Document:

Golden Global Corp. - Exhibit 10.2 - 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: $37,500.00 	Issue Date: March 14, 2012 
	Purchase Price: $37,500.00 	  

CONVERTIBLE PROMISSORY NOTE 

          FOR
VALUE RECEIVED, GOLDEN GLOBAL 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 $37,500.00 together with any interest as set forth
herein, on December 19, 2012 (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 date that the Note is fully
paid and 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, $0.0001 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 e-mail (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, plus
(3) at the Borrower’s option, Default Interest, if any, on the amounts referred
to in the immediately preceding clauses (1) and/or (2) plus (4) at the
Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and
1.4(g) hereof. 

2 

                    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 55% multiplied by the Market Price (as defined herein) (representing
a discount rate of 45%). “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 on the latest complete Trading Day prior to 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”) designated by the Holder (i.e. Bloomberg) 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 tradable 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. 

3 

                         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 four 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 the Borrower does not maintain the Reserved Amount it will be
considered an Event of Default under Section 3.2 of the Note. 

                    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, e-mail 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. 

4 

                              (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 e-mail (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 (the “Deadline”) (and, solely in the case of conversion of
the entire unpaid principal amount hereof, surrender of this Note) in accordance
with the terms hereof and the Purchase Agreement. 

                              (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 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. 

5 

                              (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 not delivered by 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. The Borrower agrees that the right to convert is a valuable right to the
Holder. The damages resulting from a failure, attempt to frustrate, interference
with such conversion right are difficult if not impossible to qualify.
Accordingly the parties acknowledge that the liquidated damages provision
contained in this Section 1.4(g) are justified. 

                    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.”

        

      

    

  

6 

                    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, which opinion shall be accepted
by the Company so that the sale or transfer is effected or (ii) 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. In the event that the Company does not accept the opinion
of counsel provided by the Buyer with respect to the transfer of Securities
pursuant to an exemption from registration, such as Rule 144 or Regulation S, at
the Deadline, it will be considered an Event of Default pursuant to Section 3.2
of the Note. 

                    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. 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. 

7 

                              (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. 

8 

                              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 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. Once the Maximum Share Amount has been issued, 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, in lieu of any further right to convert this Note,
this will be considered an Event of Default under Section 3.3 of the Note. 

9 

                    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.

                    1.9     
Prepayment. Notwithstanding anything to the contrary contained in this
Note, at any time during the period beginning on the Issue Date and ending on
the date which is ninety (90) days following the issue date, 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 Notice”) 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 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 140%, 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. 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 prepay the Note pursuant to this Section 1.9. 

10 

                    Notwithstanding
anything to the contrary contained in this Note, at any time during the period
beginning on the date which is ninety-one (91) days following the issue date and
ending on the date which is one hundred fifty (150) days following the issue
date, 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 Optional Prepayment Notice 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 which shall be not more than three (3) Trading Days from the date of
the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower
shall make payment of the Second 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 “Second Optional Prepayment
Amount”) equal to 145%, 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. If the Borrower delivers an Optional Prepayment Notice and fails
to pay the Second 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 prepay the Note pursuant to this
Section 1.9. 

                    Notwithstanding
anything to the contrary contained in this Note, at any time during the period
beginning on the date which is one hundred fifty-one (151) days following the
issue date and ending on the date which is one hundred eighty (180) days
following the issue date, 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 Optional Prepayment Notice 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 which shall be not more than three (3) Trading Days from the
date of the Optional Prepayment Notice. On the Optional Prepayment Date, the
Borrower shall make payment of the Third 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 “Third 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. If the Borrower delivers an Optional Prepayment Notice and fails
to pay the Third 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 prepay the Note pursuant to this Section 1.9. 

11 

                    After
the expiration of one hundred eighty (180) following the date of the Note, the
Borrower shall have no right of prepayment. 

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. 

                    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. 

                    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
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, 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. 

