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      EXHIBIT
        10.1

       

      PORTIONS
        OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
        AND
        EXHANGE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT
        FILED
        WITH THE COMMISSION PURSUANT TO RULE 24b-2 under the securities exchange
        act of
        1934, as amended.

       

      [*]
        INDICATES INFORMATION THAT HAS BEEN OMITTED PURSUANT TO such CONFIDENTIAL
        TREATMENT REQUEST and WHICH HAS BEEN FILED UNDER SEPARATE COVER WITH THE
        COMMISSION.

       

      SUPPLY
        AND LICENSE AGREEMENT

       

      This
        supply and license agreement (“Agreement”), effective as of January 1, 2008 (the
“Effective Date”), is by and between CTI Industries Corporation, having its
        principle office located at 22160 N. Pepper Road, Barrington, Illinois 60010
        (referred to herein as “Supplier” or “CTI”) and S. C. Johnson & Son, Inc., a
        Wisconsin corporation, having its principal office located at 1525 Howe Street,
        Racine, Wisconsin 53403.

       

      Whereas,
        Johnson and Supplier have entered into this Agreement to reflect their mutual
        understanding of the terms upon which Supplier will manufacture and supply
        certain products to Johnson;

       

      Whereas,
        Supplier owns or controls the necessary property, plant and equipment so
        as to
        be able to produce such products; 

       

      Whereas,
        Supplier has agreed to grant Johnson the right to convert the manufacture
        and
        supply arrangement described herein to a license arrangement described herein
        upon the occurrence of certain events. 

       

      Now,
        therefore, the parties agree as follows:

       

      
        	
                1.

              	
                DEFINITIONS

              

      

       

      
        	 	
                1.1
                  

              	
                General.
                  The capitalized terms defined herein shall have the meanings indicated
                  for
                  purposes of this Agreement. Terms defined in the singular shall
                  have a
                  comparable meaning when used in the plural, and vice versa.
                  

              

      

      

      
        	 	
                1.2

              	
                “Affiliate”
                  shall mean,
                  with respect to Johnson, any entity controlling or controlled by
                  Johnson,
                  where control means the power to direct the management and policies
                  of a
                  party, and with respect to Supplier it shall mean any entity controlling,
                  controlled by, or under common control with Supplier.
                  

              

      

      

      
        	 	
                1.3
                  

              	
                “Contract
                  Year”
                  means any period commencing on July 1 and ending on June 30 thereafter,
                  unless otherwise noted, provided, however, that the first Contract
                  Year
                  shall be an eighteen month period beginning January 1, 2008 and
                  ending
                  June 30, 2009.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      
        	 	
                1.4

              	
                “Consumer
                  Fields of Use”
                  means all distribution channels of trade where consumers purchase,
                  direct
                  or indirect, products for ultimate use in the home or otherwise
                  including
                  but not limited to food, drug, and mass distribution retailers,
                  do-it-yourself home improvement stores, warehouse clubs, office
                  supply
                  stores and similar retailers and internet outlets. [*]

              

      

      

      
        	 	
                1.5
                  

              	
                “Effective
                  Date”
                  is defined in the first paragraph of this
                  Agreement.

              

      

      

      
        	 	
                1.6

              	
                “Johnson License
                  Agreement”
                  shall mean Johnson’s license and right to use, at Johnson’s option and
                  upon conversion pursuant to Sections
                  11.4 or 11.7
                  hereof, all Licensed Intellectual Property (defined under Section
                  21),
                  and shall include the right to sublicense third
                  parties.

              

      

      

      
        	 	
                1.7

              	
                “Net
                  Account Revenue”
                  means Johnson’s (including Johnson Affiliates’) gross sales [*]
                  that utilize any Supplier Patent Rights, to third party
                  retail
                  customers less any deductions or payments including the
                  following:

              

      

      

      
        	 	 	
                (A)
                  Supply Chain Logistics Discounts, meaning discounts for ordering
                  full
                  pallets, trucks, proper order lead times,
                  etc.

              

      

      
        	 	 	
                (B)
                  Supply Chain Channel Discounts, meaning wholesaler or broker discounts
                  or
                  similar items.

              

      

      
        	 	 	
                (C)
                  Supply Chain Discounts/Markdowns, meaning discounts applied to
                  obsolete
                  goods in Johnson warehouses to incent secondary market
                  sales.

              

      

      
        	 	 	
                (D)
                  Returns, meaning full case returns including any third party handling
                  fees.

              

      

      
        	 	 	
                (E)
                  Remnants/Spoils, meaning less than full case returns or damaged
                  cases
                  including any third party handling
                  fees.

              

      

      
        	 	 	
                (F)
                  Cash Discounts, meaning discounts allowed for prompt payment of
                  invoices.

              

      

      
        	 	 	
                (G)
                  Deals, meaning all other trade payments for account specific consumer
                  promotions, markdowns, volume or growth rebates, display programs,
                  slotting fees, etc.;

              

      

      

      
        	 	 	
                provided
                  that, for purposes of this definition only, [*]

              

        	 	 	 

        	 	1.8	“Product(s)”
                means the following products, individually or
                collectively:

      

       

      
        	 	
                (A)

              	
                [*]

              

      

       

      
        	 	
                (B)

              	
                [*]

              

      

       

      
        	 	
                1.9

              	
                “Supplier
                  Patent Rights”
                  means those U.S. and foreign patents and patent applications,
                  currently pending or issued, that are owned, licensed, or otherwise
                  controlled by Supplier, and that contain any issued valid claim
                  that reads
                  on the Product(s), including but not limited to those patents listed
                  in
                  Schedule
                  1.9,
                  attached hereto, and hereby incorporated herein by reference.
                  

              

      

      

      
        	 	
                1.10

              	
                “Term”
                  as used herein shall have the meaning as set forth in Section
                  3
                  below. 

              

      

      

      
        	 	
                1.11

              	
                “Territory”
                  means worldwide.

              

      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      
 

      
        	
                2.

              	
                TERMS
                  OF SALE

              

      

       

      
        	 	
                2.1

              	
                Supply
                  Commitment.
                  Subject to the terms and conditions of this Agreement, the Supplier
                  shall
                  manufacture and sell to Johnson and Johnson shall purchase from
                  Supplier
                  the products listed in Schedule
                  2.1
                  ("Product(s)"). Schedule
                  2.1
                  contains a list of the Products (“Product List”) and the price adjustment
                  mechanism(s) for the Products (“Price Adjustment Mechanism(s)”), if any.
                  The Product List may be amended from time to time by written agreement
                  of
                  the parties.

              

      

       

      
        	 	
                2.2

              	
                Purchase
                  Orders.
                  Johnson may place orders in writing, by phone (confirmed in writing),
                  or
                  by electronic data transmission (“Purchase
                  Order(s)”).

              

      

       

      
        	 	
                2.3

              	
                Shipments.
                  Shipments are according to Johnson’s delivery schedules and shipping
                  instructions (“Shipment Terms”) as set forth in Schedule 2.3.
                  The Shipment Terms apply until changed by Johnson.
                  Delivery schedules shall not materially exceed the capacity levels
                  and
                  forecasts as provided in Section
                  6
                  hereof.

              

      

       

      
        	 	
                2.4

              	
                Payment
                  Terms.
                  Payment terms for [*] purchases are [*]
                  from the later of (i) the date of invoice or (ii) acceptance of
                  Product.
                  Payment terms for [*] purchases are [*]
                  from the shipment date, provided that the goods were received by
                  Johnson a
                  minimum of [*]
                  prior to the end of such time period and Johnson has not rejected
                  the
                  goods. In no event shall Johnson be required to make payment before
                  receipt of Product nor shall invoices be dated prior to the date
                  of
                  shipment. Johnson does not waive any right it has for adjustment
                  of the
                  amount due to Supplier by its having paid for the Product. 

              

      

       

      
        	 	
                2.5

              	
                Designated
                  Purchasers.

              

      

       

      
        	 	
                (A)

              	
                Johnson
                  may request that Supplier sell Product directly to a third party
                  purchaser. Under these circumstances, such designated third party
                  purchaser shall purchase the Product subject to the terms and conditions
                  of this Agreement. In the event that Supplier determines that a
                  designated
                  third party purchaser is not performing according to the terms
                  of this
                  Agreement (including events of late payment), Supplier has the
                  right to
                  cease selling to such third party purchaser; provided, however,
                  that
                  Supplier shall notify Johnson if a designated third party purchaser
                  is not
                  performing according to the terms hereof, and shall allow Johnson
                  at least
                  [*]
                  to
                  attempt to resolve the matter with the designated third party purchaser
                  before Supplier ceases sales to such designated third party purchaser.
                  

              

      

       

      
        	 	
                (B)

              	
                References
                  to Johnson are considered a reference to such third party purchaser
                  if
                  Johnson has exercised its option to have Product sold to such third
                  party
                  purchaser. Johnson may change or add third party purchasers at
                  any time
                  upon written notice to the Supplier.

              

      

       

      
        	 	
                2.6

              	
                Additional
                  Terms.
                  Acceptance of this Agreement is limited to acceptance of the terms
                  and
                  conditions contained in this document. Any proposal for additional
                  or
                  different terms or attempt by Supplier or Johnson to change any
                  of the
                  terms and conditions of this Agreement is rejected and not of any
                  effect.
                  Additionally, if any terms of a Purchase Order, invoice or other
                  document
                  exchanged between the parties related to the purchase of the Product(s)
                  conflicts with the terms of this Agreement, the terms of this Agreement
                  shall apply. 

              

      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      
        	
                3.

              	
                TERM

              

      

       

      
        	 	
                3.1

              	
                Initial
                  Term.
                  This Agreement shall commence on the Effective Date and continue
                  in full
                  force and effect for an initial term ending June 30, 2011 (“Initial
                  Term”), unless renewed per the terms of Section
                  3.2
                  or
                  terminated earlier pursuant to this Agreement (the Initial Term
                  and any
                  renewal terms shall be referred to collectively as the “Term”).
                  

              

      

       

      
        	 	
                3.2

              	
                Renewal
                  Terms.
                  After the Initial Term, this Agreement may be renewed for two additional
                  terms of two (2) years each. This Agreement shall automatically
                  renew for
                  a first renewal term of two (2) years (“Automatic First Renewal Term”)
                  [*].
                  If
                  this Agreement does not automatically renew in accordance with
                  the
                  preceding sentence, then Johnson shall have the right to unilaterally
                  renew this Agreement for the first renewal term of two (2) years
                  (“First
                  Renewal Term”) by giving written notice to Supplier at lease four (4)
                  months prior to the end of the Initial Term. In addition, provided
                  this
                  Agreement has been renewed for the Automatic First Renewal Term
                  or First
                  Renewal Term, Johnson shall have the right to further extend this
                  Agreement for a second renewal term of two (2) years (“Second Renewal
                  Term”) by giving written notice to Supplier at least four (4) months
                  prior
                  to the end of the such first renewal
                  term.

              

      

       

      
        	
                4.

              	
                PRICING

              

      

       

      
        	 	
                4.1

              	
                Price.
                  The initial price for each Product is set forth in Schedule
                  2.1.

              

      

       

      
        	 	
                4.2

              	
                Price
                  Adjustments.

              

      

       

      
        	 	
                (A)

              	
                Periodic
                  Price Adjustments. [*]
                  For the Renewal Terms,
                  Supplier will provide to Johnson, at least six months prior to
                  the
                  commencement of the First or Second Renewal Term (as applicable),
                  the
                  Product price for the first year of the applicable Renewal Term.
                  [*] 

              

      

       

      
        	 	
                (B)

              	
                Johnson
                  Requested Change. If Johnson requests a change in the Specifications
                  or
                  manufacturing process and the change would affect Supplier's conversion
                  cost and/or materials cost, the parties shall determine the impact,
                  if
                  any, the change would have on the Product price. If Johnson and
                  Supplier
                  agree on a price adjustment, the Specification change or manufacturing
                  process change, or both, will be implemented, and the price change
                  will
                  become effective on the date the change is implemented.
                  

              

      

       

      
        	 	
                (C)

              	
                Complete
                  Pricing. The Product prices are complete, and Supplier may not
                  add charges
                  of any type without Johnson's prior written consent. Examples of
                  charges
                  that may not be added to the price include, without limitation,
                  shipping,
                  packaging, labeling, customs duties, taxes, storage, insurance,
                  boxing,
                  overtime (unless approved by Johnson in advance), and crating costs.
                  

              

      

       

      
        	 	
                (D)

              	
                Most
                  Favored Pricing. The Supplier represents and warrants to Johnson
                  that the
                  Product prices are not less favorable than those currently extended
                  by
                  Supplier to any other person for the same or similar articles supplied
                  in
                  similar quantities. If permissible under applicable law, Supplier
                  shall
                  immediately reduce the price to Johnson for the affected Product
                  if
                  Supplier reduces its price to other persons for the same or similar
                  article for the supply of similar
                  quantities.

              

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (E)

              	
                Resin
                  price adjustments. Product prices shall be subject to resin price
                  adjustment made effective on the first day of each calendar quarter
                  in
                  accordance with Schedule
                  2.1
                  attached.

              

      

       

      
        	 	
                4.3

              	
                Shrinkage.
                  Supplier is responsible for all expenses relating to manufacturing
                  losses
                  and inventory losses until the Product is delivered to and accepted
                  by
                  Johnson. 

              

      

       

      
        	 	
                4.4

              	
                Cost
                  Savings.
                  Supplier shall use its reasonable commercial efforts to generate
                  cost
                  savings in the cost of the Products. Cost
                  savings shall be allocated as
                  follows:

              

      

       

      
        	 	
                (A)

              	
                Cost
                  savings, which (i) result from Product or Product packaging modifications
                  or (ii) result from projects initiated jointly or solely by either
                  party
                  and require no investment by Supplier or (iii) result from a relocation
                  of
                  production to another Supplier manufacturing facility, will be
                  applied
                  solely to reduce Product prices upon implementation. If Supplier
                  must
                  invest to achieve these savings, these savings will (i) first be
                  used to
                  fund the cost of the investment and (ii) thereafter will be applied
                  solely
                  to reduce Product prices.

              

      

       

      
        	
                5.

