Document:

ex43.htm

     

    Exhibit
      4.3

     

     

    
      	 	
              THE
                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

     

    Irvine,
      California

    
      	August
              30, 2007 	
              $1,320

            

    

     

    FOR
      VALUE
      RECEIVED, PACIFICAP ENTERTAINMENT HOLDINGS, INC., a Nevada corporation
      (hereinafter called the “Borrower”), hereby promises to pay to the order of NEW
      MILLENNIUM CAPITAL PARTNERS II, LLC or registered assigns (the “Holder”) the sum
      of $1,320, on  August 30, 2010 (the “Maturity Date”), and to pay
      interest on the unpaid principal balance hereof at the rate of ten percent
      (10%)
      per annum from August 30, 2007 (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
      September 30, 2007.  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 August 30, 2007, pursuant to which this Note was originally
      issued (the “Purchase Agreement”).

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    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
      stockholders of the Borrower and will not impose personal liability upon the
      holder thereof  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 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 August 30, 2007, executed in
      connection with the initial issuance of this Note and the other Notes issued
      on
      the Issue Date (the “Registration Rights
      Agreement”).

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    1.2  Conversion
      Price.

     

    (a)  Calculation
      of Conversion Price.  The Conversion
      Price shall be the lesser of (i) the Variable Conversion Price (as defined
      herein) and (ii) the Fixed Conversion Price (as defined herein) (subject, in
      each case, to equitable adjustments for stock splits, stock dividends or rights
      offerings by the Borrower relating to the Borrower’s securities or the
      securities of any subsidiary of the Borrower, combinations, recapitalization,
      reclassifications, extraordinary distributions and similar
      events).  The “Variable Conversion Price” shall mean
      the Applicable Percentage (as defined herein) multiplied by the Market Price
      (as
      defined herein).  “Market Price” means the average of
      the lowest three (3) Trading Prices (as defined below) for the Common Stock
      during the 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.  “Applicable Percentage” shall mean
      25.0%.  The “Fixed Conversion Price” shall mean
      $.02.

     

    (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.  Subject to the Stockholder
      Approval (as such term is defined in Section 4(n) of the Securities Purchase
      Agreement), 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 pursuant to the Purchase Agreement.  The Borrower is
      required at all times to have authorized and reserved two (2) times the number
      of shares that is actually issuable upon full conversion of the Notes (based
      on
      the Conversion Price of the Notes or the Exercise Price of the Warrants 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 Holder elects to take such payment in cash, cash payment shall be made
      to
      Holder by the fifth (5th) day of
      the month
      following the month in which it has accrued; and

     

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

     

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

     

    1.4  Method
      of Conversion.

     

    (a)  Mechanics
      of Conversion.  Subject to Section 1.1,
      this Note may be converted by the Holder 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.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (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 two (2) business days after such receipt (and, solely in the case of
      conversion of the entire unpaid principal amount hereof, surrender of this
      Note)
      (such second business day being hereinafter referred to as the
“Deadline”) in accordance with the terms hereof and the
      Purchase Agreement (including, without limitation, in accordance with the
      requirements of Section 2(g) of the Purchase Agreement that certificates for
      shares of Common Stock issued on or after the effective date of the Registration
      Statement upon conversion of this Note shall not bear any restrictive
      legend).

     

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

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (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.

     

    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.

     

    (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.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (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.

    (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 Fixed 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 Fixed 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.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    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 Fixed Conversion
      Price then in effect, then the Fixed 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 Fixed Conversion Price then
      in
      effect, then the Fixed 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 Fixed Conversion Price will be made upon the actual issuance of such
      Common Stock upon conversion or exchange of such Convertible
      Securities.

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (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
prorata 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 stockholders 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.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

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

     

     

    ARTICLE
      II. CERTAIN COVENANTS

     

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

     

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    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;

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    3.3  Failure
      to Timely File Registration or Effect
      Registration.  The Borrower fails to
      file the Registration Statement within forty-five (45) days following an
      Investor Demand (as defined in the Registration Rights Agreement) or obtain
      effectiveness with the Securities and Exchange Commission of the Registration
      Statement within one hundred thirty-five (135) days following the Investor
      Demand (as defined in the Registration Rights Agreement) or such Registration
      Statement lapses in effect (or sales cannot otherwise be made thereunder
      effective, whether by reason of the Borrower’s failure to amend or supplement
      the prospectus included therein in accordance with the Registration Rights
      Agreement or otherwise) for more than twenty (20) consecutive days or forty
      (40)
      days in any twelve (12) month period after the Registration Statement becomes
      effective;

     

    3.4  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;

     

    3.5  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;

     

    3.6  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;

     

    3.7  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;

     

    3.8  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;

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    3.9  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

     

    3.10  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, 3.5, 3.7, 3.9, or 3.10, 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 3.6 or 3.8, 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.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    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 2361 Campus Drive, Suite
      101, Irvine, California 92612, facsimile number: 949-833-8211.  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 bonafide
      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.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    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.  Subject to the Stockholder
      Approval (as such term is defined in Section 4(n) of the Securities Purchase
      Agreement), 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.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    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.

     

     

    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
      $.02 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) 130% (for prepayments occurring within thirty (30) days
      of the Issue Date), (ii) 140% for prepayments occurring between thirty-one
      (31) and sixty (60) days of the Issue Date, or (iii) 150% (for prepayments
      occurring after the sixtieth (60th) 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]

     

    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, Borrower has caused this Note to be signed in its name
      by its duly authorized officer this 30th day of August, 2007.

