Document:

Exhibit 10.2

 

HMS HOLDINGS CORP.

2016 OMNIBUS INCENTIVE PLAN

 

 

		SECTION 	 1.             
Purpose

 

The purpose of the HMS Holdings Corp. 2016 Omnibus Incentive Plan (the
“Plan”) is to furnish a material incentive to employees and non-employee Directors of the Company and its subsidiaries
by making available to them the benefits of a larger common stock ownership in the Company through stock options and awards. It
is believed that these increased incentives stimulate the efforts of employees and non-employee Directors towards the continued
success of the Company and its affiliates, as well as assist in the recruitment of new employees and non-employee Directors.

 

		SECTION	  2.              Definitions

 

As used in the Plan, the following terms shall have the meanings set
forth below:

 

(a)     “Affiliate”
shall mean any Person that directly, or through one or more intermediaries, controls, or is controlled by, or is under common control
with, the Company.

 

(b)     “Award”
shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Share, Performance
Unit, Dividend Equivalent or any other right, interest or option relating to Shares granted pursuant to the provisions of the Plan.

 

(c)     “Award
Agreement” shall mean any written or electronic agreement, contract or other instrument or document evidencing any Award
granted by the Committee hereunder, which in the sole and absolute discretion of the Committee may, but need not, be signed or
acknowledged by the Company and the Participant.

 

(d)     “Award
Period” shall have the meaning set forth in Section 9 of the Plan.

 

(e)     “Board”
shall mean the Board of Directors of the Company.

 

(f)      “Change
in Control” shall mean the occurrence of any of the following events:

 

(i)the acquisition by a Person or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person
or group beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act) 50.01% or more of either (x) the then-outstanding
shares of common stock of the Company (the “Outstanding Company Common Stock”) or (y) the combined voting power of
the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this subsection any acquisition directly from the Company
will not be a Change in Control, nor will any acquisition by any individual, entity, or group pursuant to a Business Combination
(as defined below) that complies with subclauses (x) and (y) of clause (ii) of this definition;

 

(ii)the consummation of a merger, consolidation, reorganization, recapitalization
or share exchange involving the Company or a sale or other disposition of all or substantially all (i.e., in excess of 85%) of
the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each
of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting
power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation in such Business Combination (which shall include a corporation that as a result of such transaction owns
the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) (such resulting
or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions
as their ownership of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, immediately
prior to such Business Combination and (y) no Person beneficially owns, directly or indirectly, 50.01% or more of the then-outstanding
shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such
corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to
the Business Combination); or

 

    	 

     

    

(iii)a change in the composition of the Board that results, during any one
year period, in the Continuing Directors (as defined below) no longer constituting a majority of the Board (or, if applicable,
the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any
date a member of the Board (x) who was a member of the Board on the Effective Date or (y) who was nominated or elected subsequent
to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or
whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at
the time of such nomination or election; provided, however, that there shall be excluded from this clause (y) any individual whose
initial assumption of office after the Effective Date occurred as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a
person other than the Board;

 

provided that, solely with respect to an Award that constitutes “deferred
compensation” subject to Section 409A of the Code (“Section 409A”) and that is payable on account of a Change
in Control (including any installments or stream of payments that are accelerated on account of a Change in Control), a Change
in Control shall occur only if such event also constitutes a “change in the ownership”, “change in effective
control”, and/or a “change in the ownership of a substantial portion of assets” of the Company as those terms
are defined under Treasury Regulation §1.409A-3(i)(5), but only to the extent necessary to establish a time or form of payment
that complies with Section 409A, without altering the definition of Change in Control for purposes of determining whether a Participant’s
rights to such Award become vested or otherwise unconditional upon the Change in Control.

 

(g)     “Change
in Control Price” means, with respect to a Share, (i) if the Change in Control is the result of a tender or exchange
offer or a corporate transaction, the price per such Share paid in such tender or exchange offer or corporate transaction; or (ii) if
the Change in Control is not the result of a tender or exchange offer or a corporate transaction, the Fair Market Value per Share
on the date of the Change in Control. To the extent the consideration paid in any such transaction described above consists in
full or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall
be determined in the sole discretion of the Committee.

 

(h)     “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

 

(i)      
“Committee” shall mean the Compensation Committee of the Board or such other persons or committee or
subcommittee to which it has delegated any authority, as may be appropriate.

 

(j)      “Company”
shall mean HMS Holdings Corp., a Delaware corporation.

 

(k)     “Covered
Employee” shall mean a “covered employee” within the meaning of Section 162(m)(3) of the Code, or any
successor provision thereto.

 

(l)      
“Director” shall mean a member of the Board.

 

(m)   “Dividend
Equivalent” shall mean an amount equal to any dividends or other distributions declared and paid on an equal number of
outstanding Shares.

 

(n)     “Effective
Date” shall mean June 23, 2016, the date this Plan is effective.

 

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(o)     “Employee”
shall mean any employee of the Company or any Affiliate. For any and all purposes under this Plan, the term “Employee”
shall not include a person hired as an independent contractor, leased employee, consultant or a person otherwise designated by
the Committee, the Company or an Affiliate at the time of hire as not eligible to participate in or receive benefits under the
Plan or not on the payroll, even if such ineligible person is subsequently determined to be a common law employee of the Company
or an Affiliate or otherwise an employee by any governmental or judicial authority. Unless otherwise determined by the Committee
in its sole discretion, for purposes of the Plan, an Employee shall be considered to have terminated employment or services and
to have ceased to be an Employee if his or her employer ceases to be an Affiliate, even if he or she continues to be employed by
such employer.

 

(p)     “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(q)     “Fair
Market Value” shall mean, with respect to Shares, as of any date, the closing price of the Shares as reported on the
NASDAQ Global Select Market for that date or, if no such prices are reported for that date, the closing price on the next preceding
date for which such prices were reported, unless otherwise determined by the Committee. The Board or the Committee can substitute
a particular time of day or other measure of “closing sale price” if appropriate because of exchange or market procedures
or can, in its sole discretion, use weighted averages either on a daily basis or such longer period as complies with Section 409A.

 

(r)      “Incentive
Stock Option” shall mean an Option granted under Section 6 that is intended to meet the requirements of Section 422
of the Code or any successor provision thereto.

 

(s)      “Nonqualified
Stock Option” shall mean either an Option granted under Section 6 that is not intended to be an Incentive Stock
Option or an Incentive Stock Option that has been disqualified.

 

(t)      “Option”
shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices
and during such period or periods as the Committee shall determine.

 

(u)     “Participant”
shall mean an Employee or a non-employee Director who is selected by the Committee or the Board from time to time in their sole
discretion to receive an Award under the Plan.

 

(v)     “Performance
Award” shall have the meaning set forth in Section 9 of the Plan.

 

(w)    “Performance
Goals” shall have the meaning set forth in Section 9 of the Plan.

 

(x)     “Performance
Period” shall mean that period established by the Committee at the time any Performance Award is granted or at any time
thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured.

 

(y)     “Performance
Shares” shall have the meaning set forth in Section 9 of the Plan.

 

(z)     “Performance
Units” shall have the meaning set forth in Section 9 of the Plan.

 

(aa) “Person”
shall mean any individual, corporation, partnership, association, limited liability company, joint-stock company, trust, unincorporated
organization or government or political subdivision thereof.

 

(bb) “Prior Plan”
shall mean the Company’s Fourth Amended and Restated 2006 Stock Plan, as amended, and the HDI Holdings, Inc. Amended
2011 Stock Option and Stock Issuance Plan.

(cc)  “Restricted
Period” shall have the meaning set forth in Section 8 of the Plan.

