Document:

February 2,
      2007

     

    Via
      Federal Express

     

    Wherify
      Wireless, Inc.

    2000
      Bridge Parkway, Suite 201

    Redwood
      Shores, CA 94065

    Attention: Timothy
      J. Neher

     

    Re: Wherify
      Wireless, Inc./Cornell Capital Dear Timothy:

     

    Wherify
      Wireless, Inc. (the “Company”) has requested that Cornell Capital Partners, LP
      (“Cornell”) make certain accommodations in connection with the securities
      purchase agreement between the Company and Cornell entered into on
      March 10, 2006, the secured convertible debentures (the “Debentures”) and
      warrants (the “Warrants”) issued thereunder, and other related documents entered
      into in connection with that transaction (collectively, the “Transaction
      Documents”). In order to allow Laidlaw and Company (UK) Ltd. (“Laidlaw”) to
      attempt to raise additional financing for the Company, the Company has requested
      that Cornell confirm that it will agree to the amendments below, if Laidlaw
      is
      successful in raising net proceeds to the Company, in one or more closings
      and/or transactions, of at least $4.5 million within 120 days from the date
      of
      this letter (the “Laidlaw Financing”).

     

    The
      Company and Cornell hereby agree to make the following amendments and
      modifications to the Transaction Documents, which shall only become effective
      upon the date (the “Effective
      Date”)
      the
      Company closes on the Laidlaw Financing:

     

    1.  Consent.Cornell
      hereby agrees and consents as follows:

     

    a.  From
      the
      date hereof until the earlier to occur of the Effective Date or 120 days from
      the date hereof, Cornell shall refrain from declaring the Debentures in default
      and forebear from acceleration of its right to repayment of the Debentures;
      and

     

    b.  Upon
      the
      Effective Date, Cornell shall waive all known defaults of the Company that
      exist
      as of the Effective Date and agree not to accelerate the repayment of the
      Debentures, as amended below, at any time prior to the eight (8) month
      anniversary of the Effective Date..

     

    2.  Amendments
      to the Debentures.On
      the
      Effective Date, Cornell and the Company shall amend the existing Debentures
      as
      follows, and issued amended Debentures to reflect such changes:

     

    a.  The
      maturity date shall be extended to February 1, 2009.

     

    b.  The
      interest rate shall be changed to 8% payable monthly in arrears beginning eight
      months after these amendments are made. When due, the interest may be paid
      in
      cash or capitalized and added to the principal amount of the Debenture, at
      the
      option of the Company.

     

    c.  The
      Company shall make monthly amortization payments under the Debentures in the
      principal amount of $200,000 per month beginning eight months after these
      amendments are made. These liquidation payments shall be reduced by any amounts
      of the Debentures that Cornell has converted during the prior
      month.

     

    d.  The
      conversion price shall be amended to a fixed conversion price of $0.25. The
      Laidlaw Financing
      shall
      be carved out of the anti-dilution and ratchet provisions, but, in the event
      that subsequent to the Effective Date there shall be a capital raising of equity
      or equity based financing with an effective price per share below $0.25 per
      share, the conversion price will be adjusted on a weighted average
      basis.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    e.  Cornell
      shall not convert any portion of the Debenture into in excess of 800,000 shares
      of common stock in any month unless at any time during such month the stock
      price is greater than $0.35 per share based on a trailing 5 day VWAP
      calculation.

     

    f.  The
      Company may make early redemptions of the amended Debentures at any time and
      without any additional penalty or premium provided that the Company provides
      Cornell with 10 days advance notice of any such redemptions, waives the
      conversion restriction set forth above, and, if requested by Cornell, raises
      the
      conversion cap from 4.99% to 9.99%. After receipt of any such redemption
      notices, Cornell shall continue to have the right to convert the Debentures
      during the notice period.

     

    3.  Warrants.Cornell
      shall return to the Company for cancellation warrants to purchase 15,500,000
      shares of common stock and retain the remaining warrants to purchase 7,000,000
      shares of common stock. Cornell will agree to exercise the retained warrants
      on
      a cash basis so long as the shares underlying them are subject to an effective
      registration statement at the time of exercise and no event of default under
      the
      Debentures has occurred.

     

    4.  Security.The
      Debentures, as amended, shall continue to be secured by the security granted
      in
      pursuant to the original Transaction Documents.

     

    This
      agreement shall automatically terminate if the Effective Date has not occurred
      within 120 days from the date hereof, or such other time as mutually agreed
      in
      writing by the parties. Nothing contained herein shall be considered a wavier
      on
      the part of Cornell of any and all of its rights under the Transaction
      Documents. Prior to the Effective Date, albeit subject to the provisions of
      Section 1(a) hereof, all terms, conditions, and obligations contained
      in the Transaction Documents shall remain in full force and effect.

     

    The
      Company agrees to publicly disclose the material terms of this letter and,
      subject to legal limitations relating thereto, the Laidlaw financing efforts
      within 4 days of signing.

     

    
      	 	 	
              Sincerely,

               

              CORNELL
                CAPITAL PARTNERS, LP

               

              By:
                Yorkville Advisors, LLC, General Partner

               

              

               

              By:
                __________________________________________

              Name: Mark
                Angelo

            
	 	 	 
	 	 	 

    

    

    

    Agreed
      and accepted this ____ day of February, 2007

     

    WHERIFY
      WIRELESS, INC.

