Document:

EXHIBIT 10.26

 

EMPLOYMENT
AGREEMENT

 

This Employment
Agreement (this “Agreement”) is made and entered into as of August 8, 2011 and shall be effective
August 8, 2011 (the “Effective Date”), by and between Warwick Valley
Telephone Company (the “Company”) and John Mercer
(“Executive”).

 

RECITALS: 

 

A.        The
Company’s subsidiary, Warwick Valley Networks Inc. (“WVN”), has purchased from Alteva, LLC, a New Jersey
limited liability company (“Seller”), substantially all of the assets of Seller used in its business of providing
telecommunications products and services, pursuant to an Asset Purchase Agreement dated as of August 5, 2011 (the “Purchase
Agreement”) by and among the Company, WVN and Seller.

 

B.         As
a condition precedent to the transactions contemplated by the Purchase Agreement, the Company and Executive agreed to enter into
this Agreement. 

 

		1.	Employment.

 

The Company hereby
agrees to employ Executive, and Executive hereby agrees to be employed by the Company, upon the terms and subject to the conditions
set forth in this Agreement.

 

		2.	Term of Employment.

 

(a)         The period
of Executive’s employment under this Agreement shall begin as of the Effective Date and shall continue until December 30,
2013 (the “Initial Term”), and shall be renewed automatically for successive one-year periods thereafter (each,
a “Renewal Period”), unless Executive or the Company gives written notice of nonrenewal to the other at least
sixty (60) days before the expiration of the Initial Term or any subsequent Renewal Period.

 

(b)         Notwithstanding
the foregoing, Executive’s employment may be terminated by the Company or by Executive at any time for any reason.

 

(c)         As used
in this Agreement, the term “Employment Term” refers to Executive’s period of employment from the Effective
Date until the date his employment terminates.

 

		3.	Duties and Responsibilities.

 

(a)         The Company
will employ Executive as its Executive Vice President, Chief Technology Officer. In such capacity, Executive shall perform the
customary duties and have the customary responsibilities of such positions and such other duties as may be assigned to Executive
from time to time by the President and Chief Executive Officer (the “President”) pursuant to the President’s
properly delegated authority. Executive will exercise his judgment in accordance with the highest ethical standards.

 

    	 

    	 

    

 

(b)         Executive
agrees to faithfully serve the Company, devote his full working time, attention and energies to the business of the Company, its
subsidiaries and affiliated entities, and perform the duties under this Agreement to the best of his abilities.

 

(c)         Executive
agrees (i) to comply with all applicable laws, rules and regulations; (ii) to comply with the Company’s rules, procedures,
policies, requirements, and directions; and (iii) not to engage in any other business or employment without the written consent
of the Company except as otherwise specifically provided herein.

 

(d)         Executive
acknowledges that he has received a copy of the Company’s Code of Ethics, that he has read the Code of Ethics and that this
Agreement does not supersede that policy.

 

		4.	Compensation and Benefits.

 

(a)         Base
Salary. During the Employment Term, the Company shall pay Executive a base salary at the annual rate of $180,000 per year
or such higher rate as may be determined annually by the Company (“Base Salary”). Such Base Salary, less applicable
withholdings, shall be paid in accordance with the Company’s standard payroll practice for executives.

 

(b)         Annual
Bonus. During the Employment Term, Executive will be eligible to receive an Annual Bonus each year, as determined in accordance
with the Applicable Plan approved by the Board (or Compensation Committee as the case may be) for Executive for such year. An example
of the Applicable Plan for 2011 is attached as Appendix A to this Agreement for illustration purposes only. Subsequent measurement
metrics will be determined by the Board (or Compensation Committee as the case may be) at their sole discretion for 2011 and each
subsequent year. The Board (or Compensation Committee as the case may be) has the right to change or eliminate the Applicable Plan
in its sole discretion at any time. The Annual Bonus to be paid to Executive in 2011 shall be based on the Company’s financial
performance in 2011, continuing in like progression with the Annual Bonus to be paid in any year based on the Company’s prior
year’s performance. Such Annual Bonus, less applicable withholdings, shall be paid within 2.5 months of the end of the taxable
fiscal year during which it was earned. Except as otherwise provided by Section 7, in order to be eligible to receive payment of
any portion of an Annual Bonus, Executive must be actively employed by the Company on the payment date. Notwithstanding the foregoing,
Executive acknowledges that whether any Annual Bonus is to be paid for a given year and the amount of that Annual Bonus is completely
at the discretion of the Board (or Compensation Committee as the case may be).

 

    	2

    	 

    

 

(c)         Incentive
Compensation. Executive shall be eligible to receive incentive compensation (“Incentive Compensation”) each
year, in accordance with the Applicable Plan approved by the Board (or Compensation Committee as the case may be) for Executive
for such year. The Incentive Compensation shall be in the form of equity-based awards (stock options and restricted stock of the
Company) under the Company’s incentive compensation plans. An example of the Applicable Plan for 2011 is attached as Appendix
A to this Agreement for illustration purposes only. Subsequent measurement metrics will be determined by the Board (or Compensation
Committee as the case may be) at their sole discretion for 2011 and each subsequent year. The Board (or Compensation Committee
as the case may be) has the right to change or eliminate the Applicable Plan in its sole discretion at any time. The Incentive
Compensation to be paid to Executive in 2012 shall be based on the Company’s financial performance in 2011, continuing in
like progression with the Incentive Compensation to be paid in any year based on the Company’s prior year performance. Such
Incentive Compensation shall be delivered to Executive within 2.5 months of the end of the taxable fiscal year during which it
was earned. Except as otherwise provided by Section 7, in order to be eligible to receive payment of any portion of the Incentive
Compensation, Executive must be actively employed by the Company on the payment date. Notwithstanding the foregoing, Executive
acknowledges that whether any Incentive Compensation is to be paid for a given year and the amount of that Incentive Compensation
is completely at the discretion of the Board (or Compensation Committee as the case may be).

 

(d)         Benefit
Plans, Fringe Benefits and Vacation. Executive shall be eligible to participate in any 401(k) savings plan generally made available
by the Company to other executives in accordance with the eligibility requirements of such plans and subject to the terms and conditions
set forth in such plans, except for any pension benefit. Executive shall be eligible to participate in any health and welfare plans
made available to other executives, including, but not limited to, any medical and dental benefits plan, life insurance plan, short-term
and long-term disability plans, or other executive benefit or fringe benefit plan. Executive will also be eligible to receive at
least four (4) weeks of vacation per calendar year, accrued and earned on a daily basis, as well as other types of paid time-off
(e.g., holidays, personal days, absence due to illness, etc.) according to the Company’s vacation and paid time-off policy.

 

(e)         Expense
Reimbursement. The Company shall promptly reimburse Executive for the ordinary and necessary business expenses incurred by
Executive in the performance of the duties under this Agreement in accordance with the Company’s customary practices applicable
to executives, provided that such expenses are incurred and accounted for in accordance with the Company’s expense reimbursement
policy. Reimbursement shall be made as soon as administratively practicable following Executive’s submission of the necessary
documents and receipts required under the Company’s expense reimbursement policy, but in no event later than December 31st
of the calendar year following the calendar year in which the expense was incurred.

 

(f)         Concession.
Executive will be provided with paid PDA or mobile phone service for one electronic device, as well as concession Telephone and
Toll Service and Internet Service consistent with those benefits available to other executives.

