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NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY 

THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES 

ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT 

OF 1933,  AS  AMENDED, OR  APPLICABLE  STATE SECURITIES LAWS.   THE 

SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR 

ASSIGNED (I)  IN  THE  ABSENCE  OF (A)  AN  EFFECTIVE  REGISTRATION 

STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS 

AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE 

SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT 

REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD 

PURSUANT    TO    RULE

144

OR    RULE

144A    UNDER    SAID    ACT.

NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. 

Principal Amount: $75,000.00

Issue Date: May 31, 2015

Debt Settlement Price: $75,000.00 

CONVERTIBLE PROMISSORY NOTE 

Force Minerals Corporation,  a  Nevada  corporation (hereinafter  called  the “Borrower”),  hereby  promises  to  pay  to  the  order  of  Rancho Capital Management, a Nevada corporation, or registered assigns (the “Holder”) the sum of $75,000.00 together with any interest as set forth herein, on December 1, 2015 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise.  This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note, which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”).  Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.  All payments due hereunder (to the extent not converted into Common free trading stock, $0.001par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America.  All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.  As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.  Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Debt Settlement Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Debt Settlement Agreement”). 

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This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof. 

The following terms shall apply to this Note: 

ARTICLE I. CONVERSION RIGHTS 

1.1 

Conversion Right.  The Holder shall have the right from time to time, and 

at any time during the period beginning on the date, which is one hundred eighty (180) days, 

following the dates listed for each invoice listed in Exhibit B.  The Maturity Dates for invoice dated May 31, 2015 for $75,000.00 is December 1, 2015, (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock.

For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be 

determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as 

amended  (the “Exchange Act”), and  Regulations 13D-G  thereunder,  except  as  otherwise 

provided in clause (1) of such proviso, provided, further, however, that the limitations on 

conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 

days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue 

to apply until such 61st day (or such later date, as determined by the Holder, as may be specified 

in such notice of waiver).  The number of shares of Common Stock to be issued upon each 

conversion of this Note shall be determined by dividing the Conversion Amount (as defined 

below) by the applicable Conversion Price then in effect on the date specified in the notice of 

conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to 

the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of 

Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably 

expected to result in, notice) to the Borrower before 6:00 p.m., Las Vegas, Nevada time on 

such conversion date (the “Conversion Date”).  

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The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Borrower’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Borrower’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

1.2

Conversion Price.

(a)

Calculation of  Conversion  Price.    The conversion price (the

“Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to 

equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower 

relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, 

combinations, recapitalization, reclassifications, extraordinary distributions and similar events). 

The "Conversion Price" shall mean par .001 multiplied by the number of Common Stock converted at the time. 

(b) 

Conversion Price During Major Announcements.  Notwithstanding 

anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public 

announcement that it intends to consolidate or merge with any other corporation (other than a 

merger in which the Borrower is the surviving or continuing corporation and its capital stock is 

unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any 

person, group or entity (including the Borrower) publicly announces a tender offer to Purchase 

50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the 

announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement 

Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing 

through the Adjusted Conversion Price Termination Date (as defined below), be equal to the 

lower of (x) the Conversion Price which would have been applicable for a Conversion occurring 

on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From 

and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be 

determined as set forth in this Section 1.2(a).  For purposes hereof, “Adjusted Conversion Price 

Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative. 

1.3

Authorized Shares.  The Borrower covenants that during the period the

conversion right exists, the Borrower will reserve from its authorized and unissued Common 

Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of 

Common Stock upon the full conversion of this Note issued pursuant to the Debt Settlement Agreement. 

The Borrower is required at all times to have authorized and reserved two times the number of 

shares that is actually issuable upon full conversion of the Note (based on the Conversion Price 

of the Notes in effect from time to time)(the “Reserved Amount”).  

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The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Debt Settlement Agreement.  The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.  In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes.  The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note. 

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note. 

1.4

Method of Conversion.

(a)

Mechanics of Conversion.  Subject to Section 1.1, this Note may

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

(b) 

Surrender of Note Upon Conversion.  Notwithstanding anything to 

the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, 

the Holder shall not be required to physically surrender this Note to the Borrower unless the 

entire unpaid principal amount of this Note is so converted.  The Holder and the Borrower shall 

maintain records showing the principal amount so converted and the dates of such conversions or 

shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to 

require physical surrender of this Note upon each such conversion.  In the event of any dispute or 

discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in 

the absence of manifest error.  Notwithstanding the foregoing, if any portion of this Note is 

converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically 

surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver 

upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by 

the Holder of any applicable transfer taxes) may request, representing in the aggregate the 

remaining unpaid principal amount of this Note.  The Holder and any assignee, by acceptance of 

this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following 

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conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof. 

(c) 

Payment of Taxes.  The Borrower shall not be required to pay any 

tax which may be payable in respect of any transfer involved in the issue and delivery of shares 

of Common Stock or other securities or property on conversion of this Note in a name other than 

that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver 

any such shares or other securities or property unless and until the person or persons (other than 

the Holder or the custodian in whose street name such shares are to be held for the Holder’s 

account) requesting the issuance thereof shall have paid to the Borrower the amount of any such 

tax or shall have established to the satisfaction of the Borrower that such tax has been paid. 

(d) 

Delivery of Common Stock Upon Conversion.  Upon receipt by 

the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Debt Settlement Agreement. 

(e) 

Obligation of Borrower to Deliver Common Stock.  Upon receipt 

by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of 

record of the Common Stock issuable upon such conversion, the outstanding principal amount 

and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such 

conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights 

with respect to the portion of this Note being so converted shall forthwith terminate except the 

right to receive the Common Stock or other securities, cash or other assets, as herein provided, 

on such conversion.  If the Holder shall have given a Notice of Conversion as provided herein, 

the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be 

absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the 

same, any waiver or consent with respect to any provision thereof, the recovery of any judgment 

against any person or any action to enforce the same, any failure or delay in the enforcement of 

any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, 

recoupment, limitation or termination, or any breach or alleged breach by the Holder of any 

obligation to the Borrower, and irrespective of any other circumstance which might otherwise 

limit such obligation of the Borrower to the Holder in connection with such conversion.  The 

Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as 

the Notice of Conversion is received by the Borrower before 6:00 p.m., Las Vegas, Nevada 

time, on such date. 

(f) 

Delivery of Common Stock by Electronic Transfer.  In lieu of 

delivering physical certificates representing the Common Stock issuable upon conversion, 

provided  the  Borrower  is  participating  in  the  Depository  Trust  Company (“DTC”)  Fast 

Automated  Securities  Transfer 

(“FAST”)  program,  upon  request  of  the  Holder  and  its 

compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system. 

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(g)

Failure to Deliver Common Stock Prior to Deadline.  Without in

any way limiting the Holder’s right to pursue other remedies, including actual damages and/or 

equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion 

of this Note is not delivered by the Deadline (other than a failure due to the circumstances 

described in Section 1.3 above, which failure shall be governed by such Section) the Borrower 

shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the 

Borrower fails to deliver such Common Stock.  Such cash amount shall be paid to Holder by the 

fifth day of the month following the month in which it has accrued or, at the option of the Holder 

(by written notice to the Borrower by the first day of the month following the month in which it 

has accrued), shall be added to the principal amount of this Note, in which event interest shall 

accrue thereon in accordance with the terms of this Note and such additional principal amount 

shall be convertible into Common Stock in accordance with the terms of this Note.  The 

Borrower agrees that the right to convert is a valuable right to the Holder.  The damages resulting 

from a failure, attempt to frustrate, interference with such conversion right are difficult if not 

impossible to qualify.  Accordingly the parties acknowledge that the liquidated damages 

provision contained in this Section 1.4(g) are justified. 

1.5 

Concerning the Shares.  The shares of Common Stock issuable upon 

conversion of this Note may not be sold or transferred unless  (i) such shares are sold pursuant to 

an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall 

have been furnished with an opinion of  counsel (which opinion shall be in form, substance and 

scope customary for opinions of counsel in comparable transactions) to the effect that the shares 

to be sold or transferred may be sold or transferred pursuant to an exemption from such 

registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a 

successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in 

Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance 

with this Section 1.5 and who is an Accredited Investor (as defined in the Debt Settlement Agreement). Except as otherwise provided in the Debt Settlement Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear 

a legend substantially in the following form, as appropriate: 

“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 

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PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER   LOAN   OR   FINANCING   ARRANGEMENT   SECURED   BY   THE SECURITIES.” 

The legend set forth above shall be removed and the Borrower shall issue to the 

Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer 

agent shall have received an opinion of counsel, in form, substance and scope customary for 

opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such 

Common Stock may be made without registration under the Act, which opinion shall be accepted 

by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock 

issuable upon conversion of this Note, such security is registered for sale by the Holder under an 

effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 

144 without any restriction as to the number of securities as of a particular date that can then be 

immediately sold.  In the event that the Company does not accept the opinion of counsel 

provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from 

registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of 

Default pursuant to Section 3.2 of the Note. 