     

    

     

    By:
      ___________________________________________

    Name:
      Timothy J. Neher

     

    Title:
      Chief Executive Officer

     

     

    
      
         

      

      
        -2-THIS
      NOTE, THE SHARES OF COMMON STOCK AND/OR OTHER SECURITIES ISSUABLE UPON
      CONVERSION OF THIS NOTE (THE “SECURITIES”) HAVE BEEN ACQUIRED FOR INVESTMENT
      PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) SHALL HAVE BECOME
      EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION
      OF
      COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION
      UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR
      IS
      IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE
      ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE AND ANY SECURITIES
      ISSUABLE UPON CONVERSION OF THIS NOTE.

     

    WHERIFY
      WIRELESS, INC.

     

    10%
      Senior Convertible Promissory Note and Loan Agreement

     

    
      	 Bridge Note No.: 1	
                February
                ___, 2007 

            

    

     

    FOR
      VALUE
      RECEIVED, Wherify Wireless, Inc., a Delaware corporation (collectively with
      all
      of its Subsidiaries, as defined in the SPA (as defined below), the “Company”)
      with
      its principal executive office at 200 Bridge Parkway, Suite 201, Redwood Shores,
      California 94065, promises to pay to the order of GPS Associates, LLC, a
      Delaware limited liability Company (the “Payee”
or
      the
“Holder
      of this Note”)
      or
      registered assigns on the earlier of (i) February 15, 2008 and (ii) if so
      elected by the Payee, upon consummation by the Company of a merger, combination
      or sale of substantially all of its assets or the purchase by a single entity
      or
      person or group of affiliated entities or persons of more than fifty (50%)
      percent of the voting stock of the Company (the “Maturity
      Date”),
      the
      principal amount of One Million Two Hundred Thousand Dollars ($1,200,000) (the
      “Principal
      Amount”)
      in
      such coin or currency of the United States of America as at the time of payment
      shall be legal tender for the payment of public and private debts. Interest
      on
      this Note shall accrue on the Principal Amount outstanding from time to time
      at
      a rate per annum computed in accordance with Section
      3
      hereof
      and shall be payable on the Maturity Date. Nothing in item (ii) of this
      paragraph shall be construed as the consent by the holder of this Note to any
      action otherwise prohibited by the terms of this Note or as a waiver of any
      such
      prohibition.

     

    Each
      payment by the Company pursuant to this Note shall be made without set-off
      or
      counterclaim and in immediately available funds.

     

    The
      Company (i) waives presentment, demand, protest or notice of any kind in
      connection with this Note and (ii) agrees, in the event of an Event of Default,
      to pay to the holder of this Note, on demand, all costs and expenses (including
      reasonable legal fees and expenses) incurred in connection with the enforcement
      and collection of this Note.

     

    This
      Note
      was issued to the Payee in connection with a private placement (the
“Bridge
      Financing”)
      by the
      Company of this Note and a warrant (the “Investment
      Warrant”)
      to
      purchase 3,000,000 shares of common stock, par value $0.01 per share of the
      Company (the “Common
      Stock”),
      pursuant to and in accordance with a Securities Purchase and Option Agreement
      dated the date hereof by and between the Company and the Payee (the
“SPA”),
      a
      copy of which agreement is available for inspection at the Company’s principal
      office. Notwithstanding any provision to the contrary contained herein, this
      Note is subject and entitled to certain terms, conditions, covenants and
      agreements contained in the SPA. Any transferee of this Note, by its acceptance
      hereof, assumes the obligations of the Payee in the SPA with respect to the
      conditions and procedures for transfer of this Note. Reference to the SPA shall
      in no way impair the absolute and unconditional obligation of the Company to
      pay
      both principal hereof and interest hereon as provided herein.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.  No
      Prepayment.  This Note may not be prepaid prior to the Maturity Date,
      except as provided in Section 6 herein.

     

    2.  Investment
      Warrants.
      In
      consideration for the loan evidenced by the Note, the Company shall issue to
      the
      Holder of this Note the five (5) year Investment Warrant to purchase 3,000,000
      shares of Common Stock at an exercise price of $0.10 per share (the
“Warrant
      Shares”).
      The
      Holder of this Note may at any time that this Note remains outstanding present
      that portion of the Note to the Company equal in face amount to the amount
      due
      in payment of the exercise price of all or any portion of the Investment
      Warrant, provided that, in connection therewith, any accrued interest in respect
      of surrender of a portion of the Note shall remain due and payable at the
      Maturity Date in the amount that had accrued to the exercise date of the
      Investment Warrant 

     

    3.  Computation
      of Interest.

     

    A.  Base
      Interest Rate. Subject to Subsections 3.B and
3.C below,
      the outstanding Principal Amount shall bear
      interest at the rate of ten (10%) percent per annum.

     

    B.  Penalty
      Interest. In the event that any then unpaid amount due on the Note is not
      repaid on the Maturity Date, the rate of interest applicable to the unpaid
      Principal Amount shall be adjusted to eighteen (18%) percent per annum from
      the
      date of default until repayment; provided, that in no event shall the interest
      rate exceed the Maximum Rate provided in Section 3.C
      below.

     

    C.  Maximum
      Rate. In the event that it is determined that, under the laws relating to
      usury applicable to the Company or the indebtedness evidenced by this Note
      (“Applicable Usury Laws”), the interest charges and fees
      payable by the Company in connection herewith or in connection with any other
      document or instrument executed and delivered in connection herewith cause
      the
      effective interest rate applicable to the indebtedness evidenced by this Note
      to
      exceed the maximum rate allowed by law (the “Maximum
      Rate”), then such interest shall be recalculated for the period in
      question and any excess over the Maximum Rate paid with respect to such period
      shall be credited, without further agreement or notice, to the Principal Amount
      outstanding hereunder to reduce said balance by such amount with the same force
      and effect as though the Company had specifically designated such extra sums
      to
      be so applied to principal and the Payee had agreed to accept such extra
      payment(s) as a premium-free prepayment. All such deemed prepayments shall
      be
      applied to the principal balance payable at maturity. In no event shall any
      agreed-to or actual exaction as consideration for this Note exceed the limits
      imposed or provided by Applicable Usury Laws in the jurisdiction in which the
      Company is resident applicable to the use or detention of money or to
      forbearance in seeking its collection in the jurisdiction in which the Company
      is resident.

