Document:

Unassociated Document

    Exhibit 10.37    

     

    

     

    EMPLOYMENT
AGREEMENT

     

    THIS EMPLOYMENT AGREEMENT (“Agreement”)
is made and entered into as of the 10th day of
December, 2009, by and between HearUSA, Inc., a Delaware corporation (the
“Company”), and Francisco Puñal (“Employee”).

    

    Background:

     

    (a)           Employee
has been serving as the Chief Financial Officer of the Company prior to the date
hereof as an employee at-will.

     

    (b)           From
and after December 10, 2009, the Company wishes for the Employee to continue as
an employee of the Company on the terms provided herein.

     

    (c)  The
Employee wishes to continue as an employee of the Company and is willing to
render services to the Company on the terms and conditions hereinafter set
forth.

     

    Agreement

     

    In
consideration of the mutual promises hereinafter set forth, IT IS HEREBY AGREED
as follows:

     

    1.    Employment.  Employee
shall continue to be employed by the Company, with such continued employment to
be under the terms and conditions set forth herein, and Employee hereby accepts
such continued employment upon the terms and conditions set forth
herein.

     

    2.   Term of
Employment.  The term of this Agreement shall commence on the
date first set forth above and shall end on the third anniversary of such date
(the “Initial Employment Period”), and shall continue in effect for successive
periods of one year thereafter unless either the Company or Employee gives
written notice of non-renewal at least 90 days prior to the end of the then
current term of this Agreement, or unless sooner terminated as provided in
Section 6, 7 or 8 hereof.  No such notice of non-renewal may be
provided prior to January 1, 2012.  The Initial Employment Period and
any renewal terms of this Agreement are referred to herein as the “Term of
Employment.”

     

    3.   Location of
Employment.  Employee will continue to be located at the
Company’s corporate offices in West Palm, Florida.

     

    4.   Duties.

     

    (a)  Employee
shall serve in a full-time capacity with the title of Chief Financial Officer,
reporting to the Chief Executive Officer of the Company, and the Employee shall
have the authority, duties, responsibilities and status (including office, title
and reporting requirement) associated with the office of Chief Financial Officer
(including those contemplated by the Company’s bylaws).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    (b)  Employee
shall be authorized by the Chief Executive Officer to employ reasonable
discretion in performing Employee’s responsibilities.

     

    (c)  Employee
shall have such further duties and responsibilities, not inconsistent with such
position, as shall be assigned to the Employee by the Chief Executive Officer or
the Board of Directors of the Company.

     

    (d)  Employee
shall devote his full business time and attention and such skill, energy and
best efforts as may be necessary for the faithful performance of duties assigned
to Employee.

     

    5.   Compensation.

     

    (a)  During
the Term of Employment, the Company shall pay Employee, as compensation for his
services during the Employment Period, a base salary (the “Base Salary”) at a
rate of Two Hundred Fifty Thousand Dollars ($250,000.00) per year, such Base
Salary to be payable in accordance with the Company’s usual payment practices
and to be subject to adjustment from time to time as may be agreed between the
Employee and the Company.  Employee shall be entitled to participate
in the Company’s current employee benefit plans, and will in the future be
entitled to participate in any new employee benefit plans that are put in place
for the Company executive officers, provided that any such plans shall be
subject to the approval of the Board of Directors.  Additionally,
Employee shall be entitled to such prerogatives of office as are the Company’s
current practice, subject to the right of the Company to revise such
practices.

     

    (b)  The
Employee will be eligible to participate in the equity compensation plans of the
Company, including the HearUSA Amended and Restated 2007 Incentive Compensation
Plan, subject to the discretion of the Board of Directors of the
Company

     

    (c)  The
Employee will be eligible to participate in the Company’s cash incentive plan,
the terms of which shall be subject to the discretion of the Board of Directors
of the Company.

     

    (d)  All
compensation shall be subject to customary withholding taxes and other
employment taxes as required with respect thereto.

     

    6.  Termination of Employment by
the Company by Reason Other Than Change in Control.  This
Agreement and Employee’s employment may be terminated by the Company by reason
other than a Change in Control as defined in Section 8 as follows:

     

    (a)  At the
election of the Company, upon thirty days’ prior written notice to Employee in
the event Employee becomes disabled and such disability continues for a period
exceeding three (3) consecutive months.  In the event of a
disagreement concerning the existence of any such disability, the matter shall
be resolved by a disinterested licensed physician chosen by the
Company.

     

    
      
         

      

      
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    (b)  At the
election of the Company, for “Cause” immediately upon notice by the Company to
the Employee.  “Cause” shall mean:

     

    (i)  willful
or prolonged absence from work by the Employee (other than by reason of
disability) or failure, neglect or refusal by the Employee to perform his duties
and responsibilities hereunder;

     

    (ii)  material
breach by the Employee of any of the covenants contained in this
Agreement;

     

    (iii)  the
Employee’s commission of fraud or dishonesty against the Company, its
subsidiaries, parent, affiliates or their respective officers, directors,
stockholders or employees; conduct intended to injure or having the effect of
injuring the reputation, business or business relationships of the Company, its
subsidiaries, parent or affiliates or their respective officers, directors or
employees;

     

    (iv)  upon a
charge by a governmental entity against the Employee of any crime involving
moral turpitude or which could reflect unfavorably upon the Company or upon the
filing of any civil action involving the Employee and a charge of embezzlement,
theft, fraud or other similar act; or

     

    (v)  failure
or refusal of Employee to materially comply with the policies, standards and
regulations of the Company as from time to time may be made known to
Employee.

     

    (c)  At the
election of the Company, at any time, without Cause immediately upon notice by
the Company to Employee.

