Document:

SECURITIES
PURCHASE AGREEMENT

     

    This
SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of
December 21, 2009, is by and among Magnum d’Or Resources, Inc., a Nevada
corporation, with offices located at 110 E. Broward Boulevard, Suite 1700, Ft.
Lauderdale, Florida 33301 (the “Company”), and the investors
listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the
“Buyers”).

    

    RECITALS

     

    A.           The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of
Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933
Act.

     

    B.           The
Company has authorized senior secured convertible notes, in the form attached
hereto as Exhibit
A (the “Notes”),
which Notes shall be convertible into shares of the Company’s common stock,
$0.001 par value per share (the “Common Stock”) (as converted,
collectively, the “Conversion
Shares”), in accordance with the terms of the Notes.

    

    C.           Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) the aggregate original principal amount
of the Notes set forth opposite such Buyer’s name in column (3) on the Schedule
of Buyers, (ii) a warrant to acquire up to that number of additional shares of
Common Stock set forth opposite such Buyer’s name in column (4) on the Schedule
of Buyers, in the form attached hereto as Exhibit
B (the “Series A
Warrants”) (as exercised, collectively, the “Series A Warrant Shares”), (iii) a
warrant to acquire up to that number of additional shares of Common Stock set
forth opposite such Buyer’s name in column (5) on the Schedule of Buyers, in the
form attached hereto as Exhibit
C (the “Series B
Warrants”) (as exercised, collectively, the “Series B Warrant Shares”) and (iv) a
warrant to acquire up to that number of additional shares of Common Stock set
forth opposite such Buyer’s name in column (6) on the Schedule of Buyers, in the
form attached hereto as Exhibit
D (the “Series C
Warrants”) (as exercised, collectively, the “Series C Warrant
Shares”).  The Series A Warrants, the Series B Warrants and the
Series C Warrants are collectively referred to herein as the “Warrants.” The Series A
Warrant Shares, the Series B Warrant Shares and the Series C Warrant Shares are
collectively referred to herein as the “Warrant Shares.”

    

    D.           At
the Closing, the parties hereto shall execute and deliver a Registration Rights
Agreement, in the form attached hereto as Exhibit
E (the “Registration
Rights Agreement”), pursuant to which the Company has agreed to provide
certain registration rights with respect to the Registrable Securities (as
defined in the Registration Rights Agreement), under the 1933 Act and the rules
and regulations promulgated thereunder, and applicable state securities
laws.

    

    E.           The
Notes, the Conversion Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the “Securities.”

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    F.           The
Notes will be secured by (i) a first priority perfected security interest in all
of the assets of the Company and its Subsidiaries (as defined below) and (ii) a
third priority perfected security interest in all of the assets of the Company
located in Hudson, Colorado, each as evidenced by security agreements as the
Buyers shall require in form and substance acceptable to each Buyer (such
security agreements, together with the other security documents and agreements
entered into in connection with this Agreement and each of such other documents
and agreements, as each may be amended or modified from time to time,
collectively, the “Security
Documents”), and each of its Subsidiaries (as defined below) will execute
a guaranty (collectively, the “Guaranties”) pursuant to which
each of them guarantees the obligations of the Company under the Transaction
Documents (as defined below).

     

    AGREEMENT

     

    NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each Buyer hereby
agree as follows:

     

    
      	
              1.

            	
              PURCHASE
      AND SALE OF NOTES AND WARRANTS.

            

    

     

    
      (a)           Notes and
Warrants.  Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7
below, the Company shall issue and sell to each Buyer, and each Buyer severally,
but not jointly, shall purchase from the Company on the Closing Date (as defined
below), a Note in the principal amount as is set forth opposite such Buyer’s
name in column (3) on the Schedule of Buyers along with (i) Series A Warrants to
acquire up to that number of Series A Warrant Shares as is set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers, (ii) Series B
Warrants to acquire up to that number of Series B Warrant Shares as is set forth
opposite such Buyer’s name in column (5) on the Schedule of Buyers and (iii)
Series C Warrants to acquire up to that number of Series C Warrant Shares as is
set forth opposite such Buyer’s name in column (6) on the Schedule of
Buyers.

    

     

    (b)           Closing.  The
closing (the “Closing”)
of the purchase of the Notes and the Warrants by the Buyers shall occur at the
offices of Greenberg Traurig, LLP, 77 W. Wacker Drive, Suite 3100, Chicago,
Illinois 60601, or at such other location that is mutually agreed upon by the
parties hereto.  The date and time of the Closing (the “Closing Date”) shall be 10:00
a.m., New York time, on the first (1st)
Business Day on which the conditions to the Closing set forth in Sections 6 and
7 below are satisfied or waived (or such later date as is mutually agreed to by
the Company and each Buyer).  As used herein “Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by law to remain closed.

     

    (c)           Purchase
Price.  The
aggregate purchase price for the Notes and the Warrants to be purchased by each
Buyer (the “Purchase
Price”) shall be the amount set forth opposite such Buyer’s name in
column (7) on the Schedule of Buyers.

    
      
         

      

      
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    (d)           Form of
Payment.  On
the Closing Date, (i) each Buyer shall pay its respective Purchase Price to the
Company for the Note and the Warrants to be issued and sold to such Buyer at the
Closing, by wire transfer of immediately available funds in accordance with the
Company’s written wire instructions and (ii) the Company shall deliver to
each Buyer (A) a Note (in such amount as is set forth opposite such Buyer’s name
in column (3) of the Schedule of Buyers), (B) a Series A Warrant pursuant to
which such Buyer shall have the right to acquire up to such number of Series A
Warrant Shares as is set forth opposite such Buyer’s name in column (4) of the
Schedule of Buyers, (C) a Series B Warrant pursuant to which such Buyer shall
have the right to acquire up to such number of Series B Warrant Shares as is set
forth opposite such Buyer’s name in column (5) of the Schedule of Buyers and (D)
a Series C Warrant pursuant to which such Buyer shall have the right to acquire
up to such number of Series C Warrant Shares as is set forth opposite such
Buyer’s name in column (6) of the Schedule of Buyers, in all cases, duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee.

     

    
      	
              2.

            	
              BUYER’S
      REPRESENTATIONS AND WARRANTIES.

            

    

     

    Each
Buyer, severally and not jointly, represents and warrants to the Company with
respect to only itself that:

     

    (a)           Organization;
Authority.  Such
Buyer is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents to which it is a party and otherwise to carry out its
obligations hereunder and thereunder.

     

    (b)           No Public Sale or
Distribution.  Such
Buyer is (i) acquiring its Note and Warrants, (ii) upon conversion of its Note
will acquire the Conversion Shares issuable upon conversion thereof, and
(iii) upon exercise of its Warrants will acquire the Warrant Shares
issuable upon exercise thereof, in each case, for its own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof in violation of applicable securities laws, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, by making the
representations herein, such Buyer does not agree, or make any representation or
warranty, to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933
Act.  Such Buyer is acquiring the Securities hereunder in the ordinary
course of its business.  Such Buyer does not presently have any
agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities in violation of applicable securities
laws.

     

    (c)           Accredited Investor
Status.  Such
Buyer is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D.

     

    (d)           Reliance on
Exemptions.  Such
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and such Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the
Securities.

    
      
         

      

      
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    (e)           Information.  Such
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by such
Buyer.  Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company.  Neither such inquiries
nor any other due diligence investigations conducted by such Buyer or its
advisors, if any, or its representatives shall modify, amend or affect such
Buyer’s right to rely on the Company’s representations and warranties contained
herein or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in
connection with this Agreement or the consummation of the transaction
contemplated hereby.  Such Buyer understands that its investment in
the Securities involves a high degree of risk.  Such Buyer has sought
such accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the
Securities.

     

    (f)           No Governmental
Review.  Such
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.

     

    (g)           Transfer or
Resale.  Such
Buyer understands that except as provided in the Registration Rights Agreement
and Section 4(h) hereof: (i) the Securities have not been and are not being
registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company (if
requested by the Company) an opinion of counsel to such Buyer, in a form
reasonably acceptable to the Company, to the effect that such Securities to be
sold, assigned or transferred may be sold, assigned or transferred pursuant to
an exemption from such registration, or (C) such Buyer provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor
rule thereto) (collectively, “Rule 144”); (ii) any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of
the Securities under circumstances in which the seller (or the Person (as
defined below) through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC promulgated
thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption
thereunder.

     

    (h)           Validity;
Enforcement.  This
Agreement has been duly and validly authorized, executed and delivered on behalf
of such Buyer and constitutes the legal, valid and binding obligations of such
Buyer enforceable against such Buyer in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

    
      
         

      

      
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    (i)           No
Conflicts.  The
execution, delivery and performance by such Buyer of this Agreement and the
Registration Rights Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the organizational documents of such Buyer or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.

     

    (j)           Residency.  Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.

     

    (k)           Certain Trading
Activities.  Such Buyer has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such Buyer,
engaged in any transactions in the securities of the Company (including, without
limitation, any Short Sales involving the Company’s securities) since the time
that such Buyer was first contacted by the Placement Agent (as defined below)
regarding the investment in the Company contemplated by this Agreement through
the date hereof. “Short
Sales” means all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the 1934 Act (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common
Stock).  Such Buyer does not as of the date hereof, and will not
immediately following the Closing, own 10% or more of the Company’s issued and
outstanding shares of Common Stock (calculated based on the assumption that all
Equivalents (as defined below) owned by such Buyer, whether or not presently
exercisable or convertible, have been fully exercised or converted (as the case
may be) but taking into account any limitations on exercise or conversion
(including “blockers”) contained therein).

     

    (l)           General
Solicitation.  Such
Buyer is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar.

     

    
      	
              3.

            	
              REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

            

    

     

    The
Company represents and warrants to each of the Buyers that:

    
      
         

      

      
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    (a)           Organization and
Qualification.  Each
of the Company and each of its Subsidiaries are entities duly organized and
validly existing and in good standing under the laws of the jurisdiction in
which they are formed, and have the requisite power and authorization to own
their properties and to carry on their business as now being conducted and as
presently proposed to be conducted.  Each of the Company and each of
its Subsidiaries is duly qualified as a foreign entity to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect.  As used in this Agreement,
“Material Adverse
Effect” means any material adverse effect on (i) the business,
properties, assets, liabilities, operations (including results thereof),
condition (financial or otherwise) or prospects of the Company or any
Subsidiary, individually or taken as a whole, (ii) the transactions contemplated
hereby or in any of the other Transaction Documents or (iii) the authority or
ability of the Company or any of its Subsidiaries to perform any of their
respective obligations under any of the Transaction Documents (as defined
below).  Other than its Subsidiaries, there is no Person in which the
Company, directly or indirectly, owns capital stock or holds an equity or
similar interest.  “Subsidiaries” means any Person
in which the Company, directly or indirectly, (I) owns any of the outstanding
capital stock or holds any equity or similar interest of such Person or (II)
controls or operates all or any part of the business, operations or
administration of such Person, and each of the foregoing, is individually
referred to herein as a “Subsidiary.”

    

    (b)           Authorization; Enforcement;
Validity.  The
Company has the requisite power and authority
to enter into and perform its obligations under this Agreement and the other
Transaction Documents to which it is a party and to issue the Securities in
accordance with the terms hereof and thereof.  Each Subsidiary has the
requisite power and authority to enter into and perform its obligations under
the Transaction Documents to which it is a party.  The execution and
delivery of this Agreement and the other Transaction Documents by the Company
and its Subsidiaries, and the consummation by the Company and its Subsidiaries
of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes and the reservation for issuance and
issuance of the Conversion Shares issuable upon conversion of the Notes and the
issuance of the Warrants and the reservation for issuance and issuance of the
Warrant Shares issuable upon exercise of the Warrants) have been duly authorized
by the Company’s board of directors and each of its Subsidiaries’ board of
directors or other governing body, as applicable, and (other than the filing
with the SEC of one or more Registration Statements in accordance with the
requirements of the Registration Rights Agreement and any other filings as may
be required by any state securities agencies) no further filing, consent or
authorization is required by the Company, its Subsidiaries, their respective
boards of directors or their stockholders or other governing
body.  This Agreement and the other Transaction Documents to which it
is a party have been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of applicable creditors’ rights and
remedies and except as rights to indemnification and to contribution may be
limited by federal or state securities law.  The Transaction Documents
to which each Subsidiary is a party have been duly executed and delivered by
each such Subsidiary, and constitutes the legal, valid and binding obligations
of each such Subsidiary, enforceable against each such Subsidiary in accordance
with their respective terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies and except as rights to indemnification and to contribution may be
limited by federal or state securities law.  “Transaction Documents” means,
collectively, this Agreement, the Notes, the Warrants, the Security Documents,
the Guaranties, the Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions (as defined in Section 5(b)) and each of the other agreements
and instruments entered into by the parties hereto in connection with the
transactions contemplated hereby and thereby, as may be amended from time to
time.

     

    
      
        
        

      

      
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    (c)           Issuance of
Securities.  The
issuance of the Notes and the Warrants are duly authorized and upon issuance in
accordance with the terms of the Transaction Documents shall be validly issued,
fully paid and non-assessable and free from all taxes, liens, charges and other
encumbrances with respect to the issue thereof.  As of the Closing,
the Company shall have reserved from its duly authorized capital stock not less
than 133% of the sum of (i) the maximum number of Conversion Shares issuable
upon conversion of the Notes (assuming for purposes hereof that the Notes are
convertible at the initial Conversion Price (as defined in the Notes) and
without taking into account any limitations on the conversion of the Notes set
forth therein) and (ii) the maximum number of Warrant Shares issuable upon
exercise of the Warrants (without taking into account any limitations on the
exercise of the Warrants set forth therein).  Upon conversion in
accordance with the Notes or exercise in accordance with the Warrants (as the
case may be), the Conversion Shares and the Warrant Shares, respectively, when
issued, will be validly issued, fully paid and nonassessable and free from all
preemptive or similar rights, taxes, liens, charges and other encumbrances with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock.  Subject to the accuracy of the
representations and warranties of the Buyers in this Agreement, the offer and
issuance by the Company of the Securities is exempt from registration under the
1933 Act.

     

    (d)           No
Conflicts.  The
execution, delivery and performance of the Transaction Documents by the Company
and its Subsidiaries and the consummation by the Company and its Subsidiaries of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Notes, the Warrants, the Conversion Shares and Warrant
Shares and the reservation for issuance of the Conversion Shares and Warrant
Shares) will not (i) result in a violation of the Articles of Incorporation (as
defined below) or other organizational documents of the Company or any of its
Subsidiaries, any capital stock of the Company or any of its Subsidiaries or
Bylaws (as defined below) of the Company or any of its Subsidiaries, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including foreign, federal and state securities laws and
regulations and the rules and regulations of the OTC Bulletin Board (the “Principal Market”) and
including all applicable Canadian and Quebec laws, rules and regulations)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected except, in
the case of clause (ii) or (iii) above, to the extent such violations that could
not reasonably be expected to have a Material Adverse Effect.

     

    (e)           Consents.  Neither
the Company nor any Subsidiary is required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its respective
obligations under or contemplated by the Transaction Documents, in each case, in
accordance with the terms hereof or thereof.  All consents,
authorizations, orders, filings and registrations which the Company or any
Subsidiary is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the Closing Date, and neither the Company
nor any of its Subsidiaries are aware of any facts or circumstances which might
prevent the Company or any Subsidiary from obtaining or effecting any of the
registration, application or filings pursuant to the preceding
sentence.  The Company is not in violation of the requirements of the
Principal Market and has no knowledge of any facts or circumstances which could
reasonably lead to delisting or suspension of the Common Stock in the
foreseeable future.

     

    
      
        
        

      

      
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    (f)           Acknowledgment Regarding
Buyer’s Purchase of Securities.  The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company or any of its Subsidiaries, (ii) an “affiliate” (as
defined in Rule 144) of the Company or any of its Subsidiaries or (iii) to its
knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock
(as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the “1934
Act”)).  The Company further acknowledges that no Buyer is
acting as a financial advisor or fiduciary of the Company or any of its
Subsidiaries (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Buyer’s purchase of the Securities.  The
Company further represents to each Buyer that the Company’s and each
Subsidiary’s decision to enter into the Transaction Documents to which it is a
party has been based solely on the independent evaluation by the Company, each
Subsidiary and their respective representatives.

     

    (g)           No General Solicitation;
Placement Agent’s Fees.  Neither
the Company, nor any of its Subsidiaries or affiliates, nor any Person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities.  The Company shall be responsible for the
payment of any placement agent’s fees, financial advisory fees, or brokers’
commissions (other than for persons engaged by any Buyer or its investment
advisor) relating to or arising out of the transactions contemplated
hereby.  Other than Chardan Capital Markets, LLC (the “Placement Agent”), neither the
Company nor any of its Subsidiaries has engaged any placement agent or other
agent in connection with the sale of the Securities.

     

    (h)           No Integrated
Offering.  None
of the Company, its Subsidiaries or any of their affiliates, nor any Person
acting on their behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under circumstances
that would require registration of the issuance of any of the Securities under
the 1933 Act, whether through integration with prior offerings or otherwise, or
cause this offering of the Securities to require approval of stockholders of the
Company under any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated.  None of the Company, its Subsidiaries, their affiliates
nor any Person acting on their behalf will take any action or steps referred to
in the preceding sentence that would require registration of the issuance of any
of the Securities under the 1933 Act or cause the offering of any of the
Securities to be integrated with other offerings.

    
      
         

      

      
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    (i)           Dilutive
Effect.  The
Company understands and acknowledges that the number of Conversion Shares and
Warrant Shares will increase in certain circumstances.  The Company
further acknowledges that its obligation to issue the Conversion Shares upon
conversion of the Notes and the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement, the Notes and the Warrants is, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.

     

    (j)           Application of Takeover
Protections; Rights Agreement.  The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Articles of Incorporation,
Bylaws or other organizational documents or the laws of the jurisdiction of its
incorporation or otherwise which is or could become applicable to any Buyer as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and any Buyer’s ownership
of the Securities.  The Company and its board of directors have taken
all necessary action, if any, in order to render inapplicable any stockholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of shares of Common Stock or a change in control of the Company or any
of its Subsidiaries.

     

    (k)           SEC Documents; Financial
Statements.  During
the two (2) years prior to the date hereof,
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements, notes and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC
Documents”).  The Company has delivered to the Buyers or their
respective representatives true, correct and complete copies of each of the SEC
Documents not available on the EDGAR system.  As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.  As of their respective dates,
the financial statements of the Company included in the SEC Documents complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto as in effect
as of the time of filing.  Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material, either individually or in the
aggregate). No other information provided by or on behalf of the Company to the
Buyers which is not included in the SEC Documents (including, without
limitation, information referred to in Section 2(e) of this Agreement) contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein not misleading, in the light
of the circumstance under which they are or were made.

     

    
      
        
        

      

      
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    (l)           Absence of Certain
Changes.  Since
the date of the Company’s most recent audited or reviewed financial statements
contained in a Form 10-K, there has been no material adverse change and no
material adverse development in the business, assets, liabilities, properties,
operations (including results thereof), condition (financial or otherwise) or
prospects of the Company or any of its Subsidiaries.  Since the date
of the Company’s most recent audited financial statements contained in a Form
10-K, neither the Company nor any of its Subsidiaries has (i) declared or paid
any dividends, (ii) sold any assets, individually or in the aggregate, outside
of the ordinary course of business or (iii) made any material capital
expenditures, individually or in the aggregate.  Neither the Company
nor any of its Subsidiaries has taken any steps to seek protection pursuant to
any law or statute relating to bankruptcy, insolvency, reorganization,
liquidation or winding up, nor does the Company or any Subsidiary have any
knowledge or reason to believe that any of their respective creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so. The Company and its
Subsidiaries, individually and on a consolidated basis, are not as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur
at the Closing, will not be Insolvent (as defined below).  For
purposes of this Section 3(l), “Insolvent” means, (I) with
respect to the Company and its Subsidiaries, on a consolidated basis, (i) the
present fair saleable value of the Company’s and its Subsidiaries’ assets is
less than the amount required to pay the Company’s and its Subsidiaries’ total
Indebtedness (as defined below), (ii) the Company and its Subsidiaries are
unable to pay their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company and its Subsidiaries intend to incur or believe that they will incur
debts that would be beyond their ability to pay as such debts mature; and (II)
with respect to the Company and each Subsidiary, individually, (i) the present
fair saleable value of the Company’s or such Subsidiary’s (as the case may be)
assets is less than the amount required to pay its respective total
Indebtedness, (ii) the Company or such Subsidiary (as the case may be) is unable
to pay its respective debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company or such Subsidiary (as the case may be) intends to incur or believes
that it will incur debts that would be beyond its respective ability to pay as
such debts mature.  Neither the Company nor any of its Subsidiaries
has engaged in business or in any transaction, and is not about to engage in
business or in any transaction, for which the Company’s or such Subsidiary’s
remaining assets constitute unreasonably small capital.

     

    (m)           No Undisclosed Events,
Liabilities, Developments or Circumstances.  No
event, liability, development or circumstance has occurred or exists, or is
reasonably expected to exist or occur with respect to the Company, any of its
Subsidiaries or their respective business, properties, liabilities, prospects,
operations (including results thereof) or condition (financial or otherwise),
that (i) would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced or (ii) could have a material adverse effect on
any Buyer’s investment hereunder or could have a Material Adverse
Effect.

    
      
         

      

      
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     (n)           Conduct of Business;
Regulatory Permits.  Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under its Articles of
Incorporation, any certificate of designation, preferences or rights of any
other outstanding series of preferred stock of the Company or any of its
Subsidiaries or Bylaws or their organizational charter, certificate of formation
or certificate of incorporation or bylaws, respectively.  Neither the
Company nor any of its Subsidiaries is in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to the Company or
any of its Subsidiaries, and neither the Company nor any of its Subsidiaries
will conduct its business in violation of any of the foregoing, except in all
cases for possible violations which could not, individually or in the aggregate,
have a Material Adverse Effect. Without limiting the generality of the
foregoing, the Company is not in violation of any of the rules, regulations or
requirements of the Principal Market and has no knowledge of any facts or
circumstances that could reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future.  Since
January 1, 2007, (i) the Common Stock has been listed or designated for
quotation on the Principal Market, (ii) trading in the Common Stock has not been
suspended by the SEC or the Principal Market and (iii) the Company has received
no communication, written or oral, from the SEC or the Principal Market
regarding the suspension or delisting of the Common Stock from the Principal
Market.  The Company and each of its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.

     

    (o)           Foreign Corrupt
Practices.  Neither the Company nor any of its Subsidiaries nor
any director, officer, agent, employee or other Person acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company or any of its Subsidiaries (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

     

    (p)           Sarbanes-Oxley
Act.  The Company and each Subsidiary is in compliance with all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as
of the date hereof, and all applicable rules and regulations promulgated by the
SEC thereunder that are effective as of the date hereof.

     

    (q)           Transactions With
Affiliates.  Other than the grant of stock options disclosed on
Schedule
3(q), none of
the officers, directors or employees of the Company or any of its
Subsidiaries is presently a party to any transaction with the Company or any of
its Subsidiaries (other than for ordinary course services as employees, officers
or directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company or any of
its Subsidiaries, any corporation, partnership, trust or other entity in which
any such officer, director, or employee has a substantial interest or is an
officer, director, trustee or partner.

     

    
      
        
        

      

      
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    (r)           Equity
Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of (i) 150,000,000 shares of Common Stock, of which,
72,836,212 issued and outstanding and 1,902,000 shares are reserved for issuance
pursuant to securities (other than the Notes and the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii)
50,000,000 shares of preferred stock, of which 40,000,000 are issued and
outstanding.  75,261,788 shares of Common Stock are held in
treasury.  All of such outstanding shares are duly authorized and have
been, or upon issuance will be, validly issued and are fully paid and
nonassessable. 37,009,731 shares of the Company’s issued and outstanding Common
Stock on the date hereof are as of the date hereof owned by Persons who are
“affiliates” (as defined in Rule 405 of the 1933 Act and calculated based on the
assumption that only officers, directors and holders of at least 10% of the
Company’s issued and outstanding Common Stock are “affiliates” without conceding
that any such Persons are “affiliates” for purposes of federal securities laws)
of the Company or any of its Subsidiaries.  To the Company’s
knowledge, other than those beneficial owners identified in the Company’s Form
10-K for the fiscal year ended September 30, 2008, no Person owns 10% or more of
the Company’s issued and outstanding shares of Common Stock (calculated based on
the assumption that all Equivalents, whether or not presently exercisable or
convertible, have been fully exercised or converted (as the case may
be) taking account of any limitations on exercise or conversion (including
“blockers”) contained therein without conceding that such identified Person is a
10% stockholder for purposes of federal securities laws). Except as disclosed in
Schedule 3(r) and as expressly contemplated by the terms of the Transaction
Documents: (i) none of the Company’s or any Subsidiary’s capital stock is
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company or any Subsidiary; (ii) there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become
bound; (iv) there are no financing statements securing obligations in any
amounts filed in connection with the Company or any of its Subsidiaries; (v)
there are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act; (vi) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities; (viii)
neither the Company nor any Subsidiary has any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement; and (ix)
neither the Company nor any of its Subsidiaries have any liabilities or
obligations required to be disclosed in the SEC Documents which are not so
disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company’s or its Subsidiaries’ respective businesses and which,
individually or in the aggregate, do not or could not have a Material Adverse
Effect. The Company has furnished to the Buyers true, correct and complete
copies of the Company’s Articles of Incorporation, as amended and as in effect
on the date hereof (the “Articles of Incorporation”), and the
Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock and the material rights of the holders thereof in respect
thereto.

