Document:

Unassociated Document

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

    

    

    GLOWPOINT,
      INC.

    

    Senior
      Secured Convertible Promissory Note

    due
      March
      31, 2009

    
 

    
      	
              No. CN-07-__

            	
              $___________

            
	Dated: September 21, 2007	
            

    

     

     

    For
      value
      received, Glowpoint, Inc., a Delaware corporation (the "Maker"),
      hereby promises to pay to the order of _______________________ (together with
      its successors, representatives, and permitted assigns, the "Holder"),
      in
      accordance with the terms hereinafter provided, the principal amount of
      ________________________ ($______________), together with interest thereon.
      Concurrently with the issuance of this Note, the Maker is issuing separate
      convertible promissory notes (the “Additional
      Notes”)
      to
      separate purchasers (the “Additional
      Holders”)
      in the
      aggregate principal amount of up to $3,600,000 (inclusive of this Note). The
      Maker has previously issued separate convertible promissory notes (the
“Existing
      Notes”,
      and
      together with the Additional Notes, the “Other
      Notes”)
      to
      separate purchasers (the “Existing
      Holders”,
      and
      together with the Additional Holders, the “Other
      Holders”)
      pursuant to the 2006 Purchase Agreements (as defined below). 

     

    All
      payments under or pursuant to this Note shall be made in United States Dollars
      in immediately available funds to the Holder at
      the
      address of the Holder first set forth above or at such other place as the Holder
      may designate from time to time in writing to the Maker or by wire transfer
      of
      funds to the Holder's account, instructions for which are attached hereto as
      Exhibit
      A. The
      outstanding principal balance of this Note shall be due and payable on March
      31,
      2009 (the "Maturity
      Date")
      or at
      such earlier time as provided herein. 

     

    ARTICLE
      I

     

    Section
      1.1 Purchase
      Agreement. This Note has been executed and delivered pursuant to the Note and
      Warrant Purchase Agreement dated as of September 21, 2007 (the "Purchase
      Agreement”), by and among the Maker and the purchasers listed therein.
      Capitalized terms used and not otherwise defined herein shall have the meanings
      set forth for such terms in the Purchase Agreement. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      1.2 Interest.
      Beginning on the issuance date of this Note (the “Issuance Date”), the
      outstanding principal balance of this Note shall bear interest, in arrears,
      at a
      rate per annum equal to ten percent (10%), increasing to a rate per annum equal
      to twelve percent (12%) commencing one (1) year following the Issuance Date,
      payable quarterly commencing on October 1, 2007 and on the first business day
      of
      each following quarter at the option of the Maker in cash or additional senior
      secured convertible promissory notes. Interest shall be computed on the basis
      of
      a 360-day year of twelve (12) 30-day months and shall accrue commencing on
      the
      Issuance Date. Furthermore,
      upon the occurrence of an Event of Default (as defined in Section 2.1 hereof),
      then to the extent permitted by law, the Maker will pay interest in cash to
      the
      Holder, payable on demand, on the outstanding principal balance of the Note
      from
      the date of the Event of Default until such Event of Default is cured at the
      rate of the lesser of fifteen percent (15%) and the maximum applicable legal
      rate per annum. 

     

    Section
      1.3 Security
      Agreement. The obligations of the Maker hereunder are secured by a
      continuing security interest in all of the assets of the Maker pursuant to
      the
      terms of a Security Agreement dated as of March 31, 2006, as amended, by and
      among the Maker, on the one hand, and the Holder and the Other Holders, on
      the
      other hand. 

     

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

     

    Section
      1.5 Transfer.
      This Note may be transferred or sold, subject to the provisions of Section
      4.8
      of this Note, or pledged, hypothecated or otherwise granted as security by
      the
      Holder.

     

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

     

    Section
      1.7 EBITDA.
      Subject to the last sentence of this Section 1.7, the Maker shall maintain
      the
      following minimum Adjusted EBITDA (as defined below) determined as of the
      following dates:

     

    
      
        
        

      

      
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              Determination
                Date

            	
              Adjusted
                EBITDA

            
	 	 
	
              As
                of March 31, 2008

            	
              $0
                for the quarter ending March 31, 2008

            
	 	 
	
              As
                of June 30, 2008

            	
              $1,000,000
                for the period commencing on January 1, 2008 and ending on June 30,
                2008.

            
	 	 
	
              As
                of September 30, 2008

            	
              $1,500,000
                for the quarter ending September 30, 2008, or $2,500,000 for the
                period
                commencing on January 1, 2008 and ending on September 30,
                2008.

            
	 	 
	
              As
                of December 31, 2008

            	
              $2,000,000
                for the quarter ending December 31, 2008, or $4,500,000 for the year
                ended
                December 31, 2008.

            

    

     

        In
      the event
      Maker fails to maintain the foregoing minimum Adjusted EBITDA, then the per
      annum interest rate on the unpaid principal balance of this Note then in effect
      shall increase by 200 basis points, and such increase will be cumulative for
      each subsequent breach; provided, however, that the per annum interest rate
      shall revert to the interest rate as determined in accordance with Section
      1.2
      hereof in the event the Maker achieves or exceeds the cumulative minimum
      Adjusted EBITDA for the period commencing on January 1, 2008 through any
      subsequent determination date. Failure to maintain the foregoing minimum
      Adjusted EBITDA shall not constitute an Event of Default (as defined in Section
      2.1 hereof). For purposes of this Note, “Adjusted
      EBITDA”
shall
      mean, for any period, the sum of the amounts (as determined in accordance with
      generally accepted accounting principals, consistently applied) for such period
      of (i) net income or loss before dividends, plus (ii) charges for foreign,
      federal, state and local taxes as computed on the Maker’s income tax returns,
      plus (iii) interest expense, plus (iv) depreciation, plus (v) amortization
      expense, including, without limitation, amortization of goodwill and other
      intangible assets and amortization of stock based compensation expense, plus
      (vi) extraordinary losses, plus (vii) charges related to any financing
      consummated on or prior to the Issuance Date, plus (viii) the cost of any
      beneficial conversion feature of any outstanding security of the Maker, plus
      (ix) the cost of any accretion of discounts minus (x) interest income, minus
      (xi) extraordinary gains, and (xii) such other adjustments to eliminate the
      impact of any derivative financial instruments (e.g., add back increases in
      fair
      value of derivative financial instruments and subtract decreases in fair value
      of derivative financial instruments). Notwithstanding the foregoing, in the
      event that the Holder is an Insider Purchaser (as defined in, and listed on,
      Exhibit A to the Purchase Agreement), then this Section 1.7 shall not apply
      and
      shall have no force or effect.

     

    ARTICLE
      II

     

    EVENTS
      OF DEFAULT; REMEDIES

     

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

     

    (a) the
      Maker
      shall fail to make any principal or interest payments on the date such payments
      are due and such default is not fully cured within two (2) business days after
      the occurrence thereof; or

     

    
      
        
        

      

      
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    (b) the
      Maker's notice to the Holder, including by way of public announcement, at any
      time, of its inability to comply (including for any of the reasons described
      in
      Section 3.8(a) hereof) or its intention not to comply with proper requests
      for
      conversion of this Note into shares of Common Stock; or

     

    (c) the
      Maker
      shall fail to (i) timely deliver the shares of Common Stock upon conversion
      of
      the Note or any interest accrued and unpaid, (ii) file the Registration
      Statement in accordance with the terms of the Registration Rights Agreement
      or
      (iii) make the payment of any fees and/or liquidated damages under this Note
      or
      the other Transaction Documents, which failure in the case of items (i) and
      (iii) of this Section 2.1(e) is not remedied within five (5) business days
      after
      the incurrence thereof; or

     

    (d) while
      the
      Registration Statement is required to be maintained effective pursuant to the
      terms of the Registration Rights Agreement, the effectiveness of the
      Registration Statement lapses for any reason (including, without limitation,
      the
      issuance of a stop order) or is unavailable to the Holder for sale of the
      Registrable Securities (as defined in the Registration Rights Agreement) in
      accordance with the terms of the Registration Rights Agreement, and such lapse
      or unavailability continues for a period of ten (10) consecutive Trading Days,
      provided
      that the
      Maker has not exercised its rights pursuant to Section 3(n) of the Registration
      Rights Agreement; or

     

    (e) default
      shall be made in the performance or observance of (i) any material covenant,
      condition or agreement contained in this Note (other than as set forth in clause
      (f) of this Section 2.1) and such default is not fully cured within five (5)
      business days after the Holder delivers written notice to the Maker of the
      occurrence thereof or (ii) any material covenant, condition or agreement
      contained in the Purchase Agreement, the Other Notes, the Registration Rights
      Agreement or any other Transaction Document which is not covered by any other
      provisions of this Section 2.1 and such default is not fully cured within five
      (5) business days after the Holder delivers written notice to the Maker of
      the
      occurrence thereof; or