     

    4.  Covenants
      of Company. For the purposes of this Section 4, the term
“Company” shall include all of the Subsidiaries
      (as
      defined in the SPA).

     

    A.  Affirmative
      Covenants.
      The
      Company covenants and agrees that, so long as this Note shall be outstanding,
      it
      will perform the obligations set forth in this Section
      4.A,
      unless
      it has otherwise obtained the prior written consent of Laidlaw: 

     

    (i)  Taxes
      and Levies.
      The
      Company will promptly pay and discharge all taxes, assessments, and governmental
      charges or levies imposed upon the Company or upon its income and profits,
      or
      upon any of its property, before the same shall become delinquent, as well
      as
      all claims for labor, materials and supplies which, if unpaid, might become
      a
      lien or charge upon such properties or any part thereof; provided,
      however,
      that
      the Company shall not be required to pay and discharge any such tax, assessment,
      charge, levy or claim so long as the validity thereof shall be contested in
      good
      faith by appropriate proceedings and the Company shall set aside on its books
      adequate reserves in accordance with generally accepted accounting principles
      (“GAAP”)
      with
      respect to any such tax, assessment, charge, levy or claim so contested;

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (ii)  Maintenance
      of Existence.
      The
      Company will do or cause to be done all things reasonably necessary to preserve
      and keep in full force and effect its corporate existence, rights and franchises
      and comply with all laws applicable to the Company, except where the failure
      to
      comply could not reasonably be expected to have a material adverse effect on
      the
      Company; 

     

    (iii)  Maintenance
      of Property.
      The
      Company will at all times maintain, preserve, protect and keep such property
      material to the conduct of its business in good repair, working order and
      condition, and from time to time make all needful and proper repairs, renewals,
      replacements and improvements thereto as shall be reasonably required in the
      conduct of its business; 

     

    (iv)  Insurance.
      The
      Company will, to the extent necessary for the operation of its business, keep
      adequately insured by financially sound reputable insurers, all property of
      a
      character usually insured by similar corporations and carry such other insurance
      as is usually carried by similar corporations; 

     

    (v)  Books
      and Records.
      The
      Company will at all times keep true and correct books, records and accounts
      reflecting all of its business affairs and transactions in accordance with
      GAAP.
      Such books and records shall be open at reasonable times and upon reasonable
      notice to the inspection of the Payee or its agents, subject to the execution
      by
      such persons of a reasonable non-disclosure agreement; 

     

    (vi)  Underlying
      Securities.
      The
      Company agrees to keep reserved such number of shares of Common Stock as will
      permit full conversion of the Notes at any time or from time to time at the
      Conversion Price (as defined herein) and exercise of the Investment Warrants;
      

     

    (vii)  Notice
      of Certain Events.
      The
      Company will give prompt written notice (with a description in reasonable
      detail) to the Payee of: 

     

    (a)  the
      occurrence of any Event of Default (as defined in Section
      5
      hereof),
      or an event of default under any document or instrument evidencing or governing
      any indebtedness of the Company and the delivery of any notice effecting the
      acceleration of any such indebtedness; and 

     

    (b)  the
      occurrence of any litigation, arbitration or governmental investigation or
      proceeding not previously disclosed by the Company to the Payee in writing
      which
      has been instituted or, to the knowledge of the Company, is threatened, against
      the Company or to which any of its properties, assets or revenues is subject
      which, if adversely determined, would reasonably be expected to have a material
      adverse effect on the Company; and 

     

    (c)  any
      material adverse development which shall occur in any litigation, arbitration
      or
      governmental investigation or proceeding previously disclosed by the Company
      to
      the Payee; 

     

    (viii)  Access.
      The
      Company will grant holders of this Note access to Company facilities and
      personnel during normal business hours and with reasonable advance notification.
      The Company will deliver to the Holders annual, quarterly financial statements
      and copies of other financial and other documents and/or information reasonably
      requested by the Holder.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    B.  Negative
      Covenants.
      The
      Company covenants and agrees that, so long as this Note shall be outstanding,
      it
      will perform the obligations set forth in this Section
      4.B
      unless
      it has otherwise obtained the prior written consent of all Holders:

     

    (i)  Liquidation,
      Dissolution.
      The
      Company will not liquidate or dissolve, consolidate with, or merge into or
      with,
      any other corporation or other entity, except that any wholly-owned subsidiary
      may merge with another wholly-owned subsidiary or with the Company (so long
      as
      the Company is the surviving entity and no Event of Default shall occur as
      a
      result thereof) unless, in connection therewith, the Payee shall, at its
      election, either (1) receive the Maturity Date amount then due or (2) convert
      the Note pursuant to the provisions of Section
      6.B
      hereof.

     

    (ii)  Sales
      of Assets.
      Unless
      the Payee shall, at its election, either (1) receive the Maturity Date amount
      then due or (2) convert the Note pursuant to the provisions of Section
      6.B
      hereof,
      the Company will not sell, transfer, lease or otherwise dispose of, or grant
      options, warrants or other rights with respect to, all or a substantial part
      of
      its properties or assets (an “Asset
      Transaction”)
      to any
      person or entity, provided that
      this
      clause (ii) shall not restrict any disposition made in the ordinary course
      of
      business and consisting of: 

     

    (a)  capital
      goods that are obsolete or have no remaining useful life; or 

     

    (b)  finished
      goods inventories.

