Document:

Unassociated Document

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

    

    
      	
              Principal
      Amount: $______

            	
              Issue
      Date: October 15, 2010

            

    

    

    CONVERTIBLE PROMISSORY
NOTE

    

    FOR VALUE
RECEIVED, FTOH Corp, a Delaware corporation (hereinafter called “Borrower”), hereby promises to
pay to the order of _____ (the “Holder”), without demand, the
sum of ______ (“Principal
Amount”), with interest accruing thereon, on April 15, 2011 (the “Maturity Date”), if not sooner
paid.

    

    This Note
has been entered into pursuant to the terms of a subscription agreement between
the Borrower, the Holder and the other signatories thereto (“Other Holders”) dated at
or about the date hereof (the “Subscription Agreement”), who
have been issued Notes pursuant to the Subscription Agreement (“Other Notes”) and shall be
governed by the terms of such Subscription Agreement.  Unless
otherwise separately defined herein, all capitalized terms used in this Note
shall have the same meaning as is set forth in the Subscription
Agreement.  The following terms shall apply to this Note:

    

    ARTICLE
I

    

    GENERAL
PROVISIONS

    

    1.1           Interest
Rate.   Interest payable on this Note shall accrue at the
annual rate of six (6%) percent  and be payable on the Maturity Date,
accelerated or otherwise, when the principal and remaining accrued but unpaid
interest shall be due and payable, or sooner as described below.

    

    1.2           Payment
Grace Period.  The Borrower shall not
have any grace period to pay any monetary amounts due under this
Note.  During the pendency of an Event of Default (as described in
Article III), a default interest rate of eighteen percent (18%) per annum shall
be in effect.

    

    1.3           Conversion
Privileges.  The Conversion Rights set forth in Article II shall
remain in full force and effect immediately from the date hereof and until the
Note is paid in full regardless of the occurrence of an Event of
Default.  This Note shall be payable in full on the Maturity Date,
unless previously converted into Common Stock in accordance with Article II
hereof.

    

    1.4           Prepayment.  This
Note may be prepaid by the Borrower in whole, at any time, or in part, from time
to time, without penalty or premium, upon written notice to the
Holder.  Upon receipt of such notice, the Holder may determine to
convert the Note pursuant to Article
II.

    
      
         

      

      
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    ARTICLE
II

    

    CONVERSION
RIGHTS

    

    The
Holder shall have the right to convert the principal and any interest due under
this Note into Shares of the Borrower's Common Stock, $0.0001 par value per
share (“Common Stock”)
as set forth below.

    

    2.1.        Conversion into the
Borrower's Common Stock.

    

    (a)          The
Holder shall have the right from and after the date of the issuance of this Note
and then at any time until this Note is fully paid, to convert any outstanding
and unpaid principal portion of this Note, and accrued interest, at the election
of the Holder (the date of giving of such notice of conversion being a "Conversion Date") into fully
paid and non-assessable shares of Common Stock as such stock exists on the date
of issuance of this Note, or any shares of capital stock of Borrower into which
such Common Stock shall hereafter be changed or reclassified, at the conversion
price as defined in Section 2.1(b) hereof
(the "Fixed Conversion
Price"), determined as provided herein.  Upon delivery to the
Borrower of a completed Notice of Conversion, a form of which is annexed hereto
as Exhibit A,
Borrower shall issue and deliver to the Holder within three (3) business days
after the Conversion Date (such third day being the “Delivery Date”) that number of
shares of Common Stock for the portion of the Note converted in accordance with
the foregoing.  At the election of the Holder, the Borrower will
deliver accrued but unpaid interest on the Note, if any, through the Conversion
Date directly to the Holder on or before the Delivery Date.  The
number of shares of Common Stock to be issued upon each conversion of this Note
shall be determined by dividing that portion of the principal of the Note and
interest, if any, to be converted, by the Conversion Price.

    

    (b)          Subject
to adjustment as provided in Section 2.1(c)
hereof, the fixed conversion price per share shall be equal to $1.40 (“Fixed Conversion Price”)
provided, however, such Fixed Conversion Price shall be based upon the
capitalization resulting from a 8.344159089:1 split (the “Split”) of Borrower’s
Common Stock effective on or following the date hereof.  In the event the
Conversion Date occurs prior to the record date of the Split, the Fixed
Conversion Price shall be adjusted to require Borrower to a new conversion price
in order that Borrower shall issue to Holder shares on the basis of the
Borrower’s Common Stock outstanding without giving effect to such
Split.

