Document:

exv10w2

 

Exhibit 10.02

FORM OF NONQUALIFIED STOCK OPTION AGREEMENT

     This AGREEMENT (this “Agreement”) is made as of ___by and between
HealthMarkets, Inc., a Delaware corporation (the “Company”), and David W. Fields (“Optionee”). As
a condition precedent to the Company’s grant of the Options (as defined in Section 2 of this
Agreement) to Optionee, Optionee is executing and delivering a counterpart of the Stockholders
Agreement and thereby agrees to be bound by the Stockholders’ Agreement as a “Management
Stockholder” thereunder.

     1. Certain Definitions. Capitalized terms used, but not otherwise defined, in this
Agreement will have the meanings given to such terms in the Company’s 2006 Management Option Plan
(the “Plan”). As used in this Agreement:

          (a) “Call Right” has the meaning specified in Section 8 of this Agreement.

          (b) “Company” has the meaning specified in the introductory paragraph of this Agreement.

          (c) “Compensation Committee” means the Executive Compensation Committee of the Board.

          (d) “Disability” shall mean the Optionee’s incapacity due to physical or mental illness to
substantially perform his duties on a full-time basis for at least 26 consecutive weeks or an
aggregate period in excess of 26 weeks in any one fiscal year, and within 30 days after a notice of
termination is thereafter given by the Company, the Optionee shall not have returned to the
full-time performance of the Optionee’s duties; provided, however, that if the Optionee shall not
agree with a determination to terminate his employment because of Disability, the question of the
Optionee’s Disability shall be subject to the certification of a qualified medical doctor selected
by the Company or its insurers and acceptable to the Optionee or, in the event of the Optionee’s
incapacity to accept a doctor, the Optionee’s legal representative.

          (e) “Effective Time” has the meaning specified in Section 9 hereof.

          (f) “Fair Market Value” shall have the meaning specified in the Stockholders Agreement.

          (g) “Options” has the meaning specified in Section 2 of this Agreement.

          (h) “Optionee” has the meaning specified in the introductory paragraph of this Agreement.

          (i) “Option Price” has the meaning specified in Section 2 of this Agreement.

          (j) “Option Shares” has the meaning specified in Section 2 of this Agreement.

          (k) “Performance-Based Tranche” has the meaning specified in Section 2 of this Agreement.

          (l) “Plan” has the meaning specified in Section 1 of this Agreement.

          (m) “Termination for Cause” means the termination by the Company or any Subsidiary of
Optionee’s employment with the Company or any Subsidiary as a result of (i) the

 

 

commission by Optionee of an act of gross negligence, willful misconduct, fraud, embezzlement,
misappropriation or breach of fiduciary duty against the Company or any of its affiliates or
Subsidiaries, or the conviction of Optionee by a court of competent jurisdiction of, or a plea of
guilty or nolo contendere to, any felony or any crime involving moral turpitude or any crime which
reasonably could affect the reputation of the Company or the Optionee’s ability to perform the
duties required of him, if any, with the Company or any Subsidiary, (ii) the commission by Optionee
of a material breach of any of the covenants required of his position, if any, with the Company or
any Subsidiary or the Stockholders Agreement, which breach has not been remedied within 30 days of
the delivery to the Optionee by the Board of written notice of the facts constituting the breach,
and which breach if not cured, would have a material adverse effect on the Company, or (iii) the
habitual and willful neglect by Optionee of his obligations under his job duties, if any, with the
Company or any Subsidiary or the Optionee’s duties as an employee of the Company or any Subsidiary.

          (n) “Termination for Good Reason” means the termination by the Optionee of Optionee’s
employment with the Company or any Subsidiary with written notice to the Company within 90 days
following the occurrence, without Optionee’s consent, of any of the following events (after failure
of the Company or any Subsidiary to cure in thirty (30) days): (i) the reduction of Optionee’s
position from that of a senior executive level position with the Company or any Subsidiary, (ii) a
decrease in Optionee’s base salary or target annual bonus, other than in the case of a decrease for
a majority of similarly situated executives of the Company or any Subsidiary, (iii) a reduction in
Optionee’s participation in the Company’s or any Subsidiary’s benefit plans and policies to a level
materially less favorable to Optionee, unless such reduction applies to a majority of the senior
level executives of the Company or any Subsidiary, or (iv) the announcement of the relocation of
Optionee’s primary place of employment to a location 50 or more miles from the current
headquarters.

