Document:

ISDA®

    International
      Swaps and Derivatives Association, Inc.

    

    CREDIT
      SUPPORT ANNEX

     

    to
      the
      Schedule to the

    ISDA
      MASTER AGREEMENT

     

    dated
      as
      of December 19, 2006

    between

    SWISS
      RE FINANCIAL PRODUCTS CORPORATION
      (“Party
      A”)

    and

    WELLS
      FARGO BANK, N.A., not individually but solely as trustee for Carrington Mortgage
      Loan Trust, Series 2006-NC5 with respect to the Carrington Mortgage Loan Trust,
      Series 2006-NC5 Asset-Backed Pass-Through Certificates
      (“Party
      B”)

    

    This
      Annex supplements, forms part of, and is subject to, the ISDA Master Agreement
      referred to above (this “Agreement”), is part of its Schedule and is a Credit
      Support Document under this Agreement with respect to Party A and, as to the
      Return Amount, Party B.

    

    Accordingly,
      the parties agree as follows: 

    

    
      	 	
              (1)

            	
              Paragraphs
                1 - 12. Incorporation

            

    

    

    Paragraphs
      1 through 12 inclusive of the ISDA Credit Support Annex (Bilateral Form) (ISDA
      Agreements Subject to New York Law Only) published in 1994 by the International
      Swaps and Derivatives Association, Inc. are incorporated herein by reference
      and
      made a part hereof:

    

    Paragraph
      13. Elections and Variables

    

    
      	
              (a)

            	
              Security
                Interest for “Obligations”.
                The term “Obligations”
                as
                used in this Annex includes no additional obligations of Secured
                Party
                and, for purposes of the definition of Obligations in Paragraph 12,
                includes no additional obligations of
                Pledgor.

            

    

    

    (b)    Credit
      Support Obligations.

    

    
      	 	
              (i)

            	
              Delivery
                Amount, Return Amount and Credit Support
                Amount.

            

    

    

    (A)
       “Delivery
      Amount”
      has the
      meaning specified in Paragraph 3(a) as amended (I) by deleting the words “upon a
      demand made by the Secured Party on or promptly following a Valuation Date” and
      inserting in lieu thereof the words “not later than the close of business on
      each Valuation Date” and (II) with respect to S&P and Moody’s, by deleting
      in its entirety the sentence beginning “Unless otherwise specified in Paragraph
      13” and ending “(ii) the Value as of that Valuation Date of all Posted Credit
      Support held by the Secured Party.” and inserting in lieu thereof the
      following:

    

    The
      “Delivery
      Amount”
      applicable to the Pledgor for any Valuation Date will equal the greatest
      of

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (1)

            	
              the
                amount by which (a) the S&P Credit Support Amount for such Valuation
                Date exceeds (b) the S&P Value as of such Valuation Date of all Posted
                Credit Support held by the Secured
                Party,

            

    

     

    
      	 	
              (2)

            	
              the
                amount by which (a) the Moody’s Credit Support Amount with respect to a
                Moody’s First Trigger Event, for such Valuation Date exceeds (b) the
                Moody’s First Trigger Value as of such Valuation Date of all Posted Credit
                Support held by the Secured Party,

            

    

     

    
      	 	
              (3)

            	
              the
                amount by which (a) the Moody’s Credit Support Amount with respect to a
                Moody’s First Trigger Event for such Valuation Date exceeds (b) the
                Moody’s Second Trigger Value as of such Valuation Date of all Posted
                Credit Support held by the Secured Party,
                and

            

    

     

    
      	 	
              (4)

            	
              the
                amount by which (a) the Credit Support Amount with respect to Fitch
                for
                such Valuation Date exceeds (b) the Value with respect to Fitch as
                of such
                Valuation Date of all Posted Credit Support held by the Secured
                Party.

            

    

     

    (B) “Return
      Amount” has
      the
      meaning specified in Paragraph 3(b) as amended by deleting in its entirety
      the
      sentence beginning “Unless otherwise specified in Paragraph 13” and ending “(ii)
      the Credit Support Amount.” and inserting in lieu thereof the following:

    

    The
      “Return
      Amount”
      applicable to the Secured Party for any Valuation Date will equal the least
      of:

    

    
      	 	
              (1)
                

            	
              the
                amount by which (a) the S&P Value as of such Valuation Date of all
                Posted Credit Support held by the Secured Party exceeds (b) the S&P
                Credit Support Amount for such Valuation Date,

            

    

    

    
      	 	
              (2)
                

            	
              the
                amount by which (a) the Moody’s First Trigger Value as of such Valuation
                Date of all Posted Credit Support held by the Secured Party exceeds
                (b)
                the Moody’s First Trigger Credit Support Amount for such Valuation
                Date,

            

    

    

    
      	 	
              (3)
                

            	
              the
                amount by which (a) the Moody’s Second Trigger Value as of such Valuation
                Date of all Posted Credit Support held by the Secured Party exceeds
                (b)
                the Moody’s Second Trigger Credit Support Amount for such Valuation
                Date.

            

    

    

    
      	 	
              (4)

            	
              the
                amount by which (a) the Value as of such Valuation Date with respect
                to
                Fitch of all Posted Credit Support held by the Secured Party exceeds
                (b)
                the Credit Support Amount with respect to Fitch for such Valuation
                Date.

            

    

    

    (C) “Credit
      Support Amount”
      shall
      not apply. For purposes of calculating any Delivery Amount or Return Amount
      for
      any Valuation Date, reference shall be made to the S&P Credit Support
      Amount, the Moody’s First Trigger Credit Support Amount, or the Moody’s Second
      Trigger Credit Support Amount, in each case for such Valuation Date, as provided
      in Paragraphs 13(b)(i)(A) and 13(b)(i)(B), above. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    (D) “S&P
      Value”
      means,
      on any date and with respect to any Eligible Collateral other than Cash, the
      product of (A) the bid price obtained by the Valuation Agent for such Eligible
      Collateral and (B) the S&P Valuation Percentage for such Eligible Collateral
      set forth in paragraph 13(b)(ii).

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    
      	 	
              (ii)

            	
              Eligible
                Collateral.
                The following items denominated in U.S. Dollars will qualify as
                “Eligible
                Collateral”:

            

    

    

      
        	 	 	
                Valuation

                Percentage:

              	
                The
                  Moody’s Credit Support Amount under Para 13(q)(1) below is greater than
                  zero

              	
                The
                  Moody’s Credit Support Amount under Para 13(q)(2) below is greater than
                  zero

              	
                S&P
                  Valuation Percentage

              	
                Fitch

              
	
                (A)

              	
                Cash:
                  US
                  Dollars in depository account form.

              	 	
                100%

              	
                100%

              	
                100%

              	
                100%

              
	
                (B)

              	
                U.S.
                  Treasury Securities:
                  fixed rate negotiable debt obligations issued by the U.S. Treasury
                  Department (“Fixed Rate Treasuries”) having a remaining maturity of up to
                  and not more than 1 year.

              	 	
                100%%

              	
                100%

              	
                98.6%

              	
                99%

              
	
                (C)

              	
                Fixed
                  Rate Treasuries having a remaining maturity of greater than 1 year
                  but not
                  more than 10 years.

              	 	
                100%

              	
                99%
                  (1-2yr)

                98%
                  (2-3yr)

                97%(3-5yr)

                95%
                  (5-7yr)

                94%
                  (7-10yr)

              	
                97.3%
                  (1-2yr)

                95.8%
                  (2-3yr)

                93.8%(3-5yr)

                91.4%
                  (5-7yr)

                90.3%
                  (7-10yr

              	
                98%

              
	
                (D)

              	
                Fixed
                  Rate Treasuries having a remaining maturity of greater than 10
                  years

              	 	
                100%

              	
                89%(10-20yr)

                87%
                  (>20yr)

              	
                86.9%(10-20yr)

                84.6%
                  (>20yr)

              	
                97%

              
	
                (E)

              	
                Agency
                  Securities:
                  Fixed rate negotiable debt obligations of the Federal National
                  Mortgage
                  Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC),
                  Federal Home Loan Banks (FHLB), Federal Farm Credit Banks (FFCB),
                  Student
                  Loan Marketing Association (SLMA), Tennessee Valley Authority (TVA)
                  (collectively, “Fixed Rate Agency Securities”) having a remaining maturity
                  of not more than 1 year.

              	 	
                100%

              	
                99%

              	
                98%

              	
                95%

              
	
                (F)

              	
                Fixed
                  Rate Agency Securities having a remaining maturity of greater than
                  1 year
                  but not more than 5 years.

              	 	
                100%

              	
                98%
                  (1-2yr)

                97%
                  (2-3 yr)

                96%
                  (3-5yr)

              	
                96.8%
                  (1-2yr)

                96.3%
                  (2-3 yr)

                92.5%
                  (3-5yr)

              	
                92%

              
	
                (G)

              	
                Fixed
                  Rate Agency Securities having a remaining maturity of greater than
                  5 years
                  but not more than 10 years.

              	 	
                100%

              	
                94%
                  (5-7 yr)

                93%
                  (7-10 yr)

              	
                90.3%
                  (5-7 yr)

                86.9%
                  (7-10 yr)

              	
                88%

              
	
                (H)

              	
                Fixed
                  Rate Agency Securities having a remaining maturity of greater than
                  10
                  years but not more than 20 years.

              	 	
                100%

              	
                88%

              	
                81.6%

              	
                82%

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	 	
                Valuation

                Percentage:

              	
                The
                  Moody’s Credit Support Amount under Para 13(q)(1) below is greater than
                  zero

              	
                The
                  Moody’s Credit Support Amount under Para 13(q)(2) below is greater than
                  zero

              	
                S&P
                  Valuation Percentage

              	
                Fitch

              
	
                (I)

              	
                Fixed
                  Rate Agency Securities having a remaining maturity of greater than
                  20
                  years but not more than 30 years.

              	 	
                100%

              	
                86%

              	
                77.9%

              	
                82%

              
	
                (J)

              	
                FHLMC
                  Certificates.
                  Mortgage participation certificates issued by FHLMC evidencing
                  undivided
                  interests or participations in pools of first lien conventional
                  or FHA/VA
                  residential mortgages or deeds of trust, guaranteed by FHLMC, and
                  having a
                  remaining maturity of not more than 30 years.

              	 	
                0%
                  (or such other amount subject to Moody’s rating affirmation in respect of
                  the rated notes)

              	
                0%
                  (or such other amount subject to Moody’s rating affirmation in respect of
                  the rated notes)

              	
                86.4%

              	
                82%

              
	
                (K)

              	
                FNMA
                  Certificates. Mortgage-backed
                  pass-through certificates issued by FNMA evidencing undivided interests
                  in
                  pools of first lien mortgages or deeds of trust on residential
                  properties,
                  guaranteed by FNMA, having a remaining maturity of not more than
                  30
                  years.

              	 	
                0%
                  (or such other amount subject to Moody’s rating affirmation in respect of
                  the rated notes)

              	
                0%
                  (or such other amount subject to Moody’s rating affirmation in respect of
                  the rated notes)

              	
                86.4%

              	
                82%

              
	
                (L)

              	
                GNMA
                  Certificates.
                  Mortgage-backed pass-through certificates issued by private entities,
                  evidencing undivided interests in pools of first lien mortgages
                  or deeds
                  of trust on single family residences, guaranteed by the Government
                  National Mortgage Association (GNMA) with the full faith and credit
                  of the
                  United States, and having a remaining maturity of not more than
                  30
                  years.

              	 	
                0%
                  (or such other amount subject to Moody’s rating affirmation in respect of
                  the rated notes)

              	
                0%
                  (or such other amount subject to Moody’s rating affirmation in respect of
                  the rated notes)

              	
                86.4%

              	
                82%

              
	
                (M)

              	
                Commercial
                  Paper.
                  Commercial Paper with a rating of at least P-1 by Moody’s, at least F-1 by
                  Fitch and at least A-1+ by S&P and having a remaining maturity of not
                  more than 30 days.

              	 	
                0%
                  (or such other amount subject to Moody’s rating affirmation in respect of
                  the rated notes)

              	
                0%
                  (or such other amount subject to Moody’s rating affirmation in respect of
                  the rated notes)

              	
                99%

              	
                99%

              
	
                (N)

              	
                Other.
                  Other
                  items of Credit Support approved by each applicable rating agency
                  with
                  such valuation percentages as determined by each applicable rating
                  agency.

              	 	
                0%
                  (or such other amount subject to Moody’s rating affirmation in respect of
                  the rated notes)

              	
                0%
                  (or such other amount subject to Moody’s rating affirmation in respect of
                  the rated notes)

              	
                %
                  to be determined

              	
                %
                  to be determined

              

      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (iii)
                

            	
              Other
                Eligible Support.
                Not applicable.

            

    

    

    
      	 	
              (iv)
                

            	
              Thresholds.

            

    

    

    
      	 	
              (A)

            	
              “Independent
                Amount” means
                for Pledgor: zero.

            

    

     

    “Independent
      Amount” means
      for
      Secured Party: zero

     

    
      	 	
              (B)

            	
              “Threshold”
                means, (1) with respect to Pledgor, infinity; provided that for so
                long as
                no Relevant Entity has the Moody’s First Trigger Required Ratings and
                either (i) no Relevant Entity has had the Moody’s First Trigger Required
                Ratings since this Annex was executed or (ii) at least 30 Local Business
                Days have elapsed since the last time a Relevant Entity had the Moody’s
                First Trigger Required Ratings, the Threshold with respect to Party
                A
                shall be zero; further, provided, if a Ratings Event (as described
                in Part
                5(f) of the Schedule) has occurred and is continuing pursuant to
                Part 5(f)
                of the Agreement, the threshold shall be zero in the event (i) Party
                A
                fails to assign all of its rights and obligations under the Agreement
                on
                or before the thirtieth (30) day after the date of a Ratings Event
                (as
                described in Part 5(f) of the Schedule) continues to exist or (ii)
                a
                S&P Required Ratings Downgrade Event has occurred and is continuing
                and (2) with respect to Party B and any Valuation Date, infinity.
                

            

    

    

    
      	 	
              (C)

            	
              “Minimum
                Transfer Amount” means
                USD 100,000 with respect to Party A and Party B; provided, however,
                that
                if the aggregate Certificate Principal Balance and note principal
                balance
                of Certificates and Notes rated by S&P ceases to be more than USD
                50,000,000, the “Minimum
                Transfer Amount”
                shall be USD 50,000.

            

    

    

    
      	 	
              (D)

            	
              Rounding:
                The Delivery Amount will be rounded up to the nearest integral multiple
                of
                $1,000, and the Return Amount will be rounded down to the nearest
                integral
                multiple of $1,000.

            

    

    

    
      	
              (c)

            	
              Valuation
                and Timing.