1.6

Effect of Certain Events.

(a)

Effect of Merger, Consolidation, Etc.  At the option of the Holder,

the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the 

effectuation by the Borrower of a transaction or series of related transactions in which more than 

50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other 

business combination of the Borrower with or into any other Person (as defined below) or 

Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of 

Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person”  shall  mean  any  individual,  corporation,  limited  liability  company,  partnership, association, trust or other entity or organization. 

(b) 

Adjustment Due to Merger, Consolidation, Etc.  If, at any time 

when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall 

be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other 

similar event, as a result of which shares of Common Stock of the Borrower shall be changed 

into the same or a different number of shares of another class or classes of stock or securities of 

the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of 

the assets of the Borrower other than in connection with a plan of complete liquidation of the 

Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion 

of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the 

shares  of  Common  Stock  immediately  theretofore  issuable  upon  conversion,  such  stock, 

securities or assets which the Holder would have been entitled to receive in such transaction had 

this Note been converted in full immediately prior to such transaction (without regard to any 

limitations on conversion set forth herein), and in any such case appropriate provisions shall be 

made with respect to the rights and interests of the Holder of this Note to the end that the 

provisions hereof (including, without limitation, provisions for adjustment of the Conversion 

Price and of the number of shares issuable upon conversion of the Note) shall thereafter be 

applicable, as nearly as may be practicable in relation to any securities or assets thereafter 

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deliverable upon the conversion hereof.  The Borrower shall not affect any transaction described 

in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior 

written notice (but in any event at least fifteen (15) days prior written notice) of the record date 

of the special meeting of shareholders to approve, or if there is no such record date, the 

consummation   of,   such   merger,   consolidation,   exchange   of   shares,   recapitalization, 

reorganization or other similar event or sale of assets (during which time the Holder shall be 

entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the 

Borrower) assumes by written instrument the obligations of this Section 1.6(b).  The above 

provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share 

exchanges. 

(c) 

Adjustment Due to Distribution.  If the Borrower shall declare or 

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

(d) 

Adjustment Due to Dilutive Issuance.  If, at any time when any 

Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 

1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration 

or for a consideration per share (before deduction of reasonable expenses or commissions or 

underwriting discounts or allowances in connection therewith) less than the Conversion Price in 

effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a 

“Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be 

reduced to the amount of the consideration per share received by the Borrower in such Dilutive 

Issuance. 

The Borrower shall be deemed to have issued or sold shares of Common 

Stock if the Borrower in any manner issues or grants any warrants, rights or options (not 

including employee stock option plans), whether or not immediately exercisable, to subscribe for 

or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to Purchase Common Stock 

or Convertible Securities are hereinafter referred to as “Options”) and the price per share for 

which Common Stock is issuable upon the exercise of such Options is less than the Conversion 

Price then in effect, then the Conversion Price shall be equal to such price per share.  For 

purposes of the preceding sentence, the “price per share for which Common Stock is issuable 

upon the exercise of such Options” is determined by dividing (i) the total amount, if any, 

received or receivable by the Borrower as consideration for the issuance or granting of all such 

Options, plus the minimum aggregate amount of additional consideration, if any, payable to the 

Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities 

issuable upon the exercise of such Options, the minimum aggregate amount of additional 

consideration payable upon the conversion or exchange thereof at the time such Convertible 

Securities first become convertible or exchangeable, by (ii) the maximum total number of shares 

of Common Stock issuable upon the exercise of all such Options (assuming full conversion of 

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Convertible Securities, if applicable).  No further adjustment to the Conversion Price will be 

made upon the actual issuance of such Common Stock upon the exercise of such Options or upon 

the conversion or exchange of Convertible Securities issuable upon exercise of such Options. 

Additionally, the Borrower shall be deemed to have issued or sold shares 

of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, 

whether or not immediately convertible (other than where the same are issuable upon the 

exercise of Options), and the price per share for which Common Stock is issuable upon such 

conversion or exchange is less than the Conversion Price then in effect, then the Conversion 

Price shall be equal to such price per share.  For the purposes of the preceding sentence, the 

“price per share for which Common Stock is issuable upon such conversion or exchange” is 

determined by dividing (i) the total amount, if any, received or receivable by the Borrower as 

consideration for the issuance or sale of all such Convertible Securities, plus the minimum 

aggregate amount of additional consideration, if any, payable to the Borrower upon the 

conversion or exchange thereof at the time such Convertible Securities first become convertible 

or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon 

the conversion or exchange of all such Convertible Securities.  No further adjustment to the 

Conversion Price will be made upon the actual issuance of such Common Stock upon conversion 

or exchange of such Convertible Securities. 

(e) 

Share Purchase Rights.  If, at any time when any Notes are issued and 

outstanding, the Borrower issues any convertible securities or rights to Common stock, warrants, 

securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of 

Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms 

applicable to such Share Purchase Rights, the aggregate Share Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained 

herein) immediately before the date on which a record is taken for the grant, issuance or sale of 

such Debt Settlement Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Debt Settlement Rights. 

(f) 

Notice of Adjustments.  Upon the occurrence of each adjustment 

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

1.7 

Trading Market Limitations.  Unless permitted by the applicable rules and 

regulations of the principal securities market on which the Common Stock is then listed or 

traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this 

Note and the other Notes issued pursuant to the Debt Settlement Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing 

Date (as defined in the Debt Settlement Agreement), subject to equitable adjustment from time to time 

9 

for stock splits, stock dividends, combinations, capital reorganizations and similar events relating 

to the Common Stock occurring after the date hereof.  Once the Maximum Share Amount has 

been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules 

or regulations of any stock exchange, interdealer quotation system or other self-regulatory 

organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability 

to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any 

further right to convert this Note, this will be considered an Event of Default under Section 3.3 

of the Note. 

1.8 

Status as Shareholder.  Upon submission of a Notice of Conversion by a 

Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued 

because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or 

Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the 

Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, 

excepting only the right to receive certificates for such shares of Common Stock and to any 

remedies provided herein or otherwise available at law or in equity to such Holder because of a 

failure by the Borrower to comply with the terms  of this Note.  Notwithstanding the foregoing, 

if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) 

business day after the expiration of the Deadline with respect to a conversion of any portion of 

this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder 

of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of 

this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon 

as practicable, return such unconverted Note to the Holder or, if the Note has not been 

surrendered, adjust its records to reflect that such portion of this Note has not been converted.  In 

all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) 

the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required 

thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to 

have the Conversion Price with respect to subsequent conversions determined in accordance with 

Section 1.3) for the Borrower’s failure to convert this Note. 

1.9 

Prepayment.  Notwithstanding anything to the contrary contained in this 

Note, at any time during the period beginning on the Issue Date and ending on the date which is 

ninety (90) days following the issue date, the Borrower shall have the right, exercisable on not 

less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the 

outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. 

Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the 

Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising 

its right to prepay the Note, and (2) the date of prepayment which shall be not more than three 

(3) Trading Days from the date of the Optional Prepayment Notice.  On the date fixed for 

prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the 

Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified 

by the Holder in writing to the Borrower at least one (1) business day prior to the Optional 

Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall 

make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to 

140%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus 

(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional 

Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and 

(x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the 

Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment 

10 

Amount due to the Holder of the Note within two (2) business days following the Optional 

Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this 

Section 1.9. 

Notwithstanding anything to the contrary contained in this Note, at any time 

during the period beginning  on the date of the invoices listed on Exhibit B, which is ninety-one (91) days following the issue date and ending on the date of the invoices listed on Exhibit B, which is one hundred fifty (150) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Second Optional Prepayment Amount”) equal to 145%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Second Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9. 

Notwithstanding anything to the contrary contained in this Note, at any time 

during the period beginning  on the date of the invoices listed on Exhibit B, which is one hundred fifty-one (151) days following the issue date and ending on the date which is one hundred eighty (180) days following the issue date of the invoices listed on Exhibit B, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Third Optional Prepayment Amount”) equal to 150%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Third Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9. 

11 

After the expiration of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment. 

ARTICLE II.  CERTAIN COVENANTS 

2.1 

Distributions on Capital Stock.  So long as the Borrower shall have any 

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

2.2 

Restriction on Stock Repurchase.  So long as the Borrower shall have any 

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

2.3 

Borrowings.  So long as the Borrower shall have any obligation under this 

Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume 

guarantee, endorse,  contingently  agree  to  purchase or otherwise become  liable  upon  the 

obligation  of  any  person,  firm,  partnership,  joint  venture  or  corporation,  except  by  the 

endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for 

borrowed money, except (a) borrowings in existence or committed on the date hereof and of 

which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to 

trade creditors or financial institutions incurred in the ordinary course of business or (c) 

borrowings, the proceeds of which shall be used to repay this Note. 

2.4 

Sale of Assets.  So long as the Borrower shall have any obligation under 

this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise 

dispose of any significant portion of its assets outside the ordinary course of business.  Any 

consent to the disposition of any assets may be conditioned on a specified use of the proceeds of 

disposition. 

