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

Principal Amount: $___________          Issue Date: ______________ ___, 201___
Purchase Price: $___________

                           CONVERTIBLE PROMISSORY NOTE

     FOR  VALUE  DECEIVED,  AVSTAR  AVIATION GROUP, INC., a Colorado 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  $___________  together  with  any interest as set forth
herein,  on  ______________  ___,  201___  (the  "Maturity  Date"),  and  to pay
interest  on  the  unpaid  principal  balance  hereof at the rate of ___________
percent  (_____%)  (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.  Any amount of principal or interest on this Note which is
not  paid when due shall bear interest at the rate of __________________ percent
(______%)  per  annum from the due date thereof until the same is paid ("Default
Interest").  Interest  shall  commence  accruing  on  the  Issue  Date, shall be
computed  on  the basis of a 365-day year and the actual number of days elapsed.
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 RIGHTS1ARTICLE 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 of this Note and
ending  on  the  later of: (1) the Maturity Date and (ii) the date of payment of
the  Default  Amount  (as  defined in Article III) pursuant to Section 1.6(a) or
Article  III,  each  in respect of the remaining outstanding principal amount of
this  Note  to  convert  all or any part of the outstanding and unpaid principal
amount  of  this Note into fully paid and non-assessable shares of Common Stock,
as such Common Stock exists on the Issue Date, or any shares of capital stock or
other securities of the Borrower into which such Common Stock shall hereafter be
changed  or  reclassified  at  the  conversion  price  (the  "Conversion Price")
determined  as  provided  herein  (a  "Conversion"); provided however that in no
event shall the Holder be entitled to convert any portion of this Note in excess
of  that portion of this Note upon conversion of which the sum of (1) the number
of  shares  of  Common Stock beneficially owned by the Holder and its affiliates
(other  than  shares  of  Common  Stock  which  may be deemed beneficially owned
through the ownership of the unconverted portion of the Notes or the unexercised
or  unconverted  portion  of  any  other  security  of the Borrower subject to a
limitation  on  conversion  or  exercise  analogous to the limitations contained
herein)  and  (2)  the  number  of  shares  of  Common  Stock  issuable upon the
conversion  of  the portion of this Note with respect to which the determination
of  this  proviso  is  being  made,  would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock.  For  purposes  of  the  proviso  to  the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities  Exchange  Act  of  1934,  as  amended  (the  "Exchange  Act"),  and
Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such
proviso,  provided,  further, however, that the limitations on conversion may be
waived by the Holder upon, at the election of the Holder, not less than 61 days'
prior  notice  to  the Borrower, and the provisions of the conversion limitation
shall  continue  to apply until such 61st day (or such later date, as determined
by  the  Holder,  as  may be specified in such notice of waiver).  The number of
shares  of  Common Stock to be issued upon each conversion of this Note shall be
determined  by  dividing  the  Conversion  Amount  (as  defined  below)  by  the
applicable  Conversion  Price then in effect on the date specified in the notice
of  conversion,  in  the  form  attached  hereto  as  Exhibit  A (the "Notice of
Conversion"), delivered to the Borrower by the Holder in accordance with Section
1.4  below; provided that the Notice of Conversion is submitted by facsimile (or
by other means resulting in, or reasonably expected to result in, notice) to the
Borrower  before 6:00 p.m., New York, New York time on such conversion date (the
"Conversion  Date").  The  term  "Conversion  Amount" means, with respect to any
conversion  of this Note, the sum of (1) the principal amount of this Note to be
converted  in  such  conversion  plus  (2) at the Borrower's option, accrued and
unpaid interest, if any, on such principal amount at the interest rates provided
in  this  Note to the Conversion Date, provided, however, that the Company shall
have  the  right  to  pay any or all interest in cash plus (3) at the Borrower's
option,  Default Interest, if any, on the amounts referred to in the immediately
preceding  clauses  (1)  and/or (2) plus (4) at the Holder's option, any amounts
owed  to  the  Holder  pursuant  to  Sections  1.3  and  1.4(g)  hereof.

     1.2     Conversion Price.

          (a)     Calculation  of  Conversion Price.  The Conversion Price shall
be the lesser of: (i) the Variable Conversion Price (as defined herein) and (ii)
the  Fixed  Conversion  Price  (as  defined  herein)  (subject, in each case, to
equitable  adjustments  for stock splits, stock dividends or rights offerings by
the  Borrower  relating  to  the  Borrower's securities or the securities of any
subsidiary  of  the Borrower, combinations, recapitalization, reclassifications,
extraordinary  distributions  and  similar  events).  The  "Variable  Conversion
Price"  shall  mean  the Applicable Percentage (as defined herein) multiplied by
the  Market  Price (as defined herein).  "Market Price" means the average of the
lowest  three  (3) Trading Prices (as defined below) for the Common Stock during
the  ten  (10)  Trading  Day period ending one Trading Day prior to the date the
Conversion  Notice  is  sent  by  the  Holder to the Borrower via facsimile (the
"Conversion Date").  "Trading Price" means, for any security as of any date, the
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") mutually acceptable to Borrower and Holder and hereafter designated by
Holders of a majority in interest of the Notes and the Borrower or, if the OTCBB
is  not the principal trading market for such security, the 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  traded  for  any  period  on  the  OTCBB, or on the principal
securities exchange or other securities market on which the Common Stock is then
being  traded.  "Applicable  Percentage"  shall  mean _____%.  "Fixed Conversion
Price"  shall  mean  $0.____.