            

    

    

    
      	 	
              (i)

            	
              “Valuation
                Agent”
                means Party A; provided,
                however,
                that if an Event of Default shall have occurred with respect to which
                Party A is the Defaulting Party, Party B shall have the right to
                designate
                as Valuation Agent an independent party, reasonably acceptable to
                Party A,
                the cost for which shall be borne by Party A. All calculations by
                the
                Valuation Agent must be made in accordance with standard market practice,
                including, in the event of a dispute as to the Value of any Eligible
                Credit Support or Posted Credit Support, by making reference to quotations
                received by the Valuation Agent from one or more Pricing
                Sources.

            

    

     

    
      	 	
              (ii)

            	
              “Valuation
                Date”
                means the first Local Business Day of each
                week.

            

    

    

    
      	 	
              (iii)

            	
              “Valuation
                Time” means
                the close of business in the city in which the Valuation Agent is
                located
                on the Local Business Day before the Valuation Date or date of
                calculation, as applicable; provided
                that the calculations of Value and Exposure will be made as of
                approximately the same time on the same
                date.

            

    

    

    
      	 	
              (iv)

            	
              “Notification
                Time”
                means 10:00 a.m., New York time, on a Local Business
                Day.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (v)

            	
              “External
                Verification”.
                Notwithstanding anything to the contrary in the definitions of Valuation
                Agent or Valuation Date, at any time at which Party A (or, to the
                extent
                applicable, its Credit Support Provider) does not have a long-term
                unsubordinated and unsecured debt rating of at least “BBB+” from S&P,
                the Valuation Agent shall (A) calculate the Secured Party’s Exposure and
                the S&P Value of Posted Credit Support on each Valuation Date based on
                internal marks and (B) verify such calculations with external marks
                monthly by obtaining on the last Local Business Day of each calendar
                month
                two external marks for each Transaction to which this Annex relates
                and
                for all Posted Credit Support; such verification of the Secured Party’s
                Exposure shall be based on the higher of the two external marks.
                Each
                external mark in respect of a Transaction shall be obtained from
                an
                independent Reference Market-maker that would be eligible and willing
                to
                enter into such Transaction in the absence of the current derivative
                provider, provided that an external mark may not be obtained from
                the same
                Reference Market-maker more than four times in any 12-month period.
                The
                Valuation Agent shall obtain these external marks directly or through
                an
                independent third party, in either case at no cost to Party B.
                The
                Valuation Agent shall calculate on each Valuation Date (for purposes
                of
                this paragraph, the last Local Business Day in each calendar month
                referred to above shall be considered a Valuation Date)
                the Secured Party’s Exposure based on the greater of the Valuation Agent’s
                internal marks and the external marks received. If the S&P Value on
                any such Valuation Date of all Posted Credit Support then held by
                the
                Secured Party is less than the S&P Credit Support Amount on such
                Valuation Date (in each case as determined pursuant to this paragraph),
                Party A shall, within three Local Business Days of such Valuation
                Date,
                Transfer to the Secured Party Eligible Credit Support having an S&P
                Value as of the date of Transfer at least equal to such
                deficiency.

            

    

    

    
      	 	
              (vi)

            	
              Notice
                to S&P.
                At any time at which Party A (or, to the extent applicable, its Credit
                Support Provider) does not have a long-term unsubordinated and unsecured
                debt rating of at least “BBB+” from S&P, the Valuation Agent shall
                provide to S&P not later than the Notification Time on the Local
                Business Day following each Valuation Date its calculations of the
                Secured
                Party’s Exposure and the S&P Value of any Eligible Credit Support or
                Posted Credit Support for that Valuation Date. The Valuation Agent
                shall
                also provide to S&P any external marks received pursuant to the
                preceding paragraph.

            

    

    

    
      	
              (d)

            	
              Conditions
                Precedent and Secured Party’s Rights and
                Remedies.
                No
                Specified Conditions apply.

            

    

    

    
      	
              (e)

            	
              Substitution.

            

    

    

    
      	 	
              (i)

            	
              “Substitution
                Date” has
                the meaning specified in Paragraph
                4(d)(ii).

            

    

    

    
      	 	
              (ii)

            	
              Consent.
                The Pledgor is not required to obtain the Secured Party’s consent for any
                substitution pursuant to Paragraph
                4(d).

            

    

    

    
      	
              (f)

            	
              Dispute
                Resolution.

            

    

    

    
      	 	
              (i)

            	
              “Resolution
                Time”
                means 1:00 p.m., New York time, on the Local Business Day following
                the
                date on which the notice is given that gives rise to a dispute under
                Paragraph 5.

            

    

    

    
      	 	
              (ii)

            	
              Value.
                For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of Posted
                Credit Support other than Cash will be calculated based upon the
                mid-point
                between the bid and offered purchase rates or prices for that Posted
                Credit Support as reported on the Bloomberg electronic service as
                of the
                Resolution Time, or if unavailable, as quoted to the Valuation Agent
                as of
                the Resolution Time by a dealer in that Posted Credit Support of
                recognized standing selected in good faith by the Valuation Agent,
                which
                calculation shall include any unpaid interest on that Posted Credit
                Support to the extent it is the established practice in the relevant
                market.

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iii)    Alternative.
      The
      provisions of Paragraph 5 will apply.

    

    
      	
              (g)

            	
              Holding
                and Using Posted
                Collateral.

            

    

    

    
      	 	
              (i)

            	
              Eligibility
                to Hold Posted Collateral; Custodians.
                Secured Party will not be entitled to hold Posted Collateral itself,
                and
                instead the Secured Party will be entitled to hold Posted Collateral
                through the Trustee which Posted Collateral (i) shall not be commingled
                or
                used with any other asset held by the Trustee but shall be held in
                a
                separate account for this purpose only and (ii) shall not be transferred
                to any other person or entity but Party A pursuant to the provisions
                herein except (x) in any case contemplated by Paragraph 8(a) of this
                Annex
                with respect to Party A or (y) as directed by Party A.
                

            

    

    

    
      	 	
              (ii)

            	
              Use
                of Posted Collateral.
                The provisions of Paragraph 6(c) will not apply to Secured Party
                and
                without prejudice to Secured Party’s rights under Paragraph 8 of the
                Credit Support Annex, Secured Party will not take any action specified
                in
                such Section 6(c).

            

    

    

    
      	
              (h)

            	
              Interest
                Amount.

            

    

    

    
      	 	
              (i)

            	
              Interest
                Rate. The“Interest
                Rate” means,
                for any day, the rate of interest actually earned for that day on
                Eligible
                Collateral constituting cash under Paragraph
                13(b)(ii)(A).

            

    

    

    
      	 	
              (ii)

            	
              Transfer
                of Interest Amount.
                The Transfer of the Interest Amount, if any, will be made on the
                first
                Local Business Day of each calendar month and on any Local Business
                Day
                that Posted Collateral in the form of Cash is Transferred to the
                Pledgor
                pursuant to Paragraph 3(b). Any Interest Amount paid by Party B to
                Party A
                hereunder with respect to cash collateral posted by Party A shall
                not
                exceed the actual amount of interest received by Party B with respect
                thereto.

            

    

    

    
      	 	
              (iii)

            	
              Alternative
                to Interest Amount.
                The provisions of Paragraph 6(d)(ii) will
                apply.

            

    

    

    
      	
              (i)

            	
              Additional
                Representation(s). Not
                applicable.

            

    

    

    
      	
              (j)

            	
              Other
                Eligible Support and Other Posted Support. Not
                applicable.

            

    

    

    
      	
              (k)

            	
              Demands
                and Notices. All
                demands, specifications and notices under this Annex will be made
                to a
                party as follows unless otherwise specified from time to time by
                that
                party for purposes of this Annex in a written notice given to the
                other
                party:

            

    

    

    To
      Pledgor:

    

    As
      set
      forth in the Schedule.

    

    To
      Secured Party:

    

    As
      set
      forth in the Schedule.

    

    
      	
              (l)

            	
              Addresses
                for Transfers.

            

    

    

    
      	 	
              (i)

            	
              For
                each Transfer hereunder to Pledgor:

            

    

    

    To
      be
      provided in written instructions.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	 	
              (ii)

            	
              For
                each Transfer hereunder to Secured Party, instructions will be provided
                by
                Secured Party for that specific
                Transfer.

            

    

    

    
      	
              (m)

            	
              Agreement
                as to Single Secured Party and Pledgor.
                Party A and Party B agree that, notwithstanding anything to the contrary
                in the recital of this Annex, Paragraph 1(b) or Paragraph 2 of the
                definitions in Paragraph 12, (a) the term “Secured Party” as used in this
                Annex means only Party B, (b) the term “Pledgor” as used in this Annex
                means only Party A, (c) only Party A makes the pledge and grant in
                Paragraph 2, the acknowledgment in the final sentence of Paragraph
                8(a)
                and the representations in Paragraph 9 and (d) only Party A shall
                be
                required to post Eligible Credit Support hereunder. Party A also
                agrees
                that it shall pay all reasonable costs of transferring Eligible Credit
                Support required to be delivered by Party A to Party B
                hereunder.

            

    

    

    
      	
              (n)

            	
              No
                Gross Up.
                The Secured Party will have no obligation to pay any additional amount
                of
                the kind specified in Section 2(d)(i)(4) of the Agreement with respect
                to
                any Interest Amounts or
                Distributions.

            

    

    

    
      	
              (o)

            	
              Elimination
                of Demand Requirements.
                The parties agree that the phrase “upon a demand made by the Secured
                Party” shall be deleted from Paragraph 3(a) of this Credit Support
                Annex.

            

    

    

    
      	
              (p)

            	
              S&P
                Credit Support Amount.
                The “S&P
                Credit Support Amount”
                means, for any Valuation Date, the excess, if any, of
                

            

    

     

    (I)    (A)     for
      any
      Valuation Date on which (i) an S&P Rating Threshold Event has occurred and
      been continuing for at least 30 days, or (ii) a S&P Required Ratings
      Downgrade Event has occurred and is continuing, an amount equal to the sum,
      for
      each Transaction to which this Annex relates, of (1) 100.0% of the Secured
      Party’s Transaction Exposure for such Valuation Date and (2) the product of the
      Volatility Buffer for such Transaction and the Notional Amount of such
      Transaction for the Calculation Period of such Transaction which includes such
      Valuation Date, or 

    

    
      	 	
              (B)

            	
              for
                any other Valuation Date, zero,
                over

            

    

    

    
      	 	
              (II)

            	
              the
                Threshold for Party A for such Valuation
                Date.

            

    

    

    “S&P
      Required Ratings Downgrade Event”
      means
      that no Relevant Entity has credit ratings at least equal to the S&P
      Required Ratings Threshold.

    

    “S&P
      Required Ratings Threshold” means,
      with respect to Party A, the guarantor under an Eligible Guarantee or an
      Eligible Replacement, a long-term unsecured and unsubordinated debt rating
      or
      counterparty rating from S&P of “BBB-“.

    

    “S&P
      Rating Threshold Event”
      means,
      on any date, no Relevant Entity has credit ratings from S&P which equal or
      exceed the S&P Approved Ratings Threshold.

    

    “Relevant
      Entity” means
      Party A and, to the extent applicable, a guarantor under an Eligible
      Guarantee.

    

    “S&P
      Approved Ratings Threshold”
      means,
      with respect to Party A, the guarantor under an Eligible Guarantee or an
      Eligible Replacement, a short-term unsecured and unsubordinated debt rating
      from
      S&P of “A-1”, or, if such entity does not have a short-term unsecured and
      unsubordinated debt rating from S&P, a long-term unsecured and
      unsubordinated debt rating from S&P of “A+”.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    “Transaction
      Exposure”
      means,
      for any Transaction, Exposure determined as if such Transaction were the only
      Transaction between the Secured Party and the Pledgor.

    

    “Exposure”
      has the
      meaning specified in Paragraph 12, except that after the word “Agreement” the
      words “(assuming, for this purpose only, that Part 1(f) of the Schedule is
      deleted)” shall be inserted. 

     

    TABLE
      A

    

    
      	
              Volatility
                Buffer

            
	
              Counterparty

            	
              Less
                than 5 years to Termination Date of the Transaction.

            	
              Less
                than 10 years, but more than 5 years to Termination Date of the
                Transaction.

            	
              Greater
                than 10 years to Termination Date of the Transaction.

            
	
              The
                rating by S&P of Party A’s long-term unsecured, unsubordinated
                obligations is at least equal to “A”

            	
              3.25%

            	
              4.00%

            	
              4.75%

            
	
              The
                rating by S&P of Party A’s long-term unsecured, unsubordinated
                obligations is equal to “A-”

            	
              4.00%

            	
              5.00%

            	
              6.25%

            
	
              The
                rating by S&P of Party A’s long-term unsecured, unsubordinated
                obligations is equal to or less than “BB+”

            	
              4.50%

            	
              5.75%

            	
              7.50%

            

    

     

    (q)    Moody’s
      Ratings
      Criteria 

    

    “Ratings
      Criteria” means, the criteria used by Moody’s (“Moody’s Criteria”) for the
      purposes of determining the amount of Eligible Credit Support Party A is
      required to transfer at any time when the Threshold with respect to Party A
      is
      zero.

    

    Moody's
      Criteria:

    

    Moody’s
      Credit Support Amount.*
      With
      respect to a Ratings Event (as described in Part 5(f) of the Schedule) relating
      to an action taken by Moody’s, the “Credit
      Support Amount”
      shall
      mean with respect to a Pledgor on a Valuation Date the sum of :

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    (1)   (A)    for
      any
      Valuation Date on which (I) a Moody’s First Trigger Event has occurred and has
      been continuing (x) for at least 30 Local Business Days or (y) since this Annex
      was executed and (II) it is not the case that a Moody’s Second Trigger Event has
      occurred and been continuing for at least 30 Local Business Days, an amount
      equal to the following:

    

    the
      greater of (a) zero and (b) the sum of (i) the Secured Party’s Transaction
      aggregate Exposure for all Transactions and such Valuation Date and and
      the
      aggregate of Moody’s Additional Collateralized Amounts for each
      Transaction.

    

    For
      the
      purposes of this definition, the “Moody’s
      Additional Collateralized Amount”
with
      respect to any Transaction shall mean: the
      least
      of (x) the product of the Moody’s First Trigger DV01 Multiplier and DV01 for
      each Transaction and such Valuation Date, (y) the product of Moody’s First
      Trigger Notional Amount Multiplier and the Notional Amount for such Transaction
      for the Calculation Period which includes such Valuation Date, and (z) the
      product of the applicable Moody’s First Trigger Factor set forth in Table B and
      the Notional Amount for each Transaction for the Calculation Period which
      includes such Valuation Date; or 

    

    
      	 	
              (B)

            	
              for
                any other Valuation Date, zero,
                over

            

    

     

    the
      Threshold for Party A for such Valuation Date.

     

    “DV01”
      means
      the sum of the estimated change in the Secured Party’s Exposure that would
      result from a one basis point change in the relevant swap curve, as determined
      by the Valuation Agent in good faith and in a commercially reasonable manner
      in
      accordance with the relevant customary methodology used by the Valuation
      Agent.