2.5 

Advances and Loans.  So long as the Borrower shall have any obligation 

under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $500,000. 

ARTICLE III.  EVENTS OF DEFAULT 

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

12 

3.1

Failure to Pay Principal or Interest.  The Borrower fails to pay the

principal  hereof  or  interest  thereon  when  due  on  this  Note,  whether  at  maturity,  upon acceleration or otherwise. 

3.2 

Conversion and the Shares.  The  Borrower  fails to issue shares of 

Common Stock to the Holder (or announces or threatens in writing that it will not honor its 

obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in 

accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer 

(issue) (electronically or in certificated form) any certificate for shares of Common Stock issued 

to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this 

Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its 

transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate 

for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant 

to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not 

to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive 

legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any 

shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this 

Note as and when required by this Note (or makes any written announcement, statement or threat 

that it does not intend to honor the obligations described in this paragraph) and any such failure 

shall continue uncured (or any written announcement, statement or threat not to honor its 

obligations shall not be rescinded in writing) for three (3) business days after the Holder shall 

have delivered a Notice of Conversion.  It is an obligation of the Borrower to remain current in 

its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of 

this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer 

agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer 

agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the 

Holder within forty eight (48) hours of a demand from the Holder. 

3.3 

Breach of Covenants.  The Borrower breaches any material covenant or 

other material term or condition contained in this Note and any collateral documents including but not limited to the Debt Settlement Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder. 

3.4 

Breach  of  Representations  and  Warranties.    Any  representation  or 

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

3.5 

Receiver or Trustee.  The Borrower or any subsidiary of the Borrower 

shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed. 

3.6 

Judgments.  Any money judgment, writ or similar process shall be entered 

or filed against the Borrower or any subsidiary of the Borrower or any of its property or other 

assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of 

13 

twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld. 

3.7 

Bankruptcy.    Bankruptcy,  insolvency,  reorganization  or  liquidation 

proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower. 

3.8 

Delisting of Stock.  The Borrower shall fail to maintain the 

listing of the Stock on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange. 

3.9 

Failure to Comply with the Exchange Act.  The Borrower shall fail to 

comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act. 

3.10

Liquidation.   Any dissolution, liquidation, or winding up of Borrower or

any substantial portion of its business.

3.11

Cessation of Operations.

Any cessation of operations by Borrower or

Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due. 

3.12

Maintenance of Assets.

The failure by Borrower to maintain any

material intellectual property rights, personal, real property or other assets, which are necessary to conduct its business (whether now or in the future). 

3.13 

Financial Statement Restatement. 

The  restatement  of  any  financial 

statements filed by the Borrower with the SEC for any date or period from two years prior to the 

Issue Date of this Note and until this Note is no longer outstanding, if the result of such 

restatement would, by comparison to the unrestated financial statement, have constituted a 

material adverse effect on the rights of the Holder with respect to this Note or the Debt Settlement 

Agreement. 

3.14

Reverse Splits.

The  Borrower  effectuates  a  reverse  split  of  its

Common Stock without twenty (20) days prior written notice to the Holder. 

3.15 

Replacement of Transfer Agent. In the event that the Borrower proposes to 

replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Debt Settlement Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. 

14 

3.16

Cross-Default.  Notwithstanding anything to the contrary contained in this

Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note.  Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder. 

Upon the occurrence and during the continuation of any Event of Default specified in 

Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due 

at the Maturity Date), the Note shall become immediately due and payable and the Borrower 

shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the 

Default Sum (as defined  herein).   UPON THE OCCURRENCE AND  DURING  THE 

CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE 

NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER 

SHALL PAY TO THE HOLDER,  IN  FULL SATISFACTION OF ITS OBLIGATIONS 

HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED 

HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of 

any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal 

hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event 

pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 

3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the 

“Default Notice”), and upon the occurrence of an Event of Default specified the remaining 

sections of Articles III (other than failure to pay the principal hereof or interest thereon at the 

Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and 

payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, 

an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal 

amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this 

Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, 

on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder 

pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to 

the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be 

known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where 

parity value means (a) the highest number of shares of Common Stock issuable upon conversion 

of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading 

Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for 

purposes of determining the lowest applicable Conversion Price, unless the Default Event arises 

as a result of a breach in respect of a specific Conversion Date in which case such Conversion 

Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common 

Stock during the period beginning on the date of first occurrence of the Event of Default and 

ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other 

amounts payable hereunder shall immediately become due and payable, all without demand, 

presentment or notice, all of which hereby are expressly waived, together with all costs, 

15 

including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. 

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect. 

ARTICLE IV. MISCELLANEOUS 

4.1 

Failure or Indulgence Not Waiver.  No failure or delay on the part of the 

Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver 

thereof, nor shall any single or partial exercise of any such power, right or privilege preclude 

other or further exercise thereof or of any other right, power or privileges.  All rights and 

remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies 

otherwise available. 

4.2 

Notices.  All notices, demands, requests, consents, approvals, and other 

communications required or permitted hereunder shall be in writing and, unless otherwise 

specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, 

return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with 

charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set 

forth below or to such other address as such party shall have specified most recently by written 

notice.  Any notice or other communication required or permitted to be given hereunder shall be 

deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation 

generated by the transmitting facsimile machine, at the address or number designated below (if 

delivered on a business day during normal business hours where such notice is to be received), or 

the first business day following such delivery (if delivered other than on a business day during 

normal business hours where such notice is to be received) or (b) on the second business day 

following the date of mailing by express courier service, fully prepaid, addressed to such 

address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for 

such communications shall be: 

If to the Borrower, to: 

Force Minerals Corporation

6302 Mesedge Drive

Colorado Springs, CO 80919

Attn: Nathan Lewis, Chief Executive Officer

With a copy to (which copy shall not constitute notice): 

             Thomas Stepp

             15707 Rockfield Blvd, Ste. 101

              Irvine, CA 92618

Email:  tes@stepplawgroup.com

16 

If to the Holder: 

Rancho Capital Management

1155 Camino Del Mar Unit 176

Del Mar, CA 92014

4.3 

Amendments.  This Note and any provision hereof may only be amended 

by an instrument in writing signed by the Borrower and the Holder.  The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Debt Settlement Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented. 

4.4 

Assignability.  This Note shall be binding upon the Borrower and its 

successors and assigns, and shall inure to be the benefit of the Holder and its successors and 

assigns.  Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) 

of the 1933 Act).  Notwithstanding anything in this Note to the contrary, this Note may be 

pledged  as  collateral  in  connection  with  a  bona  fide  margin  account  or  other  lending 

arrangement. 

4.5 

Cost of Collection.  If default is made in the payment of this Note, the 

Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees. 

4.6 

Governing Law.  This Note shall be governed by and construed in 

accordance with the laws of the State of Nevada without regard to principles of conflicts of 

laws.  Any action brought by either party against the other concerning the transactions 

contemplated by this Note shall be brought only in the state courts of Nevada or in the federal 

courts located in the state and county of Clark.  The parties to this Note hereby irrevocably 

waive any objection to jurisdiction and venue of any action instituted hereunder and shall not 

assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. 

The Borrower and Holder waive trial by jury.  The prevailing party shall be entitled to recover 

from the other party its reasonable attorney's fees and costs.  In the event that any provision of 

this Note or any other agreement delivered in connection herewith is invalid or unenforceable 

under any applicable statute or rule of law, then such provision shall be deemed inoperative to 

the extent that it may conflict therewith and shall be deemed modified to conform with such 

statute or rule of law.

Any such provision which may prove invalid or unenforceable under any 

law shall not affect the validity or enforceability of any other provision of any agreement.   Each 

party hereby irrevocably waives personal service of process and consents to process being served 

in any suit, action or proceeding in connection with this Agreement or any other Transaction 

Document 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 Agreement 

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 law. 

4.7 

Certain Amounts.  Whenever pursuant to this Note the Borrower is 

required to pay an amount in excess of the outstanding principal amount (or the portion thereof 

required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such 

interest, the Borrower and the Holder agree that the actual damages to the Holder from the 

17

receipt of cash payment on this Note may be difficult to determine and the amount to be so paid 

by the Borrower represents stipulated damages and not a penalty and is intended to compensate 

the Holder in part for loss of the opportunity to convert this Note and to earn a return from the 

sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the 

price paid for such shares pursuant to this Note.  The Borrower and the Holder hereby agree that 

such amount of stipulated damages is not plainly disproportionate to the possible loss to the 

Holder from the receipt of a cash payment without the opportunity to convert this Note into 

shares of Common Stock. 

4.8

Debt Settlement Agreement.  By its acceptance of this Note, each party agrees to

be bound by the applicable terms of the Debt Settlement Agreement.

