Document:

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

     

    
      	
              Basking
                Ridge, New Jersey

            	 	 
	
              July
                12, 2006

            	 	
              $_____

            

    

     

    FOR
      VALUE RECEIVED,
      STRONGHOLD TECHNOLOGIES, INC.,
      a
      Nevada corporation (hereinafter called the “Borrower”),
      hereby promises to pay to the order of ____________________________________
      or
      registered assigns (the “Holder”)
      the
      sum of __________________ Dollars ($________), on July 12, 2009 (the
“Maturity
      Date”),
      and
      to pay interest on the unpaid principal balance hereof at the rate of eight
      percent (8%) per annum from July 12, 2006 (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 on March 31, June 30, September 30 and December 31
      of each year beginning on June 30, 2006. All payments due hereunder (to the
      extent not converted into common stock, $.0001 par value per share, of the
      Borrower (the “Common
      Stock”)
      in
      accordance with the terms hereof) shall be made in lawful money of the United
      States of America, or, at the option of the Borrower, in shares of Common Stock
      of the Borrower at the applicable Conversion Price. 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 March 17, 2006, 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
      stockholders 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, dated March 17, 2006, 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 4.9%
      of
      the outstanding shares of Common Stock. For purposes of the proviso to the
      immediately preceding sentence, beneficial ownership shall be determined in
      accordance with Section 13(d) of the Securities Exchange Act of 1934, as
      amended, 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)
      accrued and unpaid interest, if any, on such principal amount at the interest
      rates provided in this Note to the Conversion Date plus
      (3)
      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 March 17, 2006, executed in connection with the initial
      issuance of this Note and the other Notes issued on the Issue Date (the
“Registration
      Rights Agreement”).

     

    
      
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    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 (as defined herein)
      (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 mutually acceptable to 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 25.0%. 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 

     

    
      
         

      

      
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    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 the Stockholder Approval (as defined in Section 4(l) 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 (2) 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 

     

    
      
         

      

      
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    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. 

     

    
      
         

      

      
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    (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 two (2) business days after such receipt (and, solely in the case of
      conversion of the entire unpaid principal amount hereof, surrender of this
      Note)
      (such second business day being hereinafter referred to as the “Deadline”)
      in
      accordance with the terms hereof and the Purchase Agreement (including, without
      limitation, in accordance with the requirements of Section 2(g) of the Purchase
      Agreement that certificates for shares of Common Stock issued on or after the
      effective date of the Registration Statement upon conversion of this Note shall
      not bear any restrictive legend).

     

    (e)  Obligation
      of Borrower to Deliver Common Stock.
      Upon
      receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed
      to
      be the holder of record of the Common Stock issuable upon such conversion,
      the
      outstanding principal amount 

     

    
      
         

      

      
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    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)
      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 

     

    
      
         

      

      
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    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 

     

    
      
         

      

      
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    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.

     

    
      
         

      

      
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    (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; provided,
      further,
      that
      the issuance of up to an aggregate of 1,000,000 shares of Common Stock to
      consultants shall not be considered a Dilutive Issuance.

     

    The
      Borrower shall be deemed to have issued or sold shares of Common Stock if the
      Borrower in any manner issues or grants any warrants, rights or options, 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.

     

    
      
         

      

      
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    (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 

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    to
      as the
“Remaining
      Convertible Amount”).
      With
      respect to each Holder of Notes, the Maximum Share Amount shall refer to such
      Holder’s pro rata
      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 stockholders 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 Stockholder.
      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.

     

     

    
      
         

      

      
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    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, 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. 

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    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 ten (10) days after the Borrower shall
      have been notified thereof in writing by the Holder;

     

    3.3  Failure
      to Maintain Registration.
      The
      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 twenty (20) consecutive days or
      forty (40) days in any twelve (12) 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;

     

    
      
         

      

      
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    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;

     

    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”),
      which
      such Event of Default continues for a period of ten (10) days after receipt
      of
      the Default Notice, and upon the occurrence of an Event of Default specified
      in
      Section 3.6 or 3.8, 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.

     

    
      
         

      

      
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    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 106 Allen Road, Basking
      Ridge, New Jersey 07920, facsimile number: 908-903-1197. 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 bona fide
      margin
      account or other lending arrangement.

     

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

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    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.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    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.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    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 $.08 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) 150% (for prepayments occurring within sixty (60) days of the
      Issue Date) or (ii) 160% (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.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      Borrower has caused this Note to be signed in its name by its duly authorized
      officer this 12th
      day of
      July, 2006.

     

    

    
      	 	
              STRONGHOLD
                TECHNOLOGIES, INC.

            
	 	 	 
	 	 	 
	 	 	 
	 	
              By:

            	
               

            
	 	 	
              Christopher
                J. Carey

            
	 	 	
              President
                and Chief Executive Officer

            

    

     

     

    
 

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    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 $.0001 per
      share
      (“Common
      Stock”),
      of
      Stronghold Technologies, Inc., a Nevada corporation (the “Borrower”)
      according to the conditions of the convertible Notes of the Borrower dated
      as of
      July 12, 2006 (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.

     

    
      
         

      

      
        21NOVASTAR
      RESOURCES LTD.