 

(dd) “Restricted Stock”
shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such
other restrictions as the Committee, in its sole discretion, may impose (including, without limitation, any restriction on the
right to vote such Share, and the right to receive any cash dividends), which restrictions may lapse separately or in combination
at such time or times, in installments or otherwise, as the Committee may deem appropriate.

 

(ee)  “Restricted
Stock Award” shall mean an award of Restricted Stock under Section 8.

 

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(ff)   “Restricted
Stock Unit” shall mean a unit that is valued by reference to a Share, which value may be paid to the Participant by delivery
of cash, Shares or such other property as the Committee shall determine and with such restrictions as the Committee, in its sole
discretion, may impose and which may lapse separately or in combination at such time or times, in installments or otherwise, as
the Committee may deem appropriate.

 

(gg)  “Restricted
Stock Unit Award” shall mean an award of Restricted Stock Units under Section 8.

 

(hh) “Section 16
Participant” shall have the meaning set forth in Section 16 of the Plan.

 

(ii)     “Shares”
shall mean the shares of common stock of the Company.

 

(jj)    “Spread”
shall have the meaning set forth in Section 7 of the Plan.

 

(kk) “Stock Appreciation
Right” shall have the meaning set forth in Section 7 of the Plan.

 

(ll)     “Substitute
Award” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange
for, awards previously granted, in each case by a company acquired by the Company or any Subsidiary or with which the Company or
any Affiliate combines.

 

		SECTION	 3.             
Administration

 

The Plan shall be administered by the Committee. The Committee shall
have full power and authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from
time to time be adopted by the Board or the Committee, to (a) select the Employees and directors of the Company and its Affiliates
to whom Awards may from time to time be granted hereunder; (b) determine the type or types of Award to be granted to each
Participant hereunder; (c) determine the number of Shares to be covered by or relating to each Award granted hereunder; (d) determine
the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder including, but not limited
to, the exercise price, grant price, or purchase price, any performance goals, any restrictions or limitations on the Award, any
schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or
waivers thereof, and any provisions related to clawback or recoupment with respect to an Award, based in each case on such considerations
as the Committee in its sole discretion determines; (e) determine whether, to what extent and under what circumstances Awards
may be settled in cash, Shares or other property or canceled or suspended; (f) determine whether, to what extent, and under
what circumstances payment of cash, Shares, other property and other amounts payable with respect to an Award made under the Plan
shall be deferred either automatically or at the election of the Participant in a manner consistent with Section 409A of the Code;
(g) interpret and administer the Plan and any instrument or agreement entered into under the Plan; (h) establish such
rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (i) make
any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan.
The Committee may, in its sole and absolute discretion, and subject to the provisions of the Plan, from time to time delegate any
or all of its authority to administer the Plan to any other persons or committee as it deems necessary or appropriate for the proper
administration of the Plan, except that no such delegation shall be made in the case of Awards intended to be qualified under Section 162(m)
of the Code or Rule 16b-3 of the Exchange Act. The decisions of the Committee shall be final, conclusive and binding with respect
to the interpretation and administration of the Plan and any grant made under it. The Committee shall make, in its sole discretion,
all determinations arising in the administration, construction or interpretation of the Plan and Awards under the Plan, including
the right to construe disputed or doubtful Plan or Award terms and provisions, and any such determination shall be conclusive and
binding on all persons, except as otherwise provided by law. A majority of the members of the Committee may determine its actions
and fix the time and place of its meetings. The Board may act in place of the Committee other than with respect to Awards intended
to constitute “performance-based compensation” under Section 162(m) of the Code.

 

Except as provided in Section 12, the Committee shall be authorized
to make adjustments in Performance Award criteria or in the terms and conditions of other Awards in recognition of unusual or nonrecurring
events affecting the Company or its financial statements or changes in applicable laws, regulations or accounting principles. The
Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and
to the extent it shall deem desirable to carry it into effect. In the event that the Company shall assume outstanding employee
benefit awards or the right or obligation to make future such awards in connection with the acquisition of or combination with
another corporation or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards under
the Plan as it shall deem appropriate.

 

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		SECTION	 4.             
Shares Subject to the Plan

 

(a)     Subject
to adjustment as provided in Section 4(c), a total of 8,800,000 Shares shall be authorized for Awards granted under the Plan,
less one (1) Share for every one (1) Share subject to an option or stock appreciation right granted under the Prior Plan after
February 29, 2016 and 1.7 Shares for every one (1) Share subject to Awards other than options and stock appreciation rights granted
under the Prior Plan after February 29, 2016. Any Shares that are subject to Options or Stock Appreciation Rights shall be counted
against this limit as one (1) Share for every one (1) Share granted, and any Shares that are subject to Awards other than Options
or Stock Appreciation Rights shall be counted against this limit as 1.7 Shares for every one (1) Share granted. After the Effective
Date of the Plan, no awards may be granted under the Prior Plan.

 

(b)     Any
Shares issued hereunder may consist, in whole or in part, of authorized and unissued Shares, treasury Shares or Shares purchased
in the open market or otherwise.

 

(c)     In
the event of any merger, reorganization, consolidation, recapitalization, stock dividend, special cash dividend, stock split, reverse
stock split, spin-off or similar transaction or other change in corporate structure affecting the Shares, the equitable adjustments
and other substitutions shall be made to the Plan and to Awards as the Committee, in its sole discretion, deems necessary, including,
without limitation, such adjustments in the aggregate number, class and kind of securities that may be delivered under the Plan,
in the aggregate or to any one Participant, in the number, class, kind and option or exercise price of securities subject to outstanding
Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the
shares of, or other awards denominated in the shares of, another company) as the Committee may determine to be appropriate in its
sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number and further provided
that in no event may any change be made to an Incentive Stock Option which would constitute a modification within the meaning of
Section 424(h)(3) of the Code.

 

(d)     Any
Shares that are not purchased or awarded under an Award that has terminated or lapsed or has been forfeited, either by its terms
or pursuant to the exercise, in whole or in part, of an Award granted under the Plan and any Shares that are withheld by the Company
to satisfy the tax withholding obligation for Awards other than Options or Stock Appreciation Rights may be used for the further
grant of Awards. In addition, if Shares under an Award are not issued because the Award is settled in cash, the Shares may be used
for the further grant of Awards. Shares under this subsection that may be used for the further grant of Awards shall be added back
as one (1) Share if the Shares were subject to Options or Stock Appreciation Rights, and (ii) as 1.7 Shares if the Shares
were subject to Awards other than Options or Stock Appreciation Rights. For purposes of determining the number of Shares that are
again available for further grants of Awards under this subsection, the term “Award” includes any Prior Plan awards
that are outstanding after February 29, 2016 and the term “Options or Stock Appreciation Rights” includes any Prior
Plan options and stock appreciation rights that are outstanding after February 29, 2016.

 

(e)     Notwithstanding
anything to the contrary, the following Shares shall not be added to the maximum share limitations described above: (i) Shares
tendered or withheld by the Company in payment of the exercise price of an Option; (ii) Shares withheld by the Company to
satisfy the tax withholding obligations for Options or Stock Appreciation Rights; (iii) Shares subject to a Stock Appreciation
Right that are not issued in connection with its stock settlement on exercise thereof; and (iv) Shares reacquired by the Company
on the open market or otherwise using cash proceeds from the exercise of an Option. Stock Appreciation Rights that may only be
settled in cash will not reduce the number of Shares available for award under the Plan. For purposes of determining the number
of Shares that will not again be available for further grants of Awards under this subsection, the term “Options or Stock
Appreciation Rights” includes any Prior Plan options and stock appreciation rights that are outstanding after February 29,
2016.

 

(f)      To
the extent consistent with the requirements of Section 422 of the Code and regulations thereunder with respect to Shares available
for Incentive Stock Options, and with other applicable legal requirements (including applicable stock exchange requirements), Shares
issued under awards of an acquired company that are converted, replaced, or adjusted in connection with the acquisition will not
reduce the number of Shares available for Awards under the Plan.