          (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 (1) or (ii) is hereinafter
referred  to  as  the  "Announcement  Date"),  then  the Conversion Price shall,
effective  upon  the  Announcement  Date  and  continuing  through  the Adjusted
Conversion  Price  Termination Date (as defined below), be equal to the lower of
(x)  the  Conversion  Price  which  would  have been applicable for a Conversion
occurring  on  the  Announcement  Date  and  (y) the Conversion Price that would
otherwise  be  in  effect.  From  and  after  the  Adjusted  Conversion  Price
Termination  Date, the Conversion Price shall be determined as set forth in this
Section  1.2(a).  For  purposes  hereof,  "Adjusted Conversion Price Termination
Date"  shall  mean, with respect to any proposed transaction or tender offer (or
takeover scheme) for which a public announcement as contemplated by this Section
1.2(b)  has  been  made, the date upon which the Borrower (in the case of clause
(i)  above)  or  the  person, group or entity (in the case of clause (ii) above)
consummates or publicly announces the termination or abandonment of the proposed
transaction  or  tender  offer  (or  takeover  scheme) which caused this Section
1.2(b)  to  become  operative.

     1.3     Authorized  Shares.  The  Borrower covenants that during the period
the  conversion  right exists, the Borrower will reserve from its authorized and
unissued  Common  Stock  a  sufficient  number  of  shares, free from preemptive
rights,  to provide for the issuance of Common Stock upon the full conversion of
this  Note  issued pursuant to the Purchase Agreement.  The Borrower is required
at  all  times  to have authorized and reserved three times the number of shares
that  is  actually  issuable  upon  full  conversion  of  the Note (based on the
Conversion  Price  of  the  Notes  in  effect  from time to time) (the "Reserved
Amount").  The  Reserved  Amount  shall  be  increased  from  time  to  time  in
accordance  with  the  Borrower's  obligations  pursuant  to Section 4(g) of the
Purchase  Agreement.  The  Borrower  represents  that upon issuance, such shares
will be duly and validly issued, fully paid and non-assessable.  In addition, if
the  Borrower  shall  issue  any  securities  or  make any change to its capital
structure which would change the number of shares of Common Stock into which the
Notes  shall  be  convertible at the then current Conversion Price, the Borrower
shall at the same time make proper provision so that thereafter there shall be a
sufficient  number  of shares of Common Stock authorized and reserved, free from
preemptive  rights,  for  conversion of the outstanding Notes.  The Borrower (i)
acknowledges  that  it  has  irrevocably  instructed its transfer agent to issue
certificates  for  the  Common  Stock issuable upon conversion of this Note, and
(ii)  agrees  that  its issuance of this Note shall constitute full authority to
its  officers  and  agents  who  are  charged  with  the duty of executing stock
certificates  to  execute  and  issue  the  necessary certificates for shares of
Common  Stock  in  accordance  with  he  terms  and  conditions  of  this  Note.

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

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

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

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

     1.4     Method  of  Conversion.

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

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

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

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

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

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

          (g)     Failure to Deliver Common Stock Prior to Deadline.  Without in
any  way  limiting the Holder's right to pursue other remedies, including actual
damages  and/or  equitable  relief,  the  parties  agree that if delivery of the
Common  Stock  issuable  upon  conversion  of  this  Note is more than three (3)
business  days after the Deadline (other than a failure due to the circumstances
described in Section 1.3 above, which failure shall be governed by such Section)
the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond
the  Deadline  that  the Borrower fails to deliver such Common Stock.  Such cash
amount shall be paid to Holder by the fifth day of the month following the month
in  which  it  has accrued or, at the option of the Holder (by written notice to
the  Borrower  by the first day of the month following the month in which it has
accrued),  shall  be  added to the principal amount of this Note, in which event
interest shall accrue thereon in accordance with the terms of this Note and such
additional principal amount shall be convertible into Common Stock in accordance
with  the  terms  of  this  Note.

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

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

     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 (1) the
Borrower  or  its  transfer  agent shall have received an opinion of counsel, in
form,  substance  and  scope  customary  for  opinions  of counsel in comparable
transactions,  to the effect that a public sale or transfer of such Common Stock
may  be  made  without  registration under the Act and the shares are so sold or
transferred,  (ii)  such Holder provides the Borrower or its transfer agent with
reasonable  assurances  that  the  Common Stock issuable upon conversion of this
Note (to the extent such securities are deemed to have been acquired on the same
date)  can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock
issuable  upon  conversion of this Note, such security is registered for sale by
the  Holder  under  an  effective  registration statement filed under the Act or
otherwise  may  be  sold  pursuant to Rule 144 without any restriction as to the
number  of  securities as of a particular date tat can then be immediately sold.