     

    (d)  Upon
termination of this Agreement by the Company by reason other than a Change in
Control as defined in Section 8, all rights and obligations of the parties
hereunder shall cease, except: (a) if this Agreement and
Employee’s employment are involuntarily terminated without Cause by the Company
prior to the end of the Term of Employment in accordance with Section 6(c)
above; or (b) if the
Company gives written notice of non-renewal of this Agreement pursuant to
Section 2 above and Employee was willing and able to continue performing his
duties under this Agreement and the Employee’s employment with the Company is
terminated as a result of such non-renewal, then

     

    (i)  Employee
shall receive in a lump sum 100% of his Base Salary and the cash bonus to which
the Employee would have been entitled absent the termination as if all
performance targets had been met, which lump sum shall be paid upon termination
of Employee’s employment or as soon as administratively practicable thereafter,
but in no event later than the fifteenth (15th) day of the third (3rd) month
following the end of the calendar year in which Employee’s employment
terminates;

     

    
      
         

      

      
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    (ii)  Employee’s
health insurance and life insurance benefits shall continue for a period of 12
months after such termination;

     

    (iii)  vesting
of Employee’s unvested options shall be accelerated by 12 months and may be
exercised by Employee for such post-termination period as is prescribed by such
option agreements and related stock plan(s); and

     

    (e)  Upon
termination of this Agreement under Section 6(a) or by reason of Employee’s
death, Employee shall receive the shares underlying Employee’s performance-based
restricted stock units to which Employee would have been entitled absent the
termination as if all performance criteria for Target (as defined in the related
restricted stock unit grant agreement) had been achieved for the fiscal year
during which the termination occurs, without regard to any time-vesting
requirements otherwise provided for in the restricted stock unit grant
agreement, which shares shall be issued to Employee upon termination or as soon
as administratively practicable thereafter.

     

    (f)  Nothing
contained herein will be construed to prevent Employee from seeking or obtaining
other employment in the event the employment of Employee is terminated by the
Company without Cause.  Termination of employment pursuant to this
Section 6 or otherwise shall not terminate or otherwise affect the rights and
obligations of the parties pursuant to Sections 9 through 12 and Section 15
hereof.

     

    7.   Termination of Employment by
Employee by Reason Other Than Change in Control.  Employee may
terminate his employment with the Company at any time and for any reason, such
termination to be effective immediately upon notice by Employee to the
Company.  Upon such termination by Employee, all rights and
obligations of the parties hereunder shall cease, except that termination of
employment pursuant to this Section 7 or otherwise shall not terminate or
otherwise affect the rights and obligations of the parties pursuant to Sections
9 through 12 and Section 15 hereof.

     

    8.   Change in
Control.  For the purposes of this Agreement,

     

    (a)  “Change
in Control” shall mean the effective date of any of the following events
occurring during the term of Employee’s employment: (a) consummation of any
consolidation, merger, statutory share exchange or other business combination as
a result of which persons who were stockholders of the Company immediately prior
to the effective date thereof beneficially own less than 50% of the combined
voting power in the election of directors of the surviving or resulting entity
following the effective date; (b) individuals who, as of the date hereof,
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided that any person who is elected as a director subsequent to the date
hereof by a vote of, or upon the recommendation of, at least a majority of the
directors comprising the current Board (other than an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company) shall be
considered a member of the current Board for these purposes; (c) consummation of
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the Company;
(d) shareholder approval of any plan or proposal for the liquidation or
dissolution of the Company; or (e) acquisition of beneficial ownership by any
“person” or “group” (as such term is used Sections 13(d) and 14(d)(2) of the
Exchange Act) of securities representing twenty percent (20%) or more of the
combined voting power in the election of the Company’s directors, provided such
acquisition has not been approved by at least a majority of the members of the
Board of Directors in office immediately prior to the acquisition.

     

    
      
         

      

      
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    (b)  “Good
Reason” shall mean, the occurrence of one or more of the following conditions
without the consent of Employee, provided Employee provides notice to the
Company of the existence of the applicable condition(s) within 90 days of the
initial existence of the condition(s) and the Company fails to remedy the
condition(s) within 30 days of receipt of such notice (1) the scope of
Employee’s responsibilities and/or discretion is/are materially diminished; or
(2) the Company requires Employee to relocate his place of employment to a
location greater than 100 miles from the Company’s current corporate
headquarters in West Palm Beach, Florida; or (3) Employee’s Base Salary is
reduced by an amount greater than 25% and such reduction is not pursuant to a
Company-wide employee salary reduction plan or program.

     

    (c)  If there
is a Change in Control of the Company and (a) this Agreement and
Employee’s employment are involuntarily terminated without Cause by the Company,
or (b) Employee
terminates his employment under this Agreement for Good Reason (as defined
above) within eighteen months of the Change in Control, provided that such Good
Reason arises after the Change in Control, then

     

    (i)  Employee
shall receive in a lump sum his Base Salary times 1.5 and the cash bonus to
which the Employee would have been entitled absent the termination, assuming
that all performance targets would have been met, which lump sum shall be paid
upon termination of Employee’s employment or as soon as administratively
practicable thereafter, but in no event later than the fifteenth (15th) day of
the third (3rd) month following the end of the calendar year in which the
Employee’s employment terminates;

     

    (ii)  Employee’s
health insurance and life insurance benefits shall continue for a period of 18
months after such termination;

     

    (iii)  all of
Employee’s unvested options, if any, shall immediately vest and may be exercised
by Employee for such post-termination period as is prescribed by such option
agreements and related stock plan(s);

     

    (iv)  all of
the Employee’s performance-based restricted stock, if any, shall immediately
vest and it shall be assumed that all performance criteria at the Target (as
that term is defined in the related restricted stock grant agreement) level for
the restricted stock  had been achieved; and

     

    (v)  Employee
shall receive the shares underlying Employee’s performance-based restricted
stock units to which Employee would have been entitled absent the termination as
if all performance criteria for Target (as defined in the related restricted
stock unit grant agreement) had been achieved for the fiscal year during which
the termination occurs, without regard to any time-vesting requirements
otherwise provided for in the restricted stock unit grant agreement, which
shares shall be issued to Employee upon termination or as soon as
administratively practicable thereafter.