 

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(g)     The
maximum number of Shares subject to Awards granted during a single fiscal year to any non-employee Director, taken together with
any cash fees paid to such non-employee Director during the fiscal year, shall not exceed $500,000 in total value (calculating
the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes). The Committee
may make exceptions to this limit for a non-executive chair of the Board or, in extraordinary circumstances, for other individual
non-employee Directors, as the Committee may determine in its discretion, provided that the non-employee Director receiving such
additional compensation may not participate in the decision to award such compensation.

 

(h)      Substitute
Awards shall not reduce the Shares authorized for grant under the Plan, nor shall Shares subject to a Substitute Award be added
to the Shares available for Awards under the Plan as provided in Section 4(a) above. Additionally, in the event that a company
acquired by the Company or any subsidiary or with which the Company or any subsidiary combines has shares available under a pre-existing
plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant
pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment
or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of
common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce
the Shares authorized for grant under the Plan (and Shares subject to such Awards shall not be added to the Shares available for
Awards under the Plan as provided in Section 4(a) above); provided that Awards using such available shares shall not be made after
the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination,
and shall only be made to individuals who were not Employees or non-employee Directors of the Company prior to such acquisition
or combination.

 

		SECTION	 5.             
Eligibility

 

Any Employee or non-employee Director shall be eligible to be selected
as a Participant; provided, however, that Incentive Stock Options shall only be awarded to Employees of the Company, or a parent
or subsidiary, within the meaning of Section 422 of the Code.

 

		SECTION	 6.             
Stock Options

 

Options may be granted hereunder to any Participant, either alone or
in addition to other Awards granted under the Plan and shall be subject to the following terms and conditions:

 

(a)     Option
Price.  Other than in connection with Substitute Awards, the option price per Share shall be not less than the Fair
Market Value of the Shares on the date the Option is granted.

 

(b)     Period
of Stock Option.  The period of each Option shall be fixed by the Committee, provided that the period for all Options
shall not exceed ten years from the grant date. The Committee may, subsequent to the granting of any Option, extend the term thereof,
but in no event shall the extended term exceed ten years from the original grant date. Notwithstanding the foregoing, in the event
that on the last business day of the term of an Option (other than an Incentive Stock Option) (i) the exercise of the Option is
prohibited by applicable law or (ii) Shares may not be purchased or sold by certain employees or directors of the Company due to
the “black-out period” of a Company policy or a “lock-up” agreement undertaken in connection with an issuance
of securities by the Company, the Committee may provide that the term of the Option shall be extended but not beyond a period of
thirty (30) days following the end of the legal prohibition, black-out period or lock-up agreement and provided further that no
extension will be made if the option price of such Option at the date the initial term would otherwise expire is below the Fair
Market Value unless such extension is permitted by Section 409A.

 

(c)     Exercise
of Option and Payment Therefore.  No Shares shall be issued until full payment of the option price has been made.
The option price may be paid in cash or, if the Committee determines, by the Participant tendering Shares or by the Company withholding
Shares otherwise issuable in connection with the exercise of the Option, a combination of cash and Shares, or through a cashless
exercise procedure that allows Participants to sell immediately some or all of the Shares underlying the exercised portion of the
Option in order to generate sufficient cash to pay the option price. If the Committee approves the use of Shares as a payment method,
the Committee shall establish such conditions as it deems appropriate for the use of common stock to exercise an Option. Options
awarded under the Plan shall be exercised through such procedure or program as the Committee may establish or define from time
to time, which may include a designated broker that must be used in exercising such Options.

 

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(d)     First
Exercisable Date.  The Committee shall determine how and when Shares covered by an Option may be purchased. The Committee
may establish waiting periods, the dates on which Options become exercisable or “vested” and, subject to subsection
(b) of this section, exercise periods. The Committee may accelerate the exercisability of any Option or portion thereof.

 

(e)     Termination
of Participant’s Employment or Service.  Unless determined otherwise by the Committee, upon the termination
of a Participant’s employment or service (for any reason other than gross misconduct), Option exercise privileges shall be
limited to the Shares that were immediately exercisable at the date of such termination. The Committee, however, in its discretion,
may provide that any Options outstanding but not yet exercisable upon the termination of a Participant’s employment or service
may become exercisable in accordance with a schedule determined by the Committee. Such Option exercise privileges shall expire
unless exercised within such period of time after the date of termination of employment or service as may be established by the
Committee, but in no event later than the expiration date of the Option.

 

(f)      Termination
Due to Misconduct.  If a Participant’s employment or Board service is terminated for gross misconduct, as determined
by the Company, all rights under his or her Options shall expire upon the date of such termination.

 

(g)     Limits
on Incentive Stock Options.  Except as may otherwise be permitted by the Code, an Employee may not receive a grant
of Incentive Stock Options for Shares that would have an aggregate Fair Market Value in excess of $100,000 (or such other amount
as the Internal Revenue Service may decide from time to time), determined as of the time that the Incentive Stock Option is granted,
that would be exercisable for the first time by such person during any calendar year. If any grant is made in excess of the limits
provided in the Code, such grant shall automatically become a Nonqualified Stock Option. In no event will Incentive Stock Options
be granted to any Participant who owns more than ten percent of the stock of the Company within the meaning of Section 422
of the Code. Solely for purposes of determining whether Shares are available for the grant of Incentive Stock Options under the
Plan, the maximum aggregate number of Shares that may be issued pursuant to Incentive Stock Options granted under the Plan shall
be 8,800,000 Shares as of the Effective Date, subject to adjustment as provided in Section 4(c) and (f) (and shareholder approval
of the Plan) to the extent consistent with the requirements of Section 422 of the Code and regulations thereunder, and reduced
by Shares subject to any Awards granted under the Prior Plan after February 29, 2016.

 

(h)     No
Dividend Equivalents.  Anything in the Plan to the contrary notwithstanding, no dividends or Dividend Equivalents
may be paid on Options.

 

		SECTION	 7.             
Stock Appreciation Rights

 

The Committee may, in its discretion, grant a right to receive the appreciation
in the Fair Market Value of Shares (“Stock Appreciation Right”). Such Stock Appreciation Right shall be subject to
the following terms and conditions and such other terms and conditions as the Committee may prescribe:

 

(a)     Time
and Period of Grant.   The period for exercise of the Stock Appreciation Right shall be set by the Committee. The
period of each Stock Appreciation Right shall be fixed by the Committee, provided that the period for all Stock Appreciation Rights
shall not exceed ten years from the grant date. Notwithstanding the foregoing, in the event that on the last business day of the
term of a Stock Appreciation Right (x) the exercise of the Stock Appreciation Right is prohibited by applicable law or (y) Shares
may not be purchased or sold by certain employees or directors of the Company due to the “black-out period” of a Company
policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the Committee
may provide that the term of the Stock Appreciation Right shall be extended but not beyond a period of thirty (30) days following
the end of the legal prohibition, black-out period or lock-up agreement and provided further that no extension will be made if
the grant price of such Stock Appreciation Right at the date the initial term would otherwise expire is below the Fair Market Value
unless such extension is permitted by Section 409A.

 

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(b)     Value
of Stock Appreciation Right.  Other than in connection with a Substitute Award, a Stock Appreciation Right shall
have a grant price per Share of not less than the Fair Market Value of one Share on the date of grant or, if applicable, on the
date of grant of an Option with respect to a Stock Appreciation Right granted in exchange for or in tandem with, but subsequent
to, the Option (subject to the requirements of Section 409A of the Code). A Participant who is granted a Stock Appreciation Right
will receive upon exercise of the Stock Appreciation Right an amount equal to the excess of the Fair Market Value of the Shares
on the date the election to surrender such Stock Appreciation Right is received by the Company, in accordance with exercise procedures
established by the Company, over the Fair Market Value of the Shares on the date of grant multiplied by the number of Shares covered
by the grant of the Stock Appreciation Right. Notwithstanding the foregoing, in its sole discretion the Committee at the time it
grants a Stock Appreciation Right may provide that the Spread covered by such Stock Appreciation Right may not exceed a specified
amount.