    

    (c)         
The Fixed Conversion Price and number and kind of shares or other securities to
be issued upon conversion determined pursuant to Section 2.1(a), shall
be subject to adjustment from time to time upon the happening of certain events
while this conversion right remains outstanding, as follows:

    

    A.           Merger, Sale of Assets,
etc.  If (A) the Borrower effects any merger
or  consolidation of the Borrower with or into another entity, (B) the
Borrower effects any sale of all or substantially all of its assets in one or a
series of related transactions,  (C) any tender offer or exchange
offer (whether by the Borrower or another entity) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, (D) the Borrower consummates a stock
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with one
or more persons or entities whereby such other persons or entities acquire more
than the 30% of the outstanding shares of Common Stock (not including any shares
of Common Stock held by such other persons or entities making or party to, or
associated or affiliated with the other persons or entities making or party to,
such stock purchase agreement or other business combination), (E) any "person"
or "group" (as these terms are used for purposes of Sections 13(d) and 14(d) of
the 1934 Act) is or shall become the "beneficial owner" (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of 30% of the aggregate
Common Stock of the Borrower, or (F) the Borrower effects any reclassification
of the Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other securities,
cash or property (in any such case, a "Fundamental  Transaction"), this
Note, as to the unpaid principal portion thereof and accrued interest thereon,
shall thereafter be deemed to evidence the right to convert into such number and
kind of shares or other securities and property as would have been issuable or
distributable on account of such Fundamental Transaction, upon or with respect
to the securities subject to the conversion right immediately prior to such
Fundamental Transaction.  The foregoing provision shall similarly
apply to successive Fundamental Transactions of a similar nature by any such
successor or purchaser.  Without limiting the generality of the
foregoing, the anti-dilution provisions of this Section shall apply to such
securities of such successor or purchaser after any such Fundamental
Transaction.

    
      
         

      

      
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    B.           Reclassification,
etc.  If the Borrower at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of
securities of any class or classes that may be issued or outstanding, this Note,
as to the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted number of
such securities and kind of securities as would have been issuable as the result
of such change with respect to the Common Stock immediately prior to such
reclassification or other change.

    

    C.           Stock Splits, Combinations
and Dividends.  If the shares of Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, or if a
dividend is paid on the Common Stock in shares of Common Stock, the Conversion
Price shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.

    

    D.           Share
Issuance.   For a period of eighteen months following the
date on which this Note is converted, if the Borrower shall issue any Common
Stock except for the Excepted Issuances (as defined in the Subscription
Agreement), for a consideration per share that is less than $1.00 (the “Lower
Price”) then the Company shall promptly issue additional shares of Common Stock
(the “Ratchet Shares”) to the Subscribers so that the total amount of shares
received by the Subscribers (conversion shares plus Ratchet Shares) shall equal
what the Subscribers would have received if the
Conversion Price was equal to
such Lower Price. For
example, if a Subscriber converts Notes with a principal amount of $700,000 at a
conversion price of $1.40 per share (equaling 500,000 shares) and then the
Company issues additional shares of Common Stock at $0.70 per share during the
Adjustment Period, the Company will issue an additional 500,000 shares on Common
Stock to such Subscriber ($700,000/1,000,000 shares = $0.70 per
share).   For
purposes of this adjustment, the issuance of any security or debt instrument of
the Borrower carrying the right to convert such security or debt instrument into
Common Stock or of any warrant, right or option to purchase Common Stock shall
result in an adjustment to the Fixed Conversion Price  and the
issuance of additional Ratchet Shares upon the issuance of the above-described
security, debt instrument, warrant, right, or option and again upon the issuance
of shares of Common Stock upon exercise of such conversion or purchase rights if
such issuance is at a price lower than $1.00. Other than with respect to
Excepted Issuances, Common Stock issued or issuable by the Borrower for no
consideration will be deemed issuable or to have been issued for $0.0001 per
share of Common Stock.  The reduction of the Fixed Conversion Price
described in this paragraph is in addition to the other rights of the Holder
described in the Subscription Agreement.

    

    (d)         Whenever
the Conversion Price is adjusted pursuant to Section 2.1(c) above,
the Borrower shall promptly mail to the Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a statement of the
facts requiring such adjustment.