     

    “Moody’s
      First Trigger Event”
means
      that no Relevant Entity has credit ratings from Moody’s at least equal to the
      Moody’s First Trigger Required Ratings.

    

    “Moody’s
      First Trigger DV01 Multiplier”
means
      (A) if each Local Business Day is a Valuation Date, 15, or (B) otherwise,
      25.

    

    “Moody’s
      First Trigger Notional Amount Multiplier”
means
      (A) if each Local Business Day is a Valuation Date, 2%, or (B) otherwise,
      4%.

     

    OR
      

     

    (2)   (A)   for
      any
      Valuation Date on which it is the case that a Moody’s Second Trigger Event has
      occurred and been continuing for at least 30 Local Business Days, an amount
      equal to the greatest of (a) zero, (b) the
      aggregate amount of the Next Payments for all Next Payment Dates
      and (c)
      the sum of the Secured Party’s aggregate Exposure and the aggregate of Moody’s
      Additional Collateralized Amounts for each Transaction.

    

    For
      the
      purposes of this definition, the “Moody’s
      Additional Collateralized Amount”
with
      respect to any Transaction shall mean: 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    if
      such
      Transaction is not a Transaction-Specific Hedge,

    

    the
      least
      of (i) the product of the Moody’s Second Trigger DV01 Multiplier and DV01 for
      each Transaction and such Valuation Date and (ii) the product of the Moody’s
      Second Trigger Notional Amount Multiplier and the Notional Amount for each
      Transaction for the Calculation Period which includes such Valuation Date,
      and
      (z) the product of the applicable Moody’s Second Trigger Factor set forth in
      Table B and the Notional Amount for each Transaction for the Calculation Period
      which includes such Valuation Date; or

    

    if
      such
      Transaction is a Transaction-Specific Hedge, 

    

    the
      least
      of (i) the product of the Moody’s Second Trigger Transaction-Specific Hedge DV01
      Multiplier and DV01 for each Transaction and such Valuation Date and (ii) the
      product of the Moody’s Second Trigger Transaction-Specific Hedge Notional Amount
      Multiplier and the Notional Amount for each Transaction for the Calculation
      Period which includes such Valuation Date and (z) the product of the applicable
      Moody’s Second Trigger Factor set forth in Table B and the Notional Amount for
      each Transaction for the Calculation Period which includes such Valuation Date;
      or 

    

    
      	 	
              (B)

            	
              for
                any other Valuation Date, zero,
                over

            

    

     

    the
      Threshold for Party A for such Valuation Date.

    

    “Moody’s
      Second Trigger Event”
means
      that no Relevant Entity has credit ratings from Moody’s at least equal to the
      Moody’s Second Trigger Required Ratings.

    

    “Moody’s
      Second Trigger DV01 Multiplier”
means
      (A) if each Local Business Day is a Valuation Date, 50, or (B) otherwise,
      60.

    

    “Moody’s
      Second Trigger Transaction-Specific Hedge DV01
      Multiplier”
means
      (A) if each Local Business Day is a Valuation Date, 65, or (B) otherwise,
      75.

    

    “Moody’s
      Second Trigger Transaction-Specific Hedge Notional Amount
      Multiplier”
means
      (A) if each Local Business Day is a Valuation Date, 10%, or (B) otherwise,
      11%.

    

    “Moody’s
      Second Trigger Notional Amount Multiplier”
means
      (A) if each Local Business Day is a Valuation Date, 8% or (B) otherwise,
      9%.

    

    “Next
      Payment”
means,
      in respect of each Next Payment Date, the greater of (i) the amount of any
      payments due to be made by Party A under Section 2(a) on such Next Payment
      Date
      less any payments due to be made by Party B under Section 2(a) on such Next
      Payment Date (in each case, after giving effect to any applicable netting under
      Section 2(c)) and (ii) zero.

    

    “Next
      Payment Date”
means
      each date on which the next scheduled payment under any Transaction is due
      to be
      paid.

    

    “Transaction-Specific
      Hedge” means
      any
      Transaction that is an interest rate cap, interest rate floor or interest rate
      swaption, or an interest rate swap if (x) the notional amount of the interest
      rate swap is “balance guaranteed” or (y) the notional amount of the interest
      rate swap for any Calculation Period otherwise is not a specific dollar amount
      that is fixed at the inception of the Transaction.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	
              (r)

            	
              Other
                Provisions.

            

    

    

    (i)
      Events
      of Default.
      Paragraph 7 will not apply to cause any Event of Default to exist with respect
      to Party B except that Paragraph 7(i) will apply to Party B solely in respect
      of
      Party B’s obligations under Paragraph 3(b) of the Credit Support Annex.
      Notwithstanding anything to the contrary in Paragraph 7, any failure by Party
      A
      to comply with or perform any obligation to be complied with or performed by
      Party A under the Credit Support Annex shall only be an Event of Default if
      (A)
      a Required Ratings Downgrade Event has occurred and been continuing for 30
      or
      more Local Business Days and (B) such failure is not remedied on or before
      the
      third Local Business Day after notice of such failure is given to Party
      A.

    

    (ii)
      Expenses.
      Notwithstanding anything to the contrary in Paragraph 10, the Pledgor will
      be
      responsible for, and will reimburse the Secured Party for, all transfer and
      other taxes and other costs involved in any Transfer of Eligible
      Collateral.

    

    (iii)
      Calculation
      of Value.
      Paragraph 4(c) is hereby amended by deleting the word “Value” and inserting in
      lieu thereof “S&P Value, Moody’s First Trigger Value, Moody’s Second Trigger
      Value”. Paragraph 4(d)(ii) is hereby amended by (A) deleting the words “a Value”
and inserting in lieu thereof “an S&P Value, Moody’s First Trigger Value,
      and Moody’s Second Trigger Value” and (B) deleting the words “the Value” and
      inserting in lieu thereof “S&P Value, Moody’s First Trigger Value, and
      Moody’s Second Trigger Value”. Paragraph 5 (flush language) is hereby amended by
      deleting the word “Value” and inserting in lieu thereof “S&P Value, Moody’s
      First Trigger Value, or Moody’s Second Trigger Value”. Paragraph 5(i) (flush
      language) is hereby amended by deleting the word “Value” and inserting in lieu
      thereof “S&P Value, Moody’s First Trigger Value, and Moody’s Second Trigger
      Value”. Paragraph 5(i)(C) is hereby amended by deleting the word “the Value, if”
and inserting in lieu thereof “any one or more of the S&P Value, Moody’s
      First Trigger Value, or Moody’s Second Trigger Value, as may be”. Paragraph
      5(ii) is hereby amended by (1) deleting the first instance of the words “the
      Value” and inserting in lieu thereof “any one or more of the S&P Value,
      Moody’s First Trigger Value, or Moody’s Second Trigger Value” and (2) deleting
      the second instance of the words “the Value” and inserting in lieu thereof “such
      disputed S&P Value, Moody’s First Trigger Value, or Moody’s Second Trigger
      Value”. Each of Paragraph 8(b)(iv)(B) and Paragraph 11(a) is hereby amended by
      deleting the word “Value” and inserting in lieu thereof “least of the S&P
      Value, Moody’s First Trigger Value, and Moody’s Second Trigger Value”.

    

    (iv)
      Valuation
      Percentage
      shall
      mean, for purposes of determining the S&P Value, Moody's First Trigger
      Value, or Moody's Second Trigger Value with respect to any Eligible Collateral
      or Posted Collateral, the applicable S&P Valuation Percentage, Moody's First
      Trigger Valuation Percentage, or Moody's Second Trigger Valuation Percentage
      for
      such Eligible Collateral or Posted Collateral, respectively, in each case as
      set
      forth in Paragraph 13(b)(ii).

    

    (v) Withholding.
      Paragraph 6(d)(ii) is hereby amended by inserting immediately after “the
      Interest Amount” in the fourth line thereof the words “less any applicable
      withholding taxes.”

    

    (vi)
      Notice
      of Failure to Post Collateral. Upon
      any
      failure by Party A to post collateral as required under this Agreement, Party
      B
      shall, no later than the next Business Day after the date such collateral was
      required to be posted, give a written notice of such failure to Party A and
      to
      Depositor. For the avoidance of doubt, notwithstanding anything in this
      Agreement to the contrary, the failure of Party B to comply with the
      requirements of this paragraph shall not constitute an Event of Default or
      Termination Event.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      B

    

    
      	
              Weighted
                Average Life of Hedge in Years

            	
              Moody’s
                First Trigger Factor

            	
              Moody’s
                Second Trigger Factor for Transactions other than Transaction-Specific
                Hedges

            	
              Moody’s
                Second Trigger Factor for Transaction-Specific
                Hedges

            
	
              Less
                than 1

            	
              0.25%

            	
              0.60%

            	
              0.75%

            
	
              More
                than 1 but no more than 2

            	
              0.50%

            	
              1.20%

            	
              1.50%

            
	
              More
                than 2 but no more than 3

            	
              0.70%

            	
              1.70%

            	
              2.20%

            
	
              More
                than 3 but no more than 4

            	
              1.00%

            	
              2.30%

            	
              2.90%

            
	
              More
                than 4 but no more than 5

            	
              1.20%

            	
              2.80%

            	
              3.60%

            
	
              More
                than 5 but no more than 6

            	
              1.40%

            	
              3.30%

            	
              4.20%

            
	
              More
                than 6 but no more than 7

            	
              1.60%

            	
              3.80%

            	
              4.80%

            
	
              More
                than 7 but no more than 8

            	
              1.80%

            	
              4.30%

            	
              5.40%

            
	
              More
                than 8 but no more than 9

            	
              2.00%

            	
              4.80%

            	
              6.00%

            
	
              More
                than 9 but no more than 10

            	
              2.20%

            	
              5.30%

            	
              6.60%

            
	
              More
                than 10 but no more than 11

            	
              2.30%

            	
              5.60%

            	
              7.00%

            
	
              More
                than 11 but no more than 12

            	
              2.50%

            	
              6.00%

            	
              7.50%

            
	
              More
                than 12 but no more than 13

            	
              2.70%

            	
              6.40%

            	
              8.00%

            
	
              More
                than 13 but no more than 14

            	
              2.80%

            	
              6.80%

            	
              8.50%

            
	
              More
                than 14 but no more than 15

            	
              3.00%

            	
              7.20%

            	
              9.00%

            
	
              More
                than 15 but no more than 16

            	
              3.20%

            	
              7.60%

            	
              9.50%

            
	
              More
                than 16 but no more than 17

            	
              3.30%

            	
              7.90%

            	
              9.90%

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              Weighted
                Average Life of Hedge in Years

            	
              Moody’s
                First Trigger Factor

            	
              Moody’s
                Second Trigger Factor for Transactions other than Transaction-Specific
                Hedges

            	
              Moody’s
                Second Trigger Factor for Transaction-Specific
                Hedges

            
	
              More
                than 17 but no more than 18

            	
              3.50%

            	
              8.30%

            	
              10.40%

            
	
              More
                than 18 but no more than 19

            	
              3.60%

            	
              8.60%

            	
              10.80%

            
	
              More
                than 19 but no more than 20

            	
              3.70%

            	
              9.00%

            	
              11.00%

            
	
              More
                than 20 but no more than 21

            	
              3.90%

            	
              9.00%

            	
              11.00%

            
	
              More
                than 21 but no more than 30

            	
              4.00%

            	
              9.00%

            	
              11.00%

            

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF
      the
      parties have executed this Credit Support Annex as of the date
      hereof.

    

    SWISS
      RE FINANCIAL PRODUCTS CORPORATION

     

    

    By:
      /s/
      Robert Spuler

    Name:
      Robert Spuler

    Title:
      Senior Vice President

     

     

    WELLS
      FARGO BANK, N.A., not individually but solely as trustee for Carrington Mortgage
      Loan Trust, Series 2006-NC5 with respect to the Carrington Mortgage Loan Trust,
      Series 2006-NC5 Asset-Backed Pass-Through Certificates

     

     

    By: 
      /s/
      Darron C. Woodus
Name:
      Darron C. Woodus
Title:
      Assistant Vice President

     

    

    
      
        
        

      

      
        S-1Exhibit
      4.1

     

    [FORM
      OF
      SENIOR SECURED CONVERTIBLE NOTE]

    

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE
      SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
 NEITHER THIS NOTE NOR SUCH SECURITIES MAY BE OFFERED FOR SALE, SOLD,
      TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
      COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
      IS
      NOT REQUIRED.  NOTWITHSTANDING THE FOREGOING, THIS NOTE AND SUCH SECURITIES
      MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
      OR
      FINANCING ARRANGEMENT SECURED BY THIS NOTE OR SUCH SECURITIES.  ANY
      TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
      INCLUDING SECTIONS 3(c)(iii) AND 20(a) HEREOF.  THE PRINCIPAL AMOUNT
      REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
      CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
      PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

    

    PURE
      VANILLA EXCHANGE, INC.

    SENIOR
      SECURED CONVERTIBLE NOTE

    

    
      	
              Issuance
                Date:  December 26, 2006

            	
              Original
                Principal Amount: U.S. $1,500,000

            

    

    

    FOR
      VALUE
      RECEIVED, Pure Vanilla eXchange, Inc., a Nevada corporation (the "Company"),
      hereby promises to pay to Gottbetter Capital Master, Ltd. (“GCM”)or
      registered assigns ("Holder")
      the
      amount set out above as the Original Principal Amount (as reduced pursuant
      to
      the terms hereof pursuant to redemption, conversion or otherwise, the
      "Principal")
      when
      due, whether upon the Maturity Date (as defined below), on any Installment
      Date
      with respect to the Installment Amount due on such Installment Date,
      acceleration, redemption or otherwise (in each case in accordance with the
      terms
      hereof) and to pay interest ("Interest")
      on any
      outstanding Principal at a rate per annum equal to the Interest Rate (as defined
      below), from the date set out above as the Issuance Date (the "Issuance
      Date")
      until
      the same becomes due and payable, whether upon an Interest Date (as defined
      below), any Installment Date, or the Maturity Date, acceleration, conversion,
      redemption or otherwise (in each case in accordance with the terms hereof).
       This Senior Secured Convertible Note (including all Senior Secured
      Convertible Notes issued in exchange, transfer or replacement hereof, this
      "Note")
      is
      being issued pursuant to the Securities Purchase Agreement (as defined below).
       Certain capitalized terms are defined in Section 28.

    

    1. PAYMENTS
      OF PRINCIPAL; MATURITY.
       On each Installment Date commencing July 1, 2007, the Company shall pay to
      the Holder an amount equal to the Installment Amount due on such Installment
      Date in cash by wire transfer of immediately available funds.  The
      "Maturity
      Date"
      shall
      be December 26, 2007, as may be extended at the option of the Holder (i) in
      the
      event that, and for so long as, an Event of Default (as defined in Section
      4(a))
      shall have occurred and be continuing or any event shall have occurred and
      be
      continuing which with the passage of time and the failure to cure would result
      in an Event of Default or (ii) through the date that is ten (10) days after
      the
      consummation of a Change of Control (as defined in Section 5(b)) in the event
      that a Change of Control is publicly announced or a Change of Control Notice
      is
      delivered prior to the Maturity Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    2. INTEREST;
      INTEREST RATE.

