Document:

ex-10_3.htm

    Exhibit
      10.3

     

    

     

    

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THE SECURITIES MAY
      NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
      SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
      THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO
      RULE
      144 OR REGULATION S UNDER SAID ACT.

     

    

     

    CALLABLE
      SECURED CONVERTIBLE NOTE

     

    Great
      Neck, NY

    September
      13, 2007                                                                 $52,800

     

    FOR
      VALUE RECEIVED, JUNIPER GROUP, INC., a Nevada corporation (hereinafter called
      the “Borrower”), hereby promises to pay to the order of AJW Partners, LLC or
      registered assigns (the “Holder”) the sum of $52,800, on September 13, 2010 (the
“Maturity Date”), and to pay interest on the unpaid principal balance hereof at
      the rate of eight percent (8%) (the “Interest Rate”) per annum from September
      13, 2007 (the “Issue Date”) until the same becomes due and payable, whether at
      maturity or upon acceleration or by prepayment or otherwise.  Any
      amount of principal or interest on this Note which is not paid when due shall
      bear interest at the rate of fifteen percent (15%) per annum from the due date
      thereof until the same is paid (“Default Interest”).  Interest shall
      commence accruing on the Issue Date, shall be computed on the basis of a 365-day
      year and the actual number of days elapsed and shall be payable quarterly
      provided that no interest shall be due and payable for any month in which the
      Trading Price (as such term is defined below) is greater than $.0375 for each
      Trading Day (as such term is defined below) of the month. All payments due
      hereunder (to the extent not converted into common stock, $.001 par value per
      share (the “Common Stock”) in accordance with the terms hereof) shall be made in
      lawful money of the United States of America.  All payments shall be
      made at such address as the Holder shall hereafter give to the Borrower by
      written notice made in accordance with the provisions of this
      Note.  Whenever any amount expressed to be due by the terms of this
      Note is due on any day which is not a business day, the same shall instead
      be
      due on the next succeeding day which is a business day and, in the case of
      any
      interest payment date which is not the date on which this Note is paid in full,
      the extension of the due date thereof shall not be taken into account for
      purposes of determining the amount of interest due on such date.  As
      used in this Note, the term “business day” shall mean any day other than a
      Saturday, Sunday or a day on which commercial banks in the city of New York,
      New
      York are authorized or required by law or executive order to remain
      closed.  Each capitalized term used herein, and not otherwise defined,
      shall have the meaning ascribed thereto in that certain Securities Purchase
      Agreement, dated September 13, 2007, 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 obligations of the Borrower under this
      Note shall be secured by that certain Security Agreement and Intellectual
      Property Security Agreement, each dated September 13, 2007 by and between the
      Borrower and the Holder.

     

    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 on or prior to the earlier 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, the Optional Prepayment Amount (as defined in Section
      5.1
      or any payments pursuant to Section 1.7, 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 (including, without
      limitation, the warrants issued by the Borrower pursuant to the Purchase
      Agreement) 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 and providedfurther that the Holder shall
      not be entitled to convert any portion of this Note during any month immediately
      succeeding a Determination Date on which the Borrower exercises its prepayment
      option pursuant to Section 5.2 of this Note.  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, and Regulations 13D-G thereunder, except as otherwise provided
      in clause (1) of such proviso.  The number of shares of Common Stock
      to be issued upon each conversion of this Note shall be determined by dividing
      the Conversion Amount (as defined below) by the applicable Conversion Price
      then
      in effect on the date specified in the notice of conversion, in the form
      attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the
      Borrower by the Holder in accordance with Section 1.4 below; provided that
      the
      Notice of Conversion is submitted by facsimile (or by other means resulting
      in,
      or reasonably expected to result in, notice) to the Borrower before 6:00 p.m.,
      New York, New York time on such conversion date (the “Conversion
      Date”).  The term “Conversion Amount” means, with respect to any
      conversion of this Note, the sum of (1) the principal amount of this Note to
      be
      converted in such conversion plus (2) at the Borrower’s option, accrued
      and unpaid interest, if any, on such principal amount at the interest rates
      provided in this Note to the Conversion Date, provided, however, that the
      Company shall have the right to pay any or all interest in cash plus (3)
      at the Borrower’s option, Default Interest, if any, on the amounts referred to
      in the immediately preceding clauses (1) and/or (2) plus (4) at the
      Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and
      1.4(g) hereof or pursuant to Section 2(c) of that certain Registration Rights
      Agreement, dated as of September 13, 2007, executed in connection with the
      initial issuance of this Note and the other Notes issued on the Issue Date
      (the
“Registration Rights Agreement”).  The term “Determination Date” means
      the last business day of each month after the Issue Date.

     

    1.2  Conversion
      Price.

     

    (a)  Calculation
      of Conversion Price.  The Conversion Price shall be the lesser of
      (i) the Variable Conversion Price (as defined herein) and (ii) the Fixed
      Conversion Price (subject, in each case, to equitable adjustments for stock
      splits, stock dividends or rights offerings by the Borrower relating to the
      Borrower’s securities or the securities of any subsidiary of the Borrower,
      combinations, recapitalization, reclassifications, extraordinary distributions
      and similar events).  The “Variable Conversion Price” shall mean the
      Applicable Percentage (as defined herein) multiplied by the Market Price (as
      defined herein).  “Market Price” means the average of the lowest three
      (3) Trading Prices (as defined below) for the Common Stock during the twenty
      (20) Trading Day period ending one Trading Day prior to the date the Conversion
      Notice is sent by the Holder to the Borrower via facsimile (the “Conversion
      Date”).  “Trading Price” means, for any security as of any date, the
      intraday trading price on the Over-the-Counter Bulletin Board (the “OTCBB”) as
      reported by a reliable reporting service (“Reporting Service”) mutually
      acceptable to Borrower and Holder and hereafter designated by Holders of a
      majority in interest of the Notes and the Borrower or, if the OTCBB is not
      the
      principal trading market for such security, the intraday trading price of such
      security on the principal securities exchange or trading market where such
      security is listed or traded or, if no intraday trading price of such security
      is available in any of the foregoing manners, the average of the intraday
      trading prices of any market makers for such security that are listed in the
      “pink sheets” by the National Quotation Bureau, Inc.  If the Trading
      Price cannot be calculated for such security on such date in the manner provided
      above, the Trading Price shall be the fair market value as mutually determined
      by the Borrower and the holders of a majority in interest of the Notes being
      converted for which the calculation of the Trading Price is required in order
      to
      determine the Conversion Price of such Notes.  “Trading Day” shall
      mean any day on which the Common Stock is traded for any period on the OTCBB,
      or
      on the principal securities exchange or other securities market on which the
      Common Stock is then being traded.  “Applicable Percentage” shall mean
      50.0%. The “Fixed Conversion Price” shall mean $.05.

     

    (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.

     

    1.3  Authorized
      Shares.  Subject to Stockholder Approval (as such term is defined
      in Section 4(k) of the Securities Purchase Agreement), 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 and the other Notes issued pursuant to the
      Purchase Agreement.  The Borrower is required at all times to have
      authorized and reserved two times the number of shares that is actually issuable
      upon full conversion of the Notes (based on the Conversion Price of the Notes
      or
      the Exercise Price of the Warrants 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(h) of the
      Purchase Agreement.  The Borrower represents that upon issuance, such
      shares will be duly and validly issued, fully paid and
      non-assessable.  In addition, if the Borrower shall issue any
      securities or make any change to its capital structure which would change the
      number of shares of Common Stock into which the Notes shall be convertible
      at
      the then current Conversion Price, the Borrower shall at the same time make
      proper provision so that thereafter there shall be a sufficient number of shares
      of Common Stock authorized and reserved, free from preemptive rights, for
      conversion of the outstanding Notes.  The Borrower (i) acknowledges
      that it has irrevocably instructed its transfer agent to issue certificates
      for
      the Common Stock issuable upon conversion of this Note, and (ii) agrees
      that its issuance of this Note shall constitute full authority to its officers
      and agents who are charged with the duty of executing stock certificates to
      execute and issue the necessary certificates for shares of Common Stock in
      accordance with the terms and conditions of this Note.