     

    
      
         

      

      
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    (d)  Additional
Limitation.

     

    (i)  Anything
in this Agreement to the contrary notwithstanding, in the event that any
compensation, payment or distribution by the Company to or for the benefit of
Employee, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (the “Severance Payments”), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the “Code”), the following provisions shall
apply:

     

    (A)  If the
Severance Payments, reduced by the sum of (1) the Excise Tax and
(2) the total of the Federal, state and local income and employment taxes
payable by Employee on the amount of the Severance Payments which are in excess
of the Threshold Amount, are greater than or equal to the Threshold Amount,
Employee shall be entitled to the full benefits payable under this
Agreement.

     

    (B)  If the
Threshold Amount is less than (x) the Severance Payments, but greater than
(y) the Severance Payments reduced by the sum of (1) the Excise Tax
and (2) the total of the Federal, state, and local income and employment
taxes on the amount of the Severance Payments which are in excess of the
Threshold Amount, then the benefits payable under this Agreement shall be
reduced (but not below zero) to the extent necessary so that the maximum
Severance Payments shall not exceed the Threshold Amount. Such reductions shall
first be made to compensation that is not “deferred compensation” and is not
subject to Code Section 409A before such reductions are made to compensation
that is “deferred compensation” subject to Code Section 409A.

     

    For the
purposes of this Section 8, “Threshold Amount” shall mean three times Employee’s
“base amount” within the meaning of Section 280G(b)(3) of the Code and the
regulations promulgated thereunder less one dollar ($1.00); and “Excise Tax”
shall mean the excise tax imposed by Section 4999 of the Code, and any
interest or penalties incurred by Employee with respect to such excise
tax.

    

    (ii)  The determination as to which of the alternative provisions
of Section 8(d)(i) shall apply to Employee shall be made by a nationally
recognized accounting firm selected by the Company (the “Accounting Firm”),
which shall provide detailed supporting calculations both to the Company and
Employee within 15 business days of the date of termination under this Section
8, if applicable, or at such earlier time as is reasonably requested by the
Company or Employee. For purposes of determining which of the alternative
provisions of Section 8(d)(i) shall apply, Employee shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation
applicable to individuals for the calendar year in which the determination is to
be made, and state and local income taxes at the highest marginal rates of
individual taxation in the state and locality of Employee’s residence on the
date of termination, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes. Any
determination by the Accounting Firm shall be binding upon the Company and
Employee.

     

    
      
         

      

      
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    (e)    Termination
of employment pursuant to this Section 8 or otherwise shall not terminate or
otherwise affect the rights and obligations of the parties pursuant to Sections
9 through 12 and Section 15 hereof.

     

    9.   Third-Party
Confidentiality.  Employee acknowledges that the Company has
disclosed that the Company is now, and may be in the future, subject to duties
to third parties to maintain information in confidence and
secrecy.  By executing this Agreement, Employee consents to be bound
by any such duty owed by the Company to any third party.

     

    10.   Confidentiality; Return of
Property.

     

    (a)  Employee
acknowledges that Employee’s work for the Company is expected to bring him into
close contact with various confidential business data of the Company, its
contracting parties, affiliates and customers not readily available to the
public.  Accordingly, Employee:

     

    (i)  covenants
and agrees that (A) during the Term of Employment, except pursuant to
appropriate safeguards on confidentiality and only in connection with the
business of the Company and (B) after the Term of Employment, on any basis for
any reason, Employee shall not use or disclose to anyone except authorized
personnel of the Company or the Company’s Affiliates (as defined below), whether
or not for his benefit or otherwise, any confidential matters (collectively,
“Confidential Matters”) concerning the Company or its suppliers, consultants,
agents, other contracting parties or customers, whether such customers are
deemed former, current or potential customers (collectively, the “Clients”),
including without limitation all confidential technical information of the
Company, secrets, trade secrets, proprietary software, copyrights, Client lists,
lists of employees, confidential evaluations, mailing lists, details of
consultant contracts, pricing policies, sales data and reports, margins,
operational methods and processes, plans, financial information and other
confidential business affairs, learned by Employee concerning the Company, its
Clients or a third party, including without limitation any subsidiaries,
partners, affiliates, shareholders, employees, lenders, suppliers, consultants,
agents or joint venture partners of the Company (collectively, “Affiliates”);
and

     

    (ii)  covenants
and agrees that (A) all confidential memoranda, notes, lists (including, without
limitation, mailing and Client lists), records and other confidential documents,
whether in written, electronic or other form (and all copies thereof) made or
compiled by Employee or made available to him concerning the Company, its
Clients and any Affiliates are the sole property of the Company, and (B) if such
documents are in the possession or control of the Employee, the Employee shall
deliver them, without retaining any copies thereof, to the Company promptly at
the time of the Employee’s termination of employment or at any other time upon
request by the Company.