     

    
      
        
        

      

      
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    (s)           Indebtedness and Other
Contracts.  Except as disclosed on Schedule 3(s) and as
expressly contemplated by the terms of the Transaction Documents, neither the
Company nor any of its Subsidiaries (i) has any outstanding Indebtedness (as
defined below), (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument could reasonably be expected to result in a
Material Adverse Effect, (iii) is in violation of any term of, or in default
under, any contract, agreement or instrument relating to any Indebtedness,
except where such violations and defaults would not result, individually or in
the aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect.  For purposes of this Agreement: (x) “Indebtedness” of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (including, without limitation, “capital leases” in
accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto; and (z) “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     

    
      
        
        

      

      
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    (t)           Absence of
Litigation.  Except as set forth on Schedule 3(t), there is no
action, suit, proceeding, inquiry or investigation before or by the Principal
Market, any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries, the Common Stock or any of the
Company’s or its Subsidiaries’ officers or directors which is outside of the
ordinary course of business or individually or in the aggregate material to the
Company or any of its Subsidiaries.  There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company, any of its Subsidiaries or any
current or former director or officer of the Company or any of its
Subsidiaries.  The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
under the 1933 Act or the 1934 Act.

     

    (u)           Insurance.  The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged.  Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for, and neither the Company nor any such Subsidiary has any reason
to believe that it will be unable to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect.

     

    (v)           Employee
Relations.  Neither the Company nor any of its Subsidiaries is
a party to any collective bargaining agreement or employs any member of a
union.  The Company believes that its and its Subsidiaries’ relations
with their respective employees are good.  No executive officer (as
defined in Rule 501(f) promulgated under the 1933 Act) or other key employee of
the Company or any of its Subsidiaries has notified the Company or any such
Subsidiary that such officer intends to leave the Company or any such Subsidiary
or otherwise terminate such officer’s employment with the Company or any such
Subsidiary.  No executive officer or other key employee of the Company
or any of its Subsidiaries is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer or other key employee (as the case may be) does
not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters.  The Company and its Subsidiaries are
in compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

     

    
      
        
        

      

      
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    (w)           Title.  The
Company and its Subsidiaries have good and marketable title in fee simple to all
real property and good and marketable title to all personal property owned by
them which is material to the business of the Company and its Subsidiaries, in
each case, free and clear of all liens, encumbrances and defects except such as
do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries.  Any real property and facilities held under lease
by the Company or any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company or any of its Subsidiaries.

     

    (x)           Intellectual Property
Rights.  The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
original works, inventions, licenses, approvals, governmental authorizations,
trade secrets and other intellectual property rights and all applications and
registrations therefor (“Intellectual Property Rights”)
necessary to conduct their respective businesses as now conducted and as
presently proposed to be conducted.  None of the Company’s or its
Subsidiaries’ Intellectual Property Rights have expired, terminated or been
abandoned, or are expected to expire, terminate or be abandoned, within three
years from the date of this Agreement.  The Company has no knowledge
of any infringement by the Company or any of its Subsidiaries of Intellectual
Property Rights of others.  There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company or any of its
Subsidiaries, being threatened, against the Company or any of its Subsidiaries
regarding their Intellectual Property Rights.  The Company is not
aware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings.  The
Company and each of its Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of all of their Intellectual
Property Rights.

     

    (y)           Environmental
Laws.  The Company and its Subsidiaries (i) are in compliance
with all Environmental Laws (as defined below), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval where, in each of
the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.  The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.

     

    (z)           Subsidiary
Rights.  The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.

     

    
      
        
        

      

      
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    (aa)           Tax Status. The
Company and each of its Subsidiaries (i) has timely made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has timely paid all
taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company and its
Subsidiaries know of no basis for any such claim. The Company is not operated in
such a manner as to qualify as a passive foreign investment company, as defined
in Section 1297 of the U.S. Internal Revenue Code of 1986, as
amended.

     

    (bb)           Internal Accounting and
Disclosure Controls. As disclosed in the Company’s Form 10-Q for the
period ended June 30, 2009, the Company has evaluated, with the participation of
its Chief Executive Officer and Chief Financial Officer, the effectiveness of
its disclosure controls and procedures, and based on this evaluation, the
Company has concluded that its disclosure controls and procedures (as defined in
Rules 13a-15(e) under the 1934 Act ) are not adequate to ensure that information
required to be disclosed by the Company in reports that are filed or submitted
under the 1934 Act is recorded, processed, summarized and reported within the
time periods specified in SEC rules and forms. These matters persist despite the
Company having developed and partially implemented a plan to ensure that all
information will be recorded accurately, processed effectively, summarized
promptly and reported on a timely basis. The Company’s internal control over
financial reporting (as defined in Rules 13a-15(f) under the 1934 Act )
disclosure, financial controls, and reporting procedures are designed by, or
under the supervision of, the Company’s Chief Executive Officer and Chief
Financial Officer. The Company’s Chief Executive Officer and Chief Financial
Officer are solely involved in implementing the Company’s internal control over
financial reporting, financial controls, and reporting procedures in an effort
to provide reasonable assurance regarding the reliability of financial
reporting, the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles, and the structural
flexibility required to effectuate such procedures. The Company does not
presently have any Board of Director members, management, or other personnel
responsible for the Company’s internal control over financial reporting. The
Company’s internal control over financial reporting, financial controls, and
reporting procedures are consistent with generally accepted accounting
principles, and include those policies and procedures that: (i) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and dispositions of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only with the authorization of the Company’s Chief Executive Officer
and Chief Financial Officer; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the Company’s assets, and unauthorized transactions, that could have a
material effect on the Company’s financial statements.

    

    (cc)           Off Balance Sheet
Arrangements.  There is no transaction, arrangement, or other
relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise could be reasonably likely to have a Material Adverse
Effect.

     

    
      
        
        

      

      
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    (dd)           Investment Company
Status.  The Company is not, and upon consummation of the sale
of the Securities will not be, an “investment company,” an affiliate of an
“investment company,” a company controlled by an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment Company Act
of  1940, as amended.

     

    (ee)           Acknowledgement Regarding
Buyers’ Trading Activity. It is understood and acknowledged by the
Company (i) that following the public disclosure of the transactions
contemplated by the Transaction Documents, in accordance with the terms thereof,
none of the Buyers have been asked by the Company or any of its Subsidiaries to
agree, nor has any Buyer agreed with the Company or any of its Subsidiaries, to
desist from purchasing or selling, long and/or short, securities of the Company,
or “derivative” securities based on securities issued by the Company or to hold
the Securities for any specified term; (ii) that any Buyer, and counter parties
in “derivative” transactions to which any such Buyer is a party, directly or
indirectly, presently may have a “short” position in the Common Stock which were
established prior to such Buyer’s knowledge of the transactions contemplated by
the Transaction Documents, and (iii) that each Buyer shall not be deemed to have
any affiliation with or control over any arm’s length counter party in any
“derivative” transaction.  The Company further understands and
acknowledges that following the public disclosure of the transactions
contemplated by the Transaction Documents pursuant to the Press Release one or
more Buyers may engage in hedging and/or trading activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Warrant Shares or
Conversion Shares, as applicable, deliverable with respect to the Securities are
being determined and (b) such hedging and/or trading activities, if any, can
reduce the value of the existing stockholders’ equity interest in the Company
both at and after the time the hedging and/or trading activities are being
conducted.  The Company acknowledges that such aforementioned hedging
and/or trading activities do not constitute a breach of this Agreement or any
other Transaction Document or any of the documents executed in connection
herewith or therewith.

     

    (ff)           Manipulation of
Price.  Neither the Company nor any of its Subsidiaries has,
and, to the knowledge of the Company, no Person acting on their behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Company or any
of its Subsidiaries to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for soliciting purchases
of, any of the Securities (other than the Placement Agent), or (iii) paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company or any of its Subsidiaries.

     

    (gg)           U.S. Real Property Holding
Corporation.  Neither the Company nor any of its Subsidiaries
is, or has ever been, and so long as any of the Securities are held by any of
the Buyers, shall become, a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the
Company and each Subsidiary shall so certify upon any Buyer’s
request.  The Common Stock does not derive, and has not at
any time during the previous five years derived, directly or indirectly
more than 50% of its fair market value from one or any combination of: (i) real
property situated in Canada, (ii) Canadian resource property and (iii) timber
resource properties (as such terms are defined for purposes of the Income Tax Act
(Canada).

     

    
      
        
        

      

      
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    (hh)           Registration
Eligibility.  The Company is eligible to register the
Registrable Securities for resale by the Buyers using Form S-3 promulgated under
the 1933 Act.

     

    (ii)     
       Transfer
Taxes.  On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the sale and transfer of the Securities to be sold to each Buyer hereunder
will be, or will have been, fully paid or provided for by the Company, and all
laws imposing such taxes will be or will have been complied with.

     

    (jj)        
   Bank
Holding Company Act.  Neither the Company nor any of its
Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”) and to
regulation by the Board of Governors of the Federal Reserve System (the “Federal
Reserve”).  Neither the Company nor any of its Subsidiaries or
affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any equity that is
subject to the BHCA and to regulation by the Federal Reserve.  Neither
the Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

     

    (kk)           Shell Company
Status.  The Company is not now, and has never been, an issuer
identified in, or subject to, Rule 144(i).

     

    (ll)     
      Disclosure.  The
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, non-public
information concerning the Company or any of its Subsidiaries, other than the
existence of the transactions contemplated by this Agreement and the other
Transaction Documents.  The Company understands and confirms that each
of the Buyers will rely on the foregoing representations in effecting
transactions in securities of the Company.  All disclosure provided to
the Buyers regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not
misleading.  Each press release issued by the Company or any of its
Subsidiaries during the twelve (12) months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading.  No event or circumstance has
occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, liabilities, prospects,
operations (including results thereof) or conditions (financial or otherwise),
which, under applicable law, rule or regulation, requires public disclosure at
or before the date hereof or announcement by the Company but which has not been
so publicly announced or disclosed. The Company acknowledges and agrees that no
Buyer makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 2.

     

    
      
        
        

      

      
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    (mm)         Ranking of
Notes.  Except as set forth on Schedule 3(mm), no Indebtedness
of the Company, at the Closing, will be senior to, or pari passu with, the Notes in
right of payment, whether with respect to payment or redemptions, interest,
damages, upon liquidation or dissolution or otherwise.

     

    
      	
              4.

            	
              COVENANTS.

            

    

     

    (a)           Best
Efforts.  Each Buyer shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Section 6 of
this Agreement.  The Company shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Section 7 of
this Agreement.

     

    (b)           Form D and Blue
Sky.  The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing.  The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to, qualify the Securities for
sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date.  The
Company shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or “Blue Sky” laws of the states
of the United States following the Closing Date.

     

    (c)           Reporting
Status.  Until the date on which the Buyers shall have sold all
of the Registrable Securities (the “Reporting Period”), the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would no longer require or otherwise permit such
termination.

     

    (d)           Use of
Proceeds.  The Company shall use the proceeds from the sale of
the Securities solely for general working capital purposes.

     

    (e)           Financial
Information. The Company agrees to send the following to each Investor
(as defined in the Registration Rights Agreement) during the Reporting Period
(i) unless the following are filed with the SEC through EDGAR and are available
to the public through the EDGAR system, within one (1) Business Day after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q, any interim reports or any consolidated balance
sheets, income statements, stockholders’ equity statements and/or cash flow
statements for any period other than annual, any Current Reports on Form 8-K and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act, (ii) on the same day as the release thereof,
electronic copies (delivered via electronic mail) of all press releases issued
by the Company or any of its Subsidiaries and (iii) electronic copies (delivered
via electronic mail) of any notices and other information made available or
given to the stockholders of the Company generally, contemporaneously with the
making available or giving thereof to the stockholders.

     

    
      
        
        

      

      
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    (f)           Listing.  The
Company shall promptly secure the listing or designation for quotation (as the
case may be) of all of the Registrable Securities upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock is
then listed or designated for quotation (as the case may be) (subject to
official notice of issuance) and shall maintain such listing or designation for
quotation (as the case may be) of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents on such national
securities exchange or automated quotation system.  The Company shall
maintain the Common Stock’s listing or authorization for quotation (as the case
may be) on the Principal Market, the New York Stock Exchange, the Nasdaq Global
Market or the Nasdaq Global Select Market (each, an “Eligible
Market”).  Neither the Company nor any of its Subsidiaries
shall take any action which could be reasonably expected to result in the
delisting or suspension of the Common Stock on an Eligible Market. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(f).

     

    (g)           Fees.  The
Company shall reimburse Cranshire Capital, L.P. (“Cranshire”) or its designee(s)
for all actual costs and expenses incurred by it or its affiliates in connection
with the transactions contemplated by the Transaction Documents (including,
without limitation, all legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence and regulatory filings in connection
therewith), which amount shall be withheld by Cranshire from its Purchase Price
at the Closing or paid by the Company upon termination of this Agreement on
demand by Cranshire so long as such termination did not occur as a result of a
material breach by Cranshire of any of its obligations hereunder (as the case
may be), less $65,000 which was previously advanced to Cranshire by the Company.
If the amount so withheld at Closing by Cranshire was less than the aggregate
amount of costs and expenses actually incurred by it or its affiliates in connection with the
transactions contemplated by the Transaction Documents, the Company shall
promptly reimburse Cranshire on demand for all such costs and expenses not so
reimbursed through such withholding at the Closing. The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or broker’s commissions (other than for Persons engaged by any Buyer)
relating to or arising out of the transactions contemplated hereby (including,
without limitation, any fees payable to the Placement Agent, who is the
Company’s sole placement agent in connection with the transactions contemplated
by this Agreement). The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys’ fees and out-of-pocket expenses) arising in connection with any claim
relating to any such payment. Except as otherwise set forth in the Transaction
Documents, each party to this Agreement shall bear its own expenses in
connection with the sale of the Securities to the Buyers.

     

    (h)           Pledge of Securities.
Notwithstanding anything to the contrary contained in Section 2(g), the
Company acknowledges and agrees that the Securities may be pledged by a Buyer in
connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Securities. The pledge of Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder.
Each Buyer effecting a pledge of Securities shall provide the Company with any
notice thereof or otherwise make any delivery to the Company pursuant to this
Agreement or any other Transaction Document within five (5) Business Days of
such pledge or transaction. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Buyer, provided
that such Buyer shall reimburse Company for any reasonable and customary costs
incurred in connection with the execution and delivery of such
documentation.

     

    
      
        
        

      

      
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    (i)        
    Disclosure of Transactions
and Other Material Information.  The Company shall, on or
before 8:30 a.m., New York time, on the first (1st)
Business Day after the date of this Agreement, issue a press release (the “Press Release”) reasonably
acceptable to the Buyers disclosing all the material terms of the transactions
contemplated by the Transaction Documents.  On or before 8:30 a.m.,
New York time, on the second (2nd)
Business Day following the date of this Agreement, the Company shall file a
Current Report on Form 8-K describing all the material terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act
and attaching all the material Transaction Documents (including, without
limitation, this Agreement (and all schedules to this Agreement), the form of
the Security Documents, the form of Guaranties, the form of the Notes, the form
of the Warrants and the form of the Registration Rights Agreement) (including
all attachments, the “8-K
Filing”).  From and after the issuance of the Press Release,
the Company shall have disclosed all material, non-public information (if any)
delivered to any of the Buyers by the Company or any of its Subsidiaries, or any
of their respective officers, directors, employees or agents in connection with
the transactions contemplated by the Transaction Documents. The Company shall
not, and the Company shall cause each of its Subsidiaries and each of its and
their respective officers, directors, employees and agents not to, provide any
Buyer with any material, non-public information regarding the Company or any of
its Subsidiaries from and after the issuance of the Press Release without the
express prior written consent of such Buyer.  In the event of a breach
of any of the foregoing covenants or any of the covenants contained in Section
4(o) by the Company, any of its Subsidiaries, or any of its or their respective
officers, directors, employees and agents (as determined in the reasonable good
faith judgment of such Buyer), in addition to any other remedy provided herein
or in the Transaction Documents, such Buyer shall have the right to make a
public disclosure, in the form of a press release, public advertisement or
otherwise, of such material, non-public information without the prior approval
by the Company, any of its Subsidiaries, or any of its or their respective
officers, directors, employees or agents.  No Buyer shall have any
liability to the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents, for any such
disclosure.  Subject to the foregoing, neither the Company, its
Subsidiaries nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, the Company shall be entitled, without the prior approval of any Buyer,
to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).  Without the prior written
consent of the applicable Buyer, the Company shall not (and shall cause each of
its Subsidiaries and affiliates to not) disclose the name of such Buyer in any
filing, announcement, release or otherwise.

     

    
      
        
        

      

      
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    (j)      
      Additional Registration
Statements.  Until the Applicable Date (as defined below) and
at any time thereafter while any Registration Statement is not effective or the
prospectus contained therein is not available for use, the Company shall not
file a registration statement under the 1933 Act relating to securities that are
not the Registrable Securities. “Applicable Date” means the
first date on which the resale by the Buyers of all Registrable Securities is
covered by one or more effective Registration Statements (as defined in the
Registration Rights Agreement) (and each prospectus contained therein is
available for use on such date).

     

    (k)      
      Additional Issuance of
Securities.  The Company agrees that for the period commencing
on the date hereof and ending on the date immediately following the one
hundredth (100th)
Trading Day (as defined in the Warrants) anniversary of the Applicable Date (the
“Restricted Period”), neither the Company
nor any of its Subsidiaries shall directly or indirectly issue, offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any issuance,
offer, sale, grant or any option to purchase or other disposition of) any of
their respective equity or equity equivalent securities, including, without
limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time and under any circumstances convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, capital
stock and other securities of the Company (including, without limitation, any
securities of the Company or any Subsidiary which entitle the holder thereof to
acquire Common Stock at any time, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder to
receive, directly or indirectly, Common Stock) (collectively with such capital
stock or other securities of the Company, “Equivalents”) (any such
issuance, offer, sale, grant, disposition or announcement (whether occurring
during the Restricted Period or at any time thereafter) is referred to as a
“Subsequent Placement”).
Notwithstanding the foregoing, this Section 4(k) shall not apply in respect of
the issuance of (i) (A) shares of Common Stock (including shares of Common Stock
issuable upon exercise of standard options to purchase Common Stock or standard
warrants to purchase Common Stock) to directors, officers, the consultants
expressly set forth on Schedule 4(k) attached hereto or employees of the
Company, in each case, in their capacity as such pursuant to an Approved Share
Plan (as defined below), provided that (1) all such issuances (taking into
account the shares of Common Stock issuable upon exercise of such options and
warrants) after the date hereof pursuant to this clause (A) do not, in the
aggregate, exceed more than 10% of the Common Stock issued and outstanding
immediately prior to the date hereof and (2) neither such options nor warrants
are amended to increase the number of shares issuable thereunder or to lower the
exercise price thereof or to otherwise materially change the terms or conditions
thereof in any manner that adversely affects any of the Buyers, (B) shares of
Common Stock issued upon the conversion or exercise of Equivalents issued prior
to the date hereof, provided that such Equivalents have not been amended since
the date of this Agreement to increase the number of shares issuable thereunder
or to lower the exercise or conversion price thereof or otherwise materially
change the terms or conditions thereof in any manner that adversely affects any
of the Buyers, (C) the Conversion Shares and (D) the Warrant Shares (each of the
foregoing in clauses (A) through (D), collectively the “Excluded Securities”) or (ii)
up to 400,000 shares of Common Stock in the aggregate to Patton Boggs, LLP and
Stephen A. Zrenda, Jr. in consideration for legal services provided to the
Company, provided that the Company shall not issue more than 50,000 of such
400,000 shares in the aggregate in any calendar month. “Approved Share Plan” means any
employee benefit plan which has been approved by the board of directors of the
Company prior to or subsequent to the date hereof pursuant to which shares of
Common Stock and standard options to purchase Common Stock may be issued to any
employee, officer or director for services provided to the Company in their
capacity as such.

     

    
      
        
        

      

      
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    (l)          
  Reservation of
Shares.  So long as any Notes or Warrants remain outstanding,
the Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than 133% of (i) the maximum
number of shares of Common Stock issuable upon conversion of all the Notes
(assuming for purposes hereof, that the Notes are convertible at the Conversion
Price (as defined in the Notes) and without regard to any limitations on the
exercise of the Notes set forth therein) and (ii) the maximum number of shares
of Common Stock issuable upon exercise of all the Warrants (without regard to
any limitations on the exercise of the Warrants set forth therein).

     

    (m)            Conduct of
Business.  The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.  The
Company shall conduct its business in such a manner as will ensure that the
Common Stock does not derive directly or indirectly more than 50% of its fair
market value from one or any combination of: (i) real property situated in
Canada, (ii) Canadian resource property and (iii) timber resource properties (as
such terms are defined for purposes of the Income Tax Act
(Canada).  No portion of any interest paid on the Notes shall
be deductible by the Company in computing the Company’s taxable income earned in
Canada for purposes of the
Income Tax Act (Canada).

     

    (n)            Variable Rate
Transaction.  Until all of the Notes have been converted,
redeemed or otherwise satisfied in accordance with their terms, the Company and
each Subsidiary shall be prohibited from effecting or entering into an agreement
to effect any Subsequent Placement involving a Variable Rate Transaction without
the prior written consent of the holders of a majority of the then-outstanding
principal amount of the Notes (for clarification purposes and without
implication that the contrary would otherwise be true, it is expressly
understood and agreed that a Variable Rate Transaction that is so consented to
still constitutes a Subsequent Placement that is subject to the terms and
conditions of this Agreement, including without limitation, Section 4(o)).
“Variable Rate
Transaction” means a transaction in which the Company or any Subsidiary
(i) issues or sells any Equivalents either (A) at a conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading
prices of or quotations for the shares of Common Stock at any time after the
initial issuance of such Equivalents, or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such Equivalents or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock, other than pursuant to a customary “weighted
average” anti-dilution provision or (ii) enters into any agreement (including,
without limitation, an equity line of credit) whereby the Company or any
Subsidiary may sell securities at a future determined price (other than standard
and customary “preemptive” or “participation” rights).  Each Buyer
shall be entitled to obtain injunctive relief against the Company and its
Subsidiaries to preclude any such issuance, which remedy shall be in addition to
any right to collect damages.

     

    
      
        
        

      

      
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    (o)            Participation Right.
Until all of the Notes have been converted, redeemed or otherwise satisfied in
accordance with their terms, neither the Company nor any of its Subsidiaries
shall, directly or indirectly, effect any Subsequent Placement unless the
Company shall have first complied with this Section 4(o).  The Company
acknowledges and agrees that the right set forth in this Section 4(o) is a right
granted by the Company, separately, to each Buyer.

     

      
(i)           At least
five (5) Trading Days prior to any proposed or intended Subsequent Placement,
the Company shall deliver to each Buyer a written notice of its proposal or
intention to effect a Subsequent Placement (each such notice, a “Pre-Notice”), which Pre-Notice
shall not contain any information (including, without limitation, material,
non-public information) other than: (i) a statement that the Company proposes or
intends to effect a Subsequent Placement, (ii) a statement that the statement in
clause (i) above does not constitute material, non-public information and (iii)
a statement informing such Buyer that it is entitled to receive an Offer Notice
(as defined below) with respect to such Subsequent Placement upon its written
request. Upon the written request of a Buyer within three (3) Trading Days
after the Company’s delivery to such Buyer of such Pre-Notice, and only upon a
written request by such Buyer, the Company shall promptly, but no later than one
(1) Trading Day after such request, deliver to each Buyer an irrevocable written
notice (the “Offer
Notice”) of any proposed or intended issuance or sale or exchange (the
“Offer”) of the
securities being offered (the “Offered Securities”) in a
Subsequent Placement, which Offer Notice shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they are
to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the Persons (if known)
to which or with which the Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with such Buyer in
accordance with the terms of the Offer all of the Offered Securities, provided
that the number of Offered Securities which such Buyer shall have the right to
subscribe for under this Section 4(o) shall be (a) based on such Buyer’s pro
rata portion of the aggregate original principal amount of the Notes purchased
hereunder by all Buyers (the “Basic Amount”), and (b) with
respect to each Buyer that elects to purchase its Basic Amount, any additional
portion of the Offered Securities attributable to the Basic Amounts of other
Buyers as such Buyer shall indicate it will purchase or acquire should the other
Buyers subscribe for less than their Basic Amounts (the “Undersubscription
Amount”).