     

    If,
      at any time a Holder of this Note submits a Notice of Conversion, and the
      Borrower does not have sufficient authorized but unissued shares of Common
      Stock
      available to effect such conversion in accordance with the provisions of this
      Article I (a “Conversion Default”), subject to Section 4.8, the Borrower shall
      issue to the Holder all of the shares of Common Stock which are then available
      to effect such conversion.  The portion of this Note which the Holder
      included in its Conversion Notice and which exceeds the amount which is then
      convertible into available shares of Common Stock (the “Excess Amount”) shall,
      notwithstanding anything to the contrary contained herein, not be convertible
      into Common Stock in accordance with the terms hereof until (and at the Holder’s
      option at any time after) the date additional shares of Common Stock are
      authorized by the Borrower to permit such conversion, at which time the
      Conversion Price in respect thereof shall be the lesser of (i) the Conversion
      Price on the Conversion Default Date (as defined below) and (ii) the Conversion
      Price on the Conversion Date thereafter elected by the Holder in respect
      thereof.  In addition, the Borrower shall pay to the Holder payments
      (“Conversion Default Payments”) for a Conversion Default in the amount of (x)
      the sum of (1) the then outstanding principal amount of this Note
plus (2) accrued and unpaid interest on the unpaid principal amount
      of
      this Note through the Authorization Date (as defined below) plus (3)
      Default Interest, if any, on the amounts referred to in clauses (1) and/or
      (2),
multiplied by (y) .24, multiplied by (z) (N/365), where N = the
      number of days from the day the holder submits a Notice of Conversion giving
      rise to a Conversion Default (the “Conversion Default Date”) to the date (the
“Authorization Date”) that the Borrower authorizes a sufficient number of shares
      of Common Stock to effect conversion of the full outstanding principal balance
      of this Note.  The Borrower shall use its best efforts to authorize a
      sufficient number of shares of Common Stock as soon as practicable following
      the
      earlier of (i) such time that the Holder notifies the Borrower or that the
      Borrower otherwise becomes aware that there are or likely will be insufficient
      authorized and unissued shares to allow full conversion thereof and (ii) a
      Conversion Default.  The Borrower shall send notice to the Holder of
      the authorization of additional shares of Common Stock, the Authorization Date
      and the amount of Holder’s accrued Conversion Default Payments.  The
      accrued Conversion Default Payments for each calendar month shall be paid in
      cash or shall be convertible into Common Stock (at such time as there are
      sufficient authorized shares of Common Stock) at the applicable Conversion
      Price, at the Borrower’s option, as follows:

     

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

     

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

     

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

     

    1.4  Method
      of Conversion.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    1.5  Concerning
      the Shares.  The shares of Common Stock issuable upon conversion
      of this Note may not be sold or transferred unless  (i) such shares
      are sold pursuant to an effective registration statement under the Act or (ii)
      the Borrower or its transfer agent shall have been furnished with an opinion
      of  counsel (which opinion shall be in form, substance and scope
      customary for opinions of counsel in comparable transactions) to the effect
      that
      the shares to be sold or transferred may be sold or transferred pursuant to
      an
      exemption from such registration or (iii) such shares are sold or
      transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule
      144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule
      144) of the Borrower who agrees to sell or otherwise transfer the shares only
      in
      accordance with this Section 1.5 and who is an Accredited Investor (as defined
      in the Purchase Agreement).  Except as otherwise provided in the
      Purchase Agreement (and subject to the removal provisions set forth below),
      until such time as the shares of Common Stock issuable upon conversion of this
      Note have been registered under the Act as contemplated by the Registration
      Rights Agreement 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:

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES MAY NOT BE SOLD,
      TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
      FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
      AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
      REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144
      OR
      REGULATION S UNDER SAID ACT.”

     

    The
      legend set forth above shall be removed and the Borrower shall issue to the
      Holder a new certificate therefor free of any transfer legend if (i) the
      Borrower or its transfer agent shall have received an opinion of counsel, in
      form, substance and scope customary for opinions of counsel in comparable
      transactions, to the effect that a public sale or transfer of such Common Stock
      may be made without registration under the Act and the shares are so sold or
      transferred, (ii) such Holder provides the Borrower or its transfer agent with
      reasonable assurances that the Common Stock issuable upon conversion of this
      Note (to the extent such securities are deemed to have been acquired on the
      same
      date) can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock
      issuable upon conversion of this Note, such security is registered for sale
      by
      the Holder under an effective registration statement filed under the Act or
      otherwise may be sold pursuant to Rule 144 without any restriction as to the
      number of securities as of a particular date that can then be immediately
      sold.  Nothing in this Note shall (i) limit the Borrower’s obligation
      under the Registration Rights Agreement or (ii) affect in any way the Holder’s
      obligations to comply with applicable prospectus delivery requirements upon
      the
      resale of the securities referred to herein.

     

    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 effect any transaction described in
      this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty
      (30) days prior written notice (but in any event at least fifteen (15) days
      prior written notice) of the record date of the special meeting of shareholders
      to approve, or if there is no such record date, the consummation of, such
      merger, consolidation, exchange of shares, recapitalization, reorganization
      or
      other similar event or sale of assets (during which time the Holder shall be
      entitled to convert this Note) and (b) the resulting successor or acquiring
      entity (if not the Borrower) assumes by written instrument the obligations
      of
      this Section 1.6(b).  The above provisions shall similarly apply to
      successive consolidations, mergers, sales, transfers or share
      exchanges.

     

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

     

    (d)  Adjustment
      Due to Dilutive Issuance.  If, at any time when any Notes are
      issued and outstanding, the Borrower issues or sells, or in accordance with
      this
      Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common
      Stock for no consideration or for a consideration per share (before deduction
      of
      reasonable expenses or commissions or underwriting discounts or allowances
      in
      connection therewith) less than the Fixed 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 Fixed
      Conversion Price will be reduced to the amount of the consideration per share
      received by the Borrower in such Dilutive Issuance; provided that only
      one adjustment will be made for each Dilutive Issuance. Notwithstanding anything
      contained in this Section 1.6 to the contrary, the Holder hereby acknowledges
      that the issuance of any shares of Common Stock in connection with any of the
      transactions set forth on Schedule A, attached hereto, shall not be
      deemed a Dilutive Issuance and accordingly there will be no reduction
      to  the Fixed Conversion Price.

     

    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 Fixed
      Conversion Price then in effect, then the Fixed Conversion Price shall be equal
      to such price per share.  For purposes of the preceding sentence, the
“price per share for which Common Stock is issuable upon the exercise of such
      Options” is determined by dividing (i) the total amount, if any, received or
      receivable by the Borrower as consideration for the issuance or granting of
      all
      such Options, plus the minimum aggregate amount of additional consideration,
      if
      any, payable to the Borrower upon the exercise of all such Options, plus, in
      the
      case of Convertible Securities issuable upon the exercise of such Options,
      the
      minimum aggregate amount of additional consideration payable upon the conversion
      or exchange thereof at the time such Convertible Securities first become
      convertible or exchangeable, by (ii) the maximum total number of shares of
      Common Stock issuable upon the exercise of all such Options (assuming full
      conversion of Convertible Securities, if applicable).  No further
      adjustment to the Conversion Price will be made upon the actual issuance of
      such
      Common Stock upon the exercise of such Options or upon the conversion or
      exchange of Convertible Securities issuable upon exercise of such
      Options.

     

    Additionally,
      the Borrower shall be deemed to have issued or sold shares of Common Stock
      if
      the Borrower in any manner issues or sells any Convertible Securities, whether
      or not immediately convertible (other than where the same are issuable upon
      the
      exercise of Options), and the price per share for which Common Stock is issuable
      upon such conversion or exchange is less than the Fixed Conversion Price then
      in
      effect, then the Fixed 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 Fixed Conversion Price will be made upon the actual issuance of such
      Common Stock upon conversion or exchange of such Convertible
      Securities.

     

    (e)  Purchase
      Rights.  If, at any time when any Notes are issued and
      outstanding, the Borrower issues any convertible securities or rights to
      purchase stock, warrants, securities or other property (the “Purchase Rights”)
      pro rata to the record holders of any class of Common Stock, then the Holder
      of
      this Note will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which such Holder could have
      acquired if such Holder had held the number of shares of Common Stock acquirable
      upon complete conversion of this Note (without regard to any limitations on
      conversion contained herein) immediately before the date on which a record
      is
      taken for the grant, issuance or sale of such Purchase Rights or, if no such
      record is taken, the date as of which the record holders of Common Stock are
      to
      be determined for the grant, issue or sale of such Purchase Rights.