 

(g)         Indemnification.
Executive will be covered by the Company’s standard Director’s and Officer’s Indemnification Agreement, providing
for indemnification consistent with the New York Business Corporation Law and the Company’s by-laws.

 

		5.	Termination of Employment.

 

Executive’s employment
may be terminated by the Company or by Executive at any time for any reason. Upon termination, Executive shall be entitled to receive
the compensation and benefits described in Section 7. Executive’s employment will terminate under the following conditions:

 

    	3

    	 

    

 

(a)         Death.
Executive’s employment shall terminate upon Executive’s death.

 

(b)         Total
Disability. The Company may terminate Executive’s employment upon his becoming Totally Disabled. For purposes of this
Agreement, Executive shall be “Totally Disabled” if Executive is physically or mentally incapacitated so as
to render Executive incapable of performing his usual and customary duties under this Agreement without reasonable accommodation.
Executive’s receipt of disability benefits under the Company’s long-term disability plan, if any, or receipt of Social
Security disability benefits shall be deemed conclusive evidence of Total Disability for purpose of this Agreement; provided, however,
that in the absence of Executive’s receipt of such longterm disability benefits or Social Security benefits, the Company
may, in its reasonable discretion (but based upon appropriate medical evidence), determine that Executive is Totally Disabled.

 

(c)         Termination
by the Company for Cause.

 

		(i)	The Company may terminate Executive’s employment for Cause at any time after providing written
notice to Executive.

 

		(ii)	For purposes of this Agreement, the term “Cause” shall mean any of the following:
(A) conviction of a crime or a nolo contendere plea involving the alleged commission by Executive of a felony or of a criminal
act involving, in the good faith judgment and sole discretion of the Board, fraud, dishonesty, or moral turpitude; (B) refusal
or failure to perform employment duties reasonably requested by the Board after fifteen (15) days’ written notice by certified
mail of such failure to perform, specifying that the failure constitutes cause (other than as a result of vacation, sickness, illness
or injury); (C) fraud or embezzlement as determined by the Board; (D) gross misconduct or gross negligence in connection with the
business of the Company or an affiliate which has a substantial adverse effect on the Company or the affiliate; (E) breach of the
terms of the confidentiality, non-solicitation and non-competition provisions of Section 9 or (F) job performance which, in the
collective determination of the CEO, Chairman of the Board and Chairman of the Audit Committee, consistently or significantly,
fails to fulfill the duties and responsibilities contemplated by this Agreement, as generally described in Section 3.

 

		(iii)	Regardless of whether Executive’s employment initially was considered to be terminated for
any reason other than Cause, Executive’s employment will be considered to have been terminated for Cause for purposes of
this Agreement if the Board subsequently determines that Executive engaged in an act constituting Cause during the Employment Period
or Executive breached the terms of the terms of the confidentiality, non-solicitation and non-competition provisions of Section
9 after his termination.

 

(d)         Termination
by the Company Without Cause. The Company may terminate Executive’s employment at any time under this Agreement without
Cause after providing written notice to Executive.

 

    	4

    	 

    

 

(e)         Termination
by Executive. Executive may terminate his employment under this Agreement after providing thirty (30) days’ written notice
to the Company.

 

(f)         Expiration
of Initial Term or Renewal Period. In the event that either party gives written notice of non-renewal of the Initial Term or
a Renewal Period, as applicable, pursuant to Section 2, Executive’s employment shall terminate upon the expiration of the
Initial Term or Renewal Period.

 

		6.	Return of Property and Information.

 

Executive agrees that
when his employment with the Company ends, he will immediately return to the Company all property, data, information and knowledge
which are in his possession or under his control, including without limitation all documents, forms, correspondence, financial
records and forecasts, operation manuals, notebooks, reports, proposals, computer programs, software, software documentation, employee
handbooks, supervisor’s manuals, lists of clients and referral sources, client data, and all copies thereof, relating in
any way to the business of the Company, whether relating to the Company directly or to a client of the Company, made or obtained
by Executive during his employment with the Company, whether or not such data, information, or knowledge constitute confidential
or trade secret information.

 

		7.	Compensation Following Termination of Employment.

 

(a)         Termination
for Any Reason. Upon termination of Executive’s employment for any reason under this Agreement, Executive (or his designated
beneficiary or estate, as the case may be) shall be entitled to receive the following compensation:

 

		(i)	Earned but Unpaid Compensation. The Company shall pay Executive any accrued but unpaid Base
Salary for services rendered through the date of termination, any appropriately documented and accrued but unpaid expenses required
to be reimbursed under this Agreement, and any unused vacation accrued to the date of termination.

 

		(ii)	Other Compensation and Benefits. Except as may be provided under this Agreement, any benefits
to which Executive may be entitled through the date of Executive’s termination pursuant to the plans, policies and arrangements
referred to in Section 4(d) shall be determined and paid in accordance with the terms of such plans, policies and arrangements,
and except as otherwise provided by this Agreement, Executive shall have no right to receive any other compensation, or to participate
in any other plan, arrangement or benefit, with respect to future periods after such termination or resignation.

 

(b)         Termination
by the Company Without Cause not in Connection With a Change in Control. In the event Executive’s employment is terminated
without Cause before a Change in Control (as defined by Section 7(c)(iii)) or more than twenty-four (24) months after a Change
in Control, if Executive executes the Release and Waiver required by Section 8 and such Release and Waiver is not revoked on or
before the expiration of the revocation period thereof, and Executive has complied with the return of property and information
provision set forth in Section 6, then in addition to the payments to be made pursuant to Section 7(a), the Company shall also:

 

    	5

    	 

    

		(i)	Severance Pay. Pay to Executive severance pay in an amount equal to 100% of his Base Salary
in effect as of the date of his termination of employment. Payment of such Severance Pay shall be made in a lump sum as soon as
administratively practicable after the date of Executive’s termination (or if required by Section 409A, on the six (6) month
anniversary of his termination), but no later than ninety (90) days thereafter, and not before the expiration of the revocation
period for the Release and Waiver.

 

		(ii)	Annual Bonus. Pay to Executive the target amount of the Annual Bonus under the Applicable
Plan for the year in which the termination of Executive’s employment occurs. Payment of such Annual Bonus shall be made in
a lump sum as soon as administratively practicable after the date of Executive’s termination (or if required by Section 409A,
on the six (6) month anniversary of his termination), but no later than ninety (90) days thereafter, and not before the expiration
of the revocation period for the Release and Waiver.

 

		(iii)	Benefits Continuation. Continue to provide Executive and his family for the one-year period
following Executive’s termination with the health and welfare benefits, including, but not limited to, benefits under any
medical and dental benefits plan, life insurance plan, short-term and long-term disability plans, or other executive benefit or
fringe benefit plan, which Executive and his family were receiving as of the date of Executive’s termination. The Company
shall provide such benefits at the same cost to Executive as the cost, if any, charged to Executive for those benefits at the time
of his termination. To the extent that the provision of such benefits at the Company’s expense during the six (6) month period
following Executive’s termination would violate the requirements of Section 409A, then Executive shall be required to pay
to the Company the Company portion of the cost of such benefits during such six (6) month period, and the Company shall reimburse
Executive for the amounts so paid by Executive on the six (6) month anniversary of his termination, or as soon as administratively
practicable thereafter, but no later than ninety (90) days thereafter.

 

(c)         Termination
by the Company Without Cause or by Executive for Good Reason in Connection With a Change in Control.