     

    
      
         

      

      
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    (b)  Section
10 shall not apply to any information that:  (i) is publicly available
or becomes publicly available through no act or fault of Employee; (ii) is made
known to Employee by a third party who did not obtain it directly or indirectly
from the Company; (iii) is independently developed by Employee without use of
the Company’s information as evidenced by credible written records of Employee;
or (iv) is information required to be disclosed by operation of law,
governmental regulation or court order provided that, if Employee determines
that such disclosure might be required, Employee will promptly notify the
Company and provide the Company, to the extent practicable, an opportunity to
seek a protective order or other appropriate remedy to prevent such
disclosure.

     

    (c)  Upon the
termination of the Employee’s employment hereunder for any reason, the Employee
shall promptly return to the Company any property owned by the Company or
furnished to the Employee by the Company for use in connection with Employee’s
services hereunder.

     

    11. Noncompetition/Conflicts of
Interest.

     

    (a)  The
Employee covenants and agrees that the Employee shall not, directly or
indirectly, as a principal, employee, partner, consultant, agent or otherwise,
compete or assist in a Competitive Activity anywhere in the United States during
the Term of Employment and for a period of two years after the termination of
this Agreement (the “Restricted Period”) without the express prior written
consent of the Company; provided, however, that the running of the Restricted
Period shall be tolled during any period of time in which Employee violates the
provisions of this Section.  “Competitive Activity” means the
promotion, marketing or sale of hearing care products and services.

     

    (b)  During
the Restricted Period, Employee shall not, directly or indirectly, alone or in
concert with others, solicit or encourage any employee of the Company, or an
employee of any person or entity with which the Company has an agreement through
which the Company and the person or entity are to act in concert with respect to
the business of the Company, to leave their respective employment or hire any
employee of the Company.

     

    12.   Acknowledgment Regarding
Restrictions.  Employee recognizes and agrees that the
restraints contained in Section 11 are reasonable in view of the Company’s
legitimate interests in protecting its business.  Employee further
acknowledges that the limitations contained in Section 11 are reasonable as to
the duration in time, as to geographic scope and as to the nature of the
activities restricted.  However, in the event an appropriate court
determines that the provisions of Section 11 are excessively broad as to
duration, geographic scope, prohibited activities or otherwise, the parties
agree that Section 11 may be reduced or curtailed to the extent necessary to
render it enforceable.

     

    
      
         

      

      
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    13.   Vacation and
Holidays.  The Employee shall be entitled to vacation allowance
and holidays in accordance with the policies of the Company as in effect from
time to time for its employees.

     

    14.   Non-Waiver of
Rights.  The Company’s failure to enforce at any time any of
the provisions of this Agreement or to require at any time performance by the
Employee of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement, or
any part of it, or the right of the Company thereafter to enforce each and every
provision in accordance with the terms of this Agreement.

     

    15.   The Company’s Right to
Injunctive Relief.  In the event of a breach or threatened
breach of any of Employee’s duties and obligations under the terms and
provisions of Section 10 or Section 11, Employee agrees that the Company shall
be entitled to a temporary restraining order and a preliminary and permanent
injunction to prevent such breach or threatened breach because the harm which
might result to the Company’s business as a result of any noncompliance by
Employee with any of the provisions of Section 10 or Section 11 may be
irreparable.  Employee acknowledges that the Company’s entitlement to
injunctive relief shall be in addition to the Company’s entitlement to
damages.

     

    16.   Assignments.  This
Agreement shall be freely assignable by the Company and shall inure to the
benefit of, and be binding upon, the Company, its successors and assigns and/or
any other corporate entity which shall succeed to the business being operated by
the Company, but, being a contract for personal services, neither this Agreement
nor any rights hereunder are assignable by the Employee.

     

    17.   Governing
Law.  This Agreement shall be interpreted in accordance with
and governed by the laws of the State of Delaware without regard to its conflict
of law rules.

     

    18.   Amendments.  No
modification, amendment or waiver of any of the provisions of this Agreement
shall be effective unless in writing and signed by the parties
hereto.

     

    19.    Notices.  Any
notices to be given by either party hereunder shall be in writing and shall be
deemed to have been duly given if delivered or mailed, certified or registered
mail, postage prepaid, as follows:  to the Company at 1250 Northpoint
Parkway, West Palm Beach, Florida 33407, Attention: Chief Executive Officer; and
to Employee at the address set forth beside his name below; or to such other
address as may have been furnished to the other party in writing.

     

    20.   Entire
Agreement.  This Agreement is the entire agreement between the
parties and supersedes any previous oral or written agreement or understanding
between the Company and the Employee with respect to the subject matter
hereof.  There are no representations, warranties, promises or
undertakings between the parties relating to the subject matter of this
Agreement other than those set forth herein.

     

    21.    Severability.  If
any provision of this Agreement shall be determined to be illegal or
unenforceable, the remaining provisions of this Agreement shall remain in full
force and effect, and this Agreement shall be construed as if the illegal or
unenforceable provision were not a part hereof, so long as the remaining
provisions of this Agreement shall be sufficient to carry out the overall intent
of the parties as expressed herein.

     

    
      
         

      

      
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    22.   Counterparts.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

     

    23.   Headings.  The
headings in this Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.

     

    24.   Code Section
409A.  If Employee is a “specified employee” (within the
meaning of Code Section 409A) of the Company at the time of his or her
termination of employment with the Company, any amounts that would be paid to
the Employee during the six months following termination of employment shall
instead be paid in a lump-sum on the first day of the seventh month following
termination of employment, except to the extent the delay described in this
Section 24 is not required to avoid any adverse tax consequences under Code
Section 409A.

     

    

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    IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.

    
       

      
         

        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          	
                                                   

                                                	
                                                  HearUSA, Inc.