4.9 

Notice of Corporate Events.  Except as otherwise provided below, the 

Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the 

extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with 

prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials 

and other information sent to shareholders).  In the event of any taking by the Borrower of a 

record of its shareholders for the purpose of determining shareholders who are entitled to receive 

payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share 

of any class or any other securities or property, or to receive any other right, or for the purpose of 

determining shareholders who are entitled to vote in connection with any proposed sale, lease or 

conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, 

dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at 

least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the 

consummation of the transaction or event, whichever is earlier), of the date on which any such 

record is to be taken for the purpose of such dividend, distribution, right or other event, and a 

brief statement regarding the amount and character of such dividend, distribution, right or other 

event to the extent known at such time.  The Borrower shall make a public announcement of any 

event requiring notification to the Holder hereunder substantially simultaneously with the 

notification to the Holder in accordance with the terms of this Section 4.9. 

4.10 

Remedies.    The  Borrower  acknowledges  that  a  breach  by  it  of  its 

obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and 

purpose of the transaction contemplated hereby.  Accordingly, the Borrower acknowledges that 

the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in 

the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the 

Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing 

or curing any breach of this Note and to enforce specifically the terms and provisions thereof, 

without the necessity of showing economic loss and without any bond or other security being 

required. 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this May 31, 2015

Force Minerals Corporation

By: ___Nathan Lewis___________________ 

Nathan Lewis

18

EXHIBIT A

NOTICE OF CONVERSION 

The undersigned hereby elects to convert $_________________ principal amount 

of the Note (defined below) into that number of shares of Common Stock to be issued pursuant 

to the conversion of the Note (“Common Stock”) as set forth below, of Force Minerals Corporation, a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of May 31, 2015 (the “Note”), as of the date written below.  No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. 

Box Checked as to applicable instructions: 

[ ]

The Borrower shall electronically transmit the Common Stock issuable pursuant

to this Notice of Conversion to the account of the undersigned or its nominee with

DTC  through  its  Deposit  Withdrawal  Agent  Commission  system

(“DWAC

Transfer”).

Name of DTC Prime Broker: Account Number: 

[ 

] 

The  undersigned  hereby  requests  that  the  Borrower  issue  a  certificate  or 

certificates for the number of shares of Common Stock set forth below (which 

numbers are based on the Holder’s calculation attached hereto) in the name(s) 

specified immediately below or, if additional space is necessary, on an attachment 

hereto: 

Rancho Capital Management

1155 Camino Del Mar Unit 176 

Del Mar, CA 92014

Attention: Certificate Delivery 

Date of Conversion:

_____________

Applicable Conversion Price:

$.001

Number of Shares of Common Stock to be Issued 

Pursuant to Conversion of the Notes:

______________

Amount of Principal Balance Due remaining 

Under the Note after this conversion:

______________

By:_____________________________

Title:  President.

Date:  ______________ 

19Exhibit 4.1

 

BIOTIME, INC. 2012 EQUITY INCENTIVE PLAN

As Amended

 

1.        Purpose; Eligibility.

 

1.1        General Purpose. The name of this plan is the BioTime, Inc.2012 Equity Incentive Plan (the "Plan"). The purposes of the Plan are to (a) enable the Company, to attract and retain the types of Employees, Consultants and Directors who will contribute to the Company's long range success; (b) provide incentives that align the interests of Employees, Consultants and Directors with those of the shareholders of the Company; and (c) promote the success of the Company's business.

 

1.2        Eligible Award Recipients. The persons eligible to receive Awards are the Employees, Consultants and Directors of the Company.

 

1.3        Available Awards. Awards that may be granted under the Plan include: (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock Appreciation Rights, and (d) Stock Awards.

 

2.        Definitions.

 

"Applicable Laws" means the requirements related to or implicated by the administration of the Plan under applicable state corporate law, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the shares of Common Stock are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.

 

"Award" means any right granted under the Plan, including an Incentive Stock Option, a Non-qualified Stock Option, a Stock Appreciation Right, or a Stock Award.

 

"Award Agreement" means a written agreement, contract, certificate or other instrument or document evidencing the terms and conditions of an individual Award granted under the Plan which may, in the discretion of the Company, be transmitted electronically to any Participant. Each Award Agreement shall be subject to the terms and conditions of the Plan.

 

“BioTime” means BioTime, Inc., a California corporation, and any successor company or any parent company.

 

"Board" means the Board of Directors of BioTime, as constituted at any time.

 

"Cause" means:

 

With respect to any Employee or Consultant:(a) If the Employee or Consultant is a party to an employment or service agreement with the Company or its Affiliates and such agreement provides for a definition of Cause, the definition contained therein; or(b) If no such agreement exists, or if such agreement does not define Cause: (i) the commission of, or plea of guilty or no contest to, a felony or a crime involving moral turpitude or the commission of any other act involving wilful malfeasance or material fiduciary breach with respect to the Company or an Subsidiary; (ii) conduct that results in or is reasonably likely to result in harm to the reputation or business of the Company or any of its Affiliates; (iii) wilful conversion or misappropriation of corporate funds; (iv) gross negligence or wilful misconduct with respect to the Company or an Subsidiary; or (v) material violation of any state or federal securities law.

 

With respect to any Director, a determination by a majority of the disinterested Board members that the Director has engaged in any of the following:(a) malfeasance in office;(b) gross misconduct or neglect;(c) false or fraudulent misrepresentation inducing the director's appointment;(d) wilful conversion or misappropriation of corporate funds; or(e) repeated failure to participate in Board meetings on a regular basis despite having received proper notice of the meetings in advance.

 

The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to whether a Participant has been discharged for Cause.

 

"Change in Control" (a) The direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person that is not a subsidiary of the Company; (b) The Incumbent Directors cease for any reason to constitute at least a majority of the Board; (c) The date which is 10 business days prior to the consummation of a complete liquidation or dissolution of the Company; (d) The acquisition by any Person of Beneficial Ownership of 50% or more (on a fully diluted basis) of either (i) the then outstanding shares of Common Stock of the Company, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting 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 Plan, the following acquisitions shall not constitute a Change in Control: (A) any acquisition by the Company or any Subsidiary, (B) any acquisition by any employee benefit plan sponsored or maintained by the Company or any subsidiary, (C) any acquisition which complies with clauses, (i), (ii) and (iii) of subsection (e) of this definition or (D) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of persons including the Participant (or any entity controlled by the Participant or any group of persons including the Participant); or (e) The consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company's shareholders, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (i) more than 50% of the total voting power of (A) the entity resulting from such Business Combination (the "Surviving Company"), or (B) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company (the "Parent Company"), is represented by the Outstanding Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the Outstanding Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Outstanding Company Voting Securities among the holders thereof immediately prior to the Business Combination; (ii) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company) is or becomes the Beneficial Owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or, if there is no Parent Company, the Surviving Company); and (iii) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination.

 

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"Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be deemed to include a reference to any regulations promulgated thereunder.

 

"Committee" means a committee of the Board appointed by the Board to administer the Plan in accordance with Section 3.3 and Section 3.4.

 

"Common Stock" means the common shares, no par value per share, of BioTime, or such other securities of the BioTime as may be designated by the Board or Committee from time to time in substitution thereof.

 

"Company" means BioTime and any or all of its Subsidiaries.

 

"Consultant" means any individual who is engaged by the Company to render consulting or advisory services.

 

"Continuous Service" means that the Participant's service with the Company, whether as an Employee, Consultant or Director, is not interrupted or terminated.  The Participant's Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service (such as a change of employment from one Subsidiary to another Subsidiary), provided that there is no interruption or termination of the Participant's Continuous Service; provided further that if any Award is subject to Section 409A of the Code, this sentence shall only be given effect to the extent consistent with Section 409A of the Code.  For example, a change in status from an Employee to a Director will not constitute an interruption of Continuous Service. The Board or Committee, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by the Board or Committee, such as sick leave, military leave, or any other personal or family leave of absence.

 

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"Director" means a member of the Board.

 

"Disability" means that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment; provided, however, for purposes of determining the term of an Incentive Stock Option pursuant to Section 6.10 hereof, the term Disability shall have the meaning ascribed to it under Section 22(e)(3) of the Code.  The determination of whether an individual has a Disability shall be determined by the Board or Committee or under procedures adopted by the Board or Committee.  Except for a determination of Disability within the meaning of Section 22(e)(3) of the Code for purposes of an Incentive Stock Option, the Board or Committee may rely on any determination that a Participant is disabled for purposes of benefits under any long-term disability plan maintained by the Company in which a Participant participates.

 

"Effective Date" shall mean the date as of which this Plan is adopted by the Board.

 

"Employee" means any person employed by the Company; provided, that, for purposes of determining eligibility to receive Incentive Stock Options, an Employee shall mean an employee of the Company or a parent corporation within the meaning of Code Section 424.  Mere service as a Director or payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company.

 

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

 

"Fair Market Value" means, as of any date, the value of the Common Stock as determined below. If the Common Stock is listed on any national stock exchange, inter-dealer quotation system, or over-the-counter market that reports closing prices, including without limitation, the New York Stock Exchange, NYSE MKT, or the OTC Bulletin Board, the Fair Market Value shall be the closing price of a share of Common Stock (or if no sales were reported the closing price on the date immediately preceding such date) as quoted on such exchange or system on the day of determination, as reported in the Wall Street Journal or such other source as the Board or Committee deems reliable. In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Board or Committee, using such methods as the Board or Committee determines to be reasonable under the circumstances, and such determination shall be conclusive and binding on all persons.