     

    SECOND
      AMENDED AND RESTATED 2006 STOCK PLAN

     

    

    1. 
Purpose.

     

    The
      purpose of this plan (the “Plan”) is to secure for Novastar Resources Ltd. (the
“Corporation”) and its stockholders the benefits arising from capital stock
      ownership by employees, officers and directors of, and consultants or advisors
      to, the Corporation and its subsidiary corporations who are expected to
      contribute to the Corporation’s future growth and success. The Plan permits
      grants of options to purchase shares of Common Stock, $0.001 par value per
      share, of the Corporation (“Common Stock”) and awards of shares of Common Stock
      that are restricted as provided in Section 12 (“Restricted Shares”). Those
      provisions of the Plan which make express reference to Section 422 of the
      Internal Revenue Code of 1986, as amended or replaced from time to time (the
      “Code”), shall apply only to Incentive Stock Options (as that term is defined in
      the Plan).

     

    2. 
Type
      of Options and Administration.

     

    (a) Types
      of Options.
      Options
      granted pursuant to the Plan shall be authorized by action of the Board of
      Directors of the Corporation (or a Committee designated by the Board of
      Directors) and may be either incentive stock options (“Incentive Stock Options”)
      meeting the requirements of Section 422 of the Code or non-statutory options
      which are not intended to meet the requirements of Section 422 of the
      Code.

     

    (b) Administration.
      The
      Plan will be administered by the Board of Directors of the Corporation, whose
      construction and interpretation of the terms and provisions of the Plan shall
      be
      final and conclusive. The Board of Directors may in its sole discretion grant
      Restricted Shares and options to purchase shares of Common Stock and issue
      shares upon exercise of such options as provided in the Plan. The Board shall
      have authority, subject to the express provisions of the Plan, to construe
      the
      respective option and Restricted Share agreements and the Plan, to prescribe,
      amend and rescind rules and regulations relating to the Plan, to determine
      the
      terms and provisions of the respective option and Restricted Share agreements,
      which need not be identical, and to make all other determinations in the
      judgment of the Board of Directors necessary or desirable for the administration
      of the Plan. The Board of Directors may correct any defect or supply any
      omission or reconcile any inconsistency in the Plan or in any option or
      Restricted Share agreement in the manner and to the extent it shall deem
      expedient to carry the Plan into effect and it shall be the sole and final
      judge
      of such expediency. No director or person acting pursuant to authority delegated
      by the Board of Directors shall be liable for any action or determination under
      the Plan made in good faith. The Board of Directors may, to the full extent
      permitted by or consistent with applicable laws or regulations (including,
      without limitation, applicable state law and Rule 16b-3 promulgated under the
      Securities Exchange Act of 1934 (the “Exchange Act”), or any successor rule
      (“Rule 16b-3”)), delegate any or all of its powers under the Plan to a committee
      (the “Committee”) appointed by the Board of Directors, and if the Committee is
      so appointed all references to the Board of Directors in the Plan shall mean
      and
      relate to such Committee with respect to the powers so delegated. Any director
      to whom an option or stock grant is awarded shall be ineligible to vote upon
      his
      or her option or stock grant, but such option or stock grant may be awarded
      any
      such director by a vote of the remainder of the directors, except as limited
      below.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) Applicability
      of Rule 16b-3.
      Those
      provisions of the Plan which make express reference to Rule 16b-3 shall apply
      to
      the Corporation only at such time as the Corporation’s Common Stock is
      registered under the Exchange Act, and then only to such persons as are required
      to file reports under Section 16(a) of the Exchange Act (a “Reporting
      Person”).

     

    (d) Compliance
      with Section 162(m) of the Code.
      Section
      162(m) of the Code, added by the Omnibus Budget Reconciliation Act of 1993,
      generally limits the tax deductibility to publicly held companies of
      compensation in excess of $1,000,000 paid to certain “covered employees”
(“Covered Employees”). It is the Corporation’s intention to preserve the
      deductibility of such compensation to the extent it is reasonably practicable
      and to the extent it is consistent with the Corporation’s compensation
      objectives. For purposes of this Plan, Covered Employees of the Corporation
      shall be those employees of the Corporation described in Section 162(m)(3)
      of
      the Code.

     

    (e) Special
      Provisions Applicable to Options Granted to Covered Employees.
      In
      order for the full value of options granted to Covered Employees to be
      deductible by the Corporation for federal income tax purposes, the Corporation
      may intend for such options to be treated as “qualified performance based
      compensation” as described in Treas. Reg. §1.162-27(e) (or any successor
      regulation). In such case, options granted to Covered Employees shall be subject
      to the following additional requirements:

     

    (i) such
      options and rights shall be granted only by a committee comprised solely of
      two
      or more “outside directors”, within the meaning of Treas. Reg. § 1.162.27(e)(3);
      and

     

    (ii) the
      exercise price of such options shall in no event be less than the Fair Market
      Value (as defined below) of the Common Stock as of the date of grant of such
      options.

     

    (f) Section
      409A of the Code.
      The
      Board of Directors may only grant those awards that either comply with the
      applicable requirements of Section 409A of the Code, or do not result in the
      deferral of compensation within the meaning of Section 409A of the
      Code.