                                                
	 	 
	 	 
	 	/s/ Stephen J. Hansbrough 
	 	By: Stephen J.
      Hansbrough, CEO 
	 	 
	 	 
	 	 
	 	EMPLOYEE 
	 	 
	 	 
	 	/s/ Francisco Puñal
	 	      
                                                  Francisco
      Puñal

                                                

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

          
             

          

        

      

    

    
      
         

      

      
        11Exhibit
4.1

    

    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: Up to $_____________

              	
                Issue
      Date: March ___, 2010

              

      

    

     

    SECURED CONVERTIBLE
PROMISSORY NOTE

    

    FOR VALUE
RECEIVED, MSGI SECURITY
SOLUTIONS, INC., a Nevada corporation (hereinafter called “Borrower”), hereby promises to
pay to the order of ______________(the “Holder”), address
_____________without demand, the sum of up to  Dollars ($____________)
(“Principal Amount”),
with interest accruing thereon, on March ___, 2011 (the “Maturity Date”), if not sooner
paid or modified as permitted herein.

    

    This Note
has been entered into pursuant to the terms of a subscription agreement among
the Borrower, the Holder and certain other holders (the “Other Holders”) of convertible
promissory notes (the “Other
Notes”), dated of even date herewith (the “Subscription Agreement”) for
up to an aggregate Principal Amount of up to __________.  Unless
otherwise separately defined herein, all capitalized terms used in this Note
shall have the same meaning as is set forth in the Subscription
Agreement.  The following terms shall apply to this Note:

    

    ARTICLE
I

    

    GENERAL
PROVISIONS

    

    1.1           Interest
Rate.   Cash interest payable on this Note shall compound
annually and accrue at the annual rate of ten percent (10%) from the Issue Date
through the Maturity Date.  Interest shall be payable quarterly in
arrears on the last day of each calendar quarter commencing June 30, 2010, and
on the Maturity Date, accelerated or otherwise, when the principal and remaining
accrued but unpaid interest shall be due and payable, or sooner as described
below.

    

    1.2           Maturity
Date.  The Holder shall have the right on three (3) business
days prior notice to Borrower to extend the Maturity Date one or more times
until one hundred and eighty (180) days after the Maturity Date as set forth in
the first paragraph of this Note.

    

    1.3           Payment
Grace Period.  The Borrower shall not
have any grace period to pay any monetary amounts due under this
Note.  After the Maturity Date and during the pendency of an Event of
Default, (as defined in Article IV) a default interest rate of fifteen percent
(15%) per annum shall be in effect.

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    

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

    

    1.5           Pari
Passu.   All payments made on this Note and the Other
Notes and except as otherwise set forth herein all actions taken by the Borrower
with respect to this Note and the Other Notes, including but not limited to
optional redemption, shall be made and taken pari passu with respect to
this Note and the Other Notes.

    

    1.6           Miscellaneous.   Interest
on this Note shall be calculated on the basis of a 360-day year and the actual
number of days elapsed.  Principal and interest on this Note and other
payments in connection with this Note shall be payable at the Holder’s offices
as designated above in lawful money of the United States of America in
immediately available funds without set-off, deduction or
counterclaim.  Upon assignment of the interest of Holder in this Note,
Borrower shall instead make its payment pursuant to the assignee’s instructions
upon receipt of written notice thereof.

    

    ARTICLE
II

    

    CONVERSION
RIGHTS

    

    The
Holder shall have the right to convert the principal and any interest due under
this Note into Shares of the Borrower’s Common Stock, $0.01 par value per share
(“Common Stock”) as set
forth below.

    

    2.1.           Conversion into the
Borrower’s Common Stock.

    

     
(a)           The Holder
shall have the right from and after the date of the issuance of this Note and
then at any time until this Note is fully paid, to convert any outstanding and
unpaid principal portion of this Note, and accrued interest, at the election of
the Holder (the date of giving of such notice of conversion being a “Conversion Date”) into fully
paid and non-assessable shares of Common Stock as such stock exists on the date
of issuance of this Note, or any shares of capital stock of Borrower into which
such Common Stock shall hereafter be changed or reclassified, at the conversion
price as defined in Section 2.1(b)
hereof, determined as provided herein.  Upon delivery to the Borrower
of a completed Notice of Conversion, a form of which is annexed hereto as Exhibit B, Borrower shall
issue and deliver to the Holder within five (5) business days after the
Conversion Date (such fifth day being the “Delivery Date”) that number of
shares of Common Stock for the portion of the Note converted in accordance with
the foregoing.  The Holder will not be required to surrender the Note
to the Borrower until the Note has been fully converted or
satisfied.  The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that portion of the
principal of the Note and interest, if any, to be converted, by the Conversion
Price.

    

     
(b)           Subject to
adjustment as provided in Section 2.1(c)
hereof, the conversion price (“Conversion Price”) per share
shall be $0.10.

