale and are
not eligible for resale pursuant to Rule 144 without regard to volume limitations, manner-of-sale
restrictions or current public information requirements.  If in the case of any Conversion Notice
the Conversion Securities are not delivered to or as directed by Payee by the Delivery Date, Payee
shall be entitled by written notice to Maker at any time on or before its receipt of such
Conversion Securities thereafter, to rescind such conversion, whereupon Maker and Payee shall each
be restored to their respective positions immediately prior to the Conversion Date, except that any
amounts described in Section 4(f) shall be payable through the date notice of rescission is given
to Maker and any amounts described in Section 4 (g) shall nevertheless be payable.



(f) Maker understands that a delay in the delivery of the Conversion Securities upon
conversion of this Note beyond the Delivery Date could result in economic loss to Payee.  If Maker
fails to deliver to Payee such Conversion Securities via DWAC (or, if applicable, certificates) by
the Delivery Date, Maker shall pay to Payee, in cash, an amount per Trading Day for each Trading
Day until such Conversion Securities are delivered via DWAC or certificates are delivered, together
with interest on such amount at a rate of 10% per annum, accruing until such amount and any accrued
interest thereon is paid in full, equal to (A) 1% of the aggregate principal amount of the Note
requested to be converted for the first five (5) Trading Days after the Delivery Date and (ii) 2%
of the aggregate principal amount of the Note requested to be converted for each Trading Day
thereafter (payable as liquidated damages and not as a penalty).  Nothing herein shall limit
Payee’s right to pursue actual damages for Maker’s failure to deliver certificates representing
Conversion Securities upon conversion within the period specified herein and Payee shall have the
right to pursue all remedies available to it at law or in equity (including, without limitation, a
decree of specific performance and/or injunctive relief).  



(g) In addition to any other rights available to Payee, if Maker fails to cause its transfer
agent to transmit via DWAC or, if applicable, transmit to Payee a certificate or certificates
representing the shares of Common Stock issuable upon conversion of this Note on or before the
Delivery Date, and if after such date Payee is required by its broker to purchase (in an open
market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
Payee of Conversion Securities issuable upon conversion of this Note which Payee anticipated
receiving upon such exercise (a “Buy-In”), then Maker shall (1) pay in cash to Payee the
amount by which (x) Payee’s total purchase price (including brokerage commissions, if any) for the
Conversion Securities so purchased exceeds (y) the amount obtained by multiplying (A) the number of
Conversion Securities issuable upon conversion of this Note that Maker was required to deliver to
Payee in connection with the conversion at issue times (B) the price(s) at which the sell order(s)
giving rise to such purchase obligation were executed, and (2) at the option of Payee, either
reinstate the portion of the Note for which such conversion was not honored or deliver to Payee the
number of Conversion Securities that would have been issued had Maker timely complied with its
conversion and delivery obligations hereunder.  For example, if Payee purchases Conversion
Securities having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion into Conversion Securities with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding sentence the Issuer shall be
required to pay Payee $1,000. Payee shall provide Maker written notice indicating the amounts
payable to Payee in respect of the Buy-In, together with applicable confirmations and other
evidence reasonably requested by Maker.  Nothing herein shall limit Payee’s right to pursue any
other remedies available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to Maker’s failure to timely
deliver certificates representing Conversion Securities upon conversion of this Note as required
pursuant to the terms hereof.



(h) Notwithstanding anything to the contrary set forth in this Note, at no time may Payee
convert all or a portion of this Note if the number of Conversion Securities to be issued pursuant
to such conversion would exceed, when aggregated with all other Conversion Securities owned by
Payee at such time, the number of Conversion Securities which would result in Payee beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules
thereunder) more than 4.9% of all of the Common Stock outstanding at such time; provided,
however, that upon Payee providing Maker with sixty-one (61) days’ notice that Payee would
like to waive this Section 4(h) with regard to any or all Conversion Securities issuable upon
conversion of this Note, this Section 4(h) will be of no force or effect with regard to all or a
portion of the Note referenced in such notice.



(i) Notwithstanding anything to the contrary set forth in this Note, at no time may Payee
convert all or a portion of this Note if the number of Conversion Securities to be issued pursuant
to such conversion, when aggregated with all other Conversion Securities owned by Payee at such
time, would result in Payee beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 9.9% of all of the Common Stock outstanding
at such time; provided, however, that upon Payee providing Maker with sixty-one
(61) days’ notice that Payee would like to waive Section 4(i) of this Note with regard to any or
all Conversion Securities issuable upon conversion of this Note, this Section 4(i) shall be of no
force or effect with regard to all or a portion of the Note referenced in such notice.