     1.6.  Effect  of  Certain  Events.

          (a)     Effect  of  Merger, Consolidation.  Etc.  At the option of the
Holder,  the  sale, conveyance or disposition of all or substantially all of the
assets  of  the  Borrower,  the effectuation by the Borrower of a transaction or
series of related transactions in which more than 50% of the voting power of the
Borrower  is  disposed  of,  or  the  consolidation,  merger  or  other business
combination  of the Borrower with or into any other Person (as defined below) or
Persons  when the Borrower is not the survivor shall either: (i) be deemed to be
an  Event  of Default (as defined in Article III) pursuant to which the Borrower
shall  be  required  to  pay  to  the  Holder  upon the consummation of and as a
condition  to such transaction an amount equal to the Default Amount (as defined
in  Article III) or (ii) be treated pursuant to Section 1.6(b) hereof.  "Person"
shall  mean any individual, corporation, limited liability company, partnership,
association,  trust  or  other  entity  or  organization.

          (b)     Adjustment  Due  to  Merger.  Consolidation.  Etc.  If, at any
time  when this Note is issued and outstanding and prior to conversion of all of
the  Notes,  there  shall  be  any  merger,  consolidation,  exchange of shares,
recapitalization,  reorganization,  or other similar event, as a result of which
shares  of  Common  Stock  of  the  Borrower shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the  Borrower  or another entity, or in case of any sale or conveyance of all or
substantially  all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower, then the Holder of this Note shall
thereafter  have  the  right  to  receive upon conversion of this Note, upon the
basis  and  upon  the  terms  and conditions specified herein and in lieu of the
shares  of  Common  Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been entitled to receive
in  such  transaction  had this Note been converted in full immediately prior to
such  transaction  (without  regard  to  any limitations on conversion set forth
herein),  and in any such case appropriate provisions shall be made with respect
to  the  rights  and  interests  of  the Holder of this Note to the end that the
provisions  hereof  (including, without limitation, provisions for adjustment of
the Conversion Price and of the number of shares issuable upon conversion of the
Note)  shall  thereafter  be  applicable,  as  neatly  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-oft)) (a "Distribution"), then the Holder of this
Note  shall  be  entitled,  upon  any  conversion of this Note after the date of
record  for  determining  shareholders entitled to such Distribution, to receive
the  amount  of  such  assets  which  would have been payable to the Holder with
respect  to  the  shares  of Common Stock issuable upon such conversion had such
Holder been the holder of such shares of Common Stock on the record date for the
determination  of  shareholders  entitled  to  such  Distribution.

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

     The  Borrower shall be deemed to have issued or sold shares of Common Stock
if  the  Borrower in any manner issues or grants any warrants, rights or options
(not  including  employee  stock  option  plans),  whether  or  not  immediately
exercisable,  to  subscribe  for or to purchase Common Stock or other securities
convertible  into  or  exchangeable  for Common Stock ("Convertible Securities")
(such  warrants,  rights  and  options  to  purchase Common Stock or Convertible
Securities are hereinafter referred to as "Options") and the price per share for
which  Common  Stock  is issuable upon the exercise of such Options is less than
the Conversion Price then in effect, then the Conversion Price shall be equal to
such  price  per  share.  For purposes of the preceding sentence, the "price per
share  for  which Common Stock is issuable upon the exercise of such Options" is
determined  by  dividing (i) the total amount, if any, received or receivable by
the  Borrower as consideration for the issuance or granting of all such Options,
plus  the  minimum aggregate amount of additional consideration, if any, payable
to  the  Borrower  upon  the  exercise of all such Options, plus, in the case of
Convertible  Securities  issuable upon the exercise of such Options, the minimum
aggregate  amount  of  additional  consideration  payable upon the conversion or
exchange  thereof  at  the  time  such  Convertible  Securities  first  become
convertible  or  exchangeable,  by  (ii)  the  maximum total number of shares of
Common  Stock  issuable  upon  the  exercise  of  all such Options (assuming the
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.

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

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

     1.7     Trading  Market  Limitations.  Unless  permitted  by the applicable
rules  and  regulations  of  the principal securities market on which the Common
Stock  is  then  listed  or  waded,  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
(the date of which is hereinafter referred to as the "Maximum Conversion Date"),
if  the Borrower fails to eliminate any prohibitions under applicable law or the
rules  or  regulations  of  any  stock exchange, interdealer quotation system or
other self-regulatory organization with jurisdiction over the Borrower or any of
its  securities  on  the  Borrower's  ability to issue shares of Common Stock in
excess  of  the  Maximum  Share Amount (a "Trading Market Prepayment Event"), in
lieu  of any further right to convert this Note, and in full satisfaction of the
Borrower's  obligations  under  this Note, the Borrower shall pay to the Holder,
within  fifteen  (15) business days of the Maximum Conversion Date (the "Trading
Market  Prepayment Date"), an amount equal to 150% times the sum of (a) the then
outstanding  principal  amount  of  this  Note immediately following the Maximum
Conversion  Date,  plus  (b) accrued and unpaid interest on the unpaid principal
amount  of  this  Note  to  the Trading Market Prepayment Date, plus (c) Default
Interest,  if  any,  on  the amounts referred to in clause (a) and/or (b) above,
plus  (d)  any  optional  amounts  that  may  be  added  thereto  at the Maximum
Conversion  Date  by  the  Holder  in accordance with the terms hereof (the then
outstanding  principal  amount  of  this  Note immediately following the Maximum
Conversion  Date, plus the amounts referred to in clauses (b), (c) and (d) above
shall  collectively  be  referred to as the "Remaining Convertible Amount").  In
the  event  that  the  sum of (x) the aggregate number of shares of Common Stock
issued  upon  conversion of this Note and the other Notes issued pursuant to the
Purchase  Agreement plus (y) the aggregate number of shares of Common Stock that
remain issuable upon conversion of this Note and the other Notes issued pursuant
to the Purchase Agreement, represents at least one hundred percent (100%) of the
Maximum  Share  Amount  (the "Triggering Event"), the Borrower will use its best
efforts  to seek and obtain Shareholder Approval (or obtain such other relief as
will  allow conversions hereunder in excess of the Maximum Share Amount) as soon
as  practicable following the Triggering Event and before the Maximum Conversion
Date.  As used herein, "Shareholder Approval" means approval by the shareholders
of the Borrower to authorize the issuance of the full number of shares of Common
Stock which would be issuable upon full conversion of the then outstanding Notes
but  for  the  Maximum  Share  Amount.