     

    (iii)  Redemptions.
      The
      Company will not redeem or repurchase any outstanding securities of the Company;
      

     

    (iv)  Indebtedness.
      The
      Company will not hereafter create, incur, assume or suffer to exist,
      contingently or otherwise, any indebtedness except accounts payable incurred
      in
      the ordinary course of business, which is not expressly subordinated in right
      of
      payment and otherwise to the Notes.

     

    (v)  Negative
      Pledge.
      The
      Company will not hereafter create, incur, assume or suffer to exist any
      mortgage, pledge, hypothecation, assignment, security interest, encumbrance,
      lien (statutory or other), preference, priority or other security agreement
      or
      preferential arrangement of any kind or nature whatsoever (including any
      conditional sale or other title retention agreement and any financing lease)
      (each, a “Lien”)
      upon
      any of its property, revenues or assets, whether now owned or hereafter
      acquired, except: 

     

    (a)  Liens
      for
      taxes, assessments or other governmental charges or levies not at the time
      delinquent or thereafter payable without penalty or being contested in good
      faith by appropriate proceedings and for which adequate reserves in accordance
      with GAAP shall have been set aside on its books; 

     

    (b)  Liens
      of
      carriers, warehousemen, mechanics, materialman and landlords incurred in the
      ordinary course of business for sums not overdue or being contested in good
      faith by appropriate proceedings and for which adequate reserves in accordance
      with GAAP shall have been set aside on its books; 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (c)  Liens
      (other than Liens arising under the Employee Retirement Income Security Act
      of
      1974, as amended, or Section 412(n) of the Internal Revenue Code of 1986, as
      amended) incurred in the ordinary course of business in connection with workers’
compensation, unemployment insurance or other forms of governmental insurance
      or
      benefits, or to secure performance of tenders, statutory obligations, leases
      and
      contracts (other than for borrowed money) entered into in the ordinary course
      of
      business or to secure obligations on surety or appeal bonds; 

     

    (d)  judgment
      Liens in existence less than thirty (30) days after the entry thereof or with
      respect to which execution has been stayed; 

     

    (e)  Liens
      in
      the nature of zoning restrictions, easements and rights or restrictions of
      record on the use of real property which do not materially detract from its
      value or impair its use; 

     

    (f)  Liens
      arising by operation of law in favor of the owner or sublessor of leased
      premises and confined to the property rented; 

     

    (g)  Liens
      arising from any litigation or proceeds which is being contested in good faith
      by appropriate proceedings, provided, however, that no execution or levy has
      been made; and 

     

    (h)  Liens
      which secure indebtedness permitted by Section
      4.B(vii).

     

    (vi)  Investments.
      The
      Company will not purchase, own, invest in or otherwise acquire, directly or
      indirectly, any stock or other securities or make or permit to exist any
      investment or capital contribution or acquire any interest whatsoever in any
      other person or entity or permit to exist any loans or advances for such
      purposes except for investments in direct obligations of the United States
      of
      America or any agency thereof, obligations guaranteed by the United States
      of
      America and certificates of deposit or other obligations of any bank or trust
      company organized under the laws of the United States or any state thereof
      and
      having capital and surplus of at least $500,000,000; provided, however, that
      nothing contained in this clause (vi) shall preclude the Company from making
      acquisitions for the purpose of expanding its business.

     

    (vii)  Guaranteed
      Indebtedness.
      The
      Company shall not create, incur, assume and/or permit to exist any Guaranteed
      Indebtedness (as defined below) to any bank, lender, or any other person in
      connection with any credit facilities extended by such creditors to the Company
      and/or any of its Subsidiaries (as defined in the SPA), and/or in connection
      with any other contracts or agreements. “Guaranteed
      Indebtedness”
shall
      mean as to any person, any obligation of such person guaranteeing any
      indebtedness, lease, dividend, or other obligation of any other person in any
      manner, including any obligation or arrangement of such person to (1) purchase
      or repurchase any such primary obligation, (2) advance or supply funds for
      the
      purchase or payment of any primary obligation or to maintain working capital
      or
      otherwise to maintain working solvency or any balance sheet condition; (3)
      purchase property, securities or services primarily for the purpose of assuring
      the owner of any such obligation of the ability of the Company to make payment
      of such obligation; (4) protect the beneficiary of such arrangement from loss;
      or (5) indemnify the owner of such obligation against loss.

     

    (viii)  Dividends.
      The
      Company will not accrue, declare or pay any cash dividends or distributions,
      whether accrued or otherwise, on its outstanding capital stock, provided,
      however, that nothing herein contained shall prevent the Company from effecting
      a stock split or declaring or paying any dividend consisting solely of shares
      of
      any class of Common Stock to the holders of shares of such class of Common
      Stock, provided that (i) such stock split or stock dividend is effected equally
      across all classes of Common Stock and (ii) the holder of the Note participates
      in such events as if the holder had converted the Note immediately prior to
      such
      event into the number of shares of Common Stock he would be entitled to receive
      if he had so converted; 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (ix)  Subsidiaries.
      The
      Company will not make or create any direct and/or indirect
      subsidiaries.

     

    (x)  The
      Company shall not provide and/or pay any cash bonus or other compensation to
      any
      of its employees, officers, directors and/or consultants in excess of what
      is
      expressly permitted in their respective employment agreements (or if no
      agreements are in place, other than what has been historically
      paid);

     

    5.  Events
      of Default

    .