    

      
(ii)          To accept an
Offer, in whole or in part, such Buyer must deliver a written notice to the
Company prior to the end of the fifth (5th)
Business Day after such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth
the portion of such Buyer’s Basic Amount that such Buyer elects to purchase and,
if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the “Notice of
Acceptance”).  If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then such Buyer who
has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription
Amount”), such Buyer who has subscribed for any Undersubscription Amount
shall be entitled to purchase only that portion of the Available
Undersubscription Amount as the Basic Amount of such Buyer bears to the total
Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts,
subject to rounding by the Company to the extent it deems reasonably
necessary.  Notwithstanding the foregoing, if the Company desires to
modify or amend the terms and conditions of the Offer prior to the expiration of
the Offer Period, the Company may deliver to each Buyer a new Offer Notice and
the Offer Period shall expire on the fifth (5th)
Business Day after such Buyer’s receipt of such new Offer Notice.

     

    
      
        
        

      

      
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(iii)         The Company shall
have five (5) days from the expiration of the Offer Period above (i) to offer,
issue, sell or exchange all or any part of such Offered Securities as to which a
Notice of Acceptance has not been given by a Buyer (the “Refused Securities”) pursuant
to a definitive agreement(s) (the “Subsequent Placement
Agreement”), but only to the offerees described in the Offer Notice (if
so described therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to the
acquiring Person or Persons or less favorable to the Company than those set
forth in the Offer Notice and (ii) to publicly announce (a) the execution of
such Subsequent Placement Agreement, and (b) either (x) the consummation of the
transactions contemplated by such Subsequent Placement Agreement or (y) the
termination of such Subsequent Placement Agreement, which shall be filed with
the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement
and any documents contemplated therein filed as exhibits thereto.

    

      
(iv)         In the event the
Company shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 4(o)(iii) above),
then such Buyer may, at its sole option and in its sole discretion, reduce the
number or amount of the Offered Securities specified in its Notice of Acceptance
to an amount that shall be not less than the number or amount of the Offered
Securities that such Buyer elected to purchase pursuant to Section 4(o)(ii)
above multiplied by a fraction, (i) the numerator of which shall be the number
or amount of Offered Securities the Company actually proposes to issue, sell or
exchange (including Offered Securities to be issued or sold to Buyers pursuant
to this Section 4(o) prior to such reduction) and (ii) the denominator of which
shall be the original amount of the Offered Securities.  In the event
that any Buyer so elects to reduce the number or amount of Offered Securities
specified in its Notice of Acceptance, the Company may not issue, sell or
exchange more than the reduced number or amount of the Offered Securities unless
and until such securities have again been offered to the Buyers in accordance
with Section 4(o)(i) above.

    

      
(v)          Upon the closing
of the issuance, sale or exchange of all or less than all of the Refused
Securities, such Buyer shall acquire from the Company, and the Company shall
issue to such Buyer, the number or amount of Offered Securities specified in its
Notice of Acceptance.  The purchase by such Buyer of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and such Buyer of a separate purchase agreement relating to such
Offered Securities reasonably satisfactory in form and substance to such Buyer
and its counsel.

     

    
      
        
        

      

      
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(vi)         Any Offered Securities
not acquired by a Buyer or other Persons in accordance with this Section 4(o)
may not be issued, sold or exchanged until they are again offered to such Buyer
under the procedures specified in this Agreement.

    

      
(vii)        The Company and each Buyer
agree that if any Buyer elects to participate in the Offer, neither the
Subsequent Placement Agreement with respect to such Offer nor any other
transaction documents related thereto (collectively, the “Subsequent Placement
Documents”) shall include any term or provision whereby such Buyer shall
be required to agree to any restrictions on trading as to any securities of the
Company or be required to consent to any amendment to or termination of, or
grant any waiver or release under or in connection with, any agreement
previously entered into with the Company or any instrument received from the
Company.

    

      
(viii)       Notwithstanding anything to the
contrary in this Section 4(o) and unless otherwise agreed to by such Buyer, the
Company shall either confirm in writing to such Buyer that the transaction with
respect to the Subsequent Placement has been abandoned or shall publicly
disclose its intention to issue the Offered Securities, in either case, in such
a manner such that such Buyer will not be in possession of any material,
non-public information, by the fifth (5th)
Business Day following delivery of the Offer Notice.  If by such fifth
(5th)
Business Day, no public disclosure regarding a transaction with respect to the
Offered Securities has been made, and no notice regarding the abandonment of
such transaction has been received by such Buyer, such transaction shall be
deemed to have been abandoned and such Buyer shall not be deemed to be in
possession of any material, non-public information with respect to the Company
or any of its Subsidiaries.  Should the Company decide to pursue such
transaction with respect to the Offered Securities, the Company shall provide
such Buyer with another Offer Notice and such Buyer will again have the right of
participation set forth in this Section 4(o).  The Company shall not
be permitted to deliver more than one such Offer Notice to such Buyer in any
sixty (60) day period.

     

      
(ix)         The restrictions
contained in this Section 4(o) shall not apply in connection with the issuance
of any Excluded Securities.  The Company shall not circumvent the
provisions of this Section 4(o) by providing terms or conditions to one Buyer
that are not provided to all.

     

    (p)            Passive Foreign Investment
Company.  The Company shall conduct its business in such a
manner as will ensure that the Company will not be deemed to constitute a
passive foreign investment company within the meaning of Section 1297 of the
U.S. Internal Revenue Code of 1986, as amended.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    
      	
              5.

            	
              REGISTER;
      TRANSFER AGENT INSTRUCTIONS;
LEGEND.

            

    

     

    (a)            Register.  The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Notes and the Warrants in which the Company
shall record the name and address of the Person in whose name the Notes and the Warrants have been
issued (including the name and address of each transferee), the principal amount
of the Notes held by such Person, the number of Conversion Shares issuable upon
conversion of the Notes and the number of Warrant Shares issuable upon exercise
of the Warrants held by such Person.  The Company shall keep the
register open and available at all times during business hours for inspection of
any Buyer or its legal representatives.

     

    (b)       
   Transfer
Agent Instructions.  The Company shall issue irrevocable
instructions to its transfer agent and any subsequent transfer agent in a form
acceptable to each of the Buyers (the “Irrevocable Transfer Agent
Instructions”) to issue certificates or credit shares to the applicable
balance accounts at The Depository Trust Company (“DTC”), registered in the name
of each Buyer or its respective nominee(s), for the Conversion Shares and the
Warrant Shares in such amounts as specified from time to time by each Buyer to
the Company upon conversion of the Notes or the exercise of the Warrants (as the
case may be).  The Company represents and warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5(b), and stop transfer instructions to give effect to Section 2(g)
hereof, will be given by the Company to its transfer agent with respect to the
Securities, and that the Securities shall otherwise be freely transferable on
the books and records of the Company, as applicable, to the extent provided in
this Agreement and the other Transaction Documents.  If a Buyer
effects a sale, assignment or transfer of the Securities in accordance with
Section 2(g), the Company shall permit the transfer and shall promptly instruct
its transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or
assignment.  In the event that such sale, assignment or transfer
involves Conversion Shares or Warrant Shares sold, assigned or transferred
pursuant to an effective registration statement or in compliance with Rule 144,
the transfer agent shall issue such shares to such Buyer, assignee or transferee
(as the case may be) without any restrictive legend in accordance with Section
5(d) below. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to a Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5(b) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5(b), that a
Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.  The Company shall cause its
counsel to issue the legal opinion referred to in the Irrevocable Transfer Agent
Instructions to the Company’s transfer agent on each Effective Date (as defined
in the Registration Rights Agreement).  Any fees (with respect to the
transfer agent, counsel to the Company or otherwise) associated with the
issuance of such opinion or the removal of any legends on any of the Securities
shall be borne by the Company.

     

    (c)            Legends.  Each
Buyer understands that the Securities have been issued (or will be issued in the
case of the Conversion Shares and the Warrant Shares) pursuant to an exemption
from registration or qualification under the 1933 Act and applicable state
securities laws, and except as set forth below, the Securities shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    [NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE
BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT 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 TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD OR ELIGIBLE TO BE 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.

     

    (d)       
   Removal of
Legends.  Certificates evidencing Securities shall not be
required to contain the legend set forth in Section 5(c) above or any other
legend (i) while a registration statement (including a Registration Statement)
covering the resale of such Securities is effective under the 1933 Act, (ii)
following any sale of such Securities pursuant to Rule 144 (assuming the
transferor is not an affiliate of the Company), (iii) if such Securities are
eligible to be sold, assigned or transferred under Rule 144 (provided that a
Buyer provides the Company with reasonable assurances that such Securities are
eligible for sale, assignment or transfer under Rule 144 which shall not include
an opinion of counsel), (iv) in connection with a sale, assignment or other
transfer (other than under Rule 144), provided that such Buyer provides the
Company with an opinion of counsel to such Buyer, in a generally acceptable
form, to the effect that such sale, assignment or transfer of the Securities may
be made without registration under the applicable requirements of the 1933 Act
or (v) if such legend is not required under applicable requirements of the 1933
Act (including, without limitation, controlling judicial interpretations and
pronouncements issued by the SEC).  If a legend is not required
pursuant to the foregoing, the Company shall no later than two (2) Trading Days
following the delivery by a Buyer to the Company or the transfer agent (with
notice to the Company) of a legended certificate representing such Securities
(endorsed or with stock powers attached, signatures guaranteed, and otherwise in
form necessary to affect the reissuance and/or transfer, if applicable),
together with any other deliveries from such Buyer as may be required above in
this Section 5(d), as directed by such Buyer, either: (A) deliver (or cause to
be delivered to) such Buyer a certificate representing such Securities that is
free from all restrictive and other legends or (B) credit the balance account of
such Buyer’s or such Buyer’s nominee with DTC with a number of shares of Common
Stock equal to the number of Conversion Shares or Warrant Shares (as the case
may be) represented by the certificate, the conversion notice or exercise notice
(as the case may be) so delivered by such Buyer (the date by which such
certificate is required to be delivered to such Buyer or such credit is so
required to be made to the balance account of such Buyer’s or such Buyer’s
nominee with DTC pursuant to the foregoing is referred to herein as the “Required Delivery
Date”).

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    (e)       
    Failure to Timely Deliver;
Buy-In.  If the Company fails to (i) issue and deliver (or
cause to be delivered) to a Buyer by the Required Delivery Date a certificate
representing the Securities so delivered to the Company by such Buyer that is
free from all restrictive and other legends or (ii) credit the balance account
of such Buyer’s or such Buyer’s nominee with DTC for such number of shares of
Conversion Shares or Warrant Shares so delivered to the Company, then, in
addition to all other remedies available to such Buyer, the Company shall pay in
cash to such Buyer on each day after the Required Delivery Date that the
issuance or credit of such shares is not timely effected an amount equal to 1%
of the original principal amount of such Buyer’s Note. In addition to the
foregoing, if the Company fails to so properly deliver such unlegended
certificates or so properly credit the balance account of such Buyer’s or such
Buyer’s nominee with DTC by the Required Delivery Date, and if on or after the
Required Delivery Date such Buyer purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
Buyer of shares of Common Stock that such Buyer anticipated receiving from the
Company without any restrictive legend, then, in addition to all other remedies
available to such Buyer, the Company shall, within three (3) Trading Days after
such Buyer’s request and in such Buyer’s sole discretion, either (i) pay cash to
such Buyer in an amount equal to such Buyer’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased (the
“Buy-In Price”), at
which point the Company’s obligation to deliver such certificate or credit such
Buyer’s balance account shall terminate and such shares shall be cancelled, or
(ii) promptly honor its obligation to deliver to such Buyer a certificate or
certificates or credit such Buyer’s DTC account representing such number of
shares of Common Stock that would have been issued if the Company timely
complied with its obligations hereunder and pay cash to such Buyer in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Conversion Shares or Warrant Shares (as the case may be)
that the Company was required to deliver to such Buyer by the Required Delivery
Date times (B) the Closing Sale Price (as defined in the Warrants) of the Common
Stock on the Trading Day immediately preceding the Required Delivery
Date.

     

    
      	
              6.

            	
              CONDITIONS
      TO THE COMPANY’S OBLIGATION TO
SELL.

            

    

     

    (a)          
The obligation of the Company hereunder to issue and sell the Notes and the related Warrants
to each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in their sole discretion by providing each Buyer with prior written
notice thereof:

     

      
(i)            Such Buyer
shall have executed each of the other Transaction Documents to which it is a
party and delivered the same to the Company.

     

      
(ii)          Such Buyer and
each other Buyer shall have delivered to the Company the Purchase Price (less,
in the case of Cranshire, the amounts withheld pursuant to Section 4(g))for the
Note and the related Warrants being purchased by such Buyer at the Closing by
wire transfer of immediately available funds pursuant to the wire instructions
provided by the Company.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

      
(iii)         The representations
and warranties of such Buyer shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though originally made at
that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), and such Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Buyer at or prior to the Closing
Date.

     

    
      	
              7.

            	
              CONDITIONS
      TO EACH BUYER’S OBLIGATION TO
PURCHASE.

            

    

     

    (a)            The
obligation of each Buyer hereunder to purchase its Note and its related Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for each
Buyer’s sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice
thereof:

     

      
(i)           The Company
and each Subsidiary (as the case may be) shall have duly executed and delivered
to such Buyer each of the Transaction Documents to which it is a party and the
Company shall have duly executed and delivered to such Buyer a Note (in such
amount as is set forth across from such Buyer’s name in column (3) of the
Schedule of Buyers and the related Series A
Warrants, Series B Warrants and Series C Warrants (for such number of shares of
Common Stock as is set forth across from such Buyer’s name in columns (4), (5)
and (6) of the Schedule of Buyers, respectively) being purchased by such Buyer
at the Closing pursuant to this Agreement.

     

      
(ii)           Such Buyer
shall have received the opinion of Patton Boggs LLP, the Company’s counsel,
dated as of the Closing Date, in the form acceptable to such Buyer.

     

      
(iii)         The Company shall
have delivered to such Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form acceptable to such Buyer, which instructions shall
have been delivered to and acknowledged in writing by the Company’s transfer
agent.

     

      
(iv)         The Company shall have
delivered to such Buyer a certificate evidencing the formation and good standing
of the Company and each of its Subsidiaries in each such entity’s jurisdiction
of formation issued by the Secretary of State (or comparable office) of such
jurisdiction of formation as of a date within ten (10) days of the Closing
Date.

     

      
(v)          The Company shall
have delivered to such Buyer a certificate evidencing the Company’s and each
Subsidiary’s qualification as a foreign corporation and good standing issued by
the Secretary of State (or comparable office) of each jurisdiction in which the
Company and each Subsidiary conducts business and is required to so qualify, as
of a date within ten (10) days of the Closing Date.

     

      
(vi)         The Company shall have
delivered to such Buyer a certified copy of the Articles of Incorporation as
certified by the Nevada Secretary of State within ten (10) days of the Closing
Date.

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    (vii)         Each
Subsidiary shall have delivered to such Buyer a certified copy of its
certificate of incorporation as certified by the Secretary of State (or
comparable office) of such Subsidiary’s jurisdiction of incorporation within ten
(10) days of the Closing Date.

     

    (viii)        The
Company and each Subsidiary shall have delivered to such Buyer a certificate,
executed by the Secretary of the Company and each Subsidiary and dated as of the
Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted
by the Company’s and each Subsidiary’s board of directors in a form reasonably
acceptable to such Buyer, (ii) the Articles of Incorporation of the Company and
the organizational documents of each Subsidiary and (iii) the Bylaws of the
Company and the bylaws of each Subsidiary, each as in effect at the Closing, in
the form acceptable to such Buyer.

     

    (ix)           Each
and every representation and warranty of the Company shall be true and correct
as of the date when made and as of the Closing Date as though originally made at
that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date) and the Company shall
have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required to be performed, satisfied or complied with
by the Company at or prior to the Closing Date.  Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such Buyer in the form acceptable to
such Buyer.

     

    (x)           The
Company shall have delivered to such Buyer a letter from the Company’s transfer
agent certifying the number of shares of Common Stock outstanding on the Closing
Date immediately prior to the Closing.

     

    (xi)           The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by
falling below the minimum maintenance requirements of the Principal
Market.

     

    (xii)          The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities, including
without limitation, those required by the Principal Market.

     

    (xiii)         No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction Documents.

     

    (xiv)         Since
the date of execution of this Agreement, no event or series of events shall have
occurred that reasonably would have or result in a Material Adverse
Effect.

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

     

    (xv)         The
Company shall have obtained approval of the Principal Market to list or
designate for quotation (as the case may be) the Conversion Shares and the
Warrant Shares.

     

    (xvi)        The
Company and its Subsidiaries shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.

     

    
      	
              8.

            	
              TERMINATION.

            

    

     

    In the
event that the Closing shall not have occurred with respect to a Buyer within
ten (10) days of the date hereof, then such Buyer shall have the right to
terminate its obligations under this Agreement with respect to itself at any
time on or after the close of business on such date without liability of such
Buyer to any other party; provided, however, (i) the right to terminate this
Agreement under this Section 8 shall not be
available to such Buyer if the failure of the transactions contemplated by this
Agreement to have been consummated by such date is the result of such Buyer’s
breach of this Agreement and (ii) the abandonment of the sale and purchase of
the Notes and the Warrants shall be applicable only to such Buyer providing such
written notice, provided further that no such termination shall affect any
obligation of the Company under this Agreement to reimburse such Buyer for the
expenses described in Section 4(g) above.  Nothing contained in this
Section 8 shall be deemed to release any party from any liability for any breach
by such party of the terms and provisions of this Agreement or the other
Transaction Documents or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement or the
other Transaction Documents.

    

    
      	
              9.

            	
              MISCELLANEOUS.

            

    

     

    (a)           Governing Law; Jurisdiction;
Jury Trial. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of
New York.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
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
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

    
      
         

      

      
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    (b)           Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party.  In the event that any signature is delivered by facsimile
transmission or by an e-mail which contains a portable document format (.pdf)
file of an executed signature page, such signature page shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such signature page were an
original thereof.

     

    (c)           Headings;
Gender.  The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.  Unless the context clearly indicates otherwise, each
pronoun herein shall be deemed to include the masculine, feminine, neuter,
singular and plural forms thereof.  The terms “including,” “includes,”
“include” and words of like import shall be construed broadly as if followed by
the words “without limitation.”  The terms “herein,” “hereunder,”
“hereof” and words of like import refer to this entire Agreement instead of just
the provision in which they are found.  For purposes of this Agreement
for each Buyer’s benefit, the word “state” or “states” includes any “province”
or “provinces” in Canada and the concept of “law, rules or regulations” includes
laws, rules and regulations under applicable law, rules and regulations in
Canada.

     

    (d)           Severability.  If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.  Notwithstanding anything to the contrary contained in
this Agreement or any other Transaction Document (and without implication that
the following is required or applicable), it is the intention of the parties
that in no event shall amounts and value paid by the Company and/or its
Subsidiaries (as the case may be), or payable to or received by the Buyers,
under the Transaction Documents, including without limitation, any amounts that
would be characterized as “interest” under applicable law (including, without
limitation, any applicable Canadian law), exceed amounts permitted under any
such applicable law.  Accordingly, if any obligation to pay, payment
made to such Buyer, or collection by such Buyer pursuant the Transaction
Documents is finally judicially determined to be contrary to any such applicable
law, such obligation to pay, payment or collection shall be deemed to have been
made by mutual mistake of such Buyer, the Company and its Subsidiaries and such
amount shall be deemed to have been adjusted with retroactive effect to the
maximum amount or rate of interest, as the case may be, as would not be so
prohibited by the applicable law.  Such adjustment shall be effected,
to the extent necessary, by reducing or refunding, at the option of such Buyer,
the amount of interest or any other amounts which would constitute unlawful
amounts required to be paid or actually paid to such Buyer under the Transaction
Documents.  For greater certainty, to the extent that any interest,
charges, fees, expenses or other amounts required to be paid to or received by
such Buyer under any of the Transaction Documents or related thereto are held to
be within the meaning of “interest” or another applicable term to otherwise be
violative of applicable law, such amounts shall be pro-rated over the period of
time to which they relate.

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    (e)           Entire Agreement;
Amendments.  This Agreement, the other Transaction Documents
and the schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein supersede all other prior oral or written
agreements between the Buyers, the Company, its Subsidiaries, their affiliates
and Persons acting on their behalf solely with respect to the matters contained
herein and therein, and this Agreement, the other Transaction Documents, the
schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein contain the entire understanding of the parties
solely with respect to the matters covered herein and therein; provided,
however, nothing contained in this Agreement or any other Transaction Document
shall (or shall be deemed to) (i) have any effect on any agreements any Buyer
has entered into with the Company or any of its Subsidiaries prior to the date
hereof with respect to any prior investment made by such Buyer in the Company or
(ii) waive, alter, modify or amend in any respect any obligations of the Company
or any of its Subsidiaries, or any rights of or benefits to any Buyer or any
other Person, in any agreement entered into prior to the date hereof between or
among the Company and/or any of its Subsidiaries and any Buyer and all such
agreements shall continue in full force and effect.  Except as
specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters.  For clarification purposes, the Recitals are part of this
Agreement.  No provision of this Agreement may be amended other than
by an instrument in writing signed by the Company and the holders of at least a
majority of the then-outstanding principal amount of the Notes issued hereunder,
and any amendment to any provision of this Agreement made in conformity with the
provisions of this Section 9(e) shall be binding on all Buyers and holders of
Securities, as applicable, provided that no such amendment shall be effective to
the extent that it (1) applies to less than all of the holders of the Notes then
outstanding, (2) imposes any obligation or liability on any Buyer without such
Buyer’s prior written consent (which may be granted or withheld in such Buyer’s
sole discretion) or (3) applies retroactively.  No waiver shall be
effective unless it is in writing and signed by an authorized representative of
the waiving party.  No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration also is offered to
all of the parties to the Transaction Documents, all holders of the Notes or all
holders of the Warrants (as the case may be).  The Company has not,
directly or indirectly, made any agreements with any Buyers relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.  Without
limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company, any Subsidiary or
otherwise.

     

    (f)           Notices.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) Business Day after deposit with an overnight courier service
with next day delivery specified, in each case, properly addressed to the party
to receive the same.  The addresses and facsimile numbers for such
communications shall be:

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

     

    If to the
Company:

     

    Magnum
d’Or Resources, Inc.

    110 E.
Broward Boulevard, Suite 1700

    Ft.
Lauderdale, Florida 33301

    Telephone:
(305) 420-6563

    Facsimile:
(305) 395-4858

    Attention:
CEO

     

    With a
copy (for informational purposes only) to:

     

    Patton
Boggs LLP

    1801
California Street, Ste. 4900

    Denver,
CO 80202

    Telephone:  (303)
894-6154

    Facsimile:  (303)
894-9239

    Attention:  James
Muchmore

     

    If to the
Transfer Agent:

     

    Holladay
Stock Transfer

    2939 N
67th Pl Ste C

    Scottsdale,
AZ 85251

    Telephone:  (480)
481-3940

    Facsimile:  (480)
481-3941

    

    If to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer’s representatives as set forth on the Schedule of
Buyers,

     

    with a
copy (for informational purposes only) to:

     

    Greenberg
Traurig, LLP

    77 W.
Wacker Drive, Suite 3100

    Chicago,
Illinois 60601

    Telephone:  (312)
456-8400

    Facsimile:  (312)
456-8435

    Attention:  Peter
H. Lieberman, Esq.

    Todd A.
Mazur, Esq.

     

    or to
such other address and/or facsimile number and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change, provided
that Greenberg Traurig, LLP shall only be provided copies of notices sent to
Cranshire.  Written confirmation of receipt (A) given by the recipient
of such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    (g)           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including
any purchasers of any of the Securities.  The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable under the Transaction Documents,
including, without limitation, by way of a Fundamental Transaction (as defined
in the Warrants) (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the
Warrants).  A Buyer may assign some or all of its rights hereunder in
connection with any transfer of any of its Securities without the consent of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder
with respect to such assigned rights.

     

    (h)           No Third Party
Beneficiaries.  This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, other than the Indemnitees
referred to in Section 9(k).

     

    (i)           Survival.  The
representations, warranties, agreements and covenants shall survive the
Closing.  Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.

     

    (j)           Further
Assurances.  Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.

     

    (k)           Indemnification.  In
consideration of each Buyer’s execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each holder of any
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company or any Subsidiary in any of the Transaction Documents, (b) any breach of
any covenant, agreement or obligation of the Company or any Subsidiary contained
in any of the Transaction Documents or (c) any cause of action, suit or claim
brought or made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company or any Subsidiary)
and arising out of or resulting from (i) the execution, delivery, performance or
enforcement of any of the Transaction Documents, (ii) any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds
of the issuance of the Securities, (iii) any disclosure properly made by such
Buyer pursuant to Section 4(i), or (iv) the status of such Buyer or holder of
the Securities as an investor in the Company pursuant to the transactions
contemplated by the Transaction Documents.  To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable
law.  Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    (l)           No Strict
Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.