              	
                SPECIFICATIONS

              

      

       

      
        	 	
                5.1

              	
                Specifications.
                  Johnson has given Supplier copies of the Product Instruction Handbooks.
                  The Green General Specifications and Guidelines Handbook contains
                  general
                  specifications for goods being manufactured for Johnson. Specifications
                  for new products just being launched are in Red Product Instruction
                  Handbooks. Blue Product Instruction Handbooks cover the specifications
                  for
                  established products. Yellow Product Instruction Handbooks cover
                  the
                  specifications for special pack products. These Product Instruction
                  Handbooks contain Product-related, finished goods, and packaging
                  specifications; manufacturing instructions, formulas, processing
                  instructions, quality control procedures, finished goods and component
                  performance tests, Acceptable Quality Limits; and other information
                  relating to the manufacture of Product (the “Specification(s)”). Supplier
                  shall not use the Product Instruction Handbooks for any purpose
                  other than
                  to perform its obligations under this Agreement. Supplier shall
                  manufacture Product in compliance with the Product Instruction
                  Handbooks.
                  The Product Instruction Handbooks (including all copies and related
                  notes)
                  must be returned to Johnson upon Johnson’s request or upon termination of
                  this Agreement. Upon changes in the Specifications, Johnson will
                  provide
                  amended Product Instruction Handbooks to
                  Supplier.

              

      

       

      
        	 	
                5.2

              	
                Changes.
                  Supplier must not change any Specification or manufacturing location
                  without Johnson’s prior written consent. Johnson shall have the right, but
                  not the obligation, to change the Specifications, from time to
                  time, upon
                  reasonable advance written notice to Supplier and, in that case,
                  Johnson
                  and Supplier shall enter into good faith negotiations to adjust
                  the price
                  in accordance with Section 4.2(B).
                  For changes to be effective, they must be set forth in a writing
                  that is
                  signed by the parties and incorporated as an amendment to the
                  Specifications.

              

      

       

      
        	 	
                5.3

              	
                Materials.
                  Unless otherwise agreed, Supplier is solely responsible for obtaining
                  the
                  equipment, materials, components, and services required by Supplier
                  to
                  manufacture and deliver Product. To the extent not covered by the
                  Specifications, providers of and specifications for materials and
                  components must be approved in advance by Johnson. If Johnson has
                  a
                  supplier of raw material and/or components that could result in
                  a Product
                  cost savings, Johnson shall have the right to change the Specifications
                  pursuant to Section
                  5.2
                  above to include such material and the designated supplier, subject
                  to the
                  terms of Section
                  5.2.
                  In addition, Supplier may use an alternative supplier if approved
                  in
                  advance and in writing by Johnson. If Supplier fails to obtain
                  Johnson’s
                  prior written approval, Supplier shall assume any and all responsibility
                  in accord with Section
                  12.1
                  of
                  the Agreement. 

              

      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	
                6.

              	
                MANUFACTURING
                  CAPACITY

              

      

       

      
        	 	
                6.1

              	
                Capacity.
                  Supplier guarantees sufficient capacity at its production facilities
                  to
                  manufacture and deliver the quantities [*].
                  [*]
                  This is not a commitment by Johnson to purchase any quantity. The
                  minimum
                  criteria for any Contract Year of this Agreement shall be that
                  Supplier’s
                  service permits Johnson to ship 99% of its orders using Products
                  to
                  Johnson customers on time and complete.

              

      

       

      
        	 	
                6.2

              	
                Forecasting.

              

      

       

      
        	 	
                (A)

              	
                Johnson
                  may provide on-line access for Supplier to Johnson’s production
                  forecasting system or its equivalent (collectively, “PFS”). This access
                  will permit Supplier to have current information relating to Johnson’s
                  estimates of production forecast. Johnson shall provide such other
                  information as Supplier may reasonably request concerning Johnson’s
                  forecasts. Supplier shall only access that portion of the PFS system
                  necessary for Supplier to determine Johnson’s Product needs. All
                  information in the PFS system is highly confidential and will be
                  treated
                  as Johnson Confidential Information pursuant to Section
                  17
                  below. 

              

      

       

      
        	 	
                (B)

              	
                If
                  Supplier does not have access to Johnson’s PFS system, Johnson shall
                  provide non-binding annual forecasts, updated quarterly, and binding
                  written or electronic data input ("EDI") Purchase Orders. The initial
                  non-binding annual forecast is attached hereto as Schedule
                  6.2.
                  

              

      

       

      
        	 	
                6.3

              	
                No
                  Requirements and No Minimums.
                  This is a not a requirements contract. Additionally, Johnson does
                  not have
                  to purchase a minimum quantity of Product. Johnson does not have
                  to use
                  its best efforts to promote and sell the Product, and Johnson may
                  discontinue or reduce its commercialization effort with respect
                  to any
                  Product at any time for any reason.

              

      

       

      
        	 	
                6.4

              	
                Exclusivity.
                  During the Term of this Agreement, Supplier and its Affiliates
                  shall not
                  directly or indirectly manufacture or sell the Product [*]
                  for
                  or to anyone other than Johnson, [*] 

              

      

       

      
        	
                7.

              	
                Brand
                  NAME

              

      

       

      Supplier
        acknowledges that Johnson’s Ziploc brand (or another brand designated by
        Johnson) will be the primary brand name for the Product. Johnson shall also
        select, own and control any sub-brand for the Product. 

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      
 

      
        	
                8.

              	
                (INTENTIONALLY
                  OMITTED)

              

      

       

      

      
        	
                9.

              	
                ROYALTY
                  PAYMENTS AND REPORTS

              

      

       

      
        	 	
                9.1

              	
                Conversion
                  to Johnson License Agreement. If
                  this Agreement converts to a Johnson License Agreement pursuant
                  to
                  Section
                  11.7
                  below, the royalty fee payable on Johnson’s [*]
                  Product Net Account Revenue shall be referred to herein as
                  “Royalties.”

              

      

       

      
        	 	
                9.2

              	
                Payment
                  Due Date.
                  Any and all Royalties payable pursuant to Section
                  11.7
                  shall be paid to Supplier at the address set forth on the first
                  page
                  hereof, within sixty (60) days of the close of each calendar quarter
                  within which the royalties accrued. All Royalties payable hereunder
                  shall
                  be paid in USD. The royalties which are to be paid for sales made
                  in
                  non-USD shall be calculated separately for each month of the calendar
                  quarter by determining the aggregate Net Account Revenue of Products
                  for
                  that month in local currency, then converting same to USD using
                  the
                  average of the conversion rates for the first and last business
                  day of
                  that month as published in the Wall Street Journal (New York edition).
                  The
                  royalties for each month of the calendar quarter shall be calculated
                  separately as described, and then added to arrive at the quarterly
                  royalty
                  payment.

              

      

       

      
        	 	
                9.3

              	
                Statements.
                  Johnson shall prepare and issue a report for each calendar quarter,
                  identifying this Agreement and showing (A) total number or amount
                  of
                  Products by item sold by Johnson and its Affiliate sublicensees,
                  (B)
                  [*] Product Net Account Revenue, and (C) the royalties
                  accrued during the quarter and payable to
                  Supplier.

              

      

       

      
        	 	
                9.4

              	
                Taxes
                  and Other.
                  Johnson shall be responsible for payment of any taxes on the sale
                  of
                  Products. If any taxes are required to be withheld on the royalties
                  due
                  under this Agreement, which taxes would be owed by Supplier, Johnson
                  shall
                  pay such taxes on behalf of Supplier, provide to Supplier a copy
                  of the
                  withholding tax certificate, and deduct any such payments from
                  the amounts
                  due to Supplier.

              

      

       

      
        	
                10.

              	
                SUPPLIER
                  REPRESENTATIONS AND
                  WARRANTIES

              

      

       

      
        	 	
                10.1

              	
                Product
                  Representations and Warranties.
                  The Supplier represents and warrants to Johnson with respect to
                  each
                  delivery of Product as follows:

              

      

       

      
        	 	
                (A)

              	
                Product
                  has been manufactured in compliance with the Specifications, is
                  new, and
                  is free from defects in materials and workmanship and conforms
                  in all
                  respects to agreed samples. Product is adequately contained, packaged,
                  marked, and labeled. Product is merchantable and is safe and appropriate
                  for the purpose for which goods of that kind are normally used
                  and shall
                  be suitable for food contact applications as defined by the FDA
                  and, for
                  product destined for the Canadian market, the Canadian equivalent
                  of the
                  FDA Notwithstanding the foregoing, Supplier shall not be responsible
                  for
                  Product [*]
                  provided that Supplier fully complies with all of the Quality Control
                  procedures and standards contained in the Product Instruction Handbook
                  with respect to the inspection and testing [*].
                  For the avoidance of any doubt, Supplier shall be responsible for
                  Product
                  defects caused by Supplier’s breach of any such Quality Control
                  requirements applicable to the valves and zippers.
                  

              

      

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (B)

              	
                Supplier
                  has conveyed to Johnson good title to the Products, free from any
                  lawful
                  security interest, lien, or
                  encumbrance.

              

      

       

      
        	 	
                (C)

              	
                Supplier
                  and Supplier’s facilities comply with all applicable laws relating to the
                  manufacture, storage and sale of the Product, including import
                  and export
                  compliance. Johnson may audit Supplier’s compliance with applicable laws,
                  rules, regulations and the like, including a safety and environmental
                  audit.

              

      

       

      
        	 	
                (D)

              	
                To
                  Supplier’s best knowledge, neither Products nor Supplier’s methods and
                  means of manufacturing Products infringe a valid patent, copyright,
                  design
                  right, or trade secret of a third
                  party.

              

      

       

      
        	 	
                (E)

              	
                Waste
                  material generated in connection with the production of the Products,
                  as
                  well as any other products manufactured by Supplier at its facility,
                  has
                  been or will be disposed of in strict compliance with applicable
                  laws.
                  Upon request, Supplier shall certify its compliance with such
                  laws.

              

      

       

      
        	 	
                (F)

              	
                Supplier
                  is authorized to enter into and perform this Agreement and will
                  not breach
                  any obligations owed to another person by performing this
                  Agreement.

              

      

       

      
        	 	
                (G)

              	
                Product,
                  Product constituents, and production methodologies comply with
                  all
                  applicable laws, regulations and government directives, including,
                  but not
                  limited to the Toxic Substances Control
                  Act.

              

      

       

      
        	 	
                10.2.

              	
                Patent Representations
                  and Warranties.
                  Supplier represents and warrants to Johnson with respect to Supplier
                  Patent Rights as follows:

              

      

       

      
        	 	
                (A)

              	
                Supplier
                  is the owner or exclusive licensee, and otherwise in control of
                  all of
                  said Supplier Patent Rights, and that all of the associated patents
                  and
                  patent applications, owned, licensed, or controlled by Supplier
                  within
                  defined Consumer Fields of Use, are set forth in Schedule
                  1.9.
                  Furthermore, Supplier represents and warrants that said Schedule
                  captures
                  all of the patent rights owned, licensed or otherwise controlled
                  by
                  Supplier that fully cover the subject matter of Products as defined
                  herein.

              

      

       

      
        	 	
                (B)

              	
                Supplier
                  has authority to enter into this Agreement and to perform its obligations
                  under this Agreement and that it has been duly authorized to execute
                  and
                  to deliver this Agreement.

              

      

       

      
        	 	
                (C)

              	
                As
                  of the date of signature hereto, and with exception for any specific
                  disclosures made to Johnson within the prior ninety days by Mr.
                  John
                  Schwan on behalf of Supplier, Supplier is without knowledge, whether
                  actual or implied, of any pending or threatened infringement litigation
                  with respect to Supplier Patent Rights, and furthermore that it
                  has not
                  received any actual notices of infringement with respect to any
                  of its own
                  manufactured products that may or could be covered by or related
                  to
                  Supplier Patent Rights. 

              

      

       

      
        	 	
                (D)

              	
                As
                  of the date of signature hereto, and with exception for any specific
                  disclosures made to Johnson within the prior ninety days by Mr.
                  John
                  Schwan on behalf of Supplier, Supplier is without actual or implied
                  knowledge of any patent, any document, or any other information,
                  that
                  would limit the validity of the Supplier Patent Rights under this
                  Agreement. 

              

      

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (E)

              	
                As
                  of the date of signature hereto, and with exception for any specific
                  disclosures made to Johnson within the prior ninety days by Mr.
                  John
                  Schwan on behalf of Supplier, Supplier is without knowledge that
                  the
                  practice of the Supplier Patent Rights is or may be limited by
                  intellectual property rights of third parties. Moreover, Supplier
                  shall
                  have a continuing obligation to notify Johnson within thirty days
                  of its
                  receipt of any non-public information that impacts this warranty
                  and
                  representation. 

              

      

       

      
        	 	10.3.	Certification.
                Upon Johnson’s request, Supplier shall provide Johnson with a warranty
                certificate certifying compliance with any and all of the representations
                and warranties contained in Sections 10.1
                and 10.2.

        	 	 	 

        	 	
                10.4

              	
                Additional
                  Agreements of Supplier.

              

      

       

      
        	 	
                (A)

              	
                If
                  requested by Johnson, Supplier must participate in Johnson’s Systems
                  Quality Assurance Program (“SQA Program”) through Johnson’s Systems
                  Quality Assurance group. If the Supplier produces “Critical Level I”
                  products, as determined by Johnson, or Products that are used in
                  the
                  manufacture of products regulated by Good Manufacturing Practices
                  (“GMP”)
                  regulations, as determined by Johnson’s Regulatory group, Supplier agrees
                  to achieve a rating of 3.0 or higher in each of the “red” subsystems in
                  the SQA Program, and a rating of 2.5 or higher in each of the “yellow”
                  subsystems in the SQA Program. Supplier further agrees to continuously
                  improve in all areas of the SQA Program, with a target of an overall
                  score
                  of 4.0 or higher.

              

      

       

      
        	 	
                (B)

              	
                If
                  the Products are regulated or controlled by the United States Food
                  and
                  Drug Administration (“FDA”) or its Canadian equivalent, Supplier shall
                  maintain itself in good standing with the FDA and manufacture the
                  Products
                  in compliance with all Good Manufacturing Practices (“GMPs”) issued by the
                  FDA from time to time, and all raw materials used in such Products
                  shall
                  be suitable for food contact applications as defined by the FDA
                  or its
                  Canadian equivalent. Johnson or its agents shall have the right
                  to audit
                  Supplier’s GMP compliance at any
                  time.