     

     

    
      	 	PACIFICAP
              ENTERTAINMENT
              HOLDINGS, INC.	 
	 	 	 	 
	
               

            	
              By:
                

            	/s/ 	 
	 	 	Mark
              Schaftlein	 
	 	 	President	 
	 	 	 	 

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    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 Pacificap Entertainment Holdings, Inc., a
      Nevada corporation (the “Borrower”) according to the conditions
      of the convertible Notes of the Borrower dated as of August 30, 2007 (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:	 

    

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

       

    

    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.

     

     

     

     

     

     

     

     

    20Unassociated Document

    Exhibit
      4.4

    
 

    
      	 	
              THIS
                WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
                HAVE NOT
                BEEN REGIS­TERED UNDER THE SECURITIES ACT OF 1933, AS
                AMENDED.  EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A
                SECURITIES PURCHASE AGREEMENT DATED AS OF AUGUST 30, 2007, NEITHER
                THIS
                WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED
                IN THE
                ABSENCE OF AN EFFECTIVE REGISTRA­TION STATEMENT FOR SUCH 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 SUCH ACT OR UNLESS SOLD PURSUANT
                TO
                RULE 144 OR REGULATION S UNDER SUCH ACT.

            	 

    

     

    Right
      to
      Purchase 704,000 Shares of Common Stock, $.001 par value per share

     

    STOCK
      PURCHASE WARRANT

     

    THIS
      CERTIFIES THAT, for value received, AJW PARTNERS, LLC or its registered
      assigns, is entitled to purchase from Pacificap Entertainment Holdings, Inc.,
      a
      Nevada corporation (the “Company”), at any time or from time to time during the
      period specified in Paragraph 2 hereof, 704,000 fully paid and
      nonassessable shares of the Company’s Common Stock, $.001 par value per share
      (the “Common Stock”), at an exercise price per share equal to $.005 (the
“Exercise Price”).  The term “Warrant Shares,” as used herein, refers
      to the shares of Common Stock purchasable hereunder.  The Warrant
      Shares and the Exercise Price are subject to adjustment as provided in Paragraph
      4 hereof.  The term “Warrants” means this Warrant and the other
      warrants issued pursuant to that certain Securities Purchase Agreement, dated
      August 30, 2007, by and among the Company and the Buyers listed on the execution
      page thereof (the “Securities Purchase Agreement”), including any additional
      warrants issuable pursuant to Section 4(l) thereof.

     

    This
      Warrant is subject to the following terms, provisions, and
      conditions:

     

    1.    Manner
      of
      Exercise; Issuance of Certificates; Payment for Shares.Subject to
      the provisions hereof, this Warrant may be exercised by the holder hereof,
      in
      whole or in part, by the surrender of this Warrant, together with a completed
      exercise agreement in the form attached hereto (the “Exercise Agreement”), to
      the Company during normal business hours on any business day at the Company’s
      principal executive offices (or such other office or agency of the Company
      as it
      may designate by notice to the holder hereof), and upon (i) payment to the
      Company in cash, by certified or offi­cial bank check or by wire transfer
      for the account of the Company of the Exercise Price for the Warrant Shares
      specified in the Exercise Agreement or (ii) if the resale of the Warrant Shares
      by the holder is not then registered pursuant to an effective registration
      statement under the Securities Act of 1933, as amended (the “Securities Act”),
      delivery to the Company of a written notice of an election to effect a “Cashless
      Exercise” (as defined in Section 11(c) below) for the Warrant Shares specified
      in the Exercise Agreement.  The Warrant Shares so purchased shall be
      deemed to be issued to the holder hereof or such holder’s designee, as the
      record owner of such shares, as of the close of business on the date on which
      this Warrant shall have been surrendered, the completed Exercise Agreement
      shall
      have been deliv­ered, and payment shall have been made for such shares as
      set forth above.  Certifi­cates for the Warrant Shares so
      purchased, representing the aggregate number of shares specified in the Exercise
      Agreement, shall be delivered to the holder hereof within a reasonable time,
      not
      exceeding three (3) business days, after this Warrant shall have been so
      exercised.  The certificates so delivered shall be in such
      denominations as may be requested by the holder hereof and shall be registered
      in the name of such holder or such other name as shall be designated by such
      holder.  If this Warrant shall have been exercised only in part, then,
      unless this Warrant has expired, the Company shall, at its expense, at the
      time
      of delivery of such certificates, deliver to the holder a new Warrant
      representing the number of shares with respect to which this Warrant shall
      not
      then have been exercised.  In addition to all other available remedies
      at law or in equity, if the Company fails to deliver certificates for the
      Warrant Shares within three (3) business days after this Warrant is exercised,
      then the Company shall pay to the holder in cash a penalty (the “Penalty”) equal
      to 2% of the number of Warrant Shares that the holder is entitled to multiplied
      by the Market Price (as hereinafter defined) for each day that the Company
      fails
      to deliver certificates for the Warrant Shares.  For example, if the
      holder is entitled to 100,000 Warrant Shares and the Market Price is $2.00,
      then
      the Company shall pay to the holder $4,000 for each day that the Company fails
      to deliver certificates for the Warrant Shares.  The Penalty shall be
      paid to the holder by the fifth day of the month following the month in which
      it
      has accrued.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Notwithstanding
      anything in this Warrant to the contrary, in no event shall the holder of this
      Warrant be entitled to exercise a number of Warrants (or portions thereof)
      in
      excess of the number of Warrants (or portions thereof) upon exercise of which
      the sum of (i) 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 unexercised Warrants and the
      unexercised or unconverted portion of any other securities of the Company
      (including the Notes (as defined in the Securities Purchase Agreement)) subject
      to a limitation on conversion or exercise analogous to the limitation contained
      herein) and (ii) the number of shares of Common Stock issuable upon exercise
      of
      the Warrants (or portions thereof) with respect to which the determination
      described herein 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 immediately preceding sentence, beneficial
      ownership shall be determined in accordance with Section 13(d) of the Securities
      Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
      otherwise provided in clause (i) of the preceding
      sentence.  Notwithstanding anything to the contrary contained herein,
      the limitation on exercise of this Warrant set forth herein may not be amended
      without (i) the written consent of the holder hereof and the Company and (ii)
      the approval of a majority of shareholders of the Company.