 

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"Free Standing Rights" has the meaning set forth in Section 7.1(a).

 

"Good Reason" means: (a) if an Employee or Consultant is a party to an employment or service agreement with the Company and such agreement provides for a definition of Good Reason, the definition contained therein; or (b) if no such agreement exists or if such agreement does not define Good Reason, the occurrence of one or more of the following without the Participant's express written consent, which circumstances are not remedied by the Company within thirty (30) days of its receipt of a written notice from the Participant describing the applicable circumstances (which notice must be provided by the Participant within ninety (90) days of the Participant's knowledge of the applicable circumstances): (i) any material increase in the Participant's duties (other than by way of promotion attendant with additional responsibilities, authority or title and an increase in salary commensurate therewith), (ii) any material diminution of responsibilities, authority, title, status or reporting structure; (iii) a material reduction in the Participant's base salary or bonus opportunity; or (iv) a geographical relocation of the Participant's principal office location by more than fifty (50) miles.

 

"Grant Date" means the date on which the Board or Committee adopts a resolution, or takes other appropriate action, expressly granting an Award to a Participant that specifies the key terms and conditions of the Award or, if a later date is set forth in such resolution, then such date as is set forth in such resolution.

 

"Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

 

"Non-Employee Director" means a Director who is a "non-employee director" within the meaning of Rule 16b-3.

 

"Non-qualified Stock Option" means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

 

"Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

"Option" means an Incentive Stock Option or a Non-qualified Stock Option granted pursuant to the Plan.

 

"Optionholder" means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

 

"Option Exercise Price" means the price at which a share of Common Stock may be purchased upon the exercise of an Option.

 

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"Outside Director" means a Director who is an "outside director" within the meaning of Section 162(m) of the Code and Treasury Regulations Section 1.162-27(e)(3).

 

"Participant" means an eligible person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.

 

"Performance Goals" means one or more goals established by the Board or Committee that must be attained by BioTime or a Subsidiary, or a division, business unit or operational unit of BioTime or a Subsidiary in order for an Award to vest or for the determination of the amount of an Award.  A Performance Goal may be based on financial results or performance or upon the attainment of any other goal or milestone designated by the Board or Committee such as, by way of example only and not by way of limitation, the attainment of a specified amount of sales, revenues, or net income, an increase in the Fair Market Value of the Common Stock, or the commencement or successful completion of a clinical trial of a new drug, biological product, or medical device.

 

"Permitted Transferee" means: (a) a member of the Optionholder's immediate family (child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships), any person sharing the Optionholder's household (other than a tenant or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the Optionholder) control the management of assets, and any other entity in which these persons (or the Optionholder) own more than 50% of the voting interests; and (b)  in conjunction with the exercise of an Option, and for the purpose of obtaining financing for such exercise, the option holder may arrange for a securities broker/dealer to exercise an option on the option holder’s behalf, to the extent necessary to obtain funds required to pay the exercise price of the option, provided that the Fair Market Value of the Common Stock determined as of the date immediately before the date of such transfer exceeded the exercise price of the Option.

 

"Plan" means this BioTime, Inc. 2012 Equity Incentive Plan, as amended and/or amended and restated from time to time.

 

"Related Rights" has the meaning set forth in Section 7.1(a).

 

"Restricted Period" has the meaning set forth in Section 7.2(a).

 

"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

 

"Securities Act" means the Securities Act of 1933, as amended.

 

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"Stock Appreciation Right" means the right pursuant to an Award granted under Section 7.1 to receive, upon exercise, an amount payable in cash or shares equal to the number of shares subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (a) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (b) the exercise price specified in the Stock Appreciation Right Award Agreement.

 

"Stock Award" means any Award granted pursuant to Section 7.2(a).

 

"Stock for Stock Exchange" has the meaning set forth in Section 6.4.

"Subsidiary" means (i) any corporation or other entity in which the Company possesses directly or indirectly equity interests representing at least 50% of the total ordinary voting power or at least 50% of the total value of all classes of equity interests of such corporation or other entity and (ii) any other entity in which the Company has a direct or indirect economic interest that is designated as a Subsidiary by the Committee.

 

"Ten Percent Shareholder" means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Subsidiaries.

 

“Voting Securities” means any class or series of stock or other securities entitling the holder vote for the election of Directors generally, but shall exclude any such security that entitles the holder to designate, appoint, or vote for the election of a minority of the Directors.

 

3.        Administration.

 

3.1        Authority of Committee. The Plan shall be administered by the Board or, in the Board's sole discretion, by a Committee. Subject to the terms of the Plan, the Board or Committee shall have the authority:

 

(a)      to construe and interpret the Plan and apply its provisions;

 

(b)      to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;

 

(c)      to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;

 

(d)      to determine when Awards are to be granted under the Plan and the applicable Grant Date;

 

(e)      from time to time to select those Participants to whom Awards shall be granted;

 

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(f)      to determine the number of shares of Common Stock to be made subject to each Award;

 

(g)      to determine whether each Option is to be an Incentive Stock Option or a Non-qualified Stock Option;

 

(h)      to prescribe the terms and conditions of each Award, including, without limitation, the exercise price and medium of payment and vesting provisions, and to specify the provisions of the Award Agreement relating to such grant;

 

(i)      to amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding Award; provided, however, that if any such amendment impairs a Participant's rights or increases a Participant's obligations under his or her Award or creates or increases a Participant's federal income tax liability with respect to an Award, such amendment shall also be subject to the Participant's consent;

 

(j)      to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees under the Company's employment policies;

 

(k)      to make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments;

 

(l)      to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; and

 

(m)      to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the Plan.

 

The Board or Committee also may modify the purchase price or the exercise price of any outstanding Award, provided that if the modification effects a repricing, shareholder approval shall be required before the repricing is effective.  As used in this paragraph, repricing means (i) reduction in the exercise price of an outstanding Option or SAR, and (ii) cancellation of an “underwater” or “out-of-the money” Award in exchange for other Awards or cash.  An “underwater” or “out-of-the money” Award is one for which the exercise price is greater than the Fair Market Value of the underlying Common Stock.

 

3.2        Decisions Final. All decisions made by the Board or Committee pursuant to the provisions of the Plan shall be final and binding on the Company and the Participants.

 

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3.3        Delegation. The Board may delegate administration of the Plan to a committee or committees of the Board, and the term "Committee" shall apply to any such committee. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. The members of the Committee shall be appointed by and serve at the pleasure of the Board. From time to time, the Board may increase or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable.

 

3.4        Committee Composition. Except as otherwise determined by the Board, the Committee shall consist solely of two or more Non-Employee Directors who are also Outside Directors. The Board shall have discretion to determine whether or not it intends to comply with the exemption requirements of Rule 16b-3 and/or Section 162(m) of the Code. However, if the Board intends to satisfy such exemption requirements, with respect to Awards to any “covered employee” (as defined in Section 162(m)(3) of the Code, as interpreted by Internal Revenue Service Notice 2007-49) and with respect to any insider subject to Section 16 of the Exchange Act, the Committee shall be a compensation committee of the Board that at all times consists solely of two or more Non-Employee Directors who are also Outside Directors.  Nothing herein shall create an inference that an Award is not validly granted under the Plan in the event Awards are granted under the Plan by a compensation committee of the Board that does not at all times consist solely of two or more Non-Employee Directors who are also Outside Directors.

 

4.        Shares Subject to the Plan.

 

4.1        Subject to adjustment in accordance with Section 11, a total of 10,000,000 shares of Common Stock shall be available for the grant of Awards under the Plan.  Any shares of Common Stock granted in connection with Options and Stock Appreciation Rights shall be counted against this limit as one share for every one Option or Stock Appreciation Right awarded. Any shares of Common Stock granted in connection with Awards other than Options and Stock Appreciation Rights shall be counted against this limit as two (2) shares of Common Stock for every one (1) share of Common Stock granted in connection with such Award.  During the terms of the Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards.

 

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4.2        Subject to adjustment in accordance with Section 11, no Participant shall be granted, during any one (1) year period, Options to purchase Common Stock and Stock Appreciation Rights with respect to more than 1,000,000 shares of Common Stock in the aggregate or any other Awards with respect to more than 500,000 shares of Common Stock in the aggregate. If an Award is to be settled in cash, the number of shares of Common Stock on which the Award is based shall not count toward the individual share limit set forth in this Section 4.