    A.  The
      term
“Event of Default” shall mean any of the events set forth in this Section
5.A: 

     

    (i)  Non-Payment
      of Obligations.
      The
      Company shall default in the payment of the principal or accrued interest on
      this Note when and as the same shall become due and payable, whether by
      acceleration or otherwise.

     

    (ii)  Non-Performance
      of Affirmative Covenants.
      The
      Company shall default in the due observance or performance of any material
      covenant set forth in Section
      4.A,
      which
      default shall continue uncured for ten (10) business days after written notice
      from Payee.

     

    (iii)  Non-Performance
      of Negative Covenants.
      The
      Company shall default in the due observance or performance of any covenant
      set
      forth in Section
      4.B,
      which
      default shall continue uncured for ten (10) business days after written notice
      from Payee.

     

    (iv)  Bankruptcy,
      Insolvency, etc.
      The
      Company shall: 

     

    (a)  generally
      fail or be unable to pay, or admit in writing its inability to pay, its debts
      as
      they become due; 

     

    (b)  apply
      for, consent to, or acquiesce in, the appointment of a trustee, receiver,
      sequestrator or other custodian for the Company or any of its property, or
      make
      a general assignment for the benefit of creditors; 

     

    (c)  in
      the
      absence of such application, consent or acquiesce in, permit or suffer to exist
      the appointment of a trustee, receiver, sequestrator or other custodian for
      the
      Company or for any part of its property, and such trustee, receiver,
      sequestrator or other custodian shall not be discharged within thirty (30)
      days;

     

    (d)  permit
      or
      suffer to exist the commencement of any bankruptcy, reorganization, debt
      arrangement or other case or proceeding under any bankruptcy or insolvency
      law,
      or any dissolution, winding up or liquidation proceeding, in respect of the
      Company, and, if such case or proceeding is not commenced by the Company or
      converted to a voluntary case, such case or proceeding shall be consented to
      or
      acquiesced in by the Company or shall result in the entry of an order for relief
      or shall remain for sixty (60) days undismissed; or 

     

    (e)  take
      any
      corporate action authorizing, or in furtherance of, any of the foregoing;

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (v)  Cross-Default.
      The
      Company shall default in the payment when due (including any applicable grace
      period) of any amount payable under any other obligation of the Company for
      money borrowed in excess of $100,000 , which default shall continue uncured
      for
      three (3) business days; 

     

    (vi)  Cross-Acceleration.
      Any
      indebtedness for borrowed money of the Company or any subsidiary in an aggregate
      principal amount exceeding $100,000 (1) shall be duly declared to be or shall
      become due and payable prior to the stated maturity thereof or (2) shall not
      be
      paid as and when the same becomes due and payable including any applicable
      grace
      period; 

     

    (vii)  Judgments.
      A
      judgment which, with other such outstanding judgments against the Company and
      its subsidiaries (in each case to the extent not covered by insurance), exceeds
      an aggregate of $100,000, shall be rendered against the Company or any
      subsidiary and, within twenty (20) days after entry thereof, such judgment
      shall
      not have been vacated, discharged or otherwise satisfied or execution thereof
      stayed pending appeal, or, within thirty (30) days after the expiration of
      any
      such stay, such judgment shall not have been discharged or otherwise satisfied;
      and 

     

    (viii)  Transaction
      Documents.
      The
      Company shall violate any material representation, warranty, covenant, agreement
      or obligation set forth in the SPA, the Registration Rights Agreement dated
      as
      of the date hereof among the Company, Payee and other purchasers of the Notes
      (the “Registration
      Rights Agreement”),
      and/or the Investment Warrant and such default is continuing for ten (10)
      business days after written notice from Payee.

     

    B.  Action
      if Bankruptcy.
      If any
      Event of Default described in clauses (v)(a) through (d) of Section
      5.A
      shall
      occur, the outstanding Principal Amount of this Note and all other obligations
      hereunder shall automatically be and become immediately due and payable, without
      notice or demand.

     

    C.  Action
      if Other Event of Default.
      If any
      Event of Default (other than any Event of Default described in clauses (v)(a)
      through (d) of Section
      5.A)
      shall
      occur for any reason, whether voluntary or involuntary, and be continuing,
      the
      Holders may, upon notice to the Company, declare all or any portion of the
      outstanding Principal Amount of the Notes together with interest accrued thereon
      to be due and payable and any or all other obligations hereunder to be due
      and
      payable, whereupon the full unpaid Principal Amount (or any portion thereof
      so
      demanded), such accrued interest and any and all other such obligations which
      shall be so declared due and payable shall be and become immediately due and
      payable, without further notice, demand, or presentment.

     

    D.  Remedies.
      In case
      any Event of Default shall occur and be continuing, the Payee may proceed to
      protect and enforce its rights by a proceeding seeking the specific performance
      of any covenant or agreement contained in this Note or in aid of the exercise
      of
      any power granted in this Note or may proceed to enforce the payment of this
      Note or to enforce any other legal or equitable rights as such holder shall
      determine.

     

    6.  Conversions
      and Exchange

     

    A.  Mandatory
      Exchange.
      In the
      event that the Payee shall elect not to convert all of this Note, along will
      all
      other Notes issued in the Bridge Financing, in accordance with Section
      6.B
      hereof,
      the remaining balance of Notes outstanding shall be converted or exchanged
      (the
“Mandatory
      Exchange”)
      into
      shares of the Series A Convertible Preferred Stock, with the terms as set forth
      on Schedule
      1.2(b)
      to the
      SPA (the “A
      Shares”),
      issued connection with completion of the Step II Offering as such is
      contemplated in the SPA.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    B.  Optional
      Conversion.
      Notwithstanding anything to the contrary contained in Section
      6
      hereof
      or elsewhere, the Holder, at its sole option, shall have the right to convert
      from time to time, any and/or all of the Principal Amount and all accrued,
      but
      unpaid Interest into Conversion Shares, at the Conversion Price by submitting
      a
      written notice (the “Optional
      Conversion Election Form”),
      in
      the form of Exhibit A annexed hereto, electing to exercise its optional
      conversion rights (the “Optional Conversion”).