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

                       ARTICLE II.  CERTAIN COVENANTS

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

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

     2.3     Borrowings.  So  long  as  the  Borrower  shall have any obligation
under  this  Note, the Borrower shall not, without the Holder's written consent,
create,  incur,  assume  or  suffer  to  exist any liability for borrowed money,
except  (a) borrowings in existence or committed on the date hereof and of which
the  Borrower  has  informed  Holder  in  writing  prior to the date hereof, (b)
indebtedness  to  trade  creditors  or  financial  institutions  incurred in the
ordinary  course  of  business or (c) borrowings, the proceeds of which shall be
used  to  repay  this  Note.

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

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

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

                      ARTICLE III.  EVENTS OF DEFAULT

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

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

     3.2     Conversion  and  the Shares.  The Borrower fails to issue shares of
Common Stock to the Holder (or announces or threatens that it will not honor its
obligation to do so) upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Note, fails to transfer or cause its
transfer  agent  to  transfer  (electronically  or  in  certificated  form)  any
certificate  for  shares of Common Stock issued to the Holder upon conversion of
or  otherwise  pursuant to this Note as and when required by this Note, or fails
to  remove any restrictive legend (or to withdraw any stop transfer instructions
in  respect thereof) on any certificate for any shares of Common Stock issued to
the  Holder  upon  conversion  of or otherwise pursuant to this Note as and when
required  by  this  Note (or makes any announcement, statement or threat that it
does  not  intend  to honor the obligations described in this paragraph) and any
such  failure  shall  continue uncured (or any announcement, statement or threat
not  to  honor  its obligations shall not be rescinded in writing) for three (3)
days  after  the  Borrower  shall  have  been notified thereof in writing by 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  often  (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;

     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;  or

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

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

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

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

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

     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 Borrower shall
pay  to the Holder, in full satisfaction of its obligations hereunder, an amount
equal  to  the Default Stun (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, or 3.8 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 the
satisfaction of its obligations hereunder, an amount equal to the greater of (i)
150%  times  the  sum  of (w) the then outstanding principal amount of this Note
plus (x) accrued and unpaid interest on the unpaid principal amount of this Note
to  the  date  of  payment  (the  "Mandatory  Prepayment Date") plus (y) Default
Interest,  if any, on the amounts referred to in clauses (w) and/or (x) plus (z)
any  amounts  owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the
then  outstanding  principal amount of this Note to the date of payment plus the
amounts  referred  to in clauses (x), (y) and (z) shall collectively be known as
the  "Default Sum") or (ii) the "parity value" of the Default Sum to be prepaid,
where  parity  value  means  (a)  the  highest  number of shares of Common Stock
issuable  upon  conversion  of  or  otherwise  pursuant  to  such Default Sum in
accordance  with  Article  I, treating the Trading Day immediately preceding the
Mandatory  Prepayment  Date as the "Conversion Date" for purposes of determining
the  lowest  applicable  Conversion  Price, unless the Default Event arises as a
result  of  a breach in respect of a specific Conversion Date in which case such
Conversion  Date  shall  be  the Conversion Date), multiplied by (b) the highest
Closing  Price  for  the Common Stock during the period beginning on the date of
first  occurrence  of  the  Event  of  Default  and  ending one day prior to the
Mandatory  Prepayment  Date (the "Default Amount") and all other amounts payable
hereunder  shall  immediately  become  due  and  payable,  all  without  demand,
presentment  or  notice, all of which hereby are expressly waived, together with
all  costs,  including,  without  limitation,  legal  fees  and  expenses,  of
collection,  and  the  Holder shall be entitled to exercise all other rights and
remedies  available  at  law  or  in  equity.

