Document:

cdxp_ex41.htm

    EXHIBIT
4.1

     

    THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN
OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO
THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF MAY BE SOLD, TRANSFERRED,  OR OTHERWISE DISPOSED OF, UNDER AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES
LAWS.

     

    CORDEX
PHARMA, INC.

    

    Senior
Secured Convertible Promissory Note

    due April
30, 2010

    (Form
of Note)

    

    No.
A-1

    Dated:  March
4, 2010

     

    For value
received, CORDEX PHARMA, INC., a Nevada corporation (the “Maker”), hereby
promises to pay to the order of (together with its successors, representatives,
and permitted assigns, the “Holder”), in
accordance with the terms hereinafter provided, the principal amount of
___________________________________ together with interest
thereon.  Concurrently with the issuance of this Note, the Maker is
issuing separate senior secured convertible promissory notes (together with the
Existing Notes, the “Other Notes”) to
separate purchasers (the “Other Holders”)
pursuant to the Extension and Bridge Funding Agreement (as defined in Section
1.1 hereof).

     

    All
payments under or pursuant to this Note shall be made in United States Dollars
in immediately available funds to the Holder at the address of the Holder first
set forth above or at such other place as the Holder may designate from time to
time in writing to the Maker or by wire transfer of funds to the Holder’s
account, instructions for which are attached hereto as Exhibit A. The
outstanding principal balance of this Note shall be due and payable on April 30,
2010 (the “Maturity
Date”) or at such earlier time as provided herein.

     

    ARTICLE
I

     

    Section
1.1  Purchase
Agreement.  This Note has been executed and delivered pursuant
to the Extension and Bridge Funding Agreement, dated as of the date hereof, by
and among the Holder, the Maker and the other parties thereto (the “Extension
Agreement”).  The Extension Agreement, among other things,
amends certain terms of the notes (the “Existing Notes”)
issued pursuant to the Note and Warrant Purchase Agreement, dated as of
September 26, 2007 (the “Purchase Agreement”),
by and among the Maker and the purchasers listed therein and the January
Amendment Agreement (as defined in the Extension
Agreement).  Capitalized terms used and not otherwise defined herein
shall have the meanings set forth for such terms in the Purchase
Agreement.

     

    Section
1.2 
­Interest.  Beginning
on the issuance date of this Note (the “Issuance Date”), the
outstanding principal balance of this Note shall bear interest, in arrears, at a
rate per annum equal to ten percent (10%), payable in cash on the Maturity
Date.

     

    
      
        
        

      

      
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    Section
1.3 
Payment of Principal; No
Prepayment.   The Principal Amount hereof shall be paid in
full on the Maturity Date or, if earlier, upon acceleration of this Note in
accordance with the terms hereof. Any amount of principal repaid hereunder may
not be reborrowed.  Subject to Section 3.1, the Maker may not prepay
any portion of the principal amount of this Note without the prior written
consent of the Holder, which may be withheld in the Holder’s sole and absolute
discretion.

     

    Section
1.4 
Security
Agreement.  The obligations of the Maker hereunder are secured
by a continuing security interest in certain assets of the Maker pursuant to the
terms of a Security Agreement dated as of September 26, 2007 by and among the
Maker and the Maker’s subsidiaries, on the one hand, and the Holder and the
Other Holders, on the other hand, on a senior basis with the Other Notes as to
security interest and right of payment.

     

    Section
1.5 
Payment on Non-Business
Days.  Whenever any payment to be made shall be due on a
Saturday, Sunday or a public holiday under the laws of the State of New York,
such payment may be due on the next succeeding business day and such next
succeeding day shall be included in the calculation of the amount of accrued
interest payable on such date.

     

    Section
1.6 
Transfer.  This
Note may be transferred or sold, subject to the provisions of Section 5.8 of
this Note, or pledged, hypothecated or otherwise granted as security by the
Holder.

     

    Section
1.7 
Replacement.  Upon
receipt of a duly executed, notarized and unsecured written statement from the
Holder with respect to the loss, theft or destruction of this Note (or any
replacement hereof) and a standard indemnity, or, in the case of a mutilation of
this Note, upon surrender and cancellation of such Note, the Maker shall issue a
new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or
mutilated Note.

     

    Section
1.8 
Use of
Proceeds.  The Maker shall use the proceeds of this Note for
its general corporate purposes.

     

    ARTICLE
II

     

    EVENTS OF
DEFAULT;  REMEDIES

     

    Section
2.1 
­Events of
Default.  The occurrence of any of the following events shall
be an “Event of
Default” under this Note:

     

    
      
        
        

      

      
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    (a) any
default in the payment of (1) the principal amount hereunder when due, or (2)
interest on, or liquidated damages in respect of, this Note, as and when the
same shall become due and payable (whether on the Maturity Date or by
acceleration or otherwise); or

     

    (b) the Maker
shall fail to observe or perform any other covenant or agreement contained in
this Note or any Other Note which failure is not cured, if possible to cure,
within 3 business days after notice of such default sent by the Holder or by any
other Holder; or

     

    (c) the
suspension from listing, without subsequent listing on any one of, or the
failure of the Common Stock to be listed on at least one of the OTC Bulletin
Board, the American Stock Exchange, the Nasdaq National Market, the Nasdaq
SmallCap Market or The New York Stock Exchange, Inc. for a period of five (5)
consecutive Trading Days; or

     

    (d) the
Maker’s notice to the Holder, including by way of public announcement, at any
time, of its inability to comply (including for any of the reasons described in
Section 3.7(a) hereof) or its intention not to comply with proper requests for
conversion of this Note into shares of Common Stock; or

     

    (e) [Reserved];
or

     

    (f) [Reserved];
or

     

    (g) default
shall be made in the performance or observance of (i) any covenant, condition or
agreement contained in this Note (other than as set forth in clause (f) of this
Section 2.1) and such default is not fully cured within three (3) business days
after the  Maker receives notice from the Holder of the occurrence
thereof or (ii) any material covenant, condition or agreement contained in the
Purchase Agreement, the Other Notes, the Registration Rights Agreement or any
other Transaction Document (including, without limitation, any use of the
proceeds of this Note and the Other Notes other than as permitted in the
Purchase Agreement) that is not covered by any other provisions of this Section
2.1 and such default is not fully cured within three (3) business days after
the  Maker receives notice from the Holder of the occurrence
thereof;  or

     

    (h) any
material representation or warranty made by the Maker herein or in the Purchase
Agreement, the Registration Rights Agreement, the Other Notes or any other
Transaction Document shall prove to have been false or incorrect or breached in
a material respect on the date as of which made; or

     

    (i) the Maker
shall (A) default in any payment of any amount or amounts of principal of or
interest on any Indebtedness (other than the Indebtedness hereunder) the
aggregate principal amount of which Indebtedness is in excess of $300,000 or (B) default in the
observance or performance of any other agreement or condition relating to any
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit the
holder or holders or beneficiary or beneficiaries of such Indebtedness to cause
with the giving of notice if required, such Indebtedness to become due prior to
its stated maturity; or

     

    
      
        
        

      

      
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    (j) the Maker
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property or assets, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition
seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition filed against it in
an involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue a
press release regarding same, or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing;
or

     

    (k) a
proceeding or case shall be commenced in respect of the Maker, without its
application or consent, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of its
assets in connection with the liquidation or dissolution of the Maker or (iii)
similar relief in respect of it under any law providing for the relief of
debtors, and such proceeding or case described in clause (i), (ii) or (iii)
shall continue undismissed, or unstayed and in effect, for a period of thirty
(30) days or any order for relief shall be entered in an involuntary case under
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Maker or
action under the laws of any jurisdiction (foreign or domestic) analogous to any
of the foregoing shall be taken with respect to the Maker and shall continue
undismissed, or unstayed and in effect for a period of sixty (60) days;
or

     

    (l) the
failure of the Maker to instruct its transfer agent to remove any legends from
shares of Common Stock eligible to be sold under Rule 144 of the Securities Act
and issue such unlegended certificates to the Holder within three (3) business
days of the Holder’s request so long as the Holder has provided reasonable
assurances to the Maker that such shares of Common Stock can be sold pursuant to
Rule 144; or

     

    (m) the
occurrence of an Event of Default under any of the Other Notes.

     

    Section
2.2 
­ Remedies Upon An Event
of Default.  If an Event of Default shall have occurred and
shall be continuing, the Holder of this Note may at any time at its option
declare the entire unpaid principal balance of this Note, together with all
interest accrued hereon, due and payable, and thereupon, the same shall be
accelerated and so due and payable, without presentment, demand, protest, or
notice, all of which are hereby expressly unconditionally and irrevocably waived
by the Maker; provided, however, that upon
the occurrence of an Event of Default described above, the Holder, in its sole
and absolute discretion, may (a) demand the prepayment of this Note pursuant to
Section 3.6(a) hereof (to the extent permitted by Section 3.6(a) hereof), (b)
demand that the principal amount of this Note then outstanding and all accrued
and unpaid interest thereon shall be converted into shares of Common Stock at
the Conversion Price per share on the Trading Day immediately preceding the date
the Holder demands conversion pursuant to this clause, or (c) exercise or
otherwise enforce any one or more of the Holder’s rights, powers, privileges,
remedies and interests under this Note, the Purchase Agreement, the Registration
Rights Agreement or applicable law.  No course of delay on the part of
the Holder shall operate as a waiver thereof or otherwise prejudice the right of
the Holder.  No remedy conferred hereby shall be exclusive of any
other remedy referred to herein or now or hereafter available at law, in equity,
by statute or otherwise.

     

    
      
        
        

      

      
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    ARTICLE
III

     

    ­CONVERSION;
ANTIDILUTION; PREPAYMENT

     

    Section
3.1 
­Conversion
Option.

     

    (a) At any
time and from time to time on or after the Issuance Date, this Note shall be
convertible (in whole or in part), at the option of the Holder (the “Conversion Option”),
into such number of fully paid and non-assessable shares of Common Stock (the
“Conversion
Rate”) as is determined by dividing (x) that portion of the outstanding
principal balance plus any accrued but unpaid interest under this Note as of
such date that the Holder elects to convert by (y) the Conversion Price (as
defined in Section 3.2 hereof) then in effect on the date on which the Holder
faxes a notice of conversion (the “Conversion Notice”),
duly executed, to the Maker (facsimile number   (610) 660-0966,
Attn.: CFO) (the “Voluntary Conversion
Date”), provided, however, that the Conversion Price shall be subject to
adjustment as described in Section 3.5 below.  The Holder shall
deliver this Note to the Maker at the address designated in the Purchase
Agreement at such time that this Note is fully converted.  With
respect to partial conversions of this Note, the Maker shall keep written
records of the amount of this Note converted as of each Conversion
Date.