          (o) “Termination Without Cause” means the termination by the Company or any Subsidiary of
Optionee’s employment with the Company or any Subsidiary for any reason other than a Termination
for Cause (other than by reason of Optionee’s death or Disability).

          (p) “Time-Based Tranche” has the meaning specified in Section 2 of this Agreement.

          (q) “Tranche C Option Shares” has the meaning specified in Section 2 of this Agreement.

          (r) “Voluntary Termination” means Optionee’s termination of Optionee’s employment with the
Company or any Subsidiary for any reason, other than a Termination for Good Reason.

     2. Grant of Stock Option. Subject to and upon the terms, conditions, and restrictions
set forth in this Agreement and in the Plan and the Company’s obtaining shareholder approval of the
Plan, the Company hereby grants to Optionee options (the “Options”) to purchase 165,000 shares of
the Company’s Class A-1 Common Stock (the “Option Shares”). The Options may be exercised from time
to time in accordance with the terms of this Agreement. Subject to adjustment as hereinafter
provided,

     (a) one-third of the Option Shares (55,000 shares) may be purchased pursuant to the
Options at a price (the “Option Price”) of $42.03 per share (the “Time-Based Tranche”);

 

 

     (b) one-third of the Option Shares( 55,000 shares) may be purchased pursuant to the
Options at an Option Price of $42.03 per share (the “Performance-Based Tranche”); and

     (c) one-third of the Option Shares (55,000 shares) (the “Tranche C Option Shares”) may
be purchased pursuant to this Option at an Option Price of (i) $42.03 per share, if Optionee
exercises the option to purchase any Tranche C Option Shares prior to the second anniversary
of the Effective Time; (ii) $46.23 per share, if Optionee exercises the option to purchase
any Tranche C Option Shares on or after the second anniversary of the Effective Time but
prior to the third anniversary of the Effective Time; (iii) $50.85 per share, if Optionee
exercises the option to purchase any Tranche C Option Shares on or after the third
anniversary of the Effective Time but prior to the fourth anniversary of the Effective Time;
(iv) $55.94 per share, if Optionee exercises the option to purchase any Tranche C Option
Shares on or after the fourth anniversary of the Effective Time but prior to the fifth
anniversary of the Effective Time; and (v) $61.53 per share, if Optionee exercises the
option to purchase any Tranche C Option Shares on or after the fifth anniversary of the
Effective Time.

The Options are intended to be nonqualified stock options and shall not be treated as an “incentive
stock option” within the meaning of that term under Section 422 of the Code, or any successor
provision thereto. In the event that shareholder approval of the Plan is not obtained, this Option
shall be void ab initio and of no force and effect.

     3. Term of Options. The term of the Options shall commence at the Effective Time and,
unless earlier terminated in accordance with Section 7 hereof, shall expire ten (10) years from the
Effective Time.

     4. Right to Exercise. Unless terminated as hereinafter provided, the Options shall
become exercisable only as follows:

          (a) The Options shall become exercisable with respect to 20% of the Time-Based Tranche(55,000
shares) on each of the first five anniversaries of the Effective Time if Optionee remains in the
continuous employ of the Company or any Subsidiary as of each such date.

          (b) The Optionee may earn the right to exercise the option to purchase (i) 25% of the
Performance-Based Tranche (13,750 shares) on the first anniversary of the Effective Time, (ii) 25%
of the Performance-Based Tranche (13,750 shares) on the second anniversary of the Effective Time,
(iii) 17% of the Performance-Based Tranche (9,350 shares) on the third anniversary of the Effective
Time, (iv) 17% of the Performance-Based Tranche (9,350 shares) on the fourth anniversary of the
Effective Time and (v) the remaining 16% of the Performance-Based Tranche (8,800 shares) on the
fifth anniversary of the Effective Time, provided, however, that (A) as of each such date Optionee
shall have remained in the continuous employ of the Company or any Subsidiary and (B) the Company
shall have achieved certain specified performance targets (including, without limitation, EBIT, net
income and revenue growth) set by the Compensation Committee after consultation in good faith with
the Chief Executive Officer of the Company for such year. Any shares included in the
Performance-Based Tranche as to which Optionee does not earn the right to exercise the related
Option Shares shall thereupon expire and terminate.