     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:

     AVIATION GROUP, INC.
     3600 Gessner - Suite 220
     Houston, TX 77063
     Attn: RUSSELL IVY, President
     facsimile: 516-466-3555

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

     [enter name of law firm]
     Attn:     [attorney name]
     (enter address line 1] [enter city, state, zip]
     facsimile: [enter fax number]

     If to the Holder:
     ASHER ENTERPRISES, INC.
     1 Linden Pl., Suite 207
     Great Neck, NY.  11021
     Attn:     Curt Kramer, President
     facsimile: 516-498-9894

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

     Naidich Wurman Birnbaum & Maday LLP
     80 Cuttermill Road.  Suite 410
     Great Neck, NY 11021
     Attn: Bernard S.  Feldman, Esq.
     facsimile: 516-466-3555

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

     4.4     Assignability.  This  Note  shall  be binding upon the Borrower and
its  successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns.  Each transferee of this Note must be an "accredited
investor" (as defined in Rule 501(a) of the 1933 Act).  Notwithstanding anything
in  this  Note  to  the  contrary,  this  Note  may  be pledged as collateral in
connection  with  a  bona  fide  margin  account  or  other lending arrangement.

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

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

     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
4.10.

     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 No to e signed in its name by
its duly authorized officer this _________________ ______, 201__.

AVSTAR AVIATION GROUP, INC.

By:___________________________

CK.  NO.     _______________

DATE          _______________

<PAGE>
                         NOTICE OF CONVERSION

    (To be Executed by the Registered Holder in order to Convert the Notes)

     The  undersigned hereby irrevocably elects to convert $__________ principal
amount of the Note (defined below) into shares of common stock, $0.001 par value
per  share  ("Common  Stock"),  of  AVSTAR  AVIATION  GROUP,  INC.,  a  Colorado
corporation (the "Borrower") according to the conditions of the convertible note
of  the  Borrower dated as of ____________ (the "Notes"), as of the date written
below.  If  securities  are  to be issued in the name of a person other than the
undersigned,  the  undersigned  will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates.  No fee will be charged to
the  Holder  for  any  conversion, except for transfer taxes, if any.  A copy of
each  Note  is  attached  hereto  (or  evidence  of  loss,  theft or destruction
thereof).

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

     Name of DTC Prime Broker:____________________________________
     Account Number:_____________________________________________

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

     Name:          _______________________________
     Address:     _______________________________

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

     Date of Conversion: ___________________________
     Applicable Conversion Price: _____________________
     Number of Shares of Common Stock to be Issued
     Pursuant to Conversion of the Notes: _____________________
     Signature: ______________________________________
     Name: _________________________________________
     Address: _______________________________________

     The Borrower shall issue and deliver shares of Common Stock to an overnight
courier  not  later  than  three business days following receipt of the original
Note(s)  to  be converted, and shall make payments pursuant to the Notes for the
number  of  business  days  such  issuance  and  delivery  is  late.exhibit101.htm

	

	
Exhibit 10.1

Tier Technologies, Inc.

Management Incentive Plan (“MIP”)

 

Fiscal Year:  2011

This Tier Technologies, Inc  (“Tier” or the “Company”) Fiscal Year Management Incentive Plan  (“MIP” or the “Plan”) supersedes all previous documents or agreements, whether oral or written, relating to annual incentive or variable compensation.  The entire Plan content is contained herein, and no one at the Company is authorized or permitted to enter into any additional or other incentive compensation agreements, or make any verbal or written representations, regarding incentive compensation under the MIP without the express written permission of Tier’s Chief Executive Officer.

	 1.	PLAN PURPOSE	 	
 

	
  The Plan is designed to:

	 

	
1.  

	
  Align the management team’s financial interests with those of the Company’s shareholders;

	
2.  

	
  Support a performance-oriented environment that rewards business drivers and business 

  contributors for the achievement of specific performance metrics;

	
3.  

	
  Provide for the recognition of individual performance and contributions for incentive 

  consideration;

	
4.  

	
  Attract, motivate and retain key management critical to the long-term success of the 

  Company; and

	
5.  

	
  Align compensation with the Company’s business strategy, values and management 

  initiatives.

	
2.  

	
 EFFECTIVE DATE

This Plan shall take effect on the first day of October in the Fiscal Year represented above and shall remain in effect through the thirtieth day of September 30 of the Fiscal Year represented above unless otherwise modified, suspended or terminated at the sole discretion of the Chief Executive Officer of the Company.

	
Tier Technologies, Inc. MIP FY 2011

Participant Name:

	
Page 1 of 9

 

  

  

  

 

	
3.  

	
ELIGIBLITY

Those employees deemed eligible to participate in the MIP (hereinafter called “Participants”) are selected by Tier’s Chief Executive Officer.  (Reference in the MIP to actions by Tier’s Chief Executive Officer shall also refer to approval, to the extent the Company’s procedures provide, by the Compensation Committee (the “Compensation Committee”) of the Board of Directors.) To be eligible to receive any incentive recognition under MIP, a participant must sign and return his/her Participant Target/Goal Worksheet as acknowledgement of the receipt and agreement to the terms of the MIP, within 30 days after receipt.  Notwithstanding any references in the MIP as to actions by the CEO or the Plan Administrator, any decisions with respect to the CEO compensation will be made exclusively by the Compensation Committee.

Participation is determined on a year-to-year basis at the sole discretion of the Company.  Continued participation in the Plan is not guaranteed and may be discontinued at any time with or without reason or specific communication.

	
4.  

	
PLAN DESIGN

• Participant Pool

Approved MIP Participants will be at the Director career level or above. Potential Participants at a career level below Director may be added at the discretion of the CEO.