     

    
      
         

      

      
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    (e)           During
the period the conversion right exists, Borrower will reserve from its
authorized and unissued Common Stock not less than an amount of Common Stock
equal to 150% of the amount of shares of Common Stock issuable upon the full
conversion of this Note.  Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and
non-assessable.  Borrower agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the conversion
of this Note.

    

    2.2         Method of
Conversion.  This Note may be converted by the Holder in whole
or in part as described in Section 2.1(a) hereof
and the Subscription Agreement.  Upon partial conversion of this Note,
a new Note containing the same date and provisions of this Note shall, at the
request of the Holder, be issued by the Borrower to the Holder for the principal
balance of this Note and interest which shall not have been converted or
paid.

    

    2.3.        Maximum
Conversion.  The Holder shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Borrower on such Conversion
Date.  For the purposes of the provision to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder.  Subject to the foregoing, the Holder shall not be limited
to aggregate conversions of 4.99%.  The Holder shall have the
authority and obligation to determine whether the restriction contained in this
Section 2.3
will limit any conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section applies, the determination of
which portion of the Notes are convertible shall be the responsibility and
obligation of the Holder.  The Holder may waive the conversion
limitation described in this Section 2.3, in whole
or in part, upon and effective after 61 days prior written notice to the
Borrower to increase such percentage to up to 9.99%.

    

    ARTICLE
III

    

    EVENT
OF DEFAULT

    

    The
occurrence of any of the following events of default ("Event of Default") shall, at
the option of the Holder hereof, make all sums of principal and interest then
remaining unpaid hereon and all other amounts payable hereunder immediately due
and payable, upon demand, without presentment, or grace period, all of which
hereby are expressly waived, except as set forth below:

    

    3.1         Failure to Pay Principal or
Interest.  The Borrower fails to pay any installment of
principal, interest or other sum due under this Note when due.

    

    3.2         Breach of
Covenant.  The Borrower breaches any material covenant or other
term or condition of the Subscription Agreement, Transaction Documents or this
Note in any material respect and such breach, if subject to cure, continues for
a period of five (5) business days after written notice to the Borrower from the
Holder.

    

    3.3         Breach of Representations
and Warranties.  Any material representation or warranty of the
Borrower made herein, in the Subscription Agreement, Transaction Documents, or
in any agreement, statement or certificate given in writing pursuant hereto or
in connection therewith shall be false or misleading in any material respect as
of the date made and the Closing Date.

    
      
         

      

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

     

    3.5         Cessation of
Operations.   Any cessation of operations by Borrower or
Borrower admits it is otherwise generally unable to pay its debts as such debts
become due.

     

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

    

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

    

    3.8         Judgments.  Any
money judgment, writ or similar final process shall be entered or filed against
Borrower or any of its property or other assets for more than $250,000, unless
stayed vacated or satisfied within thirty (30) days.

    

    3.9         Bankruptcy.  Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings or
relief under any bankruptcy law or any law, or the issuance of any notice in
relation to such event, for the relief of debtors shall be instituted by or
against the Borrower or any Subsidiary of Borrower.

    

    3.10       Delisting.   Delisting
of the Common Stock from any Principal Market; failure to comply with the
requirements for continued listing on a Principal Market for a period of five
(5) consecutive trading days; or notification from a Principal Market that the
Borrower is not in compliance with the conditions for such continued listing on
such Principal Market; provided, however, that so long as the Borrower shall
first become subject to the periodic reporting requirements of the SEC on or
prior to the six (6) months anniversary hereof, this section will not be an
Event of Default under this Section 3.10 prior to
such six (6) months anniversary.

    

    3.11       Non-Payment.   A
default by the Borrower under any one or more obligations in an aggregate
monetary amount in excess of $200,000 for more than twenty (20) days after the
due date, unless the Borrower is contesting the validity of such obligation in
good faith.

    

    3.12       Stop
Trade.  An SEC or judicial stop trade order or Principal Market
trading suspension that lasts for five or more consecutive trading days after
the Borrower has become subject to the reporting requirements of the
SEC.

    

    3.13       Failure to Deliver Common
Stock or Replacement Note.  Borrower's failures to timely
deliver Common Stock to the Holder pursuant to and in the form required by this
Note and Sections 7 and 11 of the Subscription Agreement, or, if required, a
replacement Note.

    

    3.14       Reservation
Default.   Failure by the Borrower to have reserved for
issuance upon conversion of the Note or upon exercise of the Warrants issued in
connection with the Subscription Agreement, the number of shares of Common Stock
as required in the Subscription Agreement, this Note and the
Warrants.