    

    (a) Interest
      on this Note shall commence accruing on the Issuance Date and shall be computed
      on the basis of a 360-day year and actual days elapsed and shall be payable
      in
      arrears for each Calendar Month during the period beginning on the Issuance
      Date
      and ending on, and including, the Maturity Date (each, an "Interest
      Date")
      with
      the first Interest Date being February 1, 2007.  Interest shall be payable
      on each Interest Date, to the record holder of this Note on the applicable
      Interest Date, in cash ("Cash
      Interest").

    

    (b) From
      and
      after the occurrence of an Event of Default, the Interest Rate shall be
      increased to fifteen percent (15%) per annum.  In the event that such Event
      of Default is subsequently cured, the adjustment referred to in the preceding
      sentence shall cease to be effective as of the date of such cure; provided
      that
      the Interest as calculated at such increased rate during the continuance of
      such
      Event of Default shall continue to apply to the extent relating to the days
      after the occurrence of such Event of Default through and including the date
      of
      cure of such Event of Default.  

    

    3. CONVERSION
      OF NOTES.
       This Note shall be convertible into shares of common stock of the Company,
      par value $0.001 per share (the "Common
      Stock"),
      on
      the terms and conditions set forth in this Section 3.

    

    (a) Conversion
      Right.
       Subject to the provisions of Section 3(d), at any time or times on or
      after the Issuance Date, the Holder shall be entitled to convert any portion
      of
      the outstanding and unpaid Conversion Amount (as defined below) into fully
      paid
      and nonassessable shares of Common Stock in accordance with Section 3(c), at
      the
      Conversion Rate (as defined below).  The Company shall not issue any
      fraction of a share of Common Stock upon any conversion.  If the issuance
      would result in the issuance of a fraction of a share of Common Stock, the
      Company shall round such fraction of a share of Common Stock up to the nearest
      whole share.  The Company shall pay any and all taxes that may be payable
      with respect to the issuance and delivery of Common Stock upon conversion of
      any
      Conversion Amount.

    

    (b) Conversion
      Rate.
       The number of shares of Common Stock issuable upon conversion of any
      Conversion Amount pursuant to Section 3(a) shall be determined by dividing
      (x)
      such Conversion Amount by (y) the Conversion Price (the "Conversion
      Rate").

    

    (i) "Conversion
      Amount"
      means
      the portion of the Principal to be converted, redeemed or otherwise with respect
      to which this determination is being made.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    (ii) "Conversion
      Price"
      means,
      as of any Conversion Date (as defined below) or other date of determination,
      $2.48782 (appropriately adjusted for any stock split, stock dividend, stock
      combination or other similar transaction that proportionately decreases or
      increases the Common Stock that occurs after the Issuance
      Date).

    

    (c) Mechanics
      of Conversion.

    

    (i) Optional
      Conversion.
       To convert any Conversion Amount into shares of Common Stock on any date
      (a "Conversion
      Date"),
      the
      Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
      on or
      prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice
      of conversion in the form attached hereto as Exhibit
      I
      (the
      "Conversion
      Notice")
      to the
      Company and (B) surrender this Note to a nationally recognized overnight
      delivery service for delivery to the Company (or an indemnification undertaking
      with respect to this Note in the case of its loss, theft or destruction).
 On or before the next Trading Day following the date of receipt of a
      Conversion Notice, the Company shall transmit by facsimile a confirmation of
      receipt of such Conversion Notice to the Holder and the Transfer Agent.  On
      or before the second (2nd)
      Trading
      Day following the date of receipt of a Conversion Notice (the "Share
      Delivery Date"),
      the
      Company shall (1) (X) provided that the Transfer Agent is participating in
      the
      Fast Automated Securities Transfer Program of DTC credit such aggregate number
      of shares of Common Stock to which the Holder shall be entitled to the Holder's
      or its designee's balance account with DTC through its Deposit Withdrawal Agent
      Commission system or (Y) if the Transfer Agent is not participating in the
      DTC
      Fast Automated Securities Transfer Program, issue and deliver to the address
      as
      specified in the Conversion Notice, a certificate, registered in the name of
      the
      Holder or its designee, for the number of shares of Common Stock to which the
      Holder shall be entitled, and (2) pay to the Holder in cash an amount equal
      to
      the accrued and unpaid Interest on the Conversion Amount up to and including
      the
      Conversion Date.  If the outstanding Principal of this Note is greater than
      the Principal portion of the Conversion Amount being converted, then the Company
      shall as soon as practicable and in no event later than three Business Days
      after receipt of this Note and at its own expense, issue and deliver to the
      holder a new Note (in accordance with Section 18(d)) representing the
      outstanding Principal not converted.  The Person or Persons entitled to
      receive the shares of Common
      Stock
      issuable upon a conversion of this Note shall be treated for all purposes as
      the
      record holder or holders of such shares of Common Stock on the Conversion Date.
       In the event of a partial conversion of this Note pursuant hereto, the
      principal amount converted shall be deducted from the Installment Amounts
      relating to the Installment Dates as set forth in the Conversion
      Notice.

    

    (ii) Company's
      Failure to Timely Convert.
       If within three (3) Trading Days after the Company's receipt of the
      facsimile copy of a Conversion Notice the Company shall fail to issue and
      deliver a certificate to the Holder or credit the Holder's balance account
      with
      DTC for the number of shares of Common Stock to which the Holder is entitled
      upon such holder's conversion of any Conversion Amount (a "Conversion
      Failure"),
      and
      if on or after such Trading Day the Holder purchases (in an open market
      transaction or otherwise) Common Stock to deliver in satisfaction of a sale
      by
      the Holder of Common Stock issuable upon such conversion that the Holder
      anticipated receiving from the Company (a "Buy-In"),
      then
      the Company shall, within three (3) Business Days after the Holder's request
      and
      provision of trade confirmations and in the Holder's discretion, either (i)
      pay
      cash to the Holder in an amount equal to the Holder's total purchase price
      (including brokerage commissions and other out-of-pocket expenses, if any)
      for
      the shares of Common Stock so purchased (the "Buy-In
      Price"),
      at
      which point the Company's obligation to deliver such certificate (and to issue
      such Common Stock) shall terminate, or (ii) promptly honor its obligation to
      deliver to the Holder a certificate or certificates representing such Common
      Stock and pay cash to the Holder in an amount equal to the excess (if any)
      of
      the Buy-In Price over the product of (A) such number of shares of Common Stock,
      times (B) the Closing Bid Price on the Conversion Date.

     

    
      
        
        

      

      
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    (iii) Registration;
      Book-Entry.
      The
      Company shall maintain a register (the "Register")
      for
      the recordation of the names and addresses of the holders of each Note and
      the
      principal amount of the Notes held by such holders (the "Registered
      Notes").
      The
      entries in the Register shall be conclusive and binding for all purposes absent
      manifest error. The Company and the holders of the Notes shall treat each Person
      whose name is recorded in the Register as the owner of a Note for all purposes,
      including, without limitation, the right to receive payments of principal and
      interest hereunder, notwithstanding notice to the contrary. A Registered Note
      may be assigned or sold in whole or in part only by registration of such
      assignment or sale on the Register. Upon its receipt of a request to assign
      or
      sell all or part of any Registered Note by a Holder, the Company shall record
      the information contained therein in the Register and issue one or more new
      Registered Notes in the same aggregate principal amount as the principal amount
      of the surrendered Registered Note to the designated assignee or transferee
      pursuant to Section 17. Notwithstanding
      anything to the contrary set forth herein, upon conversion of any portion of
      this Note in accordance with the terms hereof, the Holder shall not be required
      to physically surrender this Note to the Company unless (A) the full Conversion
      Amount represented by this Note is being converted or (B) the Holder has
      provided the Company with prior written notice (which notice may be included
      in
      a Conversion Notice) requesting physical surrender and reissue of this Note.
       The Holder and the Company shall maintain records showing the Principal,
      Interest and Late Charges converted and the dates of such conversions or shall
      use such other method, reasonably satisfactory to the Holder and the Company,
      so
      as not to require physical surrender of this Note upon conversion.

    

    (iv) Disputes.
       In
      the event of a dispute as to the number of shares of Common Stock issuable
      to
      the Holder in connection with a conversion of this Note, the Company shall
      issue
      to the Holder the number of shares of Common Stock not in dispute and resolve
      such dispute in accordance with Section 23.

    

    (d) Limitations
      on Conversions. 

    

    (i) Beneficial
      Ownership.
       The Company shall not effect any conversion of this Note, and the Holder
      of this Note (including any successor, transferee or assignee) shall not have
      the right to convert any portion of this Note pursuant to Section 3(a), to
      the
      extent that after giving effect to such conversion, the Holder (together with
      the Holder's affiliates) would beneficially own in excess of 4.99% (the
      "Maximum
      Percentage")
      of the
      number of shares of Common Stock outstanding immediately after giving effect
      to
      such conversion.  For purposes of the foregoing sentence, the number of
      shares of Common Stock beneficially owned by the Holder and its affiliates
      shall
      include the number of shares of Common Stock issuable upon conversion of this
      Note with respect to which the determination of such sentence is being made,
      but
      shall exclude the number of shares of Common Stock which would be issuable
      upon
      (A) conversion of the remaining, nonconverted portion of this Note beneficially
      owned by the Holder or any of its affiliates and (B) exercise or conversion
      of
      the unexercised or nonconverted portion of any other securities of the Company
      (including, without limitation, any warrants) subject to a limitation on
      conversion or exercise analogous to the limitation contained herein beneficially
      owned by the Holder or any of its affiliates.  Except as set forth in the
      preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership
      shall be calculated in accordance with Section 13(d) of the Securities Exchange
      Act of 1934, as amended.  For purposes of this Section 3(d)(i), in
      determining the number of outstanding shares of Common Stock, the Holder may
      rely on the number of outstanding shares of Common Stock as reflected in (x)
      the
      Company's most recently filed Form 10-KSB, Form 10-K, Form 10-QSB, Form 10-Q
      or
      Form 8-K, as the case may be (y) a more recent public announcement by the
      Company or (z) any other notice by the Company or the Transfer Agent setting
      forth the number of shares of Common Stock outstanding.  For any reason at
      any time, during regular business hours of the Company and upon the written
      request of the Holder, the Company shall within two (2) Business Days confirm
      in
      writing to the Holder the number of shares of Common Stock then outstanding.
       In any case, the number of outstanding shares of Common Stock shall be
      determined after giving effect to the conversion or exercise of securities
      of
      the Company, including this Note, by the Holder or its affiliates since the
      date
      as of which such number of outstanding shares of Common Stock was reported.
       By written notice to the Company, the Holder may increase or decrease the
      Maximum Percentage to any other percentage specified in such notice; provided
      that (i) any such increase will not be effective until the sixty-first
      (61st)
      day
      after such notice is delivered to the Company, and (ii) any such increase or
      decrease will apply only to the Holder and not to any other holder of
      Notes.

     

    
      
        
        

      

      
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    4. RIGHTS
      UPON EVENT OF DEFAULT.

    

    (a) Event
      of Default.
       Each of the following events shall constitute an "Event of Default
      ":

    

    (i) [Intentionally
      left blank]

    

    (ii) the
      suspension from trading or failure of the Common Stock to be listed on the
      Principal Market or on an Eligible Market for a period of five (5) consecutive
      Trading Days or for more than an aggregate of ten (10) Trading Days in any
      365-day period;

    

    (iii) the
      Company's failure to cure a Conversion Failure by delivery of the required
      number of shares of Common Stock within two (2) Business Days after (A) the
      applicable Conversion Date or (B) written notice to any holder of the Notes,
      including by way of public announcement or through any of its authorized agents,
      at any time, of its intention not to comply with a request for conversion of
      any
      Notes into shares of Common Stock that is tendered in accordance with the
      provisions of the Notes;

     

    
      
        
        

      

      
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    (iv) at
      any
      time following the tenth (10th)
      consecutive Business Day that the authorized number of shares is less than
      the
      number of shares of Common Stock that the Holder would be entitled to receive
      upon a conversion of one hundred and fifty percent (150%) of the full Conversion
      Amount of this Note (without regard to any limitations on conversion set forth
      in Section 3(d) or otherwise);

    

    (v) the
      Company's failure to pay to the Holder any amount of Principal (including,
      without limitation, any redemption payment), Interest, Late Charges or other
      amounts within five (5) business days after the same is due under this Note
      or
      any other Transaction Document (as defined in the Securities Purchase Agreement)
      or any other agreement, document, certificate or other instrument delivered
      in
      connection with the transactions contemplated hereby and thereby to which the
      Holder is a party;

    

    (vi) any
      default under, redemption of prior to maturity or acceleration prior to maturity
      of any Indebtedness in excess of $100,000, in the aggregate, of the Company
      or
      any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase
      Agreement);

    

    (vii) the
      Company or any of its Subsidiaries, pursuant to or within the meaning of Title
      11, U.S. Code, or any similar Federal, foreign or state law for the relief
      of
      debtors (collectively, "Bankruptcy
      Law"),
      (A)
      commences a voluntary case, (B) consents to the entry of an order for relief
      against it in an involuntary case, (C) consents to the appointment of a
      receiver, trustee, assignee, liquidator or similar official
      (a
      "Custodian"),
      (D)
      makes a general assignment for the benefit of its creditors or (E) admits in
      writing that it is generally unable to pay its debts as they become
      due;

    

    (viii) a
      court
      of competent jurisdiction enters an order or decree under any Bankruptcy Law
      that (A) is for relief against the Company or any of its Subsidiaries in an
      involuntary case, provided that the such order or decree must be a final order
      or decree if the Company contests the intial order or decree within thirty
      (30)
      days of its issuance, (B) appoints a Custodian of the Company or any of its
      Subsidiaries or (C) orders the liquidation of the Company or any of its
      Subsidiaries;

    

    (ix) a
      final
      judgment or judgments for the payment of money aggregating in excess of $250,000
      are rendered against the Company or any of its Subsidiaries and which judgments
      are not, within sixty (60) days after the entry thereof, bonded, discharged
      or
      stayed pending appeal, or are not discharged within sixty (60) days after the
      expiration of such stay; provided, however, that any judgment which is covered
      by insurance or an indemnity from a credit worthy party shall not be included
      in
      calculating the $250,000 amount set forth above so long as the Company provides
      the Holder a written statement from such insurer or indemnity provider (which
      written statement shall be reasonably satisfactory to the Holder) to the effect
      that such judgment is covered by insurance or an indemnity and the Company
      will
      receive the proceeds of such insurance or indemnity within thirty (30) days
      of
      the issuance of such judgment;

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    (x) the
      Company breaches any material representation, warranty, covenant or other term
      or condition of any Transaction Document, except, in the case of a breach of
      a
      covenant which is curable, only if such breach continues for a period of at
      least ten (10) consecutive Business Days;

    

    (xi) any
      breach or failure in any respect to comply with (x) Section 15 of this Note
      or
      (y) any of the Potential Partner Conditions; or

    

    (xii) at
      any
      time after February 28, 2006, the Common Stock is unable to be transferred
      with
      DTC through the Deposit Withdrawal at Custodian system. 