     

    (b) On the
Mandatory Conversion Date (as defined below), the Maker may cause the principal
amount of this Note plus all accrued and unpaid interest to convert into a
number of fully paid and nonassessable shares of Common Stock equal to the
quotient of (i) the principal amount of this Note plus all accrued and unpaid
interest outstanding on the Mandatory Conversion Date divided by (ii) the
Conversion Price in effect on the Mandatory Conversion Date by providing five
business (5) days prior written notice of such Mandatory Conversion Date; provided, that, the
Maker shall not convert into shares of Common Stock, during any twenty day
period, an aggregate principal amount of this Note and the Other Notes (in the
aggregate) in excess of twenty percent (20%) of the product of (i) the average
VWAP during the 20 consecutive Trading Days ending on the Mandatory Conversion
Date and (ii) the average volume of shares of Common Stock traded on the
principal market for the Common Stock during the 20 consecutive Trading Days
ending on the Mandatory Conversion Date.  As used herein, a “Mandatory Conversion
Date” shall be a date following the effective date of the Registration
Statement in which the Closing Bid Price exceeds $1.60 (as appropriately
adjusted for stock splits and combinations) for a period of twenty (20)
consecutive Trading Days; provided, that the Equity
Conditions are satisfied on the Mandatory Conversion Date and the date of the
delivery of such shares of Common Stock pursuant to the mandatory
conversion.  The Mandatory Conversion Date and the Voluntary
Conversion Date collectively are referred to in this Note as the “Conversion
Date.”

     

    
      
        
        

      

      
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    Section
3.2 
Conversion
Price.  The term “Conversion Price” shall mean $0.10, subject
to adjustment under Section 3.5 hereof.

     

    Section
3.3
     Mechanics of
Conversion.

     

    
    

    (a) Not later
than three (3) Trading Days after any Conversion Date, the Maker or its
designated transfer agent, as applicable, shall issue and deliver to the
Depository Trust Company (“DTC”) account on the
Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) as specified
in the Conversion Notice, registered in the name of the Holder or its designee,
for the number of shares of Common Stock to which the Holder shall be
entitled.  In the alternative, not later than three (3) Trading Days
after any Conversion Date, the Maker shall deliver to the applicable Holder by
express courier a certificate or certificates which shall be free of restrictive
legends and trading restrictions (other than those required by Section 5.1 of
the Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of this Note (the “Delivery
Date”).  Notwithstanding the foregoing to the contrary, the
Maker or its transfer agent shall only be obligated to issue and deliver the
shares to the DTC on the Holder’s behalf via DWAC (or certificates free of
restrictive legends) if such conversion is in connection with a sale and the
Holder has complied with the applicable prospectus delivery requirements (as
evidenced by documentation furnished to and reasonably satisfactory to the
Maker).  If in the case of any Conversion Notice such certificate or
certificates are not delivered to or as directed by the applicable Holder by the
Delivery Date, the Holder shall be entitled by written notice to the Maker at
any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Maker shall
immediately return this Note tendered for conversion, whereupon the Maker and
the Holder shall each be restored to their respective positions immediately
prior to the delivery of such notice of revocation, except that any amounts
described in Sections 3.3(b) and (c) shall be payable through the date notice of
rescission is given to the Maker.

     

    (b) The Maker
understands that a delay in the delivery of the shares of Common Stock upon
conversion of this Note beyond the Delivery Date could result in economic loss
to the Holder.  If the Maker fails to deliver to the Holder such
shares via DWAC (or, if applicable, certificates) by the Delivery Date, the
Maker shall pay to such Holder, in cash, an amount per Trading Day for each
Trading Day until such shares are delivered via DWAC or certificates are
delivered (if applicable), together with interest on such amount at a rate of
10% per annum, accruing until such amount and any accrued interest thereon is
paid in full, equal to the greater of (A) (i) 1% of the aggregate principal
amount of the Notes requested to be converted for the first five (5) Trading
Days after the Delivery Date and (ii) 2% of the aggregate principal amount of
the Notes requested to be converted for each Trading Day thereafter and (B)
$2,000 per day (which amount shall be paid as liquidated damages and not as a
penalty).  Nothing herein shall limit a Holder’s right to pursue
actual damages for the Maker’s failure to deliver certificates representing
shares of Common Stock upon conversion within the period specified herein and
such Holder shall have the right to pursue all remedies available to it at law
or in equity (including, without limitation, a decree of specific performance
and/or injunctive relief).  Notwithstanding anything to the contrary
contained herein, the Holder shall be entitled to withdraw a Conversion Notice,
and upon such withdrawal the Maker shall only be obligated to pay the liquidated
damages accrued in accordance with this Section 3.3(b) through the date the
Conversion Notice is withdrawn.

     

    
      
        
        

      

      
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    (c) In
addition to any other rights available to the Holder, if the Maker fails to
cause its transfer agent to transmit via DWAC or transmit to the Holder a
certificate or certificates representing the shares of Common Stock issuable
upon conversion of this Note on or before the Delivery Date, and if after such
date the Holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the shares of Common Stock issuable upon conversion of
this Note which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Maker shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Common Stock issuable upon conversion of this Note that the
Maker was required to deliver to the Holder in connection with the conversion at
issue times (B) the price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder, either reinstate
the portion of the Note and equivalent number of shares of Common Stock for
which such conversion was not honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Maker timely complied
with its conversion and delivery obligations hereunder.  For example,
if the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of shares of Common Stock
with an aggregate sale price giving rise to such purchase obligation of $10,000,
under clause (1) of the immediately preceding sentence the Maker shall be
required to pay the Holder $1,000. The Holder shall provide the Maker written
notice indicating the amounts payable to the Holder in respect of the Buy-In,
together with applicable confirmations and other evidence reasonably requested
by the Maker.  Nothing herein shall limit a Holder’s right to pursue
any other remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to the Maker’s failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Note as required pursuant to the
terms hereof.

     

    Section 3.4     Ownership Cap and Certain
Conversion Restrictions.

     

    
    

    (a) Notwithstanding
anything to the contrary set forth in Section 3 of this Note, at no time may the
Holder convert all or a portion of this Note if the number of shares of Common
Stock to be issued pursuant to such conversion would exceed, when aggregated
with all other shares of Common Stock owned by the Holder at such time, the
number of shares of Common Stock which would result in the Holder beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules thereunder) more than 4.9% of all of the Common Stock outstanding at
such time; provided, however, that upon
the Holder providing the Maker with sixty-one (61) days notice (pursuant to
Section 4.1 hereof) (the “Waiver Notice”) that
the Holder would like to waive this Section 3.4(a) with regard to any or all
shares of Common Stock issuable upon conversion of this Note, this Section
3.4(a) will be of no force or effect with regard to all or a portion of the Note
referenced in the Waiver Notice.

     

    
      
        
        

      

      
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    (b) Notwithstanding
anything to the contrary set forth in Section 3 of this Note, at no time may the
Holder convert all or a portion of this Note if the number of shares of Common
Stock to be issued pursuant to such conversion, when aggregated with all other
shares of Common Stock owned by the Holder at such time, would result in the
Holder beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 9.9% of the then issued
and outstanding shares of Common Stock outstanding at such time; provided, however, that upon
the Holder providing the Maker with a Waiver Notice that the Holder would like
to waive Section 3.4(b) of this Note with regard to any or all shares of Common
Stock issuable upon conversion of this Note, this Section 3.4(b) shall be of no
force or effect with regard to all or a portion of the Note referenced in the
Waiver Notice.

     

    Section
3.5 
Adjustment of Conversion
Price.

     

    (a) Until the
Note has been paid in full or converted in full, the Conversion Price shall be
subject to adjustment from time to time as follows (but shall not be increased,
other than pursuant to Section 3.5(a)(i) hereof):

     

    (i)   Adjustments for Stock Splits
and Combinations.  If the Maker shall at any time or from time
to time after the Issuance Date, effect a stock split of the outstanding Common
Stock, the applicable Conversion Price in effect immediately prior to the stock
split shall be proportionately decreased.  If the Maker shall at any
time or from time to time after the Issuance Date, combine the outstanding
shares of Common Stock, the applicable Conversion Price in effect immediately
prior to the combination shall be proportionately increased.  Any
adjustments under this Section 3.5(a)(i) shall be effective at the close of
business on the date the stock split or combination occurs.

     

    (ii)           Adjustments for Certain
Dividends and Distributions.  If the Maker shall at any time or
from time to time after the Issuance Date, make or issue or set a record date
for the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in shares of Common Stock, then, and in each
event, the applicable Conversion Price in effect immediately prior to such event
shall be decreased as of the time of such issuance or, in the event such record
date shall have been fixed, as of the close of business on such record date, by
multiplying, the applicable Conversion Price then in effect by a
fraction:

     

    (1)           the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date; and

     

    (2)           the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution.

     

    
      
        
        

      

      
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    (iii)           Adjustment for Other
Dividends and Distributions.  If the Maker shall at any time or
from time to time after the Issuance Date, make or issue or set a record date
for the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in other than shares of Common Stock, then, and in
each event, an appropriate revision to the applicable Conversion Price shall be
made and provision shall be made (by adjustments of the Conversion Price or
otherwise) so that the holders of this Note shall receive upon conversions
thereof, in addition to the number of shares of Common Stock receivable thereon,
the number of securities of the Maker or other issuer (as applicable) which they
would have received had this Note been converted into Common Stock on the date
of such event and had thereafter, during the period from the date of such event
to and including the Conversion Date, retained such securities (together with
any distributions payable thereon during such period), giving application to all
adjustments called for during such period under this Section 3.5(a)(iii) with
respect to the rights of the holders of this Note and the Other Notes; provided, however, that if such
record date shall have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Conversion Price
shall be adjusted pursuant to this paragraph as of the time of actual payment of
such dividends or distributions.

     

    (iv)           Adjustments for
Reclassification, Exchange or Substitution.  If the Common
Stock issuable upon conversion of this Note at any time or from time to time
after the Issuance Date shall be changed to the same or different number of
shares of any class or classes of stock, whether by reclassification, exchange,
substitution or otherwise (other than by way of a stock split or combination of
shares or stock dividends provided for in Sections 3.5(a)(i), (ii) and (iii), or
a reorganization, merger, consolidation, or sale of assets provided for in
Section 3.5(a)(v)), then, and in each event, an appropriate revision to the
Conversion Price shall be made and provisions shall be made (by adjustments of
the Conversion Price or otherwise) so that the Holder shall have the right
thereafter to convert this Note into the kind and amount of shares of stock and
other securities receivable upon reclassification, exchange, substitution or
other change, by holders of the number of shares of Common Stock into which such
Note might have been converted immediately prior to such reclassification,
exchange, substitution or other change, all subject to further adjustment as
provided herein.

     

    (v)           Adjustments for
Reorganization, Merger, Consolidation or Sales of Assets.  If
at any time or from time to time after the Issuance Date there shall be a
capital reorganization of the Maker (other than by way of a stock split or
combination of shares or stock dividends or distributions provided for in
Section 3.5(a)(i), (ii) and (iii), or a reclassification, exchange or
substitution of shares provided for in Section 3.5(a)(iv)), or a merger or
consolidation of the Maker with or into another corporation where the holders of
outstanding voting securities prior to such merger or consolidation do not own
over fifty percent (50%) of the outstanding voting securities of the merged or
consolidated entity, immediately after such merger or consolidation, or the sale
of all or substantially all of the Maker’s properties or assets to any other
person (an “Organic
Change”), then as a part of such Organic Change, (A) if the surviving
entity in any such Organic Change is a public company that is registered
pursuant to the Securities Exchange Act of 1934, as amended, and its common
stock is listed or quoted on a national exchange or the OTC Bulletin Board, an
appropriate revision to the Conversion Price shall be made and provision shall
be made (by adjustments of the Conversion Price or otherwise) so that the Holder
shall have the right thereafter to convert such Note into the kind and amount of
shares of stock and other securities or property of the Maker or any successor
corporation resulting from Organic Change, and (B) if the surviving entity in
any such Organic Change is not a public company that is registered pursuant to
the Securities Exchange Act of 1934, as amended, or its common stock is not
listed or quoted on a national exchange or the OTC Bulletin Board, the Holder
shall have the right to demand prepayment pursuant to Section 3.6(b)
hereof.  In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 3.5(a)(v) with respect to the
rights of the Holder after the Organic Change to the end that the provisions of
this Section 3.5(a)(v) (including any adjustment in the applicable Conversion
Price then in effect and the number of shares of stock or other securities
deliverable upon conversion of this Note and the Other Notes) shall be applied
after that event in as nearly an equivalent manner as may be
practicable.