              

      

       

      
        	 	
                (C)

              	
                If
                  the Products are registered with or regulated by the United States
                  Environmental Protection Agency (“EPA”) or Health Canada, Supplier shall
                  manufacture the Products in compliance with all applicable EPA
                  or Health
                  Canada rules and regulations, and shall promptly provide to Johnson
                  copies
                  of all reports, notices, filings and other correspondence with
                  the EPA or
                  Health Canada and similar state, provincial or local agencies related
                  to
                  the Products, including, without limitation, “6(a)2” forms. Johnson or its
                  agents shall have the right to audit Supplier’s EPA or Health Canada
                  compliance at any time.

              

      

       

      
        	 	
                (D)

              	
                If
                  Supplier’s projected annual sales to Johnson is $1 million to $5 million
                  in the United States, Supplier agrees to establish a Supplier Diversity
                  procurement target and agrees to report, on a semi-annual basis,
                  its
                  expenditures for materials and/or services with certified minority
                  and
                  women-owned businesses (i.e., certified by an approved third party
                  agency)
                  attributable to Products made for Johnson in the United States.
                  If
                  Supplier’s projected annual sales to Johnson exceed $5 million in the
                  United States, Supplier further agrees to submit a written supplier
                  diversity procurement plan by March 31st
                  of
                  each year. Johnson does not accept
                  self-certification.

              

      

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (E)

              	
                Supplier
                  acknowledges that it has received, is aware of and has reviewed
                  Johnson’s
                  Manufacturing Code of Conduct (the “Code”), as amended from time to time,
                  and agrees to comply with the Code. Further upon request, Supplier
                  agrees
                  to certify its compliance with the Code to Johnson. Johnson shall
                  have the
                  right to audit Supplier’s compliance with the Code at any time. The Code
                  is attached hereto as Schedule
                  10.4(E).

              

      

       

      
        	 	
                (F)

              	
                Supplier
                  acknowledges that it has received, is aware of and has reviewed
                  Johnson’s
                  Business Conduct and Ethics Policy (the “Policy”), as amended from time to
                  time, and agrees to comply with the Policy. The Policy is attached
                  hereto
                  as Schedule
                  10.4(F).

              

      

       

      
        	 	
                (G)

              	
                Upon
                  Johnson’s request, the parties will meet quarterly to review a “Supplier
                  Scorecard” as developed by Johnson to track and require improvement, when
                  necessary, the Supplier’s performance, including, but not limited to, key
                  metrics such as price, guaranteed cost savings, quality, and service.
                  Supplier will use reasonable commercial efforts to continually
                  improve its
                  performance on the metrics listed on the Supplier Scorecard. Supplier
                  will
                  track and report its performance related to these key
                  metrics.

              

      

       

       

      
        	 	
                (H)

              	
                If
                  Supplier is importing or transporting imported products to Johnson
                  or
                  Johnson’s designated third party purchaser into the U.S. or Puerto Rico,
                  and Supplier is eligible to become certified under the Customs
                  - Trade
                  Partnership Against Terrorism (“C-TPAT”) program, Supplier will become
                  C-TPAT certified and comply with the C-TPAT requirements. If Supplier
                  is
                  not eligible to become C-TPAT certified, Supplier will comply with
                  Johnson's security measures, a copy of which is attached in Schedule
                  10.4(H).
                  Supplier will provide its certification number or evidence of its
                  membership in C-TPAT, or proof of its compliance with Johnson’s security
                  measures, whichever is applicable. Johnson may audit Supplier's
                  compliance
                  at any time upon reasonable notice. 

              

      

       

       

      
        	 	
                (I)

              	
                Union
                  of Orthodox Jewish Congregations of America. At the request of
                  Johnson,
                  Supplier will support the obtaining of Orthodox Union (OU) certification
                  for the production line that manufactures Products. Thereafter
                  Supplier
                  shall maintain Kosher compliance on all production lines that manufacture
                  OU certified product for Johnson. The Orthodox Union’s (OU) Rabbinic field
                  representatives shall have the right to perform Kosher inspections
                  of
                  these lines at any time. Johnson or its agents shall have the right
                  to be
                  present for such audits. 

              

      

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      
        	
                11.

              	
                TERMINATION/CONVERSION
                  OF AGREEMENT

              

      

       

      
        	 	
                11.1

              	
                Termination.
                  Johnson may withdraw any Product(s) or all Products from this Agreement
                  (the latter withdrawal of the entire Product portfolio being deemed
                  to be
                  tantamount to a termination of this Agreement) or terminate this
                  Agreement
                  in its entirety, at any time during the Initial Term, Automatic
                  First
                  Renewal Term or any other Renewal Term at its sole discretion by
                  giving at
                  least one hundred twenty (120) days written notice. In the event
                  Johnson
                  withdraws a Product during the Initial Term, the Automatic First
                  Renewal
                  Term or, if there is no Automatic First Renewal Term then the First
                  Renewal Term, at its discretion pursuant to this Section
                  11.1,
                  then Johnson shall have no further right to sell or distribute
                  the
                  applicable withdrawn Product hereunder as of the Product withdrawal
                  date
                  and, further, Johnson shall not be entitled to exercise its conversion
                  and
                  option rights pursuant to Section
                  11.7.
                  In the event Johnson terminates this Agreement in its entirety
                  prior to
                  the end of the Initial Term, the Automatic First Renewal Term or,
                  if there
                  is no Automatic First Renewal Term, the First Renewal Term at its
                  discretion pursuant to this Section
                  11.1,
                  or if the Initial Term shall expire without automatic renewal for
                  an
                  Automatic First Renewal Term or without a renewal at the election
                  of
                  Johnson for a First Renewal Term, then Johnson shall have no further
                  right
                  to sell or distribute the Products as of the date of termination
                  and,
                  further, Johnson shall not be entitled to exercise its conversion
                  and
                  option rights pursuant to Section
                  11.7.
                  In the event Johnson withdraws any Product or terminates this Agreement
                  at
                  its discretion pursuant to this Section
                  11.1
                  for effect (a) at the earlier of the last day of (i) the Automatic
                  First
                  Renewal Term (if applicable) or (ii) the First Renewal Term, or
                  (b) if
                  Johnson shall have renewed this Agreement for a Second Renewal
                  Term, any
                  time after the earlier of the dates specified in subpart (a), then
                  Johnson
                  shall have the right to convert this Agreement to a Johnson License
                  Agreement pursuant to the conversion and option rights in Section
                  11.7
                  below. In the event the Automatic First Renewal Term or the First
                  Renewal
                  Term, if any, shall expire without renewal for a Second Renewal
                  Term, then
                  Johnson shall have the right to convert this Agreement to a Johnson
                  License Agreement pursuant to the conversion and option rights
                  in
                  Section
                  11.7
                  below. Furthermore, in the event Johnson terminates this Agreement
                  at any
                  time pursuant to Section
                  11.2,
                  then Johnson shall have the right to convert this Agreement to
                  a Johnson
                  License Agreement pursuant to the conversion and option rights
                  in
                  Section
                  11.7
                  below. 

              

      

       

      
        	 	
                11.2

              	
                Termination
                  for Breach.
                  Johnson or Supplier may terminate this Agreement, subject to Johnson’s
                  right to convert this Agreement to a Johnson License Agreement
                  pursuant to
                  the conversion and option rights in Section
                  11.7,
                  upon the other party’s breach of its obligations under this Agreement by
                  giving at least sixty (60) days written notice, which describes
                  the reason
                  for the termination. This Agreement will terminate, subject to
                  Johnson’s
                  right to convert this Agreement to a Johnson License Agreement
                  pursuant to
                  the conversion and option rights in Section
                  11.7,
                  unless the party receiving the notice cures or remedies the situation
                  supporting termination within the sixty (60) day notice period.
                  Supplier
                  shall not have the right to cure the breach if the breach relates
                  to
                  Supplier’s warranties and representations set forth in Section
                  10.1
                  hereof and such breach results in a Product recall or a government
                  regulatory action or proceeding concerning the Product.
                  

              

      

       

      
        	 	
                11.3

              	
                Bankruptcy.
                  If Supplier makes any assignment of assets or business for the
                  benefit of
                  creditors, or if a trustee or receiver is appointed to administer
                  or
                  conduct Supplier’s affairs or business, or if it is adjudged in any legal
                  action to be either a voluntary or involuntary bankrupt, the obligations
                  of Johnson and the rights and privileges of Supplier under this
                  Agreement
                  shall be deemed to have become a Johnson License Agreement (as
                  defined in
                  Section
                  11.7)
                  immediately prior to such assignment, appointment of trustee or
                  receiver,
                  or bankruptcy without Johnson giving any notice or taking any legal
                  action. 

              

      

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      
        	 	
                11.4

              	
                Automatic
                  Grant of License Rights.
                  If
                  any Johnson forecast issued pursuant to Section
                  6.2
                  hereof states a forecasted annual volume (as updated quarterly)
                  [*]
                  for any reason, then Johnson shall automatically be granted a Johnson
                  License Agreement. Such Johnson License Agreement shall supplement
                  and be
                  in addition to this Supply Agreement, shall be on the same terms
                  as the
                  Johnson License Agreement described in Section
                  11.7
                  except that the license shall be a sole non-exclusive royalty free
                  license
                  only during the term of this Agreement, and Johnson shall have
                  the right
                  to manufacture, market and sell [*] or any improved
                  [*] or any similar product to meet budgeted or actual
                  volume requirements in excess of the lesser of the following volumes
                  [*]
                  (ii)
                  Supplier’s actual [*] production capacity. Johnson’s use
                  of a third party contract manufacturer shall be subject to Supplier’s
                  approval, which approval shall not be unreasonably
                  withheld.

              

      

       

      
        	 	
                11.5

              	
                Change
                  in Control.
                  If a controlling interest in Supplier is transferred to a third
                  party,
                  then Supplier must immediately notify Johnson of such transaction.
                  In that
                  event, Johnson shall have the right to convert this Agreement to
                  a fully
                  paid-up royalty free Johnson License Agreement pursuant to Section
                  11.7
                  below provided that (i) the third party is a competitor of Johnson
                  in one
                  or more product categories within one or more of Johnson’s ten largest
                  markets, or (ii) Johnson reasonably believes the third party does
                  not meet
                  its requirements for a supplier of product.

              

      

       

      
        	 	
                11.6

              	
                Assignment.
                  If
                  this Agreement and the rights and obligations hereunder are assigned
                  by
                  Supplier to a third party pursuant to Section
                  23.4
                  below, then Supplier must immediately notify Johnson of such transaction.
                  In that event Johnson shall have the right to convert this Agreement
                  to a
                  Johnson License Agreement pursuant to Section
                  11.7
                  below provided that (i) the third party is a competitor of Johnson
                  in one
                  or more product categories in one or more of Johnson’s ten largest
                  markets, or (ii) Johnson reasonably believes the third party does
                  not meet
                  its requirements for a supplier of
                  product.

              

      

       

      
        	 	
                11.7

              	
                Johnson’s
                  Conversion and Option Rights. Notwithstanding anything
                  else herein, (a) upon termination of this Agreement by Johnson
                  (i) at the
                  end of the Automatic First Renewal Term or the end of the First
                  Renewal
                  Term, if there is no Automatic Renewal Term, or at any time thereafter
                  pursuant to Section
                  11.1,
                  or (ii) at any time during the Term hereof pursuant to Section
                  11.2,
                  (b) in the event the Automatic First Renewal Term or the First
                  Renewal
                  Term, if any, shall expire without renewal of this Agreement for
                  a Second
                  Renewal Term, or (c) upon the occurrence of an event described
                  in
                  Sections
                  11.5 or 11.6
                  hereof, then Johnson shall have the right to convert this Agreement
                  to a
                  Johnson License Agreement on written notice to Supplier. In addition,
                  this
                  Agreement shall automatically convert to a Johnson License Agreement
                  upon
                  the occurrence of an event described in Section 11.3.
                  The Johnson License Agreement shall be on the same terms and conditions
                  as
                  set forth in this Agreement, except (A) the Johnson License Agreement
                  shall include the grant to Johnson of the non-exclusive right and
                  license
                  to use any and all Licensed Intellectual Property to manufacture,
                  or have
                  manufactured the Product, any improved or modified Product, or
                  any
                  substantially similar product anywhere in the world, and to market,
                  import, distribute and sell Product or any improved or modified
                  Product
                  anywhere in the Territory, (B) the royalty rate for the Johnson
                  License
                  Agreement shall be [*]
                  of
                  Net Account Revenue payable to Supplier provided that the royalty
                  will
                  cease upon the expiration of the last Supplier Patent Right, (C)
                  the Term
                  of the Johnson License Agreement shall be indefinite, and (D) the
                  Johnson
                  License Agreement shall include the right to sublicense third parties.
                  Upon conversion to a Johnson License Agreement, Supplier will promptly
                  disclose all Licensed Intellectual Property to Johnson. All grants
                  pursuant to this Section
                  11.7
                  shall include the right on the part of Johnson to make or have
                  made the
                  Product by Johnson, a Johnson Affiliate or a third party contractor.
                  

              

      

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      
        	 	
                11.8

              	
                Effect
                  of Termination.
                  Upon termination, Supplier shall promptly stop all work and observe
                  Johnson’s instructions regarding work in process.
                  

              

      

       

      
        	
                12.

              	
                DEFECTIVE
                  PRODUCT

              

      

       

      
        	 	
                12.1

              	
                Remedies
                  for Defective Product.
                  Supplier shall promptly replace or correct defects in any Product,
                  which
                  Johnson reasonably deems is not or may not be in compliance with
                  the
                  Specifications or poses a health and/or safety risk (in any such
                  case, a
                  “Defective Product”), without expense to Johnson. If Supplier does not
                  promptly correct defects or replace Defective Products, Johnson
                  may notify
                  Supplier and make the corrections or replace the Product itself
                  or from a
                  third-party supplier and charge Supplier for all costs and expenses
                  incurred by Johnson in doing so. 

              

      

       

      
        	 	
                12.2

              	
                Inspection.
                  The inspection, test, acceptance, or use of Product does not affect
                  any of
                  Supplier's obligations to Johnson. Representations and warranties
                  survive
                  inspection, test, acceptance, and use of Product. Supplier's
                  representations and warranties run to Johnson, its successors,
                  and
                  assigns.

              

      

       

      
        	
                13.

              	
                EQUIPMENT,
                  MOLDS AND TOOLING

              

      

       

      
        	 	
                13.1

              	
                Equipment.