     

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

     

    1.7  Trading
      Market Limitations.  Unless permitted by the applicable rules and
      regulations of the principal securities market on which the Common Stock is
      then
      listed or traded, in no event shall the Borrower issue upon conversion of or
      otherwise pursuant to this Note and the other Notes issued pursuant to the
      Purchase Agreement more than the maximum number of shares of Common Stock that
      the Borrower can issue pursuant to any rule of the principal United States
      securities market on which the Common Stock is then traded (the “Maximum Share
      Amount”), which shall be 19.99% of the total shares outstanding on the Closing
      Date (as defined in the Purchase Agreement), subject to equitable adjustment
      from time to time for stock splits, stock dividends, combinations, capital
      reorganizations and similar events relating to the Common Stock occurring after
      the date hereof.  Once the Maximum Share Amount has been issued (the
      date of which is hereinafter referred to as the “Maximum Conversion Date”), if
      the Borrower fails to eliminate any prohibitions under applicable law or the
      rules or regulations of any stock exchange, interdealer quotation system or
      other self-regulatory organization with jurisdiction over the Borrower or any
      of
      its securities on the Borrower’s ability to issue shares of Common Stock in
      excess of the Maximum Share Amount (a “Trading Market Prepayment Event”), in
      lieu of any further right to convert this Note, and in full satisfaction of
      the
      Borrower’s obligations under this Note, the Borrower shall pay to the Holder,
      within fifteen (15) business days of the Maximum Conversion Date (the “Trading
      Market Prepayment Date”), an amount equal to 130% times the sum of
      (a) the then outstanding principal amount of this Note immediately following
      the
      Maximum Conversion Date, plus (b) accrued and unpaid interest on the
      unpaid principal amount of this Note to the Trading Market Prepayment Date,
      plus (c) Default Interest, if any, on the amounts referred to in clause
      (a) and/or (b) above, plus (d) any optional amounts that may be added
      thereto at the Maximum Conversion Date by the Holder in accordance with the
      terms hereof (the then outstanding principal amount of this Note immediately
      following the Maximum Conversion Date, plus the amounts referred to in
      clauses (b), (c) and (d) above shall collectively be referred to as the
“Remaining Convertible Amount”).  With respect to each Holder of
      Notes, the Maximum Share Amount shall refer to such Holder’s
prorata share thereof determined in accordance with Section 4.8
      below.  In the event that the sum of (x) the aggregate number of
      shares of Common Stock issued upon conversion of this Note and the other Notes
      issued pursuant to the Purchase Agreement plus (y) the aggregate number
      of shares of Common Stock that remain issuable upon conversion of this Note
      and
      the other Notes issued pursuant to the Purchase Agreement, represents at least
      one hundred percent (100%) of the Maximum Share Amount (the “Triggering Event”),
      the Borrower will use its best efforts to seek and obtain Shareholder Approval
      (or obtain such other relief as will allow conversions hereunder in excess
      of
      the Maximum Share Amount) as soon as practicable following the Triggering Event
      and before the Maximum Conversion Date.  As used herein, “Shareholder
      Approval” means approval by the shareholders of the Borrower to authorize the
      issuance of the full number of shares of Common Stock which would be issuable
      upon full conversion of the then outstanding Notes but for the Maximum Share
      Amount.

     

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

     

     

    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 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 $50,000.

     

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

     

     

    ARTICLE
      III.   EVENTS OF DEFAULT

     

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

     

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

     

    3.2  Conversion
      and the Shares.  The Borrower fails to issue shares of Common
      Stock to the Holder (or announces or threatens 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 (for a period of at least
      sixty
      (60) days, if such failure is solely as a result of the circumstances governed
      by Section 1.3 and the Borrower is using its best efforts to authorize a
      sufficient number of shares of Common Stock as soon as practicable), fails
      to
      transfer or cause its transfer agent to transfer (electronically or in
      certificated form) any certificate for shares of Common Stock issued to the
      Holder upon conversion of or otherwise pursuant to this Note as and when
      required by this Note or the Registration Rights Agreement, or fails to remove
      any restrictive legend (or to withdraw any stop transfer instructions in respect
      thereof) on any certificate for any shares of Common Stock issued to the Holder
      upon conversion of or otherwise pursuant to this Note as and when required
      by
      this Note or the Registration Rights Agreement (or makes any announcement,
      statement or threat that it does not intend to honor the obligations described
      in this paragraph) and any such failure shall continue uncured (or any
      announcement, statement or threat not to honor its obligations shall not be
      rescinded in writing) for three (3) business days after the Borrower shall
      have
      been notified thereof in writing by the Holder;

     

    3.3  Failure
      to Timely File Registration or Effect Registration.  The Borrower
      fails to file the Registration Statement within forty-five (45) days following
      the Closing Date (as defined in the Purchase Agreement) or obtain effectiveness
      with the Securities and Exchange Commission of the Registration Statement within
      one hundred and twenty (120) days following the Closing Date (as defined in
      the
      Purchase Agreement) or such Registration Statement lapses in effect (or sales
      cannot otherwise be made thereunder effective, whether by reason of the
      Borrower’s failure to amend or supplement the prospectus included therein in
      accordance with the Registration Rights Agreement or otherwise) for more than
      ten (10) consecutive days or twenty (20) days in any twelve month period after
      the Registration Statement becomes effective;

     

    3.4  Breach
      of Covenants.  The Borrower breaches any material covenant or
      other material term or condition contained in Sections 1.3, 1.6 or 1.7 of this
      Note, or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase Agreement
      and such breach continues for a period of ten (10) days after written notice
      thereof to the Borrower from the Holder;

     

    3.5  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 and the Registration Rights 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, the Purchase Agreement or the
      Registration Rights Agreement;

     

    3.6  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;

     

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

     

    3.8  Bankruptcy.  Bankruptcy,
      insolvency, reorganization or liquidation proceedings or other proceedings
      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, unless
      such proceeding shall be stayed within thirty (30) days;

     

    3.9  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; or

     

    3.10  Default
      Under Other Notes.  An Event of Default has occurred and is
      continuing under any of the other Notes issued pursuant to the Purchase
      Agreement,

     

    then,
      upon the occurrence and during the continuation of any Event of Default
      specified in Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option
      of the Holders of a majority of the aggregate principal amount of the
      outstanding Notes issued pursuant to the Purchase Agreement 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 in Section
      3.6 or 3.8 (unless, under Section 3.8, such proceeding shall be stayed within
      30
      days), the Notes 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) 130% 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 or pursuant to Section
      2(c) of the Registration Rights Agreement (the then outstanding principal amount
      of this Note to the date of payment plus the amounts referred to in
      clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or
      (ii) the “parity value” of the Default Sum to be prepaid, where parity value
      means (a) the highest number of shares of Common Stock issuable upon conversion
      of or otherwise pursuant to such Default Sum in accordance with Article I,
      treating the Trading Day immediately preceding the Mandatory Prepayment Date
      as
      the “Conversion Date” for purposes of determining the lowest applicable
      Conversion Price, unless the Default Event arises as a result of a breach in
      respect of a specific Conversion Date in which case such Conversion Date shall
      be the Conversion Date), multiplied by (b) the highest Closing Price for
      the Common Stock during the period beginning on the date of first occurrence
      of
      the Event of Default and ending one day prior to the Mandatory Prepayment Date
      (the “Default Amount”) and all other amounts payable hereunder shall immediately
      become due and payable, all without demand, presentment or notice, all of which
      hereby are expressly waived, together with all costs, including, without
      limitation, legal fees and expenses, of collection, and the Holder shall be
      entitled to exercise all other rights and remedies available at law or in
      equity.  If the Borrower fails to pay the Default Amount within five
      (5) business days of written notice that such amount is due and payable, then
      the Holder shall have the right at any time, so long as the Borrower remains
      in
      default (and so long and to the extent that there are sufficient authorized
      shares), to require the Borrower, upon written notice, to immediately issue,
      in
      lieu of the Default Amount, the number of shares of Common Stock of the Borrower
      equal to the Default Amount divided by the Conversion Price then in
      effect.