    

     
(c)           The Conversion
Price and number and kind of shares or other securities to be issued upon
conversion determined pursuant to Section 2.1(a), shall
be subject to adjustment from time to time upon the happening of certain events
while this conversion right remains outstanding, as follows:

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    A.          Merger, Sale of Assets,
etc.  If (A) the Borrower effects any merger
or  consolidation of the Borrower with or into another entity, (B) the
Borrower effects any sale of all or substantially all of its assets in one or a
series of related transactions,  (C) any tender offer or exchange
offer (whether by the Borrower or another entity) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, (D) the Borrower consummates a stock
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with one
or more persons or entities whereby such other persons or entities acquire more
than the 50% of the outstanding shares of Common Stock (not including any shares
of Common Stock held by such other persons or entities making or party to, or
associated or affiliated with the other persons or entities making or party to,
such stock purchase agreement or other business combination), (E) any “person”
or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of
the 1934 Act) is or shall become the “beneficial owner” (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate
Common Stock of the Borrower), or (F) the Borrower effects any reclassification
of the Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other securities,
cash or property (other than a reverse merger)  (in any such case, a
“Fundamental  Transaction”), this
Note, as to the unpaid principal portion thereof and accrued interest thereon,
if any, shall thereafter be deemed to evidence the right to convert into such
number and kind of shares or other securities and property as would have been
issuable or distributable on account of such Fundamental Transaction, upon or
with respect to the securities subject to the conversion right immediately prior
to such Fundamental Transaction.  The foregoing provision shall
similarly apply to successive Fundamental Transactions of a similar nature by
any such successor or purchaser.  Without limiting the generality of
the foregoing, the anti-dilution provisions of this Section shall apply to such
securities of such successor or purchaser after any such Fundamental
Transaction.

    

    B.           Reclassification,
etc.  If the Borrower at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of
securities of any class or classes that may be issued or outstanding, this Note,
as to the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted number of
such securities and kind of securities as would have been issuable as the result
of such change with respect to the Common Stock immediately prior to such
reclassification or other change.

    

    C.           Stock Splits, Combinations
and Dividends.  If the shares of Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, or if a
dividend is paid on the Common Stock in shares of Common Stock, the Conversion
Price shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.

    

    D.           Share
Issuance.   So long as this Note is outstanding, if the
Borrower shall issue any Common Stock except for the Excepted Issuances (as
defined in Section 12(a) of the Subscription Agreement), prior to the complete
conversion or payment of this Note, for a consideration per share that is less
than the Conversion Price that would be in effect at the time of such issue,
then, and thereafter successively upon each such issuance, the Conversion Price
shall be reduced to such other lower issue price.  For purposes of
this adjustment, the issuance of any security or debt instrument of the Borrower
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Conversion Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option and again upon the issuance
of shares of Common Stock upon exercise of such conversion or purchase rights if
such issuance is at a price lower than the then applicable Conversion Price.
Common Stock issued or issuable by the Borrower for no consideration will be
deemed issuable or to have been issued for $0.001 per share of Common
Stock.  The reduction of the Conversion Price described in this
paragraph is in addition to the other rights of the Holder described in the
Subscription Agreement.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

     (d)           When
ever the Conversion Price is adjusted pursuant to Section 2.1(c) above,
the Borrower shall promptly but not later than the fifth (5th)
business day after the effectiveness of the adjustment, provide notice to the
Holder setting forth the Conversion Price after such adjustment and setting
forth a statement of the facts requiring such adjustment.  Failure to
provide the foregoing notice is an Event of Default under this
Note.

    

     (e)           During
the period the conversion right exists, Borrower will reserve from its
authorized and unissued Common Stock not less than an amount of Common Stock
equal to 150% of the amount of shares of Common Stock issuable upon the full
conversion of this Note.  Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and
non-assessable.  Borrower agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the conversion
of this Note.

    

    2.2           Method of
Conversion.  This Note may be converted by the Holder in whole
or in part as described in Section 2.1(a) hereof
and the Subscription Agreement.  Upon partial conversion of this Note,
a new Note containing the same date and provisions of this Note shall, at the
request of the Holder, be issued by the Borrower to the Holder for the principal
balance of this Note and interest which shall not have been converted or
paid.

    

    2.3.           Maximum
Conversion.  The Holder shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Borrower on such Conversion
Date.  For the purposes of the provision 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, and Regulation 13d-3
thereunder.  Subject to the foregoing, the Holder shall not be limited
to aggregate conversions of 4.99%.  The Holder shall have the
authority to determine whether the restriction contained in this Section 2.3 will
limit any conversion hereunder and the extent such limitation applies and to
which convertible or exercisable instrument or part thereof such limitation
applies.  The Holder may waive the conversion limitation described in
this Section
2.3, in whole or in part, upon and effective after 61 days prior written
notice to the Borrower to increase such percentage to up to 9.99%.

    

    ARTICLE
III

    

    ACCELERATION
AND REDEMPTION

    

    3.1.           Fundamental
Transaction.  Upon the occurrence of a Fundamental Transaction,
then in addition to the Holder’s rights described in Section 2.1(c)(A), until
twenty (20) business days after the Borrower notifies the Holder of the
occurrence of the Fundamental Transaction, the Holder may elect to accelerate
the Maturity Date as of the date of the Fundamental Transaction and receive
payment for the then outstanding Principal Amount, and any other amount owed to
the Holder pursuant to the Transaction Documents.

    
      
         

      

      
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    3.2.          Redemption.  This
Note may not be prepaid, converted, redeemed or called by the Borrower without
the consent of the Holder except as described in this Note.

    

    3.3           Required
Prepayment.  Within two business days after the occurrence of a
Financing Transaction, Borrower shall immediately tender to the Holder at
Holder’s written request, all sums of principal, interest, and other amounts
then remaining unpaid hereunder. For purposes herein, a “Financing Transaction” shall
be deemed to have occurred, except in connection with an Excepted Issuance, upon
the Maker receiving in cash, in one or a series of debt or equity transactions,
an amount of funds not less than $3,000,000 in gross proceeds.  The
Principal Amount payable in connection with a Financing Transaction shall be
increased by fifteen percent (15%).