    

    3.15       Financial Statement
Restatement.  The restatement after the date hereof of any
financial statements filed by the Borrower with the SEC for any date or period
from two years prior to the Issue Date of this Note and until this Note is no
longer outstanding, if the result of such restatement would, by comparison to
the unrestated financial statements, have constituted a Material Adverse
Effect.

    
      
         

      

      
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    3.16       Other Note
Default.  The occurrence of any Event of Default under any
Other Note.

    

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

    

    3.18       Event Described in
Subscription Agreement.  The occurrence of an Event of Default
as described in the Subscription Agreement that, if susceptible to cure, is not
cured during any designated cure period.

    

    3.19       Executive Officers Breach of
Duties.  Any of Borrower’s named executive officers or
directors is convicted of a violation of securities laws, or a settlement in
excess of $250,000 is reached by any such officer or director relating to a
violation of securities laws, breach of fiduciary duties or
self-dealing.

    

    3.20       Cross
Default.  A default by the Borrower of a material term,
covenant, warranty or undertaking of any other agreement to which the Borrower
and Holder are parties, or the occurrence of a material event of default under
any such other agreement to which Borrower and Holder are parties which is not
cured after any required notice and/or cure period.

    

    ARTICLE
IV

    

    RESERVED.

    

    ARTICLE
V

    

    MISCELLANEOUS

    

    5.1         Failure or Indulgence Not
Waiver.  No failure or delay on the part of the Holder hereof
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.  All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

     

    5.2         Notices.  All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the first business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The
addresses for such communications shall be: (i) if to the Borrower to: FTOH
Corp., 101 Middlesex Turnpike, Burlington, MA 01803, with a copy by fax only
to:  Harvey Kesner, Esq., Sichenzia Ross Friedman Ference LLP, 61
Broadway, 32nd Floor, New York, NY 10006, facsimile: (212) 930-9725, and (ii) if
to the Holder, to the name, address and facsimile number set forth on the front
page of this Note, with a copy by fax only to
__________________________________, facsimile: ( )
 - .

    
      
         

      

      
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    5.3         Amendment
Provision.  The term “Note” and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or
supplemented.

     

    5.4         Assignability.  This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns.  The Borrower may not assign its obligations under this
Note.

     

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

     

    5.6         Governing
Law.  This Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflicts of
laws principles that would result in the application of the substantive laws of
another jurisdiction.  Any action brought by either party against the
other concerning the transactions contemplated by this Agreement must be brought
only in the civil or state courts of New York or in the federal courts located
in the State and county of New York.  Both parties and the individual
signing this Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts.  The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and
costs.  In the event that any provision of this Note 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 unenforceability of any other provision of this Note.
Nothing contained herein shall be deemed or operate to preclude the Holder from
bringing suit or taking other legal action against the Borrower in any other
jurisdiction to collect on the Borrower's obligations to Holder, to realize on
any collateral or any other security for such obligations, or to enforce a
judgment or other decision in favor of the Holder.  This Note shall be deemed an
unconditional obligation of Borrower for the payment of money and, without
limitation to any other remedies of Holder, may be enforced against Borrower by
summary proceeding pursuant to New York Civil Procedure Law and Rules Section
3213 or any similar rule or statute in the jurisdiction where enforcement is
sought.  For purposes of such rule or statute, any other document or
agreement to which Holder and Borrower are parties or which Borrower delivered
to Holder, which may be convenient or necessary to determine Holder’s rights
hereunder or Borrower’s obligations to Holder are deemed a part of this Note,
whether or not such other document or agreement was delivered together herewith
or was executed apart from this Note.

     

    5.7         Maximum
Payments.  Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum rate permitted by applicable law.  In the event
that the rate of interest required to be paid or other charges hereunder exceed
the maximum rate permitted by applicable law, any payments in excess of such
maximum rate shall be credited against amounts owed by the Borrower to the
Holder and thus refunded to the Borrower.

     

    5.8         Non-Business
Days.   Whenever any payment or any action to be made
shall be due on a Saturday, Sunday or a public holiday under the laws of the
State of New York, such payment may be due or action shall be required on the
next succeeding business day and, for such payment, such next succeeding day
shall be included in the calculation of the amount of accrued interest payable
on such date.