 

(c)     Payment
of Stock Appreciation Right.  Payment of a Stock Appreciation Right shall be in the form of Shares, cash or any combination
of Shares and cash. The form of payment upon exercise of such a right shall be determined by the Committee either at the time of
grant of the Stock Appreciation Right or at the time of exercise of the Stock Appreciation Right.

 

(d)     No
Dividend Equivalents.  Anything in the Plan to the contrary notwithstanding, no dividends or Dividend Equivalents
may be paid on Stock Appreciation Rights.

 

		SECTION	 8.             
Restricted Stock Awards and Restricted Stock Unit Awards

 

The Committee may make Restricted Stock Awards and Restricted Stock
Unit Awards to a Participant, which Awards shall be subject to the following terms and conditions and such other terms and conditions
as the Committee may prescribe:

 

(a)     Requirement
of Employment or Board Membership.  A Participant who is granted a Restricted Stock Award or Restricted Stock Unit
Award must remain an Employee or a Director of the Company during a period designated by the Committee (“Restricted Period”)
in order to vest in or receive the Shares, cash or combination thereof under the Restricted Stock Award or Restricted Stock Unit
Award. If the Participant ceases being an Employee or a Director of the Company prior to the end of the Restricted Period, the
Restricted Stock Award or Restricted Stock Unit Award shall terminate and any Shares subject to a Restricted Stock Award shall
be returned immediately to the Company, provided that the Committee may, at the time of the grant, provide for the employment or
Board membership restriction to lapse with respect to a portion or portions of the Restricted Stock Award or Restricted Stock Unit
Award at different times during the Restricted Period. The Committee may, in its discretion, also provide for such complete or
partial exceptions to the employment or Board membership restriction as it deems equitable.

 

(b)     Restrictions
on Transfer and Legend on Stock Certificates.  During the Restricted Period, the Participant may not sell, assign,
transfer, pledge or otherwise dispose of the Restricted Stock Award or Restricted Stock Unit Award, including but not limited to
any Shares. Any certificate for Shares issued hereunder shall contain a legend giving appropriate notice of the restrictions in
the Award.

 

(c)     Escrow
Agreement.  The Committee may require the Participant to enter into an escrow agreement providing that any certificates
representing the Restricted Stock Award will remain in the physical custody of an escrow holder until all restrictions are removed
or expire.

 

(d)     Lapse
of Restrictions.  All restrictions imposed under the Restricted Stock Award or Restricted Stock Unit Award shall
lapse upon the expiration of the Restricted Period if the conditions as to employment or Board membership set forth above have
been met. The Participant shall then be entitled to have the legend removed from any certificates for Restricted Stock. Restricted
Stock Awards and Restricted Stock Unit Awards may be paid in the form of Shares, cash or any combination of Shares and cash as
determined by the Committee. The Committee may establish rules and procedures to permit a Participant to defer recognition of income
upon the expiration of the Restricted Period.

 

    	 	8	 

     

    

(e)     Dividends
and Dividend Equivalents.  Restricted Stock will accrue ordinary cash dividends, unless the Board or the Committee
determines otherwise and applicable law permits such nonaccrual. Participants holding shares of Restricted Stock will only be entitled
to such cash dividends if specifically provided in the Restricted Stock agreement, will only receive the dividends if and when
the Restricted Stock vests, and will then receive dividends only prospectively unless the Board, Committee, or the Restricted Stock
agreement provides for the payment of prior dividends upon or after vesting. Any dividend payment will be made no later than the
latest of the end of the calendar year in which the dividends are paid to shareholders of that class of stock, the 15th day of
the third month following the date the dividends are paid to shareholders of that class of stock, or the 15th day of the third
month following the date on which the Restricted Stock to which the dividends pertain vests. If any dividends or distributions
are paid in shares, or consist of a dividend or distribution to holders of Common Stock other than an ordinary cash dividend, the
shares, cash or other property will be subject to the same restrictions on transferability and forfeitability as the shares of
Restricted Stock with respect to which they were paid. To the extent provided by the Board or the Committee, in its sole discretion,
a grant of Restricted Stock Units may provide Participants with the right to Dividend Equivalents. Dividend Equivalents may be
settled in cash and/or shares of Common Stock and will be subject to the same vesting conditions and restrictions on transfer and
forfeitability as the Restricted Stock Units with respect to which paid, as determined by the Board or the Committee in its sole
discretion. Any Dividend Equivalent payments will be made no later than the latest of the end of the calendar year in which the
dividends are paid to shareholders of the class of stock underlying the Restricted Stock Units, the 15th day of the third month
following the date the dividends are paid to shareholders of that class of stock, or the 15th day of the third month following
the date on which the Restricted Stock Unit to which the dividends pertain vests, absent a further deferral that complies with
Section 409A of the Code.

 

(f)      Performance
Goals.  The Committee may, but is not required to, issue Restricted Stock Awards or Restricted Stock Unit Awards
under Section 9 as “performance-based compensation” as that term is used in Section 162(m) of the Code. Any such
Restricted Stock Award or Restricted Stock Unit Award intended to be “performance-based compensation” shall be conditioned
on the achievement of one or more Performance Goals (as defined in Section 9(a)), to the extent required by Section 162(m).

 

(g)     Vesting.  The
restrictions on each Restricted Stock Award or Restricted Stock Unit Award will lapse at such time or times, and on such conditions,
as the Committee may specify.

 

		SECTION	 9.             
Performance Awards

 

The Committee may grant Awards denominated in Shares (“Performance
Shares”), or denominated in dollars (“Performance Units”) if the performance of the Company or its subsidiaries
during one or more Performance Periods contained within the Award Period (as defined below) meets certain goals established by
the Committee (“Performance Awards”). Subject to adjustment as provided in Section 4(c), the following limits will
apply to Awards of the specified type granted to any one Participant in any single fiscal year:

 

(x) Appreciation Awards -- Options and Stock Appreciation
Rights: 1,500,000 Shares;

 

(y) Full Value Awards -- Restricted Stock Award, Restricted
Stock Unit Award, Performance Shares, and Dividend Equivalents: 1,000,000 Shares; and

 

(z) Cash Awards – Performance Units: $5,000,000.

 

In applying the foregoing limits, (a) all Awards of the specified type
granted to the same Participant in the same fiscal year will be aggregated and made subject to the applicable limit; (b) the limits
applicable to Options and Stock Appreciation Rights refer to the number of Shares subject to those Awards; (c) the Share limit
under clause (y) refers to the maximum number of Shares that may be delivered under an Award or Awards of the type specified in
clause (y) assuming a maximum payout; (d) the dollar limit under clause (z) refers to the maximum dollar amount payable under an
Award or Awards of the type specified in clause (z) assuming a maximum payout, and (e) the respective limits for Awards of the
type specified in clause (y) and clause (z) are only applicable to Awards that are intended to comply with the performance-based
exception under Code Section 162(m). The limit specified for Cash Awards is in addition to, and not in replacement of or counted
into, the dollar value limit on awards made to any participant in a 12-month period under the Company’s Annual Incentive
Compensation Plan, as may be amended from time to time. Performance Awards shall be subject to the following terms and conditions
and such other terms and conditions as the Committee may prescribe:

 

    	 	9	 

     

    

(a)     Award
Period and Performance Goals.  The Committee shall determine and include in a Performance Award grant the period
of time for which a Performance Award is made (“Award Period”). The Committee also shall establish performance objectives
(“Performance Goals”) to be met during any one or more Performance Periods contained within the Award Period as a condition
to payment of the Performance Award. The Performance Goals shall be based on attainment of one or any combination of the following
performance criteria, as determined under generally accepted accounting principles (“GAAP”) (where applicable for matters
subject to GAAP) or as otherwise adjusted and reported by the Company as non-GAAP measures: net sales; revenue; revenue growth
or product revenue growth; operating income (before or after taxes); pre- or after-tax income (before or after allocation of corporate
overhead and bonus); earnings per share; net income (before or after taxes); return on equity; total shareholder return; return
on assets or net assets; appreciation in and/or maintenance of the price of the Shares or any other publicly-traded securities
of the Company; market share; gross profits; earnings (including earnings or losses before taxes, before interest and taxes, or
before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various
stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including
return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense
levels or working capital levels, including cash, and accounts receivable; operating margin; gross margin; year-end cash; cash
margin; debt reduction; shareholders equity; operating efficiencies; and client growth.