     

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

     

    (g) the
      Maker
      shall (A) default in any payment of any amount or amounts of principal of or
      interest on any Indebtedness (other than the Indebtedness hereunder) the
      aggregate principal amount of which Indebtedness is in excess of
      $100,000 or
      (B)
      default in the observance or performance of any other agreement or condition
      relating to any Indebtedness or contained in any instrument or agreement
      evidencing, securing or relating thereto, or any other event shall occur or
      condition exist, the effect of which default or other event or condition is
      to
      cause, or to permit the holder or holders or beneficiary or beneficiaries of
      such Indebtedness to cause with the giving of notice if required, such
      Indebtedness to become due prior to its stated maturity; or 

     

    
      
        
        

      

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

     

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

     

    (j) the
      failure of the Maker to instruct its transfer agent to remove any legends from
      shares of Common Stock eligible to be sold under Rule 144 of the Securities
      Act
      and issue such unlegended certificates to the Holder within ten (10) business
      days of the Holder’s request so long as the Holder has complied with Section 5.1
      of the Purchase Agreement; or

     

    (k) the
      failure of the Maker to pay any amounts due to the Holder herein or any other
      Transaction Document within three (3) business days of the date such payments
      are due; or

     

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

     

    Section
      2.2 Remedies
      Upon An Event of Default. If an Event of Default shall have occurred and
      shall be continuing, the Holder of this Note may at any time at its option,
      (a)
      pursuant to Section 3.7(a) hereof, declare the entire unpaid principal balance
      of this Note, together with all interest accrued hereon, due and payable, and
      thereupon, the same shall be accelerated and so due and payable, without
      presentment, demand, protest, or notice, all of which are hereby expressly
      unconditionally and irrevocably waived by the Maker; provided, however, that
      upon the occurrence of an Event of Default described in (i) Sections 2.1(h)
      or
      (i), the outstanding principal balance and accrued interest hereunder shall
      be
      automatically due and payable and (ii) Sections 2.1(a)-(g) and (j)-(l), the
      Holder may demand the prepayment of this Note pursuant to Section 3.7 hereof,
      (b) demand that the principal amount of this Note then outstanding and all
      accrued and unpaid interest thereon shall be converted into shares of Common
      Stock at a Conversion Price per share calculated pursuant to Section 3.1 hereof
      assuming that the date that the Event of Default occurs is the Conversion Date
      (as defined in Section 3.1 hereof), or (c) exercise or otherwise enforce any
      one
      or more of the Holder's rights, powers, privileges, remedies and interests
      under
      this Note, the Purchase Agreement, the Registration Rights Agreement or
      applicable law. No course of delay on the part of the Holder shall operate
      as a
      waiver thereof or otherwise prejudice the right of the Holder. No remedy
      conferred hereby shall be exclusive of any other remedy referred to herein
      or
      now or hereafter available at law, in equity, by statute or
      otherwise.

     

    
      
        
        

      

      
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    ARTICLE
      III

     

    CONVERSION;
      ANTIDILUTION; PREPAYMENT

     

    Section
      3.1 Conversion.
      

     

    (a) Optional
      Conversion.
      At any
      time on or after the Issuance Date, this Note shall be convertible (in whole
      or
      in part), at the option of the Holder (the "Conversion
      Option"),
      into
      such number of fully paid and non-assessable shares of Common Stock (the
      "Conversion
      Rate")
      as is
      determined by dividing (x) that portion of the outstanding principal balance
      plus any accrued but unpaid interest under this Note as of such date that the
      Holder elects to convert by (y) the Conversion Price (as defined in Section
      3.2(a) hereof) then in effect on the date on which the Holder faxes a notice
      of
      conversion (the "Conversion
      Notice"),
      duly
      executed, to the Maker (facsimile number (973) 860-0754, Attn.: Chief Executive
      Officer, with a copy to facsimile number 973-556-1272, Attn.: General Counsel)
      (the “Optional
      Conversion Date”),
      provided, however, that the Conversion Price shall be subject to adjustment
      as
      described in Section 3.6 below. The Holder shall deliver this Note to the Maker
      at the address designated in the Purchase Agreement at such time that this
      Note
      is fully converted. With respect to partial conversions of this Note, the Maker
      shall keep written records of the amount of this Note converted as of each
      Conversion Date.

     

    (b) Mandatory
      Conversion.
      On the
      Mandatory Conversion Date (as defined below), this Note shall automatically
      and
      without any action on the part of the Holder, convert into such number of fully
      paid and non-assessable shares of Common Stock as is determined by dividing
      (x)
      that portion of the outstanding principal balance plus any accrued but unpaid
      interest under this Note as of the Mandatory Conversion Date by (y) the
      Conversion Price then in effect on the Mandatory Conversion Date, provided,
      however, that the Conversion Price shall be subject to adjustment as described
      in Section 3.6 below. As used herein, "Mandatory Conversion Date" shall be
      the
      first date that the Closing Bid Price (as defined below) of the Common Stock
      exceeds $1.25 (as adjusted for stock splits, stock dividends, combinations
      and
      similar transactions) for twenty (20) consecutive trading days. The Mandatory
      Conversion Date and the Voluntary Conversion Date collectively are referred
      to
      in this Note as the "Conversion Date". Notwithstanding the foregoing to the
      contrary, the Note shall automatically convert pursuant to this Section 3.1(b)
      only if (1) the Registration Statement is effective and has been effective,
      without lapse or suspension of any kind, for such twenty (20) consecutive
      trading day period, (2) trading in the Common Stock shall not have been
      suspended by the Securities and Exchange Commission or the OTC Bulletin Board
      (or other exchange or market on which the Common Stock is trading), and (3)
      the
      Maker is in material compliance with the terms and conditions of this Note
      and
      the other Transaction Documents. The term "Closing Bid Price" shall mean, on
      any
      particular date (i) the last closing bid price per share of the Common Stock
      on
      such date on the OTC Bulletin Board or another registered national stock
      exchange on which the Common Stock is then listed, or if there is no such price
      on such date, then the last closing bid price on such exchange or quotation
      system on the date nearest preceding such date.

     

    
      
        
        

      

      
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    Section
      3.2 Conversion
      Price.

     

    (a) The
      term
      "Conversion
      Price"
      shall
      mean $0.50, subject to adjustment under Section 3.6 hereof. 

     

    (b) Notwithstanding
      any of the foregoing to the contrary, if during any period after the Maker
      is
      obligated to file the registration statement under the Registration Rights
      Agreement (a "Black-out
      Period"),
      a
      Holder is unable to trade any Common Stock issued or issuable upon conversion
      of
      this Note immediately due to the postponement of filing or delay or suspension
      of effectiveness of the Registration Statement or because the Maker has
      otherwise informed such Holder that an existing prospectus cannot be used at
      that time in the sale or transfer of such Common Stock (provided that such
      postponement, delay, suspension or fact that the prospectus cannot be used
      is
      not due to factors solely within the control of the Holder of this Note or
      due
      to the Maker exercising its rights under Section 3(n) of the Registration Rights
      Agreement), such Holder shall have the option but not the obligation on any
      Conversion Date within ten (10) Trading Days following the expiration of the
      Black-out Period of using the Conversion Price applicable on such Conversion
      Date or any Conversion Price selected by such Holder that would have been
      applicable had such Conversion Date been at any earlier time during the
      Black-out Period or within the ten (10) Trading Days thereafter. In no event
      shall the Black-out Period have any effect on the Maturity Date of this Note.
      

     

    Section
      3.3 Mechanics
      of Conversion. 

     

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

     

    
      
        
        

      

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

     

    (c) Subject
      to Section 3.3(d) hereof, in addition to any other rights available to the
      Holder, if the Maker fails to cause its transfer agent to transmit to the Holder
      a certificate or certificates representing the shares of Common Stock issuable
      upon conversion of this Note on or before the Delivery Date, and if after such
      date the Holder is required by its broker to purchase (in an open market
      transaction or otherwise) shares of Common Stock to deliver in satisfaction
      of a
      sale by the Holder of the shares of Common Stock issuable upon conversion of
      this Note which the Holder anticipated receiving upon such exercise (a
“Buy-In”),
      then
      the Maker shall (1) pay in cash to the Holder the amount by which (x) the
      Holder’s total purchase price (including brokerage commissions, if any) for the
      shares of Common Stock so purchased exceeds (y) the amount obtained by
      multiplying (A) the number of shares of Common Stock issuable upon conversion
      of
      this Note that the Maker was required to deliver to the Holder in connection
      with the conversion at issue times (B) the price at which the sell order giving
      rise to such purchase obligation was executed, and (2) at the option of the
      Holder, either reinstate the portion of the Note and equivalent number of shares
      of Common Stock for which such conversion was not honored or deliver to the
      Holder the number of shares of Common Stock that would have been issued had
      the
      Maker timely complied with its conversion and delivery obligations hereunder.
      For example, if the Holder purchases Common Stock having a total purchase price
      of $11,000 to cover a Buy-In with respect to an attempted conversion of shares
      of Common Stock with an aggregate sale price giving rise to such purchase
      obligation of $10,000, under clause (1) of the immediately preceding sentence
      the Maker shall be required to pay the Holder $1,000. The Holder shall provide
      the Maker written notice indicating the amounts payable to the Holder in respect
      of the Buy-In, together with applicable confirmations and other evidence
      reasonably requested by the Maker. Nothing herein shall limit a Holder’s right
      to pursue any other remedies available to it hereunder, at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief with respect to the Maker’s failure to timely deliver
      certificates representing shares of Common Stock upon conversion of this Note
      as
      required pursuant to the terms hereof.