          (c) The Options shall become exercisable with respect to (i) 25% of the Tranche C Option
Shares (13,750 shares) on the first anniversary of the Effective Time, (ii) 25% of the Tranche C
Option Shares (13,750 shares) on the second anniversary of the Effective Time, (iii) 17% of the
Tranche C Option Shares (9,350 shares) on the third anniversary of the Effective Time, (iv) 17% of
the Tranche C Option Shares (9,350 shares) on the fourth anniversary of the Effective Time and (v)
the remaining 16% of the Tranche C Option Shares (8,800 shares) on the fifth anniversary of the
Effective Time, provided

 

 

however, that as of each such date Optionee remains in the continuous employ of the Company or
any Subsidiary.

          (d) Notwithstanding the foregoing, (i) the Options granted hereby shall become immediately
exercisable with respect to all of the Option Shares upon the occurrence of a Change of Control if
Optionee remains in the continuous employ of the Company or any Subsidiary until the date of the
consummation of such Change of Control and (ii) if the Optionee’s employment with the Company or
any Subsidiary terminates for any reason other than a Termination for Cause or a Voluntary
Termination, then (A) the Options shall be exercisable with respect to a number of Option Shares
equal to the sum of (x) the total number of Option Shares that became exercisable pursuant to
Sections 4(a), 4(b) and 4(c) hereof as of the date of Optionee’s termination of employment and (y)
the number of Option Shares that would have become exercisable under the provisions of Sections
4(a), 4(b) and 4(c) hereof if the Optionee had remained in the employ of the Company or any
Subsidiary until the first anniversary of the date of Optionee’s termination of employment with the
Company or any Subsidiary; provided, however, that the number of Option Shares that would have
become exercisable under the provisions of Section 4(b) if the Optionee had remained in the employ
of the Company or any Subsidiary until the first anniversary of the date of Optionee’s termination
of employment with the Company or any Subsidiary will not become exercisable under clause (y) above
if it is apparent, in the reasonable judgment of the Company, that the Company will miss the
performance targets for the fiscal year in which the termination of employment occurs; and (B) and
all other Options shall terminate.

          (e) Optionee shall be entitled to the privileges of ownership with respect to Option Shares
purchased and delivered to Optionee upon the exercise of all or part of the Options.

     5. Option Nontransferable. Optionee may not transfer or assign all or any part of the
Options other than by will or by the laws of descent and distribution. The Options may be
exercised, during the lifetime of Optionee, only by Optionee, or in the event of Optionee’s legal
incapacity, by Optionee’s guardian or legal representative acting on behalf of Optionee in a
fiduciary capacity under state law and court supervision.

     6. Notice of Exercise; Payment.

          (a) To the extent then exercisable, the Option may be exercised in whole or in part by written
notice to the Company stating the number of Option Shares for which the Options are being exercised
and the intended manner of payment. The date of such notice shall be the exercise date. Except as
otherwise provided in Section 24, payment equal to the aggregate Option Price of the Option Shares
being purchased pursuant to an exercise of the Options must be tendered in full with the notice of
exercise to the Company in one or a combination of the following methods as specified by Optionee
in the notice of exercise: (i) cash in the form of currency or check or by wire transfer as
directed by the Company, (ii) solely following an IPO or shares of the Company’s Class A-1 Common
Stock otherwise being traded on an established securities market, through the surrender to the
Company of shares of Class A-1 Common Stock owned by Optionee for at least six months as valued at
their Fair Market Value on the date of exercise or (iii) through such other form of consideration
as is deemed acceptable by the Board.

          (b) As soon as practicable upon the Company’s receipt of Optionee’s notice of exercise and
payment, the Company shall direct the due issuance of the Option Shares so purchased.