     

    (m)           Remedies.  Each
Buyer and each holder of any Securities shall have all rights and remedies set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law.  Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law.  Furthermore, the Company
recognizes that in the event that it or any Subsidiary fails to perform,
observe, or discharge any or all of its or such Subsidiary’s (as the case may
be) obligations under the Transaction Documents, any remedy at law may prove to
be inadequate relief to the Buyers.  The Company therefore agrees that
the Buyers shall be entitled to seek specific performance and/or temporary,
preliminary and permanent injunctive or other equitable relief from any court of
competent jurisdiction in any such case without the necessity of proving actual
damages and without posting a bond or other security.

     

    (n)           Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Buyer exercises a right, election, demand or option under a
Transaction Document and the Company or any Subsidiary does not timely perform
its related obligations within the periods therein provided, then such Buyer may
rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company or such Subsidiary (as the case may be), any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights

     

    (o)           Payment Set
Aside.  To the extent that the Company or any Subsidiary makes
a payment or payments to any Buyer hereunder or pursuant to any of the other
Transaction Documents or any of the Buyers enforce or exercise their rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company
or any Subsidiary, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.  Unless
otherwise expressly indicated, all dollar amounts referred to in this Agreement
and the other Transaction Documents are in United States Dollars (“US Dollars”), and all amounts
owing under this Agreement and all other Transaction Documents shall be paid in
US Dollars.  All amounts denominated in other currencies shall be
converted in the US Dollar equivalent amount in accordance with the Exchange
Rate on the date of calculation.  “Exchange Rate” means, in relation to
any amount of currency to be converted into US Dollars pursuant to this
Agreement, the US Dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation.

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

     

    (p)           Independent Nature of
Buyers’ Obligations and Rights.  The obligations of each Buyer
under the Transaction Documents are several and not joint with the obligations
of any other Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under any Transaction
Document.  Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of group or entity, or create a presumption that the Buyers are in
any way acting in concert or as a group or entity with respect to such
obligations or the transactions contemplated by the Transaction Documents or any
matters, and the Company acknowledges that the Buyers are not acting in concert
or as a group, and the Company shall not assert any such claim, with respect to
such obligations or the transactions contemplated by the Transaction
Documents.  The decision of each Buyer to purchase Securities pursuant
to the Transaction Documents has been made by such Buyer independently of any
other Buyer.  Each Buyer acknowledges that no other Buyer has acted as
agent for such Buyer in connection with such Buyer making its investment
hereunder and that no other Buyer will be acting as agent of such Buyer in
connection with monitoring such Buyer’s investment in the Securities or
enforcing its rights under the Transaction Documents.  The Company and
each Buyer confirms that each Buyer has independently participated with the
Company and its Subsidiaries in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors.  Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.  The
use of a single agreement to effectuate the purchase and sale of the Securities
contemplated hereby was solely in the control of the Company, not the action or
decision of any Buyer, and was done solely for the convenience of the Company
and its Subsidiaries and not because it was required or requested to do so by
any Buyer.  It is expressly understood and agreed that each provision
contained in this Agreement and in each other Transaction Document is between
the Company, each Subsidiary and a Buyer, solely, and not between the Company,
its Subsidiaries and the Buyers collectively and not between and among the
Buyers.

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

    (q)           Certain
Adjustments.  If, and whenever on or after the date hereof
until the earlier to occur of (i) the five (5) year anniversary of the Closing
Date or (ii) the date on which none of the Notes are outstanding, a Subsequent
Placement occurs and involves any terms or conditions that are or become more
favorable to any Person than any of the terms or conditions contained in this
Agreement or any of the Securities, then (i) the Company shall provide notice
thereof to each Buyer immediately following the occurrence thereof and (ii) the
terms and conditions of this Agreement and the Securities (other than Section
1(d) of the Notes and Section 1(f) of the Warrants) shall be, without any
further action by any Buyer or the Company, automatically amended and modified
in an economically and legally equivalent manner such that each Buyer shall
receive the benefit of the more favorable terms and/or conditions (as the case
may be), provided that upon written notice to the Company at any time any Buyer
may elect not to accept the benefit of any such amended or modified term or
condition, in which event the term or condition contained in this Agreement or
the Securities (as the case may be) shall apply to such Buyer as it was in
effect immediately prior to such amendment or modification as if such amendment
or modification never occurred with respect to such Buyer.  The
provisions of this Section 9(q) shall apply similarly and equally to each
Subsequent Placement.

     

    [signature pages
follow]

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, Buyer and
the Company have caused their respective signature page to this Agreement to be
duly executed as of the date first written above.

    

    
      
        
          
            
              
                
                  	
                          COMPANY:

                        
	 
      
	
                          MAGNUM
      D’OR RESOURCES, INC.

                        
	 
      	 
      	 
      
	
                          By:

                        	
                          /s/Joseph
      Glusic

                        
	  
    	
                          Name:    

                        	

                           Joseph
      Glusic 

                        	  
	 
      	
                          Title:

                        	

                          President

                        	  

                

              

            

          

        

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, Buyer and
the Company have caused their respective signature page to this Agreement to be
duly executed as of the date first written above.

    

    
      
        	
                BUYERS:

              
	 
      
	
                CRANSHIRE
      CAPITAL, L.P.

              
	 
      
	
                By:  

              	
                Downsview
      Capital, Inc.

              
	
                Its:

              	
                General
      Partner

              
	 
      	 
      
	
                /s/Mitchell P. Kopin

              
	
                By:

              	
                Mitchell
      P. Kopin

              
	
                Its:

              	
                President

              

      

    

     

    
      
        	
                IROQUOIS
      MASTER FUND LTD.

              
	 
      	 
      
	
                By:

              	
                /s/Joshua Silverman

              
	 
      	
                Name:
      Joshua Silverman

              
	 
      	
                Title:
      Authorized Signatory

              

      

    

     

    
      
        	
                HUDSON
      BAY FUND LP

              
	 
      
	
                By:
      HUDSON BAY CAPITAL MANAGEMENT

              
	
                LP,
      its investment manager

              
	 
      	 
      
	
                By:

              	
                /s/

              
	 
      	
                Name:

              
	 
      	
                Title:

              

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        	
                HUDSON
      BAY FUND OVERSEAS LP

              
	 
      
	
                By:
      HUDSON BAY CAPITAL MANAGEMENT

              
	
                LP,
      its investment manager

              
	 
      
	
                By:

              	
                /s/

              
	 
      	
                Name:

              
	 
      	
                Title:

              

      

    

    

     

    
      
        
          	
                  ROCKMORE
      INVESTMENT MASTER FUND

                  LTD

                
	 
      
	
                  By:
      ROCKMORE CAPITAL, LLC

                
	 
      	 
      
	
                  By:

                	
                  /s/ Brian Daly

                
	 
      	
                  Name:
      Brian Daly

                
	 
      	
                  Title:
      Director

                

        

      

    

    

     

    
      
        	
                NEXT
      VIEW CAPITAL LP

              
	 
      
	
                By:
      NEXT VIEW PARTNERS LLC

              
	 
      	 
      
	
                By:

              	
                /s/ Stewart Flink

              
	 
      	
                Name:
      Stewart Flink

              
	 
      	
                Title:
      Manager

              
	 
      	 
      
	
                KINGSBROOK
      OPPORTUNITIES MASTER

                FUND
      LP

              
	 
      
	
                By:
      KINGSBROOK OPPORTUNITIES GP

                LLC,
      ITS GENERAL PARTNER

              
	 
      	 
      
	
                By:

              	
                /s/ Adam J. Chill

              
	 
      	
                Name:
      Adam J. Chill

              
	 
      	
                Title:
      Managing Member

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	
                BRIO
      CAPITAL LP

              
	 
      
	
                By:
      BRIO CAPITAL MANAGEMENT LLC, its

                general
      partner

              
	 
      	 
      
	
                By:

              	
                /s/ Shaye Hirsch

              
	 
      	
                Name:
      shaye Hirsch

              
	 
      	
                Title:
      Managing Member

              

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULE
OF BUYERS

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (1)

                                	 	
                                  (2)

                                	 	
                                  (3)

                                	 	 	
                                  (4)

                                	 	 	
                                  (5)

                                	 	 	
                                  (6)

                                	 	 	
                                  (7)

                                	 	
                                  (8)

                                
	 
      	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
      
	
                                  
                                    Buyer

                                  

                                	 	
                                  
                                    Address
      and

                                    Facsimile
      Number

                                  

                                	 	
                                  
                                    Principal

                                    Amount

                                    of
      Note

                                  

                                	 	 	
                                  
                                    Number

                                    of

                                    Series
      A

                                    Warrants

                                  

                                	 	 	
                                  
                                    Number
      of

                                    Series
      B

                                    Warrants

                                  

                                	 	 	
                                  
                                    Number
      of

                                    Series
      C

                                    Warrants

                                  

                                	 	 	
                                  
                                    Purchase
      Price

                                  

                                	 	
                                  
                                    Legal
      Representative’s

                                    Address and Facsimile Number

                                  

                                
	 
      	 	 
      	 	 	 	 	 	 	 	 	 	 
      
	
                                  Cranshire
      Capital, L.P.

                                	 	
                                  3100
      Dundee Road, Suite 703

                                  Northbrook,
      Illinois 60062

                                  Attn:  Mitchell
      P. Kopin

                                  Facsimile:
      (847) 562-9031

                                	 	$	1,000,000	 	 	 	619,835	 	 	 	826,446	 	 	 	619,835	 	 	$	1,000,000	 	
                                  Greenberg
      Traurig, LLP

                                  77
      W. Wacker Drive, Suite 3100

                                  Chicago,
      Illinois 60601

                                  Attention:  Peter
      H. Lieberman

                                                   
      Todd A. Mazur

                                  Facsimile:
      (312) 456-8435

                                
	 
      	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
      
	
                                  Iroquois
      Master Fund Ltd.

                                	 	
                                  641
      Lexington Avenue, 26th
      Fl.

                                  NY,
      NY 10022

                                  Attn:
      Josh Silverman

                                  Facsimile:
      (212) 207-8277

                                	 	$	750,000	 	 	 	464,876	 	 	 	619,835	 	 	 	464,876	 	 	$	750,000	 	
                                  Iroquois
      Master Fund Ltd.

                                  641
      Lexington Avenue, 26th Floor

                                  New
      York, New York  10022

                                  Facsimile:  (212)
      207-3452

                                  Attn:
      Mitch Kulick

                                
	 
      	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
      
	
                                  Rockmore
      Investment Master Fund Ltd.

                                	 	
                                  c/o
      Rockmore Capital, LLC

                                  150
      East 58th
      Street

                                  NY,
      NY 10155

                                  Attn:
      Michael Clateman

                                  Facsimile:
      (212) 258-2315

                                	 	$	250,000	 	 	 	154,959	 	 	 	206,612	 	 	 	154,959	 	 	$	250,000	 	
                                  c/o
      Rockmore Capital, LLC

                                  150
      East 58th
      Street

                                  NY,
      NY 10155

                                  Attn:
      Michael Clateman

                                  Facsimile:
      (212) 258-2315

                                
	 
      	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
      
	
                                  Next
      View Capital L.P.

                                	 	
                                  95
      Revere Drive, Suite A

                                  Northbrook,
      Illinois 60062

                                  Attn:
      Stewart Flink

                                  Facsimile:
      (847) 559-5807

                                	 	$	250,000	 	 	 	154,959	 	 	 	206,612	 	 	 	154,959	 	 	$	250,000	 	
                                  Elected
      not to provide

                                
	 
      	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
      
	
                                  Hudson
      Bay Fund LP

                                	 	
                                  c/o
      Hudson Bay Capital Management LP

                                  120
      Broadway, 40th
      Fl.

                                  NY,
      NY 10271

                                  Attn:
      Yoav Roth

                                  Facsimile:
      (646) 478-9513

                                	 	$	205,000	 	 	 	127,067	 	 	 	169,421	 	 	 	127,067	 	 	$	205,000	 	
                                  Elected
      not to provide

                                
	 
      	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
      
	
                                  Hudson
      Bay Overseas Fund, Ltd.

                                	 	
                                  c/o
      Hudson Bay Capital Management LP

                                  120
      Broadway, 40th
      Fl.

                                  NY,
      NY 10271

                                  Attn:
      Yoav Roth

                                  Facsimile:
      (646) 478-9513

                                	 	$	295,000	 	 	 	182,852	 	 	 	243,802	 	 	 	182,852	 	 	$	295,000	 	
                                  Elected
      not to provide

                                
	 
      	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
      
	
                                  Alpha
      Capital Anstalt

                                	 	
                                  c/o
      LH Financial Services Corp

                                  150
      Central Park South, 2nd
      Fl.

                                  NY,
      NY 10019

                                  Attn:
      Joe Hammer

                                  Facsimile:
      (212) 586-8244

                                	 	$	350,000	 	 	 	216,942	 	 	 	289,256	 	 	 	216,942	 	 	$	350,000	 	
                                  Elected
      not to provide

                                
	 
      	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
      
	
                                  Kingsbrook
      Opportunities Master Fund LP

                                	 	
                                  c/o
      Kingsbrook Opportunities GP LLC

                                  590
      Madison Avenue, 27th
      Fl.

                                  NY,
      NY 10022

                                  Attn:
      Adam Chill

                                  Facsimile:
      (212) 600-8290

                                	 	$	200,000	 	 	 	123,967	 	 	 	165,289	 	 	 	123,967	 	 	$	200,000	 	
                                  Elected
      not to provide

                                
	 
      	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
      
	
                                  Brio
      Capital, LP

                                	 	
                                  401
      E. 34th
      Street, Suite South 33c

                                  NY,
      NY 10016

                                  Attn:
      Shaye Hirsch

                                  Facsimile:
      (646) 390-2158

                                	 	$	200,000	 	 	 	123,967	 	 	 	165,289	 	 	 	123,967	 	 	$	200,000	 	
                                  Elected
      not to
provide

                                

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    The
Company’s Schedules

    

    To
that certain Securities Purchase Agreement (the “Agreement”)

    Dated
December 21, 2009

    By
and among

    Magnum
d’Or Resources, Inc., as the “Company”

    And

    Each
of the “Buyers”, who are signatories to the Securities Purchase
Agreement

    

    Capitalized
terms used in these Schedules and not otherwise defined shall have the same
definition ascribed to such terms in the Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
3(q)

    

    Transactions
with Affiliates

    

    None.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
3(r)

    

    Equity
Capitalization

     

    The
following disclosure is an exception to the representation and warranty set
forth in Section 3(r)(iii).

     

    There are
no outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound except as set forth in the following
documents:

     

    ·           Promissory
Note dated June 9, 2009 by Magnum D’Or Resources, Inc. payable to the order of
Cache Bank and Trust in the original principal amount of $1,000,000

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Cache Bank and
Trust, recorded in the real estate records of Weld County, Colorado on September
2, 2009 at Reception No. 3646372

     

    ·           Assignment
of Lease, Rent and Other Income dated August 25, 2008 by Magnum D’Or Resources,
Inc. to Cache Bank and Trust and recorded in the real estate records of Weld
County, Colorado on September 2, 2009 at Reception No. 3646373

     

    ·           Security
Agreement dated August 25, 2009 between Magnum D’Or Resources, Inc. and Cache
Bank and Trust

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Cache
Bank and Trust, as secured party, filed on August 21, 2009 with the Secretary of
State of the State of Nevada, filing No.  2009020579-9

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Cache
Bank and Trust, as secured party, filed on August 21, 2009 with the Secretary of
State of the State of Colorado, Filing No. 2009F071135

     

    ·           Promissory
Note dated June 10, 2009 by Magnum D’Or Resources, Inc. payable to the order of
FGH Financial, LLC in the original principal amount of $1,412,603

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of FGH Financial, LLC,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646374

     

    ·           Promissory
Note dated June 18, 2009 by Magnum D’Or Resources, Inc. payable to the order of
Mile High Banks in the original principal amount of $995,500

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Mile High Banks,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646375

     

    ·           Assignment
of Lease, Rent and Other Income dated August 25, 2008 by Magnum D’Or Resources,
Inc. to Mile High Banks and recorded in the real estate records of Weld County,
Colorado on September 2, 2009 at Reception No. 3646376

     

    ·           Security
Agreement dated August 25, 2009 between Magnum D’Or Resources, Inc. and Mile
High Banks

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Mile High
Banks, as secured party, filed on August 24, 2009 with the Secretary of State of
the State of Nevada, filing No. 2009020741-4

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Mile High
Banks, as secured party, recorded on September 2, 2009 in the real estate
records of Weld County, Colorado at Reception No. 3646377

     

    ·           Promissory
Note dated August 25, 2009 by Magnum D’Or Resources, Inc. payable to the order
of Charles Kohlhaas and Jean Widman, as joint tenants, in the original principal
amount of $550,000

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Charles Kohlhaas and
Jean Widman, as joint tenants, recorded in the real estate records of Weld
County, Colorado on September 2, 2009 at Reception No. 3646378

     

      
        

      

    

    The
following disclosure is an exception to the representation and warranty set
forth in Section 3(r)(iv).

     

    There are
no financing statements securing obligations in any amounts filed in connection
with the Company or any of its Subsidiaries except for the following financing
statements:

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Cache
Bank and Trust, as secured party, filed on August 21, 2009 with the Secretary of
State of the State of Nevada, filing No.  2009020579-9

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Cache
Bank and Trust, as secured party, filed on August 21, 2009 with the Secretary of
State of the State of Colorado, Filing No. 2009F071135

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Mile High
Banks, as secured party, filed on August 24, 2009 with the Secretary of State of
the State of Nevada, filing No. 2009020741-4

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Mile High
Banks, as secured party, recorded on September 2, 2009 in the real estate
records of Weld County, Colorado at Reception No. 3646377

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Cache Bank and
Trust, recorded in the real estate records of Weld County, Colorado on September
2, 2009 at Reception No. 3646372

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of FGH Financial, LLC,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646374

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Mile High Banks,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646375

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Charles Kohlhaas and
Jean Widman, as joint tenants, recorded in the real estate records of Weld
County, Colorado on September 2, 2009 at Reception No. 3646378

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
3(s)

    

    Indebtedness
and Other Contacts

    

    The
following disclosure is an exception to the representation and warranty set
forth in Section 3(s)(i).

    

    Neither
the Company nor any of its Subsidiaries has any outstanding Indebtedness except
as evidenced by the following documents:

    

    ·           Promissory
Note dated June 9, 2009 by Magnum D’Or Resources, Inc. payable to the order of
Cache Bank and Trust in the original principal amount of $1,000,000

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Cache Bank and
Trust, recorded in the real estate records of Weld County, Colorado on September
2, 2009 at Reception No. 3646372

     

    ·           Assignment
of Lease, Rent and Other Income dated August 25, 2008 by Magnum D’Or Resources,
Inc. to Cache Bank and Trust and recorded in the real estate records of Weld
County, Colorado on September 2, 2009 at Reception No. 3646373

     

    ·           Security
Agreement dated August 25, 2009 between Magnum D’Or Resources, Inc. and Cache
Bank and Trust

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Cache
Bank and Trust, as secured party, filed on August 21, 2009 with the Secretary of
State of the State of Nevada, filing No.  2009020579-9

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Cache
Bank and Trust, as secured party, filed on August 21, 2009 with the Secretary of
State of the State of Colorado, Filing No. 2009F071135

     

    ·           Promissory
Note dated June 10, 2009 by Magnum D’Or Resources, Inc. payable to the order of
FGH Financial, LLC in the original principal amount of $1,412,603

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of FGH Financial, LLC,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646374

     

    ·           Promissory
Note dated June 18, 2009 by Magnum D’Or Resources, Inc. payable to the order of
Mile High Banks in the original principal amount of $995,500

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Mile High Banks,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646375

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ·           Assignment
of Lease, Rent and Other Income dated August 25, 2008 by Magnum D’Or Resources,
Inc. to Mile High Banks and recorded in the real estate records of Weld County,
Colorado on September 2, 2009 at Reception No. 3646376

     

    ·           Security
Agreement dated August 25, 2009 between Magnum D’Or Resources, Inc. and Mile
High Banks

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Mile High
Banks, as secured party, filed on August 24, 2009 with the Secretary of State of
the State of Nevada, filing No. 2009020741-4

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Mile High
Banks, as secured party, recorded on September 2, 2009 in the real estate
records of Weld County, Colorado at Reception No. 3646377

     

    ·           Promissory
Note dated August 25, 2009 by Magnum D’Or Resources, Inc. payable to the order
of Charles Kohlhaas and Jean Widman, as joint tenants, in the original principal
amount of $550,000

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Charles Kohlhaas and
Jean Widman, as joint tenants, recorded in the real estate records of Weld
County, Colorado on September 2, 2009 at Reception No. 3646378

     

      
        

      

    

    
       

      The
following disclosure is an exception to the representation and warranty set
forth in Section 3(s)(ii).

    

    

    Neither
the Company nor any of its Subsidiaries is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect except for the following
documents:

    

    ·           Promissory
Note dated June 9, 2009 by Magnum D’Or Resources, Inc. payable to the order of
Cache Bank and Trust in the original principal amount of $1,000,000

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Cache Bank and
Trust, recorded in the real estate records of Weld County, Colorado on September
2, 2009 at Reception No. 3646372

     

    ·           Assignment
of Lease, Rent and Other Income dated August 25, 2008 by Magnum D’Or Resources,
Inc. to Cache Bank and Trust and recorded in the real estate records of Weld
County, Colorado on September 2, 2009 at Reception No. 3646373

     

    ·           Security
Agreement dated August 25, 2009 between Magnum D’Or Resources, Inc. and Cache
Bank and Trust

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ·           Promissory
Note dated June 10, 2009 by Magnum D’Or Resources, Inc. payable to the order of
FGH Financial, LLC in the original principal amount of $1,412,603

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of FGH Financial, LLC,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646374

     

    ·           Promissory
Note dated June 18, 2009 by Magnum D’Or Resources, Inc. payable to the order of
Mile High Banks in the original principal amount of $995,500

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Mile High Banks,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646375

     

    ·           Assignment
of Lease, Rent and Other Income dated August 25, 2008 by Magnum D’Or Resources,
Inc. to Mile High Banks and recorded in the real estate records of Weld County,
Colorado on September 2, 2009 at Reception No. 3646376

     

    ·           Security
Agreement dated August 25, 2009 between Magnum D’Or Resources, Inc. and Mile
High Banks

     

    ·           Promissory
Note dated August 25, 2009 by Magnum D’Or Resources, Inc. payable to the order
of Charles Kohlhaas and Jean Widman, as joint tenants, in the original principal
amount of $550,000

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Charles Kohlhaas and
Jean Widman, as joint tenants, recorded in the real estate records of Weld
County, Colorado on September 2, 2009 at Reception No. 3646378

     

      
        

      

       

    

    The
following disclosure is an exception to the representation and warranty set
forth in Section 3(s)(iv).