     

    
      
        
        

      

      
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    (d) Notwithstanding
      the foregoing, in the event that the Holder is an Insider Purchaser, then
      subsections (b) and (c) of this Section 3.3 shall not apply and shall have
      no
      force or effect.

    

    Section
      3.4 Ownership
      Cap and Certain Conversion Restrictions.

     

    (a) Notwithstanding
      anything to the contrary set forth in Section 3 of this Note, at no time may
      the
      Holder convert all or a portion of this Note if the number of shares of Common
      Stock to be issued pursuant to such conversion would exceed, when aggregated
      with all other shares of Common Stock owned by the Holder at such time, the
      number of shares of Common Stock which would result in the Holder beneficially
      owning (as determined in accordance with Section 13(d) of the Exchange Act
      and
      the rules thereunder) more than 4.9% of all of the Common Stock outstanding
      at
      such time; provided,
      however,
      that
      upon the Holder providing the Maker with sixty-one (61) days notice (pursuant
      to
      Section 4.1 hereof) (the "Waiver
      Notice")
      that
      the Holder would like to waive this Section 3.4(a) with regard to any or all
      shares of Common Stock issuable upon conversion of this Note, this Section
      3.4(a) will be of no force or effect with regard to all or a portion of the
      Note
      referenced in the Waiver Notice. In the event the Holder is unable to fully
      convert this Note in connection with either a mandatory conversion pursuant
      to
      Section 3.1(b) hereof, or a conversion election following the delivery of a
      Maker's Prepayment Notice pursuant to Section 3.7(k) hereof due to the
      restrictions set forth in this Section 3.4(a), such holder may elect to receive
      Series D Convertible Preferred Stock of the Company in lieu of shares of Common
      Stock convertible into the number of shares of Common Stock that would have
      been
      delivered to such holder but for the limitations set forth in this Section
      3.4(a). The foregoing sentence shall not preclude the Holder from waiving at
      any
      time its rights to limit its ownership to (i) 4.9% of all of the Common Stock
      issued and outstanding at such time in accordance with this Section 3.4(a)
      or
      (ii) 9.9% of all of the Common Stock issued and outstanding at such time in
      accordance with Section 3.4(b) hereof.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

     

    Section
      3.5 Intentionally
      Omitted.

     

    Section
      3.6 Adjustment
      of Conversion Price.

     

    (a) The
      Conversion Price shall be subject to adjustment from time to time as
      follows:

     

    (i) Adjustments
      for Stock Splits and Combinations.
      If the
      Maker shall at any time or from time to time after the Issuance Date, effect
      a
      stock split of the outstanding Common Stock, the applicable Conversion Price
      in
      effect immediately prior to the stock split shall be proportionately decreased.
      If the Maker shall at any time or from time to time after the Issuance Date,
      combine the outstanding shares of Common Stock, the applicable Conversion Price
      in effect immediately prior to the combination shall be proportionately
      increased. Any adjustments under this Section 3.6(a)(i) shall be effective
      at
      the close of business on the date the stock split or combination
      occurs.

     

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

     

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

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (iii) Adjustment
      for Other Dividends and Distributions.
      If the
      Maker shall at any time or from time to time after the Issuance Date, make
      or
      issue or set a record date for the determination of holders of Common Stock
      entitled to receive a dividend or other distribution payable in other than
      shares of Common Stock, then, and in each event, an appropriate revision to
      the
      applicable Conversion Price shall be made and provision shall be made (by
      adjustments of the Conversion Price or otherwise) so that the holders of this
      Note shall receive upon conversions thereof, in addition to the number of shares
      of Common Stock receivable thereon, the number of securities of the Maker which
      they would have received had this Note been converted into Common Stock on
      the
      date of such event and had thereafter, during the period from the date of such
      event to and including the Conversion Date, retained such securities (together
      with any distributions payable thereon during such period), giving application
      to all adjustments called for during such period under this Section 3.6(a)(iii)
      with respect to the rights of the holders of this Note and the Other Notes;
      provided,
      however,
      that if
      such record date shall have been fixed and such dividend is not fully paid
      or if
      such distribution is not fully made on the date fixed therefor, the Conversion
      Price shall be adjusted pursuant to this paragraph as of the time of actual
      payment of such dividends or distributions.

     

    (iv) Adjustments
      for Reclassification, Exchange or Substitution.
      If the
      Common Stock issuable upon conversion of this Note at any time or from time
      to
      time after the Issuance Date shall be changed to the same or different number
      of
      shares of any class or classes of stock, whether by reclassification, exchange,
      substitution or otherwise (other than by way of a stock split or combination
      of
      shares or stock dividends provided for in Sections 3.6(a)(i), (ii) and (iii),
      or
      a reorganization, merger, consolidation, or sale of assets provided for in
      Section 3.6(a)(v)), then, and in each event, an appropriate revision to the
      Conversion Price shall be made and provisions shall be made (by adjustments
      of
      the Conversion Price or otherwise) so that the Holder shall have the right
      thereafter to convert this Note into the kind and amount of shares of stock
      and
      other securities receivable upon reclassification, exchange, substitution or
      other change, by holders of the number of shares of Common Stock into which
      such
      Note might have been converted immediately prior to such reclassification,
      exchange, substitution or other change, all subject to further adjustment as
      provided herein.

     

    (v) Adjustments
      for Reorganization, Merger, Consolidation or Sales of Assets.
      If at
      any time or from time to time after the Issuance Date there shall be a capital
      reorganization of the Maker (other than by way of a stock split or combination
      of shares or stock dividends or distributions provided for in Section 3.6(a)(i),
      (ii) and (iii), or a reclassification, exchange or substitution of shares
      provided for in Section 3.6(a)(iv)), or a merger or consolidation of the Maker
      with or into another corporation where the holders of outstanding voting
      securities prior to such merger or consolidation do not own over fifty percent
      (50%) of the outstanding voting securities of the merged or consolidated entity,
      immediately after such merger or consolidation, or the sale of all or
      substantially all of the Maker's properties or assets to any other person (an
      "Organic
      Change"),
      then
      as a part of such Organic Change, (A) if the surviving entity in any such
      Organic Change is a public company that is
      registered pursuant to the Securities Exchange Act of 1934, as amended, and
      its
      common stock is listed or quoted on a national securities exchange, a national
      automated quotation system or the OTC Bulletin Board, an
      appropriate revision to the Conversion Price shall be made and provision shall
      be made (by adjustments of the Conversion Price or otherwise) so that the Holder
      shall have the right thereafter to convert such Note into the kind and amount
      of
      shares of stock and other securities or property of the Maker or any successor
      corporation resulting from Organic Change, and (B) if the surviving entity
      in
      any such Organic Change is not a public company that is
      registered pursuant to the Securities Exchange Act of 1934, as amended, or
      its
      common stock is not listed or quoted on a national securities exchange, a
      national automated quotation system or the OTC Bulletin Board,
      the
      Holder shall have the right to demand prepayment pursuant to Section 3.7(b)
      hereof. In any such case, appropriate adjustment shall be made in the
      application of the provisions of this Section 3.6(a)(v) with respect to the
      rights of the Holder after the Organic Change to the end that the provisions
      of
      this Section 3.6(a)(v) (including any adjustment in the applicable Conversion
      Price then in effect and the number of shares of stock or other securities
      deliverable upon conversion of this Note and the Other Notes) shall be applied
      after that event in as nearly an equivalent manner as may be
      practicable.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (vi) Adjustments
      for Issuance of Additional Shares of Common Stock. 