          (c) As a further condition precedent to the exercise of the Options in whole or in part,
Optionee shall comply with all regulations and the requirements of any regulatory authority having
control of, or supervision over, the issuance of the shares of Class A-1 Common Stock and in
connection

 

 

therewith shall execute any documents which the Board shall in its sole discretion deem
necessary or advisable.

     7. Termination of Agreement. The Agreement and the Options granted hereby shall
terminate automatically and without further notice on the earliest of the following dates:

          (a) following Optionee’s termination due to Optionee’s death, Disability, Termination for Good
Reason or Termination Without Cause by the Company, the earlier of (i) one (1) year following the
Optionee’s date of termination or (ii) the remaining term of the Option; provided, however, that it
shall be a condition to the exercise of the Options in the event of Optionee’s death that the
Person exercising the Options shall (i) have agreed in a form satisfactory to the Company to be
bound by the provisions of this Agreement and the Stockholders Agreement and (ii) comply with all
regulations and the requirements of any regulatory authority having control of, or supervision
over, the issuance of the shares of Class A-1 Common Stock and in connection therewith shall
execute any documents which the Board shall in its sole discretion deem necessary or advisable;

          (b) after Optionee’s Voluntary Termination the earlier of (i) ninety (90) calendar days
following the Optionee’s date of termination or (ii) the remaining term of the Options;

          (c) The date of Optionee’s Termination for Cause; or

          (d) Ten (10) years from the Effective Time.

In the event that Optionee’s employment is terminated in the circumstances described in Section
7(c) hereof, this Agreement shall terminate at the time of such termination notwithstanding any
other provision of this Agreement and the Options will cease to be exercisable to the extent
exercisable as of such termination and will not be or become exercisable after such termination.
Optionee shall be deemed to be an employee of the Company or any Subsidiary if on a leave of
absence approved by the Board.

     8. Call Right. Upon termination of Optionee’s employment for any reason prior to an
IPO, the Company will have the right to purchase (the “Call Right”) any Option Shares that Optionee
received pursuant to the terms and conditions set forth in Article VI Call Rights of the
Stockholders Agreement.

     9. Effective Time. The Options granted hereby shall be and become effective (the
“Effective Time”) upon the last to occur of each of the following:

          (a) An executed counterpart of this Agreement shall be delivered to the Company by the
Optionee; and

          (b) The Plan shall have been approved by the Board of Directors of the Company.

     10. Initial Public Offering. Option Shares acquired on exercise of any Option will be
subject to the terms and conditions of the Stockholders’ Agreement. The Company and Optionee
acknowledge that they will agree to provide the Company with the right to require Optionee and
other executives of the Company or any Subsidiary to waive any registration rights with regard to
such Option Shares upon an IPO, in which case the Company will implement an IPO bonus plan in cash,
stock or additional options to compensate for Optionee’s and the other executives’ loss of
liquidity.

     11. No Employment Contract. Nothing contained in this Agreement shall (a) confer upon
Optionee any right to be employed by or remain employed by the Company or any Subsidiary, or (b)
limit

 

 

or affect in any manner the right of the Company or any Subsidiary to terminate the employment
or adjust the compensation of Optionee.

     12. Taxes and Withholding. The Company or any Subsidiary may withhold, or require
Optionee to remit to the Company or any Subsidiary, an amount sufficient to satisfy federal, state,
local or foreign taxes (including the Optionee’s FICA obligation) in connection with any payment
made or benefit realized by Optionee or other person under this Agreement or otherwise, and the
amounts available to the Company or any Subsidiary for such withholding are insufficient, it shall
be a condition to the receipt of such payment or the realization of such benefit that Optionee or
such other person make arrangements satisfactory to the Company or any Subsidiary for payment of
the balance of such taxes required to be withheld. The Company or any Subsidiary may elect to have
such withholding obligation satisfied by having Optionee surrender to the Company or any Subsidiary
a portion of the Option Shares that is issued or transferred to Optionee upon the exercise of an
Option (but only to the extent of the minimum withholding required by law), and the Option Shares
so surrendered by Optionee shall be credited against any such withholding obligation at the Fair
Market Value of such shares on the date of such surrender.