 

4.3        Any shares of Common Stock subject to an Award that is cancelled, forfeited or expires prior to exercise or realization, either in full or in part, shall again become available for issuance under the Plan.  Any shares of Common Stock that again become available for future grants pursuant to this Section shall be added back as one share if such shares were subject to Options or Stock Appreciation Rights and as two (2) shares if such shares were subject to other Awards. Notwithstanding anything to the contrary contained herein: shares subject to an Award under the Plan shall not again be made available for issuance or delivery under the Plan if such shares are (a) shares tendered in payment of an Option, (b) shares delivered or withheld by the Company to satisfy any tax withholding obligation,  (c) shares covered by a stock-settled Stock Appreciation Right or other Awards that were not issued upon the settlement of the Award, or (d) shares repurchased by the Company using Option proceeds.

 

5.        Eligibility.

 

5.1        Eligibility for Specific Awards. Incentive Stock Options may be granted only to Employees. Awards other than Incentive Stock Options may be granted to Employees, Consultants and Directors.  Awards may be granted to individuals whom the Committee determines are reasonably expected to become Employees, Consultants and Directors; provided that such grant and the Grant Date shall become effective only the individual becoming an Employee, Consultant or Director.

 

5.2        Ten Percent Shareholders. A Ten Percent Shareholder shall not be granted an Incentive Stock Option unless the Option Exercise Price is at least 110% of the Fair Market Value of the Common Stock at the Grant Date and the Option is not exercisable after the expiration of five years from the Grant Date.

 

6.        Option Provisions. Each Option granted under the Plan shall be evidenced by an Award Agreement. Each Option so granted shall be subject to the conditions set forth in this Section 6, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options shall be separately designated Incentive Stock Options or Non-qualified Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. Notwithstanding the foregoing, the Company shall have no liability to any Participant or any other person if an Option designated as an Incentive Stock Option fails to qualify as such at any time or if an Option is determined to constitute "nonqualified deferred compensation" within the meaning of Section 409A of the Code and the terms of such Option do not satisfy the requirements of Section 409A of the Code. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:

 

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6.1        Term.  An Option shall expire, and thereafter no longer be exercisable, on such date as the Board or Committee may designate; provided, however, no Option shall be exercisable after the expiration of 10 years from the Grant Date, and no Incentive Stock Option granted to a Ten Percent Shareholder shall be exercisable after the expiration of 5 years from the Grant Date.  The expiration date of each Option shall be stated in the Award Agreement pertaining to the Option.

 

6.2        Exercise Price of An Incentive Stock Option. Subject to the provisions of Section 5.2 pertaining to Incentive Stock Options granted to Ten Percent Shareholders, the Option Exercise Price of each Incentive Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.

 

6.3        Exercise Price of a Non-qualified Stock Option. The Option Exercise Price of each Non-qualified Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, a Non-qualified Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 409A of the Code.

 

6.4        Consideration. The Option Exercise Price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (a) in cash or by certified or bank check at the time the Option is exercised or (b) to the extent approved by the Board or Committee, the Option Exercise Price may be paid: (i) by delivery to the Company of other Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the Option Exercise Price (or portion thereof) due for the number of shares being acquired (a "Stock for Stock Exchange"); (ii) a "cashless" exercise program established with a broker pursuant to which the broker exercises or arranges for the coordination of the exercise of the Option with the sale of some or all of the underlying Common Stock; (iii) any combination of the foregoing methods; or (iv) in any other form of consideration that is legal consideration for the issuance of Common Stock and that may be acceptable to the Board or Committee. Unless otherwise specifically provided in the Option, the exercise price of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). Notwithstanding the foregoing, during any period for which the Common Stock is publicly traded (i.e., the Common Stock is listed on any national securities exchange or an interdealer quotation system, or is traded in an over-the-counter market that reports closing prices) an exercise by a Director or Officer that involves or may involve a direct or indirect extension of credit or arrangement of an extension of credit by the Company, directly or indirectly, in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any Award under this Plan.

 

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6.5        Transferability of An Incentive Stock Option. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.

 

6.6        Transferability of a Non-qualified Stock Option. A Non-qualified Stock Option may, in the sole discretion of the Board or Committee, be transferable to a Permitted Transferee, upon approval by the Board or Committee, to the extent provided in the Award Agreement or by subsequent consent granted by the Board or Committee. If the Non-qualified Stock Option does not provide for transferability or consent to transfer to a Permitted Transferee is not granted by the Board or Committee, then the Non-qualified Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.

 

6.7        Vesting of Options. Each Option may, but need not, vest and therefore become exercisable in periodic instalments as determined by the Board or Committee or based upon the attainment of a Performance Goal or the occurrence of a specified event. The vesting provisions of individual Options may vary. No Option may be exercised for a fraction of a share of Common Stock.

 

6.8        Termination of Continuous Service. Unless otherwise provided in an Award Agreement or in an employment agreement the terms of which have been approved by the Board or Committee, in the event an Optionholder's Continuous Service terminates (other than upon the Optionholder's death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three months following the termination of the Optionholder's Continuous Service or (b) the expiration of the term of the Option as set forth in the Award Agreement.  If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Award Agreement, the Option shall terminate.

 

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6.9        Extension of Termination Date. An Optionholder's Award Agreement may also provide that if the exercise of the Option following the termination of the Optionholder's Continuous Service for any reason would be prohibited at any time because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act or any other state or federal securities law or the rules of any securities exchange or interdealer quotation system, then the Option shall terminate on the earlier of (a) the expiration of the term of the Option in accordance with Section 6.1 or (b) the expiration of a period after termination of the Participant's Continuous Service that is three months after the end of the period during which the exercise of the Option would be in violation of such registration or other securities law requirements.

 

6.10     Disability of Optionholder. Unless otherwise provided in an Award Agreement, in the event that an Optionholder's Continuous Service terminates as a result of the Optionholder's Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (a) the date 12 months following such termination or (b) the expiration of the term of the Option as set forth in the Award Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein or in the Award Agreement, the Option shall terminate.

 

6.11     Death of Optionholder. Unless otherwise provided in an Award Agreement, in the event an Optionholder's Continuous Service terminates as a result of the Optionholder's death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder's estate, executor, or personal representative, by a person who acquired the right to exercise the Option by bequest, but only within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration of the term of such Option as set forth in the Award Agreement. If, after the Optionholder's death, the Option is not exercised within the time specified herein or in the Award Agreement, the Option shall terminate.

 

6.12     Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company) exceeds $100,000, the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Non-qualified Stock Options.

 

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7.       Provisions of Awards Other Than Options.

 

7.1        Stock Appreciation Rights.

 

(a)      General

 

Each Stock Appreciation Right granted under the Plan shall be evidenced by an Award Agreement. Each Stock Appreciation Right so granted shall be subject to the conditions set forth in this Section 7.1, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. Stock Appreciation Rights may be granted alone ("Free Standing Rights") or in tandem with an Option granted under the Plan ("Related Rights").

 

(b)      Grant Requirements

 

Any Related Right that relates to a Non-qualified Stock Option may be granted at the same time the Option is granted or at any time thereafter but before the exercise or expiration of the Option. Any Related Right that relates to an Incentive Stock Option must be granted at the same time the Incentive Stock Option is granted.

 

(c)       Term of Stock Appreciation Rights

 

The term of a Stock Appreciation Right granted under the Plan shall be determined by the Board or Committee; provided, however, no Stock Appreciation Right shall be exercisable later than the tenth anniversary of the Grant Date.

 

(d)      Vesting of Stock Appreciation Rights

 

Each Stock Appreciation Right may, but need not, vest and therefore become exercisable in periodic instalments as determined by the Board or Committee or based upon the attainment of a Performance Goal or the occurrence of a specified event. The vesting provisions of individual Stock Appreciation Rights may vary. No Stock Appreciation Right may be exercised for a fraction of a share of Common Stock.

 

(e)       Exercise and Payment

 

Upon exercise of a Stock Appreciation Right, the holder shall be entitled to receive from the Company an amount equal to the number of shares of Common Stock subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (i) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (ii) the exercise price specified in the Stock Appreciation Right or related Option. Payment with respect to the exercise of a Stock Appreciation Right shall be made on the date of exercise. Payment shall be made in the form of shares of Common Stock (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Board Committee in its sole discretion), cash or a combination thereof, as determined by the Board or Committee.

 

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(f)        Exercise Price

 

The exercise price of a Free Standing Stock Appreciation Right shall be determined by the Board or Committee, but shall not be less than 100% of the Fair Market Value of one share of Common Stock on the Grant Date of the Stock Appreciation Right.  A Related Right granted simultaneously with or subsequent to the grant of an Option and in conjunction therewith or in the alternative thereto shall have the same exercise price as the related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be exercisable only to the same extent as the related Option; provided, however, that a Stock Appreciation Right, by its terms, shall be exercisable only when the Fair Market Value per share of Common Stock subject to the Stock Appreciation Right and related Option exceeds the exercise price per share thereof. No Stock Appreciation Rights may be granted in tandem with an Option unless the Board or Committee determines that the requirements of Section 7.1(b) are satisfied.

 

(g)      Reduction in the Underlying Option Shares

 

Upon any exercise of a Related Right, the number of shares of Common Stock for which any related Option shall be exercisable shall be reduced by the number of shares for which the Stock Appreciation Right has been exercised. The number of shares of Common Stock for which a Related Right shall be exercisable shall be reduced upon any exercise of any related Option by the number of shares of Common Stock for which such Option has been exercised.