     

    
      
        
        

      

      
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    (vi)           Adjustments for Issuance of
Additional Shares of Common Stock. In the event the Maker, shall, at any
time, from time to time, issue or sell any additional shares of common stock
(otherwise than as provided  in the foregoing subsections (i) through
(v) of this Section 3.5(a) or pursuant to Common Stock Equivalents (hereafter
defined) granted or issued prior to the Issuance Date) (“Additional Shares of Common
Stock”), at a price per share less than the Conversion Price then in
effect or without consideration, then the Conversion Price upon each such
issuance shall be reduced to a price equal to the consideration per share paid
for such Additional Shares of Common Stock.

     

    (vii)           Issuance of Common Stock
Equivalents.  The provisions of this Section 3.5(a)(vii) shall
apply if (a) the Maker, at any time after the Issuance Date, shall issue any
securities convertible into or exchangeable for, directly or indirectly, Common
Stock (“Convertible
Securities”), other than the Notes, or (b) any rights or warrants or
options to purchase any such Common Stock or Convertible Securities
(collectively, the “Common Stock
Equivalents”) shall be issued or sold.  If the price per share
for which Additional Shares of Common Stock may be issuable pursuant to any such
Common Stock Equivalent shall be less than the applicable Conversion Price then
in effect, or if, after any such issuance of Common Stock Equivalents, the price
per share for which Additional Shares of Common Stock may be issuable thereafter
is amended or adjusted, and such price as so amended shall be less than the
applicable Conversion Price in effect at the time of such amendment or
adjustment, then the applicable Conversion Price upon each such issuance or
amendment shall be adjusted as provided in the first sentence of subsection (vi)
of this Section 3.5(a).

     

    (viii)           Consideration for
Stock.  In case any shares of Common Stock or any Common Stock
Equivalents shall be issued or sold:

     

    (1)           in
connection with any merger or consolidation in which the Maker is the surviving
corporation (other than any consolidation or merger in which the previously
outstanding shares of Common Stock of the Maker shall be changed to or exchanged
for the stock or other securities of another corporation), the amount of
consideration therefor shall be, deemed to be the fair value, as determined
reasonably and in good faith by the Board of Directors of the Maker, of such
portion of the assets and business of the nonsurviving corporation as such Board
may determine to be attributable to such shares of Common Stock, Convertible
Securities, rights or warrants or options, as the case may be; or

     

    (2)           in
the event of any consolidation or merger of the Maker in which the Maker is not
the surviving corporation or in which the previously outstanding shares of
Common Stock of the Maker shall be changed into or exchanged for the stock or
other securities of another corporation, or in the event of any sale of all or
substantially all of the assets of the Maker for stock or other securities of
any corporation, the Maker shall be deemed to have issued a number of shares of
its Common Stock for stock or securities or other property of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated, and for a consideration equal to the fair market
value on the date of such transaction of all such stock or securities or other
property of the other corporation.  If any such calculation results in
adjustment of the applicable Conversion Price, or the number of shares of Common
Stock issuable upon conversion of the Notes, the determination of the applicable
Conversion Price or the number of shares of Common Stock issuable upon
conversion of the Notes immediately prior to such merger, consolidation or sale,
shall be made after giving effect to such adjustment of the number of shares of
Common Stock issuable upon conversion of the Notes.  In the event
Common Stock is issued with other shares or securities or other assets of the
Maker for consideration which covers both, the consideration computed as
provided in this Section 3.5(a)(viii) shall be allocated among such securities
and assets as determined in good faith by the Board of Directors of the
Maker.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (b) Record
Date.  In case the Maker shall take record of the holders of
its Common Stock for the purpose of entitling them to subscribe for or purchase
Common Stock or Convertible Securities, then the date of the issue or sale of
the shares of Common Stock shall be deemed to be such record date.

     

    (c) Certain Issues
Excepted.  Anything herein to the contrary notwithstanding, the
Maker shall not be required to make any adjustment to the Conversion Price in
connection with any of the transactions described in clauses (1) through (3) of
the definition of Permitted Financings (as set forth in the Purchase
Agreement).

    

    (d)           No
Impairment.  The Maker shall not, by amendment of its Articles
of Incorporation 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 hereunder by the Maker, but will at all
times in good faith, assist in the carrying out of all the provisions of this
Section 3.5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the Holder against
impairment.  In the event a Holder shall elect to convert any Notes as
provided herein, the Maker cannot refuse conversion based on any claim that such
Holder or any one associated or affiliated with such Holder has been engaged in
any violation of law, violation of an agreement to which such Holder is a party
or for any reason whatsoever, unless, an injunction from a court, or notice,
restraining and or adjoining conversion of all or of said Notes shall have
issued and the Maker posts a surety bond for the benefit of such Holder in an
amount equal to one hundred thirty percent (130%) of the amount of the Notes the
Holder has elected to convert, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Holder (as liquidated damages) in the event it obtains
judgment.

    

    (e)           Certificates as to
Adjustments.  Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock
issuable upon conversion of this Note pursuant to this Section 3.5, the Maker at
its expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder a certificate setting forth such
adjustment and readjustment, showing in detail the facts upon which such
adjustment or readjustment is based.  The Maker shall, upon written
request of the Holder, at any time, furnish or cause to be furnished to the
Holder a like certificate setting forth such adjustments and readjustments, the
applicable Conversion Price in effect at the time, and 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 the conversion of this
Note.  Notwithstanding the foregoing, the Maker shall not be obligated
to deliver a certificate unless such certificate would reflect an increase or
decrease of at least one percent (1%) of such adjusted amount.

     

    
      
        
        

      

      
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    (f)           Issue
Taxes.  The Maker shall pay any and all issue and other taxes,
excluding federal, state or local income taxes, that may be payable in respect
of any issue or delivery of shares of Common Stock on conversion of this Note
pursuant thereto; provided, however, that the
Maker shall not be obligated to pay any transfer taxes resulting from any
transfer requested by the Holder in connection with any such
conversion.

     

    (g)           Fractional
Shares.  No fractional shares of Common Stock shall be issued
upon conversion of this Note.  In lieu of any fractional shares to
which the Holder would otherwise be entitled, the Maker shall pay cash equal to
the product of such fraction multiplied by the average of the Closing Bid Prices
of the Common Stock for the five (5) consecutive Trading Days immediately
preceding the Conversion Date.

     

    (h)           Reservation of Common
Stock.  The Maker shall at all times when this Note shall be
outstanding, reserve and keep available out of its authorized but unissued
Common Stock at least one hundred twenty percent (120%) of the number of shares
of Common Stock for which this Note and all interest accrued thereon are at any
time convertible.  The Maker shall, from time to time in accordance
with the Nevada Revised Business Corporation Act, increase the authorized number
of shares of Common Stock if at any time the unissued number of authorized
shares shall not be sufficient to satisfy the Maker’s obligations under this
Section 3.6(h).

     

    (i)           ­Regulatory
Compliance.  If any shares of Common Stock to be reserved for
the purpose of conversion of this Note or any interest accrued thereon require
registration or listing with or approval of any governmental authority, stock
exchange or other regulatory body under any federal or state law or regulation
or otherwise before such shares may be validly issued or delivered upon
conversion, the Maker shall, at its sole cost and expense, in good faith and as
expeditiously as possible, endeavor to secure such registration, listing or
approval, as the case may be.

     

    Section
3.6 Prepayment.

     

    (a)           Prepayment Upon an Event of
Default.  Notwithstanding anything to the contrary contained
herein, upon the occurrence of an Event of Default described in Sections
2.1(b)-(m) hereof, the Holder shall have the right, at such Holder’s option, to
require the Maker to prepay in cash all or a portion of this Note at a price
equal to one hundred and twenty five percent (125%) of the aggregate principal
amount of this Note plus all accrued and unpaid interest applicable at the time
of such request.  Nothing in this Section 3.6(a) shall limit the
Holder’s rights under Section 2.2 hereof.

     

    
      
        
        

      

      
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    (b)           Prepayment Option Upon Major
Transaction.  In addition to all other rights of the Holder
contained herein, simultaneous with the occurrence of a Major Transaction (as
defined below), the Holder shall have the right, at the Holder’s option, to
require the Maker to prepay all or a portion of the Holder’s Notes in cash at a
price equal to the sum of (i) the greater of (A) one hundred and twenty five
percent (125%) of the aggregate principal amount of this Note plus all accrued
and unpaid interest and (B) in the event at such time the Holder is unable to
obtain the benefit of its conversion rights through the conversion of this Note
and resale of the shares of Common Stock issuable upon conversion hereof in
accordance with the terms of this Note and the other Transaction Documents or
the Registration Statement is not effective and covering the resale of all such
shares of Common Stock, the aggregate principal amount of this Note plus all
accrued but unpaid interest hereon, divided by the Conversion Price on (x) the
date the Prepayment Price (as defined below) is demanded or otherwise due or (y)
the date the Major Transaction Prepayment Price is paid in full, whichever is
less, multiplied by the VWAP on (x) the date the Major Transaction Prepayment
Price is demanded or otherwise due, and (y) the date the Major Transaction
Prepayment Price is paid in full, whichever is greater, and (ii) all other
amounts, costs, expenses and liquidated damages due in respect of this Note and
the other Transaction Documents (the “Major Transaction Prepayment
Price”).

     

    (c)           Prepayment Option Upon
Triggering Event.  In addition to all other rights of the
Holder contained herein, after a Triggering Event (as defined below), the Holder
shall have the right, at the Holder’s option, to require the Maker to prepay all
or a portion of this Note in cash at a price equal to the sum of (i) the greater
of (A) one hundred and twenty five percent (125%) of the aggregate principal
amount of this Note plus all accrued and unpaid interest and (B) the aggregate
principal amount of this Note plus all accrued but unpaid interest hereon,
divided by the Conversion Price on (x) the date the Prepayment Price (as defined
below) is demanded or otherwise due or (y) the date the Prepayment Price is paid
in full, whichever is less, multiplied by the VWAP on (x) the date the
Prepayment Price is demanded or otherwise due, and (y) the date the Prepayment
Price is paid in full, whichever is greater, and (ii) all other amounts, costs,
expenses and liquidated damages due in respect of this Note and the other
Transaction Documents (the “Triggering Event Prepayment
Price,” and, collectively with the Major Transaction Prepayment Price,
the “Prepayment
Price”).