     

    3. 
Eligibility.

     

    (a) General.
      Options
      and Restricted Shares may be granted to persons who are, at the time of grant,
      in a Business Relationship (as defined below) with the Corporation; provided,
      that Incentive Stock Options may only be granted to individuals who are
      employees of the Corporation (within the meaning of Section 3401(c) of the
      Code). A person who has been granted an option or Restricted Shares may, if
      he
      or she is otherwise eligible, be granted additional options or Restricted Shares
      if the Board of Directors shall so determine. For purposes of the Plan,
“Business Relationship” means that a person is serving the Corporation, its
      parent, if applicable, or any of its subsidiaries, if applicable, in the
      capacity of an employee, officer, director, advisor or consultant.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (b) Grant
      of Options to Reporting Persons.
      From
      and after the registration of the Common Stock of the Corporation under the
      Exchange Act, the selection of a director or an officer who is a Reporting
      Person (as the terms “director” and “officer” are defined for purposes of Rule
      16b-3) as a recipient of an option or Restricted Shares, the timing of the
      option or Restricted Share grant, the exercise price of the option and the
      number of Restricted Shares or shares subject to the option shall be determined
      either (i) by the Board of Directors, or (ii) by a committee consisting of
      two
      or more “Non-Employee Directors” having full authority to act in the matter. For
      the purposes of the Plan, a director shall be deemed to be a “Non-Employee
      Director” only if such person qualifies as a “Non-Employee Director” within the
      meaning of Rule 16b-3, as such term is interpreted from time to time.

     

    4. 
Stock
      Subject to Plan.

     

    The
      stock
      subject to options granted under the Plan or grants of Restricted Shares shall
      be shares of authorized but unissued or reacquired Common Stock. Subject to
      adjustment as provided in Section 16 below, the maximum number of shares of
      Common Stock of the Corporation (“Shares”) which may be issued and sold under
      the Plan is 75 million Shares. If any Restricted Shares shall be reacquired
      by
      the Corporation, forfeited or an option granted under the Plan shall expire,
      terminate or is canceled for any reason without having been exercised in full,
      the forfeited Restricted Shares or unpurchased Shares subject to such option
      shall again be available for subsequent option or Restricted Share grants under
      the Plan. Subject to adjustment in accordance with Section 16:

     

    (a) No
      more
      than an aggregate of 75 million Shares may be issued under Incentive Stock
      Options during the term of the Plan;

     

    (b) No
      more
      than an aggregate of 37.5 million Shares may be issued in the form of
      Restricted Shares during the term of the Plan;

     

    (c) The
      maximum number of Shares with respect to which options may be granted to any
      one
      person during any fiscal year of the Corporation may not exceed eight million
      Shares; and

     

    (d) The
      maximum number of Restricted Shares which may be granted to any one person
      during any fiscal year of the Corporation may not exceed five million
      Shares.

     

    These
      limits shall be applied and construed consistently with Section 162(m) of the
      Code.

     

    5. 
Forms
      of Option and Restricted Share Agreements.

     

    As
      a
      condition to the grant of Restricted Shares or an option under the Plan, each
      recipient of Restricted Shares or an option shall execute an option or
      Restricted Share agreement in such form not inconsistent with the Plan as may
      be
      approved by the Board of Directors. Such option or Restricted Share agreements
      may differ among recipients.

     

    6. 
Purchase
      Price.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (a) General.
      The
      purchase price per Share deliverable upon the exercise of an option shall be
      determined by the Board of Directors at the time of grant of such option;
      provided, however, that the exercise price of an option shall not be less than
      100% of the Fair Market Value (as hereinafter defined) of a Share, at the time
      of grant of such option, or less than 110% of such Fair Market Value in the
      case
      of an Incentive Stock Option described in Section 11(b). “Fair Market Value” of
      a Share as of a specified date for the purposes of the Plan shall mean the
      closing price of a Share on the principal securities exchange on which such
      Shares are traded on the day immediately preceding the date as of which Fair
      Market Value is being determined, or on the next preceding date on which such
      Shares are traded if no shares were traded on such immediately preceding day,
      or
      if the Shares are not traded on a securities exchange, Fair Market Value shall
      be deemed to be the average of the high bid and low asked prices of the Shares
      in the over-the-counter market on the day immediately preceding the date as
      of
      which Fair Market Value is being determined or on the next preceding date on
      which such high bid and low asked prices were recorded. In no case shall Fair
      Market Value be determined with regard to restrictions other than restrictions
      which, by their terms, will never lapse. The Board of Directors may also permit
      optionees, either on a selective or aggregate basis, to simultaneously exercise
      options and sell the Shares thereby acquired, pursuant to a brokerage or similar
      arrangement, approved in advance by the Board of Directors, and to use the
      proceeds from such sale as payment of the purchase price of such
      shares.

     

    (b) Payment
      of Purchase Price.
      Options
      granted under the Plan may provide for the payment of the exercise price by
      delivery of cash or a check to the order of the Corporation in an amount equal
      to the exercise price of such options, or, to the extent provided in the
      applicable option agreement, (i) by delivery to the Corporation of Shares having
      a Fair Market Value on the date of exercise equal in amount to the exercise
      price of the options being exercised, (ii) through any cashless exercise feature
      that may be included in the option agreement covering a particular option grant,
      (iii) by any other means which the Board of Directors determines are consistent
      with the purpose of the Plan and with applicable laws and regulations
      (including, without limitation, the provisions of Rule 16b-3 and Regulation
      T
      promulgated by the Federal Reserve Board) or (iv) by any combination of such
      methods of payment. 

     

    7. 
Option
      Period.

     

    Subject
      to earlier termination as provided in the Plan, each option and all rights
      thereunder shall expire on such date as determined by the Board of Directors
      and
      set forth in the applicable option agreement, provided, that such date shall
      not
      be later than (10) ten years after the date on which the option is
      granted.