     

    (1) In
      the
      event the Maker, shall, at any time, from time to time, issue or sell any
      additional shares of common stock (otherwise than as provided in the foregoing
      subsections (i) through (v) of this Section 3.6(a) or pursuant to Common Stock
      Equivalents (hereafter defined) granted or issued prior to the Issuance Date)
      (“Additional
      Shares of Common Stock”),
      at a
      price per share less than the Conversion Price then in effect or without
      consideration, then the Conversion Price upon each such issuance shall be
      adjusted to that price (rounded to the nearest cent) determined by multiplying
      each of the Conversion Price then in effect by a fraction:

    

    (A) the
      numerator of which shall be equal to the sum of (x) the number of shares of
      Common Stock outstanding immediately prior to the issuance of such Additional
      Shares of Common Stock plus
      (y) the
      number of shares of Common Stock (rounded to the nearest whole share) which
      the
      aggregate consideration for the total number of such Additional Shares of Common
      Stock so issued would purchase at a price per share equal to the Conversion
      Price then in effect, and

     

    (B) the
      denominator of which shall be equal to the number of shares of Common Stock
      outstanding immediately after the issuance of such Additional Shares of Common
      Stock.

     

    (2) The
      provisions of paragraph (1) of Section 3.6(a)(vi) shall not apply to any
      issuance of Additional Shares of Common Stock for which an adjustment is
      provided under Section 3.6(a)(vii). No adjustment of the number of shares of
      Common Stock for which this Note shall be convertible shall be made under
      paragraph (1) of Section 3.6(a)(vi) upon the issuance of any Additional Shares
      of Common Stock which are issued pursuant to the exercise of any Common Stock
      Equivalents, if any such adjustment shall previously have been made upon the
      issuance of such Common Stock Equivalents pursuant to Section
      3.6(a)(vii).

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (vii) Issuance
      of Common Stock Equivalents.
      If the
      Maker, at any time after the Issuance Date, shall issue any securities
      convertible into or exchangeable for, directly or indirectly, Common Stock
      ("Convertible
      Securities"),
      other
      than the Notes, or any rights or warrants or options to purchase any such Common
      Stock or Convertible Securities, shall be issued or sold (collectively, the
      "Common
      Stock Equivalents")
      and
      the aggregate of the price per share for which Additional Shares of Common
      Stock
      may be issuable thereafter pursuant to such Common Stock Equivalent, plus the
      consideration received by the Maker for issuance of such Common Stock Equivalent
      divided by the number of shares of Common Stock issuable pursuant to such Common
      Stock Equivalent (the “Aggregate
      Per Common Share Price”)
      shall
      be less than the applicable Conversion Price then in effect, or if, after any
      such issuance of Common Stock Equivalents, the price per share for which
      Additional Shares of Common Stock may be issuable thereafter is amended or
      adjusted, and such price as so amended shall make the Aggregate Per Share Common
      Price be less than the applicable Conversion Price in effect at the time of
      such
      amendment or adjustment, then the applicable Conversion Price upon each such
      issuance or amendment shall be adjusted as provided in the first sentence of
      subsection (vi) of this Section 3.6(a) on the basis that (1) the maximum number
      of Additional Shares of Common Stock issuable pursuant to all such Common Stock
      Equivalents shall be deemed to have been issued (whether or not such Common
      Stock Equivalents are actually then exercisable, convertible or exchangeable
      in
      whole or in part) as of the earlier of (A) the date on which the Maker shall
      enter into a firm contract for the issuance of such Common Stock Equivalent,
      or
      (B) the date of actual issuance of such Common Stock Equivalent. No adjustment
      of the applicable Conversion Price shall be made under this subsection (vii)
      upon the issuance of any Convertible Security which is issued pursuant to the
      exercise of any warrants or other subscription or purchase rights therefor,
      if
      any adjustment shall previously have been made to the exercise price of such
      warrants then in effect upon the issuance of such warrants or other rights
      pursuant to this subsection (vii). No adjustment shall be made to the Conversion
      Price upon the issuance of Common Stock pursuant to the exercise, conversion
      or
      exchange of any Convertible Security or Common Stock Equivalent where an
      adjustment to the Conversion Price was made as a result of the issuance or
      purchase of any Convertible Security or Common Stock Equivalent.

     

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

     

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

     

    (2) in
      the
      event of any consolidation or merger of the Maker in which the Maker is not
      the
      surviving corporation or in which the previously outstanding shares of Common
      Stock of the Maker shall be changed into or exchanged for the stock or other
      securities of another corporation, or in the event of any sale of all or
      substantially all of the assets of the Maker for stock or other securities
      of
      any corporation, the Maker shall be deemed to have issued a number of shares
      of
      its Common Stock for stock or securities or other property of the other
      corporation computed on the basis of the actual exchange ratio on which the
      transaction was predicated, and for a consideration equal to the fair market
      value on the date of such transaction of all such stock or securities or other
      property of the other corporation. If any such calculation results in adjustment
      of the applicable Conversion Price, or the number of shares of Common Stock
      issuable upon conversion of the Notes, the determination of the applicable
      Conversion Price or the number of shares of Common Stock issuable upon
      conversion of the Notes immediately prior to such merger, consolidation or
      sale,
      shall be made after giving effect to such adjustment of the number of shares
      of
      Common Stock issuable upon conversion of the Notes. In the event Common Stock
      is
      issued with other shares or securities or other assets of the Maker for
      consideration which covers both, the consideration computed as provided in
      this
      Section 3.6(viii) shall be allocated among such securities and assets as
      determined in good faith by the Board of Directors of the Maker.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

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

     

    (c) Certain
      Issues Excepted.
      Anything herein to the contrary notwithstanding, the Maker shall not be required
      to make any adjustment to the Conversion Price in connection with (i) securities
      issued (other than for cash) in connection with a merger, acquisition, or
      consolidation, (ii) securities issued pursuant to the conversion or exercise
      of
      convertible or exercisable securities issued or outstanding on or prior to
      the
      date hereof (so long as the conversion or exercise price in such securities
      are
      not amended to lower such price and/or adversely affect the Holders) or
      issued
      pursuant to the Purchase Agreement, (iii) securities issued pursuant to the
      terms of that certain Exchange Agreement, dated as of September 21, 2007, by
      and
      among the Maker and the holders signatory thereto, (iv) the issuance of the
      Promissory Notes and the Warrants (each as defined below), (v) the shares of
      Common Stock issuable upon the conversion of the Promissory Notes or the
      exercise of the Warrants, (vi) securities issued in connection with bona fide
      strategic license agreements or other partnering arrangements so long as such
      issuances are not for the purpose of raising capital, (vii) Common Stock issued
      or the issuance or grants of options to purchase Common Stock pursuant to the
      Maker’s stock option plans and employee stock purchase plans approved by the
      Makers board of directors, so long as such issuances in the aggregate do not
      exceed the number of shares of Common Stock (or options to purchase such number
      of shares of Common Stock) issuable pursuant to such plans as they exist on
      the
      Issuance Date, (viii) any warrants issued to the placement agent and its
      designees for the transactions contemplated by the Purchase Agreement, (ix)
      the
      payment of any dividends on the Maker’s Series B convertible preferred stock,
      (x) securities issued pursuant to a bona fide firm underwritten public offering
      of the Maker’s securities, (xi) the payment of liquidated damages pursuant to
      the Registration Rights Agreement dated February 17, 2004 between the Maker
      and
      the parties listed therein and (xii) the issuance of Common Stock upon the
      exercise or conversion of any securities described in clauses (i) through (xi)
      above. For purposes of this Note, (A) “Promissory
      Notes”
shall
      mean collectively, each of the following, as the same may be amended from time
      to time: (1) the senior secured convertible promissory notes issued pursuant
      to
      the that certain Note and Warrant Purchase Agreement, dated as of March 31,
      2006, by and among the Maker and the purchasers listed therein or that certain
      Note and Warrant Purchase Agreement, dated as of April 12, 2006, by and among
      the Maker and the purchasers listed therein (collectively, the “2006
      Purchase Agreements”),
      (2)
      the additional senior secured convertible promissory notes in the aggregate
      principal amount of up to $3,600,000 issued pursuant to the Purchase Agreement
      (collectively with the 2006 Purchase Agreements, the “Purchase
      Agreements”),
      and
      (3) any additional senior secured convertible promissory notes issued from
      time
      to time as interest on the outstanding principal balance of the foregoing
      promissory notes; and (B) “Warrants”
shall
      mean, collectively, each of the following, as the same may be amended from
      time
      to time: (A) the warrants to purchase shares of Common Stock issued pursuant
      to
      the Purchase Agreements; and (B) the warrants to purchase shares of Common
      Stock
      issued in connection with the amendment of the senior secured convertible
      promissory notes issued pursuant to the 2006 Purchase Agreements.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (d) No
      Impairment.
      The
Maker
      shall
      not, by amendment of its Articles of Incorporation or through any
      reorganization, transfer of assets, consolidation, merger, dissolution, issue
      or
      sale of securities or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms to be observed or performed
      hereunder by the Maker,
      but
      will at all times in good faith, assist in the carrying out of all the
      provisions of this Section 3.6 and in the taking of all such action as may
      be
      necessary or appropriate in order to protect the Conversion Rights of the Holder
      against impairment. In the event a Holder shall elect to convert any Notes
      as
      provided herein, the Maker cannot refuse conversion based on any claim that
      such
      Holder or any one associated or affiliated with such Holder has been engaged
      in
      any violation of law, violation of an agreement to which such Holder is a party
      or for any reason whatsoever, unless, an injunction from a court, or notice,
      restraining and or adjoining conversion of all or of said Notes shall have
      issued and the Maker posts a surety bond for the benefit of such Holder in
      an
      amount equal to one hundred thirty percent (130%) of the amount of the Notes
      the
      Holder has elected to convert, which bond shall remain in effect until the
      completion of arbitration/litigation of the dispute and the proceeds of which
      shall be payable to such Holder (as liquidated damages) in the event it obtains
      judgment.

