Del Toro Silver Corp.: Exhibit 10.11 - Filed by newsfilecorp.com






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: $55,000.00 	Issue Date: August 25, 2010 
	Purchase Price: $55,000.00 	  


CONVERTIBLE PROMISSORY NOTE

     FOR VALUE RECEIVED, DEL
TORO SILVER CORP., 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 $55,000.00
together with any interest as set forth herein, on May 27, 2011 (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. 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 I. CONVERSION RIGHTS

     1.1 Conversion Right. The
Holder shall have the right from time to time, and at any time during the period
beginning on the date which is one hundred eighty (180) days following the date
of this Note and ending on 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, provided, further,
however, that the limitations on conversion may be waived by the Holder
upon, at the election of the Holder, not less than 61 days’ prior notice to the
Borrower, and the provisions of the conversion limitation shall continue to
apply until such 61st day (or such later date, as determined by the Holder, as
may be specified in such notice of waiver).. 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.

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     1.2 Conversion Price.

          (a)
Calculation of Conversion Price. The conversion price (the “Conversion
Price”) shall equal the Variable Conversion Price (as defined herein)(subject 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 58% multiplied by the Market Price (as defined herein)(representing a
discount rate of 42%). “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.

          (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.

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     1.3 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 five 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)(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.

     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:

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          (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

          (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).

     1.4 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.

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          (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.

          (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.

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          (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.

     1.5 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.” 




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     The legend set forth above shall
be removed and the Borrower shall issue to the Holder a new certificate
therefore 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.

     1.6 Effect of Certain
Events.

          (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. 

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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.

     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.

9





     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.

          (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.

     1.7 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. 

10




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.

     1.8 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.

11




     1.9 Prepayment. Notwithstanding
  anything to the contrary contained in this Note, so long as the Borrower has
  not received a Notice of Conversion from the Holder, then at any time during
  the period beginning on the Issue Date and ending on the date which is one hundred
  eighty (180) days following the date hereof, the Borrower shall have the right,
  exercisable on not less than three (3) Trading Days prior written notice to
  the Holder of the Note to prepay the outstanding Note (principal and accrued
  interest), in full, in accordance with this Section 1.9. Any notice of prepayment
  hereunder (an “Optional Prepayment”) shall be delivered to the Holder
  of the Note at its registered addresses and shall state: (1) that the Borrower
  is exercising its right to prepay the Note, and (2) the date of prepayment (the
  “Optional Prepayment Notice”) which shall be not more than three (3)
  Trading Days from the date of the Optional Prepayment Notice. On the date fixed
  for prepayment (the “Optional Prepayment Date”), the Borrower shall
  make payment of the Optional Prepayment Amount (as defined below) to or upon
  the order of the Holder as specified by the Holder in writing to the Borrower
  at least one (1) business day prior to the Optional Prepayment Date. If the
  Borrower exercises its right to prepay the Note, the Borrower shall make payment
  to the Holder of an amount in cash (the “Optional Prepayment Amount”)
  equal to 150%, multiplied by 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 Optional Prepayment Date plus (y)
  Default Interest, if any, on the amounts referred to in clauses (w) and (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 “Optional Prepayment Sum”). If the Borrower
  delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment
  Amount due to the Holder of the Note within two (2) business days following
  the Optional Prepayment Date, the Borrower shall forever forfeit its right to
  redeem the Note pursuant to this Section 1.9.

ARTICLE II. CERTAIN COVENANTS

     2.1 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. Notwithstanding anything contained in the
Note or the Purchase Agreement to the contrary the Borrower may: (i) seek to
sell up to 2,000,000 shares of Common Stock of the Borrower at no less than
$0.15 cents a share and further, may (ii) acquire real property by issuing
Common Stock of the Borrower in whole or in part as consideration.

     2.2 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.

12




     2.3 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.

     2.4 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.

     2.5 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
$100,000.

     2.6 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 III. EVENTS OF DEFAULT

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

     3.1 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.

     3.2 Conversion and the Shares.
  The Borrower fails to issue shares of Common Stock to the Holder (or announces
  or threatens in writing 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 (issue)(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, the Borrower directs
  its transfer agent not to transfer or delays, impairs, and/or hinders its transfer
  agent in transferring (or issuing)(electronically or in certificated form) any
  certificate for shares of Common Stock to be issued to the Holder upon conversion
  of or otherwise pursuant to this Note as and when required by this Note, or
  fails to remove (or directs its transfer agent not to remove or impairs, delays,
  and/or hinders its transfer agent from removing) 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 written
  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 written announcement, statement or threat not to honor its obligations shall
  not be rescinded in writing) for three (3) business days after the Holder shall
  have delivered a Notice of Conversion.

13




     3.3 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.

     3.4 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.

     3.5 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.

     3.6 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.