5. Additional Matters Relating to Conversion; Inability to Convert. (a) Until the Note
has been paid in full or converted in full, the Conversion Price shall be subject to adjustment
from time to time as follows (but shall not be increased, other than pursuant to Section 5(a)(i)
hereof):




(i) If Maker shall effect a stock split of the outstanding Common Stock, the
applicable Conversion Price in effect immediately prior to the stock split shall be
proportionately decreased. If Maker shall combine the outstanding shares of Common
Stock, the applicable Conversion Price in effect immediately prior to the combination
shall be proportionately increased.




(ii) If the Maker shall at any time make or issue or set a record date for the
determination of holders of securities entitled to receive a dividend or other
distribution payable in shares of Common Stock, then, and in each event, the
applicable Conversion Price in effect immediately prior to such event shall be
decreased as of the time of such issuance or, in the event such record date shall
have been fixed, as of the close of business on such record date, by multiplying, the
applicable Conversion Price then in effect by a fraction:




(1) the numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date; and




(2) the denominator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution.




(iii) If the Maker shall at any time make or issue or set a record date for the
determination of holders of securities entitled to receive a dividend or other
distribution or securities or other property other than as described in paragraph
(ii) above or in paragraph (vii) below, then, and in each event, an appropriate
revision to the applicable Conversion Price shall be made and provision shall be made
(by adjustments of the Conversion Price or otherwise) so that Payee shall receive
upon conversion hereof, in addition to the number of Shares receivable thereon, the
securities (of Maker or any other applicable issuer) and other property which they
would have received had this Note been converted on the date of such event and had
they thereafter, during the period from the date of such event to and including the
Conversion Date, retained such securities and other property (together with any
distributions payable thereon during such period), giving application to all
adjustments called for during such period under this Section 5(a) with respect to the
rights of Payee.




(iv) If the Shares issuable upon conversion of this Note shall be changed to the same
or different number of shares of any class or classes of stock or other securities,
whether by reclassification, exchange, substitution or otherwise (other than as
provided in paragraphs (i) through (iii) above or (v) below), then an appropriate
revision to the Conversion Price shall be made and provisions shall be made (by
adjustments of the Conversion Price or otherwise) so that Payee shall have the right
thereafter to convert this Note into the kind and amount of shares of stock and other
securities receivable upon reclassification, exchange, substitution or other change,
by holders of the number of Shares into which such Note might have been converted
immediately prior to such reclassification, exchange, substitution or other change,
all subject to further adjustment as provided herein.




(v) If at any time or form time to time there shall be a capital reorganization of
Maker (other than as described in paragraphs (i) through (iv) above) or there shall
be a Liquidity Event (as defined below), then without limitation of Maker’s
obligations under Section 6(a), as a part of such capital reorganization or Liquidity
Event, provision shall be made (by adjustments of the Conversion Price or otherwise)
so that Payee shall have the right thereafter to convert this Note into the kind and
amount of shares of stock and other securities or property of Maker or any successor
corporation that would have been receivable in respect of the aggregate Shares into
which such Note might have been converted immediately prior to such capital
reorganization or Liquidity Event, all subject to further adjustment as provided
herein.




(vi) In the event Maker, shall, at any time, from time to time, issue or sell any
additional shares of Common Stock (other than as provided in paragraphs (i) through
(v) above, but including in any Qualified Financing) (“Additional Shares of
Common Stock”), at a price per share less than the Conversion Price then in
effect or without consideration, then the Conversion Price upon each such issuance
shall be reduced to a price equal to the consideration per share paid for such
Additional Shares of Common Stock. No adjustment of the Conversion Price shall be
made under this Section 5(a)(vi) upon the issuance of any Additional Shares of Common
Stock which are issued pursuant to the exercise or conversion of any Common Stock
Equivalents if any such adjustment shall previously have been made upon the issuance
of such Common Stock Equivalents or upon the issuance of any warrant or other rights
therefor pursuant to Section 4(a)(vii).




(vii) If (A) Maker shall issue or sell (including in any Qualified Financing) any
securities convertible into or exchangeable for, directly or indirectly, Common Stock
(“Convertible Securities”) or (B) any rights or warrants or options to
purchase any such Common Stock or Convertible Securities (collectively, the
“Common Stock Equivalents”) shall be issued or sold, and the price per share
for which Additional Shares of Common Stock may be issuable pursuant to any such
Common Stock Equivalent shall be less than the applicable Conversion Price then in
effect, or if, after any such issuance of Common Stock Equivalents, the price per
share for which Additional Shares of Common Stock may be issuable thereafter is
amended or adjusted, and such price as so amended shall be less than the applicable
Conversion Price in effect at the time of such amendment or adjustment, then the
applicable Conversion Price upon each such issuance or amendment shall be reduced to
a price equal to the lowest price per share for which Additional Shares of Common
Stock may be issuable pursuant to such Common Stock Equivalent.