ARTICLE III. EVENTS OF DEFAULT 

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

12 

                    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
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. It
is an obligation of the Borrower to remain current in its obligations to its
transfer agent. It shall be an event of default of this Note, if a conversion of
this Note is delayed, hindered or frustrated due to a balance owed by the
Borrower to its transfer agent. If at the option of the Holder, the Holder
advances any funds to the Borrower’s transfer agent in order to process a
conversion, such advanced funds shall be paid by the Borrower to the Holder
within forty eight (48) hours of a demand from the Holder. 

                    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. 

13 

                    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. 

                    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. 

14 

                    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 Holder, 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 related or companion documents to this Note. 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). 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.

15 

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:

If to the Borrower,
to:
       GOLDEN GLOBAL
CORP. 
       17412 105 Avenue NW - Suite
201 
       Edmonton, Alberta T5S
1G4 
       Attn: JOHN R. HOPE,
President/Chief Executive Officer 

         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] 

16 

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. 

                    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. 

17 

                    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. 

                    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 4.9.

                    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.

18 

          IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its
duly authorized officer this March 14, 2012. 

GOLDEN GLOBAL CORP. 

By: 
       /s/ JOHN R.
HOPE                         
        
    JOHN R.
HOPE 
        President/Chief
Executive Officer 

19 

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 GOLDEN GLOBAL CORP., a Nevada corporation (the “Borrower”) according
to the conditions of the convertible note of the Borrower dated as of March 14,
2012 (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, NY. 11021 

20imsc8k120323_ex10-1.htm

 

Exhibit 10.1

 

 

EMPLOYMENT AGREEMENT

 

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”), is made as of this 19th day of March, 2012 between William McGann (“Executive”) and Implant Sciences Corporation (the “Company”), a Massachusetts corporation.

 

 

1. Term of Employment.  The Company hereby agrees to employ Executive, and Executive hereby accepts employment with the Company, upon the terms set forth in this Agreement, for the period commencing as of April 2, 2012 (the “Commencement Date”) and ending on the third anniversary of the Commencement Date, unless sooner terminated in accordance with the provisions of Section 5 or extended as hereinafter provided (such period, as it may be extended or terminated, is the “Agreement Term”). Beginning on the third anniversary of the Commencement Date, this Agreement shall continue until either party provides the other with written notice of termination, such notice (except as otherwise provided in this Agreement) to take effect no less than 90 days after such notice.

 

2. Title; Capacity.  The Company will employ Executive, and Executive agrees to work for the Company, as its Chief Operating Officer to perform the duties and responsibilities inherent in such position and such other duties and responsibilities as the Company shall from time to time assign to Executive.  In addition, the Company shall take all action necessary to increase the number of Directors constituting the Company’s Board of Directors (the “Board”) to seven and to cause Executive to be appointed as a member of the Board. Executive shall report to the Company’s Chief Executive Officer and shall be subject to the supervision of, and shall have such authority as is delegated by, the Chief Executive Officer, which authority shall be sufficient to perform Executive’s duties hereunder.  Executive shall devote Executive’s full business time and reasonable best efforts in the performance of the foregoing services; provided, however, that Executive may work remotely from home for up to two days per week. Subject to the restrictions set forth in Section 6.4, Executive may accept other board memberships or service with other charitable organizations that are not in conflict with Executive’s primary responsibilities and obligations to the Company.

 

3. Compensation and Benefits.

 

3.1 Salary.  As of the Commencement Date, the Company shall pay Executive a base salary of $9,615.38 every two weeks (i.e., at an annualized rate of $250,000 per year), payable in accordance with the Company’s customary payroll practices (the “Base Salary”).  The Base Salary thereafter shall be subject to annual review and adjustment, as determined by the Board (or the Compensation Committee of the Board) in its sole discretion on the anniversary of the Commencement Date each year of the Agreement Term, provided, however, that the Base Salary may not be decreased without the Executive’s consent unless the compensation payable to all executives of the Company is similarly reduced.