     

    8. 
Exercise
      of Options.

     

    Each
      option granted under the Plan shall be exercisable either in full or in
      installments at such time or times and during such period as shall be set forth
      in the option agreement evidencing such option, subject to the provisions of
      the
      Plan. No option granted to a Reporting Person for purposes of the Exchange
      Act,
      however, shall be exercisable during the first six months after the date of
      grant. Subject to the requirements in the immediately preceding sentence, if
      an
      option is not at the time of grant immediately exercisable, the Board of
      Directors may (i) in the agreement evidencing such option, provide for the
      acceleration of the exercise date or dates of the subject option upon the
      occurrence of specified events, and/or (ii) at any time prior to the complete
      termination of an option, accelerate the exercise date or dates of such option,
      unless it would cause an option that otherwise qualified as an Incentive Stock
      Option to lose Incentive Stock Option treatment by application of Section
      422(d)(1) of the Code and Section 11(c) of the Plan.

     

    
      
        
        

      

      
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    9. 
Nontransferability
      of Options.
      

     

    No
      option
      granted under this Plan shall be assignable or otherwise transferable by the
      optionee except by will or by the laws of descent and distribution or pursuant
      to a qualified domestic relations order as defined in the Code or Title I of
      the
      Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or the
      rules thereunder. An option may be exercised during the lifetime of the optionee
      only by the optionee. In the event an optionee dies during his employment by
      the
      Corporation or any of its subsidiaries, or during the three-month period
      following the date of termination of such employment, his option shall
      thereafter be exercisable, during the period specified to the full extent to
      which such option was exercisable by the optionee at the time of his death
      during the periods set forth in Section 10 or 11(d). If any optionee should
      attempt to dispose of or encumber his or her options, other than in accordance
      with the applicable terms of this Plan or the applicable option agreement,
      his
      or her interest in such options shall terminate.

     

    10. 
Effect
      of Termination of Employment or Other Relationship.
      

     

    Except
      as
      provided in Section 11(d) with respect to Incentive Stock Options, and subject
      to the provisions of the Plan and the applicable option agreement, an optionee
      may exercise an option (but only to the extent such option was exercisable
      at
      the time of termination of the optionee’s employment or other relationship with
      the Corporation) at any time within three (3) months following the termination
      of the optionee’s employment or other relationship with the Corporation or
      within one (1) year if such termination was due to the death or disability
      of
      the optionee, but, except in the case of the optionee’s death, in no event later
      than the expiration date of the Option. If the termination of the optionee’s
      employment is for cause or is otherwise attributable to a breach by the optionee
      of an employment or confidentiality or non-disclosure agreement, the option
      shall expire immediately upon such termination. The Board of Directors shall
      have the power to determine what constitutes a termination for cause or a breach
      of an employment or confidentiality or non-disclosure agreement, whether an
      optionee has been terminated for cause or has breached such an agreement, and
      the date upon which such termination for cause or breach occurs. Any such
      determinations shall be final and conclusive and binding upon the optionee.
      

     

    11. 
Incentive
      Stock Options.

     

    Options
      granted under the Plan which are intended to be Incentive Stock Options shall
      be
      subject to the following additional terms and conditions:

     

    (a) Express
      Designation.
      All
      Incentive Stock Options granted under the Plan shall, at the time of grant,
      be
      specifically designated as such in the option agreement covering such Incentive
      Stock Options.

     

    
      
        
        

      

      
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    (b) 10%
      Stockholder.
      If any
      employee to whom an Incentive Stock Option is to be granted under the Plan
      is,
      at the time of the grant of such option, the owner of stock possessing more
      than
      10% of the total combined voting power of all classes of stock of the
      Corporation (after taking into account the attribution of stock ownership rules
      of Section 424(d) of the Code), then the following special provisions shall
      be
      applicable to the Incentive Stock Option granted to such
      individual:

     

    (i) The
      purchase price per share of the Common Stock subject to such Incentive Stock
      Option shall not be less than 110% of the Fair Market Value of one share of
      Common Stock at the time of grant; and

     

    (ii) the
      option exercise period shall not exceed five years from the date of
      grant.

     

    (c) Dollar
      Limitation.
      For so
      long as the Code shall so provide, options granted to any employee under the
      Plan (and any other incentive stock option plans of the Corporation) which
      are
      intended to constitute Incentive Stock Options shall not constitute Incentive
      Stock Options to the extent that such options, in the aggregate, become
      exercisable for the first time in any one calendar year for shares of Common
      Stock with an aggregate Fair Market Value, as of the respective date or dates
      of
      grant, of more than $100,000 (or such other limitations as the Code may
      provide).

     

    (d) Termination
      of Employment, Death or Disability.
      No
      Incentive Stock Option may be exercised unless, at the time of such exercise,
      the optionee is, and has been continuously since the date of grant of his or
      her
      option, employed by the Corporation, except that, unless otherwise specified
      in
      the applicable option agreement:

     

    (i) an
      Incentive Stock Option may be exercised within the period of three months after
      the date the optionee ceases to be an employee of the Corporation (or within
      such lesser period as may be specified in the applicable option agreement),
      provided, that the agreement with respect to such option may designate a longer
      exercise period and that the exercise after such three-month period shall be
      treated as the exercise of a non-statutory option under the Plan;

     

    (ii) if
      the
      optionee dies while in the employ of the Corporation, or within three months
      after the optionee ceases to be such an employee, the Incentive Stock Option
      may
      be exercised by the person to whom it is transferred by will or the laws of
      descent and distribution within the period of one year after the date of death
      (or within such lesser period as may be specified in the applicable option
      agreement); and

     

    (iii) if
      the
      optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code
      or
      any successor provisions thereto) while in the employ of the Corporation, the
      Incentive Stock Option may be exercised within the period of one year after
      the
      date the optionee ceases to be such an employee because of such disability
      (or
      within such lesser period as may be specified in the applicable option
      agreement).