 

		(i)	In the event Executive’s employment is terminated by the Company without Cause, or by Executive
for Good Reason, within the twenty-four (24) month period following a Change in Control, if Executive executes the Release and
Waiver required by Section 8 and such Release and Waiver is not revoked on or before the expiration of the revocation period thereof,
and Executive has complied with the return of property and information provision set forth in Section 6, then in addition to the
payments to be made pursuant to 7(a), but subject to Section 7(c)(iv), the Company shall also:

 

    	6

    	 

    

		(A)	Severance Pay. Pay to Executive severance pay in an amount equal to 150% of his Base
Salary at its highest level in effect from the date of the Change in Control through his termination of employment. Payment of
such Severance Pay shall be made in a lump sum as soon as administratively practicable after the date of Executive’s termination
(or if required by Section 409A, on the six (6) month anniversary of his termination), but no later than ninety (90) days thereafter,
and not before the expiration of the revocation period for the Release and Waiver.

 

		(B)	Annual Bonus. Pay to Executive 150% of the target amount of the Annual Bonus under the Applicable
Plan for the year in which the termination of Executive’s employment occurs. Payment of such Annual Bonus shall be made in
a lump sum as soon as administratively practicable after the date of Executive’s termination (or if required by Section 409A,
on the six (6) month anniversary of his termination), but no later than ninety (90) days thereafter, and not before the expiration
of the revocation period for the Release and Waiver.

 

		(C)	Equity Vesting Acceleration. Accelerate the vesting of and the lapsing of restrictions on
any unvested or restricted equity compensation (e.g., stock options, restricted stock, etc.).

 

		(D)	Benefits Continuation. Continue to provide Executive and his family for the one-year period
following Executive’s termination with the health and welfare benefits, including, but not limited to, benefits under any
medical and dental benefits plan, life insurance plan, short- term and long-term disability plans, or other executive benefit or
fringe benefit plan, which Executive and his family were receiving as of the date of Executive’s termination. The Company
shall provide such benefits at the same cost to Executive as the cost, if any, charged to Executive for those benefits at the time
of his termination. To the extent that the provision of such benefits at the Company’s expense during the six (6) month period
following Executive’s termination would violate the requirements of Section 409A, then Executive shall be required to pay
to the Company the Company portion of the cost of such benefits during such six (6) month period, and the Company shall reimburse
Executive for the amounts so paid by Executive on the six (6) month anniversary of his termination, or as soon as administratively
practicable thereafter, but no later than ninety (90) days thereafter.

 

    	7

    	 

    

		(ii)	“Good Reason.” For purposes of this Agreement, the term “Good
Reason” shall mean the occurrence of any of the following in connection with a Change in Control, without Executive’s
express written consent: (A) the assignment of duties to Executive materially inconsistent with Executive’s current authorities,
duties, responsibilities and status; (B) any reduction in Executive’s title, position, or reporting lines; (C) the relocation
of Executive to an office or location more than seventy-five (75) miles from the office or location of Executive’s work as
of the date of the Change in Control; (D) requiring Executive to travel on Company business to a substantially greater extent than
required as of the date of the Change in Control; or (E) the reduction in Executive’s Base Salary as in effect on the date
of the Change in Control.

 

		(iii)	“Change in Control.” For purposes of this Agreement, the term “Change
in Control” shall mean the happening of any of the following:

 

		(A)	Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”) becomes the beneficial
owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (1) the then outstanding common
shares of the Company (the “Outstanding Company Common Shares”) or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that such beneficial ownership shall not constitute a Change in Control
if it occurs as a result of any of the following acquisitions of securities: (I) any acquisition directly from the Company, (II)
any acquisition by the Company or any corporation, partnership, trust or other entity controlled by the Company (a “Subsidiary”),
(III) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary,
(IV) any acquisition by an underwriter temporarily holding Company securities pursuant to an offering of such securities, (V) any
acquisition by an individual, entity or group that is permitted to, and actually does, report its beneficial ownership on Schedule
13-G (or any successor schedule); provided that, if any such individual, entity or group subsequently becomes required to or does
report its beneficial ownership on Schedule 13D (or any successor schedule), then, for purposes of this paragraph, such individual,
entity or group shall be deemed to have first acquired, on the first date on which such individual, entity or group becomes required
to or does so report, beneficial ownership of all of the Outstanding Company Common Stock and Outstanding Company Voting Securities
beneficially owned by it on such date, or (VI) any acquisition by any corporation pursuant to a reorganization, merger or consolidation,
if, following such reorganization, merger or consolidation, the conditions described in clauses (I ), (2) and (3) of Section 7(c)(iii)(C)
are satisfied. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject
Person”) became the beneficial owner of 25% or more of the Outstanding Company Common Shares or Outstanding Company Voting
Securities as a result of the acquisition of Outstanding Company Common Shares or Outstanding Company Voting Securities by the
Company which, by reducing the number of Outstanding Company Common Shares or Outstanding Company Voting Securities, increases
the proportional number of shares beneficially owned by the Subject Person; provided, that if a Change in Control would be deemed
to have occurred (but for the operation of this sentence) as a result of the acquisition of Outstanding Company Common Shares or
Outstanding Company Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes
the beneficial owner of any additional Outstanding Company Common Shares or Outstanding Company Voting Securities which increases
the percentage of the Outstanding Company Common Shares or Outstanding Company Voting Securities beneficially owned by the Subject
Person, then a Change in Control shall then be deemed to have occurred; or

 

    	8

    	 

    

		(B)	Individuals who, as of the date of this Agreement, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs
as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board, including by reason of agreement intended to avoid or settle any such actual
or threatened contest or solicitation; or

 

    	9

    	 

    

		(C)	The consummation of a reorganization, merger, statutory share exchange, consolidation, or similar
corporate transaction involving the Company or any of its direct or indirect Subsidiaries (each a “Business Combination”)
in each case, unless, following such Business Combination, (1) the Outstanding Company Common Shares and the Outstanding Company
Voting Securities immediately prior to such Business Combination, continue to represent (either by remaining outstanding or being
converted into voting securities of the resulting or surviving entity or any parent thereof) more than 50% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting from Business Combination (including, without limitation,
a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries), (2) no Person (excluding the Company, any employee benefit plan (or related
trust) of the Company, a Subsidiary or such corporation resulting from such Business Combination or any parent or a subsidiary
thereof, and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly,
25% or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting
from such Business Combination (or any parent thereof) or the combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of directors, and (3) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination (or any parent thereof) were members of the Incumbent
Board at the time of the execution of the initial agreement or action of the Board providing for such Business Combination; or

 

		(D)	The consummation of the sale, lease, exchange or other disposition of all or substantially all
of the assets of the Company, unless such assets have been sold, leased, exchanged or disposed of to a corporation with respect
to which following such sale, lease, exchange or other disposition (1) more than 50% of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation
(or any parent thereof) entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company
Common Shares and Outstanding Company Voting Securities immediately prior to such sale, lease, exchange or other disposition in
substantially the same proportions as their ownership immediately prior to such sale, lease, exchange or other disposition of such
Outstanding Company Common Shares and Outstanding Company Voting Shares, as the case may be, (2) no Person (excluding the Company
and any employee benefit plan (or related trust) of the Company or a Subsidiary of such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such sale, lease, exchange or other disposition, directly or indirectly, 25%
or more of the Outstanding Company Common Shares or Outstanding Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of such corporation (or any parent
thereof) and the combined voting power of the then outstanding voting securities of such corporation (or any parent thereof) entitled
to vote generally in the election of directors, and (3) at least a majority of the members of the board of directors of such corporation
(or any parent thereof) were members of the Incumbent Board at the time of the execution of the initial agreement or action of
the Board providing for such sale, lease, exchange or other disposition of assets of the Company; or