     

    (d)           “Major
Transaction.”  A “Major Transaction”
shall be deemed to have occurred at such time as any of the following
events:

     

    (i)           the
consolidation, merger or other business combination of the Maker with or into
another Person (other than (A) pursuant to a migratory merger effected solely
for the purpose of changing the jurisdiction of incorporation of the Maker or
(B) a consolidation, merger or other business combination in which holders of
the Maker’s voting power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, the voting power of the surviving
entity or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities).

     

    (ii)           the
sale or transfer of more than fifty percent (50%) of the Maker’s assets (based
on the fair market value as determined in good faith by the Maker’s Board of
Directors) other than inventory in the ordinary course of business in one or a
related series of transactions; or

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (iii)           closing
of a purchase, tender or exchange offer made to the holders of more than fifty
percent (50%) of the outstanding shares of Common Stock in which more than fifty
percent (50%) of the outstanding shares of Common Stock were tendered and
accepted.

     

    (f) “Triggering
Event.”  A “Triggering Event”
shall be deemed to have occurred at such time as any of the following
events:

     

    (i) so long
as any Notes are outstanding, the effectiveness of the Registration Statement,
after it becomes effective, (a) lapses for any reason (including, without
limitation, the issuance of a stop order) or (b) after the Registration
Statement becomes effective, it is unavailable to the Holder for sale of the
shares of Common Stock, and such lapse or unavailability continues for a period
of twenty (20) consecutive Trading Days, and the shares of Common Stock into
which the Holder’s Notes can be converted cannot be sold in the public
securities market pursuant to Rule 144(k), provided that the cause of such lapse
or unavailability is not due to factors primarily within the control of the
Holder of the Notes; and provided further that a Triggering Event shall not have
occurred if and to the extent the Maker exercised its rights set forth in
Section 3(n) of the Registration Rights Agreement;

     

    (ii) the
suspension from listing, without subsequent listing on any one of, or the
failure of the Common Stock to be listed on at least one of the OTC Bulletin
Board, the American Stock Exchange, the Nasdaq National Market, the Nasdaq
SmallCap Market or The New York Stock Exchange, Inc., for a period of five (5)
consecutive Trading Days;

     

    (iii) the
Maker’s notice to any holder of the Notes, including by way of public
announcement, at any time, of its inability to comply (including for any of the
reasons described in Section 3.7) or its intention not to comply with proper
requests for conversion of any Notes into shares of Common Stock;
or

     

    (iv) the
Maker’s failure to comply with a Conversion Notice tendered in accordance with
the provisions of this Note within ten (10) business days after the receipt by
the Maker of the Conversion Notice; or

     

    (v) the Maker
deregisters its shares of Common Stock and as a result such shares of Common
Stock are no longer publicly traded; or

     

    (vi) the Maker
consummates a “going private” transaction and as a result the Common Stock is no
longer registered under Sections 12(b) or 12(g) of the Exchange Act;
or

     

    (vii) the Maker
defaults in the payment of (1) the principal amount hereunder when due, or (2)
interest on, or liquidated damages in respect of, this Note, as and when the
same shall become due and payable (whether on the Maturity Date or by
acceleration or otherwise); or

     

    (viii) the Maker
shall fail to file the Registration Statement within 30 days after the Filing
Date (as defined in the Registration Rights Agreement) or the Maker shall fail
to respond to comments from the Commission within 45 days of the receipt of the
same; or

     

    (ix) the Maker
shall fail to comply with Section 5.12(c) of this Note.

     

    
      
        
        

      

      
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    (h)           Mechanics of Prepayment at
Option of Holder Upon Major Transaction.  No sooner than
fifteen (15) days nor later than ten (10) days prior to the consummation of a
Major Transaction, but not prior to the public announcement of such Major
Transaction, the Maker shall deliver written notice thereof via facsimile and
overnight courier (“Notice of Major
Transaction”) to the Holder of this Note.  At any time after
receipt of a Notice of Major Transaction (or, in the event a Notice of Major
Transaction is not delivered at least ten (10) days prior to a Major
Transaction, at any time within ten (10) days prior to a Major Transaction), any
holder of the Notes then outstanding may require the Maker to prepay, effective
immediately prior to the consummation of such Major Transaction, all of the
holder’s Notes then outstanding by delivering written notice thereof via
facsimile and overnight courier (“Notice of Prepayment at
Option of Holder Upon Major Transaction”) to the Maker, which Notice of
Prepayment at Option of Holder Upon Major Transaction shall indicate (i) the
principal amount of the Notes that such holder is electing to have prepaid and
(ii) the applicable Major Transaction Prepayment Price, as calculated pursuant
to Section 3.6(b) above.

     

    (i)           Mechanics of Prepayment at
Option of Holder Upon Triggering Event.  Within one (1)
business day after the occurrence of a Triggering Event, the Maker shall deliver
written notice thereof via facsimile and overnight courier (“Notice of Triggering
Event”) to each holder of the Notes.  At any time after the
earlier of a holder’s receipt of a Notice of Triggering Event and such holder
becoming aware of a Triggering Event, any holder of this Note and the Other
Notes then outstanding may require the Maker to prepay all of the Notes on a pro
rata basis by delivering written notice thereof via facsimile and overnight
courier (“Notice of
Prepayment at Option of Holder Upon Triggering Event”) to the Maker,
which Notice of Prepayment at Option of Holder Upon Triggering Event shall
indicate (i) the amount of the Note that such holder is electing to have prepaid
and (ii) the applicable Triggering Event Prepayment Price, as calculated
pursuant to Section 3.6(c) above.  A holder shall only be permitted to
require the Maker to prepay the Note pursuant to Section 3.6 hereof for the
greater of a period of ten (10) days after receipt by such holder of a Notice of
Triggering Event or for so long as such Triggering Event is
continuing.

     

    (j)           Payment of Prepayment
Price.  Upon the Maker’s receipt of a Notice(s) of Prepayment
at Option of Holder Upon Triggering Event or a Notice(s) of Prepayment at Option
of Holder Upon Major Transaction from any holder of the Notes, the Maker shall
immediately notify each holder of the Notes by facsimile of the Maker’s receipt
of such Notice(s) of Prepayment at Option of Holder Upon Triggering Event or
Notice(s) of Prepayment at Option of Holder Upon Major Transaction and each
holder which has sent such a notice shall promptly submit to the Maker such
holder’s certificates representing the Notes which such holder has elected to
have prepaid.  The Maker shall deliver the applicable Triggering Event
Prepayment Price, in the case of a prepayment pursuant to Section 3.6(i), to
such holder within five (5) business days after the Maker’s receipt of a Notice
of Prepayment at Option of Holder Upon Triggering Event and, in the case of a
prepayment pursuant to Section 3.6(h), the Maker shall deliver the applicable
Major Transaction Prepayment Price immediately prior to the consummation of the
Major Transaction; provided that a holder’s original Note shall have been so
delivered to the Maker; provided further that if the Maker is unable to prepay
all of the Notes to be prepaid, the Maker shall prepay an amount from each
holder of the Notes being prepaid equal to such holder’s pro-rata amount (based
on the number of Notes and Other Notes held by such holder relative to the
number of Notes and Other Notes outstanding) of all Notes being
prepaid.  If the Maker shall fail to prepay all of the Notes submitted
for prepayment (other than pursuant to a dispute as to the arithmetic
calculation of the Prepayment Price), in addition to any remedy such holder of
the Notes may have under this Note and the Purchase Agreement, the applicable
Prepayment Price payable in respect of such Notes not prepaid shall bear
interest at the rate of two percent (2%) per month (prorated for partial months)
until paid in full.  Until the Maker pays such unpaid applicable
Prepayment Price in full to a holder of the Notes submitted for prepayment, such
holder shall have the option (the “Void Optional Prepayment
Option”) to, in lieu of prepayment, require the Maker to promptly return
to such holder(s) all of the Notes that were submitted for prepayment by such
holder(s) under this Section 3.6 and for which the applicable Prepayment Price
has not been paid, by sending written notice thereof to the Maker via facsimile
(the “Void Optional
Prepayment Notice”).  Upon the Maker’s receipt of such Void
Optional Prepayment Notice(s) and prior to payment of the full applicable
Prepayment Price to such holder, (i) the Notice(s) of Prepayment at Option of
Holder Upon Triggering Event or the Notice(s) of Prepayment at Option of Holder
Upon Major Transaction, as the case may be, shall be null and void with respect
to those Notes submitted for prepayment and for which the applicable Prepayment
Price has not been paid, (ii) the Maker shall immediately return any Notes
submitted to the Maker by each holder for prepayment under this Section 3.6(j)
and for which the applicable Prepayment Price has not been paid and (iii) the
Conversion Price of such returned Notes shall be adjusted to the lesser of (A)
the Conversion Price as in effect on the date on which the Void Optional
Prepayment Notice(s) is delivered to the Maker and (B) the lowest Closing Bid
Price during the period beginning on the date on which the Notice(s) of
Prepayment of Option of Holder Upon Major Transaction or the Notice(s) of
Prepayment at Option of Holder Upon Triggering Event, as the case may be, is
delivered to the Maker and ending on the date on which the Void Optional
Prepayment Notice(s) is delivered to the Maker; provided that no adjustment
shall be made if such adjustment would result in an increase of the Conversion
Price then in effect.  A holder’s delivery of a Void Optional
Prepayment Notice and exercise of its rights following such notice shall not
effect the Maker’s obligations to make any payments which have accrued prior to
the date of such notice.  Payments provided for in this Section 3.6
shall have priority to payments to other stockholders in connection with a Major
Transaction.

     

    
      
        
        

      

      
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    Section
3.7 
Inability to Fully
Convert.

     

    (a)           Holder’s Option if Maker
Cannot Fully Convert.  If, upon the Maker’s receipt of a
Conversion Notice, the Maker cannot issue shares of Common Stock registered for
resale under the Registration Statement if required pursuant to the Registration
Rights Agreement for any reason, including, without limitation, because the
Maker (w) does not have a sufficient number of shares of Common Stock authorized
and available, (x) is otherwise prohibited by applicable law or by the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Maker or any of its
securities from issuing all of the Common Stock which is to be issued to the
Holder pursuant to a Conversion Notice or (y) fails to have a sufficient number
of shares of Common Stock registered for resale under the Registration
Statement, then the Maker shall issue as many shares of Common Stock as it is
able to issue in accordance with the Holder’s Conversion Notice and, with
respect to the unconverted portion of this Note, the Holder, solely at Holder’s
option, can elect to:

     

    (i) require
the Maker to prepay that portion of this Note for which the Maker is unable to
issue Common Stock in accordance with the Holder’s Conversion Notice (the “Mandatory
Prepayment”) at a price per share equal to the Triggering Event
Prepayment Price as of such Conversion Date (the “Mandatory Prepayment
Price”);

     

    (ii) if the
Maker’s inability to fully convert is pursuant to Section 3.7(a)(x) above,
require the Maker to issue restricted shares of Common Stock in accordance with
such holder’s Conversion Notice;

     

    (iii) void its
Conversion Notice and retain or have returned, as the case may be, this Note
that was to be converted pursuant to the Conversion Notice (provided that the
Holder’s voiding its Conversion Notice shall not effect the Maker’s obligations
to make any payments which have accrued prior to the date of such
notice);

     

    (iv) exercise
its Buy-In rights pursuant to and in accordance with the terms and provisions of
Section 3.3(c) of this Note.