     

    For
      all
      purposes of the Plan and any option granted hereunder, “employment” shall be
      defined in accordance with the provisions of Section 1.421-1(h) of the Income
      Tax Regulations (or any successor regulations). Notwithstanding the foregoing
      provisions no Incentive Stock Option may be exercised after its expiration
      date.

     

    
      
        
        

      

      
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    12. 
Restricted
      Shares.

     

    (a) Awards.
      The
      Board of Directors may from time to time in its discretion award Restricted
      Shares to persons having a Business Relationship with the Corporation and may
      determine the number of Restricted Shares awarded and the terms and conditions
      of, and the amount of payment, if any, to be made by such persons. Each award
      of
      Restricted Shares will be evidenced by a written agreement executed on behalf
      of
      the Corporation and containing terms and conditions not inconsistent with the
      Plan as the Board of Directors shall determine to be appropriate in its sole
      discretion.

     

    (b) Restricted
      Period; Lapse of Restrictions.
      At the
      time an award of Restricted Shares is made, the Board of Directors shall
      establish a period of time (the “Restricted Period”) applicable to such award
      which shall not be less than one year nor more than ten years. Each award of
      Restricted Shares may have a different Restricted Period. In lieu of
      establishing a Restricted Period, the Board of Directors may establish
      restrictions based only on the achievement of specified performance measures.
      At
      the time an award is made, the Board of Directors may, in its discretion,
      prescribe conditions for the incremental lapse of restrictions during the
      Restricted Period and for the lapse or termination of restrictions upon the
      occurrence of other conditions in addition to or other than the expiration
      of
      the Restricted Period with respect to all or any portion of the Restricted
      Shares. Such conditions may include, without limitation, the death or disability
      of the participant to whom Restricted Shares are awarded, retirement of the
      participant pursuant to normal or early retirement under any retirement plan
      of
      the Corporation or termination by the Corporation of the participant’s
      employment other than for cause, or the occurrence of a change in control of
      the
      Corporation. Such conditions may also include performance measures, which,
      in
      the case of any such award of Restricted Shares to a participant who is a
“covered employee” within the meaning of Section 162(m) of the Code, shall be
      based on one or more of the following criteria: earnings per share, market
      value
      per share, return on invested capital, return on operating assets and return
      on
      equity. The Board of Directors may also, in its discretion, shorten or terminate
      the Restricted Period or waive any conditions for the lapse or termination
      of
      restrictions with respect to all or any portion of the Restricted Shares at
      any
      time after the date the award is made.

     

    (c) Rights
      of Holder; Limitations Thereon.
      Upon an
      award of Restricted Shares, a stock certificate representing the number of
      Restricted Shares awarded to the participant shall be registered in the
      participant’s name and, at the discretion of the Board of Directors, will be
      either delivered to the participant with an appropriate legend or held in
      custody by the Corporation or a bank for the participant’s account. The
      participant shall generally have the rights and privileges of a stockholder
      as
      to such Restricted Shares, including the right to vote such Restricted Shares,
      except that the following restrictions shall apply: (i) with respect to each
      Restricted Share, the participant shall not be entitled to delivery of an
      unlegended certificate until the expiration nor termination of the Restricted
      Period, and the satisfaction of any other conditions prescribed by the Board
      of
      Directors, relating to such Restricted Share; (ii) with respect to each
      Restricted Share, such share may not be sold, transferred, assigned, pledged,
      or
      otherwise encumbered or disposed of until the expiration of the Restricted
      Period, and the satisfaction of any other conditions prescribed by the Board
      of
      Directors, relating to such Restricted Share (except, subject to the provisions
      of the participant’s stock restriction agreement, by will or the laws of descent
      and distribution or pursuant to a qualified domestic relations order as defined
      by the Code or Title I of ERISA or the rules promulgated thereunder) and (iii)
      all of the Restricted Shares as to which restrictions have not at the time
      lapsed shall be forfeited and all rights of the participant to such Restricted
      Shares shall terminate without further obligation on the part of the Corporation
      unless the participant has remained in a Business Relationship with the
      Corporation or any of its subsidiaries until the expiration or termination
      of
      the Restricted Period and the satisfaction of any other conditions prescribed
      by
      the Board of Directors applicable to such Restricted Shares. Upon the forfeiture
      of any Restricted Shares, such forfeited shares shall be transferred to the
      Corporation without further action by the participant. At the discretion of
      the
      Board of Directors, cash and stock dividends with respect to the Restricted
      Shares may be either currently paid or withheld by the Corporation for the
      participant’s account, and interest may be paid on the amount of cash dividends
      withheld at a rate and subject to such terms as determined by the Board of
      Directors. The participant shall have the same rights and privileges, and be
      subject to the same restrictions, with respect to any shares received pursuant
      to Section 16 hereof.