 

The Performance Goals designated by the Committee may be based solely
by reference to the Company’s performance or the performance of an Affiliate, division, business segment or business unit
of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance
relative to other companies. The Committee may provide, in connection with the setting of the Performance Goals applicable to Awards
intended to constitute “performance-based compensation” under Section 162(m) of the Code, that any evaluation of performance
may include or exclude charges or adjustments related to an event or occurrence that the Committee determines should appropriately
be included or excluded because it involves (i) restructurings, discontinued operations, or items that are unusual in nature or
infrequently occurring, (ii) the cumulative effects of tax or accounting changes in accordance with GAAP, or (iii) foreign exchange
gains and losses. Such Performance Goals shall otherwise comply with the requirements of Section 162(m) of the Code and the
regulations thereunder.

 

For a Performance Award or any other Award not intended to constitute
“performance-based compensation” under Section 162(m) of the Code, Performance Goals may include any other financial
or other measurement established by the Committee.

 

(b)     Payment
of Performance Awards.  The Committee shall establish the method of calculating the amount of payment to be made
under a Performance Award if the Performance Goals are met, including the fixing of a maximum payment. After the completion of
each Performance Period within an Award Period, the performance of the Company or its subsidiary shall be measured against the
Performance Goals, and the Committee shall determine, in accordance with the terms of such Performance Award, whether all, none
or any portion of a Performance Award shall be paid. The Committee, in its discretion, may elect to make payment in Shares, cash
or a combination of Shares and cash. Any cash payment with respect to an Award denominated in Shares shall be based on the Fair
Market Value of Shares on, or as soon as practicable prior to, the date of payment. The Committee may establish rules and procedures
to permit a Participant to defer recognition of income upon the attainment of a Performance Award.

 

(c)     Revision
of Performance Goals.  As to any Performance Award not intended to constitute performance-based compensation”
under Section 162(m) of the Code, at any time prior to the end of an applicable Performance Period, the Committee may revise
the Performance Goals and the computation of payment if unforeseen events occur which have a substantial effect on the performance
of the Company or its subsidiary and which, in the judgment of the Committee, make the application of the Performance Goals unfair
unless a revision is made. For any Performance Award intended to constitute “performance-based compensation” under
Section 162(m) of the Code, such revisions must be set forth in the Award Agreement within the time period required by Section 162(m).

 

(d)     Requirement
of Employment.  A Participant who is granted a Performance Award must remain an Employee of the Company or its subsidiaries
until the completion of the Award Period in order to be entitled to payment under the Performance Award; provided that the Committee
may, in its discretion, provide for a full or partial payment where such an exception is deemed equitable or where multiple Performance
Periods are contained within an Award Period.

 

    	 	10	 

     

    

(e)     Dividends.  The
Committee may, in its discretion, at the time of the granting of a Performance Award, provide that any dividends declared on the
Shares during the Award Period, and which would have been paid with respect to Performance Shares had they been owned by a Participant,
be (i) paid to the Participant to the extent that the Performance Shares are earned, (ii) accumulated for the benefit
of the Participant and used to increase the number of Performance Shares of the Participant or (iii) not paid or accumulated.
In no event will dividends or Dividend Equivalents be paid on unearned Performance Awards.

 

		SECTION	 10.          
Other Share-Based Awards

 

(a) Other Awards of Shares, and other Awards that are valued in
whole or in part by reference to, or are otherwise based on, Shares, may be granted hereunder to Participants (“Other
Share-Based-Awards”), including without limitation Awards entitling recipients to receive Shares to be delivered in the
future. Such Other Share-Based Awards shall also be available as a form of payment in the settlement of other Awards granted
under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Share-Based Awards
may be paid in Shares or cash, as the Board or the Committee shall determine.

 

(b) Terms and Conditions. Subject to the provisions of the Plan,
the Board or the Committee shall determine the terms and conditions of each Other Share-Based Award, including any conditions for
vesting and repurchase (or forfeiture) and purchase price applicable thereto (applying principles like those set forth in Section
8(g) above and with the same carveouts).

 

		SECTION	 11.          
Change in Control Provisions

 

(a)    Unless provided
otherwise in the terms of a particular Award, and notwithstanding any other provision of the Plan to the contrary, in the event
a Participant’s employment or service is involuntarily terminated without cause (as determined by the Committee or Board
in its sole discretion) during the 24-month period following a Change in Control:

 

(i)any Options and Stock Appreciation Rights outstanding,
which are not then exercisable and vested, shall become immediately fully vested and exercisable;

 

(ii)the restrictions and deferral limitations applicable
to any Restricted Stock Award or Restricted Stock Unit Award shall lapse, and such Restricted Stock and Restricted Stock Units
shall immediately become free of all restrictions and limitations and become fully vested and transferable to the full extent of
the original grant;

 

(iii) all Performance Awards shall be considered to be
earned and payable in full, based on the applicable performance criteria or, if not determinable, at the target level and any
deferral or other restriction shall lapse and such Performance Awards shall be immediately settled or distributed;

 

(iv) the restrictions and deferral limitations and
other conditions applicable to any Other Share-Based Awards or any other Awards shall immediately lapse, and any such other
Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full
extent of the original grant.

 

(b) Unless provided otherwise in the terms of a particular Award,
to the extent the successor company does not assume or substitute an Award, then immediately prior to the Change in Control:

(i) those Options and Stock Appreciation Rights
outstanding as of the date of the Change in Control that are not assumed or substituted for (or continued) shall immediately
vest and become fully exercisable,

    	 	11	 

     

    

(ii) restrictions, limitations and other conditions
applicable to Restricted Stock and Restricted Stock Units that are not assumed or substituted for (or continued) shall lapse
and the Restricted Stock and Restricted Stock Units shall become free of all restrictions, limitations and conditions and
become fully vested,

(iii) the restrictions, other limitations and other conditions
applicable to any Other Share-Based Awards or any other Awards that are not assumed or substituted for (or continued) shall lapse,
and such Other Share-Based Awards or such other Awards shall become free of all restrictions, limitations and conditions and become
fully vested and transferable to the full extent of the original grant, and

(iv) any performance based Award shall be deemed fully
earned at the target amount as of the date on which the Change of Control occurs.

 

(c) Change in Control Cash Out.  Notwithstanding
any other provision of the Plan, in the event of a Change in Control the Committee or Board may, in its discretion, provide that
each Option or Stock Appreciation Right shall, upon the occurrence of a Change in Control, be cancelled in exchange for a cash
payment to be made within 60 days of the Change in Control in an amount equal to the amount by which the Change in Control
Price per Share exceeds the purchase price per Share under the Option or Stock Appreciation Right multiplied by the number of Shares
granted under the Option or Stock Appreciation Right. Any Option or Stock Appreciation Rights whose purchase price per Share exceeds
the Change in Control Price per Share may be cancelled without payment of consideration.