     13. Compliance with Law. The Company shall make reasonable efforts to comply with all
applicable federal and state securities laws; provided, however, that notwithstanding any other
provision of this Agreement, the Options shall not be exercisable if the exercise thereof would
result in a violation of any such law.

     14. Adjustments. The Board may make or provide for such substitution or adjustments
in the number of Option Shares covered by the Options, in the Option Price applicable to such
Options, the Maximum Price (as defined in Section 24), and in the kind of shares covered thereby
and/or such other equitable substitution or adjustments as the Board may determine to prevent
dilution or enlargement of Optionee’s rights that otherwise would result from (a) any stock
dividend, extraordinary or special cash-dividend, stock split, combination of shares,
recapitalization, or other change in the capital structure of the Company, (b) any merger,
consolidation, spin-off, split-off, spin-out, split-up, reclassification, reorganization, partial
or complete liquidation, or other distribution of assets or issuance of rights or warrants to
purchase securities, or (c) any other corporate transaction or event having an effect similar to
any of the foregoing. Such substitutions and adjustments may include, without limitation,
canceling any and all Options in exchange for cash payments equal to the excess, if any, of the
value of the consideration paid to a shareholder of an Option Share over the Option Price per share
subject to such Option in connection with such an adjustment event.

     15. Relation to Other Benefits. Any economic or other benefit to Optionee under this
Agreement shall not be taken into account in determining any benefits to which Optionee may be
entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by
the Company or any Subsidiary and shall not affect the amount of any life insurance coverage
available to any beneficiary under any life insurance plan covering employees of the Company or any
Subsidiary.

     16. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this
Agreement to the extent that the amendment is applicable hereto; provided, however, that no
amendment shall adversely affect the rights of Optionee under this Agreement without Optionee’s
written consent.

     17. Severability. If one or more of the provisions of this Agreement is invalidated
for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed
to be separable from the other provisions hereof, and the remaining provisions hereof shall
continue to be valid and fully enforceable.

     18. Relation to Plan. This Agreement is subject to the terms and conditions of the
Plan. In the event of any inconsistent provisions between this Agreement and the Plan, the Plan
shall govern. The

 

 

Board acting pursuant to the Plan, as constituted from time to time, shall, except as
expressly provided otherwise herein, have the right to determine any questions which arise in
connection with the Option or its exercise.

     19. Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and
assigns of Optionee, and the successors and assigns of the Company.

     20. Governing Law. The interpretation, performance, and enforcement of this Agreement
shall be governed by the laws of the State of Delaware, without giving effect to the principles of
conflict of laws thereof and all parties, including their successors and assigns, consent to the
jurisdiction of the state and federal courts of Delaware.

     21. Prior Agreement. As of the Effective Time, this Agreement supersedes any and all
prior and/or contemporaneous agreements, either oral or in writing, between the parties hereto, or
between either or both of the parties hereto and the Company, with respect to the subject matter
hereof. Each party to this Agreement acknowledges that no representations, inducements, promises,
or other agreements, orally or otherwise, have been made by any party, or anyone acting on behalf
of any party, pertaining to the subject matter hereof, which are not embodied herein, and that no
prior and/or contemporaneous agreement, statement or promise pertaining to the subject matter
hereof that is not contained in this Agreement shall be valid or binding on either party.

     22. Notices. For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or permitted to be given
hereunder will be in writing and will be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof confirmed), or five business
days after having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a nationally
recognized overnight courier service such as Federal Express, UPS, or Purolator, addressed to the
Company (to the attention of the Secretary of the Company) at its principal executive offices and
to Optionee at his principal residence, or to such other address as any party may have furnished to
the other in writing and in accordance herewith, except that notices of changes of address shall be
effective only upon receipt.

     23. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
agreement

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its
duly authorized officer and Optionee has executed this Agreement, as of the day and year first
above written.

	 	 	 	 	 	 	 
	 	 	HealthMarkets, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	David W. Fields	 	 
	 

	 	Name:exv10w1

 

Exhibit                    

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW, AND IT MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR STATE LAW OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS; AND THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL AS TO THE AVAILABILITY OF SUCH
EXEMPTION.