 

  

  

  

 

3.2 Annual Incentive.  For the fiscal year ending June 30, 2012, Executive will be eligible to receive an annual cash bonus in an amount up to $31,250, subject to Executive achieving certain performance milestones to be established by the Chief Executive Officer, with the approval of the Board, within 30 days following the Commencement Date.  For the fiscal year ending June 30, 2013 and subsequent fiscal years, Executive will be eligible to receive an annual cash bonus in an amount up to $125,000, subject to Executive achieving certain performance milestones to be established by the Chief Executive Officer, with the approval of the Board, within 60 days following the beginning of such fiscal year.  The bonus, if payable, shall be calculated and paid within 30 days after the end of the fiscal year in which such bonus earned; provided, however, that the Company may delay the calculation and payment of any portion of such bonus which is based on the attainment of a revenue, earnings or similar milestone until the completion of the audit of the Company’s financial statements for the fiscal year in question.

 

3.3 Long-Term Incentives.  Within 30 days after the completion of an equity financing the gross proceeds of which to the Company (excluding any investment from DMRJ Group, LLC) are not less than $15,000,000, the Company will grant Executive additional equity in the form of an incentive stock option (the “Option”) to purchase that number of shares of common stock of the Company which, together with all other options and equity awards previously issued by the Company, will equal 1% of the Company’s fully diluted equity (as such term is reasonably interpreted by the Board), immediately after such equity financing, rounded to the nearest 1,000 shares. The exercise price per share of the Option shall be equal to the per share fair market value, as determined in accordance with Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury regulations and other applicable guidance issued by the Treasury Department and/or the Internal Revenue Service thereunder (collectively, the “Code”), of the Company’s common stock as of the date the Option is approved by the Board. The Option shall vest in equal installments of thirty-three and a third percent (33 1/3%) on the first, second and third anniversaries of the date of the grant. The Option shall be exercisable for a period of ten years from the date of the grant.  The Option shall be governed in all respects by the Company’s 2004 Stock Option Plan, in effect on the Commencement Date and as amended from time to time, or such additional or successor stock option plan as may be in effect at the time the Option is awarded (the “Plan”), and by a stock option agreement containing such terms and conditions as are generally applicable to other options granted under the Plan.  In the event a Change in Control occurs, as such term is defined in the Plan, the Option shall accelerate and become fully exercisable.

 

3.4 Fringe Benefits.  Executive shall be entitled to participate in all bonus and benefit programs that the Company establishes and makes available to its executive employees, if any, to the extent that Executive’s position, tenure, salary, age, health and other qualifications make Executive eligible to participate, including, but not limited to, health care plans, short and long term disabilities plans, life insurance plans, retirement plans, and all other benefit plans from time to time in effect.  Executive shall also be entitled to take four weeks of fully paid vacation in accordance with Company policy.

 

  

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3.5 Reimbursement of Certain Expenses.  Executive shall be reimbursed for such reasonable and necessary business expenses incurred by Executive while Executive is employed by the Company, which are directly related to the furtherance of the Company’s business, including compensation under the Company’s standard policies if Executive uses his personal vehicle for Company business where such business is more than 150 miles from the Company’s main offices or Executive’s home, wherever such trip commences.  Executive will be furnished with a corporate credit card for business expenses. The Executive must submit any request for reimbursement no later than 90 days following the date that such business expense is incurred in accordance with the Company’s reimbursement policy regarding same and business expenses must be substantiated by appropriate receipts and documentation.  The Company may request additional documentation or a further explanation to substantiate any business expense submitted for reimbursement, and retains the discretion to approve or deny a request for reimbursement. If a business expense reimbursement is not exempt from Section 409A of the Code, any reimbursement in one calendar year shall not affect the amount that may be reimbursed in any other calendar year and a reimbursement (or right thereto) may not be exchanged or liquidated for another benefit or payment.  Any business expense reimbursements subject to Section 409A of the Code shall be made no later than the end of the calendar year following the calendar year in which such business expense is incurred by the Executive.

 

3.6 Indemnification.  The Company shall indemnify Executive to the fullest extent permitted under applicable law, the Company’s Articles of Organization and the Company’s By-laws, each as they may be amended from time to time.  The Executive shall be insured under the Company’s Directors’ & Officers’ liability policy in the same manner as other senior executives of the Company for as long as Executive is an officer or director of the Company and as long as the Company maintains such policy in force.  Such indemnity and insurance shall survive the termination of Executive’s employment by the Company.