 

    	10

    	 

    

		(E)	Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

 

		(iv)	Potential Section 280G Adjustment. In the event that any amount or benefit to be paid or
provided to Executive pursuant to Section 7(c)(i), taken together with any amounts or benefits otherwise paid or provided to Executive
by the Company or any affiliated company (collectively, the “Covered Payments”), would be an “excess
parachute payment,” as defined in Section 280G of the Internal Revenue Code and the related Treasury Regulations and
other guidance issued thereunder, and would thereby subject Executive to the tax imposed under Section 4999 of the Internal Revenue
Code (the “Excise Tax”), then the Company shall either (A) make the Covered Payment to Executive without adjustment
and subject to the Excise Tax, or (B) reduce the Covered Payments to the maximum amount that may be paid without Executive becoming
subject to the Excise Tax (such reduced amount, the “Payment Cap”), whichever provides the greater net after-tax
benefit to Executive. In the event that the reduction of the Covered Payments will provide Executive with the greater net after-tax
benefit, Executive shall have the right to designate which of the payments and benefits otherwise provided for in Section 7(c)(i)
that he will receive in connection with the application of the Payment Cap.

 

(d)         Termination
of Employment. For purposes of this Section 7, the term “termination of employment” and words of similar
import shall mean a “separation from service” as defined by Section 409A, and this Section 7 shall be interpreted
and administered consistent with such definition.

 

(e)         No
Mitigation; No Set-Off Against Severance Benefits. Executive shall not be required to mitigate damages or the amount of any
payment or benefits provided for under Section 7 by seeking other employment or otherwise, nor shall the amount of any payment
or benefits provided for in Section 7 be reduced by any compensation earned by Executive as a result of employment by another employer
after the date of termination of Executive’s employment with the Company, except as otherwise provided by the confidentiality,
non-solicitation and non-competition provisions of Section 9. In addition, the Company’s obligations under this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have
against Executive.

 

    	11

    	 

    

		8.	Release and Waiver.

 

(a)         In exchange
for the additional consideration under Section 7 to which Executive would not otherwise be entitled, Executive shall generally
and completely release the Company, its subsidiaries and affiliates, and its directors, officers, executives, shareholders, partners,
agents, attorneys, predecessors, successors, insurers and assigns from any and all claims, liabilities and obligations, both known
and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring at any time prior to
or at Executive’s termination. Such general release shall include, but shall not be limited to: (i) all claims arising out
of or in any way related to Executive’s employment with the Company or the termination of that employment; (ii) all claims
related to Executive’s compensation or benefits from the Company, including salary, bonuses, incentive compensation, vacation
pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, restricted stock, or any other ownership or
equity interests in the Company, or its subsidiaries or affiliates under all State and federal statutes such as the Fair Labor
Standards Act, the Family and Medical Leave Act, the Employee Retirement and Income Security Act, the New York Labor Law and any
similar Pennsylvania or other state or local statute, regulation or order; (iii) all claims for breach of contract, wrongful termination,
and breach of the implied covenant of good faith and fair dealing; (iv) all tort claims, including claims for fraud, defamation,
emotional distress, and discharge in violation of public policy; and (v) all federal, state, and local statutory claims, including
claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under, for example, the Age
Discrimination in Employment Act (the “ADEA”), Title VII of the Civil Rights Act of 1964, as amended, the Rehabilitation
Act of 1973, the Americans With Disabilities Act, the Equal Pay Act, the Family Medical Leave Act, the New York Human Rights Law
and any similar Pennsylvania or other state or local statute, regulation or order. Notwithstanding the foregoing, Executive shall
not be required to release the Company or its subsidiaries or affiliates from: (A) any obligation to indemnify Executive pursuant
to the articles and bylaws of the Company, any valid fully executed indemnification agreement with the Company, any applicable
directors and officers liability insurance policy, and applicable law; or (B) any obligations to make payments to Executive under
Section 7. Executive shall be required to represent that he has no lawsuits, claims or actions pending in his name, or on behalf
of any other person or entity, against the Company or its subsidiaries or affiliates, or any other person or entity subject to
the release to be granted under this Section.

 

(b)         Executive
shall acknowledge that: (i) he is knowingly and voluntarily waiving and releasing any rights he may have under the ADEA; (ii) that
the consideration given for the waiver and release (i.e., the additional consideration to be provided under Section 7) is in addition
to anything of value to which he is already entitled; and (iii) that he has been advised, as required by the ADEA, that: (A) his
waiver and release does not apply to any rights or claims that may arise after the date that he signs such release; (B) he should
consult with an attorney prior to signing the release (although he may choose voluntarily not to do so); (C) he has twenty-one
(21) days from the date he receives the proposed release to consider the release (although he may choose voluntarily to sign it
earlier); (D) he has seven (7) days following the date he signs the release to revoke the release by providing written notice of
his revocation to the Board; and (E) the release will not be effective until the date upon which the revocation period has expired,
which will be the eighth day after the date that the release is signed by Executive.

 

    	12

    	 

    

(c)         The claims
included in this release and waiver do not include vested rights, if any, under any qualified retirement plan in which Executive
participates, and his COBRA, unemployment compensation and worker’s compensation rights, if any. Nothing in this release
shall be construed to constitute a waiver of: (i) any claims Executive may have against the Company that arise from acts or omissions
that occur after the effective date of this Release; (ii) Executive’s right to file an administrative charge with any governmental
agency concerning the termination of that employment; or (iii) Executive’s right to participate in any administrative or
court investigation, hearing or proceeding. Executive agrees, however, to waive and release any right to receive any individual
remedy or to recover any individual monetary or non-monetary damages as a result of any such administrative charge or proceeding.
In addition, this release does not affect Executive’s rights as expressly created by this Agreement, and does not limit his
ability to enforce this Agreement.

 

		9.	Executive Covenants.

 

(a)         Non-Disclosure
of Confidential Information and Trade Secrets.

 

		(i)	During the course of Executive’s employment with the Company, Executive will acquire and
have access to Confidential Information and Trade Secrets belonging to the Company, its affiliates, subsidiaries, divisions and
joint ventures (collectively referred to as the “Company” throughout and for purposes of this Section 9). Such
Confidential Information and Trade Secrets include, without limitation, business and technical information, whatever its nature
and form and whether obtained orally, by observation, from written materials or otherwise, as for example: (A) financial and business
information, such as information with respect to costs, commissions, fees, profits, profit margins, sales, markets, mailing lists,
accounts receivables and accounts payables, pricing strategies, strategies and plans for future business, new business, product
or other development, potential acquisitions or divestitures, and new marketing ideas; (B) marketing information, such as information
on markets, end users and applications, the identity of the Company’s customers, vendors, suppliers, and distributors, their
names and addresses, the names of representatives of the Company’s customers, vendors, distributors or suppliers responsible
for entering into contracts with the Company, the Company’s financial arrangements with its distributors and suppliers, the
amounts paid by such customers to the Company, specific customer needs and requirements, leads and referrals to prospective customers;
and (C) personnel information, such as the identity and number of the Company’s employees, personal information such as social
security numbers, skills, qualifications, and abilities. Executive acknowledges and agrees that the Confidential Information and
Trade Secrets are not generally known or available to the general public, but have been developed, complied or acquired by the
Company at its great effort and expense and for commercial advantage and, therefore, takes every reasonable precaution to prevent
the use or disclosure of any part of it by or to unauthorized persons. Confidential Information and Trade Secrets can be in any
form or media, whether oral, written or machine readable, including electronic files.