			
	 
	 	Dallas, Texas
	$626,000.00
	 	October 22, 2007

CORNERWORLD, INC.

8.25% SECURED PROMISSORY NOTE

     FOR VALUE RECEIVED, CornerWorld, Inc., a Delaware corporation (the “Company”), hereby promises
to pay to the order of Dynasty Capital LLC (“Holder”), the principal amount of up to Six Hundred
and Twenty Six Thousand Dollars ($626,000.00) on October 19, 2009 (“Maturity Date”), or earlier as
hereinafter provided in accordance with the Purchase Agreement, of even date herewith, entered into
by and between the Company and Holder (as amended from time to time, the “Agreement”). Interest on
the outstanding principal balance shall be paid at maturity at the rate of eight and one quarter
percent (8.25%) per annum. Accrued interest shall also be payable at such time as any payment of
principal of this Note is made. Interest shall be computed on the basis of a 365-day year, using
the number of days actually elapsed.

     The Company’s obligations under this Note are secured by a security interest in substantially
all of the Company’s assets pursuant to a security agreement (the “Security Agreement”) dated
October 19, 2007 by and between the Company and the Holder.

ARTICLE 1.

Events of Default and Acceleration

          (a) Events of Default Defined. The entire unpaid principal amount of this Note,
together with interest thereon shall, on written notice to the Company given by the Holder, become
and be due and payable if any one or more of the following events (“Events of Default”) shall have
occurred (for any reason whatsoever and whether such happening shall be voluntary or involuntary,
or shall be effected or shall come about by operation of law pursuant to or in compliance with any
judgment, decree, or order of any court or any order, rule or regulation of any administrative or
governmental body) and be continuing. An Event of Default shall occur:

               (i) if failure shall be made in the payment of the principal or interest of this Note when and
as the same shall become due and such failure shall continue for a period of five (5) days after
such payment is due; or

               (ii) if the Company shall consent to the appointment of a receiver, trustee or liquidator of
itself or of a substantial part of its property, or shall admit in writing its inability to pay its
debts generally as they become due, or shall make a general assignment for the benefit of
creditors, or shall file a voluntary petition in bankruptcy, or an answer seeking reorganization in
a proceeding under any bankruptcy law (as now or hereafter in effect) or an answer admitting the
material allegations of a petition filed against the Company in any such proceeding, or shall by
voluntary petition, answer or

CornerWorld, Inc. 10% Secured Promissory Note

 

 

consent, seek relief under the provisions of any other now existing or future bankruptcy or
other similar law providing for the reorganization or winding up of corporations, or an
arrangement, composition, extension or adjustment with its or their creditors, or shall, in a
petition in bankruptcy filed against it or them be adjudicated a bankrupt, or the Company or its
directors or a majority of its stockholders shall vote to dissolve or liquidate the Company; or

               (iii) if an involuntary petition shall be filed against the Company seeking relief against the
Company under any now existing or future bankruptcy, insolvency or other similar law providing for
the reorganization or winding up of corporations, or an arrangement, composition, extension or
adjustment with its or their creditors, and such petition shall not be stayed or vacated or set
aside within ninety (90) days from the filing thereof; or

               (iv) if a court of competent jurisdiction shall enter an order, judgment or decree appointing,
without consent of the Company, a receiver, trustee or liquidator of the Company or of all or any
substantial part of the property of the Company, or approving a petition filed against the Company
seeking a reorganization or arrangement of the Company under the Federal bankruptcy laws or any
other applicable law or statute of the United States of America or any State thereof, or any
substantial part of the property of the Company shall be sequestered; and such order, judgment or
decree shall not be stayed or vacated or set aside within ninety (90) days from the date of the
entry thereof; or

               (v) any breach by the Company of any representation, warranty, or covenant which by its terms
is binding, following the Company being given written notice identifying such breach and the
Company’s failure to cure such breach during a period of five (5) days after its being given such
notice; or

               (vi) any breach of any representation, warranty, covenant or term of the Security Agreement by
the Company, following the Company being given written notice identifying such breach and the
Company’s failure to cure such breach during a period of five (5) days after its being given such
notice.