(viii) If, at any time after any adjustment of the Conversion Price then in effect
shall have been made pursuant to Section 4(a)(vii) as the result of any issuance of
warrants, other rights or Common Stock Equivalents, and such warrants or other
rights, or the right of conversion or exchange in such other Common Stock
Equivalents, shall expire, and all or a portion of such warrants or other rights, or
the right of conversion or exchange with respect to all or a portion of such other
Common Stock Equivalents, as the case may be shall not have been exercised, such
previous adjustment shall be rescinded and annulled and the Additional Shares of
Common Stock which were deemed to have been issued by virtue of the computation made
in connection with the adjustment so rescinded and annulled shall no longer be deemed
to have been issued by virtue of such computation. Upon the occurrence of an event
set forth in this Section 4(a)(viii), there shall be a recomputation made of the
effect of such Common Stock Equivalents on the basis of treating the number of
Additional Shares of Common Stock or other property, if any, theretofore actually
issued or issuable pursuant to the previous exercise of any such warrants or other
rights or any such right of conversion or exchange, as having been issued on the date
or dates of any such exercise and for the consideration actually received and
receivable therefor.




(ix) If Maker shall, directly or indirectly through a Subsidiary or otherwise,
purchase, redeem or otherwise acquire any shares of Common Stock at a price per share
greater than the Per Share Market Value, then the Conversion Price upon each such
purchase, redemption or acquisition shall be adjusted to that price determined by
multiplying such Conversion Price by a fraction (i) the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such purchase,
redemption or acquisition minus the number of shares of Common Stock which the
aggregate consideration for the total number of such shares of Common Stock so
purchased, redeemed or acquired would purchase at the Per Share Market Value; and
(ii) the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such purchase, redemption or acquisition. For the
purposes of this subsection 4(a)(ix), a purchase, redemption or acquisition of a
Common Stock Equivalent shall be deemed to be a purchase of the underlying Common
Stock, and the computation herein required shall be made on the basis of the full
exercise, conversion or exchange of such Common Stock Equivalent on the date as of
which such computation is required hereby to be made, whether or not such Common
Stock Equivalent is actually exercisable, convertible or exchangeable on such date.
For purposes of this Agreement, “Per Share Market Value” means on any
particular date (a) the last trading price on any national securities exchange on
which the Common Stock is listed, or, if there is no such price, the closing bid
price for a share of Common Stock in the over-the-counter market, as reported by the
OTC Bulletin Board or in the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices) at the close
of business on such date, or (b) if the Common Stock is not then traded on any
national securities exchange or reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the “Pink Sheet” quotes for the
Common Stock on such date, or (c) if the Per Share Market Value cannot be determined
as aforesaid, the fair market value of a share of Common Stock on such date as
determined by the Board of Directors of Maker and the Lead Investor in good faith,
without discount for lack of liquidity or minority interest.




(x) In case any Shares or any Common Stock Equivalents shall be issued or sold in
connection with any merger or consolidation in which Maker is the surviving
corporation (other than any consolidation or merger in which the previously
outstanding Shares shall be changed to or exchanged for the stock or other securities
of another corporation), the amount of consideration therefor shall be, deemed to be
the fair value, as determined reasonably and in good faith by the Board of Directors
of Maker, of such portion of the assets and business of the nonsurviving corporation
as such Board may determine to be attributable to such Shares or Common Stock
Equivalents.




(xi) Anything herein to the contrary notwithstanding, Maker shall not be required to
make any adjustment to the Conversion Price in connection with a Permitted Financing.




(xii) To the extent that any Additional Shares of Common Stock or any Common Stock
Equivalents (or any warrants or other rights therefor) shall be issued for cash
consideration, the consideration received by Maker therefor shall be the amount of
the cash received by Maker therefor, or, if such Additional Shares of Common Stock or
Common Stock Equivalents are offered by Maker for subscription, the subscription
price, or, if such Additional Shares of Common Stock or Common Stock Equivalents are
sold to underwriters or dealers for public offering without a subscription offering,
the initial public offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends and without taking into account
any compensation, discounts or expenses paid or incurred by Maker for and in the
underwriting of, or otherwise in connection with, the issuance thereof). To the
extent that such issuance shall be for a consideration other than cash, then, except
as herein otherwise expressly provided, the amount of such consideration shall be
deemed to be the fair value of such consideration at the time of such issuance as
mutually determined in good faith by the Board of Directors of Maker and the Lead
Investor. The consideration for each Additional Share of Common Stock issuable
pursuant to any warrants or other rights to subscribe for or purchase the same shall
be the consideration received by Maker for issuing all such warrants or other rights
divided by the number of shares of Common Stock issuable upon the exercise of such
warrants or rights; plus the additional consideration payable to Maker upon exercise
of such warrant or other right for one share of Common Stock. The consideration for
any Additional Shares of Common Stock issuable pursuant to the terms of any Common
Stock Equivalents shall be the consideration received by Maker for issuing such
Common Stock Equivalent, divided by the number of shares of Common Stock issuable
upon the conversion or other exercise of such Common Stock Equivalent, plus the
additional consideration, if any, payable to Maker upon the exercise of the right of
conversion or exchange in such Common Stock Equivalent for one share of Common Stock.
In case of the issuance at any time of any Additional Shares of Common Stock or
Common Stock Equivalents in payment or satisfaction of any dividends upon any class
of stock other than Common Stock, Maker shall be deemed to have received for such
Additional Shares of Common Stock or Common Stock Equivalents a consideration equal
to the amount of such dividend so paid or satisfied.