 

3.7 Certain Legal Fees. The Company shall be responsible for reasonable legal fees in connection with the negotiation, preparation or amendment of this Agreement.

 

4. Termination of Employment Period.  The Employment Period shall terminate upon the occurrence of any of the following:

 

4.1           Termination of the Agreement Term.  At the expiration of the Agreement Term, but only if appropriate notice is given pursuant to Section 1.

 

4.2           Termination for Cause.  At the election of the Company, for “Cause,” upon written notice by the Company to Executive.  For the purposes of this Section, “Cause” for termination shall be deemed to exist upon the occurrence of any of the following:

 

(a) Executive’s conviction or entry of nolo contendere to any felony or a crime involving moral turpitude, fraud or embezzlement of Company property; or

 

  

3

  

 

(b) Executive’s dishonesty, gross negligence or gross misconduct that is materially injurious to the Company or material breach of his duties under this Agreement, which has not been cured by Executive within 10 days (or longer period as is reasonably required to cure such breach, negligence or misconduct) after he shall have received written notice from the Company stating with reasonable specificity the nature of such breach; or

 

(c) Executive’s illegal use or abuse of drugs, alcohol, or other related substances that is materially injurious to the Company.

4.3           Voluntary Termination by the Company.  At the election of the Company, without Cause, upon 30 days prior written notice by the Company to the Executive; provided, however, that, in lieu of such notice, the Company at its option may elect to relieve the Executive of his duties immediately and continue to pay the Executive his regular compensation and benefits during such 30-day period.

 

4.4           Death or Disability.  Thirty days after the death or determination of disability of Executive.  As used in this Agreement, the determination of “disability” shall occur when Executive, due to a physical or mental disability, for a period of 90 days in the aggregate whether or not consecutive, during any 360-day period, is unable to perform the services contemplated under this Agreement.  A determination of disability shall be made by a physician satisfactory to both Executive and the Company, provided that if Executive and the Company do not agree on a physician, Executive and the Company shall each select a physician and these two together shall select a third physician, whose determination as to disability shall be binding on all parties.  Notwithstanding the foregoing, (i) Executive shall be deemed to have a “disability” if Executive receives any benefits under any long-term disability insurance policy, whether such policy is carried by the Company or by Executive; and (ii)  if and only to the extent that Executive’s disability is a trigger for the payment of deferred compensation, as defined in Section 409A of the Code, “disability” shall have the meaning set forth in Section 409A(a)(2)(C) of the Code.

 

4.5           Termination for Good Reason.  Subject to the notice and cure periods set forth in Section 5.5, at the election of Executive for Good Reason (as defined below), upon written notice by the Executive to the Company.

 

4.6           Voluntary Termination by Executive.  At the election of Executive, without Good Reason, upon not less than 30 days prior written notice by him to the Company.

 

  

4

  

 

5. Effect of Termination.

 

5.1 Termination for Cause, at the Election of Executive, at Death or Disability, or Upon Expiration of the Agreement Term.  In the event that Executive’s employment is terminated for Cause, the Company shall have no further obligations under this Agreement other than to pay to Executive Base Salary and accrued vacation through the last day of Executive’s actual employment by the Company.   In the event that Executive’s employment is terminated upon Executive’s death or disability, at the election of Executive, or upon the expiration of the Agreement Term, the Company shall have no further obligations under this Agreement other than (i) to pay to Executive, in a single lump sum upon such termination, Base Salary and accrued vacation through the last day of Executive’s actual employment by the Company and (ii) to pay to Executive, in a single lump sum, a pro rata portion of any bonus (to the extent earned prior to such termination) for the fiscal year in which termination occurs, pursuant to Section 3.2.