    

    (b) Redemption
      Right.
       Upon the occurrence of an Event of Default with respect to this Note, the
      Company shall within two (2) Business Days after the day on which the Company
      is
      aware of the Event of Default deliver written notice thereof via facsimile
      and
      overnight courier (an "Event
      of Default Notice")
      to the
      Holder.  At any time after the earlier of the Holder's receipt of an Event
      of Default Notice and the Holder becoming aware of an Event of Default, the
      Holder may require the Company to redeem all or any portion of this Note by
      delivering written notice thereof (the "Event
      of Default Redemption Notice")
      to the
      Company, which Event of Default Redemption Notice shall indicate the portion
      of
      this Note the Holder is electing to redeem.  Each portion of this Note
      subject to redemption by the Company pursuant to this Section 4(b) shall be
      redeemed by the Company at a price equal to the greater of (i) the product
      of
      (x) the Conversion Amount to be redeemed and (y) the Redemption Premium and
      (ii)
      the (A) the product of (A) the Conversion Rate with respect to such Conversion
      Amount in effect at such time as the Holder delivers an Event of Default
      Redemption Notice and (B) the Closing Sale Price of the Common Stock on the
      date
      immediately preceding such Event of Default (the "Event
      of Default Redemption Price").
       Redemptions required by this Section 4(b) shall be made in accordance with
      the provisions of
      Section
      12.  To the extent redemptions required by this Section 4(b) are deemed or
      determined by a court of competent jurisdiction to be prepayments of the Note
      by
      the Company, such redemptions shall be deemed to be voluntary prepayments.
       The parties hereto agree that in the event of the Company's redemption of
      any portion of the Note under this Section 4(b), the Holder's damages would
      be
      uncertain and difficult to estimate because of the parties' inability to predict
      future interest rates and the uncertainty of the availability of a suitable
      substitute investment opportunity for the Holder.  Accordingly, any
      Redemption Premium due under this Section 4(b) is intended by the parties to
      be,
      and shall be deemed, a reasonable estimate of the Holder's actual loss of its
      investment opportunity and not as a penalty.  

    

    5. RIGHTS
      UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

     

    (a) Assumption.
       The Company shall not enter into or be party to a Fundamental Transaction
      unless (i)  the Successor Entity assumes in writing all of the obligations
      of the Company under this Note and the other Transaction Documents in accordance
      with the provisions of this Section 5(a) pursuant to written agreements in
      form
      and substance reasonably satisfactory to the Required Holders and approved
      by
      the Required Holders prior to such Fundamental Transaction, including agreements
      to deliver to each holder of Notes in exchange for such Notes a security of
      the
      Successor Entity evidenced by a written instrument substantially similar in
      form
      and substance to the Notes, including, without limitation, having a principal
      amount and interest rate equal to the principal amounts and the interest rates
      of the Notes held by such holder, having similar conversion rights as the Notes
      and having similar ranking to the Notes, and reasonably satisfactory to the
      Required Holders and (ii) the Successor Entity (including its Parent
      Entity) is a publicly traded corporation whose common stock is quoted on or
      listed for trading on an Eligible Market.  Upon the occurrence of any
      Fundamental Transaction, the Successor Entity shall succeed to, and be
      substituted for (so that from and after the date of such Fundamental
      Transaction, the provisions of this Note referring to the "Company" shall refer
      instead to the Successor Entity), and may exercise every right and power of
      the
      Company and shall assume all of the obligations of the Company under this Note
      with the same effect as if such Successor Entity had been named as the Company
      herein.  Upon consummation of the Fundamental Transaction, the Successor
      Entity shall deliver to the Holder confirmation that there shall be issued
      upon
      conversion or redemption of this Note at any time after the consummation of
      the
      Fundamental Transaction, in lieu of the shares of Common Stock (or other
      securities, cash, assets or other property) issuable upon the conversion of
      the
      Notes prior to such Fundamental Transaction, such shares of publicly traded
      common stock (or their equivalent) of the Successor Entity, as adjusted in
      accordance with the provisions of this Note.  The provisions of this
      Section shall apply similarly and equally to successive Fundamental Transactions
      and shall be applied without regard to any limitations on the conversion of
      this
      Note.

     

    
      
        
        

      

      
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    (b) Change
      of Control; Redemption Right.
       No sooner than fifteen (15) days nor later than ten (10) days prior to the
      consummation of a Change of Control, but not prior to the public announcement
      of
      such Change of Control, the Company shall deliver written notice thereof via
      facsimile and overnight courier to the Holder (a "Change
      of Control Notice").
       At any time during the period beginning after the Holder's receipt of a
      Change of Control Notice and immediately prior to the consummation of such
      Change of Control, the Holder may require the Company to redeem all or any
      portion of this Note by delivering written notice thereof
      ("Change
      of Control Redemption Notice")
      to the
      Company, which Change of Control Redemption Notice shall indicate the Conversion
      Amount the Holder is electing to redeem.  The portion of this Note subject
      to redemption pursuant to this Section 5 shall be redeemed by the Company in
      cash at a price equal to the greater of (i) the product of the Change of Control
      Premium and the product of (x) the sum of the Conversion Amount being redeemed
      and any accrued and unpaid Interest with respect to such Conversion Amount
      and
      accrued and unpaid Late Charges with respect to such Conversion Amount and
      Interest and (y) the quotient determined by dividing (A) the Closing Sale Price
      of the Common Stock immediately following the public announcement of such
      proposed Change of Control by (B) the Conversion Price and (ii) 150% of the
      sum
      of the Conversion Amount being redeemed and any accrued and unpaid Interest
      with
      respect to such Conversion Amount subject to such Change of Control Redemption
      and accrued and unpaid Late Charges with respect to such Conversion Amount
      and
      Interest (the "Change
      of Control Redemption Price").
       Redemptions required by this Section 5 shall be made in accordance with
      the provisions of Section 12 and shall have priority to payments to shareholders
      in connection with a Change of Control.  To the extent redemptions required
      by this Section 5(b) are deemed or determined by a court of competent
      jurisdiction to be prepayments of the Note by the Company, such redemptions
      shall be deemed to be voluntary prepayments.  Notwithstanding anything to
      the contrary in this Section 5, until the Change of Control Redemption Price
      (together with any interest thereon) is paid in full, the Conversion Amount
      submitted for redemption under this Section 5(c) may be converted, in whole
      or
      in part, by the Holder into shares of Common Stock, or in the event the
      Conversion Date is after the consummation of the Change of Control, shares
      of
      publicly traded common stock (or their equivalent) of the Successor Entity
      pursuant to Section 3.  The parties hereto agree that in the event of the
      Company's redemption of any portion of the Note under this Section 5(b), the
      Holder's damages would be uncertain and difficult to estimate because of the
      parties' inability to predict future interest rates and the uncertainty of
      the
      availability of a suitable substitute investment opportunity for the Holder.
       Accordingly, any redemption premium due under this Section 5(b) is
      intended by the parties to be, and shall be deemed, a reasonable estimate of
      the
      Holder's actual loss of its investment opportunity and not as a
      penalty.

     

    
      
        
        

      

      
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    6. RIGHTS
      UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

    

    (a) Purchase
      Rights.
       If at any time the Company grants, issues or sells any Options,
      Convertible Securities or rights to purchase stock, warrants, securities or
      other property pro rata to the record holders of any class of Common Stock
      (the
      "Purchase
      Rights"),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of shares of Common Stock acquirable
      upon complete conversion of this Note (without taking into account any
      limitations or restrictions on the convertibility of this Note) 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.

    

    (b) Other
      Corporate Events.
       In addition to and not in substitution for any other rights hereunder,
      prior to the consummation of any Fundamental Transaction pursuant to which
      holders of shares of Common Stock are entitled to receive securities or other
      assets with respect
      to or in exchange for shares of Common Stock (a "Corporate
      Event"),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon a conversion of this Note, in lieu
      of
      the shares of Common Stock otherwise receivable upon such conversion, such
      securities or other assets received by the holders of shares of Common Stock
      in
      connection with the consummation of such Corporate Event in such amounts as
      the
      Holder would have been entitled to receive had this Note initially been issued
      with conversion rights for the form of such consideration (as opposed to shares
      of Common Stock) at a conversion rate for such consideration commensurate with
      the Conversion Rate.  Provision made pursuant to the preceding sentence
      shall be in a form and substance satisfactory to the Required Holders.  The
      provisions of this Section shall apply similarly and equally to successive
      Corporate Events and shall be applied without regard to any limitations on
      the
      conversion or redemption of this Note.

     

    
      
        
        

      

      
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    7. RIGHTS
      UPON ISSUANCE OF OTHER SECURITIES.

    

    (a) Adjustment
      of Conversion Price upon Issuance of Common Stock.
       If at any time after the Subscription Date, the Company issues or sells,
      or in accordance with this Section 7(a) is deemed to have issued or sold, any
      shares of Common Stock (including the issuance or sale of shares of Common
      Stock
      owned or held by or for the account of the Company, but excluding shares of
      Common Stock deemed to have been issued or sold by the Company in connection
      with any Excluded Securities) for a consideration per share (the "New
      Issuance Price")
      less
      than a price (the "Applicable
      Price")
      equal
      to Conversion Price in effect immediately prior to such issue or sale (the
      foregoing a "Dilutive
      Issuance"),
      then
      immediately after such Dilutive Issuance, the Conversion Price then in effect
      shall be reduced to the New Issuance Price.  For purposes of determining
      the adjusted Conversion Price under this Section 7(a), the following shall
      be
      applicable:

    

    (i) Issuance
      of Options.
       If the Company in any manner grants or sells any Options and the lowest
      price per share for which one share of Common Stock is issuable upon the
      exercise of any such Option or upon conversion or exchange or exercise of any
      Convertible Securities issuable upon exercise of such Option (and, subject
      to
      section 7(a)(iii), without taking into account any contingent downward
      adjustments in such option price per share) is less than the Applicable Price,
      then such share of Common Stock shall be deemed to be outstanding and to have
      been issued and sold by the Company at the time of the granting or sale of
      such
      Option for such price per share.  For purposes of this Section 7(a)(i), the
      "lowest price per share for which one share of Common Stock is issuable upon
      the
      exercise of any such Option or upon conversion or exchange or exercise of any
      Convertible Securities issuable upon exercise of such Option" shall be equal
      to
      the sum of the lowest amounts of consideration (if any) received or receivable
      by the Company with respect to any one share of Common Stock upon granting
      or
      sale of the Option, upon exercise of the Option and upon conversion or exchange
      or exercise of any Convertible Security issuable upon exercise of such Option
      (and, subject to section 7(a)(iii), without taking into account any contingent
      downward adjustments in such option price per share).  No further
      adjustment of the Conversion Price shall be made upon the actual issuance of
      such share of Common Stock or of such Convertible Securities upon the exercise
      of such Options or upon the actual
      issuance
      of such Common Stock upon conversion or exchange or exercise of such Convertible
      Securities.

    

    (ii) Issuance
      of Convertible Securities.
       If the Company in any manner issues or sells any Convertible Securities
      and the lowest price per share for which one share of Common Stock is issuable
      upon such conversion or exchange or exercise thereof (and, subject to section
      7(a)(iii), without taking into account any contingent downward adjustments
      in
      such conversion or exchange price per share) is less than the Applicable Price,
      then such share of Common Stock shall be deemed to be outstanding and to have
      been issued and sold by the Company at the time of the issuance or sale of
      such
      Convertible Securities for such price per share.  For the purposes of this
      Section 7(a)(ii), the "lowest price per share for which one share of Common
      Stock is issuable upon such conversion or exchange or exercise" shall be equal
      to the sum of the lowest amounts of consideration (if any) received or
      receivable by the Company with respect to any one share of Common Stock upon
      the
      issuance or sale of the Convertible Security and upon the conversion or exchange
      or exercise of such Convertible Security (and, subject to section 7(a)(iii),
      without taking into account any contingent downward adjustments in such option
      price per share).  No further adjustment of the Conversion Price shall be
      made upon the actual issuance of such share of Common Stock upon conversion
      or
      exchange or exercise of such Convertible Securities, and if any such issue
      or
      sale of such Convertible Securities is made upon exercise of any Options for
      which adjustment of the Conversion Price had been or are to be made pursuant
      to
      other provisions of this Section 7(a), no further adjustment of the Conversion
      Price shall be made by reason of such issue or sale.

     

    
      
        
        

      

      
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    (iii) Change
      in Option Price or Rate of Conversion.
       If the purchase price provided for in any Options, the additional
      consideration, if any, payable upon the issue, conversion,  exchange or
      exercise of any Convertible Securities, or the rate at which any Convertible
      Securities are convertible into or exchangeable or exercisable for Common Stock
      changes at any time, the Conversion Price in effect at the time of such change
      shall be adjusted to the Conversion Price which would have been in effect at
      such time had such Options or Convertible Securities provided for such changed
      purchase price, additional consideration or changed conversion rate, as the
      case
      may be, at the time initially granted, issued or sold.  For purposes of
      this Section 7(a)(iii), if the terms of any Option or Convertible Security
      that
      was outstanding as of the Subscription Date are changed in the manner described
      in the immediately preceding sentence, then such Option or Convertible Security
      and the Common Stock deemed issuable upon exercise, conversion or exchange
      thereof shall be deemed to have been issued as of the date of such change.
       No adjustment shall be made if such adjustment would result in an increase
      of the Conversion Price then in effect.

    

    (iv) Calculation
      of Consideration Received.
       In case any Option is issued in connection with the issue or sale of other
      securities of the Company, together comprising one integrated transaction in
      which no specific consideration is allocated to such Options by the parties
      thereto, the Options will be deemed to have been issued for such consideration
      as determined in good faith by the Board of Directors of the Company.  If
      any Common Stock, Options or Convertible Securities are issued or sold or deemed
      to have been issued or sold for cash, the consideration received therefor will
      be deemed to be the net amount received by the Company therefor.  If any
      Common Stock, Options or Convertible Securities are issued or sold for a
      consideration other than cash, the amount of the consideration other than cash
      received by the Company will be the fair
      value of
      such consideration as determined in good faith by the Board of Directors of
      the
      Company, except where such consideration consists of securities, in which case
      the amount of consideration received by the Company will be the Closing Sale
      Price of such securities on the date of receipt.  If any Common Stock,
      Options or Convertible Securities are issued to the owners of the non-surviving
      entity in connection with any merger in which the Company is the surviving
      entity, the amount of consideration therefor will be deemed to be the fair
      value
      of such portion of the net assets and business of the non-surviving entity
      as is
      attributable to such Common Stock, Options or Convertible Securities, as the
      case may be.  The fair value of any consideration other than cash or
      securities will be determined jointly by the Company and the Required Holders.
       If such parties are unable to reach agreement within ten (10) days after
      the occurrence of an event requiring valuation (the "Valuation
      Event"),
      the
      fair value of such consideration will be determined within five (5) Business
      Days after the tenth day following the Valuation Event by an independent,
      reputable appraiser jointly selected by the Company and the Required Holders.
       The determination of such appraiser shall be deemed binding upon all
      parties absent manifest error and the fees and expenses of such appraiser shall
      be borne by the Company.