 

7.2        Stock Awards.

 

(a)      General

 

A Stock Award is an Award of actual shares of Common Stock ("Restricted Stock") or hypothetical Common Stock units ("Restricted Stock Units") having a value equal to the Fair Market Value of an identical number of shares of Common Stock.  A Stock Award may, but need not, provide that such Stock Award may not be sold, assigned, transferred or otherwise disposed of, or pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose for such period  as the Board or Committee shall determine (the "Restricted Period"). Each Stock Award granted under the Plan shall be evidenced by an Award Agreement. Each Stock Award so granted shall be subject to the conditions set forth in this Section 7.2, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.

 

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(b)      Restricted Stock and Restricted Stock Units

 

		(i)	Each Participant granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted Stock setting forth the applicable payment terms, if any, for the Restricted Stock, and restrictions and other terms and conditions applicable to such Restricted Stock.

 

		(ii)	Restricted Stock may be issued to a Participant without payment or without the delivery of a promissory note or instalment payment agreement only for services actually performed by the Participant prior to the issuance of the Restricted Stock.

 

		(iii)	In the case of Restricted Stock sold to a Participant on an instalment payment basis, the Company may require, as a condition of the grant, that the Participant execute and deliver to the Company a promissory note or instalment payment agreement and a stock pledge or security agreement, and a blank stock power with respect to the Restricted Stock, in such form and containing such terms as the Board or Committee may require. No Restricted Stock shall be sold to an Officer or Director on instalment payment terms that would constitute an extension of credit in violation of in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002.

 

		(iv)	If the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (A) an escrow agreement satisfactory to the Committee, if applicable and (B) the appropriate blank stock power with respect to the Restricted Stock covered by such agreement.

 

		(v)	If a Participant fails to execute an agreement evidencing an Award of Restricted Stock and, if applicable, a promissory note or instalment payment agreement, stock pledge or security agreement, escrow agreement, and stock power, the Award shall be null and void. Subject to the restrictions set forth in the Award, the Participant generally shall have the rights and privileges of a shareholder as to such Restricted Stock, including the right to vote such Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld by the Company for the Participant's account, and interest may be credited on the amount of the cash dividends withheld at a rate and subject to such terms as determined by the Board or Committee. The cash dividends or stock dividends so withheld and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the Participant in cash or, at the discretion of the Board or Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, if applicable, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.

 

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		(vi)	The terms and conditions of a grant of Restricted Stock Units shall be reflected in an Award Agreement. No shares of Common Stock shall be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside a fund for the payment of any such Award. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. At the discretion of the Committee, each Restricted Stock Unit (representing one share of Common Stock) may be credited with cash and stock dividends paid by the Company in respect of one share of Common Stock ("Dividend Equivalents").  Dividend Equivalents shall be withheld by the Company for the Participant's account, and interest may be credited on the amount of cash Dividend Equivalents withheld at a rate and subject to such terms as determined by the Board or Committee. Dividend Equivalents credited to a Participant's account and attributable to any particular Restricted Stock Unit (and earnings thereon, if applicable) shall be distributed in cash or, at the discretion of the Board or Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such Dividend Equivalents and earnings, if applicable, to the Participant upon settlement of such Restricted Stock Unit and, if such Restricted Stock Unit is forfeited, the Participant shall have no right to such Dividend Equivalents.

 

(c)      Restrictions

 

		(i)	Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable Award Agreement: (A) if an escrow arrangement is used, the Participant shall not be entitled to delivery of the stock certificate; (B) the shares shall be subject to the restrictions on transferability set forth in the Award Agreement; (C) the shares shall be subject to forfeiture to the extent provided in the applicable Award Agreement; and (D) to the extent such shares are forfeited, the stock certificates shall be returned to the Company, and all rights of the Participant to such shares and as a shareholder with respect to such shares shall terminate without further obligation on the part of the Company.

 

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		(ii)	Restricted Stock Units awarded to any Participant shall be subject to (A) forfeiture until the expiration of the Restricted Period, and satisfaction of any applicable Performance Goals during such period, to the extent provided in the applicable Award Agreement, and to the extent such Restricted Stock Units are forfeited, all rights of the Participant to such Restricted Stock Units shall terminate without further obligation on the part of the Company and (B) such other terms and conditions as may be set forth in the applicable Award Agreement.

 

		(iii)	The Board or Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock and Restricted Stock Units whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date the Restricted Stock or Restricted Stock Units are granted, such action is appropriate.

 

(d)      Restricted Period

 

With respect to Stock Awards, the Restricted Period shall commence on the Grant Date and end at the time or times set forth on a schedule established by the Board or Committee in the applicable Award Agreement. The Board or Committee may, but shall not be required to, provide for an acceleration of the expiration of a Restricted Period upon the occurrence of a specified event.

 

(e)      Delivery of Restricted Stock and Settlement of Restricted Stock Units

 

Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in Section 7.2(c) and the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his or her beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (provided, that no fractional shares shall be issued) and any cash dividends or stock dividends credited to the Participant's account with respect to such Restricted Stock and the interest thereon, if any. Upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or his or her beneficiary, without charge, one share of Common Stock for each such outstanding Restricted Stock Unit ("Vested Unit"); provided, however, that, if explicitly provided in the applicable Award Agreement, the Company may, in its sole discretion, elect to pay cash or part cash and part Common Stock in lieu of delivering only shares of Common Stock for Vested Units. If a cash payment is made in lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed with respect to each Vested Unit.

 

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(f)       Stock Restrictions

 

Each certificate representing Restricted Stock awarded under the Plan shall, in addition to any other legends as may be required by law or by the Board or Committee, bear a legend to the following effect:

 

THESE SHARES MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY

 

8.        Securities Law Compliance.  All Awards, including all Options, Stock Appreciation Rights, and Stock Awards granted under the Plan shall be subject to the requirement that, if at any time the Board or the Committee shall determine, in its discretion, that the listing upon any securities exchange, or the registration under the Securities Act, or registration or qualification under any state law is required for the grant, exercise, issue , or sale of any Options, Stock Appreciation Rights, Common Stock, or Restricted Stock Units under the Plan, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection therewith, such Option, Stock Appreciation Rights, or Stock Award may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board or the Committee.  Furthermore, if the Board or the Committee determines that any amendment to any Award (including, but not limited to, an increase in the exercise price of any Option or Stock Award) is necessary or desirable in connection with the registration or qualification of any of its shares under any state securities or “blue sky” law, then the Board or the Committee shall have the unilateral right to make such changes without the consent of the Participant to whom the Award was granted.

 

(a)      Each Award Agreement shall provide that no shares of Common Stock shall be purchased or sold thereunder unless and until (i) any then applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel and (i) if required to do so by the Company, the Participant has executed and delivered to the Company a letter of investment intent in such form and containing such provisions as the Committee may require.

 

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(b)      Except as may otherwise be required by the Securities Act, the Company shall not be required to register under the Securities Act the Plan, any Award or any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, or any Common Stock issued or issuable pursuant to any such Award, and the Company shall have no liability for any delay in issuing or failure to issue or sell any Option, Stock Appreciation Right, Common Stock, or Restricted Stock Unit prior to the date on which a registration statement under the Securities Act becomes effective with respect to the offer, sale, and issuance of such Award, Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, or Common Stock.

 

9.        Use of Proceeds from Stock. Proceeds from the sale of Common Stock pursuant to Awards, or upon exercise thereof, shall constitute general funds of the Company.

 

10.    Miscellaneous.

 

10.1     Acceleration of Exercisability and Vesting. The Board or Committee shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.

 

10.2     Shareholder Rights. Except as provided in the Plan or an Award Agreement, no Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Award unless and until such Participant has satisfied all requirements for exercise of the Award pursuant to its terms and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the date such Common Stock certificate is issued, except as provided in Section 11 hereof.

 

10.3     No Employment or Other Service Rights. Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company in the capacity in effect at the time the Award was granted or shall affect the right of the Company to terminate (a) the employment of an Employee with or without notice and with or without Cause, except as may otherwise be provided in a written employment agreement between the Company and the Participant, or (b) the service of a Director pursuant to the By-laws of BioTime or an Subsidiary, and any applicable provisions of the corporate law of the state in which BioTime or the Subsidiary is incorporated, as the case may be.

 

10.4      Withholding Obligations. To the extent provided by the terms of an Award Agreement or as may be approved by the Board or Committee, a Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the Company's right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and unencumbered shares of Common Stock.