    

    ARTICLE
IV

    

    EVENT
OF DEFAULT

    

    The
occurrence of any of the following events of default (“Event of Default”) shall, at
the option of the Holder hereof, make all sums of principal and interest then
remaining unpaid hereon and all other amounts payable hereunder immediately due
and payable, upon demand, without presentment or grace period, all of which
hereby are expressly waived, except as set forth below:

    

    4.1           Failure to Pay Principal or
Interest.  The Borrower fails to pay any installment of
principal, interest or other sum due under this Note when due.

    

    4.2           Breach of
Covenant.  The Borrower or any Subsidiary breaches any material
covenant or other term or condition of the Subscription Agreement, Transaction
Documents or this Note in any material respect and such breach, if subject to
cure, continues for a period of ten (10) business days after written notice to
the Borrower from the Holder.

    

    4.3           Breach of Representations
and Warranties.  Any material representation or warranty of the
Borrower made herein, in the Subscription Agreement, Transaction Documents, or
in any agreement, statement or certificate given in writing pursuant hereto or
in connection therewith shall be false or misleading in any material respect as
of the date made and the Closing Date.

    

    4.4           Liquidation.   Any
dissolution, liquidation or winding up of Borrower or a Subsidiary substantial
portion of their business.

     

    4.5           Cessation of
Operations.   Any cessation of operations by Borrower or a
Subsidiary.

     

    4.6           Maintenance of
Assets.   The failure by Borrower or any Subsidiary to
maintain any material intellectual property rights, personal, real property,
equipment, leases or other assets which are necessary to conduct its business
(whether now or in the future) and such breach is not cured with ten (10) days
after written notice to the Borrower from the Holder.

    

    4.7           Receiver or
Trustee.  The Borrower or any Subsidiary 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.

    

    4.8           Judgments.  Any
money judgment, writ or similar final process shall be entered or made in a
non-appealable adjudication against Borrower or any Subsidiary or any of its
property or other assets for more than $100,000, unless stayed vacated or
satisfied within ten days.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    4.9           Bankruptcy.  Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings or
relief under any bankruptcy law or any law, or the issuance of any notice in
relation to such event, for the relief of debtors shall be instituted by or
against the Borrower or any Subsidiary.

    

    4.10           Delisting.   A
delisting of the Common Stock from any Principal Market; failure to comply with
the requirements for continued listing on a Principal Market for a period of
fifteen (15) consecutive trading days; or notification from a Principal Market
that the Borrower is not in compliance with the conditions for such continued
listing on such Principal Market.

    

    4.11           Non-Payment.   A
default by the Borrower or any Subsidiary under any one or more obligations in
an aggregate monetary amount in excess of $100,000 for more than twenty (20)
days after the due date, unless the Borrower or such Subsidiary is contesting
the validity of such obligation in good faith and has segregated cash funds
equal to not less than one-half of the contested amount.

    

    4.12           Stop
Trade.  An SEC or judicial stop trade order or Principal Market
trading suspension that lasts for ten (10) or more consecutive trading
days.

    

    4.13           Failure to Deliver Common
Stock or Replacement Note.  Borrower’s failures to timely
deliver Common Stock to the Holder pursuant to and in the form required by this
Note, Sections 7 and 11 of the Subscription Agreement, and the Warrant or, if
required, a replacement Note following a partial conversion.

    

    4.14           Reservation
Default.   Failure by the Borrower to have reserved for
issuance upon conversion of the Note or upon exercise of the Warrants issued in
connection with the Subscription Agreement, the number of shares of Common Stock
as required in the Subscription Agreement, this Note and the
Warrants.

    

    4.15           Financial Statement
Restatement.  The restatement after the date hereof of any
financial statements filed by the Borrower with the Securities and Exchange
Commission 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 statements, have
constituted a Material Adverse Effect.

    

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

    

    4.17           Event Described in
Subscription Agreement.  The occurrence of an Event of Default
as described in the Subscription Agreement or any other Transaction Document
that, if susceptible to cure, is not cured during any designated cure period or
longer period described in this Article IV.

    

    4.18           Executive Officers Breach of
Duties.  Any of Borrower’s named executive officers or
directors is convicted of a violation of securities laws, or a settlement in
excess of $250,000 is reached by any such officer or director relating to a
violation of securities laws, breach of fiduciary duties or
self-dealing.

    

    4.19           Notification
Failure.   A failure by Borrower to notify Holder of any
material event of which Borrower is obligated to notify Holder pursuant to the
terms of this Note or any other Transaction Document.

    

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

    
      
         

      

      
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    4.21       Other Note
Default.   The occurrence of an Event of Default under any
Other Note.

    

    ARTICLE
V

    

    SECURITY
INTEREST

    

    5.           Security Interest/Waiver of
Automatic Stay.   This Note is secured by a security
interest granted to the Holder pursuant to a Security Agreement, as delivered by
Borrower to Holder.  The Borrower acknowledges and agrees that should
a proceeding under any bankruptcy or insolvency law be commenced by or against
the Borrower, or if any of the Collateral (as defined in the Security Agreement)
should become the subject of any bankruptcy or insolvency proceeding, then the
Holder should be entitled to, among other relief to which the Holder may be
entitled under the Transaction Documents and any other agreement to which the
Borrower and Holder are parties (collectively, “Loan Documents”) and/or
applicable law, an order from the court granting immediate relief from the
automatic stay pursuant to 11 U.S.C. Section 362 to permit the Holder to
exercise all of its rights and remedies pursuant to the Loan Documents and/or
applicable law. THE BORROWER EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY
IMPOSED BY 11 U.S.C. SECTION 362.  FURTHERMORE, THE BORROWER EXPRESSLY
ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION
OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION,
11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN
ANY WAY THE ABILITY OF THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES
UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW.  The Borrower hereby
consents to any motion for relief from stay that may be filed by the Holder in
any bankruptcy or insolvency proceeding initiated by or against the Borrower
and, further, agrees not to file any opposition to any motion for relief from
stay filed by the Holder.  The Borrower represents, acknowledges and
agrees that this provision is a specific and material aspect of the Loan
Documents, and that the Holder would not agree to the terms of the Loan
Documents if this waiver were not a part of this Note. The Borrower further
represents, acknowledges and agrees that this waiver is knowingly, intelligently
and voluntarily made, that neither the Holder nor any person acting on behalf of
the Holder has made any representations to induce this waiver, that the Borrower
has been represented (or has had the opportunity to he represented) in the
signing of this Note and the Loan Documents and in the making of this waiver by
independent legal counsel selected by the Borrower and that the Borrower has
discussed this waiver with counsel.