     

     

    ARTICLE
      IV.    MISCELLANEOUS

     

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

     

    4.2  Notices.  Any
      notice herein required or permitted to be given shall be in writing and may
      be
      personally served or delivered by courier or sent by United States mail and
      shall be deemed to have been given upon receipt if personally served (which
      shall include telephone line facsimile transmission) or sent by courier or
      three
      (3) days after being deposited in the United States mail, certified, with
      postage pre-paid and properly addressed, if sent by mail.  For the
      purposes hereof, the address of the Holder shall be as shown on the records
      of
      the Borrower; and the address of the Borrower shall be 20283 State Road, Boca
      Raton, FL 33498, facsimile number: (561) 482-9328.  Both the Holder
      and the Borrower may change the address for service by service of written notice
      to the other as herein provided.

     

    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 bonafide
      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 ENFORCED, GOVERNED BY AND CONSTRUED IN
      ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
      MADE
      AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
      OF CONFLICT OF LAWS.  THE BORROWER HEREBY SUBMITS TO THE EXCLUSIVE
      JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK
      WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS NOTE, THE AGREEMENTS ENTERED
      INTO
      IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
      BOTH
      PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
      MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE
      THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
      IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT
      OR
      PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
      PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
      A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
      CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
      OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
      ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND
      EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
      CONNECTION WITH SUCH DISPUTE.

     

    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  Allocations
      of Maximum Share Amount and Reserved Amount.  The Maximum Share
      Amount and Reserved Amount shall be allocated pro rata among the Holders of
      Notes based on the principal amount of such Notes issued to each
      Holder.  Each increase to the Maximum Share Amount and Reserved Amount
      shall be allocated pro rata among the Holders of Notes based on the principal
      amount of such Notes held by each Holder at the time of the increase in the
      Maximum Share Amount or Reserved Amount.  In the event a Holder shall
      sell or otherwise transfer any of such Holder’s Notes, each transferee shall be
      allocated a pro rata portion of such transferor’s Maximum Share Amount and
      Reserved Amount.  Any portion of the Maximum Share Amount or Reserved
      Amount which remains allocated to any person or entity which does not hold
      any
      Notes shall be allocated to the remaining Holders of Notes, pro rata based
      on
      the principal amount of such Notes then held by such Holders.

     

    4.9  Damages
      Shares.  The shares of Common Stock that may be issuable to the
      Holder pursuant to Sections 1.3 and 1.4(g) hereof and pursuant to Section 2(c)
      of the Registration Rights Agreement (“Damages Shares”) shall be treated as
      Common Stock issuable upon conversion of this Note for all purposes hereof
      and
      shall be subject to all of the limitations and afforded all of the rights of
      the
      other shares of Common Stock issuable hereunder, including without limitation,
      the right to be included in the Registration Statement filed pursuant to the
      Registration Rights Agreement.  For purposes of calculating interest
      payable on the outstanding principal amount hereof, except as otherwise provided
      herein, amounts convertible into Damages Shares (“Damages Amounts”) shall not
      bear interest but must be converted prior to the conversion of any outstanding
      principal amount hereof, until the outstanding Damages Amounts is
      zero.

     

    4.10  Denominations.  At
      the request of the Holder, upon surrender of this Note, the Borrower shall
      promptly issue new Notes in the aggregate outstanding principal amount hereof,
      in the form hereof, in such denominations of at least $50,000 as the Holder
      shall request.

     

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

     

    4.12  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 4.12.

     

    4.13  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.

     

     

    ARTICLE
      V.    CALL OPTION

     

    5.1  Call
      Option.  Notwithstanding anything to the contrary contained in
      this Article V, so long as (i) no Event of Default or Trading Market
      Prepayment Event shall have occurred and be continuing, (ii) the Borrower
      has a sufficient number of authorized shares of Common Stock reserved for
      issuance upon full conversion of the Notes, then at any time after the Issue
      Date, and (iii) the Common Stock is trading at or below $.15 per share, the
      Borrower shall have the right, exercisable on not less than ten (10) Trading
      Days prior written notice to the Holders of the Notes (which notice may not
      be
      sent to the Holders of the Notes until the Borrower is permitted to prepay
      the
      Notes pursuant to this Section 5.1), to prepay all of the outstanding Notes
      in
      accordance with this Section 5.1.  Any notice of prepayment hereunder
      (an “Optional Prepayment”) shall be delivered to the Holders of the Notes at
      their registered addresses appearing on the books and records of the Borrower
      and shall state (1) that the Borrower is exercising its right to prepay all
      of
      the Notes issued on the Issue Date and (2) the date of prepayment (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 Holders as specified
      by
      the Holders 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 Notes, the Borrower shall make payment to the holders of an amount
      in
      cash (the “Optional Prepayment Amount”) equal to either (i) 125% (for
      prepayments occurring within thirty (30) days of the Issue Date), (ii) 135%
      for prepayments occurring between thirty-one (31) and sixty  (60) days
      of the Issue Date, or (iii) 150% (for prepayments occurring after the sixtieth
      (60th) day following the
      Issue Date), 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 or pursuant to Section 2(c) of the Registration Rights Agreement
      (the then outstanding principal amount of this Note to the date of payment
      plus the amounts referred to in clauses (x), (y) and (z) shall
      collectively be known as the “Optional Prepayment Sum”). Notwithstanding notice
      of an Optional Prepayment, the Holders shall at all times prior to the Optional
      Prepayment Date maintain the right to convert all or any portion of the Notes
      in
      accordance with Article I and any portion of Notes so converted after receipt
      of
      an Optional Prepayment Notice and prior to the Optional Prepayment Date set
      forth in such notice and payment of the aggregate Optional Prepayment Amount
      shall be deducted from the principal amount of Notes which are otherwise subject
      to prepayment pursuant to such notice.  If the Borrower delivers an
      Optional Prepayment Notice and fails to pay the Optional Prepayment Amount
      due
      to the Holders of the Notes within two (2) business days following the Optional
      Prepayment Date, the Borrower shall forever forfeit its right to redeem the
      Notes pursuant to this Section 5.1.

     

    5.2  Partial
      Call Option.  Notwithstanding anything to the contrary contained
      in this Article V, in the event that the Average Daily Price of the Common
      Stock, as reported by the Reporting Service, for each day of the month ending
      on
      any Determination Date is below $.15 per share, the Borrower may, at its option,
      prepay a portion of the outstanding principal amount of the Notes equal to
      104%
      of the principal amount hereof divided by thirty-six (36) plus one month’s
      interest.

     

    

     

    

     

    

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    IN
      WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by
      its
      duly authorized officer this 13th day of September,
      2007.

     

    

    JUNIPER
      GROUP, INC.

    

    

    

    By:       /s/Vlado
      P. Hreljanovic

    Chief
      Executive Officer

     

     

     

    EXHIBIT
      A

     

    NOTICE
      OF CONVERSION

     

    (To
      be Executed by the Registered Holder

     

    in
      order to Convert the Notes)

     

    The
      undersigned hereby irrevocably elects to convert $__________ principal amount
      of
      the Note (defined below) into shares of common stock, par value $.001 per share
      (“Common Stock”), of Juniper Group, Inc., a Nevada corporation (the “Borrower”)
      according to the conditions of the convertible Notes of the Borrower dated
      as of
      September 13, 2007 (the “Notes”), as of the date written below.  If
      securities are to be issued in the name of a person other than the undersigned,
      the undersigned will pay all transfer taxes payable with respect thereto and
      is
      delivering herewith such certificates.  No fee will be charged to the
      Holder for any conversion, except for transfer taxes, if any.  A copy
      of each Note is attached hereto (or evidence of loss, theft or destruction
      thereof).

     

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

     

    Name
      of DTC Prime
      Broker:                                                                                                                     

    Account
      Number:                                                                                                                     

     

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

     

    Name:                                                                                                                     

    Address:                                                                                                                     

     

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

     

    Date
      of Conversion:___________________________

    Applicable
      Conversion Price:____________________

    Number
      of Shares of Common Stock to be Issued Pursuant to

    Conversion
      of the Notes:______________

    Signature:___________________________________

    Name:______________________________________

    Address:____________________________________

     

    The
      Borrower shall issue and deliver shares of Common Stock to an overnight courier
      not later than three business days following receipt of the original Note(s)
      to
      be converted, and shall make payments pursuant to the Notes for the number
      of
      business days such issuance and delivery is late.ex-10_4.htm

    Exhibit
      10.4

     

    

     

    

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THE SECURITIES MAY
      NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
      SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
      THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO
      RULE
      144 OR REGULATION S UNDER SAID ACT.