     

    
      
        
        

      

      
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    (d) Delivery
      of Unrestricted Shares.
      Upon
      the expiration or termination of the Restricted Period and the satisfaction
      of
      any other conditions prescribed by the Board of Directors, the restrictions
      applicable to the Restricted Shares shall lapse and a stock certificate for
      the
      number of Restricted Shares with respect to which the restrictions have lapsed
      shall be delivered, free of all such restrictions, except any that may be
      imposed by law including without limitation securities laws, to the participant
      or the participant’s beneficiary or estate, as the case may be. The Corporation
      shall not be required to deliver any fractional share of Common Stock but will
      pay, in lieu thereof, the fair market value (determined as of the date the
      restrictions lapse) of such fractional share to the participant or the
      participant’s beneficiary or estate, as the case may be.

     

    13. 
Additional
      Provisions.
      

     

    (a) Additional
      Provisions.
      The
      Board of Directors may, in its sole discretion, include additional provisions
      in
      option or Restricted Stock agreements covering options or Restricted Stock
      granted under the Plan, including without limitation, restrictions on transfer,
      repurchase rights, rights of first refusal, commitments to pay cash bonuses,
      to
      make, arrange for or guaranty loans or to transfer other property to optionees
      upon exercise of options, or such other provisions as shall be determined by
      the
      Board of Directors; provided, that such additional provisions shall not be
      inconsistent with any other term or condition of the Plan and such additional
      provisions shall not cause any Incentive Stock Option granted under the Plan
      to
      fail to qualify as an Incentive Stock Option within the meaning of Section
      422
      of the Code or result in the imposition of an additional tax under Section
      409A
      of the Code.

     

    (b) Acceleration,
      Extension, Etc.
      The
      Board of Directors may, in its sole discretion, (i) accelerate the date or
      dates
      on which all or any particular option or options granted under the Plan may
      be
      exercised or (ii) extend the dates during which all, or any particular, option
      or options granted under the Plan may be exercised if it would not cause any
      Incentive Stock Option granted under the Plan to fail to qualify as an Incentive
      Stock Option within the meaning of Section 422 of the Code or result in the
      imposition of an additional tax under Section 409A of the Code.

     

    
      
        
        

      

      
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    14. 
General
      Restrictions.
      

     

    (a) Investment
      Representations.
      The
      Corporation may require any person to whom Restricted Shares or an option is
      granted, as a condition of receiving such Restricted Shares or exercising such
      option, to give written assurances in substance and form satisfactory to the
      Corporation to the effect that such person is acquiring the Restricted Shares
      or
      Common Stock subject to the option for his or her own account for investment
      and
      not with any present intention of selling or otherwise distributing the same,
      and to such other effects as the Corporation deems necessary or appropriate
      in
      order to comply with federal and applicable state securities laws, or with
      covenants or representations made by the Corporation in connection with any
      public offering of its Common Stock.

     

    (b) Compliance
      with Securities Law.
      Each
      option and grant of Restricted Shares shall be subject to the requirement that
      if, at any time, counsel to the Corporation shall determine that the listing,
      registration or qualification of the Restricted Shares or shares subject to
      such
      option upon any securities exchange or under any state or federal law, or the
      consent or approval of any governmental or regulatory body, or that the
      disclosure of non-public information or the satisfaction of any other condition
      is necessary as a condition of, or in connection with the issuance or purchase
      of shares thereunder, such Restricted Shares shall not be granted and such
      option may not be exercised, in whole or in part, unless such listing,
      registration, qualification, consent or approval, or satisfaction of such
      condition shall have been effected or obtained on conditions acceptable to
      the
      Board of Directors. Nothing herein shall be deemed to require the Corporation
      to
      apply for or to obtain such listing, registration or qualification, or to
      satisfy such condition.

     

    15. 
Rights
      as a Stockholder. 

     

    The
      holder of an option shall have no rights as a stockholder with respect to any
      shares covered by the option (including, without limitation, any rights to
      receive dividends or non-cash distributions with respect to such shares) until
      the date of issue of a stock certificate to him or her for such shares. No
      adjustment shall be made for dividends or other rights for which the record
      date
      is prior to the date such stock certificate is issued.

     

    16. 
Adjustment
      Provisions for Recapitalization, Reorganizations and Related Transactions.
       

     

    (a) Recapitalization
      and Related Transactions.
      If,
      through or as a result of any recapitalization, reclassification, stock
      dividend, stock split, reverse stock split or other similar transaction, (i)
      the
      outstanding shares of Common Stock are increased, decreased or exchanged for
      a
      different number or kind of shares or other securities of the Corporation,
      or
      (ii) additional shares or new or different shares or other non-cash assets
      are
      distributed with respect to such shares of Common Stock or other securities,
      an
      appropriate and proportionate adjustment shall be made in (x) the maximum number
      and kind of shares reserved for issuance under the Plan, (y) the number and
      kind
      of Restricted Shares granted and shares or other securities subject to any
      then
      outstanding options under the Plan, and (z) the exercise price for each share
      subject to any then outstanding options under the Plan, without changing the
      aggregate purchase price as to which such options remain exercisable.
      Notwithstanding the foregoing, no adjustment shall be made pursuant to this
      Section 16 if such adjustment (i) would cause the Plan to fail to comply with
      Section 422 of the Code or with Rule 16b-3 or (ii) would be considered as the
      adoption of a new plan requiring stockholder approval.

     

    
      
        
        

      

      
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    (b) Reorganization,
      Merger and Related Transactions.
      If the
      Corporation shall be the surviving corporation in any reorganization, merger
      or
      consolidation of the Corporation with one or more other corporations, any then
      outstanding Restricted Shares or option granted pursuant to the Plan shall
      pertain to and apply to the securities to which a holder of the number of shares
      of Common Stock subject to such Restricted Shares or options would have been
      entitled immediately following such reorganization, merger, or consolidation,
      with a corresponding proportionate adjustment of the purchase price as to which
      such options may be exercised so that the aggregate purchase price as to which
      such options may be exercised shall be the same as the aggregate purchase price
      as to which such options may be exercised for the shares remaining subject
      to
      the options immediately prior to such reorganization, merger, or
      consolidation.