(xiii) If Maker shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required by
reason of the taking of such record and any such adjustment previously made in
respect thereof shall be rescinded and annulled.



(b) Maker shall not, by amendment of its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by Maker, but will at all times in good faith, assist
in the carrying out of all the provisions of this Note, including the conversion provisions hereof.
If any event shall occur which is dilutive to the holder of this Note but which is not accounted
for in the preceding provisions of this Section 5, the principles of this Section 5 shall be
applied to that event in as nearly an equivalent manner as may be practicable in order to confer
upon Payee the protections intended to be provided hereby.



(c) Upon occurrence of each adjustment or readjustment of the Conversion Price or number of
Shares issuable upon conversion of this Note, Maker at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to Payee a certificate
setting forth such adjustment and readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. Notwithstanding the foregoing, Maker shall not be obligated to
deliver a certificate unless such certificate would reflect an increase or decrease of at least one
percent (1%) of such adjusted amount (but such increase or decrease shall nevertheless be
efffective).



(d) Maker shall pay any and all issue and other taxes, excluding federal, state or local
income taxes, that may be payable in respect of any issue or delivery of Shares on conversion of
this Note pursuant thereto; provided, however, that Maker shall not be obligated to pay any
transfer taxes resulting from any transfer requested by Payee in connection with any such
conversion.



(e) Maker shall at all times when this Note shall be outstanding, reserve and keep available
out of its authorized but unissued Common Stock the total number of Shares for which this Note and
all interest accrued thereon are at any time convertible (without regard to limitations on
exercisability set forth in Sections 4(h) and 4(i)).



(f) If, upon Maker’s receipt of a conversion notice, Maker cannot issue Conversion Shares
registered for resale under the Registration Statement for any reason in full satisfaction of such
conversion, including, without limitation, because Maker (w) does not have a sufficient number of
Shares authorized and available, (x) is otherwise prohibited by applicable law or by the rules or
regulations of any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over Maker or any of its securities from issuing all of the Shares
which are to be issued to Payee pursuant to a conversion notice or (y) fails to have a sufficient
number of Shares registered for resale under the Registration Statement, then Maker shall issue as
many registered Shares as it is able to issue in accordance with Payee’s conversion notice and,
with respect to the unconverted portion of this Note, Payee, solely at Payee’s option, can elect
to:




(i) require Maker to prepay that portion of this Note for which Maker is unable to
issue registered Shares in accordance with Payee’s conversion notice at a price per
share equal to the Triggering Event Prepayment Price (as defined below) as of the
requested conversion date;




(ii) if Maker’s inability to fully convert is pursuant to clause (y) above, require
Maker to issue restricted Shares;




(iii) rescind its conversion notice and retain the Note; and




(iv) exercise Buy-In rights in accordance with the terms of Section 4(g) of this
Note.