     

    

     

    CALLABLE
      SECURED CONVERTIBLE NOTE

     

    Great
      Neck, NY

     

    September
      13, 2007 $6,600

     

    FOR
      VALUE RECEIVED, JUNIPER GROUP, INC., a Nevada corporation (hereinafter called
      the “Borrower”), hereby promises to pay to the order of New Millennium Capital
      Partners II, LLC or registered assigns (the “Holder”) the sum of $6,600, on
      September 13, 2010 (the “Maturity Date”), and to pay interest on the unpaid
      principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”)
      per annum from September 13, 2007 (the “Issue Date”) until the same becomes due
      and payable, whether at maturity or upon acceleration or by prepayment or
      otherwise.  Any amount of principal or interest on this Note which is
      not paid when due shall bear interest at the rate of fifteen percent (15%)
      per
      annum from the due date thereof until the same is paid (“Default
      Interest”).  Interest shall commence accruing on the Issue Date, shall
      be computed on the basis of a 365-day year and the actual number of days elapsed
      and shall be payable quarterly provided that no interest shall be due and
      payable for any month in which the Trading Price (as such term is defined below)
      is greater than $.0375 for each Trading Day (as such term is defined below)
      of
      the month. All payments due hereunder (to the extent not converted into common
      stock, $.001 par value per share (the “Common Stock”) in accordance with the
      terms hereof) shall be made in lawful money of the United States of
      America.  All payments shall be made at such address as the Holder
      shall hereafter give to the Borrower by written notice made in accordance with
      the provisions of this Note.  Whenever any amount expressed to be due
      by the terms of this Note is due on any day which is not a business day, the
      same shall instead be due on the next succeeding day which is a business day
      and, in the case of any interest payment date which is not the date on which
      this Note is paid in full, the extension of the due date thereof shall not
      be
      taken into account for purposes of determining the amount of interest due on
      such date.  As used in this Note, the term “business day” shall mean
      any day other than a Saturday, Sunday or a day on which commercial banks in
      the
      city of New York, New York are authorized or required by law or executive order
      to remain closed.  Each capitalized term used herein, and not
      otherwise defined, shall have the meaning ascribed thereto in that certain
      Securities Purchase Agreement, dated September 13, 2007, 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 obligations of the Borrower under this
      Note shall be secured by that certain Security Agreement and Intellectual
      Property Security Agreement, each dated September 13, 2007 by and between the
      Borrower and the Holder.

     

    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 on or prior to the earlier 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, the Optional Prepayment Amount (as defined in Section
      5.1
      or any payments pursuant to Section 1.7, 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 (including, without
      limitation, the warrants issued by the Borrower pursuant to the Purchase
      Agreement) 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 and providedfurther that the Holder shall
      not be entitled to convert any portion of this Note during any month immediately
      succeeding a Determination Date on which the Borrower exercises its prepayment
      option pursuant to Section 5.2 of this Note.  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, and Regulations 13D-G thereunder, except as otherwise provided
      in clause (1) of such proviso.  The number of shares of Common Stock
      to be issued upon each conversion of this Note shall be determined by dividing
      the Conversion Amount (as defined below) by the applicable Conversion Price
      then
      in effect on the date specified in the notice of conversion, in the form
      attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the
      Borrower by the Holder in accordance with Section 1.4 below; provided that
      the
      Notice of Conversion is submitted by facsimile (or by other means resulting
      in,
      or reasonably expected to result in, notice) to the Borrower before 6:00 p.m.,
      New York, New York time on such conversion date (the “Conversion
      Date”).  The term “Conversion Amount” means, with respect to any
      conversion of this Note, the sum of (1) the principal amount of this Note to
      be
      converted in such conversion plus (2) at the Borrower’s option, accrued
      and unpaid interest, if any, on such principal amount at the interest rates
      provided in this Note to the Conversion Date, provided, however, that the
      Company shall have the right to pay any or all interest in cash plus (3)
      at the Borrower’s option, Default Interest, if any, on the amounts referred to
      in the immediately preceding clauses (1) and/or (2) plus (4) at the
      Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and
      1.4(g) hereof or pursuant to Section 2(c) of that certain Registration Rights
      Agreement, dated as of September 13, 2007, executed in connection with the
      initial issuance of this Note and the other Notes issued on the Issue Date
      (the
“Registration Rights Agreement”).  The term “Determination Date” means
      the last business day of each month after the Issue Date.

     

    1.2  Conversion
      Price.

     

    (a)  Calculation
      of Conversion Price.  The Conversion Price shall be the lesser of
      (i) the Variable Conversion Price (as defined herein) and (ii) the Fixed
      Conversion Price (subject, in each case, to equitable adjustments for stock
      splits, stock dividends or rights offerings by the Borrower relating to the
      Borrower’s securities or the securities of any subsidiary of the Borrower,
      combinations, recapitalization, reclassifications, extraordinary distributions
      and similar events).  The “Variable Conversion Price” shall mean the
      Applicable Percentage (as defined herein) multiplied by the Market Price (as
      defined herein).  “Market Price” means the average of the lowest three
      (3) Trading Prices (as defined below) for the Common Stock during the twenty
      (20) Trading Day period ending one Trading Day prior to the date the Conversion
      Notice is sent by the Holder to the Borrower via facsimile (the “Conversion
      Date”).  “Trading Price” means, for any security as of any date, the
      intraday trading price on the Over-the-Counter Bulletin Board (the “OTCBB”) as
      reported by a reliable reporting service (“Reporting Service”) mutually
      acceptable to Borrower and Holder and hereafter designated by Holders of a
      majority in interest of the Notes and the Borrower or, if the OTCBB is not
      the
      principal trading market for such security, the intraday trading price of such
      security on the principal securities exchange or trading market where such
      security is listed or traded or, if no intraday trading price of such security
      is available in any of the foregoing manners, the average of the intraday
      trading prices of any market makers for such security that are listed in the
      “pink sheets” by the National Quotation Bureau, Inc.  If the Trading
      Price cannot be calculated for such security on such date in the manner provided
      above, the Trading Price shall be the fair market value as mutually determined
      by the Borrower and the holders of a majority in interest of the Notes being
      converted for which the calculation of the Trading Price is required in order
      to
      determine the Conversion Price of such Notes.  “Trading Day” shall
      mean any day on which the Common Stock is traded for any period on the OTCBB,
      or
      on the principal securities exchange or other securities market on which the
      Common Stock is then being traded.  “Applicable Percentage” shall mean
      50.0%. The “Fixed Conversion Price” shall mean $.05.

     

    (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.

     

    1.3  Authorized
      Shares.  Subject to Stockholder Approval (as such term is defined
      in Section 4(k) of the Securities Purchase Agreement), 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 and the other Notes issued pursuant to the
      Purchase Agreement.  The Borrower is required at all times to have
      authorized and reserved two times the number of shares that is actually issuable
      upon full conversion of the Notes (based on the Conversion Price of the Notes
      or
      the Exercise Price of the Warrants 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(h) of the
      Purchase Agreement.  The Borrower represents that upon issuance, such
      shares will be duly and validly issued, fully paid and
      non-assessable.  In addition, if the Borrower shall issue any
      securities or make any change to its capital structure which would change the
      number of shares of Common Stock into which the Notes shall be convertible
      at
      the then current Conversion Price, the Borrower shall at the same time make
      proper provision so that thereafter there shall be a sufficient number of shares
      of Common Stock authorized and reserved, free from preemptive rights, for
      conversion of the outstanding Notes.  The Borrower (i) acknowledges
      that it has irrevocably instructed its transfer agent to issue certificates
      for
      the Common Stock issuable upon conversion of this Note, and (ii) agrees
      that its issuance of this Note shall constitute full authority to its officers
      and agents who are charged with the duty of executing stock certificates to
      execute and issue the necessary certificates for shares of Common Stock in
      accordance with the terms and conditions of this Note.