     

    2.    Period
      of
      Exercise. This Warrant is exercisable at any time or from time to
      time on or after the date on which this Warrant is issued and delivered pursuant
      to the terms of the Securities Purchase Agreement and before 6:00 p.m., New
      York, New York time on the fifth (5th) anniversary
      of
      the date of issuance (the “Exercise Period”).

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

       

      3.    Certain
        Agreements of the Company. The Company hereby covenants and agrees
        as follows:

    

     

    
      	
              (a)

            	
              Shares
                to be
                Fully Paid.  All Warrant Shares
                will, upon issuance in accordance with the terms of this Warrant,
                be
                validly issued, fully paid, and nonassessable and free from all taxes,
                liens, and charges with respect to the issue
                thereof.

            

    

     

    
      	
              (b)

            	
              Reservation
                of
                Shares.  Subject to the
                Stockholder Approval (as defined in Section 4(n) the Securities Purchase
                Agreement), during the Exercise Period, the Company shall at all
                times
                have authorized, and reserved for the purpose of issuance upon exercise
                of
                this Warrant, a suf­ficient number of shares of Common Stock to
                provide for the exercise of this
                Warrant.

            

    

     

    
      	
              (c)

            	
              Listing.  The
                Company shall promptly secure the listing of the shares of Common
                Stock
                issuable upon exercise of the Warrant upon each national securities
                exchange or automated quotation system, if any, upon which shares
                of
                Common Stock are then listed (subject to official notice of issuance
                upon
                exercise of this Warrant) and shall maintain, so long as any other
                shares
                of Common Stock shall be so listed, such listing of all shares of
                Common
                Stock from time to time issuable upon the exercise of this Warrant;
                and
                the Company shall so list on each national securities exchange or
                automated quotation system, as the case may be, and shall maintain
                such
                listing of, any other shares of capital stock of the Company issuable
                upon
                the exercise of this Warrant if and so long as any shares of the
                same
                class shall be listed on such national securities exchange or automated
                quotation system.

            

    

     

    
      	
              (d)

            	
              Certain
                Actions
                Prohibited.  The Company will not,
                by amendment of its charter or through any re­organi­zation,
                transfer of assets, consolidation, mer­ger, dissolution, issue or sale
                of securities, or any other voluntary action, avoid or seek to avoid
                the
                observance or performance of any of the terms to be observed or performed
                by it hereunder, but will at all times in good faith assist in the
                carrying out of all the provisions of this Warrant and in the taking
                of
                all such action as may reasonably be requested by the holder of this
                Warrant in order to protect the exercise privilege of the holder
                of this
                Warrant against dilu­tion or other impairment, consistent with the
                tenor and purpose of this Warrant.  Without limiting the
                general­ity of the foregoing, the Company (i) will not increase the
                par value of any shares of Common Stock receivable upon the exercise
                of
                this Warrant above the Exercise Price then in effect, and (ii) will
                take
                all such actions as may be necessary or appropriate in order that
                the
                Company may validly and legally issue fully paid and nonassessable
                shares
                of Common Stock upon the exercise of this
                Warrant.

            

    

     

    
      	
              (e)

            	
              Successors
                and
                Assigns.  This Warrant will be
                binding upon any entity succeeding to the Company by merger,
                consolidation, or acquisition of all or sub­stantially all the
                Company’s assets.

            

    

     

    4.     Antidilution
      Provisions. During
      the Exercise Period, the Exercise Price and the number of Warrant Shares shall
      be subject to adjustment from time to time as provided in this Paragraph
      4.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    In
      the
      event that any adjustment of the Exercise Price as required herein results
      in a
      fraction of a cent, such Exercise Price shall be rounded up to the nearest
      cent.

     

    
      	
              (a)

            	
              Adjustment
                of
                Exercise Price and Number of Shares upon Issuance of Common
                Stock.  Except as otherwise provided in Paragraphs
                4(c) and 4(e) hereof, if and whenever on or after the date of issuance
                of
                this Warrant, the Company issues or sells, or in accordance with
                Paragraph
                4(b) 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 Market Price on the date of
                issuance (a “Dilutive Issuance”), then immediately upon the Dilutive
                Issuance, the Exercise Price will be reduced to a price determined
                by
                multiplying the Exercise Price in effect immediately prior to the
                Dilutive
                Issuance by a fraction, (i) the numerator of which is an amount equal
                to
                the sum of (x) the number of shares of Common Stock actually outstanding
                immediately prior to the Dilutive Issuance, plus (y) the quotient
                of the
                aggregate consideration, calculated as set forth in Paragraph 4(b)
                hereof,
                received by the Company upon such Dilutive Issuance divided by the
                Market
                Price in effect immediately prior to the Dilutive Issuance, and (ii)
                the
                denominator of which is the total number of shares of Common Stock
                Deemed
                Outstanding (as defined below) immediately after the Dilutive
                Issuance.