6. Additional Prepayment Provisions. (a) Notwithstanding anything contained herein
to the contrary, this Note is subject to prepayment in whole at any time at the sole and absolute
option of Maker, upon five Trading Days’ prior written notice to Payee provided that the Equity
Conditions are satisfied at the time the prepayment notice is given to Payee and continue to be
satisfied during such five Trading Day Period. The conversion rights of Payee shall continue to be
exercisable during such five Trading Day Period and thereafter until payment is made. In the event
of prepayment pursuant to this Section 6(a), Maker shall pay to Payee 110% of the outstanding
principal balance of the Note, plus any accrued interest due thereon as of the date of such
prepayment. Any prepayment by Maker pursuant to this Section 6(a) must be made in connection with
the prepayment in whole of all Notes issued by Maker. As used herein, “Equity Conditions”
means during the period in question that (i) Maker shall have duly honored all conversions as to
which a Conversion Notice was given by Payee, (ii) (A) there is an effective Registration Statement
pursuant to which Payee is permitted to utilize the prospectus thereunder to resell all of the
Conversion Securities or (B) all of the Registrable Securities may be resold pursuant to Rule 144
without volume limitations, manner-of-sale restrictions or current public information requirements
as determined by the counsel to Maker pursuant to a written opinion letter to such effect,
addressed and acceptable to the Transfer Agent and Payee, (iii) the Common Stock is listed on at
least one of the OTC Bulletin Board, the American Stock Exchange, the Nasdaq Global Select Market,
the Nasdaq Select Market, the Nasdaq Capital Market or The New York Stock Exchange, Inc. and all of
the Registrable Securities are listed or quoted for trading on such market (and Maker believes, in
good faith, that trading of the Common Stock on at least one such market will continue
uninterrupted for the foreseeable future), (iv) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the issuance of all of the Registrable
Securities, (v) the issuance of the shares in question to Payee would not violate the limitations
set forth in Section 4(h) and 4(i) herein and (vi) Payee is not in possession of any information
provided by Maker that constitutes, or may constitute, material non-public information. Prepayment
under any provision of this Note shall not impair Payee’s right to liquidated damages or other
amounts due in excess of the prepayment amount and all such amounts must be paid as part of the
prepayment.



(b) After a Triggering Event (as defined below), Payee shall have the right, at Payee’s
option, to require Maker to prepay (a “Triggering Event Repayment”) all or a portion of
this Note in cash at a price equal to the sum of (i) the greater of (A) one hundred and twenty five
percent (125%) of the aggregate principal amount of this Note plus all accrued and unpaid interest
and (B) the aggregate principal amount of this Note plus all accrued but unpaid interest hereon,
divided by the Conversion Price on (x) the date Triggering Event Prepayment is demanded or
otherwise due or (y) the date the Triggering Event Prepayment is made in full, whichever is less,
multiplied by the VWAP on (x) the date Triggering Event Prepayment is demanded or otherwise due or
(y) the date the Triggering Event Prepayment is made in full, whichever is greater, and (ii) all
other amounts, costs, expenses and liquidated damages due in respect of this Note and the other
Transaction Documents (the “Triggering Event Prepayment Price”). Maker acknowledges that
to the extent the Triggering Event Prepayment Price exceeds the then outstanding principal of and
accrued and unpaid interest under this Note, such excess shall be paid as liquidated damages, and
not as a penalty, in recognition of the uncertainty inherent in calculating the damages suffered by
Payee upon the occurrence of a Triggering Event. For purposes of this Note, “VWAP” means,
for any date, (i) the daily volume weighted average price of the Common Stock for such date on a
national securities exchange or the OTC Bulletin Board as reported by Bloomberg Financial L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (ii) if the Common
Stock is not then listed or quoted on a national securities exchange or the OTC Bulletin Board and
if prices for the Common Stock are then reported in the “Pink Sheets” published by the Pink Sheets,
LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most
recent bid price per share of the Common Stock so reported; or (iii) in all other cases, the fair
market value of a share of Common Stock as determined by an independent appraiser selected in good
faith by the Lead Investor and reasonably acceptable to Maker. A “Triggering Event” shall
be deemed to have occurred at the time of any of the following events:

 



(i) the failure of the Common Stock to be listed on at least one of the OTC Bulletin
Board, the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq
Select Market, the Nasdaq Capital Market or The New York Stock Exchange, Inc.;

 



(ii) Maker fails to or is unable to (including by reason of Maker having insufficient
authorized capital), or notifies Payee, including by way of public announcement, at
any time, that it does not intend to, comply with proper requests for conversion of
Notes or the exercise of warrants acquired by the Investors under the Purchase
Agreement;

 



(iii) the Maker’s failure to comply with a Conversion Notice tendered in accordance
with the provisions of this Note within three (3) Trading Days after the Conversion
Notice is given;

 



(iv) (A) Maker fails to be subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act or otherwise to comply with any of the conditions set forth
in Rule 144(i) under the Securities Act, (B) on or after October 1, 2010, the Common
Stock is not registered under Section 12(g) of the Exchange Act or (C) on or after
October 1, 2010, there is not available with respect to the Common Stock in each
State of the United States an exemption from all blue sky and other trading
limitations for secondary transactions;

 



(v) the Maker shall fail to file the Registration Statement within 45 days from the
date hereof or the Registration Statement fails to become effective for any reason
within 105 days from the date hereof or, if the Registration Statement receives full
review by the Securities and Exchange Commission, within 150 days from the date
hereof, or Maker shall fail to respond to comments from the Securities and Exchange
Commission within 30 days of the receipt of the same;




(vi) so long as any Notes are outstanding, the effectiveness of the Registration
Statement, after it becomes effective, (a) lapses for any reason (including, without
limitation, the issuance of a stop order) or (b) after the Registration Statement
becomes effective, it is unavailable to the Holder for sale of the shares of Common
Stock, and such lapse or unavailability continues for a period of five (5)
consecutive Trading Days or for more than an aggregate of ten (10) Trading Days in
any 365-day period;

 



(vii) any event described in clause (w), (x) or (y) of Section 5(f).