     

    In the
event a Holder shall elect to convert any portion of its Notes as provided
herein, the Maker cannot refuse conversion based on any claim that such Holder
or any one associated or affiliated with such Holder has been engaged in any
violation of law, violation of an agreement to which such Holder is a party or
for any reason whatsoever, unless, an injunction from a court, on notice,
restraining and or adjoining conversion of all or of said Notes shall have been
issued and the Maker posts a surety bond for the benefit of such Holder in an
amount equal to 130% of the principal amount of the Notes the Holder has elected
to convert, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder in the event it obtains judgment.

    

    (b)           Mechanics of Fulfilling
Holder’s Election.  The Maker shall immediately send via
facsimile to the Holder, upon receipt of a facsimile copy of a Conversion Notice
from the Holder which cannot be fully satisfied as described in Section 3.7(a)
above, a notice of the Maker’s inability to fully satisfy the Conversion Notice
(the “Inability to
Fully Convert Notice”).  Such Inability to Fully Convert Notice
shall indicate (i) the reason why the Maker is unable to fully satisfy such
holder’s Conversion Notice, (ii) the amount of this Note which cannot be
converted and (iii) the applicable Mandatory Prepayment Price.  The
Holder shall notify the Maker of its election pursuant to Section 3.7(a) above
by delivering written notice via facsimile to the Maker (“Notice in Response to
Inability to Convert”).

     

    
      
        
        

      

      
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    (c)           Payment of Prepayment
Price.  If the Holder shall elect to have its Notes prepaid
pursuant to Section 3.7(a)(i) above, the Maker shall pay the Mandatory
Prepayment Price to the Holder within thirty (30) days of the Maker’s receipt of
the Holder’s Notice in Response to Inability to Convert, provided that prior
to the Maker’s receipt of the Holder’s Notice in Response to Inability to
Convert the Maker has not delivered a notice to the Holder stating, to the
satisfaction of the Holder, that the event or condition resulting in the
Mandatory Prepayment has been cured and all Conversion Shares issuable to the
Holder can and will be delivered to the Holder in accordance with the terms of
this Note.  If the Maker shall fail to pay the applicable Mandatory
Prepayment Price to the Holder on the date that is one (1) business day
following the Maker’s receipt of the Holder’s Notice in Response to Inability to
Convert (other than pursuant to a dispute as to the determination of the
arithmetic calculation of the Prepayment Price), in addition to any remedy the
Holder may have under this Note and the Purchase Agreement, such unpaid amount
shall bear interest at the rate of two percent (2%) per month (prorated for
partial months) until paid in full.  Until the full Mandatory
Prepayment Price is paid in full to the Holder, the Holder may (i) void the
Mandatory Prepayment with respect to that portion of the Note for which the full
Mandatory Prepayment Price has not been paid, (ii) receive back such Note, and
(iii) require that the Conversion Price of such returned Note be adjusted to the
lesser of (A) the Conversion Price as in effect on the date on which the Holder
voided the Mandatory Prepayment and (B) the lowest Closing Bid Price during the
period beginning on the Conversion Date and ending on the date the Holder voided
the Mandatory Prepayment.

     

    (d)           Pro-rata Conversion and
Prepayment.  In the event the Maker receives a Conversion
Notice from more than one holder of the Notes on the same day and the Maker can
convert and prepay some, but not all, of the Notes pursuant to this Section 3.7,
the Maker shall convert and prepay from each holder of the Notes electing to
have its Notes converted and prepaid at such time an amount equal to such
holder’s pro-rata amount (based on the principal amount of the Notes held by
such holder relative to the principal amount of the Notes and Other Notes
outstanding) of all the Notes being converted and prepaid at such
time.

     

    Section
3.8 
No Rights as
Shareholder.  Nothing contained in this Note shall be construed
as conferring upon the Holder, prior to the conversion of this Note, the right
to vote or to receive dividends or to consent or to receive notice as a
shareholder in respect of any meeting of shareholders for the election of
directors of the Maker or of any other matter, or any other rights as a
shareholder of the Maker.

     

    ARTICLE
IV

     

    COVENANTS

    

    For so long as this Note is
outstanding, without the prior written consent of the holders of at least a
majority of the aggregate principal amount of the Notes and the Other Notes
(together, as one class):

    

    Section
4.1 
No
Liens.  other than Permitted Liens, the Maker shall not, and
shall not permit its Subsidiaries to, enter into, create, incur, assume or
suffer to exist any liens, security interests, charges, claims or other
encumbrances of any kind (collectively, “Liens”) on or with respect to any of
its assets now owned or hereafter acquired or any interest therein or any income
or profits therefrom.

     

    Section
4.2 
No
Indebtedness.  Other than Permitted Financings, the Maker shall
not, and shall not permit any Subsidiary to, enter into, create, incur, assume
or suffer to exist any Indebtedness, other than Indebtedness existing on the
date hereof and disclosed in the Commission Documents.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    Section
4.3 
Compliance with Transaction
Documents.  The Maker shall, and shall cause its Subsidiaries
to, comply with its obligations under this Note, the Other Notes and the other
Transaction Documents.

     

    Section
4.4 
Compliance with
Law.  The Maker shall, and shall cause each of its Subsidiaries
to, comply with law and duly observe and conform in all material respects to all
valid requirements of governmental authorities relating to the conduct of its
business or to its properties or assets.

     

    Section
4.5 
Transactions with
Affiliates.  The Maker shall not, and shall not permit its
Subsidiaries to, engage in any transactions with any officer, director, employee
or any Affiliate of the Maker, including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Maker, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $50,000, other than (i) for payment of reasonable salary for
services actually rendered, as approved by the Board of Directors of the Maker
as fair in all respects to the Maker, and (ii) reimbursement for expenses
incurred on behalf of the Maker.

     

    Section
4.6 
No
Dividends.  the Maker shall not, and shall not permit any
Subsidiary to, (i) declare or pay any dividends or make any distributions to any
holder(s) of Common Stock or other equity security of the Maker or such
Subsidiaries (other than dividend and distributions from a Subsidiary to the
Maker), (ii) purchase or otherwise acquire for value, directly or indirectly,
any shares or other equity security of the Maker, (iii) form or create any
subsidiary become a partner in any partnership or joint venture, or make any
acquisition of any interest in any Person or acquire substantially all of the
assets of any Person, or (iv) transfer, assign, pledge, issue or otherwise
permit any equity or other ownership interests in the Subsidiaries to be
beneficially owned or held by any person other than the Maker.

     

    Section
4.7 
No Merger or Sale of
Assets.  The Maker shall not, and shall not permit any
Subsidiary to, (i) merge or consolidate or sell or dispose of all its assets or
any substantial portion thereof or (ii) in any way or manner alter its
organizational structure or effect a change of entity; provided, that the Maker
shall be permitted to sell or dispose of its assets (but not all or
substantially all of its assets) in the ordinary course of its business and
consistent with past practice;

     

    Section
4.8 
Payment of Taxes,
Etc.  The Maker shall, and shall cause each of its Subsidiaries
to, promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Maker and the
Subsidiaries, except for such failures to pay that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Maker or such Subsidiaries shall
have set aside on its books adequate reserves with respect thereto, and
provided, further, that the Maker and such Subsidiaries will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    Section
4.9  Corporate
Existence.  the Maker shall, and shall cause each of its
Subsidiaries to, maintain in full force and effect its corporate existence,
rights and franchises and all licenses and other rights to use property owned or
possessed by it and reasonably deemed to be necessary to the conduct of its
business.

     

    Section
4.10 
Investment Company
Act.  The Maker shall conduct its businesses in a manner so
that it will not become subject to the Investment Company Act of 1940, as
amended.

     

    Section
4.11     
Maintenance of
Assets.  The Maker shall, and shall cause its Subsidiaries to,
keep its properties in good repair, working order and condition, reasonable wear
and tear excepted, and from time to time make all necessary and proper repairs,
renewals, replacements, additions and improvements thereto.

     

    Section
4.12 
Indebtedness to
Affiliates.   The Maker shall not, and shall not permit
any Subsidiary to, make any payment on any indebtedness owed to officers,
directors or Affiliates.

     

    Section
4.13 
Restriction on
Dividends.  The Maker shall not, and shall not permit any
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to pay dividends or distributions to the Maker, pay any indebtedness
owed to the Maker or transfer any properties or assets to the
Maker.

     

    Section
4.14 
No
Investments.  The Maker shall not, and shall not permit any
Subsidiary to, make or suffer to exist any Investments or commitments therefor,
other than Investments made in the ordinary course of business

     

    Section
4.15 
No Lien on
IP.  The Maker shall not, and the Maker shall not permit any of
its Subsidiaries to, directly or indirectly, to encumber or allow any Liens on,
any of its copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work, whether
published or unpublished, any patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues,
extensions, and continuations-in-part of the same, trademarks, service marks
and, to the extent permitted under applicable law, any applications therefor,
whether registered or not, and the goodwill of the business of the Maker and its
Subsidiaries connected with and symbolized thereby, know-how, operating manuals,
trade secret rights, rights to unpatented inventions, and any claims for damage
by way of any past, present, or future infringement of any of the foregoing,
other than Permitted Liens.

     

    Section
4.16 
No Material Change in
Management.  The Maker shall not permit or suffer to exist a
change in the personnel in any material management position, other than any
change resulting from death or disability.   The Maker shall not
permit or suffer to exist a change in more than three directors comprising the
Board of Directors, not including any change resulting from the death or
disability of a director.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    ARTICLE
V

     

    ­MISCELLANEOUS

     

    Section
5.1 
­Notices.  Any
notice, demand, request, waiver or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery, telecopy or facsimile at the address or number designated in the
Purchase Agreement (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first
occur.  The Maker will give written notice to the Holder at least ten
(10) days prior to the date on which the Maker takes a record (x) with respect
to any dividend or distribution upon the Common Stock, (y) with respect to any
pro rata subscription offer to holders of Common Stock or (z) for determining
rights to vote with respect to any Organic Change, dissolution, liquidation or
winding-up and in no event shall such notice be provided to such holder prior to
such information being made known to the public.  The Maker will also
give written notice to the Holder at least ten (10) days prior to the date on
which any Organic Change, dissolution, liquidation or winding-up will take place
and in no event shall such notice be provided to the Holder prior to such
information being made known to the public. The Maker shall promptly notify the
Holder of this Note of any notices sent or received, or any actions taken with
respect to the Other Notes.

     

    Section
5.2 
Governing
Law.  This Note shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction.  This Note
shall not be interpreted or construed with any presumption against the party
causing this Note to be drafted.

     

    Section
5.3 
­Headings.  Article
and section headings in this Note are included herein for purposes of
convenience of reference only and shall not constitute a part of this Note for
any other purpose.