 

    	13

    	 

    

		(ii)	Executive agrees he will not, while associated with the Company and for so long thereafter as the
pertinent information or documentation remains confidential, directly or indirectly use, disclose or disseminate to any other person,
organization or entity or otherwise use any Confidential Information and Trade Secrets, except as specifically required in the
performance of Executive’s duties on behalf of the Company or with prior written authorization from the Board.

 

(b)         Non-Solicitation
of Customers. Executive acknowledges and agrees that during the course of and solely as a result of employment with the Company,
he will come into contact with some, most or all of the Company’s customers and will have access to Confidential Information
and Trade Secrets regarding the Company’s customers, distributors and suppliers. Consequently, Executive covenants and agrees
that in the event of the termination of his employment, whether such termination is voluntary or involuntary, Executive will not,
for a period of twelve (12) months following such termination, directly or indirectly, solicit or initiate contact with any customer,
former customer or prospective customer of the Company for the purpose of selling products or services to the customer competitive
with the products or services purchased by the customer from the Company. This restriction shall apply to any customer, former
customer or prospective customer of the Company with whom Executive had contact or about whom Executive obtained Confidential Information
or Trade Secrets during his employment with the Company. For the purposes of this Section, “contact” means interaction
between Executive and the customer or then prospective customer which takes place to further the business relationship, or making
sales to our performing services for the customer or prospective customer on behalf of the Company. This restriction will not apply
when a former employee who is not working in a competitive capacity responds to a request for proposal on behalf of his new employer
who is not engaged in the same or similar businesses as the Company.

 

(c)         Non-Compete.
Executive acknowledges that his services are special and unique, and compensation is partly in consideration of and conditioned
upon Executive not competing with Company, and that a covenant on Executive’s part not to compete is essential to protect
the business and good will of the Company. Accordingly, except as hereinafter provided, Executive agrees that for twelve (12)
months after the termination of his employment, Executive shall not be engaged or interested as a director, officer, stockholder
(except as provided herein), employee, partner, individual proprietor, lender or in any other capacity, in any business, which
competitive with the business of the Company as conducted at the time of Executive’s termination and which involves Executive’s
knowledge, actions or assistance within the states of Pennsylvania, New Jersey, New York, Delaware, Maryland, Connecticut, Rhode
Island or Massachusetts (the “Restricted Territory”); however, this restriction will not apply to new kinds
of business in which Executive may engage in the future, after such termination, unless Executive has been actively engaged in
the development or otherwise involved in such business while an employee of the Company. In addition, Executive agrees that for
this same twelve (12) months, he shall not recruit or recommend any other person who is or was an employee of the Company while
Executive was also an employee, to any business which is competitive with the business of Executive as conducted at the time of
Executive’s termination and which involves Executive’s knowledge, actions or assistance within the Restricted Territory.
Nothing herein shall prohibit Executive from investing in any securities of any corporation which is in competition with the Company,
whose securities are listed on a national exchange or traded in the over-the-counter market if Executive shall own less than 5%
of the outstanding securities of such operation.

 

    	14

    	 

    

(d)         Enforcement
of Covenants. Executive acknowledges and agrees that compliance with the covenants set forth in this Section 9 is necessary
to protect the Confidential Information and Trade Secrets, business and goodwill of the Company, and that any breach of this Section
9 will result in irreparable and continuing harm to the Company, for which money damages may not provide adequate relief. Accordingly,
in the event of any breach or anticipatory breach of Section 9 by Executive, the Company and Executive agree that the Company shall
be entitled to the following particular forms of relief as a result of such breach, in addition to any remedies otherwise available
to it at law or equity: (i) injunctions, both preliminary and permanent, enjoining or restraining such breach or anticipatory breach,
and Executive hereby consents to the issuance thereof forthwith and without bond; and (ii) recovery of all reasonable sums and
costs, including attorneys’ fees, incurred by the Company to enforce the provisions of this Section 9. Executive understands
and acknowledges that this Agreement, including the provisions of this Section 9, were conditions precedent to the performance
by the Company and WVN of their obligations under the Purchase Agreement, and that the provisions hereof are essential elements
of the transactions contemplated by the Purchase Agreement, and that the value of the Purchased Assets (as defined in the Purchase
Agreement) would seriously diminished if Executive were to violate any of the provisions of this Section 9.

 

(e)         Limitations.
Notwithstanding anything to the contrary contained in this Agreement, in the event (i) WVN defaults in its payment of any of the
Purchase Price or Additional Consideration (each as defined in the Purchase Agreement), when due, under the Purchase Agreement,
(ii) the Company defaults in its payment of any amounts due to Executive pursuant to this Agreement, or (iii) the Company defaults
in its payment or performance of any of its obligations under the Lock-Up Agreement (as defined in the Purchase Agreement), and
in each case such breach or default continues uncured by the Company or WVT for a period of thirty (30) days following written
notice of any such breach, the restrictive covenants set forth in Section 9(b) and Section 9(c) (but expressly excluding Section
9(a), which shall continue to apply in full force and effect) shall be null, void and of no further force and effect and Executive
shall forever be relieved of all restrictions thereunder.

 

		10.	Withholding of Taxes

 

The Company shall withhold
from any compensation and benefits payable under this Agreement all applicable federal, state, local or other taxes.

 

		11.	No Claim Against Assets.

 

Nothing in this Agreement
shall be construed as giving Executive any claim against any specific assets of the Company or as imposing any trustee relationship
upon the Company in respect of Executive. The Company shall not be required to establish a special or separate fund or to segregate
any of its assets in order to provide for the satisfaction of its obligations under this Agreement. Executive’s rights under
this Agreement shall be limited to those of an unsecured general creditor of the Company and its affiliates.

 

    	15

    	 

    

		12.	Executive Acknowledgement.

 

Executive acknowledges
that he has had the opportunity to discuss this Agreement with and obtain advice from his private attorney, has had sufficient
time to and has carefully read and fully understands all of the provisions of this Agreement, and is knowingly and voluntarily
entering into this Agreement.

 

		13.	Successors and Assignment.

 

(a)         Except
as otherwise provided in this Agreement, this Agreement shall inure to the benefit of and be binding upon the parties hereto and
their respective heirs, representatives, successors and assigns.

 

(b)         The Company
shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to Executive, to
acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof,
and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement by the Company.

 

(c)         The rights
and benefits of Executive under this Agreement are personal to him and no such right or benefit shall be subject to voluntary or
involuntary alienation, assignment or transfer; provided, however, that nothing in this Section 13 shall preclude Executive from
designating a beneficiary or beneficiaries to receive any benefit payable on his death.

 

		14.	Entire Agreement; Amendment.

 

This Agreement shall
supersede any and all existing oral or written agreements, representations, or warranties between Executive and the Company (or
any of its subsidiaries or affiliated entities) relating to the terms of Executive’s employment, except for the Company’s
Code of Ethics and the Director’s and Officer’s Indemnification Agreement. This Agreement may not be amended except
by a written agreement signed by both parties.

 

		15.	Governing Law.

 

This Agreement shall
be governed by and construed in accordance with the domestic substantive laws of the State of New York, without giving effect to
any conflicts or choice of laws rule or provision that would result in the application of the domestic substantive laws of any
other jurisdiction.