    

    (e) Certificates
      as to Adjustments.
      Upon
      occurrence of each adjustment or readjustment of the Conversion Price or number
      of shares of Common Stock issuable upon conversion of this Note pursuant to
      this
      Section 3.6, the Maker
      at its
      expense shall promptly compute such adjustment or readjustment in accordance
      with the terms hereof and furnish to the Holder a certificate setting forth
      such
      adjustment and readjustment, showing in detail the facts upon which such
      adjustment or readjustment is based. The Maker
      shall,
      upon written request of the Holder, at any time, furnish or cause to be
      furnished to the Holder a like certificate setting forth such adjustments and
      readjustments, the applicable Conversion Price in effect at the time, and the
      number of shares of Common Stock and the amount, if any, of other securities
      or
      property which at the time would be received upon the conversion of this Note.
      Notwithstanding the foregoing, the Maker shall not be obligated to deliver
      a
      certificate unless such certificate would reflect an increase or decrease of
      at
      least one percent (1%) of such adjusted amount.

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (g) Fractional
      Shares.
      No
      fractional shares of Common Stock shall be issued upon conversion of this Note.
      In lieu of any fractional shares to which the Holder would otherwise be
      entitled, the Maker shall pay cash equal to the product of such fraction
      multiplied by the average of the Closing Sale Prices of the Common Stock for
      the
      five (5) consecutive Trading Days immediately preceding the Conversion Date.
      The
      term "Closing
      Sale Price"
      shall
      mean, on any particular date (i) the last closing sale price per share of the
      Common Stock on such date on the OTC
      Bulletin Board or
      another registered national stock exchange on which the Common Stock is then
      listed, or if there is no such price on such date, then the last closing sale
      price on such exchange or quotation system on the date nearest preceding such
      date, or (ii) if the Common Stock is not listed then on the OTC Bulletin Board
      or any registered national stock exchange, the last trading price for a share
      of
      Common Stock in the over-the-counter market, as reported by the OTC Bulletin
      Board or in the National Quotation Bureau Incorporated or similar organization
      or agency succeeding to its functions of reporting prices) at the close of
      business on such date, or (iii) if the Common Stock is not then reported by
      the
      OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar
      organization or agency succeeding to its functions of reporting prices), then
      the average of the "Pink Sheet" quotes for the relevant conversion period,
      as
      determined in good faith by the Holder, or (iv) if the Common Stock is not
      then
      publicly traded the fair market value of a share of Common Stock as determined
      by the Holder and reasonably acceptable to the Maker.

     

    (h) Reservation
      of Common Stock.
      The
      Maker shall at all times when this Note shall be outstanding, reserve and keep
      available out of its authorized but unissued Common Stock, such number of shares
      of Common Stock as shall from time to time be sufficient to effect the
      conversion of this Note and all interest accrued thereon; provided
      that the
      number of shares of Common Stock so reserved shall at no time be less than
      one
      hundred twenty percent (120%) of the number of shares of Common Stock for which
      this Note and all interest accrued thereon is at any time convertible. The
      Maker
      shall, from time to time in accordance with Delaware law, increase the
      authorized number of shares of Common Stock if at any time the unissued number
      of authorized shares shall not be sufficient to satisfy the Maker’s obligations
      under this Section 3.6(h).

     

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

     

    Section
      3.7 Prepayment.

     

    (a) Prepayment
      Upon an Event of Default.
      Notwithstanding anything to the contrary contained herein, upon the occurrence
      of an Event of Default described in Section 2.1 hereof, the Holder shall have
      the right, at such Holder's option, to require the Maker to prepay in cash
      all
      or a portion of this Note at a price equal to (i) in the case of any Holder
      who
      is an Insider Purchaser, one hundred percent (100%), or (ii) in the case of
      any
      Holder who is not an Insider Purchaser, one hundred twenty percent (120%),
      of
      the aggregate principal amount of this Note plus all accrued and unpaid interest
      applicable at the time of such request. Nothing in this Section 3.7(a) shall
      limit the Holder's rights under Section 2.2 hereof. In the event the Holder
      is
      an Insider Purchaser, then the Holder agrees that prepayment of this Note plus
      all accrued interest pursuant to this Section 3.7(a) shall be expressly
      subordinate to the payment in full of any Other Notes then being prepaid
      pursuant to Section 3.7(a) of such Other Notes which are held by Other Holders
      which are not Insider Purchasers.

     

    
      
        
        

      

      
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    (b) Prepayment
      Option Upon Major Transaction. In addition to all other rights of the Holder
      contained herein, simultaneous with the occurrence of a Major Transaction (as
      defined below), the Holder shall have the right, at the Holder's option, to
      require the Maker to prepay in cash all or a portion of the Holder's Notes
      at a
      price equal to one hundred ten percent (110%) of the aggregate principal amount
      of this Note plus all accrued and unpaid interest (the "Major Transaction
      Prepayment Price"); provided that the Holder shall have the sole option to
      request payment of the Major Transaction Prepayment Price in cash or
      registered shares of common stock of the acquiror in a Major Transaction so
      long
      as the acquiror is a public company that is
      registered pursuant to the Exchange Act and its common stock is listed or quoted
      on a national securities exchange, national automated quotation system or the
      OTC Bulletin Board. In
      the
      event the Holder is an Insider Purchaser, then the Holder agrees that prepayment
      of this Note plus all accrued interest pursuant to this Section 3.7(b) shall
      be
      expressly subordinate to the payment in full of any Other Notes then being
      prepaid pursuant to Section 3.7(b) of such Other Notes which are held by Other
      Holders which are not Insider Purchasers.

     

    (c) Prepayment
      Option Upon Triggering Event.
      In
      addition to all other rights of the Holder contained herein, after a Triggering
      Event (as defined below), the Holder shall have the right, at the Holder's
      option, to require the Maker to prepay all or a portion of this Note in cash
      at
      a price equal to (1) in the case of any Holder who is an Insider Purchaser,
      one
      hundred percent (100%) of the aggregate principal amount of this Note plus
      all
      accrued and unpaid interest, or (2) in the case of any Holder who is not an
      Insider Purchaser, the sum of (i) the greater of (A) one hundred twenty-five
      percent (125%) of the aggregate principal amount of this Note and (B) in the
      event at such time the Holder is unable to obtain the benefit of its conversion
      rights through the conversion of this Note and resale of the shares of Common
      Stock issuable upon conversion hereof in accordance with the terms of this
      Note
      and the other Transaction Documents, the aggregate principal amount of this
      Note, divided by the Conversion Price on (x) the date the Prepayment Price
      (as
      defined below) is demanded or otherwise due or (y) the date the Prepayment
      Price
      is paid in full, whichever is less, multiplied by the VWAP (as defined below)
      on
      (x) the date the Prepayment Price is demanded or otherwise due, and (y) the
      date
      the Prepayment Price is paid in full, whichever is greater, and (ii) all other
      amounts, costs, expenses and liquidated damages due in respect of this Note
      and
      the other Transaction Documents (the "Triggering
      Event Prepayment Price,"
      and,
      collectively with the Major Transaction Prepayment Price, the "Prepayment
      Price").
      For
      purposes hereof, “VWAP”
means,
      for any date, (i) the daily volume weighted average price of the Common Stock
      for such date on the OTC Bulletin Board as reported by Bloomberg Financial
      L.P.
      (based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
      (ii) if the Common Stock is not then listed or quoted on the OTC Bulletin
      Board and if prices for the Common Stock are then reported in the “Pink Sheets”
published by the Pink Sheets, LLC (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid price
      per
      share of the Common Stock so reported; or (iii) in all other cases, the
      fair market value of a share of Common Stock as determined by an independent
      appraiser selected in good faith by the Holder and reasonably acceptable to
      the
      Maker. In the event the Holder is an Insider Purchaser, then the Holder agrees
      that prepayment of this Note plus all accrued interest pursuant to this Section
      3.7(c) shall be expressly subordinate to the payment in full of any Other Notes
      then being prepaid pursuant to Section 3.7(c) of such Other Notes which are
      held
      by Other Holders which are not Insider Purchasers.

     

    
      
        
        

      

      
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    (d) Intentionally
      Omitted.
      