     

    (c) Board
      Authority to Make Adjustments.
      Any
      adjustments made under this Section 16 will be made by the Board of Directors,
      whose determination as to what adjustments, if any, will be made and the extent
      thereof will be final, binding and conclusive. No fractional shares will be
      issued under the Plan on account of any such adjustments.

     

    17. 
Merger,
      Consolidation, Asset Sale, Liquidation, Etc. 

     

    (a) General.
      In the
      event of a consolidation or merger in which the Corporation is not the surviving
      corporation, or sale of all or substantially all of the assets of the
      Corporation in which outstanding shares of Common Stock are exchanged for
      securities, cash or other property of any other corporation or business entity
      or in the event of a liquidation of the Corporation (collectively, a “Corporate
      Transaction”), the Board of Directors of the Corporation, or the board of
      directors of any corporation assuming the obligations of the Corporation, may,
      in its discretion, take any one or more of the following actions, as to
      outstanding options: (i) provide that such Restricted Shares or options shall
      be
      assumed, or equivalent Restricted Shares or options shall be substituted, by
      the
      acquiring or succeeding corporation (or an affiliate thereof), provided that
      any
      such options substituted for Incentive Stock Options shall meet the requirements
      of Section 424(a) of the Code, (ii) upon written notice, provide that all
      unexercised options and Restricted Shares will terminate immediately prior
      to
      the consummation of such transaction unless such options are exercised by the
      optionee within a specified period following the date of such notice, (iii)
      in
      the event of a Corporate Transaction under the terms of which holders of the
      Common Stock of the Corporation will receive upon consummation thereof a cash
      payment for each share surrendered in the Corporate Transaction (the
“Transaction Price”), make or provide for a cash payment to the optionees equal
      to the difference between (A) the Transaction Price times the number of shares
      of Common Stock subject to such outstanding options (to the extent then
      exercisable at prices not in excess of the Transaction Price) and (B) the
      aggregate exercise price of all such outstanding options in exchange for the
      termination of such options, and (iv) provide that all restrictions on
      Restricted Shares shall lapse in full or in part and all or any outstanding
      options shall become exercisable in full or in part immediately prior to such
      event.

     

    
      
        
        

      

      
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    (b) Substitute
      Restricted Shares or Options.
      The
      Corporation may grant Restricted Shares or options under the Plan in
      substitution for Restricted Shares or options held by persons in a Business
      Relationship with another corporation who enter into a Business Relationship
      with the Corporation, or a subsidiary of the Corporation, as the result of
      a
      merger or consolidation of the employing corporation with the Corporation or
      a
      subsidiary of the Corporation, or as a result of the acquisition by the
      Corporation, or one of its subsidiaries, of property or stock of the other
      corporation. The Corporation may direct that substitute Restricted Shares or
      options be granted on such terms and conditions as the Board of Directors
      considers appropriate in the circumstances.

     

    18. 
No
      Special Employment Rights. 

     

    Nothing
      contained in the Plan or in any Restricted Share or option agreement shall
      confer upon any holder of Restricted Shares or optionee any right with respect
      to the continuation of his or her employment by, or other Business Relationship
      with, the Corporation or interfere in any way with the right of the Corporation
      at any time to terminate such employment or Business Relationship or to increase
      or decrease the compensation of the optionee.

     

    19. 
Other
      Employee Benefits.
      

     

    Except
      as
      to plans which by their terms include such amounts as compensation, the amount
      of any compensation deemed to be received by an employee as a result of the
      grant of Restricted Shares or lapse of restrictions thereon, the exercise of
      an
      option or the sale of shares received upon such exercise will not constitute
      compensation with respect to which any other employee benefits of such employee
      are determined, including, without limitation, benefits under any bonus,
      pension, profit-sharing, life insurance or salary continuation plan, except
      as
      otherwise specifically determined by the Board of Directors.

     

    20. 
Amendment
      of the Plan. 

     

    (a) The
      Board
      of Directors may at any time, and from time to time, modify or amend the Plan
      in
      any respect, except that if at any time the approval of the stockholders of
      the
      Corporation is required under Section 422 of the Code or any successor provision
      with respect to Incentive Stock Options, or the legal requirements relating
      to
      the administration of equity compensation plans, if any, under applicable
      provisions of federal securities laws, applicable state corporate and securities
      laws, the Code, the rules of any applicable stock exchange or national market
      system or quotation system on which the Common Stock is listed or quoted, and
      the applicable laws and rules of any foreign country or jurisdiction where
      awards are, or will be, granted under the Plan.

     

    (b) The
      termination or any modification or amendment of the Plan shall not, without
      the
      consent of an optionee or holder of Restricted Shares, affect his or her rights
      under an option or grant of Restricted Shares previously granted to him or
      her.
      With the consent of the optionee or holder of Restricted Shares affected, the
      Board of Directors may amend outstanding option or Restricted Share agreements
      in a manner not inconsistent with the Plan. The Board of Directors shall have
      the right to amend or modify the terms and provisions of the Plan and of any
      outstanding Incentive Stock Options granted under the Plan to the extent
      necessary to qualify any or all such options for such favorable federal income
      tax treatment (including deferral of taxation upon exercise) as may be afforded
      incentive stock options under Section 422 of the Code.