     

    
      
        
        

      

      
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    (v) Record
      Date.
       If the Company takes a record of the holders of Common Stock for the
      purpose of entitling them (A) to receive a dividend or other distribution
      payable in Common Stock, Options or in Convertible Securities or (B) to
      subscribe for or purchase Common Stock, Options or Convertible Securities,
      then
      such record date will be deemed to be the date of the issue or sale of the
      Common Stock deemed to have been issued or sold upon the declaration of such
      dividend or the making of such other distribution or the date of the granting
      of
      such right of subscription or purchase, as the case may be.

    

    (b) Adjustment
      of Conversion Price upon Subdivision or Combination of Common
      Stock.
       If the Company at any time on or after the Subscription Date subdivides
      (by any stock split, stock dividend, recapitalization or otherwise) one or
      more
      classes of its outstanding shares of Common Stock into a greater number of
      shares, the Conversion Price in effect immediately prior to such subdivision
      will be proportionately reduced.  If the Company at any time on or after
      the Subscription Date combines (by combination, reverse stock split or
      otherwise) one or more classes of its outstanding shares of Common Stock into
      a
      smaller number of shares, the Conversion Price in effect immediately prior
      to
      such combination will be proportionately increased.

    

    (c) Other
      Events.
       If any event occurs of the type contemplated by the provisions of this
      Section 7 but not expressly provided for by such provisions (including, without
      limitation, the granting of stock appreciation rights, phantom stock rights
      or
      other rights with equity features), then the Company's Board of Directors will
      make an appropriate adjustment in the Conversion Price so as to protect the
      rights of the Holder under this Note; provided that no such adjustment will
      increase the Conversion Price as otherwise determined pursuant to this Section
      7.

    

    8. COMPANY
      RIGHT OF REDEMPTION.
       

    

    (a) General.
      After
      February 28, 2007, the Company,
      at its
      option shall have the right to redeem, with three (3) Business Days advance
      written notice (the “Company
      Redemption Notice”),
      a
      portion or all of the outstanding principal of the Note. The Holder may convert
      after the Company Redemption Notice is received and until the Company Redemption
      Price is received by the Holder. Up to and including February 28, 2007, the
      redemption price shall be One Hundred and Ten percent (110%) of the face amount
      redeemed plus accrued and unpaid interest; and after February 28, 2007, the
      redemption price shall be the greater of (i) One Hundred and Twenty percent
      (120%) of the face amount redeemed plus accrued and unpaid interest and (ii)
      the
      product of (x) the remaining Conversion Amount divided by the Conversion Price
      (not less than $1 (as adjusted for any stock dividend, stock combination, stock
      split or other similar transactions that proportionately increases or decreases
      the Common Stock)) in effect on the Trading Day before the Company Redemption
      Notice is sent and (y) the Closing Sale Price on the Trading Day before the
      Company Redemption Notice is sent, plus accrued interest (the “Company Redemption
      Price”). The
      Company shall pay the Company Redemption Price on all payments made pursuant
      to
      the Note, including payments made before, on, or after the Maturity Date. For
      all payments under this Note, the payment of the Company Redemption Price by
      the
      Company shall be in addition to any accrued interest due.

     

    
      
        
        

      

      
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    (b) Mechanics
      of Company Redemption.
       If the Company elects to redeem the Note in accordance with Section 8(a),
      then the Company Redemption Price, if any, which is to be paid to the Holder,
      shall be paid, by wire transfer of immediately available funds, an amount in
      cash equal to 100% of the Company Redemption Price.  If the Company fails
      to redeem the Company Redemption Price on such date, then at the option of
      the
      Holder designated in writing to the Company (any such designation, "Conversion
      Notice" for purposes of this Note), the Holder may require the Company to
      convert all or any part of the Company Redemption Amount at the Conversion
      Price.  Conversions required by this Section 8(b) shall be made in
      accordance with the provisions of Section 3(c).  Notwithstanding anything
      to the contrary in this Section 8(b), but subject to Section 3(d), until the
      Company Redemption Price (together with any interest thereon) is paid in full,
      the Company Redemption Price (together with any interest thereon) may be
      converted, in whole or in part, by the Holder into Common Stock pursuant to
      Section 3. 

    

    (c) Up
      to and
      including February 28, 2007, upon the occurrence of a financing transaction
      (the
“Financing
      Redemption”)
      for
      the Company of at least $1,100,000, the Company shall redeem all of this Note
      plus accrued interest by sending a notice (the "Financing
      Transaction Redemption Notice")
      to the
      Holder, which Financing Transaction Redemption Notice shall indicate the date
      the Company is electing to redeem and the then-applicable Company Redemption
      Price.  This Note subject to redemption by the Company pursuant to this
      Section 8(c) shall be redeemed by the Company at a price equal to the
      then-applicable Company Redemption Price.  Redemptions required by this
      Section 8(c) shall be made in accordance with the provisions of Section
      12.

    

    9. SECURITY.
       This Note is secured to the extent and in the manner set forth in the
      Security Documents (as defined in the Securities Purchase
      Agreement).

    

    10. NONCIRCUMVENTION.
       The Company hereby covenants and agrees that the Company will not, by
      amendment of its Articles of Incorporation, Bylaws or through any
      reorganization, transfer of assets, consolidation, merger, scheme of
      arrangement, dissolution, issue or sale of securities, or any other voluntary
      action, avoid or seek to avoid the observance or performance of any of the
      terms
      of this Note, and will at all times in good faith carry out all of the
      provisions of this Note and take all reasonable action as may be required to
      protect the rights of the Holder of this Note.

     

    
      
        
        

      

      
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      11. RESERVATION
        OF AUTHORIZED SHARES.

       

    

    (a) Reservation.
       The Company initially shall reserve out of its authorized and unissued
      Common Stock a number of shares of Common Stock for each of the Notes equal
      to
      150% of the Conversion Rate with respect to the Conversion Amount of each such
      Note as of the Issuance Date.  So long as any of the Notes are outstanding,
      the Company shall take all action necessary to reserve and keep available out
      of
      its authorized and unissued Common Stock, solely for the purpose of effecting
      the conversion of the Notes, 150% of the number of shares of Common Stock as
      shall from time to time be necessary to effect the conversion of all of the
      Notes then outstanding; provided that at no time shall the number of shares
      of
      Common Stock so reserved be less than the number of shares required to be
      reserved in the previous sentence (without regard to any limitations on
      conversions) (the "Required
      Reserve Amount").
      

    

    (b) Insufficient
      Authorized Shares.
       If at any time while any of the Notes remain outstanding the Company does
      not have a sufficient number of authorized and unreserved shares of Common
      Stock
      to satisfy its obligation to reserve for issuance upon conversion of the Notes
      at least a number of shares of Common Stock equal to the Required Reserve Amount
      (an "Authorized
      Share Failure"),
      then
      the Company shall immediately take all action necessary to increase the
      Company's authorized shares of Common Stock to an amount sufficient to allow
      the
      Company to reserve the Required Reserve Amount for the Notes then outstanding.
       Without limiting the generality of the foregoing sentence, as soon as
      practicable after the date of the occurrence of an Authorized Share Failure,
      but
      in no event later than ninety (90) days after the occurrence of such Authorized
      Share Failure, the Company shall hold a meeting of its shareholders for the
      approval of an increase in the number of authorized shares of Common Stock.
       In connection with such meeting, the Company shall provide each
      shareholder with a proxy or information statement and shall use its reasonable
      best efforts to solicit its shareholders' approval of such increase in
      authorized shares of Common Stock and to cause its board of directors to
      recommend to the shareholders that they approve such proposal.

    

    12. HOLDER'S
      REDEMPTIONS.
       The Company shall deliver the applicable Event of Default Redemption Price
      to the Holder within five (5) Business Days after the Company's receipt of
      the
      Holder's Event of Default Redemption Notice.  If the Holder has submitted a
      Change of Control Redemption Notice in accordance with Section 5(b), the Company
      shall deliver the applicable Change of Control Redemption Price to the Holder
      concurrently with the consummation of such Change of Control if such notice
      is
      received prior to the consummation of such Change of Control and within five
      (5)
      Business Days after the Company's receipt of such notice otherwise.  In the
      event of a redemption of less than all of the Conversion Amount of this Note,
      the Company shall promptly cause to be issued and delivered to the Holder a
      new
      Note (in accordance with Section 18(d)) representing the outstanding Principal
      which has not been redeemed.  In the event that the Company does not pay
      the applicable Redemption Price to the Holder within the time period required,
      at any time thereafter and until the Company pays such unpaid Redemption Price
      in full, the Holder shall have the option, in lieu of redemption, to require
      the
      Company to promptly return to the Holder all or any portion of this Note
      representing the Conversion Amount that was submitted for redemption and for
      which the applicable Redemption Price (together with any Late Charges thereon)
      has not been paid.  Upon the Company's receipt of such notice, (x) the
      applicable Redemption Notice shall be null and void with respect to such
      Conversion Amount, (y) the Company shall immediately return this Note, or issue
      a new Note (in accordance with Section 18(d)) to the Holder representing the
      sum
      of such Conversion Amount to be redeemed together with accrued and unpaid
      Interest with respect to such Conversion Amount and accrued and unpaid Late
      Charges with respect to such Conversion Amount and Interest and (z) the
      Conversion Price of this Note or such new Notes shall be adjusted to the lesser
      of (A) the Conversion Price as in effect on the date on which the applicable
      Redemption Notice is voided and (B) the lowest Closing Bid Price during the
      period beginning on and including the date on which the applicable Redemption
      Notice is delivered to the Company and ending on and including the date on
      which
      the applicable Redemption Notice is voided.  The Holder's delivery of a
      notice voiding a Redemption Notice and exercise of its rights following such
      notice shall not affect the Company's obligations to make any payments of Late
      Charges which have accrued prior to the date of such notice with respect to
      the
      Conversion Amount subject to such notice.

     

    
      
        
        

      

      
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    13. RESTRICTION
      ON REDEMPTION AND CASH DIVIDENDS.
       Until all of the Notes have been converted, redeemed or otherwise
      satisfied in accordance with their terms, the Company shall not, directly or
      indirectly, redeem, repurchase or declare or pay any cash dividend or
      distribution on its Common Stock without the prior express written consent
      of
      the Required Holders.

    

    14. VOTING
      RIGHTS.
       The Holder shall have no voting rights as the holder of this Note, except
      as required by law, including but not limited to Chapter 78 of the Nevada
      Revised Statutes, and as expressly provided in this Note.

    

    15. COVENANTS.
       

    

    (a) Rank.
      All
      payments due under this Note shall be senior to or rank pari passu with all
      other Indebtedness of the Company and its Subsidiaries.

    

    (b) Incurrence
      of Indebtedness.
       So long as this Note is outstanding, the Company shall not, and the
      Company shall not permit any of its Subsidiaries to, directly or indirectly,
      incur or guarantee, assume or suffer to exist any Indebtedness, other than
      (i)
      the Indebtedness evidenced by this Note and (ii) Permitted
      Indebtedness.

    

    (c) Existence
      of Liens.
       So long as this Note is outstanding, the Company shall not, and the
      Company shall not permit any of its Subsidiaries to, directly or indirectly,
      allow or suffer to exist any mortgage, lien, pledge, charge, security interest
      or other encumbrance upon or in any property or assets (including accounts
      and
      contract rights) owned by the Company or any of its Subsidiaries (collectively,
      "Liens")
      other
      than Permitted Liens.

    

    (d) Restricted
      Payments.
       The Company shall not, and the Company shall not permit any of its
      Subsidiaries to, directly or indirectly, redeem, defease, repurchase, repay
      or
      make any payments in respect of, by the payment of cash or cash equivalents
      (in
      whole or in part, whether by way of open market purchases, tender offers,
      private transactions or otherwise), all or any portion of any Permitted
      Indebtedness, whether by way of payment in respect of principal of (or premium,
      if any) or interest on, such Indebtedness if at the time such payment is due
      or
      is otherwise made or, after giving effect to such payment, an event
      constituting, or that with the passage of time and without being cured would
      constitute, an Event of Default has occurred and is continuing.

     

    
      
        
        

      

      
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    (f) Subsidiary
      Internal Accounting Controls.
       So long as this Note is outstanding, the Company and each of its
      Subsidiaries shall maintain, in all material respects, a system
      of
      internal accounting controls consistent with the Internal Accounting Controls
      (as defined in the Securities Purchase Agreement).

    

    16. VOTE
      TO ISSUE, OR CHANGE THE TERMS OF, NOTES.
       The affirmative vote at a meeting duly called for such purpose or the
      written consent without a meeting of the Required Holders shall be required
      for
      any change or amendment to this Note.

    

    17. TRANSFER.
       The Holder acknowledges and agrees that this Note may only be offered,
      sold, assigned or transferred by the Holder without the consent of the Company,
      provided that the provisions of Section 2(f) of the Securities Purchase
      Agreement are complied with in all respects.

    

    18. REISSUANCE
      OF THIS NOTE.

    

    (a) Transfer.
       If this Note is to be transferred, the Holder shall surrender this Note to
      the Company, whereupon the Company will issue, promptly following the
      satisfaction of the provisions of Section 2(f) of the Securities Purchase
      Agreement, and deliver upon the order of the Holder a new Note (in accordance
      with Section 18(d)), in the name of the validly registered assigns or
      transferee, representing the outstanding Principal being transferred by the
      Holder and, if less then the entire outstanding Principal is being transferred,
      a new Note (in accordance with Section 18(d)) to the Holder representing the
      outstanding Principal not being transferred.  The Holder and any assignee,
      by acceptance of this Note, acknowledge and agree that, by reason of the
      provisions of Section 3(c)(iii) and this Section 18(a), following conversion
      or
      redemption of any portion of this Note, the outstanding Principal represented
      by
      this Note may be less than the Principal stated on the face of this
      Note.

    

    (b) Lost,
      Stolen or Mutilated Note.
       Upon receipt by the Company of evidence reasonably satisfactory to the
      Company of the loss, theft, destruction or mutilation of this Note, and, in
      the
      case of loss, theft or destruction, of any indemnification undertaking by the
      Holder to the Company in customary form and, in the case of mutilation, upon
      surrender and cancellation of this Note, the Company shall execute and deliver
      to the Holder a new Note (in accordance with Section 18(d)) representing the
      outstanding Principal.