     

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

     

    (i) the
      consolidation, merger or other business combination of the Maker with or into
      another Person (as defined in Section 4.14 hereof) (other than (A) pursuant
      to a
      migratory merger effected solely for the purpose of changing the jurisdiction
      of
      incorporation of the Maker or (B) a consolidation, merger or other business
      combination in which holders of the Maker's voting power immediately prior
      to
      the transaction continue after the transaction to hold, directly or indirectly,
      the voting power of the surviving entity or entities necessary to elect a
      majority of the members of the board of directors (or their equivalent if other
      than a corporation) of such entity or entities).

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    (ii) the
      Maker's notice to any holder of the Notes, including by way of public
      announcement, at any time, of its inability to comply (including for any of
      the
      reasons described in Section 3.8) or its intention not to comply with proper
      requests for conversion of any Notes into shares of Common Stock;
      or

     

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

     

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

     

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

     

    (g) Intentionally
      Omitted.

    

    (h) Mechanics
      of Prepayment at Option of Holder Upon Major Transaction. No sooner than
      fifteen (15) days nor later than ten (10) days prior to the consummation of
      a
      Major Transaction, but not prior to the public announcement of such Major
      Transaction, the Maker shall deliver written notice thereof via facsimile and
      overnight courier ("Notice of Major Transaction") to the Holder of this
      Note. At any time after receipt of a Notice of Major Transaction (or, in the
      event a Notice of Major Transaction is not delivered at least ten (10) days
      prior to a Major Transaction, at any time within ten (10) days prior to a Major
      Transaction), any holder of the Notes then outstanding may require the Maker
      to
      prepay, effective immediately prior to the consummation of such Major
      Transaction, all of the holder's Notes then outstanding by delivering written
      notice thereof via facsimile and overnight courier ("Notice of Prepayment at
      Option of Holder Upon Major Transaction") to the Maker, which Notice of
      Prepayment at Option of Holder Upon Major Transaction shall indicate (i) the
      principal amount of the Notes that such holder is electing to have prepaid
      and
      (ii) the applicable Major Transaction Prepayment Price, as calculated pursuant
      to Section 3.7(b) above.

     

    (i) Mechanics
      of Prepayment at Option of Holder Upon Triggering Event. Within one (1)
      business day after the occurrence of a Triggering Event, the Maker shall deliver
      written notice thereof via facsimile and overnight courier ("Notice of
      Triggering Event") to each holder of the Notes. At any time after the
      earlier of a holder's receipt of a Notice of Triggering Event and such holder
      becoming aware of a Triggering Event, any holder of this Note may require the
      Maker to prepay this Note by delivering written notice thereof via facsimile
      and
      overnight courier ("Notice of Prepayment at Option of Holder Upon Triggering
      Event") to the Maker, which Notice of Prepayment at Option of Holder Upon
      Triggering Event shall indicate (i) the amount of the Note that such holder
      is
      electing to have prepaid and (ii) the applicable Triggering Event Prepayment
      Price, as calculated pursuant to Section 3.7(c) above. A holder shall only
      be
      permitted to require the Maker to prepay the Note pursuant to Section 3.7 hereof
      for the greater of a period of ten (10) days after receipt by such holder of
      a
      Notice of Triggering Event or for so long as such Triggering Event is
      continuing.

     

    
      
        
        

      

      
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    (j) Payment
      of Prepayment Price.
      Upon
      the Maker's receipt of a Notice(s) of Prepayment at Option of Holder Upon
      Triggering Event or a Notice(s) of Prepayment at Option of Holder Upon Major
      Transaction from any holder of the Notes, the Maker shall promptly notify each
      holder of the Notes by facsimile of the Maker's receipt of such Notice(s) of
      Prepayment at Option of Holder Upon Triggering Event or Notice(s) of Prepayment
      at Option of Holder Upon Major Transaction and each holder which has sent such
      a
      notice shall promptly submit to the Maker such holder's certificates
      representing the Notes which such holder has elected to have prepaid. The Maker
      shall deliver the applicable Triggering Event Prepayment Price, in the case
      of a
      prepayment pursuant to Section 3.7(i), to such holder within five (5) business
      days after the Maker's receipt of a Notice of Prepayment at Option of Holder
      Upon Triggering Event and, in the case of a prepayment pursuant to Section
      3.7(h), the Maker shall deliver the applicable Major Transaction Prepayment
      Price immediately prior to the consummation of the Major Transaction; provided
      that a holder's original Note shall have been so delivered to the Maker;
      provided further that if the Maker is unable to prepay all of the Notes to
      be
      prepaid, the Maker shall prepay an amount from each holder of the Notes being
      prepaid equal to such holder's pro-rata amount (based on the number of Notes
      held by such holder relative to the number of Notes outstanding) of all Notes
      being prepaid. If the Maker shall fail to prepay all of the Notes submitted
      for
      prepayment (other than pursuant to a dispute as to the arithmetic calculation
      of
      the Prepayment Price), in addition to any remedy such holder of the Notes may
      have under this Note and the Purchase Agreement, the applicable Prepayment
      Price
      payable in respect of such Notes not prepaid shall bear interest at the rate
      of
      two percent (2%) per month (prorated for partial months) until paid in full.
      Until the Maker pays such unpaid applicable Prepayment Price in full to a holder
      of the Notes submitted for prepayment, such holder shall have the option (the
      "Void
      Optional Prepayment Option")
      to, in
      lieu of prepayment, require the Maker to promptly return to such holder(s)
      all
      of the Notes that were submitted for prepayment by such holder(s) under this
      Section 3.7 and for which the applicable Prepayment Price has not been paid,
      by
      sending written notice thereof to the Maker via facsimile (the "Void
      Optional Prepayment Notice").
      Upon
      the Maker's receipt of such Void Optional Prepayment Notice(s) and prior to
      payment of the full applicable Prepayment Price to such holder, (i) the
      Notice(s) of Prepayment at Option of Holder Upon Triggering Event or the
      Notice(s) of Prepayment at Option of Holder Upon Major Transaction, as the
      case
      may be, shall be null and void with respect to those Notes submitted for
      prepayment and for which the applicable Prepayment Price has not been paid,
      (ii)
      the Maker shall immediately return any Notes submitted to the Maker by each
      holder for prepayment under this Section 3.7(j) and for which the applicable
      Prepayment Price has not been paid and (iii) the Conversion Price of such
      returned Notes shall be adjusted to the lesser of (A) the Conversion Price
      as in
      effect on the date on which the Void Optional Prepayment Notice(s) is delivered
      to the Maker and (B) the lowest Closing Sale Price during the period beginning
      on the date on which the Notice(s) of Prepayment of Option of Holder Upon Major
      Transaction or the Notice(s) of Prepayment at Option of Holder Upon Triggering
      Event, as the case may be, is delivered to the Maker and ending on the date
      on
      which the Void Optional Prepayment Notice(s) is delivered to the Maker;
provided that
      no
      adjustment shall be made if such adjustment would result in an increase of
      the
      Conversion Price then in effect. A holder's delivery of a Void Optional
      Prepayment Notice and exercise of its rights following such notice shall not
      effect the Maker's obligations to make any payments which have accrued prior
      to
      the date of such notice. Payments provided for in this Section 3.7 shall have
      priority to payments to the Maker’s stockholders in connection with a Major
      Transaction. 

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (k) Maker
      Prepayment Option.

     