    

    ARTICLE
VI

    

    MISCELLANEOUS

    

    6.1           Failure or Indulgence Not
Waiver.  No failure or delay on the part of the Holder hereof
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 privilege.  All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

    
      
         

      

      
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    6.2           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 first business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The
addresses for such communications shall be: (i) if to the Borrower to: MSGI
Security Solutions, Inc., 575 Madison Avenue, 10th Floor,
New York, NY 10022, Attn: Jeremy Barbera, Chairman & CEO, facsimile: (212)
605-0222 with a copy by fax to: Joshua M. Gold, Esq., (401) 633-6660, and (ii)
if to the Holder, to the name, address and facsimile number set forth on the
front page of this Note, with a copy by fax only to Grushko & Mittman, P.C.,
551 Fifth Avenue, Suite 1601, New York, New York 10176, facsimile: (212)
697-3575.

     

    6.3           Amendment
Provision.  The term “Note” and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or
supplemented.

     

    6.4           Assignability.  This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns.  The Borrower may not assign its obligations under this
Note.

     

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

     

    6.6           Governing
Law.  This Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflicts of
laws principles that would result in the application of the substantive laws of
another jurisdiction.  Any action brought by either party against the
other concerning the transactions contemplated by this Agreement must be brought
only in the civil or state courts of New York or in the federal courts located
in the State and county of New York.  Both parties and the individual
signing this Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts.  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 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 unenforceability of any other provision of this Note.
Nothing contained herein shall be deemed or operate to preclude the Holder from
bringing suit or taking other legal action against the Borrower in any other
jurisdiction to collect on the Borrower’s obligations to Holder, to realize on
any collateral or any other security for such obligations, or to enforce a
judgment or other decision in favor of the Holder.  This Note shall be deemed an
unconditional obligation of Borrower for the payment of money and, without
limitation to any other remedies of Holder, may be enforced against Borrower by
summary proceeding pursuant to New York Civil Procedure Law and Rules Section
3213 or any similar rule or statute in the jurisdiction where enforcement is
sought.  For purposes of such rule or statute, any other document or
agreement to which Holder and Borrower are parties or which Borrower delivered
to Holder, which may be convenient or necessary to determine Holder’s rights
hereunder or Borrower’s obligations to Holder are deemed a part of this Note,
whether or not such other document or agreement was delivered together herewith
or was executed apart from this Note.

     

    6.7           Maximum
Payments.  Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum rate permitted by applicable law.  In the event
that the rate of interest required to be paid or other charges hereunder exceed
the maximum rate permitted by applicable law, any payments in excess of such
maximum rate shall be credited against amounts owed by the Borrower to the
Holder and thus refunded to the Borrower.

    
      
         

      

      
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    6.8           Non-Business
Days.   Whenever any payment or any action to be made
shall be due on a Saturday, Sunday or a public holiday under the laws of the
State of New York, such payment may be due or action shall be required on the
next succeeding business day and, for such payment, such next succeeding day
shall be included in the calculation of the amount of accrued interest payable
on such date.

     

    6.9           Shareholder
Status.  The Holder shall not have rights as a shareholder of
the Borrower with respect to unconverted portions of this
Note.  However, the Holder will have the rights of a shareholder of
the Borrower with respect to the Shares of Common Stock to be received after
delivery by the Holder of a Conversion Notice to the Borrower.

    

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    IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by an authorized officer as of the
____ day of March, 2010.

    

    
      
        	
                MSGI
      SECURITY SOLUTIONS, INC.

              
	 
      
	
                By: 

              	
                  

              
	 
      	
                Name:
      Jeremy Barbera

              
	 
      	
                Title:
      Chairman & CEO

              

      

    

    

    WITNESS:

      

    ______________________________________

    
      
         

      

      
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    EXHIBIT A - NOTICE OF
CONVERSION

    

    (To be
executed by the Registered Holder in order to convert the Note)

    

    The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Note issued by MSGI SECURITY SOLUTIONS, INC. on March
___, 2010 into Shares of Common Stock of MSGI SECURITY SOLUTIONS, INC. (the
“Borrower”) according to the conditions set forth in such Note, as of the date
written below.

    

    
      	
              Date
      of Conversion:

            	
                

            

    

    

    
      	
              Conversion
      Price:

            	
                

            

    

    

    Number of Shares of Common Stock Beneficially Owned on
the Conversion Date: Less than 5% of the outstanding Common Stock of MSGI
SECURITY SOLUTIONS, INC.

    

    
      	
              Shares
      To Be Delivered:

            	
                

            

    

    

    
      	
              Signature:

            	
                

            

    

    

    
      	
              Print
      Name:

            	
                

            

    

    

    
      	
              Address:

            	
                

            
	 
      	 
      
	 
      	
                

            

    

    
      
         

      

      
        11

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}]]