    

    (c) Note
      Exchangeable for Different Denominations.
       This Note is exchangeable, upon the surrender hereof by the Holder at the
      principal office of the Company, for a new Note or Notes (in accordance with
      Section (d) and in principal amounts of at least $100,000) representing in
      the
      aggregate the outstanding Principal of this Note, and each such new Note will
      represent such portion of such outstanding Principal as is designated by the
      Holder at the time of such surrender.

    

    (d) Issuance
      of New Notes.
       Whenever the Company is required to issue a new Note pursuant to the terms
      of this Note, such new Note (i) shall be of like tenor with this Note, (ii)
      shall represent, as indicated on the face of such new Note, the Principal
      remaining outstanding (or in the case of a new Note being issued pursuant to
      Section 18(a) or Section 18(c), the Principal designated by the Holder which,
      when added to the principal represented by the other new Notes issued in
      connection with such issuance, does not exceed the Principal remaining
      outstanding under this Note immediately prior to such issuance of new Notes),
      (iii) shall have an issuance date, as indicated on the face of such new Note,
      which is the same as the Issuance Date of this Note, (iv) shall have the same
      rights and conditions as this Note, and (v) shall represent accrued Interest
      and
      Late Charges on the Principal and Interest of this Note, from the Issuance
      Date.

     

    
      
        
        

      

      
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    (e) Registered
      Instrument.
      This
      Note is a registered instrument and is not a bearer instrument. The Note is
      registered as to both Principal and Interest with the Company and its Transfer
      Agent and all payments hereunder shall be made to the named Holder or, in the
      event of a transfer, to the transferee identified in the record of ownership
      of
      the Note maintained by the Company. Transfer of this Note may not be effected
      except in accordance with the provisions of the Note and the Securities Purchase
      Agreement.

    

    (f) Notation
      of Payments and Conversions.
      Concurrently with the receipt of any payment on account of the principal balance
      of or interest on this Note, and concurrently with the conversion of any portion
      hereof, the Holder shall note the date and amount of such payment or the amount
      so converted on Exhibit II to this Note and promptly deliver a copy of Exhibit
      II containing such notation to the Company. Any transferee of this Note shall
      take this Note subject to confirmation with the Company of the accuracy of
      Exhibit II, which confirmation shall be provided by the Company reasonably
      and promptly.

    

    19. REMEDIES,
      CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
      RELIEF.
       The remedies provided in this Note shall be cumulative and in addition to
      all other remedies available under this Note and any of the other Transaction
      Documents at law or in equity (including a decree of specific performance and/or
      other injunctive relief), and nothing herein shall limit the Holder's right
      to
      pursue actual and consequential damages for any failure by the Company to comply
      with the terms of this Note.  Amounts set forth or provided for herein with
      respect to payments, conversion and the like (and the computation thereof)
      shall
      be the amounts to be received by the Holder and shall not, except as expressly
      provided herein, be subject to any other obligation of the Company (or the
      performance thereof).  The Company acknowledges that a breach by it of its
      obligations hereunder will cause irreparable harm to the Holder and that the
      remedy at law for any such breach may be inadequate.  The Company therefore
      agrees that, in the event of any such breach or threatened breach, the Holder
      shall be entitled, in addition to all other available remedies, to an injunction
      restraining any breach, without the necessity of showing economic loss and
      without any bond or other security being required.

    

    20. PAYMENT
      OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
       If (a) this Note is placed in the hands of an attorney for collection or
      enforcement or is collected or enforced through any legal proceeding or the
      Holder otherwise takes action to collect amounts due under this Note or to
      enforce the provisions of this Note or (b) there occurs any bankruptcy,
      reorganization, receivership of the Company or other proceedings affecting
      Company creditors' rights and involving a claim under this Note, then the
      Company shall pay the costs incurred by the Holder for such collection,
      enforcement or action or in connection with such bankruptcy, reorganization,
      receivership or other proceeding, including, but not limited to, reasonable
      attorneys' fees and disbursements.

     

    
      
        
        

      

      
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    21. CONSTRUCTION;
      HEADINGS.
       This Note shall be deemed to be jointly drafted by the Company and all the
      Purchasers and shall not be construed against any person as the drafter hereof.
       The headings of this Note are for convenience of reference and shall not
      form part of, or affect the interpretation of, this Note.

    

    22. 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
      privilege.

    

    23. DISPUTE
      RESOLUTION.
       In the case of a dispute as to the determination of the Closing Bid Price,
      the Closing Sale Price, or the arithmetic calculation of the Conversion Rate
      or
      any Redemption Price, the Company shall submit the disputed determinations
      or
      arithmetic calculations via facsimile within one (1) Business Day of receipt
      of
      the Conversion Notice or Redemption Notice or other event giving rise to such
      dispute, as the case may be, to the Holder.  If the Holder and the Company
      are unable to agree upon such determination or calculation within one (1)
      Business Day of such disputed determination or arithmetic calculation being
      submitted to the Holder, then the Company shall, within one (1) Business Day
      submit via facsimile (a) the disputed determination of the Closing Bid Price
      or
      the Closing Sale Price to an independent, reputable investment bank selected
      by
      the Company and approved by the Holder  (such approval not to be
      unreasonably withheld or delayed) or (b) the disputed arithmetic calculation
      of
      the Conversion Rate or any Redemption Price to the Company's independent,
      outside accountant.  The Company, at the Company's expense, shall cause the
      investment bank or the accountant, as the case may be, to perform the
      determinations or calculations and notify the Company and the Holder of the
      results no later than five (5) Business Days from the time it receives the
      disputed determinations or calculations.  Such investment bank's or
      accountant's determination or calculation, as the case may be, shall be binding
      upon all parties absent demonstrable error.

    

    24. NOTICES;
      PAYMENTS.

    

    (a) Notices.
       Whenever notice is required to be given under this Note, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Securities Purchase Agreement.  The Company shall provide the Holder
      with prompt written notice of all actions taken pursuant to this Note, including
      in reasonable detail a description of such action and the reason therefore.
       Without limiting the generality of the foregoing, the Company will give
      written notice to the Holder (i) promptly upon any adjustment of the Conversion
      Price, setting forth in reasonable detail, and certifying, the calculation
      of
      such adjustment and (ii) at least ten days prior to the date on which the
      Company closes its books or takes a record (A) with respect to any dividend
      or
      distribution upon the Common Stock, (B) with respect to any pro rata
      subscription offer to holders of Common Stock or (C) for determining rights
      to
      vote with respect to any Fundamental Transaction, dissolution or liquidation,
      provided in each case that such information shall be made known to the public
      prior to or in conjunction with such notice being provided to the
      Holder.

     

    
      
        
        

      

      
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    (b) Payments.
       Whenever any payment of cash is to be made by the Company to any Person
      pursuant to this Note, such payment shall be made in lawful money of the United
      States of America by a check drawn on the account of the Company and sent via
      overnight courier service to such Person at such address as previously provided
      to the Company in writing (which address, in the case of each of the Purchasers,
      shall initially be as set forth on the Schedule of Buyers attached to the
      Securities Purchase Agreement); provided that the Holder may elect to receive
      a
      payment of cash via wire transfer of immediately available funds by providing
      the Company with prior written notice setting out such request and the Holder's
      wire transfer instructions.  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 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.  Any amount of Principal or other amounts due under the Transaction
      Documents, other than Interest, which is not paid when due shall result in
      a
      late charge being incurred and payable by the Company in an amount equal to
      interest on such amount at the rate of fifteen percent (12.5%) per annum from
      the date such amount was due until the same is paid in full ("Late
      Charge").

    

    25. CANCELLATION.
       After all Principal, accrued Interest and other amounts at any time owed
      on this Note has been paid in full, this Note shall automatically be deemed
      canceled, shall be surrendered to the Company for cancellation and shall not
      be
      reissued.

    

    26 WAIVER
      OF NOTICE.
       To the extent permitted by law, the Company hereby waives demand, notice,
      protest and all other demands and notices in connection with the delivery,
      acceptance, performance, default or enforcement of this Note and the Securities
      Purchase Agreement.

    

    27. GOVERNING
      LAW; JURISDICTION; JURY TRIAL.
       This Note shall be construed and enforced in accordance with, and all
      questions concerning the construction, validity, interpretation and performance
      of this Note shall be governed by, the internal laws of the State of New York,
      without giving effect to any choice of law or conflict of law provision or
      rule
      (whether of the State of New York or any other jurisdictions) that would cause
      the application of the laws of any jurisdictions other than the State of New
      York.  The Company and GCM hereby irrevocably submit to the exclusive
      jurisdiction of the state and federal courts sitting in The City of New York,
      Borough of Manhattan, for the adjudication of any dispute hereunder or in
      connection herewith or with any transaction contemplated hereby or discussed
      herein, and hereby irrevocably waives, and agrees not to assert in any suit,
      action or proceeding, any claim that it is not personally subject to the
      jurisdiction of any such court, that such suit, action or proceeding is brought
      in an inconvenient forum or that the venue of such suit, action or proceeding
      is
      improper.  The Company and GCM hereby irrevocably waive personal service of
      process and consents to process being served in any such suit, action or
      proceeding by mailing a copy thereof to such party at the address it set forth
      on the signature page hereto 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 manner
      permitted by law.  In the event that any provision of this Note 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
      this Note.  Nothing contained herein shall be deemed or operate to preclude
      any Holder other than GCM from bringing suit or taking other legal action
      against the Company in any other jurisdiction to collect on the Company's
      obligations to the Holder, to realize on any collateral or any other security
      for such obligations, or to enforce a judgment or other court ruling in favor
      of
      the Holder.   EACH OF THE COMPANY AND GCM HEREBY IRREVOCABLY WAIVES ANY
      RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
      OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE
      OR
      ANY TRANSACTION CONTEMPLATED HEREBY.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    

    28. CERTAIN
      DEFINITIONS.
       For purposes of this Note, the following terms shall have the following
      meanings:

    

    (a) "Approved
      Stock Plan"
      means
      any employee benefit plan which has been approved by the Board of Directors
      of
      the Company, pursuant to which the Company's securities may be issued to any
      employee, consultant, officer or director for services provided to the
      Company.

    

    (b) "[Intentionally
      Omitted]

    

    (c) "Bloomberg"
      means
      Bloomberg Financial Markets.

    

    (d) "Business
      Day"
      means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

    

    (e) "Calendar
      Month"
      means
      the period beginning on and including the first of each calendar month and
      ending on and including the last day of such calendar month.

    

    (f) "Change
      of Control"
      means
      any Fundamental Transaction other than (i) any reorganization, recapitalization
      or reclassification of the Common Stock in which holders of the Company's voting
      power immediately prior to such reorganization, recapitalization or
      reclassification continue after such reorganization, recapitalization or
      reclassification to hold publicly traded securities and, directly or indirectly,
      the voting power of the surviving entity or entities necessary to elect a
      majority of the members of the board of directors (or their equivalent if other
      than a corporation) of such entity or entities, or (ii) pursuant to a migratory
      merger effected solely for the purpose of changing the jurisdiction of
      incorporation of the Company.

    

    (g) "Change
      of Control Premium"
      means
      (i) 130% or (ii) 120% in the event of a Change of Control involving
      consideration paid to holders of the Company's Common Stock where the
      consideration per share of the Company's Common Stock to be received by the
      holders thereof is greater (as to amounts other than cash, as determined
      reasonably and in good faith by the Board of Directors of the Company) than
      200%
      of the Conversion
      Price as of the Initial Issuance Date (as adjusted for stock splits, stock
      dividends, reverse stock splits, recapitalizations, reclassifications and
      similar events).

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    

    (h) "Closing
      Bid Price"
      and
      "Closing
      Sale Price"
      means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, for such security on the Principal Market, as
      reported by Bloomberg, or, if the Principal Market begins to operate on an
      extended hours basis and does not designate the closing bid price or the closing
      trade price, as the case may be, then the last bid price or last trade price,
      respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
      by Bloomberg, or, if the Principal Market is not the principal securities
      exchange or trading market for such security, the last closing bid price or
      last
      trade price, respectively, of such security on the principal securities exchange
      or trading market where such security is listed or traded as reported by
      Bloomberg, or if the foregoing do not apply, the last closing bid price or
      last
      trade price, respectively, of such security in the over-the-counter market
      on
      the electronic bulletin board for such security as reported by Bloomberg, or,
      if
      no closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, of any market makers for such security as reported in the "pink
      sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
       If the Closing Bid Price or the Closing Sale Price cannot be calculated
      for a security on a particular date on any of the foregoing bases, the Closing
      Bid Price or the Closing Sale Price, as the case may be, of such security on
      such date shall be the fair market value as mutually determined by the Company
      and the Holder.  If the Company and the Holder are unable to agree upon the
      fair market value of such security, then such dispute shall be resolved pursuant
      to Section 23.  All such determinations to be appropriately adjusted for
      any stock dividend, stock split, stock combination or other similar transaction
      during the applicable calculation period.

    

    (i) "Closing
      Date"
      shall
      have the meaning set forth in the Securities Purchase Agreement, which date
      is
      the date the Company initially issued Notes pursuant to the terms of the
      Securities Purchase Agreement.

    

    (j) "Contingent
      Obligation"
      means,
      as to any Person, any direct or indirect liability, contingent or otherwise,
      of
      that Person with respect to any indebtedness, lease, dividend or other
      obligation of another Person if the primary purpose or intent of the Person
      incurring such liability, or the primary effect thereof, is to provide assurance
      to the obligee of such liability that such liability will be paid or discharged,
      or that any agreements relating thereto will be complied with, or that the
      holders of such liability will be protected (in whole or in part) against loss
      with respect thereto.

    

    (k) "Convertible
      Securities"
      means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for Common Stock.

    

    (l) "Eligible
      Market"
      means,
      the Principal Market, The New York Stock Exchange, Inc., the Nasdaq Capital
      Market, the Nasdaq National Market or the American Stock Exchange.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    

    (m) "Excluded
      Securities"
      means
      any Common Stock issued or issuable: (i) in connection with any Approved Stock
      Plan up to a maximum of percent (5%) of the outstanding Common Stock; (ii)
      upon
      conversion of, or in exchange for, the Notes or the exercise of the Warrants;
      (iii) in connection with any acquisition by the Company, whether through an
      acquisition of stock or a merger of any business, assets or technologies the
      primary purpose of which is not to raise equity capital; (iv) securities issued
      in connection with corporate partnering transactions on terms approved by the
      Board of Directors of the Company and the primary purpose of which is not to
      raise equity capital; and (v) upon conversion of any Options or Convertible
      Securities which are outstanding on the day immediately preceding the
      Subscription Date, provided that the terms of such Options or Convertible
      Securities are not amended, modified or changed on or after the Subscription
      Date.