 

    	16

    	 

    

		16.	Section 409A.

 

The parties intend
that this Agreement and the payments and benefits to be provided hereunder satisfy the requirements of Section 409A, and this Agreement
shall be administered and interpreted consistent with such intention.

 

		17.	Notices.

 

Any notice, consent,
request or other communication made or given in connection with this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by registered or certified mail, return receipt requested, or by facsimile or by hand
delivery, to those listed below at their following respective addresses or at such other address as each may specify by notice
to the others:

 

	To the Company:
	Warwick Valley Telephone
    Company
	Attention: President
    and CEO
	47 Main Street
	Warwick, New York 10990
	 
	To Executive:
	At the address set forth
    below

 

		18.	Miscellaneous.

 

(a)         Waiver.
The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a
waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of
this Agreement.

 

(b)         Severability.
If any term or provision of this Agreement is declared illegal or unenforceable by any court of competent jurisdiction and cannot
be modified to be enforceable, such term or provision shall immediately become null and void, leaving the remainder of this Agreement
in full force and effect.

 

(c)         Headings.
Section headings are used herein for convenience of reference only and shall not affect the meaning of any provision of this Agreement.

 

(d)         Rules
of Construction. Whenever the context so requires, the use of the singular shall be deemed to include the plural and vice versa.

 

(e)         Authority
to Enter into this Agreement. The officer of the Company whose signature appears below has been authorized to enter into this
Agreement on behalf of the Company.

 

(f)         Counterparts.
This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, and
such counterparts will together constitute but one agreement.

 

    	17

    	 

    

  

In
Witness Whereof, the parties hereto have duly executed this Agreement as of the day and year set forth below.

 

	Warwick Valley Telephone Company	 	Executive
	 	 	 
	By:	/s/ Duane W. Albro	 	By:	/s/ John Mercer
	 	 	 	 	 
	Name:	Duane W. Albro	 	Address:	 
	 	 	 	 	 

	Title:	President and CEO	 	 
	 	 	 	 	 
	Date:	8/16/11	 	Date:	8/8/11

  

    	18

    	 

    

 

APPENDIX
A

 

Illustration of Annual
Bonus and Incentive Compensation (Long Term Incentive Plan) — CTO

 

Annual Bonus Performance Matrix:

 

The performance matrix below will be used to calculate
the Payout Factor amounts. The Payout Factor amounts will be applied to both the Target Annual Bonus and the Target Incentive Compensation
amounts.

 

Target Annual Bonus:

Target Annual Bonus Amount: 30% x [base salary of $170,000]
= $51,000

Actual Annual Bonus Payout: [Target Annual Bonus Amount
of $51,000] x [calculated Payout Factor]

 

Methodology:

 

Target Financial Metrics will be determined for each year by
the Board of Directors on behalf of the Company and in collaboration with the CEO.

 

The matrix below reflects both the elements of performance
that will be evaluated and the weightings associated with each Financial Metric to determine the applicable payout factor that
will be used to calculate the Annual Bonus and Incentive Compensation amounts. 

 

	Financial Metric	 	Weighting	 	Result	 	Target	 	Actual/Target	 	Payout Factor
	 	 	A	 	B	 	C	 	(B/C)	 	A x (B/C)
	Revenue	 	0.25	 	TBD	 	$	TBD	 	TBD	 	TBD
	EBITDA	 	0.25	 	TBD	 	$	TBD	 	TBD	 	TBD
	Free Cash Flow	 	0.25	 	TBD	 	$	TBD	 	TBD	 	TBD
	Net Income	 	0.15	 	TBD	 	$	TBD	 	TBD	 	TBD
	BOD Discretion	 	0.10	 	NA	 	 	NA	 	NA	 	TBD
	Total	 	1.00	 	 	 	 	 	 	 	 	Total Payout Factor

 

Illustrative Example:
By way of illustration only, assume the following Financial Metric targets: (1) Revenue: $30,000,000; (2) EBITDA: $5,000,000;
(3) Free Cash Flow: $2,000,000; and (4) Net Income: $6,000,000. Assume the following actual financial results for the fiscal year:
(1) Actual Revenue: $28,000,000; (2) Actual EBITDA: $4,000,000; (3) Actual Free Cash Flow: $1,500,000; and (4) Actual Net Income:
$5,000,000. The resulting payout factor calculations would be calculated as follows:

 

    	19

    	 

    

 

	Financial Metric	 	Weighting	 	Result	 	Target	 	Actual/Target	 	Payout Factor
	 	 	A	 	B	 	C	 	(B/C)	 	A x (B/C)
	Revenue	 	0.25	 	$	28,000,000	 	$	30,000,000	 	.9333	 	.2333
	EBITDA	 	0.25	 	$	4,000,000	 	$	5,000,000	 	.8000	 	.2000
	Free Cash Flow	 	0.25	 	$	1,500,000	 	$	2,000,000	 	.7500	 	.1875
	Net Income	 	0.15	 	$	5,000,000	 	$	6,000,000	 	.8333	 	.1250
	BOD Discretion	 	0.10	 	N/A	 	N/A	 	N/A	 	.1000
	Total	 	1.00	 	 	 	 	 	 	 	.8458

  

Based upon this illustration,
which also assumes the BOD Discretionary component is paid out in the full 10% amount, the actual Annual Bonus to be paid would
be based on a payout factor of .8458 and result in an Annual Bonus of $51,000 x .8458 or $43,136.

 

Notwithstanding the foregoing matrix, in the event that
the actual results / target results for Revenue and Net Income are less than .9000 (90%) then the payout factor attributable to
those metrics of measurement will be zero, respectively. Likewise, in the event that the actual results / target results for EBITDA
and Free Cash Flow are less than .7500 (75%) then the payout factor attributable to those metrics of measurement will be zero,
respectively. This methodology will also be applied to Incentive Compensation payout in the same manner.

 

Incentive Compensation (Long Term Incentive Plan) Component:

 

		Ø	Target Incentive Compensation Component

  

	Stock Options:	10,000
	 	 
	Restricted Shares:	  2,500

 

Applying the same methodological
approach used to determine the Annual Bonus payout as shown above would result in an Incentive Compensation payout of: 

 

	Stock Options:	10,000 x .8458 = 8458
	 	 
	Restricted Shares:	2,500 x .8458 = 2,115

  

For calculating both
the Annual Bonus and the Incentive Compensation, the Board of Directors retains the sole discretion to award compensation, if
any, under this Appendix A. 

 

    	20NEITHER THE ISSUANCE AND SALE
OF THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE
OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. SUBJECT TO THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

	Principal Amount: $32,500.00	Issue Date: January 18, 2012        
	Purchase Price: $32,500.00	 

 

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE
RECEIVED, DIGERATI TECHNOLOGIES, INC., a Nevada corporation (hereinafter called the "Borrower"), hereby promises
to pay to the order of ASHER ENTERPRISES, INC., a Delaware corporation, or registered assigns (the "Holder")
the sum of $32,500.00 together with any interest as set forth herein, on October 23, 2012 (the "Maturity Date"), and
to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the "Interest Rate") per annum
from the date hereof (the "Issue Date") until the same becomes due and payable, whether at maturity or upon acceleration
or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein.
Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent
(22%) per annum from the due date thereof until the same is paid ("Default Interest"). Interest shall commence accruing
on the date that the Note is fully funded (fully paid) and shall be computed on the basis of a 365-day year and the actual number
of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the "Common
Stock") in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments
shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the
provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business
day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment
date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account
for purposes of determining the amount of interest due on such date. As used in this Note, the term "business day" shall
mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized
or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have
the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note
was originally issued (the "Purchase Agreement").