     

    
      
         

      

      
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    5.9         Redemption.  This
Note may not be redeemed or called without the consent of the Holder except as
described in this Note or the Subscription Agreement.

     

    5.10       Shareholder
Status.  The Holder shall not have rights as a shareholder of
the Borrower with respect to unconverted portions of this
Note.  However, the Holder will have the rights of a shareholder of
the Borrower with respect to the Shares of Common Stock to be received after
delivery by the Holder of a Conversion Notice to the Borrower.

     

    
      
         

      

      
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    IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by an authorized officer as of the
15th
day of October 2010.

    

    
      
        
          	 
      	
                  FTOH
      CORP.

                
	 
      	 
      	 
      
	 
      	
                  By:

                	  
        
	 
      	 
      	
                  Name:
      Glenn Kesner

                
	 
      	 
      	
                  Title:
      President

                

        

      

    

    
      
         

      

      
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    NOTICE OF
CONVERSION

    

    (To be
executed by the Registered Holder in order to convert the Note)

    

    The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Note issued by __________________ on _________, 2010
into Shares of Common Stock of FTOH Corp. (the “Borrower”) according to the
conditions set forth in such Note, as of the date written below.

    

    Date of
Conversion:____________________________________________________________________

    

    Conversion
Price:______________________________________________________________________

    

    Number of Shares of Common Stock Beneficially Owned on
the Conversion Date: Less than 5% of the outstanding Common Stock of
______________________.

    

    Shares To
Be
Delivered:_________________________________________________________________

    

    Signature:____________________________________________________________________________

    

    Print
Name:__________________________________________________________________________

    

    Address:_____________________________________________________________________________

    

     ____________________________________________________________________________

    

    
      
         

      

      
        10Sterling Group Ventures, Inc.- Exhibit 10.1

Exhibit 10.1 

Initial Agreement 

This agreement (“Initial Agreement”) entered into
between Sterling Group Ventures, Inc (“Sterling”) and Chenxi County
Hongyu Mining Co. Ltd. (“Hongyu”) on October 18, 2010 for the development
of Gaoping Phosphate mine located in Tanjiaxiang, Chenxi County, Hunan
Province, China (“GP Project”). Both parties agree that Hongyu will be
taken over and 90% majority –owned by a Hong Kong investment company
(“Investment Co”) controlled by Sterling. 

The Parties have agreed to the following terms: 

	1. 	
      Hongyu agrees to surrender its future exclusive
      cooperative rights to Sterling. Within three months from signing this
      agreement, Sterling does not complete taking over Hongyu through the
      Investment Co, then Sterling shall pay RMB 200,000 Yuan to the assigned
      account by Hongyu as down payment. 

	  	
       

	2. 	
      Before Hongyu is converted and is controlled by the
      Investment Co, Sterling’s contribution will be limited to the preliminary
      cost for the acquisition process including the daily operation of Hongyu, and will
      not be responsible for any investment in the mining and processing plant.
      After this agreement is signed, Hongyu shall hand over all company
      documents and seals to Sterling. Sterling shall be in charge of
      maintenance of Hongyu during the period of this agreement. 

	  	
       

	3. 	
      Hongyu agrees that 90% of its Shares will be acquired by the
      Investment Co. Sterling will ensure that the net assets value of Hongyu
      will be RMB five (5) million Yuan during the acquisition. 

	  	
       

	4. 	
      If any of the following events occur for any reason, it
      shall constitute a default (a “Default”) under this agreement:
    

	 	4.1 	
      Any action or omission by Hongyu causing any existing
      exploration or mining permits (the “Permits”) held by Hongyu to be
      transferred or leased to or used by a third party, or otherwise to expire
      or to terminate;

	 	 	 
	 	4.2 	
      Any failure or omission on the part of Hongyu to make the
      Permits for the benefit of Hongyu which is 90% majority –owned by the
      Investment Co, as provided for under this agreement.

	 	 	 
	 	4.3 	
      Any failure or omission on the part of Hongyu to apply
      for changing Hongyu to be controlled by the Investment Co pursuant to the
      terms of this agreement.

1

	 	
      4.4 
	
      Any material change caused or required by Hongyu to this
      agreement rendering it impossible to finalize the contract and articles of
      association for Hongyu to be controlled by the Investment Co.
  