    

    (n) "Fundamental
      Transaction"
      means
      that the Company shall, directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person, or (ii) sell, assign, transfer,
      convey or otherwise dispose of all or substantially all of the properties or
      assets of the Company to another Person, or (iii) allow another Person or
      Persons to make a purchase, tender or exchange offer that is accepted by the
      holders of more than the 50% of the outstanding shares of Voting Stock (not
      including any shares of Voting Stock held by the Person or Persons making or
      party to, or associated or affiliated with the Person or Persons making or
      party
      to, such purchase, tender or exchange offer), or (iv) consummate a stock
      purchase agreement or other business combination (including, without limitation,
      a reorganization, recapitalization, spin-off or scheme of arrangement) with
      another Person whereby such other Person acquires more than the 50% of either
      the outstanding shares of Voting Stock (not including any shares of Voting
      Stock
      held by the other Person or other Persons making or party to, or associated
      or
      affiliated with the other Persons making or party to, such stock purchase
      agreement or other business combination), (v) reorganize, recapitalize or
      reclassify its Common Stock or (vi) any "person" or "group" (as these terms
      are
      used for purposes of Sections 13(d) and 14(d) of the Exchange Act)
      is or
      shall become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
      Act), directly or indirectly, of 50% of the aggregate Voting Stock of the
      Company.

    

    (o) "GAAP"
      means
      United States generally accepted accounting principles, consistently
      applied.

    

    (p) "Indebtedness"
      of any
      Person means, without duplication (i) all indebtedness for borrowed money,
      (ii)
      all obligations issued, undertaken or assumed as the deferred purchase price
      of
      property or services, including (without limitation) "capital leases" in
      accordance with generally accepted accounting principles (other than trade
      payables entered into in the ordinary course of business), (iii) all
      reimbursement or payment obligations with respect to letters of credit, surety
      bonds and other similar instruments, (iv) all obligations evidenced by notes,
      bonds, debentures or similar instruments, including obligations so evidenced
      incurred in connection with the acquisition of property, assets or businesses,
      (v) all indebtedness created or arising under any conditional sale or other
      title retention agreement, or incurred as financing, in either case with respect
      to any property or assets acquired with the proceeds of such indebtedness (even
      though the rights and remedies of the seller or bank under such agreement in
      the
      event of default are limited to repossession or sale of such property), (vi)
      all
      monetary obligations under any leasing or similar arrangement which, in
      connection with generally accepted accounting principles, consistently applied
      for the periods covered thereby, is classified as a capital lease, (vii) all
      indebtedness referred to in clauses (i) through (vi) above secured by (or for
      which the holder of such Indebtedness has an existing right, contingent or
      otherwise, to be secured by) any mortgage, lien, pledge, charge, security
      interest or other encumbrance upon or in any property or assets (including
      accounts and contract rights) owned by any Person, even though the Person which
      owns such assets or property has not assumed or become liable for the payment
      of
      such indebtedness, (viii) all obligations issued, undertaken or assumed as
      part
      of any financing facility with respect to accounts receivables of the Company
      and its Subsidiaries, including, without limitation, any factoring arrangement
      of such accounts receivables and (ix) all Contingent Obligations in respect
      of
      indebtedness or obligations of others of the kinds referred to in clauses (i)
      through (viii) above.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    

    (q) "Initial
      Issuance Date"
      means
      December 26, 2006.

    

    (r) "Installment
      Amount"
      means
      with respect to any Installment Date, the lesser of $250,000 or the principal
      balance then outstanding on this Note . In the event the Holder shall sell
      or
      otherwise transfer any portion of this Note, the transferee shall be allocated
      a
      pro rata portion of the each unpaid Installment Amount hereunder.

    

    (s) "Installment
      Date"
      means
      the first day of each calendar month commencing July 1, 2007.

    

    (t) "Interest
      Rate"
      means
      ten percent (10%) per annum, subject to periodic adjustment pursuant to Section
      2.

    

    (u) "Options"
      means
      any rights, warrants or options to subscribe for or purchase Common Stock or
      Convertible Securities.

    

    (v) "Parent
      Entity"
      of a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

    

    (w) "Permitted
      Indebtedness"
      means
      (A) Indebtedness incurred by the Company that is made expressly subordinate
      in
      right of payment to the Indebtedness evidenced by this Note, as reflected in
      a
      written agreement acceptable to the Holder and approved by the Holder in writing
      (which approval shall not be unreasonably delayed), and which Indebtedness
      does
      not provide at any time for (1) the payment, prepayment, repayment, repurchase
      or defeasance, directly or indirectly, of any principal or premium, if any,
      thereon until ninety-one (91) days after the Maturity Date or later and (2)
      total interest and fees at a rate in excess of the Interest Rate hereunder,
      (B)
      Indebtedness secured by Permitted Liens, (C) Indebtedness to trade creditors
      incurred in the ordinary course of
      business, (D) extensions, refinancings and renewals of any items of Permitted
      Indebtedness, provided that the principal amount is not increased or the terms
      modified to impose more burdensome terms upon the Company or its Subsidiary,
      as
      the case may be and (E) Indebtedness outstanding on the Issuance Date and as
      disclosed in Schedule 3(s) the Securities Purchase Agreeement.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    

    (x) "Permitted
      Liens"
      means
      (i) any Lien for taxes not yet due or delinquent or being contested in good
      faith by appropriate proceedings for which adequate reserves have been
      established in accordance with GAAP, (ii) any statutory Lien arising in the
      ordinary course of business by operation of law with respect to a liability
      that
      is not yet due or delinquent, (iii) any Lien created by operation of law, such
      as materialmen's liens, mechanics' liens and other similar liens, arising in
      the
      ordinary course of business with respect to a liability that is not yet due
      or
      delinquent or that are being contested in good faith by appropriate proceedings,
      (iv) Liens securing the Company's obligations under the Notes, (v) Liens (A)
      upon or in any equipment (as defined in the Security Agreement) acquired or
      held
      by the Company or any of its Subsidiaries to secure the purchase price of such
      equipment or indebtedness incurred solely for the purpose of financing the
      acquisition or lease of such equipment, or (B) existing on such equipment at
      the
      time of its acquisition, provided that the Lien is confined solely to the
      property so acquired and improvements thereon, and the proceeds of such
      equipment, (vi) Liens incurred in connection with the extension, renewal or
      refinancing of the indebtedness secured by Liens of the type described in
      clauses (i) and (v) above, provided that any extension, renewal or replacement
      Lien shall be limited to the property encumbered by the existing Lien and the
      principal amount of the Indebtedness being extended, renewed or refinanced
      does
      not increase, (vii) leases or subleases and licenses and sublicenses granted
      to
      others in the ordinary course of the Company's business, not interfering in
      any
      material respect with the business of the Company and its Subsidiaries taken
      as
      a whole, (viii) Liens in favor of customs and revenue authorities arising as
      a
      matter of law to secure payments of custom duties in connection with the
      importation of goods; (ix) Liens arising from judgments, decrees or attachments
      in circumstances not constituting an Event of Default under Section 4(a)(ix)
      and
      (x) Liens with respect to Indebtedness not individually in excess of $25,000
      or
      in the aggregate in excess of $100,000, which individually and in aggregate
      are
      not material to the Company.

    

    (y) "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization, any other entity  and
      a government or any department or agency thereof.

    

    (z) "Potential
      Partner Conditions"
      means
      at any time during the period commencing on the date of the consummation of
      any
      material transaction between the Company and a Person and ending on the first
      anniversary of the Effective Date, there shall be no disclosure that any
      executive officer of such Person has (i) exhibited dishonesty in the performance
      of his or her duties, which is materially and demonstrably injurious to the
      Company;
      or (ii) been convicted of (x) a felony under the laws of the United States
      or
      any state thereof or (y) a misdemeanor involving moral turpitude, in each case,
      which is materially and demonstrably injurious to the Company.

    

    (aa) "Principal
      Market"
      means
      Over-the-Counter Bulletin Board.

    

    (bb) "Redemption
      Notices"
      means,
      collectively, the Event of Default Redemption Notices, Change of Control
      Redemption Notices, the Company Redemption Notice, and, each of the foregoing,
      individually, a Redemption Notice.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    

    (cc) "Redemption
      Premium"
      means
      125%.

    

    (dd) "Redemption
      Prices"
      means,
      collectively, the Event of Default Redemption Price, Change of Control
      Redemption Price, and the Company Redemption Amount, the Holder Optional
      Redemption Price and the Holder Partial Redemption Price and, each of the
      foregoing, individually, a Redemption Price.

    

    (ee) "Required
      Holders"
      means
      the holders of Notes representing at least a majority of the aggregate principal
      amount of the Notes then outstanding.

     

    (ff) "SEC"
      means
      the United States Securities and Exchange Commission.

    

    (gg) "Securities
      Purchase Agreement"
      means
      that certain securities purchase agreement dated the Subscription Date by and
      among the Company and the initial holders of the Notes pursuant to which the
      Company issued the Notes.

    

    (hh) "Subscription
      Date"
      means
      December 26, 2006

    

    (ii) "Successor
      Entity"
      means
      the Person, which may be the Company, formed by, resulting from or surviving
      any
      Fundamental Transaction or the Person with which such Fundamental Transaction
      shall have been made, provided that if such Person is not a publicly traded
      entity whose common stock or equivalent equity security is quoted or listed
      for
      trading on an Eligible Market, Successor Entity shall mean such Person's Parent
      Entity.

    

    (jj) "Trading
      Day"
      means
      any day on which the Common Stock are traded on the Principal Market, or, if
      the
      Principal Market is not the principal trading market for the Common Stock,
      then
      on the principal securities exchange or securities market on which the Common
      Stock are then traded; provided that "Trading Day" shall not include any day
      on
      which the Common Stock are scheduled to trade on such exchange or market for
      less than 4.5 hours or any day that the Common Stock are suspended from trading
      during the final hour of trading on such exchange or market (or if such exchange
      or market does not designate in advance the closing time of trading on such
      exchange or market, then during the hour ending at 4:00:00 p.m., New York
      Time).

    

    (kk) "Voting
      Stock"
      of a
      Person means capital stock of such Person of the class or classes pursuant
      to
      which the holders thereof have the general voting power to elect, or the general
      power to appoint, at least a majority of the board of directors, managers or
      trustees of such Person (irrespective of whether or not at the time capital
      stock of any other class or classes shall have or might have voting power by
      reason of the happening of any contingency).

    

    (ll) "Warrants"
      has the
      meaning ascribed to such term in the Securities Purchase Agreement, and shall
      include all warrants issued in exchange therefor or replacement
      thereof.

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    29. DISCLOSURE.
      Upon
      receipt or delivery by the Company of any notice in accordance with the terms
      of
      this Note, unless the Company has in good faith determined that the matters
      relating to such notice do not constitute material, nonpublic information
      relating to the Company or its Subsidiaries, the Company shall within four
      (4)
      Business Days after any such receipt or delivery publicly disclose such
      material, nonpublic information on a Current Report on Form 8-K or otherwise.
      In
      the event that the Company believes that a notice contains material, nonpublic
      information, relating to the Company or its Subsidiaries, the Company shall
      indicate to the Holder contemporaneously with delivery of such notice, and
      in
      the absence of any such indication, the Holder shall be allowed to presume
      that
      all matters relating to such notice do not constitute material, nonpublic
      information relating to the Company or its Subsidiaries.

    

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
      the
      Issuance Date set out above.

     

    
      	 	 	 
	 	
              PURE
                VANILLA EXCHANGE, INC.

            
	 
 	 
 	 
 
	 	By:  	/s/
              Steven Yevoli
	 	
              

              Name: Steven
                Yevoli

            
	 	
              Title: Chairman

            

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      I

    

    (To
      be
      Executed by Holder in order to Convert Note)

    

    CONVERSION
      NOTICE

    FOR
      PURE
      VANILLA EXCHANGE, INC.

    SENIOR
      SECURED CONVERTIBLE NOTE DUE DECEMBER__, 2007

    

    The
      undersigned, as Holder of the Senior Secured Convertible Note Due December
      _,
      2007 of Pure Vanilla Exchange, Inc. (the "Company"),
      in
      the outstanding principal amount of U.S. $_____________ (the "Note"),
      hereby elects to convert that portion of the outstanding principal amount of
      the
      Note shown on the next page into shares of Common Stock, $0.001 par value per
      share (the "Common
      Stock"),
      of
      the Company according to the conditions of the Note, as of the date written
      below. The undersigned hereby requests that share certificates for the Common
      Stock to be issued to the undersigned pursuant to this Conversion Notice be
      issued in the name of, and delivered to, the undersigned or its designee as
      indicated below. If shares 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. No fee will be charged to the Holder for any conversion, except
      for transfer taxes, if any.

     

    Conversion
      Information:

    

    NAME
      OF
      HOLDER: ______________________________

     

    By:
      __________________________    

    Print
      Name:

    Print
      Title:

    

    Print
      Address of Holder:

     

    ______________________________

     

    Issue
      Common Stock to:

    _______________________________     

    at: ____________________________

    _______________________________

     

     

    Electronically
      transmit and credit Common Stock to:

     

    at:
      ___________________________    

    _____________________________

     

    Date
      of
      Conversion: ________________

    Applicable
      Conversion Rate $_________ per share of Common Stock

     

    THE
      COMPUTATION OF THE NUMBER OF COMMON SHARES TO

    BE
      RECEIVED IS SET FORTH ON THE ATTACHED PAGE

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    Page
      2 to Conversion Notice for:

    _______________________________       

    (Name
      of Holder)

     

    COMPUTATION
      OF NUMBER OF COMMON SHARES TO BE RECEIVED

    

    
      	
              A.
                 Outstanding
                Principal Amount converted:

            	
              $

            	
                  
                

            
	
              B. Accrued,
                unpaid interest on Outstanding Principal Amount converted:

            	
              $

            	
                  
                

            
	 	
              $

            	
                    
                

            
	
              Total
                dollar amount converted (total of A + B )

            	
              $

            	
                 
                

            
	 	 	   

	
               

              Conversion
                Price

            	 	
            
	
              Number
                of Shares of Common Stock = 

            	
               
$

            	 

	
              Total dollar amount
                converted

            	
               

            	    

	
              divided by 

              Conversion
                Rate 

            	
              $

            	   

	
               

              Number
                of shares of Common Stock =
                ______________________________________        

            	 	     

	 	 	
            

    

    

    If
      the
      conversion is not being settled by DTC, please issue and deliver _____

    certificate(s)
      for shares of Common Stock in the following amount(s):

    ____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________

     

    Please
      issue and deliver new Note(s) in the following amounts to:

    ____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      II

    

    SCHEDULE
      OF PAYMENTS AND CONVERSIONS

    FOR
      PURE
      VANILLA EXCHANGE, INC.

    SENIOR
      SECURED CONVERTIBLE NOTE DUE DECEMBER 26, 2007

     

    

      
        	 	 	
                 

              	
                 

              	
                Principal

              	
                 

              	
                Conversion

              	
                 

              	
                Holder

              	
                 

              	
                Company

              	
                 

              
	
                Date

              	
                 

              	
                Interest
                  Payment

              	
                 

              	
                Payment

              	
                 

              	
                Amount

              	
                 

              	
                Initials

              	
                 

              	
                Initials

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}]]