            

    

     

    
      	
              (b)

            	
              Effect
                on
                Exercise Price of Certain
                Events.  For purposes of
                determining the adjusted Exercise Price under Paragraph 4(a) hereof,
                the
                following will be applicable:

            

    

     

    
      	
              (i)

            	
              Issuance
                of
                Rights or Options.  If the Company
                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 Market Price on the
                date of
                issuance or grant of such Options, then the maximum total number
                of shares
                of Common Stock issuable upon the exercise of all such Options will,
                as of
                the date of the issuance or grant of such Options, be deemed to be
                outstanding and to have been issued and sold by the Company for 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 Company as consideration for the issuance or
                granting
                of all such Options, plus the minimum aggregate amount of additional
                consideration, if any, payable to the Company 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
                Exercise 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.

            

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	
              (ii)

            	
              Issuance
                of
                Convertible Securities.  If the Company 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 Market
                Price on
                the date of issuance, then the maximum total number of shares of
                Common
                Stock issuable upon the conversion or exchange of all such Convertible
                Securities will, as of the date of the issuance of such Convertible
                Securities, be deemed to be outstanding and to have been issued and
                sold
                by the Company for 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 Company 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 Company 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 Exercise Price will be made upon the actual
                issuance of such Common Stock upon conversion or exchange of such
                Convertible Securities.

            

    

     

    
      	
              (iii)

            	
              Change
                in Option Price or Conversion Rate.  If there is a
                change at any time in (i) the amount of additional consideration
                payable
                to the Company upon the exercise of any Options; (ii) the amount
                of
                additional consideration, if any, payable to the Company upon the
                conversion or exchange of any Convertible Securities; or (iii) the
                rate at
                which any Convertible Securities are convertible into or exchangeable
                for
                Common Stock (other than under or by reason of provisions designed
                to
                protect against dilution), the Exercise Price in effect at the time
                of
                such change will be readjusted to the Exercise Price which would
                have been
                in effect at such time had such Options or Convertible Securities
                still
                outstanding provided for such changed additional consideration or
                changed
                conversion rate, as the case may be, at the time initially granted,
                issued
                or sold.

            

    

      

    
      	
              (iv)

            	
              Treatment
                of Expired Options and Unexercised Convertible
                Securities.  If, in any case, the total number of
                shares of Common Stock issuable upon exercise of any Option or upon
                conversion or exchange of any Convertible Securities is not, in fact,
                issued and the rights to exercise such Option or to convert or exchange
                such Convertible Securities shall have expired or terminated, the
                Exercise
                Price then in effect will be readjusted to the Exercise Price which
                would
                have been in effect at the time of such expiration or termination
                had such
                Option or Convertible Securities, to the extent outstanding immediately
                prior to such expiration or termination (other than in respect of
                the
                actual number of shares of Common Stock issued upon exercise or conversion
                thereof), never been issued.

            

    

      

    
      	
              (v)

            	
              Calculation
                of Consideration Received.  If any Common Stock,
                Options or Convertible Securities are issued, granted or sold for
                cash,
                the consideration received therefor for purposes of this Warrant
                will be
                the amount received by the Company therefor, before deduction of
                reasonable commissions, underwriting discounts or allowances or other
                reasonable expenses paid or incurred by the Company in connection
                with
                such issuance, grant or sale.  In case any Common Stock, Options
                or Convertible Securities are issued or sold for a consideration
                part or
                all of which shall be other than cash, the amount of the consideration
                other than cash received by the Company will be the fair value of
                such
                consideration, except where such consideration consists of securities,
                in
                which case the amount of consideration received by the Company will
                be the
                Market Price thereof as of the date of receipt.  In case any
                Common Stock, Options or Convertible Securities are issued in connection
                with any acquisition, merger or consolidation in which the Company
                is the
                surviving corporation, the amount of consideration therefor will
                be deemed
                to be the fair value of such portion of the net assets and business
                of the
                non-surviving corporation as is attributable to such Common Stock,
                Options
                or Convertible Securities, as the case may be.  The fair value
                of any consideration other than cash or securities will be determined
                in
                good faith by the Board of Directors of the
                Company.

            

    

      

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
      	
              (vi)

            	
              Exceptions
                to Adjustment of Exercise Price.  No adjustment to
                the Exercise Price will be made (i) upon the exercise of any warrants,
                options or convertible securities granted, issued and outstanding
                on the
                date of issuance of this Warrant; (ii) upon the grant or exercise
                of any
                stock or options which may hereafter be granted or exercised under
                any
                employee benefit plan, stock option plan or restricted stock plan
                of the
                Company now existing or to be implemented in the future, so long
                as the
                issuance of such stock or options is approved by a majority of the
                independent members of the Board of Directors of the Company or a
                majority
                of the members of a committee of independent directors established
                for
                such purpose; or (iii) upon the exercise of the
                Warrants.

            

    

      

    
      	
              (c)

            	
              Subdivision
                or Combination of Common Stock.  If the Company at
                any time subdivides (by any stock split, stock dividend, recapitalization,
                reorganization, reclassification or otherwise) the shares of Common
                Stock
                acquirable hereunder into a greater number of shares, then, after
                the date
                of record for effecting such subdivision, the Exercise Price in effect
                immediately prior to such subdivision will be proportionately
                reduced.  If the Company at any time combines (by reverse stock
                split, recapitalization, reorganization, reclassification or otherwise)
                the shares of Common Stock acquirable hereunder into a smaller number
                of
                shares, then, after the date of record for effecting such combination,
                the
                Exercise Price in effect immediately prior to such combination will
                be
                proportionately increased.