 

(d) Compliance with Section 409A of the
Code.  In the case of an Award providing for the payment of deferred compensation subject to Section 409A
of the Code, any payment of such deferred compensation by reason of a Change in Control shall be made only if the Change in
Control is one described in subsection (a)(2)(A)(v) of Section 409A and the guidance thereunder and shall be paid
consistent with the requirements of Section 409A. If any deferred compensation that would otherwise be payable by reason
of a Change in Control cannot be paid by reason of the immediately preceding sentence, it shall be paid as soon as
practicable thereafter consistent with the requirements of Section 409A, as determined by the Committee.

 

		SECTION	 12.          
Amendments and Termination

 

(a) The Board may amend, suspend or terminate the Plan or any
portion thereof at any time provided that (i) to the extent required by Code Section 162(m), no Award granted to a
Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, unless and until the Company’s shareholders approve such amendment
in the manner required by Section 162(m); (ii) no amendment that would require shareholder approval under the rules of NASDAQ
may be made effective unless and until the Company’s shareholders approve such amendment; and (iii) if NASDAQ amends
its corporate governance rules so that such rules no longer require shareholder approval of material amendments to equity
compensation plans, then, from and after the effective date of such amendment to the NASDAQ rules, no amendment to the Plan
(A) materially increasing the number of shares authorized under the Plan (other than pursuant to Section 4 or 11), (B)
expanding the types of Awards that may be granted under the Plan, or (C) materially expanding the class of participants
eligible to participate in the Plan shall be effective unless and until the Company’s shareholders approve such
amendment. In addition, if at any time the approval of the Company’s shareholders is required as to any other
modification or amendment under Section 422 of the Code or any successor provision with respect to Incentive Stock Options,
the Board may not effect such modification or amendment without such approval. Unless otherwise specified in the amendment,
any amendment to the Plan adopted in accordance with this Section 12 shall apply to, and be binding on the holders of, all
Awards outstanding under the Plan at the time the amendment is adopted, provided the Board determines that
such amendment, taking into account any related action, does not materially and adversely affect the rights of Participants
under the Plan. Notwithstanding the foregoing, without consent of affected Participants, Awards may be amended, revised or
revoked when necessary to avoid penalties under Section 409A of the Code.

 

    	 	12	 

     

    

(b) Unless such action is approved by the Company’s
shareholders, the Company may not, with respect to any outstanding Option or Stock Appreciation Right granted under the Plan
(except as provided for under Section 4(c) or Section 11): (i) amend any Option or Stock Appreciation Right to provide an
exercise price or measurement price per share that is lower than the then-current exercise price or measurement price per
share of such outstanding Option or Stock Appreciation Right, (ii) cancel any Option or Stock Appreciation Right and grant in
substitution therefor new Awards under the Plan covering the same or a different number of Shares and having an exercise
price or measurement price per share lower than the then-current exercise price or measurement price per share of the
cancelled option or stock appreciation right, (iii) cancel for cash any Options or Stock Appreciation Rights that have
exercise prices or measurement prices per share above the then-current Fair Market Value, other than under Section 11, or
(iv) take any other action that constitutes a “repricing” within the meaning of the rules of the NASDAQ Stock
Market (“NASDAQ”).

 

		SECTION	 13.          
Transferability

 

Each Incentive Stock Option granted under the Plan shall not be transferable
other than by will or the laws of descent and distribution; each other Award granted under the Plan will not be transferable or
assignable by the recipient, and may not be made subject to execution, attachment or similar procedures, other than by will or
the laws of descent and distribution or as determined by the Committee in accordance with the Exchange Act or any other applicable
law or regulation. Notwithstanding the foregoing, the Committee, in its discretion, may adopt rules permitting the transfer, solely
as gifts during the grantee’s lifetime, of Options (other than Incentive Stock Options) to members of a Participant’s
immediate family or to trusts, family partnerships or similar entities for the benefit of such immediate family members. For this
purpose, immediate family member means the Participant’s spouse, parent, child, stepchild, grandchild and the spouses of
such family members. The terms of an Option shall be final, binding and conclusive upon the beneficiaries, executors, administrators,
heirs and successors of the grantee.

 

		SECTION	 14.          
General Provisions

 

(a)     Nothing
in the Plan shall be construed to limit the right of the Company to establish other plans or to pay compensation to its employees,
in cash or property, in a manner which is not expressly authorized under the Plan.

 

(b)     Nothing
in the Plan shall be construed (i) to limit, impair or otherwise affect the Company’s right or power to make adjustments,
reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate,
sell or transfer all or any part of its business or assets, or (ii) except as provided in Section 12, to limit the right
or power of the Company or its subsidiaries to take any action which such entity deems to be necessary or appropriate.

 

(c)     The
Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before
the Company will deliver stock certificates or otherwise recognize ownership of Shares under an Award. The Company may decide to
satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold
from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker
tender to the Company cash equal to the withholding obligations. Payment of withholding obligations is due before the Company will
issue any shares on exercise, vesting or release from forfeiture of an Award or, if the Company so requires, at the same time as
payment of the exercise or purchase price, unless the Company determines otherwise. If provided for in an Award or approved by
the Board or the Committee in its sole discretion, a Participant may satisfy such tax obligations in whole or in part by delivery
(either by actual delivery or attestation) of Shares, including Shares retained from the Award creating the tax obligation, valued
at their Fair Market Value; provided, however, except as otherwise provided by the Board or the Committee, that the total tax withholding
where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations
(based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable
to such supplemental taxable income) or, if permitted by the Company, such other rate as will not cause adverse accounting consequences
and is permitted under applicable IRS withholding rules. Shares used to satisfy tax withholding requirements cannot be subject
to any repurchase, forfeiture, unfulfilled vesting or other similar requirements

 

(d)     Any
proceeds received by the Company under the Plan shall be added to the general funds of the Company and shall be used for such corporate
purposes as the Board or the Committee shall direct.

 

(e)     Nothing
in the Plan or any Award granted under the Plan shall be deemed to constitute an employment or service contract or confer or be
deemed to confer on any Employee or Participant any right to continue in the employ or service of, or to continue any other relationship
with, the Company or any Affiliate or limit in any way the right of the Company or any Affiliate to terminate an Employee’s
employment or Participant’s service at any time, with or without cause.

 

    	 	13	 

     

    

(f)      All
certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

(g)     No
Award granted hereunder shall be construed as an offer to sell securities of the Company, and no such offer shall be outstanding,
unless and until the Committee in its sole discretion has determined that any such offer, if made, would comply with all applicable
requirements of the U.S. federal securities laws and any other laws to which such offer, if made, would be subject.

 

(h)     Any
Award shall contain a provision that it may not be exercised at a time when the exercise thereof or the issuance of shares thereunder
would constitute a violation of any federal or state law or listing requirements of the NASDAQ National Market for such shares
or a violation of any foreign jurisdiction where Awards are or will be granted under the Plan.

 

(i)      
The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable securities,
tax or other laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to the Plan containing
(i) such limitations on the Board’s discretion under the Plan as the Board deems necessary or desirable or (ii) such additional
terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted
by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction
and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the
subject of such supplement.

 

(j)      The
provisions of the Plan shall be construed, regulated and administered according to the laws of the State of Delaware without giving
effect to principles of conflicts of law, except to the extent superseded by any controlling federal statute.

 

(k)     If
any provision of the Plan is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify
the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to
conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan, it shall be stricken and the remainder of the Plan shall remain in full force and effect.