 

    	 

    	 

    

 

This Note is
free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights
or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms
shall apply to this Note:

 

ARTICLE I. CONVERSION RIGHTS

 

1.1         
Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the
date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and
(ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect
of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount
of this Note into fully paid and nonassessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares
of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at
the conversion price (the "Conversion Price") determined as provided herein (a "Conversion"); provided,
however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of
this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion
of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion
or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion
of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership
by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Regulations 13D-G thereunder, except as otherwise provided in clause
(1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder
upon, at the election of the Holder, not less than 61 days' prior notice to the Borrower, and the provisions of the conversion
limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in
such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined
by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in
the notice of conversion, in the form attached hereto as Exhibit A (the "Notice of Conversion"), delivered to the Borrower
by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail
(or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York
time on such conversion date (the "Conversion Date"). The term "Conversion Amount" means, with respect to any
conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at
the Borrower's option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note
to the Conversion Date, plus (3) at the Borrower's option, Default Interest, if any, on the amounts referred to in the immediately
preceding clauses (1) and/or (2) plus (4) at the Holder's option, any amounts owed to the Holder pursuant to Sections 1.3
and 1.4(g) hereof.

 

    	2

    	 

    

 

1.2         Conversion
Price.

 

(a)          Calculation
of Conversion Price. The Conversion Price shall be the greater 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 58% multiplied by the Market Price (as defined herein)(representing a discount rate of 42%). "Market
Price" means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10)
Trading Day period ending on the last complete Trading Day prior to the Conversion Date. "Trading Price" means, for any
security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the "OTCBB")
as reported by a reliable reporting service ("Reporting Service") designated by the Holder (i.e. Bloomberg) or, if the
OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities
exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in
any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the
"pink sheets" by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated for such security on such
date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and
the holders of a majority in interest of the Notes being converted for which the calculation of the trading price is required in
order to determine the Conversion Price of such Notes. "Trading Day" shall mean any day on which the Common Stock is
tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock
is then being traded. Fixed Conversion Price shall mean $0.00009.

 

(b)          Conversion
Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower
(i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which
the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially
all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer
to purchase 50% or more of the Borrower's Common Stock (or any other takeover scheme) (the date of the announcement referred to
in clause (i) or (ii) is hereinafter referred to as the "Announcement Date"), then the Conversion Price shall, effective
upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to
the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and
(y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in Section 1.2(a). For purposes hereof, "Adjusted Conversion Price Termination
Date" shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement
as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the
person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of
the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

 

    	3

    	 

    

 

1.3         Authorized
Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock
upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have
sixty five (65) million shares authorized but unissued in its capital structure such that when the Holder submits a Notice of Conversion
there will be at a minimum sixty five (65) million shares of Common Stock that are authorized but unissued for the Borrower's transfer
agent to issue to the Holder (the "Reserved Amount"). This Reserved Amount is in addition to any shares presently held
or to be held in the future by the transfer agent for the benefit of the Holder. If at any time the Reserved Amount is less than
sixty five (65) million shares of Common Stock then the Borrower will take immediate steps to increase the reserve but in any event
will increase the reserve within thirty (30) days of the Reserved Amount falling below sixty five (65) million shares of Common
Stock (the "Cure Period"). The Borrower represents that upon issuance, such shares will be duly and validly issued, fully
paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which
would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price,
the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common
Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges
that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this
Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged
with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance
with the terms and conditions of this Note.

 

If, at any time
the Borrower does not maintain the Reserved Amount (subject to the Cure Period) it will be considered an Event of Default under
Section 3.2 of the Note.

 

1.4         Method
of Conversion.

 

(a)          Mechanics
of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to
time after the expiration of 180 days, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other
reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject
to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

 

    	4

    	 

    

 

(b)          Surrender
of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance
with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount
so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower,
so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such
records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding
the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the
Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate 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 Common Stock or other securities or property on conversion of this Note in a name other than that of the
Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property
unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held
for the Holder's account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have
established to the satisfaction of the Borrower that such tax has been paid.

 

(d)          Delivery
of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other
reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section
1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for
the Common Stock issuable upon such conversion within three (3) business days after such receipt (the "Deadline") (and,
solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms
hereof and the Purchase Agreement.

 

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

 

    	5

    	 

    

 

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

 

(g)          Failure
to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder's right to pursue other remedies, including
actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this
Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure
shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline
that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following
the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month
following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall
accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common
Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder.
The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible
to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

 

1.5         
Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless
(i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent
shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions
of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor
rule) ("Rule 144") or (iv) such shares are transferred to an "affiliate" (as defined in Rule 144) of the Borrower
who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor
(as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions
set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under
the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular
date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that
has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration
statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

    	6

    	 

    

 

"THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE
OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. SUBJECT TO THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES."

 

The legend set
forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend
if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without
registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in
the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an
effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to
the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not accept
the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration,
such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

1.6         Effect
of Certain Events.

 

(a)          Effect
of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all
of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more
than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the
Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall 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.

 

    	7

    	 

    

  

(b)          Adjustment
Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all
of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar
event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares
of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all
or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted
in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such
case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the
provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities
or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section
1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen
(15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record
date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event
or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring
entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly
apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

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

 

(d)
         Adjustment Due
to Dilutive Issuance. If, at any time when this Note is outstanding, the Borrower issues or sells, or in accordance with this
Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration
per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith)
less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a "Dilutive
Issuance"), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration
per share received by the Borrower in such Dilutive Issuance.

 

    	8

    	 

    

 

The Borrower
shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights
or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase
Common Stock or other securities convertible into or exchangeable for Common Stock ("Convertible Securities") (such warrants,
rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as "Options") and the
price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in
effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the "price
per share for which Common Stock is issuable upon the exercise of such Options" is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion
of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance
of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.

 

Additionally,
the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible
Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the
price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect,
then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon such conversion or exchange" is determined by dividing (i) the total amount,
if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof
at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion
Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

Excluded from
the definition of Dilutive Issuance are prior publically disclosed warrants, options and or convertible instruments, or future
employee option grants under the 2005 Stock Compensation Plans.

 

    	9

    	 

    

 

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

 

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

  

1.7         Trading
Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the
Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note
and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower
can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the "Maximum
Share Amount"), which shall be 4.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement),
subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and
similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, if
the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower's
ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note,
this will be considered an Event of Default under Section 3.3 of the Note.

 

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

 

    	10

    	 

    

 

1.9         Prepayment.
Notwithstanding anything to the contrary contained in this Note, so long as the Borrower has not received a Notice of Conversion
from the Holder, then at any time during the period beginning on the Issue Date and ending on the date which is ninety (90) days
following the date hereof, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written
notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this
Section 1.9. Any notice of prepayment hereunder (an "Optional Prepayment Notice") shall be delivered to the Holder of
the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2)
the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On
the date fixed for prepayment (the "Optional Prepayment Date"), the Borrower shall make payment of the Optional Prepayment
Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one
(1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall
make payment to the Holder of an amount in cash (the "Optional Prepayment Amount") equal to the sum of: (w) 135%, multiplied
by the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount
of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w)
and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an
Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business
days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to repay the Note pursuant to this Section
1.9.