     

    Section
5.4 
Remedies, Characterizations,
Other Obligations, Breaches and Injunctive Relief.  The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note, at law or in equity (including, without
limitation, a decree of specific performance and/or other injunctive relief), no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit a holder’s
right to pursue actual damages for any failure by the Maker to comply with the
terms of this Note.  Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the holder thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Maker (or
the performance thereof).  The Maker acknowledges that a breach by it
of its obligations hereunder will cause irreparable and material harm to the
Holder and that the remedy at law for any such breach may be inadequate.
Therefore the Maker agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available rights
and remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    Section
5.5 
Enforcement
Expenses.  The Maker agrees to pay all costs and expenses of
enforcement of this Note, including, without limitation, reasonable attorneys’
fees and expenses.

     

    Section
5.6 
Binding
Effect.   The obligations of the Maker and the Holder set
forth herein shall be binding upon the successors and assigns of each such
party, whether or not such successors or assigns are permitted by the terms
hereof.

     

    Section
5.7 
Amendments.  This
Note may not be modified or amended in any manner except in writing executed by
the Maker and the Holder.

     

    Section
5.8 
Compliance with Securities
Laws.  The Holder of this Note acknowledges that this Note is
being acquired solely for the Holder’s own account and not as a nominee for any
other party, and for investment, and that the Holder shall not offer, sell or
otherwise dispose of this Note except in accordance with applicable securities
laws.  This Note and any Note issued in substitution or replacement
therefor shall be stamped or imprinted with a legend in substantially the
following form:

     

    “THIS NOTE AND THE SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE
REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION HEREOF HAVE MAY BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION
UNDER THE ACT AND SUCH STATE SECURITIES LAWS.”

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    Section
5.9 
­Consent to
Jurisdiction.  Each of the Maker and the Holder (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court sitting in the Southern District of New York and the courts of the State
of New York located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Note and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper.  Each of the Maker and the
Holder consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices to
it under the Purchase Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof.  Nothing in
this Section 4.9 shall affect or limit any right to serve process in any other
manner permitted by law.  Each of the Maker and the Holder hereby
agree that the prevailing party in any suit, action or proceeding arising out of
or relating to this Note shall be entitled to reimbursement for reasonable legal
fees from the non-prevailing party.

     

    Section
5.10 
­Parties in
Interest.  This Note shall be binding upon, inure to the
benefit of and be enforceable by the Maker, the Holder and their respective
successors and permitted assigns.

     

    Section
5.11 
­Failure or Indulgence
Not Waiver.  No failure or delay on the part of the Holder in
the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.

     

    Section
5.12 
­Maker Waivers; Dispute
Resolution.  Except as otherwise specifically provided herein,
the Maker and all others that may become liable for all or any part of the
obligations evidenced by this Note, hereby waive presentment, demand, notice of
nonpayment, protest and all other demands’ and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, and do hereby
consent to any number of renewals of extensions of the time or payment hereof
and agree that any such renewals or extensions may be made without notice to any
such persons and without affecting their liability herein and do further consent
to the release of any person liable hereon, all without affecting the liability
of the other persons, firms or Maker liable for the payment of this Note, AND DO
HEREBY WAIVE TRIAL BY JURY.

     

    (a) No delay
or omission on the part of the Holder in exercising its rights under this Note,
or course of conduct relating hereto, shall operate as a waiver of such rights
or any other right of the Holder, nor shall any waiver by the Holder of any such
right or rights on any one occasion be deemed a waiver of the same right or
rights on any future occasion.

     

    (b) THE MAKER
ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL
TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS
RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE
HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.

     

    (c) In the
case of a dispute as to the determination of the Closing Bid Price or the VWAP
or the arithmetic calculation of the Conversion Price, any adjustment to the
Conversion Price, liquidated damages amount, interest or dividend calculation,
or any redemption price, redemption amount, adjusted Conversion Price, or
similar calculation, or as to whether a subsequent issuance of securities is
prohibited hereunder or would lead to an adjustment to the Conversion Price, the
Maker shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Business Days of receipt, or deemed receipt, of the
Conversion Notice, any redemption notice, default notice or other event giving
rise to such dispute, as the case may be, to the Holder. If the Holder and the
Maker are unable to agree upon such determination or calculation within two (2)
Business Days of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Maker shall, within two (2) Business Days
submit via facsimile (a) the disputed determination of the Closing Price or the
VWAP to an independent, reputable investment bank selected by the Maker and
approved by the Holder, which approval shall not be unreasonably withheld, (b)
the disputed arithmetic calculation of the Conversion Price, adjusted Conversion
Price or any redemption price, redemption amount or default amount to the
Maker’s independent, outside accountant or (c) the disputed facts regarding
whether a subsequent issuance of securities is prohibited hereunder or would
lead to an adjustment to the Conversion Price (or any of the other above
described facts not expressly designated to the investment bank or accountant),
to an expert attorney from a nationally recognized outside law firm (having at
least 100 attorneys and having with no prior relationship with the Maker)
selected by the Maker and approved by the Lead Purchaser as defined in the
Purchase Agreement).  The Maker, at the Maker’s expense, shall cause
the investment bank, the accountant, the law firm, or other expert, as the case
may be, to perform the determinations or calculations and notify the Maker and
the Holder of the results no later than five (5) Business Days from the time it
receives the disputed determinations or calculations. Such investment bank’s,
accountant’s or attorney’s determination or calculation, as the case may be,
shall be binding upon all parties absent demonstrable error.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    Section
5.13 
Definitions.  Terms
used herein and not defined shall have the meanings set forth in the Purchase
Agreement.  For the purposes hereof, the following terms shall have
the following meanings:

     

    “Closing Bid Price”
shall mean, on any particular date (i) the last trading price per share of the
Common Stock on such date on the OTC Bulletin Board or another registered
national stock exchange on which the Common Stock is then listed, or if there is
no such price on such date, then the last trading price on such exchange or
quotation system on the date nearest preceding such date, or (ii) if the Common
Stock is not listed then on the OTC Bulletin Board or any registered national
stock exchange, the last trading price for a share of Common Stock in the
over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (iii) if the Common Stock is not then reported by the OTC Bulletin
Board or the National Quotation Bureau Incorporated (or similar organization or
agency succeeding to its functions of reporting prices), then the average of the
“Pink Sheet” quotes for the relevant conversion period, as determined in good
faith by the Holder, or (iv) if the Common Stock is not then publicly traded the
fair market value of a share of Common Stock as determined by the Holder and
reasonably acceptable to the Maker.

    

    “Equity Conditions”
shall mean, during the period in question, (i) the Maker shall have duly honored
all conversions and redemptions scheduled to occur or occurring by virtue of one
or more Conversion Notices of the Holder, if any, (ii) all liquidated damages
and other amounts owing to the Holder in respect of this Note shall have been
paid; (iii) there is an effective Registration Statement pursuant to which the
Holder is permitted to utilize the prospectus thereunder to resell all of the
shares issuable pursuant to the Transaction Documents, whether by conversion or
exercise, forced conversion, in lieu of cash interest or otherwise (and the
Maker believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future), (iv) the Common Stock is trading on
the Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed for trading on a Trading Market (and the Maker believes, in
good faith, that trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (v) there is a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the Transaction Documents,
(vi) there is then existing no Event of Default or event which, with the passage
of time or the giving of notice, would constitute an Event of Default, (vii) the
issuance of the shares in question to the Holder would not violate the
limitations set forth in Section 3.4 hereof, (viii) no public announcement of a
pending or proposed Major Transaction or Triggering Event has occurred and (ix)
the average daily trading dollar volume of the Common Stock for each three
consecutive Trading Days throughout such period exceeds $100,000.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    “Indebtedness” means
(a) all obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, current swap
agreements, interest rate hedging agreements, interest rate swaps, or other
financial products, (c) all capital lease obligations that exceed $50,000 in the
aggregate in any fiscal year, (d) all obligations or liabilities secured by a
lien or encumbrance on any asset of the Maker, irrespective of whether such
obligation or liability is assumed, (e) all obligations for the deferred
purchase price of assets, together with trade debt and other accounts payable
that exceed $50,000 in the aggregate in any fiscal year, (f) all synthetic
leases, and (g) any obligation guaranteeing or intended to guarantee (whether
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse) any of the foregoing obligations of any other person; provided,
however, Indebtedness shall not include (a) usual and customary trade debt
incurred in the ordinary course of business and (b) endorsements for collection
or deposit in the ordinary course of business.

    

    “Investment” means,
with respect to any Person, all investments in any other Person, whether by way
of extension of credit, loan, advance, purchase of stock or other ownership
interest (other than ownership interests in such Person), bonds, notes,
debentures or other securities, or otherwise, and whether existing on the date
of this Agreement or thereafter made, but such term shall not include the cash
surrender value of life insurance policies on the lives of officers or
employees, excluding amounts due from customers for services or products
delivered or sold in the ordinary course of business.

    

    “Permitted Lien”
means the individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet due or Liens
for taxes, assessments and other governmental charges or levies being contested
in good faith and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Maker) have been established in
accordance with GAAP; and (b) Liens imposed by law which were incurred in the
ordinary course of the Maker’s business, such as carriers’, warehousemen’s and
mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
the ordinary course of the Maker’s business, and which (x) do not individually
or in the aggregate materially detract from the value of such property or assets
or materially impair the use thereof in the operation of the business of the
Maker and its consolidated subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of preventing for
the foreseeable future the forfeiture or sale of the property or asset subject
to such Lien.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    “Person” means an
individual or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.

     

    “Trading Day” means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board, or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a) or (b)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.

    

    “Trading Market” means
the Over the Counter Bulletin Board, the New York Stock Exchange, the Nasdaq
Capital Markets, the Nasdaq Global Markets, the Nasdaq Global Select Market or
the American Stock Exchange.

    

    “VWAP” means, for any
date, (i) the daily volume weighted average price of the Common Stock for such
date on the OTC Bulletin Board as reported by Bloomberg Financial L.P. (based on
a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(ii) if the Common Stock is not then listed or quoted on the OTC Bulletin
Board and if prices for the Common Stock are then reported in the “Pink Sheets”
published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (iii) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the
Maker.

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    
 

    IN
WITNESS WHEREOF, the Maker has caused this Note to be duly executed by its duly
authorized officer as of the date first above indicated.

    

    
      
        	 	CORDEX PHARMA,
      INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	 	Name:
      Shepard Goldberg	 
	 	 	Title:
      Chief Executive Officer	 
	 	 	 	 

      

    

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    EXHIBIT
A

    

    WIRE
INSTRUCTIONS

     

     

    Payee:
________________________________________________________

     

    Bank:  ________________________________________________________

     

    Address:
_____________________________________________________

     

     _____________________________________________________

     

    Bank No.:
_____________________________________________________

     

    Account
No.:  __________________________________________________

     

    Account
Name: _________________________________________________

     

    

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

     

    FORM
OF

     

    NOTICE OF
CONVERSION

     

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

     

    The
undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. ___ into shares of Common Stock of Cordex
Pharma, Inc. (the “Maker”) according to the conditions hereof, as of the date
written below.