 

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11.    Adjustments Upon Changes in Stock. In the event of changes in the outstanding Common Stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the Grant Date of any Award, Awards granted under the Plan and any Award Agreements, including the exercise price of Options and Stock Appreciation Rights and the number of shares of Common Stock subject to such Options, Stock Appreciation Rights, or Stock Awards, the maximum number of shares of Common Stock subject to all Awards stated in Section 4, and the maximum number of shares of Common Stock with respect to which any one person may be granted Awards during any period stated in Section 4 will be equitably adjusted or substituted, as to the number, price or kind of a share of Common Stock or other consideration subject to such Awards to the extent necessary to preserve the economic intent of such Award. In the case of adjustments made pursuant to this Section 11, unless the Board or Committee specifically determines that such adjustment is in the best interests of the Company, Board or the Committee shall, in the case of Incentive Stock Options, ensure that any adjustments under this Section 11 will not constitute a modification, extension or renewal of the Incentive Stock Options within the meaning of Section 424(h)(3) of the Code and in the case of Non-qualified Stock Options, ensure that any adjustments under this Section 11 will not constitute a modification of such Non-qualified Stock Options within the meaning of Section 409A of the Code. Any adjustments made under this Section 11 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with respect to Awards intended to qualify as "performance-based compensation" under Section 162(m) of the Code, any adjustments or substitutions will not cause the Company to be denied a tax deduction on account of Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.

 

12.     Effect of Change in Control.

 

12.1        In the discretion of the Board and the Committee, any Award Agreement may provide, or the Board or the Committee may provide by amendment of any Award Agreement or otherwise, notwithstanding any provision of the Plan to the contrary, that in the event of a Change in Control, Options and/or Stock Appreciation Rights shall become immediately exercisable with respect to all or a specified portion of the shares subject to such Options or Stock Appreciation Rights, and/or the Restricted Period shall expire immediately with respect to all or a specified portion of the shares of Restricted Stock or Restricted Stock Units.

 

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12.2        In addition, in the event of a Change in Control, the Committee may in its discretion and upon at least 10 days' advance notice to the affected persons, cancel any outstanding Awards and pay to the holders thereof, in cash or stock, or any combination thereof, the value of such Awards based upon the price per share of Common Stock received or to be received by other shareholders of the Company in the event. In the case of any Option or Stock Appreciation Right with an exercise price (or SAR Exercise Price in the case of a Stock Appreciation Right) that equals or exceeds the price paid for a share of Common Stock in connection with the Change in Control, the Committee may cancel the Option or Stock Appreciation Right without the payment of consideration therefor.

 

12.3        The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company and its Subsidiaries, taken as a whole.

 

13.    Amendment of the Plan and Awards.

 

13.1      Amendment of Plan. The Board at any time, and from time to time, may amend or terminate the Plan. However, except as provided in Section 11 relating to adjustments upon changes in Common Stock, and Section 13.3 and Section 14.14, no amendment shall be effective unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy any Applicable Laws. At the time of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on shareholder approval.

 

13.2     Shareholder Approval. The Board may, in its sole discretion, submit any amendment to the Plan or any Award for shareholder approval, including, but not limited submissions for shareholder approval intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers.  If any Award is granted under the Plan prior to the date that the Plan has been approved by the shareholders of BioTime, such Award shall be contingent upon the approval of the Plan by the shareholders of BioTime.  Further, the Board or Committee may make the payment of any Award contingent upon shareholder approval, for the purposes of compliance with Section 162(m) of the Code or otherwise.

 

13.3        No Impairment of Rights. Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (a) the Company requests the consent of the Participant and the Participant consents in writing, or (b) the Award was granted subject to the terms of the amendment.

 

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14.     General Provisions.

 

14.1      Forfeiture Events. The Committee may specify in an Award Agreement that the Participant's rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain events, in addition to applicable vesting conditions of an Award. Such events may include, without limitation, breach of non-competition, non-solicitation, confidentiality, or other restrictive covenants that are contained in the Award Agreement or otherwise applicable to the Participant, a termination of the Participant's Continuous Service for Cause, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Subsidiaries.

 

14.2     Clawback. Notwithstanding any other provisions in this Plan, any Award which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).

 

14.3     Other Compensation Arrangements. Nothing contained in this Plan shall prevent the Board or Committee from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

 

14.4     Sub-plans. The Committee may from time to time establish sub-plans under the Plan for purposes of satisfying blue sky, securities, tax or other laws of various jurisdictions in which the Company intends to grant Awards. Any sub-plans shall contain such limitations and other terms and conditions as the Committee determines are necessary or desirable. All sub-plans shall be deemed a part of the Plan, but each sub-plan shall apply only to the Participants in the jurisdiction for which the sub-plan was designed.

 

14.5     Deferral of Awards. The Committee may establish one or more programs under the Plan to permit selected Participants the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Participant to payment or receipt of shares of Common Stock or other consideration under an Award. The Committee may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Committee deems advisable for the administration of any such deferral program.

 

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14.6     Unfunded Plan. The Plan shall be unfunded. Neither the Company, the Board nor the Committee shall be required to establish any special or separate fund or to segregate any assets to assure the performance of its obligations under the Plan.

 

14.7     Recapitalizations. Each Award Agreement shall contain provisions required to reflect the provisions of Section 11.

 

14.8     Delivery. Subject to Section 8 and Section 7.2(c), upon exercise of an Option or Stock Appreciation Right or Restricted Stock Unit granted under this Plan, the Company shall issue Common Stock or pay any amounts due within a reasonable period of time thereafter. A period of 30 days shall be considered a reasonable period of time.

 

14.9     No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The Board or Committee shall determine whether cash, additional Awards or other securities or property shall be issued or paid in lieu of fractional shares of Common Stock or whether any fractional shares should be rounded down, forfeited, or otherwise eliminated.

 

14.10   Other Provisions. The Award Agreements authorized under the Plan may contain such other provisions not inconsistent with this Plan, including, without limitation, restrictions upon the exercise of the Awards, as the Committee may deem advisable.

 

14.11   Section 409A. The Plan is intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the "short-term deferral period" as defined in Section 409A of the Code shall not be treated as deferred compensation unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Participant's termination of Continuous Service shall instead be paid on the first payroll date after the six-month anniversary of the Participant's separation from service (or the Participant's death, if earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any Participant under Section 409A of the Code and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.

 

14.12   Disqualifying Dispositions. Any Participant who shall make a "disposition" (as defined in Section 424 of the Code) of all or any portion of shares of Common Stock acquired upon exercise of an Incentive Stock Option within two years from the Grant Date of such Incentive Stock Option or within one year after the issuance of the shares of Common Stock acquired upon exercise of such Incentive Stock Option shall be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such shares of Common Stock.

 

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14.13   Section 16. It is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange Act so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in this Section 14.13, such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.

 

14.14   Section 162(m). To the extent the Committee issues any Award that is intended to be exempt from the deduction limitation of Section 162(m) of the Code, the Committee may, without shareholder or grantee approval, amend the Plan or the relevant Award Agreement retroactively or prospectively to the extent it determines necessary in order to comply with any subsequent clarification of Section 162(m) of the Code required to preserve the Company's federal income tax deduction for compensation paid pursuant to any such Award.

 

14.15   Expenses. The costs of administering the Plan shall be paid by the Company.

 

14.16   Severability. If any of the provisions of the Plan or any Award Agreement is held to be invalid, illegal or unenforceable, whether in whole or in part, such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected thereby.

 

14.17   Plan Headings. The headings in the Plan are for purposes of convenience only and are not intended to define or limit the construction of the provisions hereof.

 

14.18   Non-Uniform Treatment. The determinations of the Board or Committee under the Plan need not be uniform and may be made selectively among persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the Board and Committee shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements.

 

15.    Effective Date of Plan. The Plan shall become effective as of the Effective Date, but no Award shall be exercised (or, in the case of a stock Award, shall be granted) unless and until the Plan has been approved by the shareholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.

 

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16.     Termination or Suspension of the Plan. The Plan shall terminate automatically on  December 19, 2022 which is ten from the date the Plan was approved by the Company’s Board of Directors. No Award shall be granted pursuant to the Plan after such date, but Awards theretofore granted may extend beyond that date.

 

17.     Effect of Dissolution, Merger or Other Reorganization.  Upon the dissolution or liquidation of BioTime, or upon a reorganization, merger or consolidation of BioTime as a result of which the outstanding Common Stock or other securities of the class then subject to Awards are changed into or exchanged for cash or property or securities not of BioTime’s issue, or upon a sale of substantially all the property of BioTime to, or the acquisition of more than eighty percent (80%) of the Voting Securities of BioTime then outstanding by, another corporation or person, this Plan shall terminate, and all unexercised Awards theretofore granted hereunder shall terminate, unless provision can be made in writing in connection with such transaction for the continuance of the Plan and/or for the assumption of Awards theretofore granted, or the substitution for Awards options or other rights covering the shares of a successor corporation, or a parent or a subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in which event the Plan and Awards theretofore granted shall continue in the manner and under the terms so provided, subject to such adjustments. The grant of an Award pursuant to the Plan shall not affect in any way the right or power of BioTime or any Subsidiary or parent corporation to make adjustments, reclassifications, reorganizations or changes or its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.

 

18.    Choice of Law. The law of the State of California shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state's conflict of law rules.

 

 

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