 

Notwithstanding
anything to the contrary contained in this Note, at any time during the period beginning on the date which is ninety-one (91) days
following the issue date and ending on the date which is one hundred twenty (120) days following the issue date, the Borrower shall
have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the
outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice
shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its
right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the
Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Second Optional Prepayment
Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one
(1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall
make payment to the Holder of an amount in cash (the "Second Optional Prepayment Amount") equal to the sum of: (w) 140%,
multiplied by the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal
amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses
(w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers
an Optional Prepayment Notice and fails to pay the Second Optional Prepayment Amount due to the Holder of the Note within two (2)
business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant
to this Section 1.9.

 

    	11

    	 

    

 

Notwithstanding
any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred twenty-one
(121) day from the issue date and ending one hundred eighty (180) days following the issue date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note
(principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered
to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay
the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment
Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount (as defined below)
to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to
the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the "Third Optional Prepayment Amount") equal to the sum of: (w) 150%, multiplied by the then outstanding
principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional
Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and
fails to pay the Third Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

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

 

ARTICLE II. CERTAIN COVENANTS

 

2.1         Distributions
on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder's
written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or
other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares
of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its
capital stock except for distributions pursuant to any shareholders' rights plan which is approved by a majority of the Borrower's
disinterested directors.

 

    	12

    	 

    

 

2.2         Restriction
on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the
Holder's written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities
or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants,
rights or options to purchase or acquire any such shares.

 

2.3         Borrowings.
So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder's written consent,
create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any
person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection,
or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of
which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions
incurred in the ordinary course of business, (c) borrowings that in the aggregate do not exceed $1,000,000.00 or (c) borrowings,
the proceeds of which shall be used to repay this Note.

 

2.4         Sale
of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder's
written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business.
Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

2.5         Advances
and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder's
written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a)
in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b)
made in the ordinary course of business or (c) not in excess of $100,000.

 

ARTICLE III. EVENTS OF DEFAULT

 

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

 

3.1         Failure
to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether
at maturity, upon acceleration or otherwise.

  

    	13

    	 

    

 

3.2         Conversion
and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that
it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with
the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form)
any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when
required by thisNote, the Borrower directs its transfer
agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in
certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant
to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays,
and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this
Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor
the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement
or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have
delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent.
It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance
owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower's transfer
agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48)
hours of a demand from the Holder.

 

3.3         Breach
of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days
after written notice thereof to the Borrower from the Holder.

 

3.4         Breach
of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement
or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement),
shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have)
a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.5         Receiver
or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply
for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such
a receiver or trustee shall otherwise be appointed.

 

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

 

3.7         Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the
Borrower.

 

    	14

    	 

    

 

3.8         Delisting
of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent
replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock
Exchange.

 

3.9         Failure
to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or
the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

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

 

3.11       Cessation
of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts
as such debts become due, provided, however, that any disclosure of the Borrower's ability to continue as a "going concern"
shall not be an admission that the Borrower cannot pay its debts as they become due.

 

3.12       Maintenance
of Assets. The failure by Borrower to maintain any material intellectual properly rights, personal, real property or other
assets which are necessary to conduct its business (whether now or in the future).

 

3.13       Financial
Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period
from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement
would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder
with respect to this Note or the Purchase Agreement.

 

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

 

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

 

    	15

    	 

    

 

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

 

Upon the occurrence
and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal
hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall
pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON
THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY
DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO
THE DEFAULT SUM (AS DEFINED HEREIN). Upon the occurrence and during the continuation of any Event of Default specified in Sections
3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market
Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.2, 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3.15
exercisable through the delivery of written notice to the Borrower by such Holders (the "Default Notice"), and upon the
occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof
or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and
the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i)
the sum of (w) 150% times the then outstanding principal amount of this Note plus (x) accrued and unpaid interest
on the unpaid principal amount of this Note to the date of payment (the "Mandatory Prepayment Date") plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant
to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts
referred to in clauses (x), (y) and (z) shall collectively be known as the "Default Sum") or (ii) the "parity value"
of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion
of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory
Prepayment Date as the "Conversion Date" for purposes of determining the lowest applicable Conversion Price, unless the
Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall
be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on
the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the "Default
Amount") and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment
or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses,
of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

    	16

    	 

    

 

If the Borrower
fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient
authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number
of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

 

ARTICLE IV. MISCELLANEOUS

 

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

 

4.2         Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:

 

If to the Borrower, to:

DIGERATI TECHNOLOGIES, INC.

3463 Magic Drive - suite 202

San Antonio, TX 78229

Attn: ARTHUR L. SMITH,Chief Executive Officer

Facsimile:

 

With a copy by fax only to (which copy shall not constitute
notice):

Kane Russell Coleman & Logan PC

Attn: Lawrence E. Wilson

919 Milan, Suite 2200

Houston, Texas 77002

facsimile: 713-425-7700

 

    	17

    	 

    

 

If to the Holder:

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attn: Curt Kramer, President

facsimile: 516-498-9894

 

With a copy by fax only
to (which copy shall not constitute notice):

Naidich Wurman Birnbaum &
Maday, LLP

80 Cuttermill Road, Suite 410

Great Neck, NY 11021

Attn: Bernard S. Feldman, Esq.

facsimile: 516-466-3555

 

4.3         Amendments.
This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term
"Note" and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes
issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

4.4         Assignability.
This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Each transferee of this Note must be an "accredited investor" (as defined in Rule 501(a)
of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection
with a bona   fide margin account or other lending arrangement, provided that such actions
are not prohibited by state or federal law.

 

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

 

4.6         Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles
of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note
shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties
to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not
assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive
trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.
In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party
hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in
connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

    	18

    	 

    

 

4.7         Certain
Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount
(or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest,
the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult
to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate
the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock
acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower
and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the
Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

 

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

 

4.9         Notice
of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior
notification of any meeting of the Borrower's shareholders (and copies of proxy materials and other information sent to shareholders).
In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including
by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed
sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or
winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement
regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower
shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section 4.9.

 

    	19

    	 

    

 

4.10         Remedies.
The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the
remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened
breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing
economic loss and without any bond or other security being required.

  

IN WITNESS WHEREOF,
Borrower has caused this Note to be signed in its name by its duly authorized officer this January 18, 2012.

  

	 	DIGERATI TECHNOLOGIES, INC.
	 	 	 
	 	By:	/s/ Arthur L. Smith
	 	 	ARTHUR L. SMITH
	 	 	Chief Executive Officer

 

    	20

    	 

    

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

The undersigned
hereby elects to convert $                     
principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion
of the Note ("Common Stock") as set forth below, of DIGERATI TECHNOLOGIES, INC., a Nevada corporation (the "Borrower")
according to the conditions of the convertible note of the Borrower dated as of January 18, 2012 (the "Note"), as of
the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

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

 

Name of DTC Prime Broker:

Account Number:

 

		 ̈	The undersigned hereby requests that the
Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based
on the Holder's calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on
an attachment hereto:

 

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attention: Certificate Delivery

(516)498-9890

 

	Date of Conversion:	 	 
	Applicable Conversion Price:	$	 
	Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes:	 	 
	Amount of Principal Balance Due remaining Under the Note after this conversion:	 	 

 

	ASHER ENTERPRISES, INC.	 
	 	 
	By:	 	 
	Name: Curt Kramer	 
	Title:  President	 
	Date:	 	 	 
	Great Neck, NY. 11021

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00201-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00201-of-00352.parquet"}]]