            

    

     

    
      	
              (d)

            	
              Adjustment
                in Number of Shares.  Upon each adjustment of the
                Exercise Price pursuant to the provisions of this Paragraph 4, the
                number
                of shares of Common Stock issuable upon exercise of this Warrant
                shall be
                adjusted by multiplying a number equal to the Exercise Price in effect
                immediately prior to such adjustment by the number of shares of Common
                Stock issuable upon exercise of this Warrant immediately prior to
                such
                adjustment and dividing the product so obtained by the adjusted Exercise
                Price.

            

  

    
      	
              (e)

            	
              Consolidation,
                Merger or Sale.  In case of any consolidation of
                the Company with, or merger of the Company into any other corporation,
                or
                in case of any sale or conveyance of all or substantially all of
                the
                assets of the Company other than in connection with a plan of complete
                liquidation of the Company, then as a condition of such consolidation,
                merger or sale or conveyance, adequate provision will be made whereby
                the
                holder of this Warrant will have the right to acquire and receive
                upon
                exercise of this Warrant in lieu of the shares of Common Stock immediately
                theretofore acquirable upon the exercise of this Warrant, such shares
                of
                stock, securities or assets as may be issued or payable with respect
                to or
                in exchange for the number of shares of Common Stock immediately
                theretofore acquirable and receivable upon exercise of this Warrant
                had
                such consolidation, merger or sale or conveyance not taken
                place.  In any such case, the Company will make appropriate
                provision to insure that the provisions of this Paragraph 4 hereof
                will
                thereafter be applicable as nearly as may be in relation to any shares
                of
                stock or securities thereafter deliverable upon the exercise of this
                Warrant.  The Company will not effect any consolidation, merger
                or sale or conveyance unless prior to the consummation thereof, the
                successor corporation (if other than the Company) assumes by written
                instrument the obligations under this Paragraph 4 and the obligations
                to
                deliver to the holder of this Warrant such shares of stock, securities
                or
                assets as, in accordance with the foregoing provisions, the holder
                may be
                entitled to
                acquire.

            

  

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      	
              (f)

            	
              Distribution
                of Assets.  In case the Company shall declare or
                make any distribution of its assets (including cash) to holders of
                Common
                Stock as a partial liquidating dividend, by way of return of capital
                or
                otherwise, then, after the date of record for determining shareholders
                entitled to such distribution, but prior to the date of distribution,
                the
                holder of this Warrant shall be entitled upon exercise of this Warrant
                for
                the purchase of any or all of the shares of Common Stock subject
                hereto,
                to receive the amount of such assets which would have been payable
                to the
                holder 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

            

    

     

    
      	
              (g)

            	
              Notice
                of Adjustment.  Upon the occurrence of any event
                which requires any adjustment of the Exercise Price, then, and in
                each
                such case, the Company shall give notice thereof to the holder of
                this
                Warrant, which notice shall state the Exercise Price resulting from
                such
                adjustment and the increase or decrease in the number of Warrant
                Shares
                purchasable at such price upon exercise, setting forth in reasonable
                detail the method of calculation and the facts upon which such calculation
                is based.  Such calculation shall be certified by the Chief
                Financial Officer of the Company.

            

    

      

    
      	
              (h)

            	
              Minimum
                Adjustment of Exercise Price.  No adjustment of the
                Exercise Price shall be made in an amount of less than 1% of the
                Exercise
                Price in effect at the time such adjustment is otherwise required
                to be
                made, but any such lesser adjustment shall be carried forward and
                shall be
                made at the time and together with the next subsequent adjustment
                which,
                together with any adjustments so carried forward, shall amount to
                not less
                than 1% of such Exercise Price.

            

    

      

    
      	
              (i)

            	
              No
                Fractional Shares.  No fractional shares of Common
                Stock are to be issued upon the exercise of this Warrant, but the
                Company
                shall pay a cash adjustment in respect of any fractional share which
                would
                otherwise be issuable in an amount equal to the same fraction of
                the
                Market Price of a share of Common Stock on the date of such
                exercise.

            

    

     

    
      	
              (j)

            	
              Other
                Notices.  In case at any
                time:

            

  

    
      	
              (i)

            	
              the
                Company shall declare any dividend upon the Common Stock payable
                in shares
                of stock of any class or make any other distribution (including dividends
                or distributions payable in cash out of retained earnings) to the
                holders
                of the Common Stock;

            

    

      

    
      	
              (ii)

            	
              the
                Company shall offer for subscription pro rata to the holders of the
                Common
                Stock any additional shares of stock of any class or other
                rights;

            

    

      

    
      	
              (iii)

            	
              there
                shall be any capital reorganiza­tion of the Company, or
                reclassification of the Common Stock, or consolidation or merger
                of the
                Company with or into, or sale of all or substan­tially all its assets
                to, another corporation or entity;
                or

            

    

     

    
      	
              (iv)

            	
              there
                shall be a voluntary or involun­tary dissolution, liquidation or
                winding up of the Company;

            