	5. 	
      Should any Default occur and unless such Default is
      promptly remedied, then Sterling shall be entitled to demand from Hongyu
      as liquidated damages, an amount which shall be RMB one (1) million plus 15
      times (the “Damages”) of the total amounts of any payment, expenses, costs
      that Sterling has incurred or made as of the date of the occurrence of any
      such Default, by delivering a written default notice and demand to Hongyu,
      and such Damages shall become immediately due and payable by Hongyu. Any
      arrears of unpaid Damages shall bear interest at 0.3% per day.

	 	 
	6. 	
      Hongyu hereby agrees to grant Sterling an exclusive
      charge and secured interest of any and all Permits Hongyu now holds or may
      hold in the future, to guarantee its obligations hereunder and under this
      agreement. Hongyu further agrees to promptly enter into such mortgage,
      charge or pledge or other security agreements for the purpose of this
      paragraph, when and as required by Sterling.

	 	 
	7. 	
      In addition to the Damages, Sterling shall have the
      option to convert any Damages into title or interest in the GP Project
      at such time and ratio as it may reasonably determine subject to any
      applicable regulations, and Hongyu hereby grants Sterling such an
      option. Hongyu hereby agrees to do such things and sign such documents as
      may be required for the purposes of this
paragraph.

	8. 	
      This agreement shall be binding on the Parties and their
      related successors, transferees and assignees.

	9. 	
      Time shall be of the essence of this agreement.

	 	 
	10. 	
      There are two copies of this agreement. Each party holds
      one copy.

	Both parties 	 	  
	 	 	 
	Sterling Group Ventures, Inc. 	 	Chenxi County Hongyu Mining Co. Ltd.
  
	  	 	  
	/s/ Richard Shao
    	 	/s/
      Dongliang Hu 
	Authorized person 	 	Authorized person 
	  	 	  
	Date: October 18, 2010 	 	Date: October 18, 2010 

2

AGREEMENT 

This Agreement is dated for reference this
18th day of October, 2010 

Between: 

The Shareholders of Chenxi County
Hongyu Mining Co. Ltd. 
(hereinafter “Hongyu Shareholders”)

And: 

Chenxi County Hongyu Mining Co.
Ltd.
(hereinafter “Hongyu”) 

And: 

Sterling Group Ventures, Inc.

(hereinafter “Sterling”) 

WHEREAS: 

	A. 	
      Chenxi County Hongyu Mining Co. Ltd. is a Chinese mining
      company with connections and resources in Hunan, China. Hongyu is
      interested in exploring, developing and expanding its Phosphate business.
      Hongyu is the holder of a mining permit (the “Permit”) covering the
      Gaoping Phosphate mine located in Tanjiaxiang, Chenxi County of Hunan
      Province, China (the “GP Property”). Hongyu Shareholders are the
      founders and principals of Hongyu.

	 	 
	C. 	
      Sterling is a Nevada, US company specializing in
      exploration and development of natural resource projects and with its
      shares traded on the United States OTC Bulletin Board.

	 	 
	E. 	
      The Parties wish to structure a transaction contemplated
      under the Initial Agreement, and to jointly develop the GP Property and
      phosphate resources in Hunan Province and elsewhere, by way of Sterling
      acquiring an interest in Hongyu pursuant to the terms of this
      Agreement.

NOW THEREFORE THIS AGREEMENT WITNESSES that in
consideration of the premises and the covenants and agreements contained in this
Agreement, the Parties covenant and agree with each other as follows: 

1.               
  Initial Agreement. 

	 	1.1 	
      The Initial Agreement and this Agreement are hereby
      acknowledged as inclusive and to be read together as part and parcel of
      the same transaction.

	 	
      1.2
	
      Sterling shall incorporate a subsidiary in the British
      Virgin Islands to hold any interest pursuant to this Agreement and the
      Initial Agreement and all reference to Sterling herein shall include the
      subsidiary or shall mean the subsidiary as the context requires.
  

	 	1.3 	
      Hongyu Shareholders acknowledge and agree that an
      investment company (the “Investment Co.”) is to be established in
      Hong Kong. Hongyu Shareholders shall hold 20% of the issued shares of the
      Investment Co. and shall keep the GP Property in good standing at all
      times during the terms of the Agreement and shall keep the mining Permit
      valid and effective, free from any encumbrance or liability. Hongyu agrees
      to assist with these matters. The Investment Co. shall acquire 90% of Hongyu.
      The other 10% of Hongyu shall be transferred to the nominees of Sterling.
      After this transaction, Hongyu shall become a Hong Kong / Mainland China
      joint venture company (“HK Invested Hongyu”), and within 5 business days
      from the approval of HK Invested Hongyu, Sterling shall pay RMB two (2) million
      Yuan to Hongyu shareholders.