     

    C.  Conversion
      Price.
      The
      number of Conversion Shares to be issued upon conversion of the Principal Amount
      pursuant to Section
      6.B
      shall be
      determined by dividing the Conversion Amount (as defined below) by the
      applicable Conversion Price (as defined in below). The term “Conversion
      Amount”
means,
      with respect to any conversion of this Note, the Principal Amount to be
      converted. The “Conversion
      Price”
shall
      be (subject to anti-dilution adjustments as provided in this Note) $0.10 per
      share.

     

    D.  Conversion
      Mechanics

     

    (i)  Surrender
      of Note Upon Conversion.
      Notwithstanding anything to the contrary set forth herein, upon conversion
      of
      this Note in accordance with the terms of Section
      6
      of this
      Note, the Holder shall be required to physically surrender this Note (or any
      affidavit of lost Note) to the Company in order to receive the Conversion Shares
      due upon conversion of this Note by the Company.

     

    (ii)  Delivery
      of Common Stock Upon Conversion.
      Upon
      receipt by the Company of this Note (or any affidavit of lost Note) and provided
      the Holder has converted this Note in accordance with the requirements of
Section
      6
      of this
      Note, the Company shall issue and deliver or cause to be issued and delivered
      to
      or upon the order of the Holder certificates for the Conversion Shares no later
      than five (5) business days after such receipt (the “Deadline”).

     

    E.  Concerning
      the Conversion Shares.
      Conversion Shares may not be sold or transferred unless (i) such shares are
      sold
      pursuant to an effective registration statement under the Act or (ii) the
      Company or its transfer agent shall have been furnished with an opinion of
      counsel (which opinion shall be in form, substance and scope customary for
      opinions of counsel in comparable transactions) to the effect that the shares
      to
      be sold or transferred may be sold or transferred pursuant to an exemption
      from
      such registration or (iii) such shares are sold or transferred pursuant to
      Rule
      144 under the Act (or a successor rule) (“Rule
      144”)
      or
      (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of
      the Holder who agrees to sell or otherwise transfer the shares only in
      accordance with this Note and who is an accredited investor. Except as otherwise
      provided in the SPA, until such time as the Conversion Shares have been
      registered under the Act as contemplated by the Registration Rights Agreement
      or
      otherwise may be sold pursuant to Rule 144 without any restriction as to the
      number of securities as of a particular date that can then be immediately sold,
      each certificate for Conversion Shares that has not been so included in an
      effective registration statement or that has not been sold pursuant to an
      effective registration statement or an exemption that permits removal of the
      legend, shall bear a legend substantially in the following form, as appropriate:
      

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED
      OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
      SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
      SCOPE
      CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION
      IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION
      S
      UNDER SAID ACT.”

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    The
      legend set forth above shall be removed and the Company shall issue to the
      Holder a new certificate therefor free of any transfer legend if (i) the Company
      or its transfer agent shall have received an opinion of counsel, in form,
      substance and scope customary for opinions of counsel in comparable
      transactions, to the effect that a public sale or transfer of such Common Stock
      may be made without registration under the Securities Act and the shares are
      so
      sold or transferred, (ii) such Holder provides the Company or its transfer
      agent
      with reasonable assurances that the Conversion Shares can be sold pursuant
      to
      Rule 144 or Rule 144(k) or (iii) if the Conversion Shares are registered for
      resale under an effective registration statement filed under the Act Nothing
      in
      this Note shall limit the Company’s obligation under the Registration Rights
      Agreement. Failure to delivery certificates with the legend removed for
      Conversion Shares shall result in certain payments to the Holder as set forth
      in
      the SPA.

     

    F.  Status
      as Shareholder.
      Upon
      submission of this Note by the Holder and the satisfaction of the Conversion
      Conditions by the Holder, (i) the shares covered thereby shall be deemed
      Conversion Shares and (ii) the Holder’s rights as a Holder of this Note shall
      cease and terminate, excepting only the right to receive certificates for the
      Conversion Shares and to any remedies provided herein or otherwise available
      at
      law or in equity that have then accrued to such Holder because of a failure
      by
      the Borrower to comply with the terms of this Note. Notwithstanding the
      foregoing, if a Holder has not received certificates for all Conversion Shares
      prior to the second (2nd) business day after the expiration of the Deadline
      with
      respect to any reason, then (unless the Holder otherwise elects to retain its
      status as a holder of Common Stock by so notifying the Borrower) the Holder
      shall regain the rights of a Holder of this Note and the Company shall, as
      soon
      as practicable, return such unconverted Note to the Holder or, if the Note
      has
      not been surrendered, adjust its records to reflect that such portion of this
      Note has not been converted. In all cases, the Holder shall retain all of its
      rights and remedies for the Company’s failure to convert this Note.

     

    7.  Adjustment
      Of Conversion Price And Number Of Convertible Shares Issuable

     

    A.  For
      purposes of this Section 7,
      “Convertible
      Security”
means
      any stock or securities, directly or indirectly, convertible into or
      exchangeable for Common Equity (as hereinafter defined) , including without
      limitation any exchangeable debt securities; “Option”
shall
      mean any rights or options to subscribe for or purchase Common Equity or
      Convertible Securities.