 


(c) If Maker shall fail to make any prepayment required to be made pursuant to Section 4(a),
Section 5(f), Section 6(b) or Section 7 within five (5) business days following Maker’s receipt of
Payee’s notice requesting prepayment, or if Maker fails to prepay the Note within five (5) business
days following Payee’s receipt of Maker’s notice electing prepayment pursuant to Section 6(a), in
addition to any remedy Payee may have under this Note and the Purchase Agreement, such unpaid
amount shall bear interest at the rate of two percent (2%) per month (prorated for partial months)
until paid in full.  Until the prepayment is made in full to Payee, Payee shall not be prevented
from converting the Note into Conversion Securities by virtue of any prepayment demand or election
(whether Payee or Maker is in possession of the Note).



7. Liquidity Event. If a Liquidity Event (as defined herein) occurs while this Note
is outstanding, Maker will pay to Payee 110% of the outstanding principal balance of the Note, plus
any accrued interest due thereon as of the date of the closing of such Liquidity Event. For
purposes herein, a “Liquidity Event” shall mean any of the following: (a) a merger of
Maker with or into any other Person (as defined herein), if, and only if, after such merger holders
of a majority of the Maker’s voting securities immediately prior to the merger do not hold a
majority of the voting securities of the successor entity; (b) a sale or conveyance of all or
substantially all of Maker’s assets or common stock to any other Person; or (c) the closing of a
purchase, tender or exchange offer made to the holders of more than fifty percent (50%) of the
outstanding shares of Common Stock in which more than fifty percent (50%) of the outstanding shares
of Common Stock were tendered and accepted. For purposes herein, “Person” is defined as an
individual, partnership, corporation, business trust, limited liability company, limited liability
partnership, joint stock company, trust, unincorporated association, joint venture, or governmental
body.



8. Events of Default. Any of the following shall constitute an “Event of Default”
under this Note, and shall give rise to the remedies provided in Section 9 herein.



(a) Maker defaults in the payment of principal of or interest on this Note when due, including
upon any prepayment provided for herein.



(b) The failure of any applicable Registration Statement (as defined in the Registration
Rights Agreement) to be filed with the Commission on or prior to the date that is ten (10) days
after the applicable Filing Deadline (as defined in the Registration Rights Agreement) or the
failure of the applicable Registration Statement to be declared effective by the Commission on or
prior to the date that is ten (10) days after the applicable Effectiveness Date (as defined in the
Registration Rights Agreement).



(c) While the applicable Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the effectiveness of the applicable
Registration Statement lapses for any reason (including, without limitation, the issuance of a stop
order) or such Registration Statement (or the prospectus contained therein) is unavailable to any
holder of Registrable Securities (as defined in the Registration Rights Agreement) for sale of all
of such holder’s Registrable Securities in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of five (5) consecutive Trading
Days or for more than an aggregate of ten (10) Trading Days in any 365-day period.



(d) The failure of the Common Stock to be listed on at least one of the OTC Bulletin Board,
the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Select Market, the Nasdaq
Capital Market or The New York Stock Exchange, Inc. for a period of five (5) consecutive Trading
Days or for more than an aggregate of ten (10) Trading Days in any 365-day period.



(e) Maker fails to or is unable to (including by reason of Maker having insufficient
authorized capital), or notifies Payee, including by way of public announcement, at any time, that
it does not intend to, comply with proper requests for conversion of Notes or the exercise of
warrants acquired by the Investors under the Purchase Agreement.



(f) Maker fails to instruct its transfer agent to remove any legends from Conversion
Securities eligible to be sold under Rule 144 of the Securities Act and issue such unlegended
certificates to Payee (or Payee’s transferee, if such request is made in connection with a transfer
of Conversion Securities), or to cause to be provided to such transfer agent any opinion of counsel
and/or certification of Maker required in order for such transfer agent to comply with such
instructions, within three (3) Trading Days of Payee’s request so long as Payee has provided a
customary representation letter to Maker that provides a reasonable basis to conclude, to the
extent such conclusion is dependent upon matters to be confirmed by the Investor, that such shares
of Common Stock can be sold pursuant to Rule 144.