 

5.2 Voluntary Termination by the Company, or for Good Reason.  In the event that (a) Executive’s employment is terminated by the Company without Cause, or by Executive’s resignation for Good Reason, and (b) (i) Executive executes a release in favor of the Company substantially in the form annexed hereto as Exhibit A not later than 30 days after such termination and (ii) the period in which Executive is entitled to revoke such release has expired without any such revocation then, beginning on the 45th day after the date of such termination, (x) the Company shall continue to pay to Executive the annual Base Salary in effect immediately prior to such termination for 12 months on a regular payroll basis (with the first such payment including all amounts due from the date of termination through the date of such payment), (y) the Company shall continue Executive’s coverage under and its contributions towards Executive’s health care, dental, life insurance benefits on the same basis as immediately prior to the date of termination, except as provided below, for 12 months from the last day of Executive’s employment, and (z) in  addition to the foregoing amounts, the Company shall pay Executive in a single lump sum, a pro rata portion of any bonus (to the extent earned prior to such termination) for the year in which termination occurs, pursuant to Section 3.2. Notwithstanding the foregoing, subject to any overriding laws, the Company shall not be required to provide any health care, dental, disability or life insurance benefit otherwise receivable by Executive if Executive is actually covered or becomes covered by an equivalent benefit (at the same cost to Executive, if any) from another source.  Any such benefit made available to Executive shall be reported to the Company.

 

5.3 Notwithstanding any other provision with respect to the timing of payments under Section 5, if, at the time of the Executive’s termination, the Executive is deemed to be a “specified employee” of the Company within the meaning of Section 409A(a)(2)(B)(i) of the Code, then only to the extent necessary to comply with the requirements of Section 409A of the Code, any payments to which the Executive may become entitled under Section 5 which are subject to Section 409A of the Code (and not otherwise exempt from its application) will be withheld until the first business day of the seventh month following the date of termination, at which time the Executive shall be paid an aggregate amount equal to six months of payments otherwise due to the Executive under the terms of Section 5, as applicable.  After the first

 

  

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business day of the seventh month following the date of termination and continuing each month thereafter, the Executive shall be paid the regular payments otherwise due to the Executive in accordance with the terms of Section 5, as thereafter applicable.

 

5.4 Upon Executive’s termination without Cause other than upon termination at the end of the Agreement Term, or as a result of Executive’s resignation for Good Reason, all Options then held by Executive shall be accelerated and become fully vested and exercisable as of the date of Executive’s termination.

 

5.5 As used in this Agreement, “Good Reason” means, without Executive’s written consent, (a) a “material diminution” (as such term is used in Section 409A of the Code) of the duties assigned to Executive (provided, however, that no termination of Executive’s service as a member of the Board, regardless of the reason therefor, shall constitute a “material diminution” of Executive’s duties for purposes of this Section 5.5); (b) a material reduction in Base Salary or other benefits (other than a reduction or change in benefits generally applicable to all executive employees of the Company); (c) relocation to an office more than 50 miles further from Executive’s  current residence in Massachusetts than the Company’s current location in the greater Boston area is located from such residence; (d) a “Change of Control” of the Company, as that term is defined in the Plan; or (e), the acquisition (other than an acquisition directly from the Company) by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the then outstanding shares of voting stock of the Company (the “Voting Stock”); provided, however, that any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries of (i) 50% or more of the then outstanding Voting Stock, or (ii) Voting Stock which has the effect of increasing the percentage of Voting Stock owned by any such individual, entity or group to 50% or more of the then outstanding Voting Stock,  shall not constitute a Change of Control.  Notwithstanding the occurrence of any of the events enumerated in this Section 5.5, no event or condition shall be deemed to constitute Good Reason unless (i) Executive reports the event or condition which the Executive believes to be Good Reason to the Board, in writing, within 45 days of such event or condition occurring and (ii) within 30 days after the Executive provides such written notice of Good Reason, the Company has failed to fully correct such Good Reason and to make the Executive whole for any such losses.

 

5.6 The provisions of this Section 5 and the payments provided hereunder are intended to be exempt from or to comply with the requirements of Section 409A of the Code, and shall be interpreted and administered consistent with such intent. To the extent required for compliance with Section 409A, references in this Agreement to a “termination of employment” shall mean a “separation of service” as defined by Section 409A. It is further intended that each installment of the payments provided hereunder shall be treated as a separate “payment” for purposes of Section 409A. Neither the Company nor Employee shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A.