     

    Date of
Conversion
_________________________________________________________

     

    Applicable
Conversion Price __________________________________________________

     

    Number of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the Date of Conversion: _________________________

     

    Signature___________________________________________________________________

     

    [Name]

     

    Address:__________________________________________________________________

     

    _______________________________________________________________________

     

     

     

    
      
        
        

      

      
        28cdxp_ex101.htm

     

     

    Exhibit 10.1

    EXTENSION
AND BRIDGE FUNDING AGREEMENT

    

    THIS EXTENSION AND BRIDGE FUNDING
AGREEMENT (this “Agreement”) is entered into on
March 4, 2010 by and among Cordex Pharma, Inc., a Nevada
corporation, f/k/a Duska Therapeutics, Inc., a Nevada corporation (the “Company”), and the Company’s
subsidiary Duska Scientific Co., a Delaware corporation (such subsidiary, the “Guarantor” and together with the Company, the “Debtors”), on the one hand,
and Platinum-Montaur Life
Sciences LLC (“PMLS”), Platinum Long Term Growth VI, LLC (“PLTG”), Firebird
Global Master Fund Ltd. (“FGMF”), Firebird Global Master Fund II Ltd. (“FGMF
II”), ICON Capital Partners, LP (“ICP”), Philip and Debra Sobol Trust (“PDST”)
and BridgePointe Master
Fund Ltd. (“BridgePointe,” together with
PMLS, PLTG, FGMF, FGMF II and PDST, each individually referred to as a “Holder” and collectively as
the “Holders”), on the
other hand.  Capitalized terms not defined in this Agreement shall
have the meanings ascribed to such terms in each of the Securities Purchase
Agreement (as defined below) or in each of the Debentures (as defined
below).

    

    WHEREAS, pursuant to a Note
and Warrant Purchase Agreement dated on or about September 26, 2007 (the “Securities Purchase
Agreement”) by and among the Company and the Holders, the Company issued
to the Holders (a) an aggregate principal amount equal to $5,900,000 of the
Company’s Senior Secured Convertible Promissory Notes Due September 26, 2009,
issued on or about September 26, 2007 (the “Debentures”), (b) short term
warrants to purchase an aggregate of 14,750,000 shares of Common Stock, with a
Date of Issuance of September 26, 2007 and an initial exercise price of $0.50 per share (the
“Short Term Warrants”) and (c) long term
warrants to purchase an aggregate of 14,375,000 shares of Common Stock, with a
Date of Issuance of September 26, 2007 and an initial exercise price of $0.44, per share (the
“Long Term Warrants” and
together with the Short Term Warrants referred to as the “Warrants,” and the Warrants
together with the Debentures, collectively referred to herein as the “Securities”);

     

    WHEREAS, pursuant to a
Guaranty agreement (the “Guaranty”), dated as of
September 26, 2007, by the Guarantor, in favor of the Holders, the Guarantor
guaranteed payment of the Company’s obligations under the Debentures to the
Holders;

     

    WHEREAS, pursuant to the
Amendment to Debentures and Warrants Agreement and Waiver dated as of October
19, 2009 (the “October
Amendment Agreement”), among the Company, the Guarantor and the Holders,
as amended by one or more the Extensions to the Amendment to Debentures and
Warrants Agreement and Waiver, among the Holders, the Company and the Guarantor,
the parties thereto agreed, among other things, to extend the maturity date of
the Debentures to January 8, 2010, and to increase the principal amounts of the
Debentures as set forth on Schedule A thereto;

    

    WHEREAS, pursuant to the
Extension and Bridge Funding Agreement among the Company, the Guarantor and the
Holders, dated as of January 20, 2010 (the “January Amendment Agreement”),
the Company issued secured Bridge Notes (the “January Notes”) to certain of
the Holders and the parties thereto agreed, among other things, to extend the
maturity date of the Debentures to February 28, 2010 and to increase the
principal amounts of the Debentures as set forth on Schedule A
thereto;

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    WHEREAS, pursuant to the
Extension and Bridge Funding Agreement among the Company, the Guarantor and the
Holders, dated as of February 17, 2010 (the “February Amendment Agreement”
and, together with the January Amendment Agreement and the October Amendment
Agreement, the “Amendment
Agreements”), the Company issued secured Bridge Notes (the “February Notes”) to certain of
the Holders and the parties thereto agreed, among other things, to extend the
maturity date of the Debentures to March 31, 2010;

    

    WHEREAS, the Holders have
agreed to subordinate their security interest in the collateral currently
securing the Debentures to the Debtors’ obligations under the Bridge Loan and
Bridge Guaranty (each as defined below); and

    

    WHEREAS, the Company has
requested that the Holders further extend the Maturity Date of the Debentures,
the January Notes and the February Notes, and the Holders have agreed to such
extension on the terms and conditions set forth herein.

    

    NOW THEREFORE, in
consideration of the mutual promises and agreements contained herein, and
intending to be legally bound hereby, the undersigned parties hereby agree as
follows:

    

    Incorporation of Preliminary
Statements. The Recitals set forth above by this reference hereto are
hereby incorporated into this Agreement.

    

    1. Certain
Definitions.  Terms used herein and not defined shall have the
meanings set forth in the Securities Purchase Agreement.

    

    2. Confirmation of Outstanding
Principal Amounts of the Debentures.  The Company and the
Holders acknowledge that the outstanding principal amounts of the respective
Debentures of each Holder, as of immediately prior to this Agreement, is as set
forth in the Schedule
“A” under the heading “Outstanding Principal Amounts.”

    

    3. Amendment to Debentures and
Securities Purchase Agreement.  Each of the Debentures, the
January Notes and the February Notes is hereby amended as follows:

    

    The
“Maturity Date” in the Debentures, the January Notes and the February Notes is
hereby redefined to mean April 30, 2010; provided, that it is understood that
interest shall continue to accrue on the principal amount of the Debentures
until paid in full at the Default Rate set forth therein.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    4. Bridge
Funding.  On the date hereof, PMLS, PLTG, FGMF, FGMF II and
BridgePointe (collectively, the “Bridge Lenders”) are advancing
to the Company an aggregate of $40,000 (the “Bridge Loan”), with each
Bridge Lender advancing the sum set forth opposite such Bridge Lender’s name on
Schedule “B”
hereto.  Each Holder hereby consents to the Bridge Loan up to the
specified amount, and waives any right of participation or similar rights with
respect thereto (including pursuant to Section 3.19 of the Purchase Agreement)
and acknowledges and agrees that the Bridge Loan shall not be deemed to be a
“Triggering Issuance” for purposes of the Amendment Agreement.  Each
Bridge Lender shall be issued a Bridge Note, in substantially the form attached
hereto as Exhibit A (collectively, the “Bridge Notes”), to evidence
its portion of the Bridge Loan and the Guarantor is entering into a Guaranty
(the “Bridge Guaranty”)
in favor of the Bridge Lenders guaranteeing repayment of the Bridge Loan to the
Bridge Lenders.  The Debtors’ obligations under the Bridge Loan and
Bridge Guaranty shall be secured by all collateral currently securing the
Debentures; provided, that, the Debtors’ obligations under the Bridge Notes
(together with all costs of collecting such obligations including attorneys’
fees) shall be deemed senior, in payment and security, to their obligations
under the Debentures set forth above but shall be on a parity basis with the
Debtors’ obligations under the January Notes and the February
Notes.  The Debtors hereby ratify and confirm the security interest
granted to the Bridge Lenders pursuant to the Security Agreement and the other
Transaction Documents and agree that the term “Obligations” under the Security
Agreement be deemed to mean and include the obligations under the Bridge Notes
and Bridge Guaranty.  It is understood and agreed that the Bridge
Loans (including all amounts payable under the Bridge Notes) shall, in all
events, be paid in full prior to any payment made in respect of the
Debentures.  Each Holder covenants and agrees to note on the face of
each Debenture held by it that such Debenture is subject to the provisions of
this Agreement.  Each Holder hereby consents to the incurrence by the
Debtors of the indebtedness evidenced by the Bridge Notes.

    

    5. Agreement and Clarification
Regarding Amended Debentures. It is the intention of the Holders and
the Company that the Rule 144 holding periods for the shares issuable upon
conversion of the Debentures will tack to, and run from, the September 26, 2007
Original Issue Dates of the Debentures and the Company hereby acknowledges such
tacking (the “Hold Period
Tacking”).  If an opinion of counsel is required by the
transfer agent in order to issue unlegended shares upon the conversion of a
Debenture, the Company and its legal counsel agree to accept an opinion of
counsel from Holder’s legal counsel confirming the Hold Period Tacking of such
holding periods regarding the Debentures, in each case as amended hereby (the
“Tacking Opinion”) and,
if required by the transfer agent, also confirming the non-affiliate status of
the Holder (“Affiliate
Opinion”).   Prior to and as a condition to the
effectiveness of this Agreement, the Company shall provide a letter (the “Counsel Acceptance Letter”),
signed by its outside counsel, stating that such counsel agrees to accept a
Tacking Opinion and Affiliate Opinion presented by an attorney reasonably
experienced in securities law as legal counsel for the Holder.

    

     Upon
receipt of a Tacking Opinion and/or Affiliate Opinion from the Holder’s legal
counsel, the Company’s legal counsel shall submit an opinion of counsel to the
transfer agent and the Company which confirms and acknowledges the Tacking
Opinion and the Affiliate Opinion (the “Company Counsel
Opinion”).  At such time as the Holders or transfer agent shall
so require in connection with the conversion of a Debenture, the Company shall
provide the Company Counsel Opinion, signed by Company’s counsel, to the Holder
or the transfer agent (or an updated, or bring-down opinion, if required by the
transfer agent).  The Company agrees not to take a position contrary
to this Section 5 provided that applicable law is not amended after the date
hereof to require the Company to take a contrary position.  In addition to, and without limiting the rights and
obligations of the parties under the Transaction Documents, the Company
agrees to use its best efforts to take all actions, including, without
limitation,  the issuance by its legal
counsel of any legal opinions necessary to issue to the Holders any Debentures
and Warrants (and for the underlying shares issuable upon the conversion or
exercise thereof) without restriction and not containing any restrictive legend
without the need for any action by the Holder, except that the Company may
request the applicable holder to provide a customary Rule 144 representation
letter, with such issuance to otherwise be made in
accordance with the terms and conditions of the applicable Transaction
Documents.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    6. Amendments.  No
provision of this Agreement may be waived or amended except in a written
instrument signed by the Company and by the Holders then holding at least 80% of
the outstanding principal amount of the Debentures (the “Required Holders”), provided
that there shall be no amendment or waiver of the provisions of this Agreement
related to the senior security interest with respect to the Bridge Notes except
in a written instrument signed by the Company and by each of the
Holders.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right.

    

    7. Capitalization.  The
capitalization of the Company as of the date hereof, immediately following and
accounting for the effectiveness of this Agreement, is as set forth on Schedule “C”, which
Schedule shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the date
hereof.