    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    then,
      in
      each such case, the Company shall give to the holder of this Warrant (a) notice
      of the date on which the books of the Company shall close or a record shall
      be
      taken for determining the holders of Common Stock entitled to receive any such
      divi­dend, distribution, or subscription rights or for determining the
      holders of Common Stock entitled to vote in respect of any such reorganization,
      reclassification, consolidation, merger, sale, dissolution, liquidation or
      winding-up and (b) in the case of any such reorganization, reclassification,
      consolidation, merger, sale, dissolution, liquidation or winding-up, notice
      of
      the date (or, if not then known, a reasonable approximation thereof by the
      Company) when the same shall take place.  Such notice shall also
      specify the date on which the holders of Common Stock shall be entitled to
      receive such dividend, distribution, or subscription rights or to exchange
      their
      Common Stock for stock or other securities or property deliverable upon such
      reorganization, re­classification, consolidation, merger, sale, dissolution,
      liquidation, or winding-up, as the case may be.  Such notice shall be
      given at least thirty (30) days prior to the record date or the date on which
      the Company’s books are closed in respect thereto.  Failure to give
      any such notice or any defect therein shall not affect the validity of the
      proceedings referred to in clauses (i), (ii), (iii) and (iv) above.

     

    
      	
              (k)

            	
              Certain
                Events.  If any event occurs of the type
                contemplated by the adjustment provisions of this Paragraph 4 but
                not
                expressly provided for by such provisions, the Company will give
                notice of
                such event as provided in Paragraph 4(g) hereof, and the Company’s Board
                of Directors will make an appropriate adjustment in the Exercise
                Price and
                the number of shares of Common Stock acquirable upon exercise of
                this
                Warrant so that the rights of the holder shall be neither enhanced
                nor
                diminished by such event.

            

    

      

    
      	
              (I)

            	
              Certain
                Definitions.

            

    

      

    
      	
              (i)

            	
              “Common
                Stock Deemed Outstanding” shall mean the number of shares of
                Common Stock actually outstanding (not including shares of Common
                Stock
                held in the treasury of the Company), plus (x) pursuant to Paragraph
                4(b)(i) hereof, the maximum total number of shares of Common Stock
                issuable upon the exercise of Options, as of the date of such issuance
                or
                grant of such Options, if any, and (y) pursuant to Paragraph 4(b)(ii)
                hereof, the maximum total number of shares of Common Stock issuable
                upon
                conversion or exchange of Convertible Securities, as of the date
                of
                issuance of such Convertible Securities, if
                any.

            

    

      

    
      	
              (ii)

            	
              “Market
                Price,” as of any date, (i) means the average of the last
                reported sale prices for the shares of Common Stock on the OTCBB
                for the
                five (5) Trading Days immediately preceding such date as reported
                by
                Bloomberg, or (ii) if the OTCBB is not the principal trading market
                for
                the shares of Common Stock, the average of the last reported sale
                prices
                on the principal trading market for the Common Stock during the same
                period as reported by Bloomberg, or (iii) if market value cannot
                be
                calculated as of such date on any of the foregoing bases, the Market
                Price
                shall be the fair market value as reasonably determined in good faith
                by
                (a) the Board of Directors of the Company or, at the option of a
                majority-in-interest of the holders of the outstanding Warrants by
                (b) an
                independent investment bank of nationally recognized standing in
                the
                valuation of businesses similar to the business of the corporation.
                The
                manner of determining the Market Price of the Common Stock set forth
                in
                the foregoing definition shall apply with respect to any other security
                in
                respect of which a determination as to market value must be made
                hereunder.

            

    

     

    
      	
              (iii)

            	
              “Common
                Stock,” for purposes of this Paragraph 4, includes the Common
                Stock, par value $.001 per share, and any additional class of stock
                of the
                Company having no preference as to dividends or distributions on
                liquidation, provided that the shares purchasable pursuant to this
                Warrant
                shall include only shares of Common Stock, par value $.001 per share,
                in
                respect of which this Warrant is exercisable, or shares resulting
                from any
                subdivision or combination of such Common Stock, or in the case of
                any
                reorganization, reclassification, consolidation, merger, or sale
                of the
                character referred to in Paragraph 4(e) hereof, the stock or other
                securities or property provided for in such
                Paragraph.

            

  

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    5.    Issue
      Tax. The issuance of certificates for Warrant Shares upon the
      exercise of this Warrant shall be made without charge to the holder of this
      Warrant or such shares for any issuance tax or other costs in respect thereof,
      provided that the Company shall not be required to pay any tax which may be
      payable in respect of any transfer involved in the issuance and delivery of
      any
      certificate in a name other than the holder of this Warrant.

     

    6.    No
      Rights
      or Liabilities as a Shareholder. This Warrant shall not
      entitle the holder hereof to any voting rights or other rights as a shareholder
      of the Company.  No provision of this Warrant, in the absence of
      affirmative action by the holder hereof to purchase Warrant Shares, and no
      mere
      enumeration herein of the rights or privileges of the holder hereof, shall
      give
      rise to any liability of such holder for the Exercise Price or as a shareholder
      of the Company, whether such liability is asserted by the Company or by
      creditors of the Company.

     

    7.     Transfer,
      Exchange, and Replacement of Warrant.

     

    
      	
              (a)

            	
              Restriction
                on Transfer.  This Warrant and the rights granted
                to the holder hereof are transferable, in whole or in part, upon
                surrender
                of this Warrant, together with a properly executed assignment in
                the form
                attached hereto, at the office or agency of the Company referred
                to in
                Paragraph 7(e) below, pro­vided, however, that any transfer or
                assignment shall be subject to the conditions set forth in Paragraph
                7(f)
                hereof and to the applicable provisions of the Securities Purchase
                Agreement.  Until due presentment for registration of transfer
                on the books of the Company, the Company may treat the registered
                holder
                hereof as the owner and holder hereof for all purposes, and the Company
                shall not be affected by any notice to the
                con­trary.  Notwithstanding anything to the contrary
                contained herein, the registration rights described in Paragraph
                8 are
                assignable only in accordance with the provisions of that certain
                Registration Rights Agreement, dated August 30, 2007, by and among
                the
                Company and the other signatories thereto (the “Registration Rights
                Agreement”).