 

  

6

  

 

6. Nondisclosure and Noncompetition.

 

6.1 Proprietary Information.

 

(a) Executive agrees that all information and know-how, whether or not in writing, of a private, secret or confidential nature concerning the Company’s business or financial affairs (collectively, “Proprietary Information”) is and shall be the exclusive property of the Company.  By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, designs, drawings, slogans, tests, logos, ideas, practices, projects, developments, plans, research data, financial data, personnel data, computer programs and codes, and customer and supplier lists.  Executive will not disclose any Proprietary Information to others outside the Company except in the performance of his duties or use the same for any unauthorized purposes without written approval by an officer of the Company, either during or after his employment, unless and until such Proprietary Information has become public knowledge or generally known within the industry without fault by Executive, or unless otherwise required by law.

 

(b) Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, electronic or other material containing Proprietary Information, whether created by Executive or others, which shall come into his custody or possession, shall be and are the exclusive property of the Company to be used by Executive only in the performance of his duties for the Company.

(c) Executive agrees that his obligation not to disclose or use information, know-how and records of the types set forth in paragraphs (a) and (b) above, also extends to such types of information, know-how, records and tangible property of subsidiaries and joint ventures of the Company, customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to Executive in the course of the Company’s business.

 

6.2 Inventions

 

(a)           Disclosure.  Executive shall disclose promptly to an officer or to attorneys of the Company in writing any idea, invention, work of authorship, whether patentable or unpatentable, copyrightable or uncopyrightable, including, but not limited to, any computer program, software, command structure, code, documentation, compound, genetic or biological material, formula, manual, device, improvement, method, process, discovery, concept, algorithm, development, secret process, machine or contribution (any of the foregoing items hereinafter referred to as an “Invention”) Executive may conceive, make, develop or work on, in whole or in part, solely or jointly with others. The disclosure required by this Section applies (a) to any invention related to the general line of business engaged in by the Company or to which the Company planned to enter during the period of Executive’s employment with the Company and for one year thereafter; (b) with respect to all Inventions whether or not they are conceived, made, developed or worked on by Executive during Executive’s regular hours of employment

  

7

  

with the Company; (c) whether or not the Invention was made at the suggestion of the Company; and (d) whether or not the Invention was reduced to drawings, written description, documentation, models or other tangible form.

 

(b)           Assignment of Inventions to Company; Exemption of Certain Inventions. Executive hereby assigns to the Company without royalty or any other further consideration Executive’s entire right, title and interest in and to all Inventions which Executive conceives, makes, develops or works on during employment and for one year thereafter, except as limited by 6.2(a) above and those Inventions that Executive develops entirely on Executive’s own time after the date of this Agreement without using the Company’s equipment, supplies, facilities or trade secret information unless those Inventions either (a) relate at the time of conception or reduction to practice of the Invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company; or (b) result from any work performed by Executive for the Company.

 

(c)           Records.  Executive will make and maintain adequate and current written records of all Inventions. These records shall be and remain the property of the Company.

 

(d)           Patents.  Executive will assist the Company in obtaining, maintaining and enforcing patents and other proprietary rights in connection with any Invention covered by Section 6.2.  Executive further agrees that his obligations under this Section shall continue beyond the termination of his employment with the Company, but if he is called upon to render such assistance after the termination of such employment, he shall be entitled to a fair and reasonable rate of compensation for such assistance. Executive shall, in addition, be entitled to reimbursement of any expenses incurred at the request of the Company relating to such assistance.

 

6.3 Prior Contracts and Inventions; Information Belonging to Third Parties.  Executive represents that there are no contracts to assign Inventions between any other person or entity and Executive.  Executive further represents that (a) Executive is not obligated under any consulting, employment or other agreement which would affect the Company’s rights or my duties under this Agreement, (b) there is no action, investigation, or proceeding pending or threatened, or any basis therefor known to me involving Executive’s prior employment or any consultancy or the use of any information or techniques alleged to be proprietary to any former employer, and (c) the performance of Executive’s duties as an employee of the Company will not breach, or constitute a default under any agreement to which Executive is bound, including, without limitation, any agreement limiting the use or disclosure of proprietary information acquired in confidence prior to engagement by the Company. Executive will not, in connection with Executive’s employment by the Company, use or disclose to the Company any confidential, trade secret or other proprietary information of any previous employer or other person to which Executive is not lawfully entitled.