Participants will be eligible for management incentive compensation consideration based upon pre-determined company performance metrics and assessed individual performance / contribution, with individual Participant incentive opportunity calculated based upon a pre-determined percentage of the Participant’s base salary at the start of the Plan year or as of the date of hire, as appropriate.

In addition, the MIP will maintain a discretionary pool for the recognition of both MIP Participants and other nominated employees at the end of the fiscal year.  The payment of the discretionary component will be determined and approved by the Chief Executive Officer.

• MIP Goals

“MIP Goals” consist of two key and discrete performance metrics:

1) an overall company performance metric of Adjusted EBITDA from continuing operations defined by net income from continuing operations before interest expense net of interest income, income taxes, depreciation and amortization and stock-based compensation in both equity and cash, to include adjustments as may be determined by the Compensation Committee and,

2) assessed individual performance as determined through the Company’s annual Performance Review period taken to be the Participant’s overall Participant performance rating.

Participant incentive eligibility will be determined and calculated based (x) on overall company performance (EBITDA) in relation to Threshold, Target and Stretch performance goals and (y) on individual performance as determined by the annual Performance Review process, with the weighting of the two factors being determined by the career level of the participant (CEO,

	
Tier Technologies, Inc. MIP FY 2011

Participant Name:

	
Page 2 of 9

 

  

  

  

Section 16/Senior Vice President, Vice President, Director). The allocation for each metric is specified on each Participant’s Target Goal Worksheet. A Participant must be rated at Meets Expectations or higher on his/her FY2011 Performance Review to be eligible for any incentive payment under this plan.

Should overall company performance (EBITDA) fall below the threshold performance level required under the MIP provisions but remain positive, the Chief Executive Officer at his/her sole discretion may provide for individual Participant incentive recognition based upon the funding of the discretionary incentive pool and assessed individual performance.

The overall Company performance metric (EBITDA) is set at a threshold performance level consistent with the Company’s strategic business planning and budgeting process.

 

• Participation Performance Minimum Thresholds

If the threshold EBITDA performance goal is met, Participants in the Plan will be eligible for incentive compensation consideration under the company performance metric. The remaining incentive opportunity will be based upon assessed individual performance, weighted as noted above, based upon the overall performance rating of the employee from his/her Performance Review.  There will be no pay-out under the individual or company performance components for an assessed overall performance rating that is below Meets Expectations. All executive incentive compensation awards under this Plan are subject to the review and approval of Tier’s Chief Executive Officer and the Compensation Committee.

 

	
5.  

	
ADMINISTRATIVE PROVISIONS

• Payment

Incentive calculations will be based upon the Participant’s base salary at the start of the plan year, i.e. October 1st of the current fiscal year or as of the date of hire, as appropriate, or as soon thereafter as the Company takes action. Awards will be paid only to those Participants who are considered active on the last day of the Fiscal Year, i.e. September 30 of the current (or most recent fiscal year if ended).  No pro-ration shall be applied to incentive eligibility for termination of employment for any reason prior to the end of the MIP year or for early termination of the MIP, with or without notice.  Irrespective of termination date, an employee whose employment is terminated for cause or voluntary resignation either (1) during or (2) following the end of the MIP plan year prior to receipt of incentive compensation payment shall be deemed ineligible for payment under the MIP provisions.

Payment will be made to the Participant in accordance with standard payroll procedures and will be subject to applicable withholdings and deductions. Participants will receive their awards in the first quarter following the MIP plan (fiscal) year end.

• Adherence to Company Policies

Each Participant is required to comply with all Company policies including, but not limited to, Tier's Business Code of Conduct.  A Participant's failure to adhere to any Company policy shall render that Participant ineligible to receive any payment under the MIP.

	
Tier Technologies, Inc. MIP FY 2011

Participant Name:

	
Page 3 of 9

 

  

  

  

 

• Alterations, Interpretation and Review

Tier Human Resources will be charged with the responsibility for the administration of the MIP’s provisions and all other incentive compensation plans and policies.  Participants seeking clarification of its provisions or incentive policy should direct their inquiries to the Tier Human Resources Department Head, as the Plan Administrator.

 

The Plan Administrator shall have full power and discretionary authority to administer the MIP in accordance with its terms and subject to the requirements of applicable law. The Plan Administrator shall have the authority and responsibility to: (i) construe the terms of the MIP, including the authority to remedy any omissions, ambiguities or inconsistencies in the provisions of the MIP and (ii) resolve all questions of fact under the MIP, including, without limitation, questions concerning eligibility, participation and benefits and all other related or incidental matters. The Plan Administrator’s decisions and determinations (including determinations of the meaning and reference of terms used in the MIP) shall be conclusive and binding upon all Participants and their beneficiaries, heirs and assigns.

 

•Partial Service, Promotion, Transfer, Disability/Death & Leave of Absence

Partial Service

Partial service employees who are newly hired or promoted into an incentive-eligible position so as to become a Participant after the beginning of the Fiscal Year but prior to the first day of July of that Fiscal Year, may become eligible to receive a prorated payment if so determined by Tier’s Chief Executive Officer.  Incentive eligibility will be calculated as and from the commencement of the first of the month following the date of new hire or date of promotion.