	 	1.4 	
      Hongyu Shareholders and Sterling agree that Sterling
      shall have all Hongyu’s title to and interest in any phosphate properties,
      including but not limited to the GP Property, and Sterling shall arrange
      for the financing of building a mining and processing plant on the GP
    Property.

	 	1.5 	
      The Parties agree that HK Invested Hongyu shall continue
      to hold all such approvals, permits and licenses pursuant to the terms and
      spirit of this Agreement and the Initial
Agreement.

3

	 	
      1.6 
	
      The Parties agree that the HK Invested Hongyu’s
      registered capital shall be increased to meet the required capital for
      building a mining processing plant and other facilities. Sterling
      shall cause all the registered capital of the HK Invested Hongyu to be
      timely advanced to the accounts of Hongyu according to Chinese regulations
      

2.                Mutual
  Requirements 

	 	
      2.1 
	
      The Parties shall cause Hongyu to adopt a business
      plan expeditiously for the exploration and development of the GP Property,
      and construction of related facilities. 

	 	 	  
	 	
      2.2 
	
      The Parties shall cause all necessary corporate actions
      to be taken to approve and effect the transactions contemplated above, and
      to make any adjustment, registration or filings necessary to meet
      applicable regulatory requirements. 

	 	 	  
	 	
      2.3 
	
      Sterling will control the Board of HK Invested Hongyu,
      appoints its President, Manager and Treasurer as well as other executives.
      

3.               
  Sterling’s Acquisition of Hongyu 

	 	
      3.1 
	
      Upon signing of this Agreement and subject to applicable
      regulatory approval, Sterling shall arrange the financing to put the GP Property into production and shall cause all necessary corporate
      actions to be taken to effect the transactions contemplated above,
      including the share acquisition and share issuance.

4.               
  Hongyu Shareholders’ covenants 

	 	4.1 	
      Hongyu Shareholders shall use their best efforts to
      assist Sterling in the incorporation of the Investment Co and in procuring any
      applicable regulatory approvals in China for the transfer of 90% of Hongyu
      to the Investment Co., as well as the remaining 10% of Hongyu to the nominees
      of Sterling. Hongyu Shareholders shall also arrange for the transfer and
      registration of such interests to the Investment Co. and nominees of
      Sterling hereunder expeditiously. 

	 	 	
       

	 	4.2 	
      Without written consent of Sterling, Hongyu Shareholders,
      their associates, successors and assignees and Hongyu shall not enter into
      any business transactions or relationships with any firm or company with
      respect to phosphate business in China. 

5.                Hongyu
  Shareholders and Hongyu Covenants 

	 	5.1 	
      Hongyu Shareholders agree to sell their 20% interest in the
      Investment Co to Sterling when requested to do so, for 10 million shares
      of Sterling to be issued as consideration for such sale and shall at all
      times be subject to the rules and requirements of the US regulatory bodies
      bearing jurisdiction.

	 	 	 
	 	5.2 	
      Hongyu Shareholders shall complete expeditiously its
      transactions with Sterling as contemplated hereunder, and advise Sterling
      from time to time of the developments in completing such
  transactions.

	 	 	 
	 	5.3 	
      Hongyu Shareholders agree and allow Sterling to place on
      the Board of Directors of HK Invested Hongyu and the Investment
  Co.

6.                Sterling
  Covenants 

	 	
      6.1 
	
      Sterling shall procure all required corporate and
      regulatory approvals for the issuance of Sterling shares required pursuant
      to the terms of this Agreement. 

	 	
       
	
       

	 	
      6.2 
	
      Sterling shall, when and as required by the mutually
      agreed budget to be prepared by Hongyu as agreed by Hongyu
      Shareholders, arrange and complete a financing for the operation on the GP
      Property. 