              

      

       

      
        	 	
                (A)

              	
                Supplier
                  Equipment.
                  From time to time, Johnson may request that Supplier purchase and
                  place
                  specific equipment at the Supplier’s facility for the sole purpose of
                  producing the Products (the “Supplier Equipment”), and Supplier agrees to
                  comply with such request(s). Supplier shall not use the Supplier
                  Equipment
                  for any purpose other than for production of the Products, unless
                  Johnson
                  has provided its prior written approval, and if such approval is
                  given
                  then Johnson will be credited for Supplier Equipment amortization
                  at a
                  rate to be agreed as part of the approval process. The Supplier
                  Equipment
                  is listed in Schedule
                  13.1
                  attached hereto, which will be reviewed and updated annually, if
                  necessary, no later than February 15 of each year. Schedule
                  13.1
                  also describes, for each item of Supplier Equipment, the amortization
                  schedule for purposes of determining Johnson’s Supplier Equipment purchase
                  rights and obligations and Supplier’s sale obligations in the event of a
                  withdrawal, termination or conversion of this Agreement, as further
                  described in Section
                  13.3
                  below. 

              

      

       

      
        	 	
                (B)

              	
                Johnson
                  Equipment.
                  Johnson may directly or indirectly purchase certain production
                  equipment
                  for use by the Supplier at Supplier’s facility for the sole purpose of
                  producing the Products (“Johnson Equipment”). Supplier shall not use the
                  Johnson Equipment for any other purpose. The Johnson Equipment
                  is listed
                  on Schedule
                  13.2
                  attached hereto, which shall be reviewed and updated annually,
                  if
                  necessary, no later than February 15 of each year. Supplier shall
                  mark the
                  Johnson Equipment as being owned by Johnson in a highly visible
                  location
                  on or adjacent to the Johnson Equipment, in a manner acceptable
                  to
                  Johnson. Supplier shall keep the Johnson Equipment free of any
                  liens,
                  encumbrances or other rights of third
                  parties.

              

      

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (C)

              	
                Risk
                  of Loss.
                  Supplier shall bear the entire risk of loss, damage, theft, or
                  destruction
                  to the Supplier Equipment and Johnson Equipment (collectively the
                  “Equipment”). In addition, Supplier shall carry and maintain, at all times
                  and at its expense, physical damage insurance providing “all risks”
                  coverage for the Equipment and public liability and property damage
                  insurance in an amount levied upon the possession or use of the
                  Equipment.

              

      

       

      
        	 	
                (D)

              	
                Taxes
                  and Fees.
                  Supplier shall pay all fees, taxes and governmental charges imposed
                  or
                  levied upon the possession or use of the
                  Equipment.

              

      

       

      
        	 	
                (E)

              	
                Care
                  of Equipment/Indemnification.
                  Supplier shall, at its expense, keep the Equipment in good condition
                  and
                  working order and shall make all necessary adjustments, repairs,
                  services
                  and replacements in a manner consistent with prudent industry practice
                  and
                  subject to Johnson’s approval, from time to time. Supplier shall defend,
                  hold harmless and indemnify Johnson from and against any damage
                  (including
                  incidental and consequential damages), expense (including reasonable
                  attorney’s fees), loss, claim, demand, or liability resulting from or
                  arising out of the use of the Johnson Equipment by Supplier, including
                  but
                  not limited to any personal injury, wrongful death or other claims.
                  

              

      

       

      
        	 	
                (F)

              	
                Personal
                  Property. Supplier
                  shall ensure that the Equipment remains personal property even
                  though it
                  may be installed on real property. Supplier shall, at its expense,
                  comply
                  with all laws, rules, regulations, requirements, orders and guidelines
                  applying to the Equipment and its use (including, but not limited
                  to, all
                  requirements for safe operation of the Equipment), maintenance,
                  repair,
                  condition, storage and operation. Supplier shall not use the Equipment
                  for
                  any function not intended by its manufacturer, or operate the Equipment
                  with any materials that do not meet the specifications of its
                  manufacturer. Supplier shall keep all Equipment free of liens,
                  claims and
                  encumbrances.

              

      

       

      
        	 	
                13.2

              	
                Molds
                  and Tooling.
                  The following governs all molds and tooling, if any, used by the
                  Supplier
                  to make Products:

              

      

       

      
        	 	
                (A)

              	
                Supplier
                  shall manufacture or have manufactured all molds and tooling required
                  to
                  manufacture the Products. The method by which the
                  cost
                  of the molds or tooling is funded is provided in Schedule
                  13.1.

              

      

       

      
        	 	
                (B)

              	
                In
                  the event new molds or tooling are required due to normal wear,
                  or the
                  molds or tooling become obsolete, Supplier shall replace such molds
                  or
                  tooling. The method by which the cost of the molds or tooling is
                  funded is
                  provided in Schedule
                  13.1.

              

      

       

      (C) The
        provisions of Section
        13.1
        also
        apply to all molds and tooling.

       

      
        	 	
                13.3

              	
                Johnson’s
                  Right to Purchase.
                  Johnson shall have the right (and in some instances shall have
                  the
                  obligation) to purchase, and Supplier shall have the obligation
                  to sell,
                  all or any of the Supplier Equipment, molds, or tooling pursuant
                  to the
                  terms and conditions set forth in Schedule
                  13.1
                  attached hereto. Johnson’s purchase price for such Supplier Equipment,
                  molds, or tooling is set forth in Schedule
                  13.1.
                  In
                  that case, Supplier will promptly cooperate with Johnson to transfer
                  and
                  deliver such equipment to Johnson. 

              

      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      
        	
                14.

              	
                INVENTORY

              

      

       

      
        	 	
                14.1

              	
                Seasonal
                  Carry-Over or Slow-Moving Inventory.
                  Johnson shall reimburse Supplier for raw material or component
                  inventory
                  carrying costs for seasonal carry-over or slow-moving inventory.
                  Seasonal
                  carry-over or slow-moving inventory is defined as inventory purchased
                  by
                  Supplier under a Purchase Order for the exclusive use in the Products
                  which is not anticipated to be needed in the next one hundred twenty
                  (120)
                  days of production and is not obsolete. Seasonal carry-over or
                  slow-moving
                  inventory does not include materials or components otherwise usable
                  by
                  Supplier or purchased without Johnson’s approval or under a Purchase
                  Order. Carrying costs shall mean the cost of warehousing, using
                  a
                  third-party warehouse, and interest expense at Supplier’s Borrowing Rates.
                  Payment of such costs will commence thirty (30) days after the
                  number of
                  turns specified in the Price Template for the affected Product,
                  or as
                  otherwise agreed, and will discontinue when production begins again
                  for
                  the Product.  

              

      

       

      
        	 	
                14.2

              	
                Closing
                  Inventories.
                  Supplier may rely upon Purchase Orders to purchase the materials
                  and
                  components necessary to assure the supply of Products. If Johnson
                  terminates the Agreement,
                  Johnson shall purchase Supplier's inventory of materials and components
                  at
                  Supplier’s cost, but only to the extent the inventory is dedicated solely
                  to the manufacture of Product and was purchased to supply Product
                  under a
                  Purchase Order. Johnson shall purchase finished Product that was
                  produced
                  in good faith against a Purchase Order at the price in effect as
                  of the
                  termination date. If Johnson decides not to purchase finished Product
                  on
                  the termination date, Johnson will purchase the finished Product
                  within
                  six (6) months after the termination date if Johnson pays Supplier
                  a
                  reasonable, mutually agreed upon monthly carrying cost. Upon termination,
                  Supplier shall cancel (if possible) open purchase orders for materials
                  and
                  components. Supplier shall assign non-cancelable orders to
                  Johnson.

              

        	 	 	 

        	 	 	
                All requests that Johnson purchase
                  finished Products, materials or components pursuant to this Section
                  14.2
                  must be made by Supplier in writing within ninety (90) days after
                  the
                  later to occur of (a) notification by Johnson that such finished
                  Products, materials or components are obsolete, or (b) (i) in
                  the case of obsolete finished Products, the last manufacture by
                  Supplier
                  of such finished Products or (ii) in the case of obsolete materials
                  or components, the last use of such materials or components by
                  Supplier in
                  the manufacture of Products.

              

      

       

      
        	 	
                14.3

              	
                Obsolescence.
                  Johnson shall purchase from Supplier at Supplier’s cost any materials or
                  components purchased in good faith against a Purchase Order that
                  are made
                  obsolete by a Johnson-approved change in the Specifications if
                  Supplier
                  cannot use the materials or components to manufacture other products
                  or,
                  if compatible with the other products, the materials or components
                  are in
                  excess of Supplier's 120-day requirement when aggregated with other
                  stocks
                  on hand or on order. Johnson shall purchase finished Product that
                  becomes
                  obsolete as a result of reformulation, relabeling, or repackaging
                  if the
                  Product was originally produced in good faith against a Purchase
                  Order.
                  Johnson shall purchase Product at the price in effect on the date
                  of the
                  Purchase Order against which such Product was
                  manufactured.

              

      

       

      
        	 	
                14.4

              	
                Purchase
                  Condition.
                  Johnson’s obligation to purchase materials, components, or finished
                  Product under this Section
                  14
                  does not apply to materials, components, or Product not in compliance
                  with
                  applicable Specifications.

              

      

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      
        	
                15.

              	
                INDEMNIFICATION
                  

              

      

       

      
        	 	
                15.1

              	
                Supplier Indemnification.

              

      

       

      
        	 	
                (A)

              	
                Supplier
                  shall defend, hold harmless, and indemnify Johnson from and against
                  any
                  damage (including incidental and consequential damages), expense
                  (including reasonable attorney’s fees), loss, lawsuit, claim, demand, or
                  liability to the extent such results from or arises out of (i)
                  any
                  omission, misrepresentation, negligence, or breach of this Agreement
                  by
                  Supplier; (ii) any allegation against Supplier that Supplier’s
                  manufacturing methods or equipment infringe upon, or constitute
                  the
                  misappropriation of, the patent or other intellectual property
                  rights of
                  any third party; (iii) any allegation against Johnson that Johnson’s use
                  or sale of any Product, because manufactured using Supplier Patent
                  Rights
                  or Licensed Intellectual Property, infringes upon, or constitutes
                  the
                  misappropriation of, the intellectual property rights of any third
                  party;
                  (iv) any allegation that the materials or components used without
                  the
                  authorization of Johnson to manufacture and deliver Products infringe
                  upon, or constitute the misappropriation of, the patent or other
                  intellectual property rights of any third party; or (v) any allegation
                  that the materials or components used without the authorization
                  of Johnson
                  to manufacture and deliver Products caused any injuries or damages.
                  

              

      

       

      
        	 	
                (B)

              	
                Supplier
                  shall defend, indemnify and hold Johnson harmless from and against
                  any
                  damage (including incidental and consequential damages), expense
                  (including reasonable attorney’s fees), loss, lawsuit, claim, demand, or
                  liability arising out of bodily injury (including death), property
                  damage,
                  and personal injury, to the extent such results from or arises
                  out of
                  Supplier’s use or possession of the Equipment.

              

      

       

      
        	 	
                (C)

              	
                Supplier
                  also hereby agrees to defend, hold harmless, and indemnify Johnson
                  against
                  any and all third party liability, claims, actions, suits, and
                  expenses,
                  and any other damages incurred by a third party or Johnson arising
                  out of
                  Johnson’s use of Supplier’s Patent
                  Rights.

              

      

       

      
        	 	
                15.2

              	
                Johnson
                  Indemnification.
                  Johnson shall defend, indemnify and hold Supplier harmless from
                  and
                  against any damage (including incidental and consequential damages),
                  expense (including reasonable attorney's fees), loss, lawsuit,
                  claim,
                  demand, or liability arising out of bodily injury (including death),
                  property damage, or personal injury to the extent such arises out
                  of (i)
                  Johnson’s breach of this Agreement or (ii) Johnson’s production and sale
                  of Products pursuant to a Johnson License
                  Agreement.

              

      

       

      
        	 	
                15.3

              	
                Notice.
                  The parties shall promptly notify each other in writing of the
                  institution
                  of any suit, claim, demand, or proceeding with respect to which
                  a party
                  may be entitled to indemnification.

              

      

       

      
        	 	
                15.4

              	
                Insurance.
                  Supplier shall carry insurance during the term of this Agreement
                  and for
                  at least two years thereafter as
                  follows:

              

      

       

      
        	 	
                (A)

              	
                Workers
                  Compensation and Employers Liability as required by law,
                  and

              

      

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (B)

              	
                Comprehensive
                  General Liability Insurance, which includes, without limitation,
                  bodily
                  injury liability, personal injury liability, property damage liability,
                  products liability, and completed operations liability
                  coverage.

              

      

       

      
        	 	
                15.5

              	
                Insurance
                  Amounts.
                  Supplier’s insurance must have total limits of at least US$10 million for
                  each occurrence, combined single limit for bodily injury and property
                  damage, including personal injury liability, products liability,
                  contractual liability, and completed operations liability. Supplier
                  shall
                  name Johnson as an “additional named insured” on the insurance
                  policies.

              

      

       

      
        	 	
                15.6

              	
                Certificate
                  of Insurance.
                  Within thirty (30) days after execution of this Agreement, Supplier
                  shall
                  provide to Johnson a Certificate of Insurance showing Supplier,
                  the
                  issuing insurance company, the type of insurance, the policy number,
                  the
                  effective date, the expiration date, and the limits of liability.
                  The
                  insurance must provide for at least thirty (30) days written notice
                  to the
                  parties regarding cancellation or material change in the
                  insurance.

              

      

       

      
        	
                16.

              	
                INSPECTIONS
                  AND RECORDS

              

      

       

      
        	 	
                16.1

              	
                Right
                  to Inspect.
                  Johnson may, during regular business hours access any of Supplier’s
                  premises to examine (i) Supplier’s records relating to its performance
                  under this Agreement, and (ii) materials, components, manufacturing
                  facilities, procedures, and Product in any state of production
                  or
                  delivery. Johnson’s inspection of Product (or its election not to inspect)
                  does not operate as a waiver of Johnson’s right to reject and return
                  Product under Section
                  12.
                  

              

      

       

      
        	 	
                16.2

              	
                Retention
                  of Records.
                  Supplier shall maintain books and records relating to this Agreement
                  for
                  at least three (3) years.

              

      

       

      
        	 	
                16.3

              	
                Retain
                  Samples.
                  Supplier shall maintain retain samples and manufacturing records
                  related
                  to any Product for at least three (3) years after such Product
                  has been
                  de-listed by Johnson.