 

  

8

  

 

6.4 Noncompetition and Nonsolicitation.

 

(a) During the Employment Period and for a period of 12 months after the termination of Executive’s employment with the Company for any reason or for no reason, Executive will not directly or indirectly, absent the Company’s prior written approval, render services of a business, professional or commercial nature to any other person or entity in the area of trace explosives detection or such other services or products provided by the Company at the time employment terminates in any geographical area where the Company does business at the time this covenant is in effect, whether such services are for compensation or otherwise, whether alone or in conjunction with others, as an employee, as a partner, or as a shareholder (other than as the holder of not more than 1% of the combined voting power of the outstanding stock of a public company), officer or director of any corporation or other business entity, or as a trustee, fiduciary or in any other similar representative capacity.

 

(b) During the Employment Period and for a period of 12 months after the termination of Executive’s employment for any reason or for no reason, Executive will not, directly or indirectly, recruit, solicit or induce, or attempt to recruit, solicit or induce any employee or employees of the Company to terminate their employment with, or otherwise cease their relationship with, the Company.

 

(c) During the Employment Period and for a period of 12 months after termination of Executive’s employment for any reason or for no reason, Executive will not, directly or indirectly, contact, solicit, divert or take away, or attempt to solicit, contact, divert or take away, the business or patronage of any of the clients, customers or accounts, or prospective clients, customers or accounts, of the Company.

 

6.5 If any restriction set forth in this Section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

 

6.6 The restrictions contained in this Section are necessary for the protection of the business and goodwill of the Company and are considered by Executive to be reasonable for such purpose.  Executive agrees that any breach of this Section will cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief.  The prevailing party shall be entitled to recover its reasonable attorneys’ fees in such an action.  In addition, the Company’s obligation to pay Executive the amount set fourth in Section 5.2 or 5.3 shall terminate in the event Executive materially breaches any terms and conditions in Section 6.  If the Company breaches its obligation to pay Executive the amounts due hereunder, Executive’s obligations in this Section 6 shall terminate.

 

  

9

  

 

7. Entire Agreement.  This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral relating to the subject matter of this Agreement, including without limitation the Agreement for Consulting Services dated as of April 1, 2011, between the Company and the Executive.

 

8. Amendment.  This Agreement may be amended or modified only by a written instrument executed by both the Company and Executive.

 

9. Governing Law; Waiver of Jury Trial.  This Agreement shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Massachusetts without regard to principles of conflicts of laws thereunder. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

10. Notices.  Any notice or other communication required or permitted by this Agreement to be given to a party shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by U.S. registered or certified mail (return receipt requested), or sent via facsimile (with receipt of confirmation of complete transmission) to the party at the party’s last known address or facsimile number or at such other address or facsimile number as the party may have previously specified by like notice. If by mail, delivery shall be deemed effective three business days after mailing in accordance with this Section.

 

11. Successors and Assigns.

 

11.1 Assumption by Successors.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to assume in writing prior to such succession and to agree to perform its obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  Successions by virtue of the sale of stock shall be governed by operation of law.

 

11.2  Successor Benefits.  This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation into which the Company may be merged or which may succeed to its assets or business, provided, however, that the obligations of Executive are personal and shall not be assigned by him.

 

  

10

  

 

 

12. Miscellaneous.

 

12.1 No Waiver.  No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right.  A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.

 

12.2 Severability.  In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.

 

12.3 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.

 

12.4  Withholding.  All payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company pursuant to applicable law.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.