     

    B.  If
      and
      whenever the Company issues or sells or, in accordance with Section 7.C,
      is
      deemed to have issued or sold, any share of Common Equity without consideration
      or for a net consideration per share less than $0.10 (as adjusted for stock
      splits, dividends, recapitalizations, reclassifications and other similar
      events), then immediately upon such issuance or sale, the Conversion Price
      shall
      be reduced to the price per share determined by dividing (i) an amount equal
      to
      the sum of (A) the number of shares of Fully Diluted Equity immediately prior
      to
      such issuance multiplied by the Conversion Price in effect immediately prior
      to
      such issuance, and (B) the consideration, if any, received by the Company upon
      such issuance, by (ii) the total number of shares of Fully Diluted Equity
      immediately after such issuance.

     

    Notwithstanding
      the foregoing, there shall be no adjustment to the Conversion Price with respect
      to: 

     

    (i)  Common
      Stock issued or issuable upon conversion of the Note and/or this Warrant;

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (ii)  Common
      Stock issued or issuable upon the conversion or exercise or exchange of options,
      warrants, rights and other securities or debt that is outstanding on the
      Original Issuance Date; 

     

    (iii)  Common
      Stock or securities convertible into Common Stock issuable upon the conversion
      or exercise of securities issuable to Laidlaw & Company (UK) Ltd.;

     

    (iv)  Common
      Stock issuable pursuant to stock option plans which have been approved by the
      Corporation’s directors and shareholders, but only to the extent that the
      aggregate number of shares of Common Stock and securities providing for the
      right to acquire Common Stock, issued under all of such plans to all officers,
      directors and employees, does not, in any twelve (12) month period, exceed,
      in
      the aggregate, five percent (5%) of the total number of shares of Common Stock
      issued and outstanding at the beginning of such twelve (12) month period; and
      

     

    (v)  Common
      Stock or options, warrants or other rights to acquire or securities convertible
      into or exchangeable for shares of Common Stock, which are issued to any
      non-affiliated third party in connection with (A) the acquisition of all of
      the
      issued and outstanding equity interests of an unaffiliated corporation or other
      entity; (B) the merger of any such entity described in clause (A) immediately
      preceding into the Corporation, where the Corporation is the surviving entity;
      or (C) the acquisition by the Corporation of all or substantially all of the
      assets of any such entity described in clause (A) hereof; provided,
      however,
      that in
      any such case the transaction has been approved by the Corporation’s independent
      and disinterested directors.

     

    C.  For
      purposes of this Section 7,
      “Common
      Equity”
means
      all shares now or hereafter authorized of any class of common stock of the
      Company (including the Common Stock) and any other stock of the Company, however
      designated, authorized on or after the date hereof, which has the right (subject
      always to prior rights of any class or series of preferred stock) to participate
      in any distribution of the assets or earnings of the Company without limit
      as to
      per share amount, and “Fully
      Diluted Equity”
means,
      with respect to the Company at any given time, (A) the number of shares of
      Common Equity actually outstanding at such time, plus (B) the maximum number
      of
      shares of Common Equity that are issuable upon the exercise, exchange or
      conversion of any unexpired right or unexpired option (including the Warrants)
      to subscribe for, to purchase or to receive Common Equity or other securities
      convertible into or exchangeable for Common Equity, including without limitation
      any exchangeable debt securities, regardless of whether any of the foregoing
      are
      actually exercisable at such time; provided, however, the number of shares
      of
      Common Equity outstanding at any given time shall not include shares, directly
      or indirectly, owned or held by or for the account of the Company.

     

    D.  For
      purposes of determining the adjusted Conversion Price under Section 7.B
      above,
      the following shall be applicable: 

     

    (1)  CONSIDERATION.
      If any Common Equity, Options or Convertible Securities are issued or sold
      or
      deemed to have been issued or sold for cash, the consideration received therefor
      shall be deemed to be (i) in the case of any public offering of such securities
      for cash, the gross proceeds of such offering (without deduction for any
      underwriters discount) and (ii) in the case of any other issuance, sale or
      deemed issuance or sale for cash, the gross amount received by the Company
      therefor. In case any Common Equity, Options or Convertible Securities are
      issued or sold for a consideration other than cash, the amount of the
      consideration other than cash received by the Company shall be the fair market
      value of such consideration. In case any Common Equity, Options or Convertible
      Securities are issued to the owners of the non-surviving entity in connection
      with any merger in which the Company is the surviving corporation, the amount
      of
      consideration therefor shall be deemed to be the fair market value of such
      portion of the net assets and business of the non-surviving entity as is
      attributable to such Common Equity, Options or Convertible Securities, as the
      case may be. The fair market value of any consideration other than cash shall
      be
      determined by the Company in good faith.

     

    (2)  OPTIONS
      AND CONVERTIBLE SECURITIES. In the case of the granting or sale of any Option
      or
      Convertible Security (whether or not at the time convertible, exercisable or
      exchangeable): 

     

    (A)  the
      aggregate maximum number of shares of Common Equity deliverable, directly or
      indirectly, upon exercise of any Option shall be deemed to have been issued
      at
      the time such Option was granted and for a consideration equal to the
      consideration (determined in the manner provided in subsection (1) above),
      if
      any, received by the Company upon the issuance of such Option plus the minimum
      purchase price provided in such Option for the Common Equity covered thereby;
      

     