              

      

       

      
        	 	
                16.4

              	
                Financial
                  Statements.
                  Supplier shall give Johnson a copy of its (i) annual report if
                  it is a
                  public company or (ii) audited financial statements if it is a
                  privately-owned company.

              

      

       

      
        	 	
                16.5

              	
                Audits.
                  Supplier shall carry out regular (at least once every six (6) months)
                  and
                  diligent audits of its manufacturing and supply chain processes
                  and
                  procedures and record keeping to ensure it is complying with the
                  terms of
                  this Agreement. Johnson shall have the right, but not the obligation,
                  to
                  require Supplier to carry out further audits in addition to the
                  regular
                  audits referred to above.

              

      

       

      
        	
                17.

              	
                CONFIDENTIALITY

              

      

       

      
        	 	
                17.1

              	
                Definition.
                  "Confidential Information" means any information disclosed by Johnson
                  relating to its products or business. Confidential Information
                  may be
                  disclosed in oral, written, visual, or physical form by Johnson
                  employees
                  or by other persons disclosing under Johnson authorization. Information
                  will not be considered Confidential Information if it can be shown
                  to have
                  been:

              

      

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (A)

              	
                Rightfully
                  in Supplier’s possession prior to the date of Johnson's disclosure to
                  Supplier,

              

      

       

      
        	 	
                (B)

              	
                Available
                  to the public prior to the date of Johnson's disclosure to Supplier
                  or to
                  have become available to the public after Johnson's disclosure
                  without any
                  unauthorized act or omission by
                  Supplier,

              

      

       

      
        	 	
                (C)

              	
                Disclosed
                  to Supplier without restriction by a third party who had a right
                  to
                  disclose and was not under an obligation of confidence to Johnson,
                  or

              

      

       

      
        	 	
                (D)

              	
                Independently
                  developed by Supplier by a person having no access to the Confidential
                  Information.

              

      

       

      Confidential
        Information will not be deemed to be generally available to the public or
        in
        Supplier’s possession merely because it may be embraced by a more general
        disclosure or merely because it may be derived from combinations of disclosures
        generally available to the public or in Supplier’s possession.

      

      
        	 	
                17.2

              	
                Confidentiality
                  Obligation.
                  Supplier shall not disclose any Confidential Information to any
                  third
                  party or use or reproduce any Confidential Information for any
                  purpose
                  other than to carry out its obligations under the Agreement. Supplier
                  will
                  disclose Confidential Information only to its employees who have
                  a need to
                  know. However, Supplier may disclose Confidential Information in
                  compliance with applicable law or an order of a court of competent
                  jurisdiction if Supplier gives Johnson prompt, advance notice of
                  its need
                  to disclose and cooperates with Johnson in an effort to narrow
                  or avoid
                  such disclosure, obtain any available protective order, or the
                  like.
                  Supplier agrees not to use any reference to Johnson or its products
                  or
                  trademarks, including, but not limited to, its logos, in Supplier’s
                  advertising, web page, or other materials given or exposed to third
                  parties without Johnson's express prior written permission granted
                  by a
                  Johnson officer. Notwithstanding anything else herein, Johnson
                  acknowledges and agrees that Supplier must comply with certain
                  SEC
                  disclosure requirements, and may include reference to Johnson and
                  this
                  Agreement in documents filed with the SEC and related disclosure
                  materials. Supplier shall redact from such disclosures any confidential
                  business information to be extent permitted by the SEC. Supplier
                  shall
                  provide Johnson with an advance copy of any such SEC filings that
                  include
                  a reference to Johnson or this Agreement.

              

      

       

      
        	 	
                17.3

              	
                Return
                  of Confidential Information.
                  Johnson may request the return of the Confidential Information
                  at any
                  time. If Johnson makes that request, Supplier will promptly comply,
                  returning to Johnson any and all written or physical embodiments
                  of the
                  Confidential Information that are then in Supplier’s possession or
                  control, including all physical or electronic
                  copies.

              

      

       

      
        	 	
                17.4

              	
                Time
                  Limitation.
                  The confidentiality obligations in this Section
                  17 remain
                  in effect for a period of three (3) years following termination
                  of this
                  Agreement, except that information identified by Johnson as strictly
                  confidential will be maintained in confidence as long as it is
                  confidential as defined under Section
                  17.1.

              

      

       

      
        	 	
                17.5

              	
                Additional
                  Obligation.
                  The obligations in this Section
                  17
                  do
                  not abrogate, and are in addition to, any prior confidentiality
                  agreements
                  entered into between Supplier and
                  Johnson.

              

      

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      
        	
                18.

              	
                FORCE
                  MAJEURE

              

      

       

      
        	 	
                18.1

              	
                Force
                  Majeure.

              

      

       

      
        	 	
                (A)

              	
                Johnson
                  Excuse.
                  Johnson may delay delivery of Products occasioned by causes beyond
                  its
                  control. Supplier shall hold delayed Products at Johnson’s direction and
                  shall deliver the Products when the cause for the delay ends. Johnson
                  is
                  responsible only for Supplier's direct additional costs in holding
                  the
                  Products or delaying performance of this Agreement at Johnson's
                  request.

              

      

       

      
        	 	
                (B)

              	
                Supplier
                  Excuse.
                  Supplier will be excused if delivery is delayed by the occurrence
                  of
                  unforeseen or unforeseeable events or by causes beyond its control,
                  provided Supplier promptly notifies Johnson of the events and gives
                  Johnson a revised delivery schedule. If a delay exceeds thirty
                  (30) days
                  from the original delivery date, Johnson may cancel the affected
                  Purchase
                  Order and convert this Agreement to the Johnson License Agreement
                  pursuant
                  to Section
                  11.4
                  above in order to manufacture or have manufactured that quantity
                  of
                  Product contained in Johnson’s cancelled Purchase Orders. Johnson shall be
                  entitled to pre-qualify its own production line or that of a third
                  party
                  in order to prepare for such an event. If Supplier's production
                  is only
                  partially restricted or delayed, Supplier shall use its best efforts
                  to
                  accommodate Johnson's requirements and shall give unfilled Johnson
                  Purchase Orders preference and priority over those of other customers that
                  were placed after Johnson's Purchase
                  Orders.

              

      

       

      
        	
                19.

              	
                DISPUTE
                  RESOLUTION

              

      

       

      
        	 	
                19.1

              	
                Dispute.
                  Any dispute arising out of or relating to this Agreement, except
                  for
                  disputes involving or arising out of third-party claims described
                  in
                  Section
                  15,
                  (“Dispute”) shall be resolved in accordance with the procedures specified
                  in this Section
                  19,
                  which shall be the sole and exclusive procedures for the resolution
                  of any
                  such disputes.

              

      

       

      
        	 	
                19.2

              	
                Non-binding
                  Negotiation.
                  The parties shall attempt in good faith to resolve any Dispute
                  promptly by
                  negotiation between executives who have authority to settle the
                  controversy and who are at a higher level of management than the
                  persons
                  with direct responsibility for administration of this Agreement.
                  Any party
                  may give the other party written notice of any Dispute not resolved
                  in the
                  normal course of business. Within twenty (20) business days after
                  delivery
                  of the notice, the receiving party shall submit to the other a
                  written
                  response. The notice and the response shall include (a) a statement
                  of
                  such party’s position and a summary of arguments supporting that position,
                  and (b) the name and title of the executive who will represent
                  that party
                  and of any other person who will accompany the executive. Within
                  ten (10)
                  business days after delivery of the responding party’s response, the
                  executives of both parties shall meet at a mutually acceptable
                  time and
                  place, and thereafter as often as they reasonably deem necessary,
                  to
                  attempt to resolve the Dispute. All reasonable requests for information
                  made by one party to the other will be honored. All negotiations
                  pursuant
                  to this clause are confidential and shall be treated as compromise
                  and
                  settlement negotiations for purposes of applicable rules of
                  evidence.

              

      

       

      
        	 	
                19.3

              	
                Non-binding
                  Mediation.
                  If a Dispute has not been resolved by negotiation within thirty
                  (30) days
                  of the disputing party’s notice, or if the parties fail to meet within
                  twenty (20) days, one or both parties may request in writing to
                  settle the
                  dispute by mediation under the then current CPR Model Mediation
                  Procedure
                  for Business Disputes. Unless otherwise agreed, the parties will
                  select a
                  mediator from the CPR Panel of Neutrals and shall notify CPR to
                  initiate
                  the selection process. Unless otherwise agreed, mediation shall
                  take place
                  in Milwaukee, Wisconsin.

              

      

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      
        	 	19.4	Arbitration.

      

       

      
        	 	
                (A)

              	
                If
                  a Dispute is not resolved by a non-binding procedure as provided
                  herein
                  within sixty (60) days of the delivery of the original notice,
                  one or both
                  of the parties may request in writing that it be settled by arbitration
                  in
                  accordance with the then current CPR Non-Administered Arbitration
                  Rules by
                  a sole arbitrator mutually acceptable to the parties provided,
                  however,
                  that if either party will not participate in a non-binding procedure,
                  the
                  other may initiate arbitration before expiration of the above period.
                  The
                  arbitration shall be governed by the United States Arbitration
                  Act, 9
                  U.S.C. §1-26, and any court having jurisdiction thereof may enter judgment
                  upon the award rendered by the arbitrator. The place of arbitration
                  shall
                  be Milwaukee, Wisconsin. The arbitrator is empowered to award damages
                  as
                  provided in this Agreement.

              

      

       

      
        	 	
                (B)

              	
                The
                  parties recognize that a party may need a preliminary remedy or
                  other
                  assistance of a court in aid of arbitration hereunder. The parties
                  hereby
                  consent to the jurisdiction of the courts in Wisconsin with respect
                  to any
                  application for preliminary injunctive relief or other assistance
                  in
                  connection with any arbitration hereunder and for entry of judgment
                  with
                  respect to the award of the
                  arbitrator.

              

      

       

      
        	 	
                (C)

              	
                The
                  statute of limitations of Wisconsin applicable to the commencement
                  of a
                  lawsuit shall apply to the commencement of an arbitration hereunder,
                  except that no defenses shall be available based upon the passage
                  of time
                  during any negotiation called for by the preceding paragraphs of
                  this
                  Section
                  19.

              

      

       

      
        	 	
                (D)

              	
                Each
                  party shall be responsible for its own arbitration costs, including
                  attorney fees.

              

      

       

      
        	 	
                19.5

              	
                Performance
                  Pending Dispute.
                  During the pendency of any Dispute under this Section 19,
                  the parties shall continue to perform all of their respective obligations
                  under this Agreement unless one party has terminated this Agreement
                  under
                  Section
                  11.
                  The obligations under this Section
                  19 may
                  survive termination at the sole discretion of the party terminating
                  the
                  Agreement under Section
                  11.

              

      

       

      
        	
                20.

              	
                INDEPENDENT
                  CONTRACTOR

              

      

       

      
        	 	
                20.1

              	
                Independent
                  Contractor.
                  The parties are independent contractors. This Agreement does not
                  create a
                  partnership, joint venture, employer-employee, principle-agent,
                  or any
                  similar relationship between the parties. Neither party has the
                  right or
                  authority to assume or create obligations or responsibilities,
                  express or
                  implied, on behalf of the other and neither may bind the other
                  in any
                  manner or thing whatsoever.

              

      

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      
        	
                21.

              	
                INTELLECTUAL
                  PROPERTY

              

      

       

      21.1
        Definitions.

       

      
        	 	
                (A)

              	
                "Intellectual
                  Property (IP)" shall mean any invention (whether patentable or
                  not and
                  including, but not limited to, apparatuses, procedures, and designs),
                  together with any data, writings subject to copyright, any patent,
                  patent
                  application, trademark, trade name, trade secret, service mark,
                  drawing,
                  formula, method of treatment, processing technique, or other intellectual
                  property, and any secret know-how.

              

      

       

      
        	 	
                (B)

              	
                “Project
                  Intellectual Property” shall mean Intellectual Property relating to the
                  Product, which includes any Improvements as defined herein below,
                  whether
                  invented solely by Supplier (also sometimes referred to in this
                  Section
                  21
                  as
                  “CTI”), solely by Johnson, or jointly by Supplier and Johnson under
                  this
                  Agreement, but shall not include any of Johnson’s or Supplier’s
                  pre-Agreement Intellectual Property, the latter constituting Background
                  Intellectual Property, as defined herein below (except for that
                  portion of
                  Supplier’s Background Intellectual Property which comprises Supplier
                  Patent Rights or Johnson's Patent Rights, each as defined above,
                  and as
                  specifically identified in current Schedule
                  1.9).

              

      

       

      
        	 	
                (C)

              	
                “Improvements”
                  shall mean any and all contributions to Project Intellectual Property
                  under this Agreement, [*].

              

      

       

      
        	 	
                (D)

              	
                “Background
                  Intellectual Property” shall mean all Intellectual Property owned
                  respectively by Supplier or Johnson prior to this Agreement, but
                  not
                  including Intellectual Property created under said separate Term
                  Sheet.
                  

              

      

       

      
        	 	
                (E)

              	
                “Licensed
                  Intellectual Property” shall mean the subset of Supplier's Background
                  Intellectual Property (including all of Supplier’s Patent Rights
                  identified in Schedule
                  1.9)
                  which is necessary for Johnson's manufacture and sale of the Product,
                  any
                  improved or modified Product or any substantially similar product
                  in the
                  event that Johnson converts this Agreement to a Johnson License
                  Agreement
                  pursuant to Sections
                  11.4 or 11.7
                  hereof.

              

      

       

      (F) [*].

       

      21.2
        Rights
        to Intellectual Property.

       

      
        	 	(A)	
                No disclosure of Confidential
                  Information
                  will be deemed by implication or otherwise to vest in Supplier
                  any
                  ownership rights in any of Johnson's Intellectual Property, Project
                  Intellectual Property, or Background Intellectual Property. In
                  addition,
                  no disclosure of Confidential Information, or any grant of rights
                  to
                  Johnson by Supplier hereunder will be deemed by implication or
                  otherwise
                  to vest in Johnson any ownership rights in any of Supplier’s Background
                  Intellectual Property. Notwithstanding any of the foregoing, Supplier
                  is
                  hereby granted a limited license to use Johnson's Project Intellectual
                  Property to the limited extent required to perform its obligations
                  under
                  this Agreement. 