Transfer

Plan Participants who transfer to another position within the Company during the MIP year may continue to be eligible for incentive compensation or may be removed if they transfer to an ineligible position.  Human Resources, in conjunction with the Chief Executive Officer and the employee’s direct manager, will determine eligibility.  The Participant’s incentive targets may be adjusted as deemed appropriate.

Disability/Death

If a Plan Participant becomes totally disabled (as determined for purposes of the Plan by the Company’s long-term disability plan), or dies during the Plan year (but after the end of the first quarter), the Plan Participant (or the designated beneficiary) will be eligible to receive incentive compensation based upon the Participant’s performance up to the end of the fiscal quarter in which the disability or death (annualized through the end of the year) occurs.  Any resulting award determined under the Participant’s Target/Goal Worksheet will be pro-rated to the effective date of death or permanent disability.  Payment, if any, will be processed in accordance with the Plan.

 

             Leave of Absence (LOA)

A Participant is considered active in the MIP when on an approved Leave of Absence for a period not to exceed three (3) months.  No change in individual performance targets will be made with respect to such a leave.  For LOA’s greater than three (3) months, MIP

 

	
Tier Technologies, Inc. MIP FY 2011

Participant Name:

	
Page 4 of 9

 

  

  

  

 

eligibility and participation will be suspended until active status is resumed and the final payment will be pro-rated to reflect the period of time on approved LOA, unless applicable state or federal law mandates that employees on leaves greater than three (3) months remain active in the plan.

 

• Tax Liabilities

Deductions for all appropriate local, state and federal tax liabilities will be calculated and withheld from all MIP payments.

 

• Employment-at-will

Except as individual employment agreements may otherwise provide, the employment of all Participants at Tier is for an indefinite period of time and is terminable at any time, for any or no reason, by either the  Participant or the Company.  The MIP shall not be construed to create a contract of employment for a specified period of time between the Company and any Participant.  The Company retains the rights to change its employment and compensation policies and practices at any and all times.

 

• Events Not Covered by the Plan

The Chief Executive Officer will review any event not described or anticipated by the MIP and will have the sole discretion to determine the final and binding resolution.  This may include recognition of any financial adjustments that are not associated with the efforts of the Participant(s).

 

 • Other Agreements

This MIP plan, including any amendment or supplement hereto, constitutes the entire understanding of Tier and its subsidiaries and affiliates with respect to the MIP and cancels and supersedes all other policies or agreements relating to such compensation.  No person at the Company, other than the Chief Executive Officer, is authorized or permitted to enter into any additional or other agreements, or make any verbal or written representations, regarding incentive compensation for Participants.  Nothing in the MIP shall be construed to create or imply the creation of a term contract, nor a guarantee of employment for any specific period of time between Tier and any of its divisions or subsidiaries, and any Participant.

 

• Modification, Suspension or Termination

The Company may unilaterally modify, suspend or discontinue, at any time, in whole or in part, and if suspended, may reinstate any or all of the provisions of the MIP with or without notice. All modifications are effective as of the date designated in the decision made by the Chief Executive Officer, regardless of when notice of such changes, if any such notice is provided, is given.  The Company, at its sole discretion, may publish revisions to the MIP from time-to-time and such revisions shall govern the operation of the MIP for all Participants.  Modifications of and additions to all or any part of the MIP will not necessarily result in the re-publication of the entire plan.

 

• Compliance with Section 409A

 The MIP plan and its Agreement are intended to comply with the provisions of Section 409A and the Agreement shall, to the extent practicable, be construed in accordance therewith.  Terms defined in the Plan shall have the meanings given such terms under Section 409A if and to the extent required to comply with Section 409A.  In any event, the Company makes no

	
Tier Technologies, Inc. MIP FY 2011

Participant Name:

	
Page 5 of 9

 

  

  

  

representations or warranty and shall have no liability to the Participant or any other person, other than with respect to payments made by Tier in violation of the provisions of the MIP, if any provisions of or payments under the MIP are determined to constitute deferred compensation subject to Code Section 409A but not to satisfy the conditions of that section.

• Effect on Other Plans

 Whether the accrual or payment of the amounts under the MIP causes a Participant to accrue or receive additional benefits under any pension or other plan is governed solely by the terms of such other plan.

• Non-Transferability

Neither the Participants nor anyone claiming an interest through him, her, or them will have any right to assign, pledge, or otherwise transfer the right to receive a payment under the MIP.  Any rights to such payments are expressly declared to be non-assignable and nontransferable.  Unless the law requires otherwise, no unpaid amounts will be subject to attachment, alienation, garnishment, or execution, or be transferable if the Participant becomes bankrupt or insolvent, for the satisfaction of the debts of, or other obligations or claims against, the Participant or any person or entity claiming an interest through him or them, including claims for alimony, support, or separate maintenance.

• ERISA Treatment

The Company intends that the MIP be exempt from regulation under the Employee Retirement Income Security Act of 1974 (“ERISA”).  The Company and the Administrator must at all times interpret and administer the MIP in a manner consistent with that exemption.