     

    
      
        
        

      

      
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    21. 
Withholding.
      

     

    (a) The
      Corporation shall have the right to deduct from payments of any kind otherwise
      due to the optionee or holder of Restricted Shares any federal, state or local
      taxes of any kind required by law to be withheld with respect to any shares
      issued upon exercise of options or lapse of restrictions on Restricted Shares
      under the Plan. Subject to the prior approval of the Corporation, which may
      be
      withheld by the Corporation in its sole discretion, the optionee or holder
      of
      Restricted Shares may elect to satisfy such obligations, in whole or in part,
      (i) by causing the Corporation to withhold shares of Common Stock otherwise
      issuable pursuant to the exercise of an option or lapse of restrictions on
      Restricted Shares or (ii) by delivering to the Corporation shares of Common
      Stock already owned by the optionee or holder of Restricted Shares. The shares
      so delivered or withheld shall have a Fair Market Value equal to such
      withholding obligation as of the date that the amount of tax to be withheld
      is
      to be determined. An optionee who has made an election pursuant to this Section
      21(a) may satisfy his or her withholding obligation only with shares of Common
      Stock which are not subject to any repurchase, forfeiture, unfulfilled vesting
      or other similar requirements.

     

    (b) The
      acceptance of shares of Common Stock upon exercise of an Incentive Stock Option
      shall constitute an agreement by the optionee (i) to notify the Corporation
      if
      any or all of such shares are disposed of by the optionee within two years
      from
      the date the option was granted or within one year from the date the shares
      were
      transferred to the optionee pursuant to the exercise of the option, and (ii)
      if
      required by law, to remit to the Corporation, at the time of and in the case
      of
      any such disposition, an amount sufficient to satisfy the Corporation’s federal,
      state and local withholding tax obligations with respect to such disposition,
      whether or not, as to both (i) and (ii), the optionee is in the employ of the
      Corporation at the time of such disposition.

     

    (c) Notwithstanding
      the foregoing, in the case of a Reporting Person whose options have been granted
      in accordance with the provisions of Section 3(b) herein, no election to use
      shares for the payment of withholding taxes shall be effective unless made
      in
      compliance with any applicable requirements of Rule 16b-3.

     

    22. 
Section
      162(m) of the Code.
      The
      Board of Directors, in its sole discretion, may require that one or more
      agreements contain provisions which provide that, in the event Section 162(m)
      of
      the Code, or any successor provision relating to excessive employee
      remuneration, would operate to disallow a deduction by the Corporation for
      all
      or part of any payment of an award under the Plan, a grantee’s receipt of the
      portion that would not be deductible by the Corporation shall be deferred to
      either the earliest date at which the Board reasonably anticipates that the
      grantee’s remuneration either does not exceed the limit set forth in Section
      162(m) of the Code or is not subject to Section 162(m) of Code, or the calendar
      year in which the grantee separates from service. This Section 22 shall be
      applied and construed consistently with Section 409A of the Code and the
      regulations (and guidance) thereunder.

     

    
      
        
        

      

      
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    23. 
Effective
      Date and Duration of the Plan. 

     

    (a) Effective
      Date.
      The
      Plan shall become effective when adopted by the Board of Directors, but no
      Incentive Stock Option granted under the Plan shall become exercisable unless
      and until the Plan shall have been approved by the Corporation’s stockholders.
      If such stockholder approval is not obtained within twelve (12) months after
      the
      date of the Board’s adoption of the Plan, no options previously granted under
      the Plan shall be deemed to be Incentive Stock Options and no Incentive Stock
      Options shall be granted thereafter. Amendments to the Plan not requiring
      stockholder approval shall become effective when adopted by the Board of
      Directors; amendments requiring stockholder approval (as provided in Section
      20)
      shall become effective when adopted by the Board of Directors, but no Incentive
      Stock Option granted after the date of such amendment shall become exercisable
      (to the extent that such amendment to the Plan was required to enable the
      Corporation to grant such Incentive Stock Option to a particular optionee)
      unless and until such amendment shall have been approved by the Corporation’s
      stockholders. If such stockholder approval is not obtained within twelve (12)
      months of the Board’s adoption of such amendment, any Incentive Stock Options
      granted on or after the date of such amendment shall terminate to the extent
      that such amendment to the Plan was required to enable the Corporation to grant
      such option to a particular optionee. Subject to this limitation, options may
      be
      granted under the Plan at any time after the effective date and before the
      date
      fixed for termination of the Plan.

     

    (b) Termination.
      Unless
      sooner terminated in accordance with Section 17, the Plan shall terminate upon
      the earlier of (i) the close of business on the day next preceding the tenth
      anniversary of the date of its adoption by the Board of Directors, or (ii)
      the
      date on which all shares available for issuance under the Plan shall have been
      issued pursuant to the exercise or cancellation of Restricted Shares or options
      granted under the Plan. If the date of termination is determined under (i)
      above, then Restricted Shares or options outstanding on such date shall continue
      to have force and effect in accordance with the provisions of the instruments
      evidencing such Restricted Shares or options.

     

    24. 
Governing
      Law. 

     

    The
      provisions of this Plan shall be governed and construed in accordance with
      the
      laws of the State of Nevada without regard to the principles of conflicts of
      laws.

     

    Adopted
      by the Board of Directors on July 17, 2006.

     

    

    
      
        13

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