              

      

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (B)

              	
                Except
                  as may be otherwise provided under this Agreement, each party shall
                  continue to solely own its respective Background Intellectual Property,
                  and nothing in this Agreement, apart from any actual grant a license,
                  shall be construed as a grant by one party of a license to the
                  other party
                  of any Background Intellectual Property owned by the one party
                  as of the
                  date of this Agreement.

              

      

       

      
        	 	
                (C)

              	
                [*].

              

      

       

      
        	 	
                (D)

              	
                The
                  spirit of this Agreement shall be one of open collaboration. Upon
                  completion of any development work hereunder, both Supplier and
                  Johnson
                  shall provide the other with details of fruits of all results,
                  including
                  documentation (electronic and hard copies) and any tangible materials
                  associated therewith so that compliance with terms of this Agreement
                  may
                  be fully met. Each party shall promptly disclose, in writing to
                  the other,
                  all Project Intellectual Property made, developed, or conceived
                  which
                  arises out of work conducted pursuant to this Agreement, said separate
                  Term Sheet, or out of any Confidential Information provided to
                  one party
                  by the other. 

              

      

       

      
        	 	
                (E)

              	
                Supplier
                  shall continue to be responsible for its own Background Intellectual
                  Property, and shall pay all maintenance fees due and payable on
                  said
                  subset of Supplier's Background Intellectual Property under which
                  Johnson
                  is licensed hereunder. Supplier agrees to cooperate with Johnson
                  in the
                  perfection of Johnson’s rights to Project Intellectual Property, including
                  any required assistance in the preparation and execution of all
                  documents
                  (including patent applications, assignments, and updates or additions
                  to
                  Schedule
                  1.9,
                  of any and all patent rights), in a timely
                  manner.

              

      

       

      
        	 	
                (F)

              	
                Johnson
                  will have the sole right to determine when and if it is appropriate
                  to
                  prosecute patent infringement by others within Johnson’s Consumer Fields
                  of Use concerning Project Intellectual Property. In the event of
                  any such
                  prosecution of patent infringement, Johnson shall have the absolute
                  right
                  to control all aspects of such prosecution and Supplier hereby
                  agrees to
                  become an indispensable party to any lawsuit brought by Johnson.
                  Johnson
                  will pay the costs of such prosecution. However, with respect to
                  any
                  patent infringement that occurs within CTI’s Fields of Use, Supplier shall
                  be free to pursue any patent infringement actions against third
                  parties.
                  

              

      

       

      
        	 	
                (G)

              	
                The
                  parties' obligations and rights under said Term Sheet will survive
                  any
                  early termination of this Agreement. Moreover, in the event of
                  discrepancy
                  between said Term Sheet and this Agreement, said Term Sheet shall
                  be
                  controlling and shall govern.

              

      

       

      
        	 	
                (H)

              	
                In
                  the event of termination and conversion of this Agreement to a
                  Johnson
                  License Agreement pursuant to Section
                  11.7 hereof,
                  then Johnson shall have a non-exclusive license to Supplier’s Background
                  Intellectual Property to manufacture, have manufactured, distribute
                  and
                  sell the Product, any improved or modified product, and any substantially
                  similar product. 

              

      

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      
         

        
          	 	21.3	
                  Assistance by CTI.
                    CTI shall provide all reasonable assistance to Johnson to effectuate
                    the
                    requirements of this Section
                    21,
                    including, but not limited to, providing all necessary information
                    and
                    executing all necessary documents requested by
                    Johnson.

                

        

         

      

      
        	
                22.

              	
                REGULATORY
                  COMPLIANCE

              

      

       

      As
        and
        when requested by Johnson in writing, Supplier shall promptly provide Johnson
        with all information necessary for Johnson to comply with all legal and
        regulatory requirements relating to the Products or any products in which
        the
        Products are to be incorporated, including, without limitation, the
        registration, packaging, labeling and provision of safety information (e.g.,
        material safety data sheet) in all countries where products incorporating
        the
        Products are sold from time to time. Johnson may disclose such information
        as
        required by applicable law.

      

      
        	
                23.

              	
                MISCELLANEOUS

              

      

       

      
        	 	
                23.1

              	
                Governing
                  Law.
                  This Agreement and the relationship of the parties hereunder is
                  governed
                  by and interpreted in accordance with the internal laws of the
                  State of
                  Wisconsin without regard to its principles of conflict of
                  laws.

              

      

      
        	 	 	 

        	 	
                23.2

              	
                Survivability.
                  The claims of either party for indemnification or breach of warranty
                  under
                  this Agreement, as well as Sections
                  10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21
                  shall survive termination of this
                  Agreement.

              

      

       

      
        	 	
                23.3

              	
                Modification.
                  This Agreement is not modified or supplemented by any agreement
                  or
                  representation that is not contained in this document. Modifications
                  or
                  supplements to the Agreement must be agreed to in writing and signed
                  by
                  the parties.

              

      

       

      
        	 	
                23.4

              	
                Assignment.
                  The rights and duties under this Agreement are not assignable or
                  delegable
                  by either party without the other party's prior written consent,
                  except
                  that Johnson may assign or delegate this Agreement, or any portion
                  thereof, to a Johnson Affiliate without Supplier’s consent and Supplier
                  may assign this Agreement to a third party purchaser of all or
                  substantially all of its business (including all assets related
                  to the
                  performance of this Agreement).

              

      

       

      
        	 	
                23.5

              	
                Time
                  of the Essence.
                  Time and punctual performance are of the
                  essence.

              

      

       

      
        	 	
                23.6

              	
                Waiver.
                  Waiver by either party of nonperformance or any breach of this
                  Agreement
                  does not constitute a waiver of any subsequent nonperformance or
                  other
                  breach of the same or any other
                  provision.

              

      

       

      
        	 	
                23.7

              	
                Notices.
                  Notices must be in writing and must be sent to the recipient at
                  the
                  address set forth at the beginning of this Agreement. Either party
                  may
                  change the address to which notice must be given by written notice
                  to the
                  other party. Notices are effective upon receipt or 10 days after
                  sending,
                  whichever comes first, if the notice is sent by an overnight delivery
                  service or if mailed postage prepaid, certified or registered mail,
                  return
                  receipt requested.

              

      

       

      
        	 	
                23.8

              	
                Severability.
                  If any provision of this Agreement is held to be invalid, the validity
                  of
                  the remainder of the Agreement will not be affected, and the rights
                  and
                  obligations of the parties will be construed and enforced as if
                  the
                  Agreement did not contain the invalid provision. The provisions
                  of this
                  Agreement are severable.

              

      

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      
        	 	
                23.9

              	
                Entire
                  Agreement.
                  This Agreement and the documents referred to herein constitute
                  the entire
                  agreement between the parties relating to the subject matter of
                  this
                  Agreement. It supersedes any other agreement between the parties
                  relating
                  to this subject matter. It does not in any way alter, affect, or
                  set forth
                  the terms of a contractual relationship between the parties relating
                  to a
                  subject matter other than that set forth in this
                  Agreement.

              

      

       

      
        	 	
                23.10

              	
                UN
                  Convention.
                  The United Nations Convention on Contracts for the International
                  Sale of
                  Goods shall not apply to this
                  Agreement.

              

      

       

      
        	 	
                23.11

              	
                No
                  Rule of Strict Construction.
                  The parties chose the language used in this Agreement to express
                  their
                  mutual intent. No rule of strict construction is to be applied
                  against
                  either party. 

              

      

       

      
        	 	
                23.12

              	
                Section
                  Headings.
                  The section headings in this Agreement are inserted for convenience
                  only
                  and are in no way to be construed as part of this Agreement or
                  as a
                  limitation or enlargement of the scope or meaning of the particular
                  section to which it refers and shall not affect the interpretation
                  of any
                  provisions of this Agreement. 

              

      

       

      
        	 	
                23.13

              	
                Schedules
                  and Exhibits.
                  All schedules and exhibits referred to herein are intended to be
                  and
                  hereby are specifically made a part of this
                  Agreement.

              

      

       

       

      
        	Signed:	 	 	 
	 	 	 	 	 
	
                CTI
                  Industries Corporation

              	 	
                S.
                  C. Johnson & Son, Inc.

              
	 	 	 	 	 
	
                By:

              	/s/
                John Schwan	 	By:	
                /s/
                  Victor J. Puente

              
	
                Name: 

              	John
                Schwan	 	
                Name:

              	Victor
                J. Puente
	
                Date:

              	February
                1, 2008	 	
                Date:

              	February
                1, 2008

      

      

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
        1.9

      

      [*]

       

       

       

       

       

       

      
 

      

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
        2.1

      

      [*]

       

       

       

       

       

       

       

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        2.3

      

      SHIPMENT
        AND SHIPPING PAYMENT TERMS

      

      

      
        	
                Item

              	
                Shipping
                  Terms

              	
                Shipping
                  Payment Terms

              
	
                [*]

              	
                FCA
                  - 

                CTI
                  Industries Corporation

                22160
                  N. Pepper Road

                Barrington,
                  Illinois, USA

              	
                Undelivered
                  Price

                Johnson’s
                  3rd
                  party Billing

              
	
                [*]

              	
                FCA
                  - 

                CTI
                  Industries Corporation

                22160
                  N. Pepper Road

                Barrington,
                  Illinois, USA

              	
                Undelivered
                  Price

                Johnson’s
                  3rd
                  party Billing

              
	
                [*]

              	
                DDP
                  - Racine, Wisconsin, USA

              	
                DDP
                  - Supplier

              

      

      

      Johnson’s
        Third Party Billing address:

      

      S.
        C.
        Johnson & Son, Inc.

      TransInternationnal
        Co. Inc.

      N93
        W16288 Megal Drive

      Menomonee
        Falls, WI 53051

      

      

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      

      

      

      SCHEDULE
        3.2

      

      

       [*]

       

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      SCHEDULE
        6.1

      

      [*]

       

       

       

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
        6.2

      

      

      

      [*]

      

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
        10.4(E)

      

      MANUFACTURING
        CODE OF CONDUCT

      

      [*]

       

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        10.4(F)

      

      BUSINESS
        CONDUCT AND ETHICS POLICY

      

      [*]

       

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        10.4(H) - Part 1

      

      [*]

      

      

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
        10.4(H) - Part 2

      

      [*]

      

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

      
 

      
        	
                SCHEDULE
                  13.1

              

      

       

       

      [*]

       

       

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

      

       

      SCHEDULE
        13.2

      

      [*]

      
 

       

       

      
        
          
          

        

        
          36THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THE SECURITIES MAY NOT BE SOLD,
      TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
      FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
      AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT
      REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE
      144
      OR REGULATION S UNDER SAID ACT.

     

    

     

    CALLABLE
      SECURED CONVERTIBLE NOTE

     

    New
      York,
      New York

    
      	
              January
                31, 2008

            	
              $508,046.20

            

    

     

    FOR
      VALUE RECEIVED,
      OPTIGENEX INC., a
      Delaware corporation (hereinafter called the “Borrower”),
      hereby promises to pay to the order of AJW Master Fund, Ltd. or registered
      assigns (the “Holder”)
      the
      sum of $508,046.20, on January 31, 2011 (the “Maturity
      Date”),
      and
      to pay interest on the unpaid principal balance hereof at the rate of two
      percent (2%) per annum from January 31, 2008 (the “Issue
      Date”)
      until
      the same becomes due and payable, whether at maturity or upon acceleration
      or by
      prepayment or otherwise. Any amount of principal or interest on this Note which
      is not paid when due shall bear interest at the rate of fifteen percent (15%)
      per annum from the due date thereof until the same is paid (“Default
      Interest”).
      Interest shall commence accruing on the Issue Date, shall be computed on the
      basis of a 365-day year and the actual number of days elapsed and shall be
      payable, quarterly on March 31, June 30, September 30 and December 31
      of each year beginning on the last day of the first full quarter after Issue
      Date. All payments due hereunder (to the extent not converted into common stock,
      $.001 par value per share, of the Borrower (the “Common
      Stock”)
      in
      accordance with the terms hereof) shall be made in lawful money of the United
      States of America. All payments shall be made at such address as the Holder
      shall hereafter give to the Borrower by written notice made in accordance with
      the provisions of this Note. Whenever any amount expressed to be due by the
      terms of this Note is due on any day which is not a business day, the same
      shall
      instead be due on the next succeeding day which is a business day and, in the
      case of any interest payment date which is not the date on which this Note
      is
      paid in full, the extension of the due date thereof shall not be taken into
      account for purposes of determining the amount of interest due on such date.
      As
      used in this Note, the term “business day” shall mean any day other than a
      Saturday, Sunday or a day on which commercial banks in the city of New York,
      New
      York are authorized or required by law or executive order to remain closed.
      Each
      capitalized term used herein, and not otherwise defined, shall have the meaning
      ascribed thereto in that certain Securities Purchase Agreement dated February
      12, 2007 (the “Purchase
      Agreement”).
      

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    This
      Note
      is free from all taxes, liens, claims and encumbrances with respect to the
      issue
      thereof and shall not be subject to preemptive rights or other similar rights
      of
      shareholders of the Borrower and will not impose personal liability upon the
      holder thereof. The obligations of the Borrower under this Note shall be secured
      by that certain Security Agreement and that certain Intellectual Property
      Security Agreement, each by and among the Borrower, the Holder and the other
      parties thereto and dated February 12, 2007.

     

    This
      Note
      represents the principal amount of outstanding and accrued interest payable
      on
      those certain existing notes issued by the Borrower to Holder and Holder’s
      affiliates and related entities (the “Interest
      Debt”)
      as of
      December 31, 2007. This Note shall represent the obligation owed by such
      Interest Debt and shall be collectible in lieu of such Interest Debt as of
      December 31, 2007, owed under the existing notes and not in addition thereto.
      Where the terms of the existing notes conflict with the terms of this Note
      as
      related to interest owed under the existing notes, the terms of this Note shall
      prevail.