          (a) Rights of the Holder. Nothing in this Note shall be construed to modify, amend or
limit in any way the right of the Holder to bring an action against the Company.

ARTICLE 2.

Miscellaneous

          (a) Prepayments. The Company may prepay this Note at any time, or from time to time,
in whole or in part, on ten (10) days prior written notice to the Holder. The Company may prepay
interest due on the Note by issuing shares of the Company’s common stock, without prior approval of
the Holder. Additionally, the Company may prepay the principal balance due under the Note by
issuing shares of the Company’s common stock, provided all parties to this Agreement agree,
otherwise the principal balance shall be payable by cash.

CornerWorld, Inc. 10% Secured Promissory Note

- 2 -

 

          (b) Transferability. This Note shall not be transferred except in a transaction
exempt from registration pursuant to the Securities Act and applicable state securities law. The
Company shall treat as the owner of this Note the person shown as the owner on its books and
records. The term “Holder” shall include the initial holder named on the first page of this Note
and any subsequent holder of this Note.

          (c) WAIVER OF TRIAL BY JURY. IN ANY LEGAL PROCEEDING TO ENFORCE PAYMENT OF THIS NOTE,
THE COMPANY WAIVES TRIAL BY JURY.

          (d) Usury Saving Provision. All payment obligations arising under this Note are
subject to the express condition that at no time shall the Company be obligated or required to pay
interest at a rate which could subject the holder of this Note to either civil or criminal
liability as a result of being in excess of the maximum rate which the Company is permitted by law
to contract or agree to pay. If by the terms of this Note, the Company is at any time required or
obligated to pay interest at a rate in excess of such maximum rate, the applicable rate of interest
shall be deemed to be immediately reduced to such maximum rate, and interest thus payable shall be
computed at such maximum rate, and the portion of all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in reduction of principal.

          (e) Notice to Company. Notice to the Company shall be given to the Company at its
principal executive offices, presently located at 12222 Merit Drive, Suite 120, Dallas, Texas
75251, Facsimile (972) 404-4056, Attn: Scott Beck with a copy to Richard A. Friedman, Esq.,
Facsimile (212) 930-9725, or to such other address or person as the Company may, from time to time,
advise the holder of this Note, or to the Holder of this Note at the address set forth on the
Company’s records. Notice shall be given by hand delivery, certified or registered mail, return
receipt requested, three days after being deposited in the US mail, by overnight courier service,
which provides evidence of delivery, one day after delivery to such courier for next day priority
delivered and properly addressed, or by telecopier if confirmation of receipt is given or of
confirmation of transmission is sent as herein provided.

          (f) Governing Law. This Note shall be governed by the laws of the State of New York
applicable to agreements executed and to be performed wholly within such State, and without regard
to conflicts of laws principles. The Company hereby (i) consents to the non-exclusive jurisdiction
of the United States District Court for the Southern District of New York and Supreme Court of the
State of New York in the County of New York in any action relating to or arising out of this Note,
(ii) agrees that any process in any such action may be served upon it, in addition to any other
method of service permitted by law, by certified or registered mail, return receipt requested, or
by an overnight courier service which obtains evidence of delivery, with the same full force and
effect as if personally served upon him in New York City, and (iii) waives any claim that the
jurisdiction of any such tribunal is not a convenient forum for any such action and any defense of
lack of in personam jurisdiction with respect thereto.

          (g) Expenses. In the event that the Holder commences a legal proceeding in order to
enforce its rights under this Note, the Company shall pay all reasonable legal fees and expenses
incurred by the Holder with respect thereto, if the Holder is successful in enforcing such action.

CornerWorld, Inc. 10% Secured Promissory Note

- 3 -

 

     IN WITNESS WHEREOF, the Company has executed this Note as of the date and year first
aforesaid.

	 	 	 	 	 
	 	CORNERWORLD, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Scott Beck 	 
	 	 	Title:  	President 	 
	 

CornerWorld, Inc. 10% Secured Promissory Note

- 4 -

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