 

(l)      
If approved by the Committee in its sole discretion, an Employee’s absence or leave because of military or governmental
service, disability or other reason shall not be considered an interruption of employment for any purpose under the Plan.

 

(m)   Anything to the
contrary in the Plan notwithstanding, the Committee may (i) offset any Award by amounts reasonably believed to be owed to
the Company by the Participant and (ii) disallow an Award to be exercised or otherwise payable during a time when the Company
is investigating reasonably reliable allegations of gross misconduct by the Participant.

 

(n)     Awards
under the Plan are intended either to be exempt from the rules of Section 409A of the Code or to satisfy those rules and shall
be construed accordingly. However, the Company shall not be liable to any Participant or other holder of an Award with respect
to any Award-related adverse tax consequences arising under Section 409A or other provision of the Code.

 

		SECTION	 15.          
Term of Plan

 

The Plan shall terminate on the tenth anniversary of the Effective Date,
unless sooner terminated by the Board pursuant to Section 12.

 

    	 	14	 

     

    

		SECTION	 16.          
Compliance with Section 16 of the Exchange Act

 

With respect to Participants subject to Section 16 of the Exchange
Act (“Section 16 Participants”), transactions under the Plan are intended to comply with all applicable conditions
of Rule 16b-3 or its successors under the Exchange Act. To the extent that compliance with any Plan provision applicable solely
to such Section 16 Participants that is included solely for purposes of complying with Rule 16b-3 is not required in
order to bring a transaction by such Section 16 Participant in compliance with Rule 16b-3, it shall be deemed null and
void as to such transaction, to the extent permitted by law and deemed advisable by the Committee. To the extent any provision
in the Plan or action by the Committee involving such Section 16 Participants is deemed not to comply with an applicable condition
of Rule 16b-3, it shall be deemed null and void as to such Section 16 Participants, to the extent permitted by law and
deemed advisable by the Committee.

 

SECTION 17.           
Limitations on Liability

 

Notwithstanding any other provisions of the Plan, no individual acting
as a director, officer, employee or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary,
or any other person for any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual be
personally liable with respect to the Plan because of any contract or other instrument he or she executes in his or her capacity
as a director, officer, employee or agent of the Company. The Company will indemnify and hold harmless each director, officer,
employee or agent of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been
or will be delegated, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement
of a claim with the Board’s or the Committee’s approval) arising out of any act or omission to act concerning the Plan
unless arising out of such person’s own fraud or bad faith.

 

SECTION 18.           
Clawback

 

Notwithstanding anything to the contrary, an Award agreement may provide
that the Committee may cancel such Award if the participant has engaged in or engages in activity that is in conflict with or adverse
to the interest of the Company while employed by or providing services to the Company or any subsidiary, including fraud or conduct
contributing to any financial restatements or irregularities. The Committee may also provide in an Award agreement that, in such
event, the participant will forfeit any compensation, gain or other value realized thereafter on the vesting, exercise or settlement
of such Award, the sale or other transfer of such Award, or the sale of shares of Common Stock acquired in respect of such Award,
and must promptly repay such amounts to the Company. The Committee may also provide in an Award agreement that if the participant
receives any amount in excess of what the participant should have received under the terms of the Award for any reason (including
without limitation by reason of a financial restatement, mistake in calculations or other administrative error), then the participant
shall be required to promptly repay any such excess amount to the Company. Furthermore, to the extent required by applicable law
(including, without limitation, Section 304 of the Sarbanes-Oxley Act and Section 954 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act) and/or the rules and regulations of Nasdaq or any other securities exchange or inter-dealer quotation
service on which the Common Stock is listed or quoted, or if so required pursuant to a written policy adopted by the Company, Awards
shall be subject (including on a retroactive basis) to clawback, forfeiture or similar requirements.

  

15Converted by EDGARwiz

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: March 10, 2016

$210,000

8% CONVERTIBLE PROMISSORY NOTE

DUE SEPTEMBER 10, 2016

THIS 8% CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued 8% Convertible Promissory Notes of Force Protection Video Equipment Corp. (the “Company”), having its principal place of business at 140 Iowa Lane, Suite 101, Cary, NC 27511, designated as its 8% Convertible Notes due September 10, 2016 (this Note, the “Note” and, collectively with the other Notes of such series, the “Notes”).

FOR VALUE RECEIVED, the Company promises to pay, in cash, to RDW Capital, LLC or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $210,000 on September 10, 2016 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions:

Section 1.

Definitions.  For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

“Alternate Consideration” shall have the meaning set forth in Section 5(d).

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1

“Alternative Conversion Price” means 50% of the lowest traded price of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.

 “Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Base Conversion Price” shall have the meaning set forth in Section 5(b).

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(d). 

“Buy-In” shall have the meaning set forth in Section 4(c)(v).

“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, , or (d) the execution by the Company of an 

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2

agreement to which the Company  is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (c above.

“Conversion” shall have the meaning ascribed to such term in Section 4. 

“Conversion Date” shall have the meaning set forth in Section 4(a).

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms hereof.

“Dilutive Issuance” shall have the meaning set forth in Section 5(b).

“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b).

“DTC” means the Depository Trust Company.

 

“DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer Program.

“DWAC Eligible” means that (a) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational Arrangements, (b) the Company has been approved (without revocation) by the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program, and (d) the Transfer Agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

“

Event of Default

” shall have the meaning set forth in Section 6(a).

“Fundamental Transaction” shall have the meaning set forth in Section 5(d). 

“Late Fees” shall have the meaning set forth in Section 2(c).

“Mandatory Default Amount” means the payment of 130% of the outstanding principal amount of this Note and accrued and unpaid interest hereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note.

“New York Courts” shall have the meaning set forth in Section 7(d).

“Note Register” shall have the meaning set forth in Section 2(b).

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3

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

“Original Issue Date” means the date of the first issuance of this Note, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.

“Purchase Agreement” means the Securities Purchase Agreement, dated as of May 13, 2016 between the Company and the original Holder, as amended, modified or supplemented from time to time in accordance with its terms.

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the Company and the original Holders, in the form of Exhibit B attached to the Purchase Agreement.

“Registration Statement” means a registration statement covering the resale of the Underlying Shares by each Holder.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Share Delivery Date” shall have the meaning set forth in Section 4(c)(ii).

“Successor Entity” shall have the meaning set forth in Section 5(d). 

Section 2.

Interest. 

a)

Payment of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note at the rate of 8% per annum, which interest amount shall be guaranteed. All interest payments hereunder will be payable in cash or Common Stock in the Holder’s discretion. Accrued and unpaid interest shall be due and payable on each Conversion Date and on the Maturity Date, or as otherwise set forth herein.  

b)

Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made.  Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).

c)

Late Fee.  All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily 

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4

from the date such interest is due hereunder through and including the date of actual payment in full. 

d)

Prepayment.  At any time upon ten (10) days written notice to the Holder, the Company may prepay any portion of the principal amount of this Note and any accrued and unpaid interest. If the Company exercises its right to prepay the Note, the Company shall make payment to the Holder of an amount in cash equal to the sum of the then outstanding principal amount of this Note and interest multiplied by 130%.  The Holder may continue to convert the Note from the date notice of the prepayment is given until the date of the prepayment.

Section 3.

Registration of Transfers and Exchanges. 

 

a)

Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be payable for such registration of transfer or exchange.

 

b)

Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.  

c)

Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 4.

Conversion.

 

a)

Voluntary Conversion. This Note shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(d) hereof).  The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”).  If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder.  No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required.  To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and 

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5

unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion.  The Holder and the Company shall maintain a Conversion Schedule showing the principal amount(s) converted and the date of such conversion(s).  The Company may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion.  In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof. 