     

    If,
      at any time a Holder of this Note submits a Notice of Conversion, and the
      Borrower does not have sufficient authorized but unissued shares of Common
      Stock
      available to effect such conversion in accordance with the provisions of this
      Article I (a “Conversion Default”), subject to Section 4.8, the Borrower shall
      issue to the Holder all of the shares of Common Stock which are then available
      to effect such conversion.  The portion of this Note which the Holder
      included in its Conversion Notice and which exceeds the amount which is then
      convertible into available shares of Common Stock (the “Excess Amount”) shall,
      notwithstanding anything to the contrary contained herein, not be convertible
      into Common Stock in accordance with the terms hereof until (and at the Holder’s
      option at any time after) the date additional shares of Common Stock are
      authorized by the Borrower to permit such conversion, at which time the
      Conversion Price in respect thereof shall be the lesser of (i) the Conversion
      Price on the Conversion Default Date (as defined below) and (ii) the Conversion
      Price on the Conversion Date thereafter elected by the Holder in respect
      thereof.  In addition, the Borrower shall pay to the Holder payments
      (“Conversion Default Payments”) for a Conversion Default in the amount of (x)
      the sum of (1) the then outstanding principal amount of this Note
plus (2) accrued and unpaid interest on the unpaid principal amount
      of
      this Note through the Authorization Date (as defined below) plus (3)
      Default Interest, if any, on the amounts referred to in clauses (1) and/or
      (2),
multiplied by (y) .24, multiplied by (z) (N/365), where N = the
      number of days from the day the holder submits a Notice of Conversion giving
      rise to a Conversion Default (the “Conversion Default Date”) to the date (the
“Authorization Date”) that the Borrower authorizes a sufficient number of shares
      of Common Stock to effect conversion of the full outstanding principal balance
      of this Note.  The Borrower shall use its best efforts to authorize a
      sufficient number of shares of Common Stock as soon as practicable following
      the
      earlier of (i) such time that the Holder notifies the Borrower or that the
      Borrower otherwise becomes aware that there are or likely will be insufficient
      authorized and unissued shares to allow full conversion thereof and (ii) a
      Conversion Default.  The Borrower shall send notice to the Holder of
      the authorization of additional shares of Common Stock, the Authorization Date
      and the amount of Holder’s accrued Conversion Default Payments.  The
      accrued Conversion Default Payments for each calendar month shall be paid in
      cash or shall be convertible into Common Stock (at such time as there are
      sufficient authorized shares of Common Stock) at the applicable Conversion
      Price, at the Borrower’s option, as follows:

     

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

     

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

     

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

     

    1.4  Method
      of Conversion.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    1.5  Concerning
      the Shares.  The shares of Common Stock issuable upon conversion
      of this Note may not be sold or transferred unless  (i) such shares
      are sold pursuant to an effective registration statement under the Act or (ii)
      the Borrower or its transfer agent shall have been furnished with an opinion
      of  counsel (which opinion shall be in form, substance and scope
      customary for opinions of counsel in comparable transactions) to the effect
      that
      the shares to be sold or transferred may be sold or transferred pursuant to
      an
      exemption from such registration or (iii) such shares are sold or
      transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule
      144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule
      144) of the Borrower who agrees to sell or otherwise transfer the shares only
      in
      accordance with this Section 1.5 and who is an Accredited Investor (as defined
      in the Purchase Agreement).  Except as otherwise provided in the
      Purchase Agreement (and subject to the removal provisions set forth below),
      until such time as the shares of Common Stock issuable upon conversion of this
      Note have been registered under the Act as contemplated by the Registration
      Rights Agreement 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:

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES MAY NOT BE SOLD,
      TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
      FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
      AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
      REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144
      OR
      REGULATION S UNDER SAID ACT.”

     

    The
      legend set forth above shall be removed and the Borrower shall issue to the
      Holder a new certificate therefor free of any transfer legend if (i) the
      Borrower or its transfer agent shall have received an opinion of counsel, in
      form, substance and scope customary for opinions of counsel in comparable
      transactions, to the effect that a public sale or transfer of such Common Stock
      may be made without registration under the Act and the shares are so sold or
      transferred, (ii) such Holder provides the Borrower or its transfer agent with
      reasonable assurances that the Common Stock issuable upon conversion of this
      Note (to the extent such securities are deemed to have been acquired on the
      same
      date) can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock
      issuable upon conversion of this Note, such security is registered for sale
      by
      the Holder under an effective registration statement filed under the Act or
      otherwise may be sold pursuant to Rule 144 without any restriction as to the
      number of securities as of a particular date that can then be immediately
      sold.  Nothing in this Note shall (i) limit the Borrower’s obligation
      under the Registration Rights Agreement or (ii) affect in any way the Holder’s
      obligations to comply with applicable prospectus delivery requirements upon
      the
      resale of the securities referred to herein.

     

    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 effect any transaction described in
      this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty
      (30) days prior written notice (but in any event at least fifteen (15) days
      prior written notice) of the record date of the special meeting of shareholders
      to approve, or if there is no such record date, the consummation of, such
      merger, consolidation, exchange of shares, recapitalization, reorganization
      or
      other similar event or sale of assets (during which time the Holder shall be
      entitled to convert this Note) and (b) the resulting successor or acquiring
      entity (if not the Borrower) assumes by written instrument the obligations
      of
      this Section 1.6(b).  The above provisions shall similarly apply to
      successive consolidations, mergers, sales, transfers or share
      exchanges.

     

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

     

    (d)  Adjustment
      Due to Dilutive Issuance.  If, at any time when any Notes are
      issued and outstanding, the Borrower issues or sells, or in accordance with
      this
      Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common
      Stock for no consideration or for a consideration per share (before deduction
      of
      reasonable expenses or commissions or underwriting discounts or allowances
      in
      connection therewith) less than the Fixed 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 Fixed
      Conversion Price will be reduced to the amount of the consideration per share
      received by the Borrower in such Dilutive Issuance; provided that only
      one adjustment will be made for each Dilutive Issuance. Notwithstanding anything
      contained in this Section 1.6 to the contrary, the Holder hereby acknowledges
      that the issuance of any shares of Common Stock in connection with any of the
      transactions set forth on Schedule A, attached hereto, shall not be
      deemed a Dilutive Issuance and accordingly there will be no reduction
      to  the Fixed Conversion Price.

     

    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 Fixed
      Conversion Price then in effect, then the Fixed Conversion Price shall be equal
      to such price per share.  For purposes of the preceding sentence, the
“price per share for which Common Stock is issuable upon the exercise of such
      Options” is determined by dividing (i) the total amount, if any, received or
      receivable by the Borrower as consideration for the issuance or granting of
      all
      such Options, plus the minimum aggregate amount of additional consideration,
      if
      any, payable to the Borrower upon the exercise of all such Options, plus, in
      the
      case of Convertible Securities issuable upon the exercise of such Options,
      the
      minimum aggregate amount of additional consideration payable upon the conversion
      or exchange thereof at the time such Convertible Securities first become
      convertible or exchangeable, by (ii) the maximum total number of shares of
      Common Stock issuable upon the exercise of all such Options (assuming full
      conversion of Convertible Securities, if applicable).  No further
      adjustment to the Conversion Price will be made upon the actual issuance of
      such
      Common Stock upon the exercise of such Options or upon the conversion or
      exchange of Convertible Securities issuable upon exercise of such
      Options.

     

    Additionally,
      the Borrower shall be deemed to have issued or sold shares of Common Stock
      if
      the Borrower in any manner issues or sells any Convertible Securities, whether
      or not immediately convertible (other than where the same are issuable upon
      the
      exercise of Options), and the price per share for which Common Stock is issuable
      upon such conversion or exchange is less than the Fixed Conversion Price then
      in
      effect, then the Fixed 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 Fixed Conversion Price will be made upon the actual issuance of such
      Common Stock upon conversion or exchange of such Convertible
      Securities.

     

    (e)  Purchase
      Rights.  If, at any time when any Notes are issued and
      outstanding, the Borrower issues any convertible securities or rights to
      purchase stock, warrants, securities or other property (the “Purchase Rights”)
      pro rata to the record holders of any class of Common Stock, then the Holder
      of
      this Note will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which such Holder could have
      acquired if such Holder had held the number of shares of Common Stock acquirable
      upon complete conversion of this Note (without regard to any limitations on
      conversion contained herein) immediately before the date on which a record
      is
      taken for the grant, issuance or sale of such Purchase Rights or, if no such
      record is taken, the date as of which the record holders of Common Stock are
      to
      be determined for the grant, issue or sale of such Purchase Rights.