(g) Any provision of any Transaction Document shall at any time for any reason (other than
pursuant to the express terms thereof) in any material respect cease to be valid and binding on or
enforceable against the parties thereto, or the validity or enforceability thereof shall be
contested by any party thereto, or a proceeding shall be commenced by Maker or any subsidiary of
Maker or any governmental authority having jurisdiction over any of them, seeking to establish the
invalidity or unenforceability thereof, or Maker or any subsidiary of Maker shall deny in writing
that it has any liability or obligation purported to be created under any Transaction Document.



(h) The Security Documents shall for any reason fail or cease to create (i) a valid and
perfected first priority security interest in the Collateral (as defined in the Security Agreement)
in favor of the Collateral Agent on behalf of the First Lien Noteholders or (ii) a valid and
perfected second priority security interest in the Collateral in favor of the Collateral Agent on
behalf of the Second Lien Noteholders.



(i) Maker or any of its subsidiaries shall be a party to or otherwise participate in or
recommend a transaction that, if consummated, would constitute a Liquidity Event in which holders
of Shares are to receive or may elect to receive consideration other than cash or securities of a
publicly traded corporation whose common stock is quoted or listed for trading on at least one of
the OTC Bulletin Board, the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq
Select Market, the Nasdaq Capital Market or The New York Stock Exchange, Inc. or in which the
Successor Entity has not agreed to assume in writing all obligations of Maker hereunder; or, other
than pursuant to a permitted Liquidity Event, Maker or any of its subsidiaries shall directly or
indirectly transfer sell, lease or otherwise dispose of any of its assets or rights other than
sales of inventory in the ordinary course of business. For purposes herein, “Successor
Entity” means the Person (or, if so elected by Payee, the parent entity) formed by, resulting
from or surviving any Liquidity Event or the Person (or, if so elected by Payee, the parent entity)
with which such Liquidity Event shall have been or is anticipated to be entered into.



(j) Maker defaults in the compliance with any other term contained in this Note or any other
Transaction Document (which default is not described in paragraphs (a) through (i) above) and such
default is not remedied or waived within 10 business days after receipt by Maker of notice from
Payee of such default.



(k) Maker or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) shall be subject to a Bankruptcy Event. For purposes hereof, “Bankruptcy Event” means
any of the following events: (a) Maker or any Significant Subsidiary thereof commences a case or
other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to
Maker or any Significant Subsidiary thereof, (b) there is commenced against Maker or any
Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days
after commencement, (c) Maker or any Significant Subsidiary thereof is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case or proceeding is entered,
(d) Maker or any Significant Subsidiary thereof suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not discharged or stayed within 60
calendar days after such appointment, (e) Maker or any Significant Subsidiary thereof makes a
general assignment for the benefit of creditors, (f) Maker or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts, or (g) Maker or any Significant Subsidiary thereof, by any act or
failure to act, expressly indicates its consent to, approval of or acquiescence in any of the
foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.



(l) A final judgment or judgments for the payment of money aggregating in excess of $150,000
are rendered against Maker and/or any subsidiary of Maker and which judgments are not, within
thirty (30) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within thirty (30) days after the expiration of such stay; provided, however, any
judgment which is covered by insurance or an indemnity from a credit worthy party shall not be
included in calculating the $150,000 amount set forth above so long as Maker provides the Holder a
written statement from such insurer or indemnity provider (which written statement shall be
reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or
an indemnity and Maker or such subsidiary of Maker (as the case may be) will receive the proceeds
of such insurance or indemnity within thirty (30) days of the issuance of such judgment.



(m) The Company and/or any subsidiary of Maker, individually or in the aggregate, either (i)
fails to pay, when due, or within any applicable grace period, any payment with respect to any
Indebtedness in excess of $150,000 due to any third party (other than, with respect to unsecured
Indebtedness only, payments contested by Maker and/or such subsidiary of Maker (as the case may be)
in good faith by proper proceedings and with respect to which adequate reserves have been set aside
for the payment thereof in accordance with GAAP) or is otherwise in breach or violation of any
agreement for monies owed or owing in an amount in excess of $150,000, which breach or violation
permits the other party thereto to declare a default or otherwise accelerate amounts due
thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the
passage of time or the giving of notice, result in a default or event of default under any
agreement binding Maker or any subsidiary of Maker, which default or event of default would or is
likely to have a material adverse effect on the business, assets, operations (including results
thereof), liabilities, properties, condition (including financial condition) or prospects of Maker
or any of its Subsidiaries, individually or in the aggregate.