7.               
  Representations and Warranties of the Parties 

	 	7.1 	
      Each of the Parties hereby represents and warrants to the
      other Parties that:

4

	 	(a) 	
      if it is a company or if it is the sole Shareholder of a
      company which is the subject matter of this Agreement, that company is
      duly organized and legally existing under the laws of the jurisdiction
      where it is incorporated; it has all requisite corporate power and
      authority to execute and fully perform this Agreement, and has all
      corporate power and capacity to fully perform all obligations under this
      Agreement when this Agreement becomes effective; its execution and
      performance of this Agreement constitutes no breach or violation of its
      articles of association or any clause specified in the certificate of
      registration of the company, nor does it constitute any breach or
      violation of any applicable law, regulation or regulatory document, or any
      clause of any contract or agreement to which it is a party;

	 	 	 
	 	(b) 	
      if it is an individual then each of the individuals has
      the authority and power to enter into this Agreement, and is able to
      perform his/her obligations hereunder.

	 	 	 
	 	(c) 	
      the signing of this Agreement is fully authorized by each
      Party and this Agreement so signed shall be effective and binding upon
      each of the Parties.

	 	 	 
	 	(d) 	
      each of the Parties has duly disclosed all corporate,
      financial and technical information requested by other Parties and such
      information provided or disclosed is true and accurate to the best
      knowledge of the Party disclosing or delivering such
information.

	 	 	 
	 	(e) 	
      except those disclosed expressly in writing, there is no
      litigation or administrative proceedings outstanding or threatened against
      any of the Parties or with respect to the GP
Property.

8.                Fees
  and Expenses 

	 	8.1 	
      Each Party shall bear its respective costs and expenses
      associated with this Agreement.

9.          
     General 

	 	9.1 	
      This Agreement constitutes the entire agreement among the
      Parties with respect to the subject matter hereof, and supersedes any
      agreement or arrangement between or among any of the Parties.

	 	 	 
	 	9.2 	
      This Agreement may not be assigned by a Party, in whole
      or in part, without the express written consent of all the other
      Parties.

	 	 	 
	 	9.3 	
      This Agreement shall be governed by the laws of the
      province of British Columbia, Canada and any applicable Canadian federal
      laws.

	 	 	 
	 	9.4 	
      No amendment, waiver or consent shall bind any Party
      unless in writing and signed by all the Parties.

	 	 	 
	 	9.5 	
      The Parties acknowledge and agree to seek their own
      independent legal opinion with respect to this Agreement and/or any
      interpretation hereof.

	 	 	 
	 	9.6 	
      The failure by any Party at any time to enforce any of
      the provisions of this Agreement, or to require performance by any other
      Party of any of the provisions hereof, shall in no way be construed to be
      a waiver of such provisions or to affect either the validity of this
      Agreement or any part hereof, or the right of any party thereafter to
      enforce each and every provision in accordance with the terms of this
      Agreement.

	 	 	 
	 	9.7 	
      If any term, clause, or provision hereof is held invalid
      or unenforceable by a court of competent jurisdiction, such invalidity
      shall not affect the validity or operation of any other term, clause or
      provision of this Agreement and such invalid term, clause or provision
      shall be deemed to be severed from this Agreement.

5

	 	9.8 	
      The Parties agree that should any dispute arise with
      respect to this Agreement or the performance or interpretation hereof,
      they shall resolve such dispute amicably, failing which such dispute shall
      resolved by binding arbitration, at the Hong Kong International
      Arbitration Center, HKIAC pursuant to its rules of arbitration.

	 	 	 
	 	9.9 	
      If, for reasons beyond the control of the Parties, the HK
      Invested Hongyu cannot be established within six months of the date herof,
      then In such an event the Parties shall agree to negotiate in good faith
      to restructure any uncompleted transactions such that, among other things,
      Sterling’s interest in the Property shall be protected, and reasonably
      reflected or fairly compensated in any restructured
transactions.

	 	 	 
	 	9.10 	
      This Agreement shall be effective once duly signed by all
      the Parties hereto.

IN WITNESS WHEREOF the Parties have executed this
Agreement effective the day and year first above written. 

	Chenxi County Hongyu Mining Co. Ltd. 	 	Hongyu Shareholders: 
	 	 	 
	/s/ Dongliang Hu
    	 	/s/
      Chuanya Xiang 
	By its authorized signatory: 	 	(Signature) 
	 	 	 
	Printed Name:     
      Dongliang
      Hu                   
       	 	Printed Name:     
      Chuanya
      Xiang                     
       
	 	 	 
	 	 	 
	Sterling Group Ventures, Inc. 	 	  
	 	 	 
	/s/ Richard Shao
    	 	  
	By its authorized signatory: 	 	  
	 	 	 
	Printed Name:      Richard
      Shao                      
       	 	  
	Title:     
      President                                           
       	 	  

6

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