    

    Neither
the Company nor any of its Subsidiaries is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the
judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect except for the following documents:

    

    ·           Promissory
Note dated June 9, 2009 by Magnum D’Or Resources, Inc. payable to the order of
Cache Bank and Trust in the original principal amount of $1,000,000

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Cache Bank and
Trust, recorded in the real estate records of Weld County, Colorado on September
2, 2009 at Reception No. 3646372

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ·           Assignment
of Lease, Rent and Other Income dated August 25, 2008 by Magnum D’Or Resources,
Inc. to Cache Bank and Trust and recorded in the real estate records of Weld
County, Colorado on September 2, 2009 at Reception No. 3646373

     

    ·           Security
Agreement dated August 25, 2009 between Magnum D’Or Resources, Inc. and Cache
Bank and Trust

     

    ·           Promissory
Note dated June 10, 2009 by Magnum D’Or Resources, Inc. payable to the order of
FGH Financial, LLC in the original principal amount of $1,412,603

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of FGH Financial, LLC,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646374

     

    ·           Promissory
Note dated June 18, 2009 by Magnum D’Or Resources, Inc. payable to the order of
Mile High Banks in the original principal amount of $995,500

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Mile High Banks,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646375

     

    ·           Assignment
of Lease, Rent and Other Income dated August 25, 2008 by Magnum D’Or Resources,
Inc. to Mile High Banks and recorded in the real estate records of Weld County,
Colorado on September 2, 2009 at Reception No. 3646376

     

    ·           Security
Agreement dated August 25, 2009 between Magnum D’Or Resources, Inc. and Mile
High Banks

     

    ·           Promissory
Note dated August 25, 2009 by Magnum D’Or Resources, Inc. payable to the order
of Charles Kohlhaas and Jean Widman, as joint tenants, in the original principal
amount of $550,000

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Charles Kohlhaas and
Jean Widman, as joint tenants, recorded in the real estate records of Weld
County, Colorado on September 2, 2009 at Reception No. 3646378

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
3(t)

    

    Litigation

    

    None.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
3(mm)

    

    Ranking
of Notes

    

    The
Indebtedness evidenced by the following agreements:

    

    ·           Promissory
Note dated June 9, 2009 by Magnum D’Or Resources, Inc. payable to the order of
Cache Bank and Trust in the original principal amount of $1,000,000

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Cache Bank and
Trust, recorded in the real estate records of Weld County, Colorado on September
2, 2009 at Reception No. 3646372

     

    ·           Assignment
of Lease, Rent and Other Income dated August 25, 2008 by Magnum D’Or Resources,
Inc. to Cache Bank and Trust and recorded in the real estate records of Weld
County, Colorado on September 2, 2009 at Reception No. 3646373

     

    ·           Security
Agreement dated August 25, 2009 between Magnum D’Or Resources, Inc. and Cache
Bank and Trust

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Cache
Bank and Trust, as secured party, filed on August 21, 2009 with the Secretary of
State of the State of Nevada, filing No.  2009020579-9

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Cache
Bank and Trust, as secured party, filed on August 21, 2009 with the Secretary of
State of the State of Colorado, Filing No. 2009F071135

     

    ·           Promissory
Note dated June 10, 2009 by Magnum D’Or Resources, Inc. payable to the order of
FGH Financial, LLC in the original principal amount of $1,412,603

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of FGH Financial, LLC,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646374

     

    ·           Promissory
Note dated June 18, 2009 by Magnum D’Or Resources, Inc. payable to the order of
Mile High Banks in the original principal amount of $995,500

     

    ·           Deed
of Trust dated August 25, 2008 by Magnum D’Or Resources, Inc. in favor of the
Public Trustee of Weld County, Colorado, for the benefit of Mile High Banks,
recorded in the real estate records of Weld County, Colorado on September 2,
2009 at Reception No. 3646375

     

    ·           Assignment
of Lease, Rent and Other Income dated August 25, 2008 by Magnum D’Or Resources,
Inc. to Mile High Banks and recorded in the real estate records of Weld County,
Colorado on September 2, 2009 at Reception No. 3646376

     

    ·           Security
Agreement dated August 25, 2009 between Magnum D’Or Resources, Inc. and Mile
High Banks

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Mile High
Banks, as secured party, filed on August 24, 2009 with the Secretary of State of
the State of Nevada, filing No. 2009020741-4

     

    ·           UCC-1
Financing Statement naming Magnum D’Or Resources, Inc., as debtor, and Mile High
Banks, as secured party, recorded on September 2, 2009 in the real estate
records of Weld County, Colorado at Reception No. 3646377

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
4(k)

    

    Consultants:

    

    Steve
Caboor

    Kyle
Pottorff

    USA
Master Web Advisors

    Larry
Hogan

    Green
Spirit Managerial Consultants

    Ayman
Haddad[FORM
OF SENIOR SECURED CONVERTIBLE NOTE]

     

    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 TO
THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR
ELIGIBLE TO BE 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. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF
THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 19(a) HEREOF.  THE
PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE
FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

     

    Magnum
d’Or Resources, Inc.

     

    Senior
Secured Convertible Note

     

    
      	
              Issuance
      Date:  December __, 2009

            	
              Original
      Principal Amount: U.S. $____

            

    

    

    FOR VALUE RECEIVED, Magnum
d’Or Resources, Inc., a Nevada corporation (the “Company”), hereby promises to
pay to the order of [CRANSHIRE CAPITAL L.P.][OTHER BUYERS]or
registered assigns (“Holder”) the amount set out
above as the Original Principal Amount (as reduced pursuant to the terms hereof
pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether
upon the Maturity Date, on any Installment Date with respect to the Installment
Amount due on such Installment Date (each as defined below), acceleration,
redemption or otherwise (in each case in accordance with the terms hereof) and
to pay interest (“Interest”) on any outstanding
Principal (as defined below) at the applicable Interest Rate (as defined below)
from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes
due and payable, whether upon an Interest Date (as defined below), any
Installment Date or the Maturity Date or acceleration, conversion, redemption or
otherwise (in each case in accordance with the terms hereof). This Senior
Secured Convertible Note (including all Senior Secured Convertible Notes issued
in exchange, transfer or replacement hereof, this “Note”) is one of an issue of
Senior Secured Convertible Notes issued pursuant to the Securities Purchase
Agreement (as defined below) on the Closing Date (as defined below)
(collectively, the “Notes” and such other Senior
Secured Convertible Notes, the “Other Notes”). Certain capitalized
terms used herein are defined in Section 29.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    1.           PAYMENTS OF
PRINCIPAL. On each Installment Date (which includes the Maturity Date),
the Company shall pay to the Holder an amount equal to the Installment Amount
due on such Installment Date in accordance with Section 8. Other than as
specifically permitted by this Note, the Company may not prepay any portion of
the outstanding Principal, accrued and unpaid Interest or accrued and unpaid
Late Charges on Principal and Interest, if any.

     

    2.           INTEREST; INTEREST
RATE. Interest on this Note shall commence accruing on the Issuance Date,
shall accrue daily at the Interest Rate on the outstanding Principal amount from
time to time, shall be computed on the basis of a 360-day year comprised of
twelve (12) thirty (30) day months and shall be payable in arrears for each
Quarter on the first Installment Date immediately following the end of such
Quarter during the period beginning on the Issuance Date and ending on, and
including, the Maturity Date (each, an “Interest Date”), with the first
Interest Date being April 1, 2010. Interest shall be payable to the record
holder of this Note on each Interest Date in accordance with Section 8 as part
of the applicable Installment Amount due on the applicable Interest Date. From
and after the occurrence and during the continuance of any Event of Default, the
Interest Rate shall automatically be increased to eighteen percent (18%). In the
event that such Event of Default is subsequently waived or cured, the increase
referred to in the preceding sentence shall cease to be effective as of the date
of such waiver or cure, it being understood that the Interest as calculated and
unpaid at such increased rate during the continuance of such Event of Default
shall continue to apply to the extent relating to the days after the occurrence
of such Event of Default through and including the date of such waiver or cure
of such Event of Default.

     

    3.           CONVERSION OF NOTES.
This Note and any amounts hereunder shall be convertible into shares of Common
Stock (as defined below), on the terms and conditions set forth in this Section
3.

     

    (a)          Conversion Right.
Subject to the provisions of Section 3(d), at any time or times on or after the
Issuance Date, the Holder shall be entitled to convert any portion of the
outstanding and unpaid Conversion Amount (as defined below) into fully paid and
nonassessable shares of Common Stock in accordance with Section 3(c), at the
Conversion Rate (as defined below).  The Company shall not issue any
fraction of a share of Common Stock upon any conversion.  If the
issuance would result in the issuance of a fraction of a share of Common Stock,
the Company shall round such fraction of a share of Common Stock up to the
nearest whole share. The Company shall pay any and all transfer, stamp, issuance
and similar taxes that may be payable with respect to the issuance and delivery
of Common Stock upon conversion of any Conversion Amount.

     

    (b)          Conversion Rate. The
number of shares of Common Stock issuable upon conversion of any Conversion
Amount pursuant to Section 3(a) shall be determined by dividing (x) such
Conversion Amount by (y) the Conversion Price (the “Conversion
Rate”).

     

    (i)           “Conversion Amount” means the
portion of the Principal to be converted, redeemed or otherwise with respect to
which this determination is being made, plus all accrued and unpaid Interest
with respect to such portion of the Principal amount and accrued and unpaid Late
Charges with respect to such portion of such Principal and such
Interest.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (ii)           “Conversion Price” means, as of
any Conversion Date or other date of determination, $1.21, subject to adjustment
as provided herein.

     

    (c)          Mechanics of
Conversion.

     

    (i)           Optional Conversion.
To convert any Conversion Amount into shares of Common Stock on any date (a
“Conversion Date”), the
Holder shall (A) deliver (whether via facsimile or otherwise), for receipt on or
prior to 11:59 p.m., New York time, on such date, a copy of an executed notice
of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the
Company and (B) if required by Section 3(c)(iii), surrender this Note to a
nationally recognized overnight delivery service for delivery to the Company (or
an indemnification undertaking with respect to this Note in the case of its
loss, theft or destruction as contemplated by Section 19(b)).  On or
before the first (1st)
Trading Day following the date of receipt of a Conversion Notice, the Company
shall transmit by facsimile or electronic mail an acknowledgment of confirmation
of receipt of such Conversion Notice to the Holder and the Company’s transfer
agent (the “Transfer
Agent”). On or before the second (2nd)
Trading Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall (1)
provided that the Transfer Agent is participating in The Depository Trust
Company’s (“DTC”) Fast
Automated Securities Transfer Program, credit such aggregate number of shares of
Common Stock to which the Holder shall be entitled to the Holder’s or its
designee’s balance account with DTC through its Deposit Withdrawal at Custodian
system or (2) if the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program, issue and deliver (via reputable
overnight courier) to the address as specified in the Conversion Notice, a
certificate, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be entitled. If this
Note is physically surrendered for conversion at the option of the Holder in
accordance with Section 3(c)(iii) and the outstanding Principal of this Note is
greater than the Principal portion of the Conversion Amount being converted,
then the Company shall as soon as practicable and in no event later than five
(5) Business Days after receipt of this Note and at its own expense, issue and
deliver to the Holder (or its designee) a new Note (in accordance with Section
19(d)) representing the outstanding Principal not converted. The Person or
Persons entitled to receive the shares of Common Stock issuable upon a
conversion of this Note shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on the Conversion Date. In the event
of a partial conversion of this Note pursuant hereto, the Principal amount
converted shall be deducted from the Installment Amount(s) relating to the
Installment Date(s) as set forth in the applicable Conversion
Notice.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (ii)           Company’s Failure to Timely
Convert. If the Company shall fail, for any reason or for no reason
(other than as a result of a dispute as contemplated in Section 3(c)(iv) below
(but then only with respect to the disputed number of shares) or as a result of
the limitations set forth in Section 3(d) below), to issue to the Holder within
five (5) Trading Days after the Company’s receipt of a Conversion Notice
(whether via facsimile or otherwise), a certificate for the number of shares of
Common Stock to which the Holder is entitled and register such shares of Common
Stock on the Company’s share register or to credit the Holder’s or its
designee’s balance account with DTC for such number of shares of Common Stock to
which the Holder is entitled upon the Holder’s conversion of any Conversion
Amount (as the case may be) (a “Conversion Failure”), then, in
addition to all other remedies available to the Holder, (1) the Company shall
pay in cash to the Holder on each day after such fifth (5th)
Trading Day that the issuance of such shares of Common Stock is not timely
effected an amount equal to 1% of the product of (A) the sum of the number of
shares of Common Stock not issued to the Holder on a timely basis and to which
the Holder is entitled multiplied by (B) the Closing Sale Price of the Common
Stock on the Trading Day immediately preceding the last possible date which the
Company could have issued such shares of Common Stock to the Holder without
violating Section 3(c)(i) and (2) the Holder, upon written notice to the
Company, may void its Conversion Notice with respect to, and retain or have
returned (as the case may be) any portion of this Note that has not been
converted pursuant to such Conversion Notice, provided that the voiding of a
Conversion Notice shall not affect the Company’s obligations to make any
payments which have accrued prior to the date of such notice pursuant to this
Section 3(c)(ii) or otherwise. In addition to the foregoing, if within three (3)
Trading Days after the Company’s receipt of a Conversion Notice (whether via
facsimile or otherwise), the Company shall fail to issue and deliver a
certificate to the Holder and register such shares of Common Stock on the
Company’s share register or credit the Holder’s or its designee’s balance
account with DTC for the number of shares of Common Stock to which the Holder is
entitled upon the Holder’s conversion hereunder (as the case may be), and if on
or after such third (3rd)
Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
shares of Common Stock issuable upon such conversion that the Holder anticipated
receiving from the Company, then, in addition to all other remedies available to
the Holder, the Company shall, within three (3) Business Days after the Holder’s
request and in the Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the shares of Common
Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such
certificate (and to issue such shares of Common Stock) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock or credit the Holder’s
balance account with DTC for the number of shares of Common Stock to which the
Holder is entitled upon the Holder’s conversion hereunder (as the case may be)
and pay cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock
multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the Conversion Date.

    
      
         

      

      
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    (iii)           Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon conversion of
any portion of this Note in accordance with the terms hereof, the Holder shall
not be required to physically surrender this Note to the Company unless (A) the
full Conversion Amount represented by this Note is being converted or (B) the
Holder has provided the Company with prior written notice (which notice may be
included in a Conversion Notice) requesting reissuance of this Note upon
physical surrender of this Note. The Holder and the Company shall maintain
records showing the Principal, Interest and Late Charges converted and/or paid
(as the case may be) and the dates of such conversions and/or payments (as the
case may be) or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of this Note
upon conversion.

     

    (iv)           Pro Rata Conversion;
Disputes. In the event that the Company receives a Conversion Notice from
more than one holder of Notes for the same Conversion Date and the Company can
convert some, but not all, of such portions of the Notes submitted for
conversion, the Company, subject to Section 3(d), shall convert from each holder
of Notes electing to have Notes converted on such date a pro rata amount of such
holder’s portion of its Notes submitted for conversion based on the principal
amount of Notes submitted for conversion on such date by such holder relative to
the aggregate principal amount of all Notes submitted for conversion on such
date. In the event of a dispute as to the number of shares of Common Stock
issuable to the Holder in connection with a conversion of this Note, the Company
shall issue to the Holder the number of shares of Common Stock not in dispute
and resolve such dispute in accordance with Section 24.

     

    (d)           Limitations on
Conversions. Notwithstanding anything to the contrary contained in this
Note, this Note shall not be convertible by the Holder hereof, and the Company
shall not effect any conversion of this Note or otherwise issue any shares of
Common Stock pursuant to Section 8 hereof, to the extent (but only to the
extent) that the Holder or any of its affiliates would beneficially own in
excess of [4.9%][9.9%] (the “Maximum Percentage”) of the
Common Stock. To the extent the above limitation applies, the determination
of whether this Note shall be convertible (vis-à-vis other convertible,
exercisable or exchangeable securities owned by the Holder) shall, subject to
such Maximum Percentage limitation, be determined on the basis of the first
submission to the Company for conversion, exercise or exchange (as the case may
be). No prior inability to convert this Note, or to issue shares of Common
Stock, pursuant to this paragraph shall have any effect on the applicability of
the provisions of this paragraph with respect to any subsequent
determination of convertibility. For purposes of this paragraph, beneficial
ownership and all determinations and calculations (including, without
limitation, with respect to calculations of percentage ownership) shall be
determined in accordance with Section 13(d) of the 1934 Act (as defined in the
Securities Purchase Agreement) and the rules and regulations promulgated
thereunder. The provisions of this paragraph shall be implemented in a manner
otherwise than in strict conformity with the terms of this paragraph to correct
this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Maximum Percentage beneficial ownership limitation herein
contained or to make changes or supplements necessary or desirable to properly
give effect to such Maximum Percentage limitation. The limitations contained in
this paragraph shall apply to a successor Holder of this Note. The holders of
Common Stock shall be third party beneficiaries of this paragraph and the
Company may not waive this paragraph without the consent of holders of a
majority of its Common Stock. For any reason at any time, upon the written or
oral request of the Holder, the Company shall within one (1) Business Day
confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding, including by virtue of any prior conversion or exercise of
convertible or exercisable securities into Common Stock, including, without
limitation, pursuant to this Note or securities issued pursuant to the
Securities Purchase Agreement.

    
      
         

      

      
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    4.           RIGHTS UPON EVENT OF
DEFAULT.

     

    (a)          Event of
Default.  Each of the following events shall constitute an
“Event of
Default”:

     

    (i)           the
failure of the applicable Registration Statement (as defined in the Registration
Rights Agreement) to be filed with the SEC on or prior to the date that is ten
(10) days after the applicable Filing Deadline (as defined in the Registration
Rights Agreement) or the failure of the applicable Registration Statement to be
declared effective by the SEC on or prior to the date that is twenty (20) days
after the applicable Effectiveness Deadline (as defined in the Registration
Rights Agreement);

     

    (ii)          while
the applicable Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the effectiveness of
the applicable Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or such Registration Statement (or the
prospectus contained therein) is unavailable to any holder of Registrable
Securities (as defined in the Registration Rights Agreement) for sale of all of
such holder’s Registrable Securities in accordance with the terms of the
Registration Rights Agreement, and such lapse or unavailability continues for a
period of five (5) consecutive Trading Days or for more than an aggregate of ten
(10) Trading Days in any 365-day period (excluding days during an Allowable
Grace Period (as defined in the Registration Rights Agreement));

     

    (iii)       
the suspension (or threatened suspension) from trading or the failure (or
threatened failure) of the Common Stock to be trading or listed (as applicable)
on an Eligible Market for a period of five (5) consecutive Trading Days or for
more than an aggregate of ten (10) Trading Days in any 365-day
period;

     

    (iv)     
   the Company’s (A) failure to cure a Conversion Failure or a
Delivery Failure (as defined in the Warrants) by delivery of the required number
of shares of Common Stock within five (5) Trading Days after the applicable
Conversion Date or exercise date (as the case may be) or (B) notice, written or
oral, to any holder of the Notes or Warrants, including, without limitation, by
way of public announcement or through any of its agents, at any time, of its
intention not to comply, as required, with a request for conversion of any Notes
into shares of Common Stock that is requested in accordance with the provisions
of the Notes, other than pursuant to Section 3(d), or a request for exercise of
any Warrants for Warrant Shares in accordance with the provisions of the
Warrants;

    
      
         

      

      
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    (v)          at
any time following the tenth (10th)
consecutive day that the Holder’s Authorized Share Allocation is less than the
number of shares of Common Stock that the Holder would be entitled to receive
upon a conversion of the full Conversion Amount of this Note (without regard to
any limitations on conversion set forth in Section 3(d) or
otherwise);

     

    (vi)         the
Company’s or any Subsidiary’s failure to pay to the Holder any amount of
Principal, Interest, Late Charges or other amounts when and as due under this
Note (including, without limitation, the Company’s or any Subsidiary’s failure
to pay any redemption payments or amounts hereunder) or any other Transaction
Document (as defined in the Securities Purchase Agreement) or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated hereby and thereby, except, in the case of a
failure to pay Interest and Late Charges when and as due, in which case only if
such failure remains uncured for a period of at least five (5)
days;

     

    (vii)        the
Company fails to remove any restrictive legend on any certificate or any shares
of Common Stock issued to the Holder upon conversion or exercise (as the case
may be) of any Securities acquired by the Holder under the Securities Purchase
Agreement (including this Note) as and when required by such Securities or the
Securities Purchase Agreement, unless otherwise then prohibited by applicable
federal securities laws, and any such failure remains uncured for at least five
(5) days;

     

    (viii)       the
occurrence of any default under, redemption of or acceleration prior to maturity
of any Indebtedness (as defined in the Securities Purchase Agreement) of the
Company or any of its Subsidiaries, other than with respect to (A) Permitted
Company Senior Indebtedness, (B) Permitted Subsidiary Senior Indebtedness and
(C) any Other Notes;

     

    (ix)          bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings for
the relief of debtors shall be instituted by or against the Company or any
Subsidiary and, if instituted against the Company or any Subsidiary by a third
party, shall not be dismissed within thirty (30) days of their
initiation;

     

    (x)           the
commencement by the Company or any Subsidiary of a voluntary case or proceeding
under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree, order, judgment or other similar document in respect of the Company or
any Subsidiary in an involuntary case or proceeding under any applicable
federal, state or foreign bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable federal, state or foreign
law, or the consent by it to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Subsidiary or of
any substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the execution of a composition of debts, or the
occurrence of any other similar federal, state or foreign proceeding, or the
admission by it in writing of its inability to pay its debts generally as they
become due, the taking of corporate action by the Company or any Subsidiary in
furtherance of any such action or the taking of any action by any Person to
commence a UCC foreclosure sale or any other similar action under federal, state
or foreign law;

    
      
         

      

      
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    (xi)          the
entry by a court of (i) a decree, order, judgment or other similar document in
respect of the Company or any Subsidiary of a voluntary or involuntary case or
proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or (ii) a decree, order,
judgment or other similar document adjudging the Company or any Subsidiary as
bankrupt or insolvent, or approving as properly filed a petition seeking
liquidation, reorganization, arrangement, adjustment or composition of or in
respect of the Company or any Subsidiary under any applicable federal, state or
foreign law or (iii) a decree, order, judgment or other similar document
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or any Subsidiary or of any substantial
part of its property, or ordering the winding up or liquidation of its affairs,
and the continuance of any such decree, order, judgment or other similar
document or any such other decree, order, judgment or other similar document
unstayed and in effect for a period of thirty (30) consecutive
days;

     

    (xii)         a
final judgment or judgments for the payment of money aggregating in excess of
$100,000 are rendered against the Company and/or any of its Subsidiaries and
which judgments are not, within thirty (30) days after the entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged within thirty
(30) days after the expiration of such stay; provided, however, any judgment
which is covered by insurance or an indemnity from a credit worthy party shall
not be included in calculating the $100,000 amount set forth above so long as
the Company provides the Holder a written statement from such insurer or
indemnity provider (which written statement shall be reasonably satisfactory to
the Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company or such Subsidiary (as the case may be) will receive
the proceeds of such insurance or indemnity within thirty (30) days of the
issuance of such judgment;

     

    (xiii)        the
Company and/or any Subsidiary, individually or in the aggregate, either (i)
fails to pay, when due, or within any applicable grace period, any payment with
respect to any Indebtedness in excess of $150,000 due to any third party (other
than, with respect to unsecured Indebtedness only, payments contested by the
Company and/or such Subsidiary (as the case may be) in good faith by proper
proceedings and with respect to which adequate reserves have been set aside for
the payment thereof in accordance with GAAP) or is otherwise in breach or
violation of any agreement for monies owed or owing in an amount in excess of
$300,000, which breach or violation permits the other party thereto to declare a
default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist
any other circumstance or event that would, with or without the passage of time
or the giving of notice, result in a default or event of default under any
agreement binding the Company or any Subsidiary, which default or event of
default would or is likely to have a material adverse effect on the business,
assets, operations (including results thereof), liabilities, properties,
condition (including financial condition) or prospects of the Company or any of
its Subsidiaries, individually or in the aggregate;

    
      
         

      

      
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    (xiv)       other
than as specifically set forth in another clause of this Section 4(a), the Company or any
Subsidiary breaches any representation, warranty, covenant or other term or
condition of any Transaction Document (including, without limitation, the
Security Documents and the Guaranties), except, in the case of a breach of a
covenant or other term or condition that is curable, only if such breach remains
uncured for a period of five (5) Business Days following notice from the
Holder;

     

    (xv)        any
breach or failure in any respect by the Company or any Subsidiary to comply with
any provision of either of Sections 8 or 14 of this Note;

     

    (xvi)       a
false or inaccurate certification (including a false or inaccurate deemed
certification) by the Company that the Equity Conditions are satisfied, that
there has been no Equity Conditions Failure, Dollar Failure or Volume Failure,
that the Holder Pro Rata Portion of the Installment Volume Limitation will not
be exceeded or as to whether any Event of Default has occurred;

     

    (xvii)      any
Material Adverse Effect (as defined in the Securities Purchase Agreement)
occurs;

     

    (xviii)     any
provision of any Transaction Document (including, without limitation, the
Security Documents and the Guaranties) shall at any time for any reason (other
than pursuant to the express terms thereof) cease to be valid and binding on or
enforceable against the parties thereto, or the validity or enforceability
thereof shall be contested by any party thereto, or a proceeding shall be
commenced by the Company or any Subsidiary or any governmental authority having
jurisdiction over any of them, seeking to establish the invalidity or
unenforceability thereof, or the Company or any Subsidiary shall deny in writing
that it has any liability or obligation purported to be created under any
Transaction Document (including, without limitation, the Security Documents and
the Guaranties);

     

    (xix)        the
Security Documents shall for any reason fail or cease to create (1) a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on any of the Collateral (as defined in the Security
Agreements) (other than on the Colorado Collateral (as defined in the U.S.
Security Agreement)) or (2) a valid and perfected and, except to the extent
permitted by the terms hereof or thereof, third-priority lien on any of the
Colorado Collateral, in each case, in favor of each of the Secured Parties (as
defined in the Security Agreements); or

     

    (xx)         any
Event of Default (as defined in the Other Notes) occurs with respect to any
Other Notes.