    (i) At
      any
      time following March 19, 2008, the Maker may prepay in cash all or any portion
      of the outstanding principal amount of this Note together with all accrued
      and
      unpaid interest thereon upon ten (10) Trading Days prior written notice to
      the
      Holder (the “Maker's
      Prepayment Notice”)
      at a
      price (the “Maker's
      Prepayment Price”)
      equal
      to (A) one hundred ten percent (110%)
      of the
      aggregate principal amount of this Note; plus (B) any accrued but unpaid
      interest outstanding at such time; (C) plus an amount equal to interest at
      the
interest
      rate as determined in accordance with Section 1.2 hereof on
      the
      principal amount of this Note being prepaid for a period that commences on
      the
      date of such prepayment and that terminates on the Maturity Date;
      provided,
      however,
      that if
      the Holder has delivered a Conversion Notice to the Maker or delivers a
      Conversion Notice within such ten (10) Trading Day period following delivery
      of
      the Maker’s Prepayment Notice, the principal amount of this Note designated to
      be converted may not be prepaid by the Maker and shall be converted in
      accordance with Section 3.3 hereof; provided further
      that if
      during the period between delivery of the Maker's Prepayment Notice and the
      Maker's Prepayment Date (as defined below), the Holder shall become entitled
      to
      deliver a Notice of Prepayment at Option of Holder Upon Major Transaction or
      Notice of Prepayment at Option of Holder upon Triggering Event, then such rights
      of the Holder, at its option, shall take precedence over the previously
      delivered Maker Prepayment Notice. The Maker's Prepayment Notice shall state
      the
      date of prepayment which date shall be the eleventh (11th)
      Trading
      Day after the Maker has delivered the Maker's Prepayment Notice (the
“Maker's
      Prepayment Date”),
      the
      Maker’s Prepayment Price and the principal amount of this Note to be prepaid by
      the Maker. The Maker shall deliver the Maker's Prepayment Price on the Maker’s
      Prepayment Date, provided,
      that if
      the Holder delivers a Conversion Notice before the Maker's Prepayment Date,
      then
      the portion of the Maker's Prepayment Price which would be paid to prepay this
      Note covered by such Conversion Notice shall be returned to the Maker upon
      delivery of the Common Stock issuable in connection with such Conversion Notice
      to the Holder. On the Maker's Prepayment Date, the Maker shall pay the Maker's
      Prepayment Price, subject to any adjustment pursuant to the immediately
      preceding sentence, to the Holder. If the Maker fails to pay the Maker's
      Prepayment Price by the eleventh (11th)
      Trading
      Day after the Maker has delivered the Maker's Prepayment Notice, the Maker’s
      Prepayment Notice will be declared null and void ab
      initio
      and the
      Maker shall lose its right to prepay this Note pursuant to this Section 3.7(k).
      Notwithstanding the foregoing to the contrary, the Maker may effect a prepayment
      pursuant to this Section 3.7(k) only if (1) the Registration Statement is
      effective and has been effective, without lapse or suspension of any kind,
      for a
      period of thirty (30) consecutive calendar days immediately preceding the
      Maker’s Prepayment Notice through the Maker’s Prepayment Date, (2) trading
      in the Common Stock shall not have been suspended by the Securities and Exchange
      Commission or the OTC Bulletin Board (or other exchange or market on which
      the
      Common Stock is trading), (3) the Maker is in material compliance with the
      terms
      and conditions of this Note and the other Transaction Documents, and (4) the
      Maker is not in possession of any material non-public information.

     

    
      
        
        

      

      
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    (ii) In
      the
      event that this Note is prepaid in accordance with this Section 3.7(k), then
      on
      the Maker’s Prepayment Date, the Maker shall issue to the Holder warrants (the
“Prepayment
      Warrants”)
      substantially in the form of the Warrants issued to the Holder pursuant to
      the
      Purchase Agreement to purchase up to such number of fully paid and
      non-assessable shares of Common Stock as is determined by multiplying (A) the
      quotient of (1) that portion of the principal
      amount of this Note being prepaid plus
      any
      accrued but unpaid interest on such principal amount as of the Maker’s
      Prepayment Date, divided by (2) the Conversion Price then in effect on the
      Maker’s Prepayment Date, by (B) twenty-five percent (25%). The Prepayment
      Warrants will have an exercise price equal to 110% of the Closing Sale Price
      of
      the Common Stock on the Maker’s Prepayment Date, and shall expire on the five
      (5) year anniversary of the Maker’s Prepayment Date.

    

    Section
      3.8 Inability
      to Fully Convert.

     

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

     

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

     

    (ii) if
      the
      Maker's inability to fully convert is pursuant to Section 3.8(a)(x) above,
      require the Maker to issue restricted shares of Common Stock in accordance
      with
      such holder's Conversion Notice;

     

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

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

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

     

    (b) Mechanics
      of Fulfilling Holder's Election.
      The
      Maker shall promptly send via facsimile to the Holder, upon receipt of a
      facsimile copy of a Conversion Notice from the Holder which cannot be fully
      satisfied as described in Section 3.8(a) above, a notice of the Maker's
      inability to fully satisfy the Conversion Notice (the "Inability
      to Fully Convert Notice").
      Such
      Inability to Fully Convert Notice shall indicate (i) the reason why the Maker
      is
      unable to fully satisfy such holder's Conversion Notice, (ii) the amount of
      this
      Note which cannot be converted and (iii) the applicable Mandatory Prepayment
      Price. The Holder shall notify the Maker of its election pursuant to Section
      3.8(a) above by delivering written notice via facsimile to the Maker
      ("Notice
      in Response to Inability to Convert").

     

    (c) Payment
      of Prepayment Price.
      If the
      Holder shall elect to have its Notes prepaid pursuant to Section 3.8(a)(i)
      above, the Maker shall pay the Mandatory Prepayment Price to the Holder within
      thirty (30) days of the Maker's receipt of the Holder's Notice in Response
      to
      Inability to Convert, provided
      that
      prior to the Maker's receipt of the Holder's Notice in Response to Inability
      to
      Convert the Maker has not delivered a notice to the Holder stating, to the
      satisfaction of the Holder, that the event or condition resulting in the
      Mandatory Prepayment has been cured and all Conversion Shares issuable to the
      Holder can and will be delivered to the Holder in accordance with the terms
      of
      this Note. If the Maker shall fail to pay the applicable Mandatory Prepayment
      Price to the Holder on the date that is one (1) business day following the
      Maker's receipt of the Holder's Notice in Response to Inability to Convert
      (other than pursuant to a dispute as to the determination of the arithmetic
      calculation of the Prepayment Price), in addition to any remedy the Holder
      may
      have under this Note and the Purchase Agreement, such unpaid amount shall bear
      interest at the rate of two percent (2%) per month (prorated for partial months)
      until paid in full. Until the full Mandatory Prepayment Price is paid in full
      to
      the Holder, the Holder may (i) void the Mandatory Prepayment with respect to
      that portion of the Note for which the full Mandatory Prepayment Price has
      not
      been paid, (ii) receive back such Note, and (iii) require that the Conversion
      Price of such returned Note be adjusted to the lesser of (A) the Conversion
      Price as in effect on the date on which the Holder voided the Mandatory
      Prepayment and (B) the lowest Closing Sale Price during the period beginning
      on
      the Conversion Date and ending on the date the Holder voided the Mandatory
      Prepayment. In the event the Holder is an Insider Purchaser, then the Holder
      agrees that the Mandatory Prepayment pursuant to Section 3.8(a)(i) above shall
      be expressly subordinate to the payment in full of any Other Notes then subject
      to Mandatory Prepayment which are held by Other Holders which are not Insider
      Purchasers.

     

    (d) Pro-rata
      Conversion and Prepayment.
      In the
      event the Maker receives a Conversion Notice from more than one holder of the
      Notes on the same day and the Maker can convert and prepay some, but not all,
      of
      the Notes pursuant to this Section 3.8, the Maker shall convert and prepay
      from
      each holder of the Notes electing to have its Notes converted and prepaid at
      such time an amount equal to such holder's pro-rata amount (based on the
      principal amount of the Notes held by such holder relative to the principal
      amount of the Notes outstanding) of all the Notes being converted and prepaid
      at
      such time.

     

    
      
        
        

      

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

     

     

    ARTICLE
      IV

     

    MISCELLANEOUS

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    Section
      4.14 Definitions.
      For the
      purposes hereof, the following terms shall have the following
      meanings:

    

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

     

    “Trading
      Day”
means
      any day during which The New York Stock Exchange shall be open for
      business.

    
      	 	 	 
	 	GLOWPOINT,
              INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
	 	Title:
              

    

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A

    

    WIRE
      INSTRUCTIONS

     

    

     

    Payee:
      ________________________________________________________

     

    Bank:
      ________________________________________________________

     

    Address:
      _____________________________________________________

     

    ______________________________________________________

     

    Bank
      No.:
      _____________________________________________________

     

    Account
      No.: __________________________________________________

     

    Account
      Name: _________________________________________________

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

       

    

    FORM
      OF

     

    NOTICE
      OF
      CONVERSION

     

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

     

    The
      undersigned hereby irrevocably elects to convert $ ________________ of the
      principal amount of the above Note No. CN-07-____ into shares of Common Stock
      of
      Glowpoint, Inc. (the “Maker”) according to the conditions hereof, as of the date
      written below.

     

    Date
      of
      Conversion
      _________________________________________________________

     

    Applicable
      Conversion Price __________________________________________________

     

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

     

    Name
      of
      bank/broker due to receive the underlying Common Stock:
      _________________________    

     

    Bank/broker's
      four digit "DTC" participant number

    (obtained
      from the receiving bank/broker):
      __________________________________________________

     

    Signature___________________________________________________________________

     

    [Name]

     

    Address:__________________________________________________________________

     

    _______________________________________________________________________

     

    
      
        
        

      

      
        29Unassociated Document

    AMENDMENT
      NO. 1

    TO

    SERIES
      A WARRANT TO PURCHASE

    SHARES
      OF COMMON STOCK OF

    GLOWPOINT,
      INC.

     

    THIS
      AMENDMENT NO. 1 TO SERIES A WARRANT TO PURCHASE SHARES OF COMMON STOCK OF
      GLOWPOINT, INC. (this “Amendment”), dated as of September 21, 2007, is made by
      and among Glowpoint, Inc., a Delaware corporation (the “Issuer”) and
      ___________________ (the “Holder”).