 

b)

Conversion Price.  The conversion price (the “Conversion Price”) in effect on any Conversion Date shall be equal to 60% of the lowest traded price of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.  Notwithstanding anything herein to the contrary, at any time after the occurrence of any Event of Default the Holder may require the Company to, at such Holder’s option and otherwise in accordance with the provisions for conversion herein, convert all or any part of this Note into Common Stock at the Alternative Conversion Price.  All such foregoing determinations will be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such measuring period.  Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.  

c)

Mechanics of Conversion.

 

i.

Conversion Shares Issuable Upon Conversion of Principal Amount.  The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted and any accrued and unpaid interest to be converted by (y) the Conversion Price.

ii.

Delivery of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion Shares which, on or after the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information and the Company has received an opinion of counsel to such effect reasonably acceptable to the Company (which opinion the Company will be responsible for obtaining) shall be free of restrictive legends and 

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6

trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Note, and (B) payment in the amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash). All certificate or certificates required to be delivered by the Company under this Section 4(d) shall be delivered electronically through the Depository Trust Company or another established clearing corporation performing similar functions. If the Conversion Date is prior to the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information the Conversion Shares shall bear a restrictive legend in substantially the following form, as appropriate:

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

Notwithstanding the foregoing, commencing on such date that the Conversion Shares are eligible for sale under Rule 144 subject to current public information requirements, the Company, upon request of the Holder, shall obtain a legal opinion to allow for such sales under Rule 144.

 

iii.

Failure to Deliver Certificates.  If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice. 

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iv.

Obligation Absolute; Partial Liquidated Damages.  The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder.  In the event the Holder of this Note shall elect to convert any or all of the outstanding principal  or interest amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment.  In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion.  If the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $1,000 per Trading Day for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

v.

Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm 

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otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii).  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 this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000.  The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  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 Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.

 

vi.

Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to 300% of the Required Minimum for the sole purpose of issuance upon conversion of this Note and payment of interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note and payment of interest hereunder.  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

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vii.

Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

viii.

Transfer Taxes and Expenses.  The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.  The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion.

d)

Holder’s Conversion Limitations.  The Company shall not effect any conversion of principal and/or interest of this Note, and a Holder shall not have the right to convert any principal and/or interest of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes) beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 4(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure 

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compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination.  

In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act

and the rules and regulations promulgated thereunder

..

   For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(e) shall continue to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company.  The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation.

 The limitations contained in this paragraph shall apply to a successor holder of

this Note

..

 

Section 5.

Certain Adjustments.

 

a)

Stock Dividends and Stock Splits.  If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a 

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reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)

Subsequent Equity Sales.  If, at any time while this Note is outstanding,  the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance.  The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder will be entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

c)

Subsequent Rights Offerings.  In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, 

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the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d)

Fundamental Transaction. If, at any time while this Note is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(e) on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Note).  For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among 

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the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction.  The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Note and the Purchase Agreement in accordance with the provisions of this Section 5(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

e)

Calculations.  All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

f)

Notice to the Holder.

i.

Adjustment to Conversion Price.  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.  

 

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ii.

Notice to Allow Conversion by Holder.  If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein. 

 

Section 6.

Events of Default.  

a)

“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

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i.

any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within 3 Trading Days;

 

ii.

the Company shall materially fail to observe or perform any other material covenant or material agreement contained in the Notes (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (ix) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 10 Trading Days after the Company has become or should have become aware of such failure;

iii.

a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which the Company or any Subsidiary is obligated (and not covered by clause (vi) below);

iv.

any representation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;

v.

the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X)  shall be subject to a Bankruptcy Event;

 

vi.

the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $100,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; 

vii.

the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within five Trading Days or the transfer of shares of 

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Common Stock through the Depository Trust Company System is no longer available or “chilled”;

viii.

the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);

ix.

the Company does not meet the current public information requirements under Rule 144 in respect of the Registrable Securities (as defined in the Registration Rights Agreement);

x.

if, during the Effectiveness Period (as defined in the Registration Rights Agreement), either (a) the effectiveness of the Registration Statement lapses for any reason or (b) the Holder shall not be permitted to resell Registrable Securities (as defined in the Registration Rights Agreement) under the Registration Statement for a period of more than 20 consecutive Trading Days or 30 non-consecutive Trading Days during any 12 month period; provided, however, that if the Company is negotiating a merger, consolidation, acquisition or sale of all or substantially all of its assets or a similar transaction and, in the written opinion of counsel to the Company, the Registration Statement would be required to be amended to include information concerning such pending transaction(s) or the parties thereto which information is not available or may not be publicly disclosed at the time, the Company shall be permitted an additional 10 consecutive Trading Days during any 12 month period pursuant to this Section 6(a)(x);

xi.

the Company shall fail for any reason to deliver certificates to a Holder on or prior to the third Trading Day after a Conversion Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof; 

xii.

the Company fails to file with the Commission any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable);

xiii.

if the Company or any Significant Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its properties, (ii) admit in writing its inability to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute of any other jurisdiction or foreign country, or (v) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment of 

{00788291.DOCX;2 }

debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or (vi) take or permit to be taken any action in furtherance of or for the purpose of effecting any of the foregoing;

xiv.

if any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Significant Subsidiary, by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or any Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the Company or any Subsidiary, or of all or any substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;

xv.

the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company or any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in the aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof;

xvi.

the Company shall fail to maintain sufficient reserved shares pursuant to Section 4(c)(vi);

xvii.

any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days; or 

xviii.

the Company has not filed a Schedule 14C with the Commission to increase the number of authorized shares of Common Stock to a number reasonably acceptable to the Holder within thirty (30) days after the first Closing Date and has not used its reasonable best efforts to cause such increase to become effective.

b)

Remedies Upon Event of Default. Subject to the Beneficial Ownership Limitation as set forth in Section 4(d), if any Event of Default occurs, then the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount.  After the occurrence of any Event of Default that results in the eventual acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal to the lesser of 2% per month (24% per annum) or the maximum rate permitted under applicable law.  Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by the Company.  In connection with such acceleration described herein, the 

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Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b).  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 7.

Miscellaneous.  

 

a)

Notices.  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 7(a).  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the Holder as set forth in the Purchase Agreement or as  appearing on the books of the Company, or such other facsimile number or address as the Holder may specify for such purposes by notice to the Company delivered in accordance with this Section 7(a). Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 12:00 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

b)

Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed.  This Note is a direct debt obligation of the Company.  This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.   

 

c)

Lost or Mutilated Note.  If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, 

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stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

d)

Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

e)

Waiver.  Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion.  Any waiver by the Company or the Holder must be in writing.  

 

f)

Severability.  If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate 

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of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

g)

Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note.  The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.

h)

Next Business Day.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

i)

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

*********************

(Signature Pages Follow)

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

	
	FORCE PROTECTION VIDEO EQUIPMENT CORP. 

	By: /s/Paul Feldman

     Name: Paul Feldman

     Title: CEO

Facsimile No. for delivery of Notices: _______________

	 

	 

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ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the 8% Convertible Promissory Note due September 10, 2016 of Force Protection Video Equipment Corp. (the “Company”), into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. 

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.  

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Note to be Converted:

Payment of Interest in Common Stock __ yes  __ no

If yes, $_____ of Interest Accrued on Account of Conversion at Issue.

Number of shares of Common Stock to be issued:

Signature:

Name:

Delivery Instructions:

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Schedule 1

CONVERSION SCHEDULE

This 8% Convertible Promissory Note due on September 10, 2016 in the original principal amount of $210,000 is issued by Force Protection Video Equipment Corp.  This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.

Dated: 

				
	

Date of Conversion

(or for first entry, Original Issue Date)

	

Amount of Conversion

	

Aggregate Principal Amount Remaining Subsequent to Conversion

(or original Principal Amount)

	

Company Attest

	

	

	

	

	

	

	

	

	

 

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

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