    
      
         

      

      
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    (b)           Redemption Right.
Promptly upon the occurrence of an Event of Default with respect to this Note or
any Other Note, but in no event later than one (1) Business Day after the
earlier to occur of (i) knowledge thereof by any Senior Officer and (ii) the
date on which any Senior Officer should have had knowledge thereof, the Company
shall deliver written notice thereof via facsimile and overnight courier (with
next day delivery specified) (an “Event of Default Notice”) to
the Holder. At any time after the earlier of the Holder’s receipt of an Event of
Default Notice and the Holder becoming aware of an Event of Default, the Holder
may require the Company to redeem (regardless of whether such Event of Default
has been cured) all or any portion of this Note by delivering written notice
thereof (the “Event of Default
Redemption Notice”) to the Company, which Event of Default Redemption
Notice shall indicate the portion of this Note the Holder is electing to redeem.
Each portion of this Note subject to redemption by the Company pursuant to this
Section 4(b) shall be redeemed by the Company at a price equal to the greater of
(i) the product of (A) the Conversion Amount to be redeemed multiplied by (B)
the Redemption Premium and (ii) the product of (X) the Conversion Rate with
respect to the Conversion Amount in effect at such time as the Holder delivers
an Event of Default Redemption Notice multiplied by (Y) the product of (1) the
Equity Value Redemption Premium multiplied by (2) the greatest of (I) the
Closing Sale Price of the Common Stock on the date immediately preceding such
Event of Default, (II) the Closing Sale Price of the Common Stock on the date
immediately after such Event of Default and (III) the Closing Sale Price of the
Common Stock on the date the Holder delivers an Event of Default Redemption
Notice with respect to such Event of Default (the “Event of Default Redemption Price”).
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 12. To the extent redemptions required by this Section
4(b) are deemed or determined by a court of competent jurisdiction to be
prepayments of this Note by the Company, such redemptions shall be deemed to be
voluntary prepayments. Notwithstanding anything to the contrary in this Section
4, but subject to Section 3(d), until the Event of Default Redemption Price
(together with any Late Charges thereon) is paid in full, the Conversion Amount
submitted for redemption under this Section 4(b) (together with any Late Charges
thereon) may be converted, in whole or in part, by the Holder into Common Stock
pursuant to Section 3. In the event of a partial redemption of this Note
pursuant hereto, the Principal amount redeemed shall be deducted from the
Installment Amount(s) relating to the applicable Installment Date(s) as set
forth in the Event of Default Redemption Notice. In the event of the Company’s
redemption of any portion of this Note under this Section 4(b), the Holder’s
damages would be uncertain and difficult to estimate because of the parties’
inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any redemption premium due under this Section 4(b) is intended by
the parties to be, and shall be deemed, a reasonable estimate of the Holder’s
actual loss of its investment opportunity and not as a penalty.

     

    
      
        
        

      

      
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    5.           RIGHTS UPON FUNDAMENTAL
TRANSACTION.

    (a)           Assumption. The
Company shall not enter into or be party to a Fundamental Transaction unless
(i) the Successor Entity assumes in writing all of the obligations of the
Company under this Note and the other Transaction Documents in accordance with
the provisions of this Section 5(a) pursuant to written agreements in form and
substance satisfactory to the Holder and approved by the Holder prior to such
Fundamental Transaction, including agreements to deliver to each holder of Notes
in exchange for such Notes a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to the Notes,
including, without limitation, having a principal amount and interest rate equal
to the principal amounts then outstanding and the interest rates of the Notes
held by such holder, having similar conversion rights as the Notes and having
similar ranking to the Notes, and satisfactory to the Holder and (ii) the
Successor Entity (including its Parent Entity) is a publicly traded corporation
whose common stock is quoted on or listed for trading on an Eligible Market.
Upon the occurrence of any Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Note and the other Transaction
Documents referring to the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Note and the other Transaction
Documents with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of a Fundamental Transaction, the Successor
Entity shall deliver to the Holder confirmation that there shall be issued upon
conversion or redemption of this Note at any time after the consummation of such
Fundamental Transaction, in lieu of the shares of the Company’s Common Stock (or
other securities, cash, assets or other property (except such items still
issuable under Sections 6 and 16, which shall continue to be receivable
thereafter) issuable upon the conversion or redemption of the Notes prior to
such Fundamental Transaction, such shares of the publicly traded common stock
(or their equivalent) of the Successor Entity (including its Parent Entity)
which the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Note been converted immediately prior to such
Fundamental Transaction (without regard to any limitations on the conversion of
this Note), as adjusted in accordance with the provisions of this Note. The
provisions of this Section 5 shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
on the conversion of this Note.

    
      
         

      

      
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    (b)           Redemption Right. No
sooner than twenty (20) Trading Days nor later than ten (10) Trading Days prior
to the consummation of a Fundamental Transaction, but not prior to the public
announcement of such Fundamental Transaction, the Company shall deliver written
notice thereof via facsimile and overnight courier to the Holder (a “Fundamental Transaction Notice”). At any time during
the period beginning after the Holder’s receipt of a Fundamental Transaction
Notice and ending on the later of twenty (20) Trading Days after (A)
consummation of such Fundamental Transaction or (B) the date of receipt of such
Fundamental Transaction Notice, the Holder may require the Company to redeem all
or any portion of this Note by delivering written notice thereof (“Fundamental Transaction Redemption
Notice”) to the Company, which Fundamental Transaction Redemption Notice
shall indicate the Conversion Amount the Holder is electing to
redeem.  The portion of this Note subject to redemption pursuant to
this Section 5 shall be redeemed by the Company in cash at a price equal to the
greater of (i) the product of (w) the Fundamental Transaction Redemption Premium
multiplied by (x) the Conversion Amount being redeemed and (ii) the product of
(y) the Equity Value Redemption Premium multiplied by (z) the product of (1) the
Conversion Amount being redeemed multiplied by (2) the quotient of (A) the
aggregate cash consideration and the aggregate cash value of any non-cash
consideration per share of Common Stock to be paid to the holders of the shares
of Common Stock upon consummation of such Fundamental Transaction (any such
non-cash consideration constituting publicly-traded securities shall be valued
at the highest of the Closing Sale Price of such securities as of the Trading
Day immediately prior to the consummation of such Fundamental Transaction, the
Closing Sale Price of such securities on the Trading Day immediately following
the public announcement of such proposed Fundamental Transaction and the Closing
Sale Price of such securities on the Trading Day immediately prior to the public
announcement of such proposed Fundamental Transaction) divided by (B) the
Conversion Price then in effect (the “Fundamental Transaction Redemption
Price”). Redemptions required by this Section 5 shall be made in
accordance with the provisions of Section 12 and shall have priority to payments
to stockholders in connection with such Fundamental Transaction. To the extent
redemptions required by this Section 5(b) are deemed or determined by a court of
competent jurisdiction to be prepayments of this Note by the Company, such
redemptions shall be deemed to be voluntary prepayments. Notwithstanding
anything to the contrary in this Section 5, but subject to Section 3(d), until
the Fundamental Transaction Redemption Price (together with any Late Charges
thereon) is paid in full, the Conversion Amount submitted for redemption under
this Section 5(b) (together with any Late Charges thereon) may be converted, in
whole or in part, by the Holder into Common Stock pursuant to Section 3. In the
event of a partial redemption of this Note pursuant hereto, the Principal amount
redeemed shall be deducted from the Installment Amount(s) relating to the
applicable Installment Date(s) as set forth in the Fundamental Transaction
Redemption Notice. In the event of the Company’s redemption of any portion of
this Note under this Section 5(b), the Holder’s damages would be uncertain and
difficult to estimate because of the parties’ inability to predict future
interest rates and the uncertainty of the availability of a suitable substitute
investment opportunity for the Holder. Accordingly, any redemption premium due
under this Section 5(b) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder’s actual loss of its investment opportunity
and not as a penalty.

     

    6.           RIGHTS UPON ISSUANCE OF
PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

     

    (a)           Purchase Rights. In
addition to any adjustments pursuant to Section 7 below, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the “Purchase Rights”), then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
the Holder had held the number of shares of Common Stock acquirable upon
complete conversion of this Note (without taking into account any limitations or
restrictions on the convertibility of this Note) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights (provided, however, to the extent that the Holder’s right to participate
in any such Purchase Right would result in the Holder exceeding the Maximum
Percentage, then the Holder shall not be entitled to participate in such
Purchase Right to such extent (or beneficial ownership of such shares of Common
Stock as a result of such Purchase Right to such extent) and such Purchase Right
to such extent shall be held in abeyance for the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding the Maximum
Percentage).

    
      
         

      

      
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    (b)           Other Corporate
Events. In addition to and not in substitution for any other rights
hereunder, prior to the consummation of any Fundamental Transaction pursuant to
which holders of shares of Common Stock are entitled to receive securities or
other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company
shall make appropriate provision to insure that the Holder will thereafter have
the right to receive upon a conversion of this Note (i) in addition to the
shares of Common Stock receivable upon such conversion, such securities or other
assets to which the Holder would have been entitled with respect to such shares
of Common Stock had such shares of Common Stock been held by the Holder upon the
consummation of such Corporate Event (without taking into account any
limitations or restrictions on the convertibility of this Note) or (ii) in lieu
of the shares of Common Stock otherwise receivable upon such conversion, such
securities or other assets received by the holders of shares of Common Stock in
connection with the consummation of such Corporate Event in such amounts as the
Holder would have been entitled to receive had this Note initially been issued
with conversion rights for the form of such consideration (as opposed to shares
of Common Stock) at a conversion rate for such consideration commensurate with
the Conversion Rate. The provisions of this Section 6 shall apply similarly and
equally to successive Corporate Events and shall be applied without regard to
any limitations on the conversion or redemption of this Note.

     

    7.           RIGHTS UPON ISSUANCE OF
OTHER SECURITIES.

     

    (a)           Adjustment of Conversion
Price upon Issuance of Common Stock.  If and whenever on or
after the Subscription Date the Company issues or sells, or in accordance with
this Section 7(a) is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding any Excluded Securities (as
defined in the Securities Purchase Agreement) issued or sold or deemed to have
been issued or sold) for a consideration per share (the “New Issuance Price”) less than
a price equal to the Conversion Price in effect immediately prior to such issue
or sale or deemed issuance or sale (such Conversion Price then in effect is
referred to herein as the “Applicable Price”) (the
foregoing a “Dilutive
Issuance”), then, immediately after such Dilutive Issuance, the
Conversion Price then in effect shall be reduced to an amount equal to the New
Issuance Price. For purposes of determining the adjusted Conversion Price under
this Section 7(a), the following shall be applicable:

    
      
         

      

      
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    (i)           Issuance of
Options.  If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 7(a)(i), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock upon the granting or sale of the Option, upon exercise
of the Option and upon conversion, exercise or exchange of any Convertible
Security issuable upon exercise of such Option. Except as contemplated below, no
further adjustment of the Conversion Price shall be made upon the actual
issuance of such share of Common Stock or of such Convertible Securities upon
the exercise of such Options or upon the actual issuance of such share of Common
Stock upon conversion, exercise or exchange of such Convertible
Securities.

     

    (ii)           Issuance of Convertible
Securities.  If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such Convertible Securities for such price per
share.  For the purposes of this Section 7(a)(ii), the “lowest price
per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible Security. Except as
contemplated below, no further adjustment of the Conversion Price shall be made
upon the actual issuance of such share of Common Stock upon conversion, exercise
or exchange of such Convertible Securities, and if any such issue or sale of
such Convertible Securities is made upon exercise of any Options for which
adjustment of the Conversion Price has been or is to be made pursuant to other
provisions of this Section 7(a), except as contemplated below, no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.

     

    (iii)           Change in Option Price or
Rate of Conversion. If the purchase or exercise price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Conversion Price in effect at the time of such increase or decrease shall be
adjusted to the Conversion Price which would have been in effect at such time
had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration or increased or decreased
conversion rate (as the case may be) at the time initially granted, issued or
sold. For purposes of this Section 7(a)(iii), if the terms of any Option or
Convertible Security that was outstanding as of the Subscription Date are
increased or decreased in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 7(a) shall be made if such adjustment would
result in an increase of the Conversion Price then in effect.

    
      
         

      

      
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    (iv)           Calculation of Consideration
Received. In case any Option is issued in connection with the issue or
sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been issued for a
consideration of $0.01.  If any shares of Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be deemed to be the net
amount received by the Company therefor. If any shares of Common Stock, Options
or Convertible Securities are issued or sold for a consideration other than
cash, the amount of such consideration received by the Company will be the fair
value of such consideration, except where such consideration consists of
publicly traded securities, in which case the amount of consideration received
by the Company for such securities will be the average VWAP of such security for
the five (5) Trading Day period immediately preceding the date of receipt. If
any shares of Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such shares of Common Stock,
Options or Convertible Securities (as the case may be). The fair value of any
consideration other than cash or publicly traded securities will be determined
jointly by the Company and the Holder. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation
Event”), the fair value of such consideration will be determined within
five (5) Trading Days after the tenth (10th) day
following such Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Holder. The determination of such appraiser
shall be final and binding upon all parties absent manifest error and the fees
and expenses of such appraiser shall be borne by the Company.

     

    (v)           Record Date. If the
Company takes a record of the holders of shares of Common Stock for the purpose
of entitling them (A) to receive a dividend or other distribution payable in
Common Stock, Options or in Convertible Securities or (B) to subscribe for or
purchase shares of Common Stock, Options or Convertible Securities, then such
record date will be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase (as the case may be).

    
      
         

      

      
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    (b)           Adjustment of Conversion
Price upon Subdivision or Combination of Common Stock.  If the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time on or after the Subscription
Date combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased. Any adjustment pursuant to this Section 7(b)
shall become effective immediately after the effective date of such subdivision
or combination. If any event requiring an adjustment under this Section 7(b)
occurs during the period that a Conversion Price is calculated hereunder, then
the calculation of such Conversion Price shall be adjusted appropriately to
reflect such event.

     

    (c)           Other Events. In the
event that the Company (or any direct or indirect Subsidiary thereof) shall
take any action to which the provisions hereof are not strictly applicable, or,
if applicable, would not operate to protect the Holder from dilution or if any
event occurs of the type contemplated by the provisions of this Section 7 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s board of directors shall in good faith
determine and implement an appropriate adjustment in the Conversion Price so as
to protect the rights of the Holder, provided that no such adjustment pursuant
to this Section 7(c) will increase the Conversion Price as otherwise determined
pursuant to this Section 7, provided further that if the Holder does not accept
such adjustments as appropriately protecting its interests hereunder against
such dilution, then the Company’s board of directors and the Holder shall agree,
in good faith, upon an independent investment bank of nationally recognized
standing to make such appropriate adjustments, whose determination shall be
final and binding and whose fees and expenses shall be borne by the
Company.

     

    
      
        
        

      

      
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    8.           COMPANY INSTALLMENT
CONVERSION OR REDEMPTION.

    (a)           General. On each
applicable Installment Date, the Company shall pay to the Holder of this Note
the applicable Installment Amount due on such date by converting such
Installment Amount in accordance with this Section 8 (a “Company Conversion”);
provided, however, the Company may, at its option as described below, pay all or
any part of such Installment Amount by redeeming such Installment Amount in cash
(a “Company Redemption”)
or by any combination of a Company Conversion and a Company Redemption so long
as the entire amount of such Installment Amount due shall be converted and/or
redeemed by the Company on the applicable Installment Date, subject to the
provisions of this Section 8, provided further that the Company shall not be
entitled to elect a Company Conversion with respect to any portion of such
Installment Amount and shall be required to elect and to pay the entire amount
of such Installment Amount in cash pursuant to a Company Redemption if on the
applicable Installment Notice Due Date or on the applicable Installment Date (as
the case may be) there is an Equity Conditions Failure, a Dollar Failure or a
Volume Failure or such Company Conversion would result in the Holder Pro Rata
Amount of the applicable Installment Volume Limitation being exceeded. On or
prior to the date which is the twenty-fifth (25th)
Trading Day prior to each Installment Date (each, an “Installment Notice Due Date”),
the Company shall deliver written notice (each, a “Company Installment Notice”
and the date all of the holders receive such notice is referred to as to the
“Company Installment Notice
Date”), to each holder of Notes and such Company Installment Notice shall
(i) either (A) confirm that the applicable Installment Amount of such holder’s
Note shall be converted in whole pursuant to a Company Conversion or (B) (1)
state that the Company elects to redeem, or is required to elect and redeem in
accordance with the provisions of the Notes, in whole or in part, the applicable
Installment Amount pursuant to a Company Redemption and (2) specify the portion
of the applicable Installment Amount which the Company elects, or is required to
elect and redeem, pursuant to a Company Redemption (such amount to be redeemed
in cash, the “Company
Redemption Amount”) and the portion of the applicable Installment Amount,
if any, that the Company elects, and is permitted, to convert pursuant to a
Company Conversion (such amount of the applicable Installment Amount so elected
to be so converted pursuant to this Section 8 is referred to herein as the
“Company Conversion
Amount”), which amounts when added together, must equal the entire
applicable Installment Amount and (ii) if the applicable Installment Amount is
to be paid, in whole or in part, pursuant to a Company Conversion, certify that
there is not then an Equity Conditions Failure, a Dollar Failure or a Volume
Failure and that the Holder Pro Rata Amount of the applicable Installment Volume
Limitation would not be exceeded, in each case, as of the date of the Company
Installment Notice. Each Company Installment Notice shall be irrevocable and may
not be revoked by the Company. If the Company does not timely deliver a Company
Installment Notice in accordance with this Section 8, then the Company shall be
deemed to have delivered an irrevocable Company Installment Notice confirming a
Company Conversion and shall be deemed to have certified that there is not then
an Equity Conditions Failure, a Dollar Failure or a Volume Failure and that the
Holder Pro Rata Amount of the applicable Installment Volume Limitation would not
be exceeded, in each case, in connection with such Company Conversion. No later
than two (2) Trading Days after delivery of the applicable Company Installment
Notice setting forth a Company Conversion Amount, the Company shall deliver to
the Holder’s account with DTC such number of shares of Common Stock (the “Pre-Installment Conversion
Shares”) equal to the quotient of (x) such Company Conversion Amount
divided by (y) the Pre-Installment Conversion Price, and as to which the Holder
shall be the owner thereof as of such time of delivery or deemed delivery (as
the case may be) of such Company Installment Notice. Except as expressly
provided in this Section 8(a), the Company shall convert and/or redeem the
applicable Installment Amount of this Note pursuant to this Section 8 and the
corresponding Installment Amounts of the Other Notes pursuant to the
corresponding provisions of the Other Notes in the same ratio of the applicable
Installment Amount being converted and/or redeemed hereunder. The applicable
Company Conversion Amount (whether set forth in the applicable Company
Installment Notice or by operation of this Section 8) shall be converted in
accordance with Section 8(b) and the applicable Company Redemption Amount shall
be redeemed in accordance with Section 8(c).

    
      
         

      

      
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    (b)           Mechanics of Company
Conversion. Subject to Section 3(d), if the Company delivers a Company
Installment Notice and elects, or is deemed to have delivered a Company
Installment Notice and deemed to have elected, in whole or in part, a Company
Conversion in accordance with Section 8(a), then the remainder of this Section
8(b) shall apply. The applicable Company Conversion Amount, if any, which
remains outstanding as of the applicable Installment Date shall be converted as
of the applicable Installment Date by converting on such Installment Date such
Company Conversion Amount at the Company Conversion Price and the Company shall,
on the applicable Installment Date, deliver to the Holder’s account with DTC
such shares of Common Stock issued upon such conversion (subject to the
reduction contemplated by the immediately following sentence and, if applicable,
the last sentence of this Section 8(b)), provided that the Equity Conditions are
then satisfied (or waived in writing by the Holder) on such Installment Date and
a Company Conversion is not otherwise prohibited under any other provision of
this Note (including, without limitation, as a result of the occurrence of a
Dollar Failure or a Volume Failure or as a result of the Holder Pro Rata Amount
of the Installment Volume Limitation being exceeded (each determined as of the
applicable Installment Date)). The number of shares of Common Stock to be
delivered upon such Company Conversion shall be reduced by the number of any
Pre-Installment Conversion Shares delivered in connection with such Installment
Date. If an Event of Default occurs during any applicable Company Conversion
Measuring Period, then either (i) the Holder shall return any Pre-Installment
Conversion Shares delivered in connection with the applicable Installment Date
or (ii) the Conversion Amount used to calculate the Event of Default Redemption
Price shall be reduced by the product of (x) the Company Conversion Amount
applicable to such Installment Date multiplied by (y) the Conversion Share Ratio
(as defined below). If any of the Equity Conditions are not satisfied (or waived
in writing by the Holder) on such Installment Date or a Company Conversion is
not otherwise permitted under any other provision of this Note (including,
without limitation, as a result of the occurrence of a Dollar Failure or a
Volume Failure or as a result of the Holder Pro Rata Amount of the Installment
Volume Limitation being exceeded (each determined as of the applicable
Installment Date)), then, at the option of the Holder designated in writing to
the Company, the Holder may require the Company to do any one or more of the
following: (i) the Company shall redeem all or any part designated by the Holder
of the unconverted Company Conversion Amount (such designated amount is referred
to as the “Designated
Redemption Amount”) and the Company shall pay to the Holder within three
(3) days of such Installment Date, by wire transfer of immediately available
funds, an amount in cash equal to 135% of such Designated Redemption Amount,
and/or (ii) the Company Conversion shall be null and void with respect to all or
any part designated by the Holder of the unconverted Company Conversion Amount
and the Holder shall be entitled to all the rights of a holder of this Note with
respect to such designated part of the Company Conversion Amount; provided,
however, the Conversion Price for such designated part of such unconverted
Company Conversion Amount shall thereafter be adjusted to equal the lesser of
(A) the Company Conversion Price as in effect on the date on which the Holder
voided the Company Conversion and (B) the Company Conversion Price that would be
in effect on the date on which the Holder delivers a Conversion Notice relating
thereto as if such date was an Installment Date. In addition, if any of the
Equity Conditions are not satisfied (or waived in writing by the Holder) on such
Installment Date or a Company Conversion is not otherwise permitted under any
other provision of this Note (including, without limitation, as a result of the
occurrence of a Dollar Failure or a Volume Failure or as a result of the Holder
Pro Rata Amount of the Installment Volume Limitation being exceeded (each
determined as of the applicable Installment Date)), then, at the Holder’s
option, either (I) the Holder shall return any Pre-Installment Conversion Shares
delivered in connection with the applicable Installment Date or (II) the
applicable Designated Redemption Amount shall be reduced by the product of (X)
the Company Conversion Amount applicable to such Installment Date multiplied by
(Y) the Conversion Share Ratio. If the Company fails to redeem any Designated
Redemption Amount by the third (3rd) day
following the applicable Installment Date by payment of such amount on the
applicable Installment Date, then the Holder shall have the rights set forth in
Section 12(a) as if the Company failed to pay the applicable Company Installment
Redemption Price (as defined below) and all other rights under this Note
(including, without limitation, such failure constituting an Event of Default
described in Section 4(a)(xv)). Notwithstanding anything to the contrary in this
Section 8(b), but subject to 3(d), until the Company delivers Common Stock
representing the Company Conversion Amount to the Holder, the Company Conversion
Amount may be converted by the Holder into Common Stock pursuant to Section 3.
In the event that the Holder elects to convert the Company Conversion Amount
prior to the applicable Installment Date as set forth in the immediately
preceding sentence, the Company Conversion Amount so converted shall be deducted
from the Installment Amount(s) relating to the applicable Installment Date(s) as
set forth in the applicable Conversion Notice. If, with respect to an
Installment Date, the number of Pre-Installment Conversion Shares delivered to
the Holder exceeds the number of Post-Installment Conversion Shares with respect
to such Installment Date, then the number of shares of Common Stock equal to
such excess shall constitute a credit against the number of shares of Common
Stock to be issued to such Holder pursuant to Sections 3 and 8(a) hereof and
shall reduce the number of shares of Common Stock required to be actually issued
by the Company to the Holder under such sections on a share-for-share basis
until such time as the number of shares that would have been issued by the
Company to such Holder (not taking account of such credit) equals the amount of
such excess.