     

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

     

    1.7  Trading
      Market Limitations.  Unless permitted by the applicable rules and
      regulations of the principal securities market on which the Common Stock is
      then
      listed or traded, in no event shall the Borrower issue upon conversion of or
      otherwise pursuant to this Note and the other Notes issued pursuant to the
      Purchase Agreement more than the maximum number of shares of Common Stock that
      the Borrower can issue pursuant to any rule of the principal United States
      securities market on which the Common Stock is then traded (the “Maximum Share
      Amount”), which shall be 19.99% of the total shares outstanding on the Closing
      Date (as defined in the Purchase Agreement), subject to equitable adjustment
      from time to time for stock splits, stock dividends, combinations, capital
      reorganizations and similar events relating to the Common Stock occurring after
      the date hereof.  Once the Maximum Share Amount has been issued (the
      date of which is hereinafter referred to as the “Maximum Conversion Date”), if
      the Borrower fails to eliminate any prohibitions under applicable law or the
      rules or regulations of any stock exchange, interdealer quotation system or
      other self-regulatory organization with jurisdiction over the Borrower or any
      of
      its securities on the Borrower’s ability to issue shares of Common Stock in
      excess of the Maximum Share Amount (a “Trading Market Prepayment Event”), in
      lieu of any further right to convert this Note, and in full satisfaction of
      the
      Borrower’s obligations under this Note, the Borrower shall pay to the Holder,
      within fifteen (15) business days of the Maximum Conversion Date (the “Trading
      Market Prepayment Date”), an amount equal to 130% times the sum of
      (a) the then outstanding principal amount of this Note immediately following
      the
      Maximum Conversion Date, plus (b) accrued and unpaid interest on the
      unpaid principal amount of this Note to the Trading Market Prepayment Date,
      plus (c) Default Interest, if any, on the amounts referred to in clause
      (a) and/or (b) above, plus (d) any optional amounts that may be added
      thereto at the Maximum Conversion Date by the Holder in accordance with the
      terms hereof (the then outstanding principal amount of this Note immediately
      following the Maximum Conversion Date, plus the amounts referred to in
      clauses (b), (c) and (d) above shall collectively be referred to as the
“Remaining Convertible Amount”).  With respect to each Holder of
      Notes, the Maximum Share Amount shall refer to such Holder’s
prorata share thereof determined in accordance with Section 4.8
      below.  In the event that the sum of (x) the aggregate number of
      shares of Common Stock issued upon conversion of this Note and the other Notes
      issued pursuant to the Purchase Agreement plus (y) the aggregate number
      of shares of Common Stock that remain issuable upon conversion of this Note
      and
      the other Notes issued pursuant to the Purchase Agreement, represents at least
      one hundred percent (100%) of the Maximum Share Amount (the “Triggering Event”),
      the Borrower will use its best efforts to seek and obtain Shareholder Approval
      (or obtain such other relief as will allow conversions hereunder in excess
      of
      the Maximum Share Amount) as soon as practicable following the Triggering Event
      and before the Maximum Conversion Date.  As used herein, “Shareholder
      Approval” means approval by the shareholders of the Borrower to authorize the
      issuance of the full number of shares of Common Stock which would be issuable
      upon full conversion of the then outstanding Notes but for the Maximum Share
      Amount.

     

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

     

     

    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 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 $50,000.

     

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

     

     

    ARTICLE
      III.   EVENTS OF DEFAULT

     

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

     

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

     

    3.2  Conversion
      and the Shares.  The Borrower fails to issue shares of Common
      Stock to the Holder (or announces or threatens 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 (for a period of at least
      sixty
      (60) days, if such failure is solely as a result of the circumstances governed
      by Section 1.3 and the Borrower is using its best efforts to authorize a
      sufficient number of shares of Common Stock as soon as practicable), fails
      to
      transfer or cause its transfer agent to transfer (electronically or in
      certificated form) any certificate for shares of Common Stock issued to the
      Holder upon conversion of or otherwise pursuant to this Note as and when
      required by this Note or the Registration Rights Agreement, or fails to remove
      any restrictive legend (or to withdraw any stop transfer instructions in respect
      thereof) on any certificate for any shares of Common Stock issued to the Holder
      upon conversion of or otherwise pursuant to this Note as and when required
      by
      this Note or the Registration Rights Agreement (or makes any announcement,
      statement or threat that it does not intend to honor the obligations described
      in this paragraph) and any such failure shall continue uncured (or any
      announcement, statement or threat not to honor its obligations shall not be
      rescinded in writing) for three (3) business days after the Borrower shall
      have
      been notified thereof in writing by the Holder;

     

    3.3  Failure
      to Timely File Registration or Effect Registration.  The Borrower
      fails to file the Registration Statement within forty-five (45) days following
      the Closing Date (as defined in the Purchase Agreement) or obtain effectiveness
      with the Securities and Exchange Commission of the Registration Statement within
      one hundred and twenty (120) days following the Closing Date (as defined in
      the
      Purchase Agreement) or such Registration Statement lapses in effect (or sales
      cannot otherwise be made thereunder effective, whether by reason of the
      Borrower’s failure to amend or supplement the prospectus included therein in
      accordance with the Registration Rights Agreement or otherwise) for more than
      ten (10) consecutive days or twenty (20) days in any twelve month period after
      the Registration Statement becomes effective;

     

    3.4  Breach
      of Covenants.  The Borrower breaches any material covenant or
      other material term or condition contained in Sections 1.3, 1.6 or 1.7 of this
      Note, or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase Agreement
      and such breach continues for a period of ten (10) days after written notice
      thereof to the Borrower from the Holder;

     

    3.5  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 and the Registration Rights 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, the Purchase Agreement or the
      Registration Rights Agreement;

     

    3.6  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;

     

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

     

    3.8  Bankruptcy.  Bankruptcy,
      insolvency, reorganization or liquidation proceedings or other proceedings
      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, unless
      such proceeding shall be stayed within thirty (30) days;

     

    3.9  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; or

     

    3.10  Default
      Under Other Notes.  An Event of Default has occurred and is
      continuing under any of the other Notes issued pursuant to the Purchase
      Agreement,

     

    then,
      upon the occurrence and during the continuation of any Event of Default
      specified in Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option
      of the Holders of a majority of the aggregate principal amount of the
      outstanding Notes issued pursuant to the Purchase Agreement 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 in Section
      3.6 or 3.8 (unless, under Section 3.8, such proceeding shall be stayed within
      30
      days), the Notes 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) 130% 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 or pursuant to Section
      2(c) of the Registration Rights Agreement (the then outstanding principal amount
      of this Note to the date of payment plus the amounts referred to in
      clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or
      (ii) the “parity value” of the Default Sum to be prepaid, where parity value
      means (a) the highest number of shares of Common Stock issuable upon conversion
      of or otherwise pursuant to such Default Sum in accordance with Article I,
      treating the Trading Day immediately preceding the Mandatory Prepayment Date
      as
      the “Conversion Date” for purposes of determining the lowest applicable
      Conversion Price, unless the Default Event arises as a result of a breach in
      respect of a specific Conversion Date in which case such Conversion Date shall
      be the Conversion Date), multiplied by (b) the highest Closing Price for
      the Common Stock during the period beginning on the date of first occurrence
      of
      the Event of Default and ending one day prior to the Mandatory Prepayment Date
      (the “Default Amount”) and all other amounts payable hereunder shall immediately
      become due and payable, all without demand, presentment or notice, all of which
      hereby are expressly waived, together with all costs, including, without
      limitation, legal fees and expenses, of collection, and the Holder shall be
      entitled to exercise all other rights and remedies available at law or in
      equity.  If the Borrower fails to pay the Default Amount within five
      (5) business days of written notice that such amount is due and payable, then
      the Holder shall have the right at any time, so long as the Borrower remains
      in
      default (and so long and to the extent that there are sufficient authorized
      shares), to require the Borrower, upon written notice, to immediately issue,
      in
      lieu of the Default Amount, the number of shares of Common Stock of the Borrower
      equal to the Default Amount divided by the Conversion Price then in
      effect.