     

    Preliminary
      Statement

     

    WHEREAS,
      the Issuer is the issuer and the Holder is the holder of Series A Warrant No.
      _______ to Purchase Common Stock of the Issuer (the “Warrant”); and

     

    WHEREAS,
      the Issuer and the Holder desire to amend certain provisions of the Warrant
      as
      described herein.

     

    NOW,
      THEREFORE, for good and valuable consideration, the receipt and sufficiency
      of
      which is hereby acknowledged, the parties, intending to be legally bound, hereby
      agree as follows:

     

    1.  Capitalized
      Terms.
      Capitalized terms used, but not defined, herein, shall have the meanings
      ascribed to such terms in the Warrant. 

     

    2.  Amendments
      to Warrant.

     

    (a)  Additional
      Shares of Common Stock.
      The
      definition of “Additional Shares of Common Stock” in Section 8 of the Warrant is
      hereby deleted in its entirety and the following new definition shall be
      substituted in lieu thereof:

     

    “
      “Additional
      Shares of Common Stock”
means
      all shares of Common Stock issued by the Issuer after the Original Issue Date,
      and all shares of Other Common, if any, issued by the Issuer after the Original
      Issue Date, except: (i) securities issued (other than for cash) in connection
      with a merger, acquisition, or consolidation, (ii) securities issued pursuant
      to
      the conversion or exercise of convertible or exercisable securities issued
      or
      outstanding on or prior to the date hereof (so long as the conversion or
      exercise price in such securities are not amended to lower such price and/or
      adversely affect the Holders) or
      issued
      pursuant to the Purchase Agreements, as amended, (iii) securities issued
      pursuant to the terms of that certain Exchange Agreement, dated as of September
      21, 2007, by and among the Maker and the holders signatory thereto, (iv) the
      issuance of the Notes and the Warrants, (v) the shares of Common Stock issuable
      upon the conversion of the Notes, (vi) the Warrant Stock, (vii) securities
      issued in connection with bona fide strategic license agreements or other
      partnering arrangements so long as such issuances are not for the purpose of
      raising capital, (viii) Common Stock issued or the issuance or grants of options
      to purchase Common Stock pursuant to Issuer’s stock option plans and employee
      stock purchase plans approved by the Issuer’s board of directors, so long as
      such issuances in the aggregate do not exceed the number of shares of Common
      Stock (or options to purchase such number of shares of Common Stock) issuable
      pursuant to such plans as they exist as of September 21, 2007, (ix) any warrants
      issued to the placement agent and its designees for the transactions
      contemplated by the Purchase Agreements, (x) the payment of any dividends on
      the
      Issuer’s Series B convertible preferred stock, (xi) securities issued pursuant
      to a bona fide firm underwritten public offering of the Issuer’s securities,
      (xii) the payment of liquidated damages pursuant to the Registration Rights
      Agreement dated February 17, 2004 between the Issuer and the parties listed
      therein and (xiii) the issuance of Common Stock upon the exercise or conversion
      of any securities described in clauses (i) through (xii) above.”

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)  Notes.
      The
      definition of “Notes” in Section 8 of the Warrant is hereby deleted in its
      entirety and the following new definition shall be substituted in lieu
      thereof:

     

    “
      “Notes”
shall
      mean collectively, each of the following, as the same may be amended from time
      to time: (1) the senior secured convertible promissory notes issued pursuant
      to
      the Purchase Agreement, and that certain Note and Warrant Purchase Agreement,
      dated as of April 12, 2006, by and among the Maker and the purchasers listed
      therein (collectively with the Purchase Agreement, the “2006
      Purchase Agreements”),
      (2)
      the additional senior secured convertible promissory notes in the aggregate
      principal amount of up to $3,600,000 issued pursuant to that certain Note and
      Warrant Purchase Agreement, dated as of September 21, 2007, by and among the
      Maker and the purchasers listed therein (collectively with the 2006 Purchase
      Agreements, the “Purchase
      Agreements”),
      and
      (3) any additional senior secured convertible promissory notes issued from
      time
      to time as interest on the outstanding principal balance of the foregoing
      promissory notes.”

     

    (c)  Warrants.
      The
      definition of “Warrants” in Section 8 of the Warrant is hereby deleted in its
      entirety and the following new definition shall be substituted in lieu
      thereof:

     

    “
      “Warrants”
shall
      mean, collectively, each of the following, as the same may be amended from
      time
      to time: (A) the warrants to purchase shares of Common Stock issued pursuant
      to
      the Purchase Agreements (including, without limitation, this Warrant); (B)
      the
      warrants to purchase shares of Common Stock issued in connection with the
      amendment of the senior secured convertible promissory notes issued pursuant
      to
      the 2006 Purchase Agreements; and (C) any other warrants of like tenor issued
      in
      substitution or exchange for any of the foregoing Warrants pursuant to the
      provisions of Section 2(c), 2(d) or 2(e) thereof.”

     

    (d)  Notice
      of Adjustments.
      Section
      5 of the Warrant is hereby deleted in its entirety and the following new Section
      5 shall be substituted in lieu thereof:

     

    “5. Notice
      of Adjustments; Dispute Resolution.
      Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
      to
      Section 4 hereof (for purposes of this Section 5, each an "adjustment"),
      the
      Issuer shall cause its Chief Financial Officer to prepare and execute a
      certificate setting forth, in reasonable detail, the event requiring the
      adjustment, the amount of the adjustment, the method by which such adjustment
      was calculated (including a description of the basis on which the Board made
      any
      determination hereunder), and the Warrant Price and Warrant Share Number after
      giving effect to such adjustment, and shall cause copies of such certificate
      to
      be delivered to the Holder of this Warrant promptly after each adjustment.
      Notwithstanding any dispute between the Issuer and the Holder of this Warrant
      with respect to the matters set forth in such certificate, the Issuer shall
      cause its transfer agent to promptly issue to the Holder the number of shares
      of
      Warrant Stock that is not disputed.”

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (e)  Certain
      Other Distributions.
      Section
      4(c)(i) of the Warrant is hereby amended by deleting the parenthetical contained
      therein.

     

    (f)  Notices
      to the Company.
      The
      notices information for the Issuer in Section 12 of the Warrant is hereby
      deleted in its entirety and the following new notices information be substituted
      in lieu thereof:

     

    “Glowpoint,
      Inc.

    225
      Long
      Avenue

    Hillside,
      New Jersey 07205

    Attention:
      Chief Executive Officer 

    Tel.
      No.:
      (312) 235-3888 x2053

    Fax
      No.:
      (973) 391-1904

     

    and

     

    General
      Counsel

    Glowpoint,
      Inc.

    225
      Long
      Avenue 

    Hillside,
      New Jersey 07205

    Tel.
      No.:
      (312) 235-3888 x 2087

    Fax
      No.:
      (973) 556-1272

     

    with
      copies (which copies 

    shall
      not
      constitute notice 

    to
      the
      Issuer) to:   

     

    Gibbons
      P.C.

    One
      Gateway Center

    Newark,
      New Jersey 07102

    Attn:
      Frank Cannone, Esq.

    Tel.
      No.:
      (973) 596-4500

    Fax
      No.:
      (973) 596-0545”

     

    3.  Ratification.
      Except
      as expressly amended hereby, all of the terms, provisions and conditions of
      the
      Warrant are hereby ratified and confirmed in all respects by each party hereto
      and, except as expressly amended hereby, are, and hereafter shall continue,
      in
      full force and effect.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    4.  Entire
      Agreement.
      This
      Amendment and the Warrant constitute the entire agreement of the parties with
      respect to the subject matter hereof and supersede all prior and contemporaneous
      agreements and understandings, both written and oral, between the parties with
      respect thereto.

     

    5.  Amendments.
      No
      amendment, supplement, modification or waiver of this Amendment shall be binding
      unless executed in writing by all parties hereto.

     

    6.  Counterparts.
      This
      Amendment may be executed in two or more counterparts, each of which shall
      constitute an original but all of which when taken together shall constitute
      but
      one contract. Each party shall be entitled to rely on a facsimile signature
      of
      any other party hereunder as if it were an original.

     

    7.  Governing
      Law.
      This
      Amendment shall be governed by and construed in accordance with the internal
      laws of the State of New York, without giving effect to any of the conflicts
      of
      law principles which would result in the application of the substantive law
      of
      another jurisdiction. 

     

    8.  Successors
      and Assigns.
      This
      Amendment shall be binding upon and inure to the benefit of the parties hereto
      and their respective successors and assigns.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    
      	 	 	 
	 	GLOWPOINT,
              INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
	 	Title:

    

     

     

    
      	 	 	 
	 	[Holder]
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
	 	Title:

    

     

    

      Signature
        Page to Amendment No. 1 to Warrant

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