    
      
         

      

      
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    (c)           Mechanics of Company
Redemption. If the Company elects, or is required to elect, a Company
Redemption, in whole or in part, in accordance with Section 8(a), then the
Company Redemption Amount, if any, which is to be paid to the Holder on the
applicable Installment Date shall be redeemed by the Company on such Installment
Date, and the Company shall pay to the Holder on such Installment Date, by wire
transfer of immediately available funds, in an amount in cash (the “Company Installment Redemption
Price”) equal to 110% of the applicable Company Redemption Amount. If the
Company fails to redeem the applicable Company Redemption Amount on the
applicable Installment Date by payment of the Company Installment Redemption
Price on such date, then, at the option of the Holder designated in writing to
the Company (any such designation shall be a “Conversion Notice” for purposes of
this Note), the Holder may require the Company to convert all or any part of the
Company Redemption Amount at the Company Conversion Price (determined as of the
date of such designation). Conversions required by this Section 8(c) shall be
made in accordance with the provisions of Section 3(c). Notwithstanding anything
to the contrary in this Section 8(c), but subject to Section 3(d), until the
Company Installment Redemption Price (together with any Late Charges thereon) is
paid in full, the Company Redemption Amount (together with any Late Charges
thereon) may be converted, in whole or in part, by the Holder into Common Stock
pursuant to Section 3. In the event the Holder elects to convert all or any
portion of the Company Redemption Amount prior to the applicable Installment
Date as set forth in the immediately preceding sentence, the Company Redemption
Amount so converted shall be deducted from the Installment Amounts relating to
the applicable Installment Date(s) as set forth in the applicable Conversion
Notice. With respect to each Company Redemption, (I) the portion of the
applicable Company Installment Redemption Price that is equal to applicable
Principal Reduction Amount is the only amount that shall applied against the
Principal amount due under this Note, (II) the portion of the applicable Company
Installment Redemption Price that is equal to Interest accrued through the
applicable Installment Date (but only if such Installment Date is also an
Interest Date) plus Late Charges accrued through the applicable Installment Date
shall be applied against such accrued Interest and Late Charges (as the case may
be) and (III) the portion of the applicable Company Installment Redemption Price
remaining after application of clauses (I) and (II) above shall be applied as a
redemption premium to the Holder. In the event of the Company’s redemption of
any portion of this Note under this Section 8(c), the Holder’s damages would be
uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder. Accordingly, any redemption
premium due under this Section 8(c) is intended by the parties to be, and shall
be deemed, a reasonable estimate of the Holder’s actual loss of its investment
opportunity and not as a penalty.

     

    9.           REDEMPTION AT OPTION OF THE
COMPANY.

     

    (a)           Right to Cause
Redemption. If at any time after the Effective Date (as defined in the
Registration Rights Agreement) of the initial Registration Statement required to
be filed by the Company pursuant to Section 2(a) of the Registration Rights
Agreement (the “Company
Optional Redemption Eligibility Date”), (i) the Common Stock trades on an
Eligible Market for no less than $2.42 per share (as adjusted for stock splits,
combinations and the like occurring after the Issuance Date) (the “Trigger Price”) for a period
of twenty (20) consecutive Trading Days commencing after the Company Optional
Redemption Eligibility Date, (ii) the average daily dollar trading volume (as
reported on Bloomberg) of the Common Stock on the applicable Eligible Market
over the twenty (20) consecutive Trading Day period ending on the Trading Day
immediately preceding the Company Optional Redemption Notice Date (as defined
below) exceeds $400,000 per day and (iii) no Equity Conditions Failure has
occurred, the Company shall have the right to redeem all, but not less than all,
of the then-remaining amounts outstanding under this Note (all of such
then-remaining amounts are referred to herein as the “Company Optional Redemption
Amount”) on the Company Optional Redemption Date (as defined below) (the
“Company Optional
Redemption”).

    
      
         

      

      
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    (b)           Mechanics of Redemption at
Option of the Company. The Company may exercise its right to require
redemption under this Section 9 by delivering, no later than ten (10) days
following the date of satisfaction of all the conditions set forth in Section
9(a) above, a written notice thereof by facsimile and overnight courier to all,
but not less than all, of the holders of Notes (the “Company Optional Redemption
Notice” and the date all of the holders of Notes received such notice is
referred to as the “Company
Optional Redemption Notice Date”). The Company Optional Redemption
Notice shall (x) state the date on which the Company Optional Redemption shall
occur (the “Company Optional
Redemption Date”), which date shall not be less than twenty (20) Trading
Days nor more than sixty (60) Trading Days following the Company Optional
Redemption Notice Date, (y) certify that there has been no Equity Conditions
Failure and (z) state the Company Optional Redemption Amount. The Company
Optional Redemption Notice shall be irrevocable.

     

    (c)           Payment of Optional
Redemption Price. The redemption price shall be determined as of the
Company Optional Redemption Date and shall be an amount equal to 110% of all of
the remaining amounts outstanding under this Note as of the Company Optional
Redemption Date (the “Company
Optional Redemption Price”). The Company Optional Redemption Price shall
be payable in cash to the Holder on the Company Optional Redemption Date. To the
extent redemptions required by this Section 9 are deemed or determined by a
court of competent jurisdiction to be prepayments of this Note by the Company,
such redemptions shall be deemed to be voluntary prepayments. Notwithstanding
anything to the contrary in this Section 9, but subject to Section 3(d) and the
last sentence of this Section 9(c), until the Company Optional Redemption Price
(together with any Late Charges thereon) is paid in full, the Company Optional
Redemption Amount subject to redemption under this Section 9 (together with any
Late Charges thereon) may be converted, in whole or in part, by the Holder into
shares of Common Stock pursuant to Section 3, and all such amounts so converted
shall reduce the Company Optional Redemption Amount required to be redeemed on
the Company Optional Redemption Date. In the event of the Company’s redemption
of any portion of this Note under this Section 9, the Holder’s damages would be
uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder. Accordingly, any redemption
premium due under this Section 9 is intended by the parties to be, and shall be
deemed, a reasonable estimate of the Holder’s actual loss of its investment
opportunity and not as a penalty. In the event that the Company does not pay to
the Holder the Company Optional Redemption Price on the Company Optional
Redemption Date, then, in addition to all other rights and remedies available to
the Holder, the Holder shall have the right to void the redemption pursuant to
Section 12(a) with the term “Company Optional Redemption Price” being
substituted for “Redemption Price” and “Company Optional Redemption Notice”
being substituted for “Redemption Notice,” shall have all rights of the Holder
under Section 12(a) as if they were part of this Section 9 and applied solely to
this Section 9 and the Company shall pay to the Holder Late Charges in respect
of the Company Optional Redemption Price until paid in full. Notwithstanding
anything contained in this Section 9 to the contrary, if (i) the VWAP of the
Common Stock on any Trading Day during the period commencing on the Company
Optional Redemption Notice Date and ending on the date on which the Company
Optional Redemption Price is paid in full in cash to the Holder is less than the
Trigger Price; (ii) the average daily dollar trading volume (as reported on
Bloomberg) of the Common Stock on the applicable Eligible Market over the period
commencing on the Company Optional Redemption Notice Date and ending on the
Trading Day immediately preceding the date on which the Company Optional
Redemption Price is paid in full in cash to the Holder is less than $8,000,000;
or (iii) an Equity Conditions Failure occurs on any day during the period
commencing on the Company Optional Redemption Notice Date and ending on the date
on which the Company Optional Redemption Price is paid in full in cash to the
Holder which failure has not been waived by the Holder, then the Company
Optional Redemption Notice delivered to the Holder shall be null and void ab
initio and such Company Optional Redemption shall not occur.

    
      
         

      

      
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     (d)           Pro Rata Redemption
Requirement. If the Company elects to cause a Company Optional Redemption
pursuant to this Section 12, then it must simultaneously take the same action
with respect to all of the Other Notes.

     

    10.           NONCIRCUMVENTION. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Incorporation (as defined in the Securities Purchase Agreement),
Bylaws (as defined in the Securities Purchase Agreement) or through any
reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note. Without limiting the generality of the
foregoing, the Company (i) shall not increase the par value of any shares
of Common Stock receivable upon conversion of this Note above the Conversion
Price then in effect, (ii) shall take all such actions as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the conversion of this Note,
and (iii) shall, so long as any of the Notes are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Notes, the maximum number of shares of Common Stock as shall from time to
time be necessary to effect the conversion of the Notes then outstanding
(without regard to any limitations on conversion).

     

    11.           RESERVATION OF AUTHORIZED
SHARES.

     

      (a)           Reservation. The
Company shall initially reserve out of its authorized and unissued Common Stock
a number of shares of Common Stock for each of the Notes equal to 133% of the
entire Conversion Rate with respect to the entire Conversion Amount of each such
Note as of the Issuance Date.  So long
as any of the Notes are outstanding, the Company shall take all action necessary
to reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes, 133% of the
number of shares of Common Stock as shall from time to time be necessary to
effect the conversion of all of the Notes then outstanding, provided that at no
time shall the number of shares of Common Stock so reserved be less than the
number of shares required to be reserved by the previous sentence (without
regard to any limitations on conversions) (the “Required Reserve
Amount”).  The initial number of shares of Common Stock
reserved for conversions of the Notes and each increase in the number of shares
so reserved shall be allocated pro rata among the holders of the Notes based on
the original principal amount of the Notes held by each holder on the Closing
Date or increase in the number of reserved shares (as the case may be) (the
“Authorized Share
Allocation”). In the event that a holder shall sell or otherwise transfer
any of such holder’s Notes, each transferee shall be allocated a pro rata
portion of such holder’s Authorized Share Allocation. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any Notes shall be
allocated to the remaining holders of Notes, pro rata based on the principal
amount of the Notes then held by such holders.

    
      
         

      

      
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    (b)           Insufficient Authorized
Shares. If, notwithstanding Section 11(a), and not in limitation thereof,
at any time while any of the Notes remain outstanding the Company does not have
a sufficient number of authorized and unreserved shares of Common Stock to
satisfy its obligation to reserve for issuance upon conversion of the Notes at
least a number of shares of Common Stock equal to the Required Reserve Amount
(an “Authorized Share
Failure”), then the Company shall immediately take all action necessary
to increase the Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for the
Notes then outstanding. Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an
Authorized Share Failure, but in no event later than sixty (60) days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the approval of an increase in the number of authorized
shares of Common Stock.  In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.

     

    12.          HOLDER’S
REDEMPTIONS.

     

    (a)           Mechanics. The
Company shall deliver the applicable Event of Default Redemption Price to the
Holder in cash within five (5) Business Days after the Company’s receipt of the
Holder’s Event of Default Redemption Notice. If the Holder has submitted a
Fundamental Transaction Redemption Notice in accordance with Section 5(b), the
Company shall deliver the applicable Fundamental Transaction Redemption Price to
the Holder in cash concurrently with the consummation of such Fundamental
Transaction if such notice is received prior to the consummation of such
Fundamental Transaction and within five (5) Business Days after the Company’s
receipt of such notice otherwise. The Company shall deliver the applicable
Company Installment Redemption Price to the Holder in cash on the applicable
Installment Date. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 19(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the applicable Redemption Price to the Holder
within the time period required, at any time thereafter and until the Company
pays such unpaid Redemption Price in full, the Holder shall have the option, in
lieu of redemption, to require the Company to promptly return to the Holder all
or any portion of this Note representing the Conversion Amount that was
submitted for redemption and for which the applicable Redemption Price (together
with any Late Charges thereon) has not been paid. Upon the Company’s receipt of
such notice, (x) the applicable Redemption Notice shall be null and void with
respect to such Conversion Amount, (y) the Company shall immediately return this
Note, or issue a new Note (in accordance with Section 19(d)), to the Holder, and
in each case the principal amount of this Note or such new Note (as the
case may be) shall be increased by an amount equal to the difference between (1)
the applicable Event of Default Redemption Price or Fundamental Transaction
Redemption Price (as the case may be) minus (2) the Conversion Amount submitted
for redemption and (z) the Conversion Price of this Note or such new Notes (as
the case may be) shall be adjusted with respect to each conversion effected
thereafter by the Holder to the lowest of (A) the Conversion Price as in effect
on the date on which the applicable Redemption Notice is voided, (B) 85% of the
lowest Closing Bid Price of the Common Stock during the period beginning on and
including the date on which the applicable Redemption Notice is delivered to the
Company and ending on and including the date on which the applicable Redemption
Notice is voided and (C) 85% of the VWAP for the five (5) Trading Day period
immediately preceding the Conversion Date of the applicable conversion. The
Holder’s delivery of a notice voiding a Redemption Notice and exercise of its
rights following such notice shall not affect the Company’s obligations to make
any payments of Late Charges which have accrued prior to the date of such notice
with respect to the Conversion Amount subject to such notice.

    
      
         

      

      
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    (b)           Redemption by Other
Holders. Upon the Company’s receipt of notice from any of the holders of
the Other Notes for redemption or repayment as a result of an event or
occurrence substantially similar to the events or occurrences described in
Section 4(b) or Section 5(b) (each, an “Other Redemption Notice”), the
Company shall immediately, but no later than one (1) Business Day of its receipt
thereof, forward to the Holder by facsimile a copy of such notice. If the
Company receives a Redemption Notice and one or more Other Redemption Notices,
during the eleven (11) Business Day period beginning on and including the date
which is five (5) Business Days prior to the Company’s receipt of the Holder’s
applicable Redemption Notice and ending on and including the date which is five
(5) Business Days after the Company’s receipt of the Holder’s applicable
Redemption Notice and the Company is unable to redeem all principal, interest
and other amounts designated in such Redemption Notice and such Other Redemption
Notices received during such eleven (11) Business Day period, then the Company
shall redeem a pro rata amount from each holder of the Notes (including the
Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received by
the Company during such eleven (11) Business Day period.

     

    13.          VOTING RIGHTS. The
Holder shall have no voting rights as the holder of this Note, except as
required by law (including, without limitation, Chapters 78 and 92A of the
Nevada Revised Statutes) and as expressly provided in this Note.

     

    14.          COVENANTS. Until all
of the Notes have been converted, redeemed or otherwise satisfied in accordance
with their terms:

     

    (a)           Rank. All payments
due under this Note (a) shall rank pari passu with all Other
Notes, (b) shall be senior to all other Indebtedness of the Company other than
Permitted Company Senior Indebtedness and (c) shall be senior to all other
Indebtedness of the Subsidiaries other than Permitted Subsidiary Senior
Indebtedness.

     

    
      
        
        

      

      
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    (b)           Incurrence of
Indebtedness. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, incur or guarantee, assume or
suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by
this Note and the Other Notes and (ii) Permitted Indebtedness.

     

    (c)           Existence of Liens.
The Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, allow or suffer to exist any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property
or assets (including accounts and contract rights) owned by the Company (other
than Permitted Company Liens) or any of its Subsidiaries (other than Permitted
Subsidiary Liens) (collectively, “Liens”).

     

    (d)           Restricted Payments.
The Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, redeem, defease, repurchase, repay or make any
payments in respect of, by the payment of cash or cash equivalents (in whole or
in part, whether by way of open market purchases, tender offers, private
transactions or otherwise), all or any portion of any Indebtedness (other than
Permitted Company Senior Indebtedness and Permitted Subsidiary Senior
Indebtedness), whether by way of payment in respect of principal of (or premium,
if any) or interest on, such Indebtedness if at the time such payment is due or
is otherwise made or, after giving effect to such payment, (i) an event
constituting an Event of Default has occurred and is continuing or (ii) an event
that with the passage of time and without being cured would constitute an Event
of Default has occurred and is continuing.

     

    (e)           Restriction on Redemption
and Cash Dividends. The Company shall not, and the Company shall cause
each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or
declare or pay any cash dividend or distribution on any of its capital stock
without the prior express written consent of the Holder.

     

    (f)           Restriction on Transfer of
Assets. The Company shall not, and the Company shall cause each of its
Subsidiaries to not, directly or indirectly, sell, lease, license, assign,
transfer, convey or otherwise dispose of any assets or rights of the Company or
any Subsidiary owned or hereafter acquired whether in a single transaction or a
series of related transactions, other than (i) sales, leases, licenses,
assignments, transfers, conveyances and other dispositions of such assets or
rights by the Company and its Subsidiaries that, in the aggregate, do not have a
fair market value in excess of $250,000 in any twelve (12) month period; (ii)
sales of inventory in the ordinary course of business; and (iii) sales of
obsolete or worn out equipment that, in the aggregate, do not have a fair market
value in excess of $250,000 in any twelve (12) month period. The Company shall
not, and the Company shall cause each of its Subsidiaries (other than Magnum
Recycling Canada, Inc.) to not, directly or indirectly, own or acquire any
assets located outside of the United States. The Company shall cause Magnum
Recycling Canada, Inc. to not, directly or indirectly, own or acquire any assets
located outside of the Province of Quebec, Canada.

     

    
      
        
        

      

      
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    (g)           Maturity of
Indebtedness. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, permit any Indebtedness of the
Company or any of the Subsidiaries to mature or accelerate prior to the Maturity
Date, other than Permitted Company Senior Indebtedness and Permitted Subsidiary
Senior Indebtedness.

     

    (h)           New Subsidiaries.
Simultaneously with the acquisition or formation of each New Subsidiary, the
Company shall cause such New Subsidiary to execute, and deliver to each holder
of Notes, all Security Documents (as defined in the Securities Purchase
Agreement) and Guaranties (as defined in the Securities Purchase Agreement) that
the Current Subsidiaries are required to execute in connection with the
transactions contemplated by the Securities Purchase Agreement.

     

    (i)           Change in Nature of
Business. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, engage in any material line of
business substantially different from those lines of business conducted by the
Company and each of its Subsidiaries on the Issuance Date or any business
substantially related or incidental thereto.  The Company shall not,
and the Company shall cause each of its Subsidiaries to not, directly or
indirectly, modify its or their corporate structure or purpose.

     

    (j)           Net Cash Balance
Test. The Company shall maintain a Net Cash Balance in excess of the
applicable Reserved Amount (the “Net Cash Balance Test”). If
the Company fails (a “Failure
Date”) to satisfy the Net Cash Balance Test as of any date, the Company
promptly shall provide to the Holder a certification, executed on behalf of the
Company by the Chief Financial Officer of the Company, as to the amount of the
Net Cash Balance as of the Failure Date, and immediately publicly disclose (on a
Current Report on Form 8-K or otherwise) such material non-public
information.

     

    15.          SECURITY. This Note
and the Other Notes are secured to the extent and in the manner set forth in the
Transaction Documents (including, without limitation, the Security Agreements,
the other Security Documents and the Guaranties).

     

    16.          PARTICIPATION. In
addition to any adjustments pursuant to Section 7, the Holder, as the holder of
this Note, shall be entitled to receive such dividends paid and distributions
made to the holders of Common Stock to the same extent as if the Holder had
converted this Note into Common Stock (without regard to any limitations on
conversion herein or elsewhere) and had held such shares of Common Stock on the
record date for such dividends and distributions. Payments under the preceding
sentence shall be made concurrently with the dividend or distribution to the
holders of Common Stock (provided, however, to the extent that the Holder’s
right to participate in any such dividend or distribution would result in the
Holder exceeding the Maximum Percentage, then the Holder shall not be entitled
to participate in such dividend or distribution to such extent (or the
beneficial ownership of any such shares of Common Stock as a result of such
dividend or distribution to such extent) and such dividend or distribution to
such extent shall be held in abeyance for the benefit of the Holder until such
time, if ever, as its right thereto would not result in the Holder exceeding the
Maximum Percentage).

     

    
      
        
        

      

      
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    17.          AMENDING THE TERMS OF THIS
NOTE. The prior written consent of the Holder shall be required for any
change or amendment to this Note. No consideration shall be offered or paid to
the Holder to amend or consent to a waiver or modification of any provision of
this Note unless the same consideration is also offered to all of the holders of
the Other Notes. The Holder shall be entitled, at its option, to the benefit of
any amendment to any of the Other Notes.

     

    18.          TRANSFER. This Note
and any shares of Common Stock issued upon conversion of this Note may be
offered, sold, assigned or transferred by the Holder without the consent of the
Company, subject only to the provisions of Section 2(g) of the Securities
Purchase Agreement, provided that the Holder shall pay for any reasonable and
customary costs associated with any offer, sale, assignment or transfer by the
Holder pursuant to this Section 18 and shall reimburse the Company for any such
costs that the Company incurs as a result of taking any actions expressly
requested by the Holder (other than any actions required to be taken by the
Company pursuant to the terms of the Transaction Documents) in any such offer,
sale, assignment or transfer.

     

    19.          REISSUANCE OF THIS
NOTE.

     

    (a)           Transfer. If this
Note is to be transferred, the Holder shall surrender this Note to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the
Holder a new Note (in accordance with Section 19(d)), registered as the Holder
may request, representing the outstanding Principal being transferred by the
Holder and, if less than the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 19(d)) to the Holder representing the
outstanding Principal not being transferred. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of the provisions
of Section 3(c)(iii) following conversion or redemption of any portion of this
Note, the outstanding Principal represented by this Note may be less than the
Principal stated on the face of this Note.

     

    (b)           Lost, Stolen or Mutilated
Note. Upon receipt by the Company of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Note (as to
which a written certification and the indemnification contemplated below shall
suffice as such evidence), and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary and
reasonable form and, in the case of mutilation, upon surrender and cancellation
of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance with Section 19(d)) representing the outstanding
Principal.

     

    (c)           Note Exchangeable for
Different Denominations. This Note is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Note or
Notes (in accordance with Section 19(d) and in principal amounts of at least
$100,000) representing in the aggregate the outstanding Principal of this Note,
and each such new Note will represent such portion of such outstanding Principal
as is designated by the Holder at the time of such surrender. Holder shall pay
for any reasonable and customary costs associated with any such exchange of this
Note and shall reimburse the Company for any such costs that the Company incurs
in connection with any such exchange.

     

    
      
        
        

      

      
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    (d)           Issuance of New
Notes. Whenever the Company is required to issue a new Note pursuant to
the terms of this Note, such new Note (i) shall be of like tenor with this Note,
(ii) shall represent, as indicated on the face of such new Note, the Principal
remaining outstanding (or in the case of a new Note being issued pursuant to
Section 19(a) or Section 19(c), the Principal designated by the Holder which,
when added to the principal represented by the other new Notes issued in
connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest and Late Charges on the Principal and Interest of this Note, from the
Issuance Date.

     

    20.          REMEDIES, CHARACTERIZATIONS,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided
in this Note shall be cumulative and in addition to all other remedies available
under this Note and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder’s right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this
Note.  The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required. The Company shall provide all information and documentation to the
Holder that is requested by the Holder to enable the Holder to confirm the
Company’s compliance with the terms and conditions of this Note (including,
without limitation, compliance with Section 7).

     

    21.          PAYMENT OF COLLECTION,
ENFORCEMENT AND OTHER COSTS.  If (a) this Note is placed in the
hands of an attorney for collection or enforcement or is collected or enforced
through any legal proceeding or the Holder otherwise takes action to collect
amounts due under this Note or to enforce the provisions of this Note or (b)
there occurs any bankruptcy, reorganization, receivership of the Company or
other proceedings affecting Company creditors’ rights and involving a claim
under this Note, then the Company shall pay the actual costs incurred by the
Holder for such collection, enforcement or action or in connection with such
bankruptcy, reorganization, receivership or other proceeding, including, without
limitation, reasonable attorneys’ fees and disbursements.

     

    
      
        
        

      

      
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    22.          CONSTRUCTION;
HEADINGS.  This Note shall be deemed to be jointly drafted by
the Company and the Holder and shall not be construed against any Person as the
drafter hereof. The headings of this Note are for convenience of reference and
shall not form part of, or affect the interpretation of, this Note. Terms used
in this Note but defined in the other Transaction Documents shall have the
meanings ascribed to such terms on the Closing Date in such other Transaction
Documents unless otherwise consented to in writing by the Holder.

     

    23.          FAILURE OR INDULGENCE NOT
WAIVER. No failure or delay on the part of the Holder in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.

     

    24.          DISPUTE RESOLUTION.
In the case of a dispute as to the determination of the Conversion Price, the
Closing Bid Price, the Closing Sale Price or fair market value (as the case may
be) or the arithmetic calculation of the Conversion Rate or the applicable
Redemption Price (as the case may be), the Company or the Holder (as the case
may be) shall submit the disputed determinations or arithmetic calculations (as
the case may be) via facsimile (i) within two (2) Business Days after receipt of
the applicable notice giving rise to such dispute to the Company or the Holder
(as the case may be) or (ii) if no notice gave rise to such dispute, at any time
after the Holder learned of the circumstances giving rise to such dispute
(including, without limitation, as to whether any issuance or sale or deemed
issuance or sale was an issuance or sale or deemed issuance or sale of Excluded
Securities). If the Holder and the Company are unable to agree upon such
determination or calculation within two (2) Business Days of such disputed
determination or arithmetic calculation (as the case may be) being submitted to
the Company or the Holder (as the case may be), then the Company shall, within
two (2) Business Days, submit via facsimile (a) the disputed determination of
the Conversion Price, the Closing Bid Price, the Closing Sale Price or fair
market value (as the case may be) to an independent, reputable investment bank
selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Conversion Rate or any Redemption Price (as the
case may be) to the Company’s independent, outside accountant. The Company shall
cause at its expense the investment bank or the accountant (as the case may be)
to perform the determinations or calculations (as the case may be) and notify
the Company and the Holder of the results no later than ten (10) Business Days
from the time it receives such disputed determinations or calculations (as the
case may be). Such investment bank’s or accountant’s determination or
calculation (as the case may be) shall be binding upon all parties absent
demonstrable error.

     

    25.          NOTICES;
PAYMENTS.

     

    (a)           Notices. Whenever
notice is required to be given under this Note, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement. The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Note, including in
reasonable detail a description of such action and the reason therefore. Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder (i) immediately upon any adjustment of the Conversion Price,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least fifteen (15) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any grant, issuances, or
sales of any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of shares of Common Stock or
(C) for determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder.