     

     

    ARTICLE
      IV.     MISCELLANEOUS

     

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

     

    4.2  Notices.  Any
      notice herein required or permitted to be given shall be in writing and may
      be
      personally served or delivered by courier or sent by United States mail and
      shall be deemed to have been given upon receipt if personally served (which
      shall include telephone line facsimile transmission) or sent by courier or
      three
      (3) days after being deposited in the United States mail, certified, with
      postage pre-paid and properly addressed, if sent by mail.  For the
      purposes hereof, the address of the Holder shall be as shown on the records
      of
      the Borrower; and the address of the Borrower shall be 111 Great Neck Road,
      Great Neck, NY 11021, facsimile number: (516) 829-4691.  Both the
      Holder and the Borrower may change the address for service by service of written
      notice to the other as herein provided.

     

    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 bonafide
      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 ENFORCED, GOVERNED BY AND CONSTRUED IN
      ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
      MADE
      AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
      OF CONFLICT OF LAWS.  THE BORROWER HEREBY SUBMITS TO THE EXCLUSIVE
      JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK
      WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS NOTE, THE AGREEMENTS ENTERED
      INTO
      IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
      BOTH
      PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
      MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE
      THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
      IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT
      OR
      PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
      PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
      A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
      CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
      OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
      ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND
      EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
      CONNECTION WITH SUCH DISPUTE.

     

    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  Allocations
      of Maximum Share Amount and Reserved Amount.  The Maximum Share
      Amount and Reserved Amount shall be allocated pro rata among the Holders of
      Notes based on the principal amount of such Notes issued to each
      Holder.  Each increase to the Maximum Share Amount and Reserved Amount
      shall be allocated pro rata among the Holders of Notes based on the principal
      amount of such Notes held by each Holder at the time of the increase in the
      Maximum Share Amount or Reserved Amount.  In the event a Holder shall
      sell or otherwise transfer any of such Holder’s Notes, each transferee shall be
      allocated a pro rata portion of such transferor’s Maximum Share Amount and
      Reserved Amount.  Any portion of the Maximum Share Amount or Reserved
      Amount which remains allocated to any person or entity which does not hold
      any
      Notes shall be allocated to the remaining Holders of Notes, pro rata based
      on
      the principal amount of such Notes then held by such Holders.

     

    4.9  Damages
      Shares.  The shares of Common Stock that may be issuable to the
      Holder pursuant to Sections 1.3 and 1.4(g) hereof and pursuant to Section 2(c)
      of the Registration Rights Agreement (“Damages Shares”) shall be treated as
      Common Stock issuable upon conversion of this Note for all purposes hereof
      and
      shall be subject to all of the limitations and afforded all of the rights of
      the
      other shares of Common Stock issuable hereunder, including without limitation,
      the right to be included in the Registration Statement filed pursuant to the
      Registration Rights Agreement.  For purposes of calculating interest
      payable on the outstanding principal amount hereof, except as otherwise provided
      herein, amounts convertible into Damages Shares (“Damages Amounts”) shall not
      bear interest but must be converted prior to the conversion of any outstanding
      principal amount hereof, until the outstanding Damages Amounts is
      zero.

     

    4.10  Denominations.  At
      the request of the Holder, upon surrender of this Note, the Borrower shall
      promptly issue new Notes in the aggregate outstanding principal amount hereof,
      in the form hereof, in such denominations of at least $50,000 as the Holder
      shall request.

     

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

     

    4.12  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 4.12.

     

    4.13  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.

     

     

    ARTICLE
      V.      CALL OPTION

     

    5.1  Call
      Option.  Notwithstanding anything to the contrary contained in
      this Article V, so long as (i) no Event of Default or Trading Market
      Prepayment Event shall have occurred and be continuing, (ii) the Borrower
      has a sufficient number of authorized shares of Common Stock reserved for
      issuance upon full conversion of the Notes, then at any time after the Issue
      Date, and (iii) the Common Stock is trading at or below $.15 per share, the
      Borrower shall have the right, exercisable on not less than ten (10) Trading
      Days prior written notice to the Holders of the Notes (which notice may not
      be
      sent to the Holders of the Notes until the Borrower is permitted to prepay
      the
      Notes pursuant to this Section 5.1), to prepay all of the outstanding Notes
      in
      accordance with this Section 5.1.  Any notice of prepayment hereunder
      (an “Optional Prepayment”) shall be delivered to the Holders of the Notes at
      their registered addresses appearing on the books and records of the Borrower
      and shall state (1) that the Borrower is exercising its right to prepay all
      of
      the Notes issued on the Issue Date and (2) the date of prepayment (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 Holders as specified
      by
      the Holders 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 Notes, the Borrower shall make payment to the holders of an amount
      in
      cash (the “Optional Prepayment Amount”) equal to either (i) 125% (for
      prepayments occurring within thirty (30) days of the Issue Date), (ii) 135%
      for prepayments occurring between thirty-one (31) and sixty  (60) days
      of the Issue Date, or (iii) 150% (for prepayments occurring after the sixtieth
      (60th) day following the
      Issue Date), 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 or pursuant to Section 2(c) of the Registration Rights Agreement
      (the then outstanding principal amount of this Note to the date of payment
      plus the amounts referred to in clauses (x), (y) and (z) shall
      collectively be known as the “Optional Prepayment Sum”). Notwithstanding notice
      of an Optional Prepayment, the Holders shall at all times prior to the Optional
      Prepayment Date maintain the right to convert all or any portion of the Notes
      in
      accordance with Article I and any portion of Notes so converted after receipt
      of
      an Optional Prepayment Notice and prior to the Optional Prepayment Date set
      forth in such notice and payment of the aggregate Optional Prepayment Amount
      shall be deducted from the principal amount of Notes which are otherwise subject
      to prepayment pursuant to such notice.  If the Borrower delivers an
      Optional Prepayment Notice and fails to pay the Optional Prepayment Amount
      due
      to the Holders of the Notes within two (2) business days following the Optional
      Prepayment Date, the Borrower shall forever forfeit its right to redeem the
      Notes pursuant to this Section 5.1.

     

    5.2  Partial
      Call Option.  Notwithstanding anything to the contrary contained
      in this Article V, in the event that the Average Daily Price of the Common
      Stock, as reported by the Reporting Service, for each day of the month ending
      on
      any Determination Date is below $.15 per share, the Borrower may, at its option,
      prepay a portion of the outstanding principal amount of the Notes equal to
      104%
      of the principal amount hereof divided by thirty-six (36) plus one month’s
      interest.

     

    

     

    

     

    

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    IN
      WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by
      its
      duly authorized officer this 13th day of September,
      2007.

     

    

    JUNIPER
      GROUP, INC.

    

    

    

    By:     /s/
      Vlado P. Hreljanovic

    Chief
      Executive Officer

     

     

     

    EXHIBIT
      A

     

    NOTICE
      OF CONVERSION

     

    (To
      be Executed by the Registered Holder

     

    in
      order to Convert the Notes)

     

    The
      undersigned hereby irrevocably elects to convert $__________ principal amount
      of
      the Note (defined below) into shares of common stock, par value $.001 per share
      (“Common Stock”), of Juniper Group, Inc., a Nevada corporation (the “Borrower”)
      according to the conditions of the convertible Notes of the Borrower dated
      as of
      September 13, 2007 (the “Notes”), as of the date written below.  If
      securities are to be issued in the name of a person other than the undersigned,
      the undersigned will pay all transfer taxes payable with respect thereto and
      is
      delivering herewith such certificates.  No fee will be charged to the
      Holder for any conversion, except for transfer taxes, if any.  A copy
      of each Note is attached hereto (or evidence of loss, theft or destruction
      thereof).

     

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

     

    Name
      of DTC Prime
      Broker:                                                                                                                     

    Account
      Number:                                                                                                                     

     

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

     

    Name:                                                                                                                     

    Address:                                                                                                                     

     

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

     

    Date
      of Conversion:___________________________

    Applicable
      Conversion Price:____________________

    Number
      of Shares of Common Stock to be Issued Pursuant to

    Conversion
      of the Notes:______________

    Signature:___________________________________

    Name:______________________________________

    Address:____________________________________

     

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

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