            

    

      

    
      	
              (b)

            	
              Warrant
                Exchangeable for Different
                Denomina­tions.  This Warrant is
                exchange­able, upon the surrender hereof by the holder hereof at the
                office or agency of the Company referred to in Paragraph 7(e) below,
                for
                new Warrants of like tenor representing in the aggregate the right
                to
                purchase the number of shares of Common Stock which may be purchased
                hereunder, each of such new Warrants to represent the right to purchase
                such number of shares as shall be designated by the holder hereof
                at the
                time of such surrender

            

    

      .

    
      	
              (c)

            	
              Replacement
                of Warrant.  Upon receipt of evi­dence
                reasonably satisfactory to the Company of the loss, theft, destruction,
                or
                mutilation of this Warrant and, in the case of any such loss, theft,
                or
                destruc­tion, upon delivery of an indemnity agreement reason­ably
                satisfactory in form and amount to the Company, or, in the case of
                any
                such mutilation, upon surrender and cancellation of this Warrant,
                the
                Company, at its expense, will execute and deliver, in lieu thereof,
                a new
                Warrant of like tenor.

            

    

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
      	
              (d)

            	
              Cancellation;
                Payment of Expenses.  Upon the surrender of this
                Warrant in connection with any trans­fer, exchange, or replacement as
                provided in this Paragraph 7, this Warrant shall be promptly canceled
                by
                the Company.  The Company shall pay all taxes (other than
                securities transfer taxes) and all other expenses (other than legal
                expenses, if any, incurred by the holder or transferees) and charges
                payable in connection with the preparation, execution, and delivery
                of
                Warrants pursuant to this Paragraph
                7.

            

    

     

    
      	
              (e)

            	
              Register.  The
                Company shall maintain, at its principal executive offices (or such
                other
                office or agency of the Company as it may designate by notice to
                the
                holder hereof), a register for this Warrant, in which the Company
                shall
                record the name and address of the person in whose name this Warrant
                has
                been issued, as well as the name and address of each transferee and
                each
                prior owner of this Warrant.

            

    

     

    
      	
              (f)

            	
              Exercise
                or Transfer Without Registration.  If, at the time
                of the surrender of this Warrant in connection with any exercise,
                transfer, or exchange of this Warrant, this Warrant (or, in the case
                of
                any exercise, the Warrant Shares issuable hereunder), shall not be
                registered under the Securities Act and under applicable state securities
                or blue sky laws, the Company may require, as a condition of allowing
                such
                exercise, transfer, or exchange, (i) that the holder or transferee
                of this
                Warrant, as the case may be, furnish to the Company a written opinion
                of
                counsel, which opinion and counsel are acceptable to the Company,
                to the
                effect that such exercise, transfer, or exchange may be made without
                registration under said Act and under applicable state securities
                or blue
                sky laws, (ii) that the holder or transferee execute and deliver
                to the
                Company an investment letter in form and substance acceptable to
                the
                Company and (iii) that the transferee be an “accredited investor” as
                defined in Rule 501(a) promulgated under the Securities Act; provided
                that
                no such opinion, letter or status as an “accredited investor” shall be
                required in connection with a transfer pursuant to Rule 144 under
                the
                Securities Act.  The first holder of this Warrant, by taking and
                holding the same, represents to the Company that such holder is acquiring
                this Warrant for investment and not with a view to the distribution
                thereof.

            

    

     

    8.     Registration
      Rights.The
      initial holder of this Warrant (and certain assignees thereof) is entitled
      to
      the benefit of such registration rights in respect of the Warrant Shares as
      are
      set forth in Section 2 of the Registration Rights
      Agreement.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    9.     Notices. All
      notices, requests, and other communications required or permitted to be given
      or
      delivered hereunder to the holder of this Warrant shall be in writing, and
      shall
      be personally delivered, or shall be sent by certified or registered mail or
      by
      recognized overnight mail courier, postage prepaid and addressed, to such holder
      at the address shown for such holder on the books of the Company, or at such
      other address as shall have been furnished to the Company by notice from such
      holder.  All notices, requests, and other communications required or
      permitted to be given or delivered hereunder to the Company shall be in writing,
      and shall be personally delivered, or shall be sent by certified or registered
      mail or by recognized overnight mail courier, postage prepaid and addressed,
      to
      the office of the Company at 2361 Campus Drive, Suite 101, Irvine, California
      92612, Attention:  President, or at such other address as shall have
      been furnished to the holder of this Warrant by notice from the
      Company.  Any such notice, request, or other communication may be sent
      by facsimile, but shall in such case be subsequently confirmed by a writing
      personally delivered or sent by certified or registered mail or by recognized
      overnight mail courier as provided above.  All notices, requests, and
      other communications shall be deemed to have been given either at the time
      of
      the receipt thereof by the person entitled to re­ceive such notice at the
      address of such person for purposes of this Paragraph 9, or, if mailed by
      registered or certified mail or with a recognized overnight mail courier upon
      deposit with the United States Post Office or such overnight mail courier,
      if
      postage is prepaid and the mailing is properly addressed, as the case may
      be.