     3.7 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.

     3.8 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.

     3.9 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.

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

14




     3.11 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.

     3.12 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).

     3.13 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.

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

     3.15 Replacement of Transfer
Agent. In the event that the Borrower proposes to replace its transfer
agent, the Borrower fails to provide, prior to the effective date of such
replacement, a fully executed Irrevocable Transfer Agent Instructions in a form
as initially delivered pursuant to the Purchase Agreement (including but not
limited to the provision to irrevocably reserve shares of Common Stock in the
Reserved Amount) signed by the successor transfer agent to Borrower and the
Borrower.

     3.16 Cross-Default.
Notwithstanding anything to the contrary contained in this Note or the other
related or companion documents, a breach or default by the Borrower of any
covenant or other term or condition contained in any of the Other Agreements,
after the passage of all applicable notice and cure or grace periods, shall, at
the option of the Borrower, be considered a default under this Note and the
Other Agreements, in which event the Holder shall be entitled (but in no event
required) to apply all rights and remedies of the Holder under the terms of this
Note and the Other Agreements by reason of a default under said Other Agreement
or hereunder. “Other Agreements” means, collectively, all agreements and
instruments between, among or by: (1) the Borrower, and, or for the benefit of,
(2) the Holder and any affiliate of the Holder, including, without limitation,
promissory notes; provided, however, the term “Other Agreements” shall not
include the agreements and instruments defined as the Documents. Each of the
loan transactions will be cross-defaulted with each other loan transaction and
with all other existing and future debt of Borrower to the Holder.

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 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 Default
  Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF
  ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, 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: (Y) THE DEFAULT SUM (AS DEFINED
  HEREIN); MULTIPLIED BY (Z) TWO (2).

15




 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), 3.3,
  3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 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 IV. MISCELLANEOUS

     4.1 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.

     4.2 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:

16






	 	If to the Borrower, to: 
	 	         DEL TORO
      SILVER CORP. 
	 	         409 Granville
      Street- Suite 400 
	 	         Vancouver, BC
      V6C 1T2 
	 	         Attn: MARK
      MCLEARY, President 
	 	         facsimile:
  
	 	  
	 	         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 
	 	         Attn: Curt
      Kramer, President 
	 	         facsimile:
      516-498-9894 
	 	  
	 	With a copy by fax only to (which copy shall
      not constitute notice): 
	 	  
	 	         Naidich
      Wurman Birnbaum & Maday, LLP 
	 	         80 Cuttermill
      Road, Suite 410 
	 	         Great Neck,
      NY 11021 
	 	         Attn: Bernard
      S. Feldman, Esq. 
	 	         facsimile:
      516-466-3555 


     4.3 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.

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     4.4 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.

     4.5 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.

     4.6 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 Borrower
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.

     4.7 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.

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

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     4.9 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
4.10.

     4.10 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.

     IN WITNESS WHEREOF, Borrower has
caused this Note to be signed in its name by its duly authorized officer this
August 25, 2010.

	 	DEL TORO SILVER
      CORP. 
	 	 	  
	 	By: 	/s/ Mark McLeary
	 	 	MARK MCLEARY 
	 	 	President 


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EXHIBIT A
NOTICE OF CONVERSION 

     The undersigned hereby elects to
convert $_________________ principal amount of the Note (defined below) into
that number of shares of Common Stock to be issued pursuant to the conversion of
the Note (“Common Stock”) as set forth below, of DEL TORO SILVER CORP., a Nevada
corporation (the “Borrower”) according to the conditions of the convertible note
of the Borrower dated as of August 25, 2010 (the “Note”), as of the date written
below. No fee will be charged to the Holder for any conversion, except for
transfer taxes, if any.

Box Checked as to applicable instructions:

	
      [ ] 
	
      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: 	  
	  	  	  
	
      [ ] 
	
      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: 

	  	  	  
	  	ASHER ENTERPRISES, INC. 	  
	  	1 Linden Pl., Suite 207 	  
	  	Great Neck, NY. 11021 	  
	  	Attention: Certificate Delivery 	  
	  	(516) 498-9890 	  
	  	  	  
	  	Date of Conversion: 	  ____________
	  	Applicable Conversion Price: 	$____________ 
	  	Number of Shares of Common Stock to
      be Issued 
	  	     Pursuant to Conversion of
      the Notes: 	  ____________
	  	Amount of Principal Balance Due remaining 	  
	  	     Under the Note after this
      conversion: 	  ____________
	  	  	  
	  	ASHER ENTERPRISES, INC. 	  
	  	  	  
	  	By: _____________________________ 	  
	  	Name: Curt Kramer 	  
	  	Title: President 	  
	  	Date: ___________________________	  
	  	1 Linden Pl., Suite 207 	  
	  	Great Neck, New York 11021 	  


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