     

    The
      following terms shall apply to this Note:

     

     

    ARTICLE
      I. CONVERSION
      RIGHTS

     

    1.1 Conversion
      Right.
      The
      Holder shall have the right from time to time, and at any time on or prior
      to
      the earlier of (i) the Maturity Date and (ii) the date of payment of the Default
      Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III,
      the Optional Prepayment Amount (as defined in Section 5.1) or (iii) any payments
      pursuant to Section 1.7, each in respect of the remaining outstanding principal
      amount of this Note to convert all or any part of the outstanding and unpaid
      principal amount of this Note into fully paid and non-assessable shares of
      Common Stock, as such Common Stock exists on the Issue Date, or any shares
      of
      capital stock or other securities of the Borrower into which such Common Stock
      shall hereafter be changed or reclassified at the conversion price (the
“Conversion
      Price”)
      determined as provided herein (a “Conversion”);
      provided,
      however,
      that in
      no event shall the Holder be entitled to convert any portion of this Note in
      excess of that portion of this Note upon conversion of which the sum of (1)
      the
      number of shares of Common Stock beneficially owned by the Holder and its
      affiliates (other than shares of Common Stock which may be deemed beneficially
      owned through the ownership of the unconverted portion of the Notes or the
      unexercised or unconverted portion of any other security of the Borrower
      (including, without limitation, the Warrants issued by the Borrower pursuant
      to
      the Purchase Agreement) subject to a limitation on conversion or exercise
      analogous to the limitations contained herein) and (2) the number of shares
      of
      Common Stock issuable upon the conversion of the portion of this Note with
      respect to which the determination of this proviso is being made, would result
      in beneficial ownership by the Holder and its affiliates of more than 4.9%
      of
      the outstanding shares of Common Stock. For purposes of the proviso to the
      immediately preceding sentence, beneficial ownership shall be determined in
      accordance with Section 13(d) of the Securities Exchange Act of 1934, as
      amended, and Regulations 13D-G thereunder, except as otherwise provided in
      clause (1) of such proviso. The number of shares of Common Stock to be issued
      upon each conversion of this Note shall be determined by dividing the Conversion
      Amount (as defined below) by the applicable Conversion Price then in effect
      on
      the date specified in the notice of conversion, in the form attached hereto
      as
      Exhibit A (the “Notice
      of Conversion”),
      delivered to the Borrower by the Holder in accordance with Section 1.4 below;
      provided that the Notice of Conversion is submitted by facsimile (or by other
      means resulting in, or reasonably expected to result in, notice) to the Borrower
      before 6:00 p.m., New York, New York time on such conversion date (the
“Conversion
      Date”).
      The
      term “Conversion
      Amount”
means,
      with respect to any conversion of this Note, the sum of (1) the principal amount
      of this Note to be converted in such conversion plus
      (2)
      accrued and unpaid interest, if any, on such principal amount at the interest
      rates provided in this Note to the Conversion Date plus
      (3)
      Default Interest, if any, on the amounts referred to in the immediately
      preceding clauses (1) and/or (2) plus
      (4) at
      the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and
      1.4(g) hereof or pursuant to Section 2(c) of that certain Registration Rights
      Agreement, dated as of February 12, 2007 (the “Registration
      Rights Agreement”).

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    1.2 Conversion
      Price.

     

    (a) Calculation
      of Conversion Price.
      The
      Conversion Price shall be the Variable Conversion Price (as defined herein)
      (subject to equitable adjustments for stock splits, stock dividends or rights
      offerings by the Borrower relating to the Borrower’s securities or the
      securities of any subsidiary of the Borrower, combinations, recapitalization,
      reclassifications, extraordinary distributions and similar events). The
“Variable
      Conversion Price”
shall
      mean the Applicable Percentage (as defined herein) multiplied by the Market
      Price (as defined herein). “Market
      Price”
means
      the average of the lowest three (3) Trading Prices (as defined below) for the
      Common Stock during the twenty (20) Trading Day period ending one Trading Day
      prior to the date the Conversion Notice is sent by the Holder to the Borrower
      via facsimile (the “Conversion
      Date”).
      “Trading
      Price”
means,
      for any security as of any date, the intraday trading price on the
      Over-the-Counter Bulletin Board (the “OTCBB”)
      as
      reported by a reliable reporting service mutually acceptable to and hereafter
      designated by Holders of a majority in interest of the Notes and the Borrower
      or, if the OTCBB is not the principal trading market for such security, the
      intraday trading price of such security on the principal securities exchange
      or
      trading market where such security is listed or traded or, if no intraday
      trading price of such security is available in any of the foregoing manners,
      the
      average of the intraday trading prices of any market makers for such security
      that are listed in the “pink sheets” by the National Quotation Bureau, Inc. If
      the Trading Price cannot be calculated for such security on such date in the
      manner provided above, the Trading Price shall be the fair market value as
      mutually determined by the Borrower and the holders of a majority in interest
      of
      the Notes being converted for which the calculation of the Trading Price is
      required in order to determine the Conversion Price of such Notes. “Trading
      Day”
shall
      mean any day on which the Common Stock is traded for any period on the OTCBB,
      or
      on the principal securities exchange or other securities market on which the
      Common Stock is then being traded. The “Applicable
      Percentage”
shall
      mean 60%.

     

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

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

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

     

    If,
      at
      any time a Holder of this Note submits a Notice of Conversion, and the Borrower
      does not have sufficient authorized but unissued shares of Common Stock
      available to effect such conversion in accordance with the provisions of this
      Article I (a “Conversion
      Default”),
      subject to Section 4.8, the Borrower shall issue to the Holder all of the shares
      of Common Stock which are then available to effect such conversion. The portion
      of this Note which the Holder included in its Conversion Notice and which
      exceeds the amount which is then convertible into available shares of Common
      Stock (the “Excess
      Amount”)
      shall,
      notwithstanding anything to the contrary contained herein, not be convertible
      into Common Stock in accordance with the terms hereof until (and at the Holder’s
      option at any time after) the date additional shares of Common Stock are
      authorized by the Borrower to permit such conversion, at which time the
      Conversion Price in respect thereof shall be the lesser of (i) the Conversion
      Price on the Conversion Default Date (as defined below) and (ii) the Conversion
      Price on the Conversion Date thereafter elected by the Holder in respect
      thereof. In addition, the Borrower shall pay to the Holder payments
      (“Conversion
      Default Payments”)
      for a
      Conversion Default in the amount of (x) the sum
      of
      (1) the
      then outstanding principal amount of this Note plus
      (2)
      accrued and unpaid interest on the unpaid principal amount of this Note through
      the Authorization Date (as defined below) plus
      (3)
      Default Interest, if any, on the amounts referred to in clauses (1) and/or
      (2),
multiplied
      by
      (y) .24,
multiplied
      by
      (z)
      (N/365), where N = the number of days from the day the holder submits a Notice
      of Conversion giving rise to a Conversion Default (the “Conversion
      Default Date”)
      to the
      date (the “Authorization
      Date”)
      that
      the Borrower authorizes a sufficient number of shares of Common Stock to effect
      conversion of the full outstanding principal balance of this Note. The Borrower
      shall use its best efforts to authorize a sufficient number of shares of Common
      Stock as soon as practicable following the earlier of (i) such time that the
      Holder notifies the Borrower or that the Borrower otherwise becomes aware that
      there are or likely will be insufficient authorized and unissued shares to
      allow
      full conversion thereof and (ii) a Conversion Default. The Borrower shall send
      notice to the Holder of the authorization of additional shares of Common Stock,
      the Authorization Date and the amount of Holder’s accrued Conversion Default
      Payments. The accrued Conversion Default Payments for each calendar month shall
      be paid in cash or shall be convertible into Common Stock (at such time as
      there
      are sufficient authorized shares of Common Stock) at the applicable Conversion
      Price, at the Borrower’s option, as follows:

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

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

     

    

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

     

    

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

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    1.4 Method
      of Conversion.

     

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

     

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

     

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

     

    (d) Delivery
      of Common Stock Upon Conversion.
      Upon
      receipt by the Borrower from the Holder of a facsimile transmission (or other
      reasonable means of communication) of a Notice of Conversion meeting the
      requirements for conversion as provided in this Section 1.4, the Borrower shall
      issue and deliver or cause to be issued and delivered to or upon the order
      of
      the Holder certificates for the Common Stock issuable upon such conversion
      within five (5) business days after such receipt (and, solely in the case of
      conversion of the entire unpaid principal amount hereof, surrender of this
      Note)
      (such second business day being hereinafter referred to as the “Deadline”)
      in
      accordance with the terms hereof and the Purchase Agreement (including, without
      limitation, in accordance with the requirements of Section 2(g) of the Purchase
      Agreement that certificates for shares of Common Stock issued on or after the
      effective date of the Registration Statement upon conversion of this Note shall
      not bear any restrictive legend).

     

    
      
         

      

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

     

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

     

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

     

    
      
         

      

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

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED
      OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
      SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
      SCOPE
      CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION
      IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION
      S
      UNDER SAID ACT.”

     

    The
      legend set forth above shall be removed and the Borrower shall issue to the
      Holder a new certificate therefor free of any transfer legend if (i) the
      Borrower or its transfer agent shall have received an opinion of counsel, in
      form, substance and scope customary for opinions of counsel in comparable
      transactions, to the effect that a public sale or transfer of such Common Stock
      may be made without registration under the Act and the shares are so sold or
      transferred, (ii) such Holder provides the Borrower or its transfer agent with
      reasonable assurances that the Common Stock issuable upon conversion of this
      Note (to the extent such securities are deemed to have been acquired on the
      same
      date) can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock
      issuable upon conversion of this Note, such security is registered for sale
      by
      the Holder under an effective registration statement filed under the Act or
      otherwise may be sold pursuant to Rule 144 without any restriction as to the
      number of securities as of a particular date that can then be immediately sold.
      Nothing in this Note shall (i) limit the Borrower’s obligation under the
      Registration Rights Agreement or (ii) affect in any way the Holder’s obligations
      to comply with applicable prospectus delivery requirements upon the resale
      of
      the securities referred to herein.

     

    1.6 Effect
      of Certain Events.

     

    
      
         

      

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

     

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

     

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

     

    
      
         

      

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

     

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

     

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

     

    
      
         

      

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

     

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

     

    1.7 Trading
      Market Limitations.
      Unless
      permitted by the applicable rules and regulations of the principal securities
      market on which the Common Stock is then listed or traded, in no event shall
      the
      Borrower issue upon conversion of or otherwise pursuant to this Note and the
      other Notes issued pursuant to the Purchase Agreement more than the maximum
      number of shares of Common Stock that the Borrower can issue pursuant to any
      rule of the principal United States securities market on which the Common Stock
      is then traded (the “Maximum
      Share Amount”),
      which
      shall be 19.99% of the total shares outstanding on the Closing Date (as defined
      in the Purchase Agreement), subject to equitable adjustment from time to time
      for stock splits, stock dividends, combinations, capital reorganizations and
      similar events relating to the Common Stock occurring after the date hereof.
      Once the Maximum Share Amount has been issued (the date of which is hereinafter
      referred to as the “Maximum
      Conversion Date”),
      if
      the Borrower fails to eliminate any prohibitions under applicable law or the
      rules or regulations of any stock exchange, interdealer quotation system or
      other self-regulatory organization with jurisdiction over the Borrower or any
      of
      its securities on the Borrower’s ability to issue shares of Common Stock in
      excess of the Maximum Share Amount (a “Trading
      Market Prepayment Event”),
      in
      lieu of any further right to convert this Note, and in full satisfaction of
      the
      Borrower’s obligations under this Note, the Borrower shall pay to the Holder,
      within fifteen (15) business days of the Maximum Conversion Date (the
“Trading
      Market Prepayment Date”),
      an
      amount equal to 130% times
      the
sum
      of (a)
      the then outstanding principal amount of this Note immediately following the
      Maximum Conversion Date, plus
      (b)
      accrued and unpaid interest on the unpaid principal amount of this Note to
      the
      Trading Market Prepayment Date, plus
      (c)
      Default Interest, if any, on the amounts referred to in clause (a) and/or (b)
      above, plus
      (d) any
      optional amounts that may be added thereto at the Maximum Conversion Date by
      the
      Holder in accordance with the terms hereof (the then outstanding principal
      amount of this Note immediately following the Maximum Conversion Date,
plus
      the
      amounts referred to in clauses (b), (c) and (d) above shall collectively be
      referred to as the “Remaining
      Convertible Amount”).
      With
      respect to each Holder of Notes, the Maximum Share Amount shall refer to such
      Holder’s pro rata
      share
      thereof determined in accordance with Section 4.8 below. In the event that
      the
      sum of (x) the aggregate number of shares of Common Stock issued upon conversion
      of this Note and the other Notes issued pursuant to the Purchase Agreement
      plus
      (y) the
      aggregate number of shares of Common Stock that remain issuable upon conversion
      of this Note and the other Notes issued pursuant to the Purchase Agreement,
      represents at least one hundred percent (100%) of the Maximum Share Amount
      (the
“Triggering
      Event”),
      the
      Borrower will use its best efforts to seek and obtain Shareholder Approval
      (or
      obtain such other relief as will allow conversions hereunder in excess of the
      Maximum Share Amount) as soon as practicable following the Triggering Event
      and
      before the Maximum Conversion Date. As used herein, “Shareholder
      Approval”
means
      approval by the shareholders of the Borrower to authorize the issuance of the
      full number of shares of Common Stock which would be issuable upon full
      conversion of the then outstanding Notes but for the Maximum Share
      Amount.

     

    
      
         

      

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

     

     

    ARTICLE
      II. CERTAIN
      COVENANTS

     

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

     

    
      
         

      

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

     

    2.3 Borrowings.
      So long
      as the Borrower shall have any obligation under this Note, the Borrower shall
      not, without the Holder’s written consent, create, incur, assume or suffer to
      exist any liability for borrowed money in excess of $50,000, except (a)
      borrowings in existence or committed on the date hereof and of which the
      Borrower has informed Holder in writing prior to the date hereof, (b)
      indebtedness to trade creditors or financial institutions incurred in the
      ordinary course of business or (c) borrowings, the proceeds of which shall
      be
      used to repay this Note.

     

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

     

    2.5 Advances
      and Loans.
      So long
      as the Borrower shall have any obligation under this Note, the Borrower shall
      not, without the Holder’s written consent, lend money, give credit or make
      advances to any person, firm, joint venture or corporation, including, without
      limitation, officers, directors, employees, subsidiaries and affiliates of
      the
      Borrower, except loans, credits or advances (a) in existence or committed on
      the
      date hereof and which the Borrower has informed Holder in writing prior to
      the
      date hereof, (b) made in the ordinary course of business or (c) not in excess
      of
      $50,000.