     

    10.    Governing
      Law.THIS WARRANT 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 PARTIES HERETO HEREBY SUBMIT TO THE
      EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
      NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT, 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 WARRANT SHALL BE RESPONSIBLE FOR
      ALL
      FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY
      IN CONNECTION WITH SUCH DISPUTE.

     

    11.     Miscellaneous.

     

    
      	
              (a)

            	
              Amendments.  This
                Warrant and any provision hereof may only be amended by an instrument
                in
                writing signed by the Company and the holder
                hereof.

            

    

      

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    
      	
              (b)

            	
              Descriptive
                Headings.  The descriptive headings of the several
                paragraphs of this Warrant are in­serted for purposes of reference
                only, and shall not affect the meaning or construction of any of
                the
                provisions hereof.

            

    

      

    
      	
              (c)

            	
              Cashless
                Exercise.  Notwithstanding anything to the contrary
                contained in this Warrant, if the resale of the Warrant Shares by
                the
                holder is not then registered pursuant to an effective registration
                statement under the Securities Act, this Warrant may be exercised
                by
                presentation and surrender of this Warrant to the Company at its
                principal
                executive offices with a written notice of the holder’s intention to
                effect a cashless exercise, including a calculation of the number
                of
                shares of Common Stock to be issued upon such exercise in accordance
                with
                the terms hereof (a “Cashless Exercise”).  In the event of a
                Cashless Exercise, in lieu of paying the Exercise Price in cash,
                the
                holder shall surrender this Warrant for that number of shares of
                Common
                Stock determined by multiplying the number of Warrant Shares to which
                it
                would otherwise be entitled by a fraction, the numerator of which
                shall be
                the difference between the then current Market Price per share of
                the
                Common Stock and the Exercise Price,  and the denominator of
                which shall be the then current Market Price per share of Common
                Stock.  For example, if the holder is exercising 100,000
                Warrants with a per Warrant exercise price of $0.75 per share through
                a
                cashless exercise when the Common Stock’s current Market Price per share
                is $2.00 per share, then upon such Cashless Exercise the holder will
                receive 62,500 shares of Common
                Stock.

            

    

     

    
      	
              (d)

            	
              Remedies.  The
                Company 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
                Company acknowledges that the remedy at law for a breach of its
                obligations under this Warrant will be inadequate and agrees, in
                the event
                of a breach or threatened breach by the Company of the provisions
                of this
                Warrant, 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 Warrant 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.

            

    

     

    

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be signed by
      its duly authorized officer.

     

     

    
      	 	
              PACIFICAP
                ENTERTAINMENT

              HOLDINGS,
                INC.

            	 
	 	 	 	 
	
              Dated
                as of August
                30, 2007

            	
              By:
                

            	/s/ 	 
	 	 	Mark
              Schaftlein	 
	 	 	President	 
	 	 	 	 

    

    

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    FORM
      OF EXERCISE AGREEMENT

     

    

    
      	 	
              Dated:  

            

    

     

     

    To: 

     

     

     

    The
      undersigned, pursuant to the provisions set forth in the within Warrant, hereby
      agrees to purchase ________ shares of Common Stock covered by such Warrant,
      and
      makes pay­ment herewith in full therefor at the price per share provided by
      such Warrant in cash or by certified or official bank check in the amount of,
      or, if the resale of such Common Stock by the undersigned is not currently
      registered pursuant to an effective registration statement under the Securities
      Act of 1933, as amended, by surrender of securities issued by the Company
      (including a portion of the Warrant) having a market value (in the case of
      a
      portion of this Warrant, determined in accordance with Section 11(c) of the
      Warrant) equal to $_________.  Please issue a certificate or
      certifi­cates for such shares of Common Stock in the name of and pay any
      cash for any fractional share to:

     

     

    
 

    
      	 	 	Name:     
	 	 	Signature:
	 	 	 
	 	 	Address:
	 	 	 
	 	 	 

    

     

    
      	
               

            	
              Note:

            	
              The
                above signature should correspond exactly with the name on the face
                of the
                within Warrant, if applicable.

            

    

    

     

    and,
      if
      said number of shares of Common Stock shall not be all the shares purchasable
      under the within Warrant, a new Warrant is to be issued in the name of said
      undersigned covering the balance of the shares purchasable thereunder less
      any
      frac­tion of a share paid in cash.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    FORM
      OF ASSIGNMENT

     

    

     

    

     

    FOR
      VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
      all the rights of the undersigned under the within Warrant, with respect to
      the
      number of shares of Common Stock covered thereby set forth hereinbelow,
      to:

     

     

    
      	
              Name
                of
                Assignee                                  

            	Address  	No
              of Shares

    

    

     

    

     

    ,
      and
      hereby irrevocably constitutes and appoints ___________________________________
      as agent and attorney-in-fact to trans­fer said Warrant on the books of the
      within-named corporation, with full power of substitution in the
      premises.

     

     

    
      	
              Dated:

            	 	 
	
               

            	 	 	 
	
              In
                the presence
                of:

            	
              By:
                

            	/s/ 	 
	 	 	Name 	 
	 	 	Title
              of Signing
              Officer or Agent (if any):	 
	Address:	 	 	 
	 	 	 	 
	 	 	 	 

    

    

    
      	
               

            	
              Note:

            	
              The
                above signature should correspond exactly with the name on the face
                of the
                within Warrant, if
                applicable.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]