    

    8. Release.  The Debtors hereby knowingly and
voluntarily forever release, acquit and discharge the Holders from and of any
and all claims that the Holders, their affiliates or their agents are in any way
responsible for the past or current condition or deterioration of the business
operations and/or financial condition of the Debtors, and from and of any and
all claims that the Holders breached any agreement to loan money or make other
financial accommodations available to the Debtors or to fund any operations of
the Debtors at any time. The Debtors also hereby knowingly and voluntarily
forever release, acquit and discharge the Holders (and their affiliates and
agents) from and of any and all other claims, damages, losses, actions,
counterclaims, suits, judgments, obligations, liabilities, defenses, affirmative
defenses, setoffs, and demands of any kind or nature whatsoever, in law or in
equity, whether presently known or unknown, which the Debtors may have had, now
have, or which it can, shall or may have for, upon, or by reason of any matter,
course or thing whatsoever relating to, arising out of, based upon, or in any
manner connected with, any transaction, event, circumstance, action, failure to
act, or occurrence of any sort or type, whether known or unknown, which
occurred, existed, was taken, permitted, begun, or otherwise related or
connected to or with any or all of the obligations under Debentures, this
Agreement, any or all of the Transaction Documents, and/or any direct or
indirect action or omission of the Holders related to any or all of the
obligations under Debentures, this Agreement, any or all of the Transaction
Documents.  The Debtors further agree that from and after the date
hereof, it will not assert to any person or entity that any deterioration of the
business operations or financial condition of the Debtors was caused by any
breach or wrongful act of the Holders (and their affiliates or agents) that
occurred prior to the date hereof.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    9. Effect on Transaction
Documents. Subject to the
amendments provided herein, all of the terms and conditions of the Transaction
Documents and the Amendment Agreement shall continue in full force and effect
after the execution of this Agreement and shall not be in any way changed,
modified or superseded by the terms set forth herein, including but not limited
to, any other obligations the Company may have to the Holders under the
Transaction Documents and the Amendment Agreement provided however that references to Securities,
Debentures and Notes in the Transaction Documents shall include such securities,
as amended hereby, and the shares underlying such
securities.  Except as expressly set forth herein, this
Agreement shall not be deemed to be a waiver, amendment or modification of any
provisions of the Transaction Documents or of any right, power or remedy of the
Holders, or constitute a waiver of any provision of the Transaction Documents,
or any other document, instrument and/or agreement executed or delivered in
connection therewith, in each case whether arising before or after the date
hereof or as a result of performance hereunder or thereunder.  The
Holders reserve all rights, remedies, powers, or privileges available under the
Transaction Documents and the Amendment Agreement, at law or
otherwise.  This Agreement shall not constitute a novation or
satisfaction and accord of the Transaction Documents or any other document,
instrument and/or agreement executed or delivered in connection therewith,
including, without limitation, the Security Agreement.

    

    10. Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be delivered as set forth in the applicable
Transaction Document.

    

    11. Successors and
Assigns.  This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and
shall inure to the benefit of the Holders. The Company may not assign (except by
merger) its rights or obligations hereunder without the prior written consent of
the Holders.  The Holders may assign their respective rights hereunder
in the manner and to the Persons as permitted under the applicable Transaction
Document.

    

    12. Execution and
Counterparts.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart.  In the event that any
signature is delivered by facsimile transmission or by e-mail delivery of a
“.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.

    

    13. Governing Law and
Venue.  All questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the venue for court actions
shall be determined in accordance with the provisions of the Transaction
Documents.

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    14. Severability.  If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

    

    15. Headings.  The
headings in this Agreement are for convenience only, do not constitute a part of
this Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

    

    16. Closing
Conditions.  Prior to and as a condition to closing of this
Agreement, the Company shall provide to the Holders (i) a certificate, signed by
the president and chief executive officer of the Company, certifying that no new
lawsuits or material changes have occurred in the business of the Company or its
Subsidiaries since the Company’s last 10-Q for the period ended September 30,
2009 other than in connection with this transaction and the Amendment
Agreements, and (ii) all other documents required to be delivered by the Company
hereunder shall have been executed and delivered to the Holders.

     

    17. Representations and
Warranties; Corporate Authority.  The Company hereby makes the
representations and warranties set forth below to the Holders that as of the
date of its execution of this Agreement:

    

    (a)           The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by this Agreement and otherwise to
carry out its obligations hereunder and thereunder.  The execution and
delivery of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of such Company and no further action is required by such
Company, its board of directors or its stockholders in connection
therewith.  This Agreement has been duly executed by the Company and,
when delivered in accordance with the terms hereof will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.

    

    (b)           The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby do not and
will not: (i) conflict with or violate any provision of the Company’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, or (ii) conflict with, or constitute a material default (or
an event that with notice or lapse of time or both would become a default)
under, result in the creation of any lien upon any of the properties or assets
of the Company, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any material agreement, credit facility, debt or other material instrument
(evidencing Company debt or otherwise) or other material understanding to which
the Company is a party or by which any property or asset of the Company is bound
or affected, or (iii) conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations), or by which any property or
asset of the Company is bound or affected.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
 

    (c)           No
consideration has been offered or paid to any person to amend or consent to a
waiver, modification, forbearance or otherwise of any provision of any of the
Transaction Documents.

    

    (d)           All
of the Company’s warranties and representations contained in this Agreement
shall survive the execution, delivery and acceptance of this Agreement by the
parties hereto.  Except as otherwise set forth on the disclosure
schedule attached hereto as Schedule “D,” the
Company expressly reaffirms that each of the representations and warranties set
forth in the Securities Purchase Agreement continues to be true, accurate and
complete, and the Company hereby remake and incorporate herein by reference each
such representation and warranty as though made on the date of this
Agreement.

    

    18. Amendments and
Waivers.  The Holders hereby waive the Debtors’ failure to make
interest payments on the Debentures when due on January 1, 2010 (it being agreed
that such interest shall be payable on the Maturity Date of the Debentures as
extended hereunder).  No waiver of any default with respect to any
provision, condition or requirement of this Agreement or the other Transaction
Documents shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such
right.

    

    19. Joint
Preparation.  Each of the parties hereto acknowledges that this
Agreement has been prepared jointly by the parties hereto, and shall not be
strictly construed against either party. Notwithstanding the above, the parties acknowledge that
no Holder has agreed to act with any other Holder for the purposes of acquiring,
holding, voting or disposing of any securities of the Company for purposes of
Section 13(d) of the Exchange Act.

    

    20. Amendments Not Effective
Until All Parties Agree.  The amendments herein shall not be
effective unless and until the Company, its undersigned subsidiaries and all of
the Holders of the Debentures shall have agreed to the terms and conditions
hereunder.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    21. Disclosure and Filing of
8-K.  Except with respect to the material terms and
conditions of the transactions contemplated by this Agreement, the Company
confirms that neither it nor any other Person acting on its behalf has provided
any of the Holders or their agents or counsel with any information that it
believes constitutes or might constitute material, nonpublic information. On or
before the second (2nd) Trading Day immediately following the date hereof, the
Company shall file a Current Report on Form 8-K, reasonably acceptable to each
Investor disclosing the material terms of the transaction contemplated hereby,
which shall include this Agreement and all schedules and exhibits hereto as an
attachment thereto.   The
Company represents, warrants and covenants that it will include all necessary
information in the Form 8-K referred to above such that, immediately following
the filing of the Form 8-K referred to above, the Holders will not be in
possession, by receipt from the Company or anyone under the Company’s control,
of any material non-public information pertaining to the Company or any of its
subsidiaries and the Company shall not disclose any material non-public
information pertaining to the Company or any of its subsidiaries to any of the
Holders in the future, including the factual basis of an Event of Default or
Triggering Event under the Debentures, or a breach of this Agreement, and
including any other information or notice that the Company would otherwise be
required to provide to an Holder under the terms of this Agreement or the
Transaction Documents, unless the Holder has first agreed in writing to receive
such information.

    

    22. INDEPENDENT NATURE OF
HOLDERS’ OBLIGATIONS AND RIGHTS.  THE COMPANY HAS ELECTED TO
PROVIDE ALL HOLDERS WITH THE SAME TERMS AND FORM OF THIS AGREEMENT FOR THE
CONVENIENCE OF THE COMPANY AND NOT BECAUSE IT WAS REQUESTED TO DO SO BY THE
HOLDERS.  THE OBLIGATIONS OF EACH INVESTOR UNDER THIS AGREEMENT, AND
ANY TRANSACTION DOCUMENT ARE SEVERAL AND NOT JOINT WITH THE OBLIGATIONS OF ANY
OTHER HOLDER, AND NO HOLDER SHALL BE RESPONSIBLE IN ANY WAY FOR THE PERFORMANCE
OR NON-PERFORMANCE OF THE OBLIGATIONS OF ANY OTHER INVESTOR UNDER THIS AGREEMENT
OR ANY TRANSACTION DOCUMENT. NOTHING CONTAINED HEREIN OR IN ANY TRANSACTION
DOCUMENT, AND NO ACTION TAKEN BY ANY INVESTOR PURSUANT THERETO, SHALL BE DEEMED
TO CONSTITUTE THE HOLDERS AS A PARTNERSHIP, AN ASSOCIATION, A JOINT VENTURE OR
ANY OTHER KIND OF ENTITY, OR CREATE A PRESUMPTION THAT THE HOLDERS ARE IN ANY
WAY ACTING IN CONCERT OR AS A GROUP WITH RESPECT TO SUCH OBLIGATIONS OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE TRANSACTION
DOCUMENTS.  EACH INVESTOR SHALL BE ENTITLED TO INDEPENDENTLY PROTECT
AND ENFORCE ITS RIGHTS, INCLUDING WITHOUT LIMITATION, THE RIGHTS ARISING OUT OF
THIS AGREEMENT OR OUT OF THE OTHER TRANSACTION DOCUMENTS, AND IT SHALL NOT BE
NECESSARY FOR ANY OTHER INVESTOR TO BE JOINED AS AN ADDITIONAL PARTY IN ANY
PROCEEDING FOR SUCH PURPOSE. EACH INVESTOR HAS BEEN REPRESENTED BY ITS OWN
SEPARATE LEGAL COUNSEL IN THEIR REVIEW AND NEGOTIATION OF THIS AGREEMENT AND THE
TRANSACTION DOCUMENTS.

    

    

    [signature
page of Company/Subsidiaries and Holders follows]

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first written above.

     

     

    Company:

    

    CORDEX
PHARMA, INC.

    

    By:
_______________________

    Name:
Shepard Goldberg

    Title:
Chief Executive Officer

    

    Guarantor:

    

    DUSKA
SCIENTIFIC CO.

    

    By:
_______________________

    Name:
Shepard Goldberg

    Title:
Chief Executive Officer

    

     

    

    

    

    

    [signature page of Holders
follows]

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    
 Holders:

    

    BRIDGEPOINTE
MASTER FUND LTD.

    By:
________________________________

    Name:
______________________________

    Title:
_______________________________

    

    PLATINUM-MONTAUR
LIFE SCIENCES LLC

    By:
________________________________

    Name:
______________________________

    Title:
_______________________________

    

    PLATINUM
LONG TERM GROWTH VI, LLC

    By:
________________________________

    Name:
______________________________

    Title:
_______________________________

    

    FIREBIRD
GLOBAL MASTER FUND LTD.

    By:
________________________________

    Name:
______________________________

    Title:
_______________________________

    

    FIREBIRD
GLOBAL MASTER FUND II LTD.

    By:
________________________________

    Name:
______________________________

    Title:
_______________________________

    

    ICON
CAPITAL PARTNERS, LP

    By:
________________________________

    Name:
______________________________

    Title:
_______________________________

    

    PHILIP
AND DEBRA SOBOL TRUST

    By:
________________________________

    Name:
______________________________

    Title:
_______________________________

     
 

    
      
        
        

      

      
        10

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