     

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

     

     

    ARTICLE
      III. EVENTS
      OF DEFAULT

     

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

     

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

     

    
      
         

      

      
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    3.2 Conversion
      and the Shares.
      The
      Borrower fails to issue shares of Common Stock to the Holder (or announces
      or
      threatens that it will not honor its obligation to do so) upon exercise by
      the
      Holder of the conversion rights of the Holder in accordance with the terms
      of
      this Note (for a period of at least sixty (60) days, if such failure is solely
      as a result of the circumstances governed by Section 1.3 and the Borrower is
      using its best efforts to authorize a sufficient number of shares of Common
      Stock as soon as practicable), fails to transfer or cause its transfer agent
      to
      transfer (electronically or in certificated form) any certificate for shares
      of
      Common Stock issued to the Holder upon conversion of or otherwise pursuant
      to
      this Note as and when required by this Note or the Registration Rights
      Agreement, or fails to remove any restrictive legend (or to withdraw any stop
      transfer instructions in respect thereof) on any certificate for any shares
      of
      Common Stock issued to the Holder upon conversion of or otherwise pursuant
      to
      this Note as and when required by this Note or the Registration Rights Agreement
      (or makes any announcement, statement or threat that it does not intend to
      honor
      the obligations described in this paragraph) and any such failure shall continue
      uncured (or any announcement, statement or threat not to honor its obligations
      shall not be rescinded in writing) for ten (10) days after the Borrower shall
      have been notified thereof in writing by the Holder;

     

    3.3 Breach
      of Covenants.
      The
      Borrower breaches any material covenant or other material term or condition
      contained in Sections 1.3, 1.6 or 1.7 of this Note, or Sections 4(c), 4(e),
      4(h), 4(i), 4(j) or 5 of the Purchase Agreement and such breach continues for
      a
      period of ten (10) days after written notice thereof to the Borrower from the
      Holder;

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    3.9 Default
      Under Other Notes.
      An Event
      of Default has occurred and is continuing under any of the other Notes issued
      pursuant to the Purchase Agreement,

     

    then,
      upon the occurrence and during the continuation of any Event of Default
      specified in Section 3.1, 3.2, 3.3, 3.4, 3.6, 3.8, or 3.9, at the option of
      the
      Holders of a majority of the aggregate principal amount of the outstanding
      Notes
      issued pursuant to the Purchase Agreement exercisable through the delivery
      of
      written notice to the Borrower by such Holders (the “Default
      Notice”),
      and
      upon the occurrence of an Event of Default specified in Section 3.5 or 3.7,
      the
      Notes shall become immediately due and payable and the Borrower shall pay to
      the
      Holder, in full satisfaction of its obligations hereunder, an amount equal
      to
      the greater of (i) 130% times
      the
sum
      of (w)
      the then outstanding principal amount of this Note plus
      (x)
      accrued and unpaid interest on the unpaid principal amount of this Note to
      the
      date of payment (the “Mandatory
      Prepayment Date”)
      plus
      (y)
      Default Interest, if any, on the amounts referred to in clauses (w) and/or
      (x)
plus
      (z) any
      amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or
      pursuant to Section 2(c) of the Registration Rights Agreement (the then
      outstanding principal amount of this Note to the date of payment plus
      the
      amounts referred to in clauses (x), (y) and (z) shall collectively be known
      as
      the “Default
      Sum”)
      or
      (ii) the “parity value” of the Default Sum to be prepaid, where parity value
      means (a) the highest number of shares of Common Stock issuable upon conversion
      of or otherwise pursuant to such Default Sum in accordance with Article I,
      treating the Trading Day immediately preceding the Mandatory Prepayment Date
      as
      the “Conversion Date” for purposes of determining the lowest applicable
      Conversion Price, unless the Default Event arises as a result of a breach in
      respect of a specific Conversion Date in which case such Conversion Date shall
      be the Conversion Date), multiplied
      by
      (b) the
      highest Closing Price for the Common Stock during the period beginning on the
      date of first occurrence of the Event of Default and ending one day prior to
      the
      Mandatory Prepayment Date (the “Default
      Amount”)
      and
      all other amounts payable hereunder shall immediately become due and payable,
      all without demand, presentment or notice, all of which hereby are expressly
      waived, together with all costs, including, without limitation, legal fees
      and
      expenses, of collection, and the Holder shall be entitled to exercise all other
      rights and remedies available at law or in equity. If the Borrower fails to
      pay
      the Default Amount within five (5) business days of written notice that such
      amount is due and payable, then the Holder shall have the right at any time,
      so
      long as the Borrower remains in default (and so long and to the extent that
      there are sufficient authorized shares), to require the Borrower, upon written
      notice, to immediately issue, in lieu of the Default Amount, the number of
      shares of Common Stock of the Borrower equal to the Default Amount divided
      by
      the Conversion Price then in effect.

     

     

    ARTICLE
      IV. MISCELLANEOUS

     

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

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    4.2 Notices.
      Any
      notice herein required or permitted to be given shall be in writing and may
      be
      personally served or delivered by courier or sent by United States mail and
      shall be deemed to have been given upon receipt if personally served (which
      shall include telephone line facsimile transmission) or sent by courier or
      three
      (3) days after being deposited in the United States mail, certified, with
      postage pre-paid and properly addressed, if sent by mail. For the purposes
      hereof, the address of the Holder shall be as shown on the records of the
      Borrower; and the address of the Borrower shall be 1170 Valley Brook Ave,
      2nd
      Floor
      Suite B, Lyndhurst, NJ 07071. Both the Holder and the Borrower may change the
      address for service by service of written notice to the other as herein
      provided.

     

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

     

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

     

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

     

    4.6 Governing
      Law.
      THIS
      NOTE SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
      OF
      THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
      WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE
      BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
      FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING
      UNDER THIS NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
      TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE
      THE
      DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.
      BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST
      CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
      THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER
      PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH
      PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR
      PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
      SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT
      PREVAIL IN ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL
      FEES
      AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
      CONNECTION WITH SUCH DISPUTE.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

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

     

    4.8 Allocations
      of Maximum Share Amount and Reserved Amount.
      The
      Maximum Share Amount and Reserved Amount shall be allocated pro rata among
      the
      Holders of Notes based on the principal amount of such Notes issued to each
      Holder. Each increase to the Maximum Share Amount and Reserved Amount shall
      be
      allocated pro rata among the Holders of Notes based on the principal amount
      of
      such Notes held by each Holder at the time of the increase in the Maximum Share
      Amount or Reserved Amount. In the event a Holder shall sell or otherwise
      transfer any of such Holder’s Notes, each transferee shall be allocated a pro
      rata portion of such transferor’s Maximum Share Amount and Reserved Amount. Any
      portion of the Maximum Share Amount or Reserved Amount which remains allocated
      to any person or entity which does not hold any Notes shall be allocated to
      the
      remaining Holders of Notes, pro rata based on the principal amount of such
      Notes
      then held by such Holders.

     

    4.9 Damages
      Shares.
      The
      shares of Common Stock that may be issuable to the Holder pursuant to Sections
      1.3 and 1.4(g) hereof and pursuant to Section 2(c) of the Registration Rights
      Agreement (“Damages
      Shares”)
      shall
      be treated as Common Stock issuable upon conversion of this Note for all
      purposes hereof and shall be subject to all of the limitations and afforded
      all
      of the rights of the other shares of Common Stock issuable hereunder, including
      without limitation, the right to be included in the Registration Statement
      filed
      pursuant to the Registration Rights Agreement. For purposes of calculating
      interest payable on the outstanding principal amount hereof, except as otherwise
      provided herein, amounts convertible into Damages Shares (“Damages
      Amounts”)
      shall
      not bear interest but must be converted prior to the conversion of any
      outstanding principal amount hereof, until the outstanding Damages Amounts
      is
      zero.

     

    4.10 Denominations.
      At the
      request of the Holder, upon surrender of this Note, the Borrower shall promptly
      issue new Notes in the aggregate outstanding principal amount hereof, in the
      form hereof, in such denominations of at least $50,000 as the Holder shall
      request.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

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

     

    4.12 Notice
      of Corporate Events.
      Except
      as otherwise provided below, the Holder of this Note shall have no rights as
      a
      Holder of Common Stock unless and only to the extent that it converts this
      Note
      into Common Stock. The Borrower shall provide the Holder with prior notification
      of any meeting of the Borrower’s shareholders (and copies of proxy materials and
      other information sent to shareholders). In the event of any taking by the
      Borrower of a record of its shareholders for the purpose of determining
      shareholders who are entitled to receive payment of any dividend or other
      distribution, any right to subscribe for, purchase or otherwise acquire
      (including by way of merger, consolidation, reclassification or
      recapitalization) any share of any class or any other securities or property,
      or
      to receive any other right, or for the purpose of determining shareholders
      who
      are entitled to vote in connection with any proposed sale, lease or conveyance
      of all or substantially all of the assets of the Borrower or any proposed
      liquidation, dissolution or winding up of the Borrower, the Borrower shall
      mail
      a notice to the Holder, at least twenty (20) days prior to the record date
      specified therein (or thirty (30) days prior to the consummation of the
      transaction or event, whichever is earlier), of the date on which any such
      record is to be taken for the purpose of such dividend, distribution, right
      or
      other event, and a brief statement regarding the amount and character of such
      dividend, distribution, right or other event to the extent known at such time.
      The Borrower shall make a public announcement of any event requiring
      notification to the Holder hereunder substantially simultaneously with the
      notification to the Holder in accordance with the terms of this Section
      4.12.

     

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

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    ARTICLE
      V. CALL
      OPTION

     

    5.1 Call
      Option.
      Notwithstanding anything to the contrary contained in this Article V, so long
      as
(i) no
      Event of Default or Trading Market Prepayment Event shall have occurred and
      be
      continuing, (ii) the
      Borrower has a sufficient number of authorized shares of Common Stock reserved
      for issuance upon full conversion of the Notes, then at any time after the
      Issue
      Date, and (iii) the
      Common Stock is trading at or below $.04 per share, the Borrower shall have
      the
      right, exercisable on not less than ten (10) Trading Days prior written notice
      to the Holders of the Notes (which notice may not be sent to the Holders of
      the
      Notes until the Borrower is permitted to prepay the Notes pursuant to this
      Section 5.1), to prepay all of the outstanding Notes in accordance with this
      Section 5.1. Any notice of prepayment hereunder (an “Optional
      Prepayment”)
      shall
      be delivered to the Holders of the Notes at their registered addresses appearing
      on the books and records of the Borrower and shall state (1) that the Borrower
      is exercising its right to prepay all of the Notes issued on the Issue Date
      and
      (2) the date of prepayment (the “Optional
      Prepayment Notice”).
      On
      the date fixed for prepayment (the “Optional
      Prepayment Date”),
      the
      Borrower shall make payment of the Optional Prepayment Amount (as defined below)
      to or upon the order of the Holders as specified by the Holders in writing
      to
      the Borrower at least one (1) business day prior to the Optional Prepayment
      Date. If the Borrower exercises its right to prepay the Notes, the Borrower
      shall make payment to the holders of an amount in cash (the “Optional
      Prepayment Amount”)
      equal
      to either (i) 135% (for prepayments occurring within thirty (30) days of
      the Issue Date), (ii) 145% for prepayments occurring between thirty-one
      (31) and ninety (90) days of the Issue Date, or (iii) 150% (for prepayments
      occurring after the ninetieth (90th)
      day
      following the Issue Date), multiplied by the sum of (w) the then outstanding
      principal amount of this Note plus
      (x) accrued and unpaid interest on the unpaid principal amount of this Note
      to the Optional Prepayment Date plus
      (y)
      Default Interest, if any, on the amounts referred to in clauses (w) and (x)
      plus
      (z) any
      amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or
      pursuant to Section 2(c) of the Registration Rights Agreement (the then
      outstanding principal amount of this Note to the date of payment plus
      the
      amounts referred to in clauses (x), (y) and (z) shall collectively be known
      as
      the “Optional
      Prepayment Sum”).
      Notwithstanding notice of an Optional Prepayment, the Holders shall at all
      times
      prior to the Optional Prepayment Date maintain the right to convert all or
      any
      portion of the Notes in accordance with Article I and any portion of Notes
      so
      converted after receipt of an Optional Prepayment Notice and prior to the
      Optional Prepayment Date set forth in such notice and payment of the aggregate
      Optional Prepayment Amount shall be deducted from the principal amount of Notes
      which are otherwise subject to prepayment pursuant to such notice. If the
      Borrower delivers an Optional Prepayment Notice and fails to pay the Optional
      Prepayment Amount due to the Holders of the Notes within two (2) business days
      following the Optional Prepayment Date, the Borrower shall forever forfeit
      its
      right to redeem the Notes pursuant to this Section 5.1.

     

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    
       

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

    

    IN
      WITNESS WHEREOF,
      Borrower has caused this Note to be signed in its name by its duly authorized
      officer this 31st
      day of
      January, 2008.

     

    

    
      	
              OPTIGENEX
                INC.

            
	
               

            
	
               

            
	
               

            
	
              By:
                _______________________________

            
	
              Daniel
                Zwiren

            
	
              President
                and Chief Executive Officer

            

    

     

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    EXHIBIT
      A

     

    NOTICE
      OF CONVERSION

    (To
      be
      Executed by the Registered Holder

    in
      order
      to Convert the Notes)

     

    The
      undersigned hereby irrevocably elects to convert $__________ principal amount
      of
      the Note (defined below) into shares of common stock, par value $.001 per share
      (“Common
      Stock”),
      of
      Optigenex Inc., a Delaware corporation (the “Borrower”)
      according to the conditions of the convertible Notes of the Borrower dated
      as of
      January 31, 2008 (the “Notes”),
      as of
      the date written below. If securities are to be issued in the name of a person
      other than the undersigned, the undersigned will pay all transfer taxes payable
      with respect thereto and is delivering herewith such certificates. No fee will
      be charged to the Holder for any conversion, except for transfer taxes, if
      any.
      A copy of each Note is attached hereto (or evidence of loss, theft or
      destruction thereof).

     

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

     

    Name
      of
      DTC Prime Broker:
      ____________________________________________________

    Account
      Number: ___________________________________________________________

     

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

     

    Name:
      ______________________________________________________________________

    Address:
      ____________________________________________________________________

     

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

     

    Date
      of
      Conversion:___________________________

    Applicable
      Conversion Price:____________________

    Number
      of
      Shares of Common Stock to be Issued Pursuant to

    Conversion
      of the Notes:______________

    Signature:___________________________________

    Name:______________________________________

    Address:____________________________________

     

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

     

    
      
         

      

      
        21

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