• Limitations on Liability

Notwithstanding any other provisions of the MIP, no individual acting as a director, manager, officer, other employee, or agent of the Company will be liable to any Participant, former Participant, spouse, or any other person for any claim, loss, liability, or expense incurred in connection with the MIP, nor will such individual be personally liable because of any contract or other instrument he executes in such other capacity.  The Company will indemnify and hold harmless each director, manager, officer, other employee, or agent of the Company to whom any duty or power relating to the administration or interpretation of the MIP has been or will be delegated, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Board’s approval) arising out of any act or omission to act concerning the MIP unless arising out of such person’s own fraud, willful misconduct, criminal conduct or bad faith.

• Effect on and of Transactions

The Company and its affiliates retain full authority to enter into any transactions involving the Company and the business without any consent from any Participant in his capacity as such.  The existence of the MIP does not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or to consolidate, or to dissolve, liquidate, sell, or transfer all or any part of its business or assets, and no Participant shall have any claim against the Company by reason of any such action or transaction or the fact that such action or transaction had an effect (adverse or otherwise) on the calculation of the MIP’s metrics or goals.

 

	
Tier Technologies, Inc. MIP FY 2011

Participant Name:

	
Page 6 of 9

 

  

  

  

• Unfunded: Unsecured

The MIP will at all times be entirely unfunded and no provision will at any time be made with respect to segregating assets of the Company for payment of any benefits hereunder.  Additionally, nothing contained herein may be construed as giving a Participant, his or her beneficiary, or any other person, any equity or other interest of any kind in any assets of the Company or creating a trust of any kind or a fiduciary relationship of any kind between the Company and any such person.  As to any claim for any unpaid amounts, a Participant, his or her beneficiary, and any other person having a claim for payment will be unsecured creditors.

• Dispute Resolution

Any action to enforce, arising out of or in connection with, or relating in any way to any of these provisions shall be brought in any state or federal court otherwise having jurisdiction that is located in Fairfax County, Virginia, and, as a condition to receiving and retaining an Award, each Participant consents to the jurisdiction of such courts located in Fairfax County, Virginia and agrees not to argue that any such court is an inconvenient forum.

• Applicable Law

The laws of the Commonwealth of Virginia (other than its choice of law provisions) govern the MIP and its interpretation.

 

	
Tier Technologies, Inc. MIP FY 2011

Participant Name:

	
Page 7 of 9

 

  

  

  

 

 

PARTICIPANT ACKNOWLEDGEMENT OF RECEIPT

I acknowledge the following:

 

	
1.  

	
That I have received and understand the terms and conditions of the Management Incentive Plan as set forth and for the Fiscal Year term above herein;

 

	
2.  

	
That I have received a copy of the MIP document;

 

	
3.  

	
That all awards are subject to the terms of the MIP document;

 

	
4.  

	
That I must be (i) actively employed through the final day of the MIP plan year, established to be the thirtieth day of September of the Fiscal Year, and (ii) not have been terminated for cause or have voluntary resigned either during the MIP plan year or following the end of the MIP plan year, prior to receipt of the MIP incentive compensation payment;

 

	
5.  

	
That the Target/Goal Worksheet below indicates my MIP opportunity for the Fiscal Year based on the MIP’s provisions herein; and

 

	
6.  

	
That the Company may amend, suspend or terminate the MIP at any time and for any reason.

 

 

	 	 	 
	 Plan Participant Signature	 	Date
	 	
 

	 
	 	 	 
	 Human Resources Signature	 	
Date

	 	 	 

 

    

 

 

 

 

	
Tier Technologies, Inc. MIP FY 2011

Participant Name:

	
Page 8 of 9

 

  

  

  

THE PARTICIPANT TARGET / GOAL WORKSHEET

 

 

FISCAL YEAR:  2011

 

PARTICIPANT NAME:  ______________________

 

CAREER LEVEL: __________________________

 

 

	  	  	  	  
	  	
Company Performance Metric

	
Participant Opportunity

	  
	 	 	 	 
	  	
EBITDA

	
xx% Company and xx% Individual

	  
	  	
THRESHOLD EBITDA:  $xxxxxxx

	
xx% Company = $xxxx

	  
	  	
xx% Individual = $xxxx

	  
	  	
 Threshold Opportunity:

	
$xxxx

	  
	  	
TARGET EBITDA:  $xxxxxxx

	
xx% Company = $xxxx

	  
	  	
xx% Individual = $xxxx

	  
	  	
 Target Opportunity:

	
$xxxx

	  
	  	
STRETCH EBITDA:  $xxxxxxx

	
xx% Company = $xxxx

	  
	  	
xx% Individual = $xxxx

	  
	  	
 Stretch Opportunity:

	
$xxxxx

	  

 

 

 

	  	
Performance Metric

	
Participant Opportunity

	  
	  	
Individual Performance Rating

	
% of Individual Bonus

	  
	  	
Below Expectations

	
0%

	  
	  	  
	  	  	  	  
	  	
Meets Expectations

	
75%

	  
	  	  
	  	  	  	  
	  	
Exceeds Expectations

	
 

100%

	  
	  	  
	  	  	  	  
	 	
Far Exceeds Expectations

	
110%

	 
	 	 	 	 

	
Tier Technologies, Inc. MIP FY 2011

Participant Name:

	
Page 9 of 9

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