/s/ William McGann

William McGann

 

Date executed: March 19, 2012

 

IMPLANT SCIENCES CORPORATION

By: /s/ Glenn D. Bolduc

      Glenn D. Bolduc

President and Chief Executive Officer

Date executed: March 19, 2012

  

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Exhibit A

 

 

1.           Your Release of Claims.  By signing this Agreement, you hereby agree and acknowledge that, for good and valuable consideration, you are waiving your right to assert any and all forms of legal claims against the Company1/ of any kind whatsoever, whether known or unknown, arising from the beginning of time through the date you execute this Agreement (the “Execution Date”).  Except as set forth below, your waiver and release herein is intended to bar any form of legal claim, complaint or any other form of action (jointly referred to as “Claims”) against the Company seeking any form of relief including, without limitation, equitable relief (whether declaratory, injunctive or otherwise), the recovery of any damages, or any other form of monetary recovery whatsoever (including, without limitation, back pay, front pay, compensatory damages, emotional distress damages, punitive damages, attorneys fees and any other costs) against the Company, for any alleged action, inaction or circumstance existing or arising through the Execution Date.

Without limiting the foregoing general waiver and release, you specifically waive and release the Company from any Claim arising from or related to your prior employment relationship with the Company or the termination thereof, including, without limitation:

	
  

	
**

	
Claims under any state or federal discrimination, fair employment practices or other employment related statute, regulation or executive order (as they may have been amended through the Execution Date) prohibiting discrimination or harassment based upon any protected status including, without limitation, race, national origin, age, gender, marital status, disability, veteran status or sexual orientation.  Without limitation, specifically included in this paragraph are any Claims arising under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Equal Pay Act, the Americans With Disabilities Act and any similar Federal and state statute.

	
  

	
**

	
Claims under any other state or federal employment related statute, regulation or executive order (as they may have been amended through the Execution Date) relating to wages, hours or any other terms and conditions of employment.

	
  

	
**

	
Claims under any state or federal common law theory including, without limitation, wrongful discharge, breach of express or implied contract, promissory estoppel, unjust enrichment, breach of a covenant of good faith and fair dealing, violation of public policy, defamation, interference with contractual relations, intentional or negligent infliction of emotional distress, invasion of privacy, misrepresentation, deceit, fraud or negligence.

	
  

	
**

	
Any other Claim arising under state or federal law.

 

           For purposes of this Agreement, the Company includes the Company and any of its divisions, affiliates (which means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company), subsidiaries and all other related entities, and its and their directors, officers, employees, trustees, agents, successors and assigns.

 

 

  

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You acknowledge and agree that, but for providing this waiver and release, you would not be receiving the economic benefits being provided to you under the terms of this Agreement.   You further acknowledge that this release does not waive any claims you cannot by law waive and does not release any claims that arise after its execution.

It is the Company’s desire and intent to make certain that you fully understand the provisions and effects of this Agreement.  To that end, you have been advised and given the opportunity to consult with legal counsel for the purpose of reviewing the terms of this Agreement.  Also, because you are over the age of 40, the Age Discrimination in Employment Act (“ADEA”), which prohibits discrimination on the basis of age, allows you at least twenty-one (21) days to consider the terms of this Agreement.  ADEA also allows you to rescind your assent to this Agreement if, within seven (7) days after you sign this Agreement, you deliver by hand or send by mail (certified, return receipt and postmarked within such 7 day period) a notice of rescission to the Company. The eighth day following your signing of this Agreement is the Effective Date.

Also, consistent with the provisions of Federal law, nothing in this release shall be deemed to prohibit you from challenging the validity of this release under the discrimination laws (the “Federal Discrimination Laws”) or from filing a charge or complaint of employment-related discrimination with the Equal Employment Opportunity Commission (“EEOC”) or any state fair employment practices agency, or from participating in any investigation or proceeding conducted by the EEOC or any state fair employment practices agency.  Further, nothing in this release or Agreement shall be deemed to limit the Company’s right to seek immediate dismissal of such charge or complaint on the basis that your signing of this Agreement constitutes a full release of any individual rights under the Federal Discrimination Laws, or to seek restitution to the extent permitted by law of the economic benefits provided to you under this Agreement in the event that you successfully challenge the validity of this release and prevail in any claim under the Federal Discrimination Laws.

	
  

	
By: /s/ William McGann

 

	
  

	
Executive

 

	
  

	
Date signed: March 19, 2012

 

	  

 

 

  

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