9. Remedies on Event of Default; Power to Confess Judgment. (a) If any Event of
Default will occur, Payee shall, in addition to any and all other available rights and remedies,
have the right, at Payee’s option, to: (a) declare the entire unpaid outstanding principal balance
of this Note, together with all interest accrued thereon, and all other sums due by Maker hereunder
(including without limitation any applicable prepayment premium or liquidated damages if such Event
of Default is an event otherwise giving rise to payment of such prepayment premium or liquidated
damages), to be immediately due and payable without presentment, demand, protest, or notice, all of
which are hereby expressly unconditionally and irrevocably waived by Maker, provided that upon the
occurrence of an Event of Default described in Section 8(k), the entire unpaid outstanding
principal balance of this Note, together with all interest accrued thereon, and all other sums due
by Maker hereunder, shall be immediately due and payable without any declaration or other act by
Payee; and (b) pursue any and all available remedies for the collection of such principal and
interest and all other sums due by Maker hereunder and to enforce its rights as described herein
and in the Security Documents; and in such case Payee may also recover all costs of suit and other
expenses in connection therewith, including reasonable attorney’s fees for collection and the right
to equitable relief to enforce Payee’s rights as set forth herein without the requirement to post
any bond or other financial surety. The remedies provided in this Note may be exercised by Payee
without notice to Maker (to the extent permitted by law and except as notice is herein expressly
required), and will be in addition to and not in substitution for the rights and remedies which
would otherwise be vested in Payee for the recovery of damages or otherwise in the event of a
breach of any of the undertakings of Maker hereunder. No failure by Payee to exercise and no delay
in exercising any right, power or privilege under this Note will operate as a waiver thereof, nor
will any single or partial exercise of any right, power or privilege hereunder preclude any other,
further or additional exercise thereof. Notwithstanding the foregoing, the exercise of remedies by
Payee shall in all respects be subject to Sections 7.16 through 7.18 of the Purchase Agreement.



(b) Maker hereby empowers any attorney of any court of record, after the occurrence of any
Event of Default hereunder, to appear for Maker and, with or without complaint filed, confess
judgment, or a series of judgments, against the Maker in favor of Payee or any holder hereof for
the entire principal balance of this Note, all accrued interest and all other amounts due
hereunder, together with costs of suit and an attorney’s commission equal to twenty (20%) of such
principal and interest added as a reasonable attorneys’ fee (provided, however, that Payee shall
only seek to recover those reasonable attorneys’ fees incurred by it from time to time), and for
doing so, this Note or a copy verified by affidavit shall be a sufficient warrant. Maker hereby
forever waives and releases all errors in said proceedings and all rights of appeal and all relief
from any and all appraisement, stay or exemption laws of any state now in force or hereafter
enacted. Interest on any such judgment shall accrue at the Default Rate



No single exercise of the foregoing power to confess judgment, or a series of judgments, shall be
deemed to exhaust the power, whether or not any such exercise shall be held by any court to be
invalid, voidable, or void, but the power shall continue undiminished and it may be exercised from
time to time as often as Payee shall elect until such time as Payee shall have received payment in
full of the debt, interest and costs. Notwithstanding the attorney’s commission provided for in
the preceding paragraph (which is included in the warrant for purposes of establishing a sum
certain), the amount of attorneys’ fees that Payee may recover from Maker shall not exceed the
actual attorneys’ fees incurred by Payee.



10. Governing Law; Venue; Waiver of Jury Trial. This Note shall be governed by and
construed in accordance with the laws of the State of Delaware applied to contracts to be performed
wholly within the State of Delaware, without regard to conflicts of laws principles. Any judicial
proceeding brought against Maker with respect to this Note or any related agreement may be brought
in any court located in the State of Delaware, United States of America, and, by execution and
delivery of this Note, Maker accepts for itself and in connection with its properties, generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees
to be bound by any judgment rendered thereby in connection with this Note. Maker hereby waives
personal service of any and all process upon it and consents that all such service of process may
be made by registered mail (return receipt requested) directed to Maker at its address set forth in
the Note Purchase Agreement and service so made shall be deemed completed five (5) days after the
same shall have been so deposited in the mails of the United States of America. Nothing herein
shall affect the right to serve process in any manner permitted by law or shall limit the right of
Payee to bring proceedings against Maker in the courts of any other jurisdiction. Maker waives 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. Any judicial
proceeding by Maker against Payee involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Note or any related agreement, shall be brought
only in a federal or state court located in the State of Delaware.



MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR NOTE EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR
THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS NOTE MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS
OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.



11. Amendment. Neither any provision of this Note nor any performance hereunder may
be amended or waived orally, but only by an agreement in writing and signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.



12. Security Interest. This Note is secured by the Security Documents.



13. Binding Effect. The rights and obligations of Maker under this Note will be
binding upon its successors, assigns, heirs, administrators and transferees.



14. Notices. All notices and other communications required or permitted hereunder
will be provided and become effective as set forth in Section 7.4 of the Purchase Agreement.



EXECUTED as of the date first set forth above.



	 
	MAKER:

	TECHNISCAN, INC., a Delaware corporation

	By:

	David C. Robinson, CEO