     

    
      
        
        

      

      
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    (b)           Payments. Whenever
any payment of cash is to be made by the Company to any Person pursuant to this
Note, unless otherwise expressly set forth herein, such payment shall be made in
lawful money of the United States of America by a certified check drawn on the
account of the Company and sent via overnight courier service to such Person at
such address as previously provided to the Company in writing (which address, in
the case of each of the Buyers, shall initially be as set forth on the Schedule
of Buyers attached to the Securities Purchase Agreement), provided that the
Holder may elect to receive a payment of cash via wire transfer of immediately
available funds by providing the Company with prior written notice setting out
such request and the Holder’s wire transfer instructions. 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 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. Any amount of Principal or other amounts due under the Transaction
Documents which is not paid when due (after expiration of any applicable cure
periods) shall result in a late charge being incurred and payable by the Company
in an amount equal to interest on such amount at the rate of eighteen percent
(18%) per annum from the date such amount was due until the same is paid in full
(“Late
Charge”).

     

    26.          CANCELLATION. After
all Principal, accrued Interest, Late Charges and other amounts at any time owed
on this Note have been paid in full, this Note shall automatically be deemed
canceled, shall be surrendered to the Company for cancellation and shall not be
reissued.

     

    27.          WAIVER OF
NOTICE.  To the extent permitted by law, the Company hereby
irrevocably waives demand, notice, presentment, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note and the Securities Purchase Agreement.

     

    28.          GOVERNING
LAW.  This Note shall be construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation
and performance of this Note shall be governed by, the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
(other than Sections 5-1401 and 5-1402 of the New York General Obligations Law)
that would cause the application of the laws of any jurisdictions other than the
State of New York. The Company hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law.  In the
event that any provision of this Note 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 this Note.
Nothing contained herein shall be deemed or operate to preclude the Holder from
bringing suit or taking other legal action against the Company in any other
jurisdiction to collect on the Company’s obligations to the Holder, to realize
on any collateral or any other security for such obligations, or to enforce a
judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

     

    
      
        
        

      

      
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    29.          CERTAIN DEFINITIONS.
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed thereto in the Securities Purchase Agreement. For purposes of this
Note, the following terms shall have the following meanings:

     

    (a)           “Bloomberg” means Bloomberg,
L.P.

     

    (b)           “Business Day” means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.

     

    (c)           “Canadian Security Agreements”
means those certain security agreements, dated as of the Closing Date and
governed by Quebec law, by and among the Company and/or the Subsidiaries party
thereto (as applicable) and the initial holders of the Notes, as may be amended
from time to time.

     

    (d)           “Closing Bid Price” and “Closing Sale Price” means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price
(as the case may be) then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price (as the case may be) of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in accordance with the
procedures in Section 24. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.

     

    
      
        
        

      

      
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    (e)           “Closing Date” shall have the
meaning set forth in the Securities Purchase Agreement, which date is the date
the Company initially issued Notes pursuant to the terms of the Securities
Purchase Agreement.

     

    (f)           “Common Stock” means
(i) the Company’s shares of common stock, $0.001 par value per share, and
(ii) any capital stock into which such common stock shall have been changed or
any share capital resulting from a reclassification of such common
stock.

     

    (g)           “Company Conversion Price”
means, with respect to a particular date of determination, the lower of (i) the
Conversion Price then in effect and (ii) the price which shall be computed as
85% of the quotient of (I) the sum of each of the five (5) lowest Trading Day
VWAPs of the Common Stock during the twenty (20) consecutive Trading Day period
immediately preceding the applicable Installment Date (each such period, a
“Company Conversion Measuring
Period”) divided by (II) five (5). All such determinations to be
appropriately adjusted for any stock split, stock dividend, stock combination or
other similar transaction during any such Company Conversion Measuring
Period.

     

    (h)           “Conversion Share Ratio” means
as to any applicable Installment Date, the quotient of (i) the number of
Pre-Installment Conversion Shares delivered in connection with such Installment
Date divided by (ii) the number of Post-Installment Conversion Shares applicable
to such Installment Date.

     

    (i)           “Convertible Securities” means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.

     

    (j)           “Current Subsidiaries” means
any Person in which the Company on the Subscription Date, directly or
indirectly, (i) owns any of the outstanding capital stock or holds any equity or
similar interest of such Person or (ii) controls or operates all or any part of
the business, operations or administration of such Person, and each of the
foregoing, individually, a “Current Subsidiary.”

     

    (k)           “Dollar Failure” means, with
respect to a particular date of determination, that the aggregate dollar trading
volume (as reported on Bloomberg) of the Common Stock on the Eligible Market on
which the Common Stock is listed or designated for quotation as of such date of
determination over the twenty (20) consecutive Trading Day period ending on the
Trading Day immediately preceding such date of determination is less than
$3,000,000.

     

    
      
        
        

      

      
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    (l)           “Eligible Market” means The New
York Stock Exchange, Inc., the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market or the Principal Market.

    (m)           “Equity Conditions” means: (i)
on each day during the period beginning one month prior to the applicable date
of determination and ending on and including the applicable date of
determination either (x) the applicable Registration Statement filed pursuant to
the Registration Rights Agreement shall be effective and the prospectus
contained therein shall be available for the resale by the Holder of all of the
Registrable Securities (which, solely for clarification purposes, includes all
shares of Common Stock issuable upon conversion of this Note, including, without
limitation, under Sections 3 and 8) in accordance with the terms of the
Registration Rights Agreement and there shall not have been during such period
any Grace Periods (as defined in the Registration Rights Agreement) or (y)
all Registrable Securities shall be eligible for sale without restriction under
Rule 144 (including, without limitation, volume restrictions) and without the
need for current public information required by Rule 144(c)(1) (or Rule
144(i)(2), if applicable) and without the need for registration under any
applicable federal or state securities laws (in each case, disregarding any
limitation on conversion of the Notes and exercise of the Warrants); (ii) on
each day during the period beginning three months prior to the applicable date
of determination and ending on and including the applicable date of
determination (the “Equity
Conditions Measuring Period”), the shares of Common Stock (including all
Registrable Securities) are listed or designated for quotation on an Eligible
Market and shall not have been suspended from trading on an Eligible Market
(other than suspensions of not more than two (2) days and occurring prior to the
applicable date of determination due to business announcements by the Company)
nor shall delisting or suspension by an Eligible Market have been threatened or
pending (with a reasonable prospect of delisting occurring) either (A) in
writing by such Eligible Market or (B) by falling below the minimum listing
maintenance requirements of the Eligible Market on which the shares of Common
Stock are then listed; (iii) on each day during the Equity Conditions Measuring
Period, the Company shall have delivered all shares of Common Stock issuable
upon conversion of this Note on a timely basis as set forth in Section 3 hereof
and all other shares of capital stock required to be delivered by the Company on
a timely basis as set forth in the other Transaction Documents; (iv) any shares
of Common Stock to be issued in connection with the event requiring
determination may be issued in full without violating Section 3(d) hereof; (v)
any shares of Common Stock to be issued in connection with the event requiring
determination may be issued in full without violating the rules or regulations
of the Eligible Market on which the Common Stock is then listed; (vi) on each
day during the Equity Conditions Measuring Period, no public announcement of a
pending, proposed or intended Fundamental Transaction shall have occurred which
has not been abandoned, terminated or consummated; (vii) the Company shall have
no knowledge of any fact that would reasonably be expected to cause (1) the
applicable Registration Statement required to be filed pursuant to the
Registration Rights Agreement to not be effective or the prospectus contained
therein to not be available for the resale of at least all of the Registrable
Securities in accordance with the terms of the Registration Rights Agreement or
(2) any Registrable Securities to not be eligible for sale without restriction
pursuant to Rule 144 under the 1933 Act (as defined in the Securities Purchase
Agreement) and any applicable state securities laws (in each case, disregarding
any limitation on conversion or exercise); (viii) the Holder shall not be in
(and no other Buyer shall be in) possession of any material, non-public
information provided to any of them by the Company or any of its affiliates;
(ix) on each day during the Equity Conditions Measuring Period, the Company
otherwise shall have been in compliance with and shall not have breached any
provision, covenant, representation or warranty of any Transaction Document; and
(x) on each day during the Equity Conditions Measuring Period, there shall not
have occurred an Event of Default or an event that with the passage of time or
giving of notice would constitute an Event of Default.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    (n)           “Equity Conditions Failure”
means that (i) on any day during the period commencing twenty (20) Trading Days
prior to the applicable Company Installment Notice Date through the later of the
applicable Installment Date and the date on which the applicable shares of
Common Stock are actually delivered to the Holder or (ii) on any day during the
period commencing twenty (20) Trading Days prior to the Company Optional
Redemption Notice Date through later of the Company Optional Redemption Date and
the date on which the Company Optional Redemption Price is paid in full in cash
to the Holder (as applicable), the Equity Conditions have not been satisfied (or
waived in writing by the Holder).

     

    (o)           “Equity Value Redemption
Premium” means 135%.

    (p)           “Fundamental Transaction” means
that (i) the Company shall, directly or indirectly, in one or more related
transactions, (1) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (2) sell, lease, license,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company or any material Subsidiary to another
Person, or (3) allow another Person to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares of
Common Stock (not including any shares of Common Stock held by the Person or
Persons making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), or (4) consummate a stock
or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination), or (5) reorganize,
recapitalize or reclassify its Common Stock, or (ii) any “person” or “group” (as
these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act)
is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the
1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.

     

    (q)           “Fundamental Transaction Redemption
Premium” means 135%.

     

    
      
        
        

      

      
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    (r)           
“GAAP” means United
States generally accepted accounting principles, consistently
applied.

     

    (s)           “Holder Pro Rata Amount” means
a fraction (i) the numerator of which is the original Principal amount of this
Note on the Closing Date and (ii) the denominator of which is the aggregate
original principal amount of all Notes issued to the initial purchasers pursuant
to the Securities Purchase Agreement on the Closing Date.

     

    (t)           “Installment Amount” means (i)
with respect to any Installment Date other than the Maturity Date, the lesser of
(A) the product of (I) $350,000, multiplied by (II) Holder Pro Rata Amount and
(B) the Principal amount under this Note as of such Installment Date, and (ii)
with respect to the Installment Date that is the Maturity Date, the Principal
amount under this Note as of such Installment Date (the amounts described under
clauses (i) and (ii) are referred to herein as the “Principal Reduction Amount”),
in each case, as any such Installment Amount may be reduced pursuant to the
terms of this Note, whether upon conversion, redemption or otherwise, together
with, in each case of clauses (i) and (ii), the sum of any accrued and unpaid
Interest as of such Installment Date under this Note (if such Installment Date
is also an Interest Date) and accrued and unpaid Late Charges, if any, under
this Note as of such Installment Date. In the event the Holder shall sell or
otherwise transfer any portion of this Note, the transferee shall be allocated a
pro rata portion of the each unpaid Installment Amount hereunder.

     

    (u)           “Installment Date” means each
of the following dates: (i) April 1, 2010, (ii) May 1, 2010, (iii) June 1, 2010,
(iv) July 1, 2010, (v) August 1, 2010, (vi) September 1, 2010, (vii) October 1,
2010, (viii) November 1, 2010, (ix) December 1, 2010 and (x) the Maturity
Date.

     

    (v)           “Installment Volume Limitation”
means 35% of the aggregate dollar trading volume (as reported on Bloomberg) of
the Common Stock on the Principal Market over the twenty (20) consecutive
Trading Day period ending on the Trading Day immediately preceding the
applicable Installment Notice Date.

     

    (w)           “Interest Rate” means nine percent (9%)
per annum.

     

    (x)           “Maturity Date” shall mean December ___,
2010; provided, however, the Maturity Date may be extended at the option of the
Holder (i) in the event that, and for so long as, an Event of Default shall have
occurred and be continuing or any event shall have occurred and be continuing
that with the passage of time and the failure to cure would result in an Event
of Default or (ii) through the date that is twenty (20) Business Days after the
consummation of a Fundamental Transaction in the event that a Fundamental
Transaction is publicly announced or a Fundamental Transaction Notice is
delivered prior to the Maturity Date, provided further that if a Holder elects
to convert some or all of this Note pursuant to Section 3 hereof, and the
Conversion Amount would be limited pursuant to Section 3(d) hereunder, the
Maturity Date shall automatically be extended until such time as such provision
shall not limit the conversion of this Note.

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    (y)           “Net Cash Balance” means, at
any date, (i) an amount equal to the aggregate amount of cash (but not including
any restricted cash) that would be classified as “cash” in accordance with GAAP
on a balance sheet as of such date minus
(ii) all Indebtedness of the Company and its Subsidiaries (including, for
purposes of this clause (ii), trade payables but excluding, for purposes of this
clause (ii), Indebtedness under the Notes).

     

    (z)          
 “New Subsidiaries”
means, as of any date of determination, any Person in which the Company after
the Subscription Date, directly or indirectly, (i) owns or acquires any of the
outstanding capital stock or holds any equity or similar interest of such Person
or (ii) controls or operates all or any part of the business, operations or
administration of such Person, and each of the foregoing, individually, a “New Subsidiary.”

     

    (aa)         “Options” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.

     

    (bb)         “Parent Entity” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.

    (cc)         “Permitted Indebtedness” means
(i) total Indebtedness of the Company and the Subsidiaries not to exceed
$1,000,000 in the aggregate (excluding Indebtedness specified in, and permitted
by, clauses (ii) through (vi) below) outstanding at any time; provided, however,
such Indebtedness shall be made expressly subordinate in right of payment to the
Indebtedness evidenced by the Notes, as reflected in a written agreement
acceptable to the Required Holders and approved by the Required Holders in
writing, and which Indebtedness does not provide at any time for the payment,
prepayment, repayment, repurchase or defeasance, directly or indirectly, of any
principal or premium, if any, thereon until ninety-one (91) days after the
Maturity Date or later; (ii) equipment leases and purchase money obligations of
the Company not to exceed $5,000 in the aggregate outstanding at any time; (iii)
equipment leases and purchase money obligations of the Subsidiaries not to
exceed $245,000 in the aggregate outstanding at any time; (iv) Indebtedness
evidenced by this Note and the Other Notes; (v) Indebtedness of the Company owed
to the Persons identified on Schedule 3(s) to the Securities Purchase Agreement,
and any renewal or refinancing thereof (provided that such renewal or
refinancing does not increase or decrease the length of the term thereof,
increase any amounts due thereunder, increase the interest rate thereunder or
amend or modify any other material term thereof); (vi) total Indebtedness of the
Company and the Subsidiaries pursuant to promissory notes not exceeding
$5,000,000 in the aggregate outstanding at any time; provided, however, such
Indebtedness (A) shall be made expressly subordinate in right of payment to the
Indebtedness evidenced by the Notes, as reflected in a written agreement
acceptable to the Required Holders and approved by the Required Holders in
writing, and which Indebtedness does not provide at any time for the payment,
prepayment, repayment, repurchase or defeasance, directly or indirectly, of any
principal or premium, if any, thereon until ninety-one (91) days after the
Maturity Date or later and (B) shall not be, directly or indirectly, exercisable
for, convertible into or otherwise exchangeable for any securities of the
Company or any of its Subsidiaries (including, without limitation, Convertible
Securities or Options); and (vii) unsecured Indebtedness in the aggregate amount
of $2,100,000 related to the obligation owed by Magnum Recycling Canada, Inc.
pursuant to the lease of its facility located at 2935 Rue René Patenaude, Magog,
QC J1X 7J2.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    (dd)         “Permitted Company Liens”
means, with respect to the Company, (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any Lien
created by operation of law, such as materialmen’s liens, mechanics’ liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings, (iv) Liens securing the Company’s
obligations under the Notes and the other Transaction Documents (other than the
Warrants) and (v) any Lien securing Permitted Company Senior
Indebtedness.

     

    (ee)          “Permitted Company Senior
Indebtedness” means the Indebtedness
described in clauses (ii) and (v) of Permitted Indebtedness.

     

    (ff)           “Permitted Subsidiary Liens”
means, with respect to each Subsidiary, (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any Lien
created by operation of law, such as materialmen’s liens, mechanics’ liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings, (iv) Liens securing each Subsidiary’s
obligations under the Guaranties and (v) any Lien securing Permitted Subsidiary
Senior Indebtedness.

     

    (gg)         “Permitted Subsidiary Senior
Indebtedness” means the Indebtedness
described in clause (iii) of Permitted Indebtedness.

     

    (hh)         “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity or a government or any
department or agency thereof.

     

    (ii)           “Pre-Installment Conversion
Price” means, with respect to a particular date of determination, the
lower of (i) the Conversion Price then in effect and (ii) the price which shall
be computed as 85% of the quotient of (I) the sum of each of the five (5) lowest
Trading Day VWAPs of the Common Stock during the twenty (20) consecutive Trading
Day period immediately preceding the delivery or deemed delivery of the
applicable Company Installment Notice divided by (II) five (5). All such
determinations to be appropriately adjusted for any stock split, stock dividend,
stock combination or other similar transaction during any such measuring
period.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    (jj)           “Principal Market” means the
OTC Bulletin Board.

     

    (kk)         “Post-Installment Conversion
Shares” means that number of shares of Common Stock that would be
required to be delivered pursuant to Section 8 on an applicable Installment Date
without taking into account the delivery of any Pre-Installment Conversion
Shares.

     

    (ll)           “Quarter” means each of: (i)
the period beginning on and including January 1 and ending on and including
March 31; (ii) the period beginning on and including April 1 and ending on and
including June 30; (iii) the period beginning on and including July 1 and ending
on and including September 30; and (iv) the period beginning on and including
October 1 and ending on and including December 31.

     

    (mm)       “Redemption Notices” means,
collectively, the Event of Default Redemption Notice and the Fundamental
Transaction Redemption Notice, and each of the foregoing, individually, a “Redemption
Notice.”

     

    (nn)           “Redemption Premium” means (i)
in the case of the Events of Default described in Section 4(a) (other than
Sections 4(a)(ix) through 4(a)(xi)), 135% or (ii) in the case of the Events of
Default described in Sections 4(a)(ix) through 4(a)(xi), 100%.

     

    (oo)           “Redemption Prices” means,
collectively, the Event of Default Redemption Price, the Fundamental Transaction
Redemption Price and the Company Installment Redemption Price, and each of the
foregoing, individually, a “Redemption
Price.”

     

    (pp)         “Registration Rights Agreement”
means that certain registration rights agreement, dated as of the Closing Date,
by and among the Company and the initial holders of the Notes relating to, among
other things, the registration of the resale of the Common Stock issuable upon
conversion of the Notes and exercise of the Warrants, as may be amended from
time to time.

     

    (qq)         “Reserved Amount” means, as of
any date of determination, (i) at all times after the first Installment Date so
long as (1) the Company timely effects a Company Conversion with respect (I) to
the entire Installment Amount due on the first Installment Date and (II) each
entire Installment Amount due on each Installment Date thereafter and (2) the
Company is at all times in compliance with Section 8, an amount equal to 33% of
the aggregate Principal amount then-outstanding under all of the Notes or (ii)
at all times when clause (i) does not apply, $1,166,667 (as
applicable).

     

    (rr)           “Required Holders” means the
holders of Notes representing at least a majority of the aggregate principal
amount of the Notes then outstanding.

     

    (ss)         “SEC” means the United States
Securities and Exchange Commission or the successor thereto.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    (tt)           “Securities Purchase Agreement”
means that certain securities purchase agreement, dated as of the Subscription
Date, by and among the Company and the initial holders of the Notes pursuant to
which the Company issued the Notes and Warrants, as may be amended from time to
time.

     

    (uu)         “Security Agreements” means,
collectively, the U.S. Security Agreement and the Canadian Security
Agreements.

     

    (vv)         “Senior Officer” means any
chairman, chief executive officer, chief financial officer, chief operating
officer, chief accounting officer, president or vice president in charge of a
principal business unit, division or function (such as sales, administration or
finance) of the Company or any of its Subsidiaries or any other officer who
performs a policy making function or any other Person who performs similar
policy making functions for the Company or any of its Subsidiaries.

     

    (ww)    
   “Subscription
Date” means December 21, 2009.

     

    (xx)          “Subsidiaries” means, as of any
date of determination, collectively, all Current Subsidiaries and all New
Subsidiaries, and each of the foregoing, individually, a “Subsidiary.”

     

    (yy)         “Successor Entity” means the
Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting
from or surviving any Fundamental Transaction or the Person (or, if so elected
by the Holder, the Parent Entity) with which such Fundamental Transaction shall
have been entered into.

    (zz)          “Trading Day” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded, provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time) unless such
day is otherwise designated as a Trading Day in writing by the
Holder.

     

    (aaa)       “U.S. Security Agreement” means
that certain security agreement, dated as of the Closing Date and governed by
New York law, by and among the Company, the Subsidiaries party thereto and the
initial holders of the Notes, as may be amended from time to time.

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    (bbb)      “VWAP” means, for any security
as of any date, the dollar volume-weighted average price for such security on
the Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If the VWAP cannot be calculated for such security on such date on any of
the foregoing bases, the VWAP of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved in accordance with the procedures
in Section 24. All such determinations shall be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during such period.

     

    (ccc)       “Volume Failure” means, with
respect to a particular date of determination, the average daily volume (as
reported on Bloomberg) of the Common Stock on the Eligible Market on which the
Common Stock is listed or designated for quotation as of such date of
determination over the twenty (20) consecutive Trading Day period ending on the
Trading Day immediately preceding such date of determination is less than
200,000 shares per day (adjusted for any stock dividend, stock split, stock
combination or other similar transaction during such period).

     

    (ddd)      “Warrants” has the meaning
ascribed to such term in the Securities Purchase Agreement, and shall include
all warrants issued in exchange therefor or replacement thereof.

     

    30.          DISCLOSURE. Upon
receipt or delivery by the Company of any notice in accordance with the terms of
this Note, unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, non-public information
relating to the Company or any of its Subsidiaries, the Company shall within one
(1) Business Day after any such receipt or delivery publicly disclose such
material, non-public information on a Current Report on Form 8-K or otherwise.
In the event that the Company believes that a notice contains material,
non-public information relating to the Company or any of its Subsidiaries, the
Company so shall indicate to such Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material,
non-public information relating to the Company or its Subsidiaries. Nothing
contained in this Section 30 shall limit any obligations of the Company, or any
rights of the Holder, under Section 4(i) of the Securities Purchase
Agreement.

     

    [signature page
follows]

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

    

    IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the
Issuance Date set out above.

    

    
      
        
          	
                  Magnum
      d’Or Resources, Inc.

                
	 
      
	
                  By:

                	 
      
	 
      	
                  Name:

                
	 
      	
                  Title:

                

        

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
I

     

    MAGNUM
D’OR RESOURCES, INC.

    CONVERSION
NOTICE

     

    Reference
is made to the Senior Secured Convertible Note (the “Note”) issued to the
undersigned by Magnum d’Or Resources, Inc. (the “Company”). In accordance with
and pursuant to the Note, the undersigned hereby elects to convert the
Conversion Amount (as defined in the Note) of the Note indicated below into
shares of Common Stock, $0.001 par value per share (the “Common Stock”), of the
Company, as of the date specified below.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              	
                                                                      Date
      of Conversion:

                                                                    	 
      
	 	 
	
                                                                      Aggregate
      Conversion Amount to be converted:

                                                                    	 
	 	 
	
                                                                      Please
      confirm the following information:

                                                                    
	 
	
                                                                      Conversion
      Price:

                                                                    	 
      
	 	 
	
                                                                      Number
      of shares of Common Stock to be issued:

                                                                    	 
      
	 	 
	
                                                                      Please
      issue the Common Stock into which the Note is being converted in the
      following name and to the following address:

                                                                    
	 
	
                                                                      Issue to:

                                                                    	 
      
	 	 
	 
      	 
      
	 	 
	 	 
	 
      	 
      
	
                                                                      Facsimile
      Number:

                                                                    	 
      
	 	 
	
                                                                      Authorization:

                                                                    	 
      
	 	 
	
                                                                      By:

                                                                    	 
      
	 	 
	
                                                                      Title:

                                                                    	 
      
	 	 
	
                                                                      Dated:

                                                                    	 
      
	 	 
	
                                                                      Account
      Number:

                                                                    	 
      
	
                                                                        (if
      electronic book entry transfer)

                                                                    	 
      
	 	 
	
                                                                      Transaction
      Code Number:

                                                                    	 
      
	
                                                                        (if
      electronic book entry transfer)

                                                                    	 
      
	
                                                                      Installment
      Amount(s) to be reduced (and corresponding Installment Date(s)) and amount
      of reduction:

                                                                    	
                                                                        _________________________________

                                                                    

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    ACKNOWLEDGMENT

     

    The
Company hereby acknowledges this Conversion Notice and hereby directs
_________________ to issue the above indicated number of shares of Common Stock
in accordance with the Transfer Agent Instructions dated _____________, 2009
from the Company and acknowledged and agreed to by
________________________.

    

    
      
        
          	
                  Magnum
      d’Or Resources, Inc.

                
	 
      	 
      
	
                  By:

                	 
      
	 
      	
                  Name:

                
	 
      	
                  Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}]]