    (B)  the
      aggregate maximum number of shares of Common Equity deliverable upon conversion
      of or in exchange for any such Convertible Security, or upon the exercise of
      any
      Option to purchase or acquire any Convertible Security and the subsequent
      conversion or exchange thereof, shall be deemed to have been issued at the
      time
      such Convertible Security was issued or such Option was issued and for a
      consideration equal to the consideration, if any, received by the Company for
      any such Convertible Security and any related Option (excluding any cash
      received on account of accrued interest or accrued dividends), plus the
      additional consideration (determined in the manner provided in subsection (1)
      above), if any, to be received by the Company upon the conversion or exchange
      of
      such Convertible Security, or upon the exercise of any related Option to
      purchase or acquire any Convertible Security and the subsequent conversion
      or
      exchange thereof; 

     

    (C)  on
      any
      change in the number of shares of Common Equity deliverable, directly or
      indirectly, upon conversion, exercise or exchange of any such Option or
      Convertible Security or any change in the consideration to be received by the
      Company upon such exercise, conversion or exchange, including, but not limited
      to, a change resulting from the anti-dilution provisions thereof, the Conversion
      Price as then in effect shall forthwith be readjusted to such Conversion Price
      as would have been obtained had an adjustment been made upon the issuance of
      such Option or Convertible Security upon the basis of such change; and

     

    (D)  if
      the
      Conversion Price shall have been adjusted upon the issuance of any such Option
      or Convertible Security, no further adjustment of the Conversion Price shall
      be
      made for the actual issuance of Common Equity upon any exercise, conversion,
      or
      exchange thereof; provided, however, that none of the events set forth in
Section
      7(c)(2)(A) through 7(c)(2)(D),
      inclusive, shall result in any increase in the Purchase Price.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (3)  INTEGRATED
      TRANSACTION. In case any Option is issued in connection with the issue or sale
      of other securities of the Company, together comprising one integrated
      transaction in which no specific consideration is allocated to such Options
      by
      the parties thereto, the Options shall be deemed to have been issued without
      consideration.

     

    (4)  TREASURY
      SHARES. The number of shares of Common Equity outstanding at any given time
      does
      not include shares owned or held by or for the account of the Company, and
      the
      disposition of any shares so owned or held shall be considered an issuance
      or
      sale of Common Equity.

     

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

     

    (A)  If
      the
      Company at any time subdivides (by any stock split, stock dividend,
      recapitalization or otherwise) one or more classes of its outstanding shares
      of
      Common Equity into a greater number of shares, the Conversion Price in effect
      immediately prior to such subdivision shall be proportionately reduced and
      the
      number of shares of Common Stock obtainable upon exercise of the Note shall
      be
      proportionately increased. If the Company at any time combines (by reverse
      stock
      split or otherwise) one or more classes of its outstanding shares of Common
      Stock into a smaller number of shares, the Conversion Price in effect
      immediately prior to such combination shall be proportionately increased and
      the
      number of shares of Common Stock obtainable upon exercise of this Note shall
      be
      proportionately decreased.

     

    (B)  Any
      recapitalization, reorganization, reclassification, consolidation, merger,
      sale
      of all or substantially all of the Company’s assets or other transaction, in
      each case which is effected in such a way that the holders of Common Equity
      are
      entitled to receive (either directly or upon subsequent liquidation) stock,
      securities or assets with respect to or in exchange for Common Equity is
      referred to herein as a “Corporate
      Change.”
Prior
      to the consummation of any Corporate Change, the Company shall make appropriate
      provision (in form and substance satisfactory to the Noteholder) to insure
      that
      the Noteholder shall thereafter have the right to acquire and receive, in lieu
      of or in addition to (as the case may be) the Conversion Shares acquirable
      and
      receivable upon the conversion of this Note, such shares of stock, securities
      or
      assets as may be issued or payable with respect to or in exchange for the number
      of Conversion Shares acquirable and receivable upon exercise of such holder’s
      Note had such Corporate Change not taken place. In any such case, the Company
      shall make appropriate provision (in form and substance reasonably satisfactory
      to the Noteholder) with respect to such holder’s rights and interests to insure
      that the provisions of this Agreement shall thereafter be applicable to the
      Notes (including, in the case of any such consolidation, merger or sale in
      which
      the successor entity or purchasing entity is other than the Company, any
      adjustment of the Conversion Price based on Section
      7
      hereof).
      The Company shall not effect any such consolidation, merger or sale, unless
      prior to the consummation thereof, the successor entity (if other than the
      Company) resulting from consolidation or merger or the entity purchasing such
      assets assumes by written instrument (in form and substance reasonably
      satisfactory to the Noteholder), the obligation to deliver to the Noteholder
      such shares of stock, securities or assets as, in accordance with the foregoing
      provisions, such holder may be entitled to acquire. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (C)  If
      any
      event occurs of the type contemplated by the provisions of this Section
      7
      but not
      expressly provided for by such provisions (including, without limitation, the
      granting of stock appreciation rights, phantom stock rights or other rights
      with
      equity features), then the Company’s Board shall make an appropriate adjustment
      in the Conversion Price and the number of shares of Common Stock obtainable
      upon
      conversion of this Note so as to protect the rights of the Noteholder; provided
      that no such adjustment shall increase the Conversion Price or decrease the
      number of shares of Common Stock obtainable as otherwise determined pursuant
      to
      this Section
      7.
      

     

    (D)  If
      the
      Company declares or pays a dividend upon the Common Equity payable otherwise
      than in cash out of earnings or earned surplus (determined in accordance with
      generally accepted accounting principles, consistently applied) except for
      a
      stock dividend payable in shares of Common Stock (a “Liquidating
      Dividend”),
      then
      the Company shall pay to the Noteholder at the time of payment thereof the
      Liquidating Dividend which would have been paid to such Noteholder on the Common
      Stock had the Notes been fully converted immediately prior to the date on which
      a record is taken for such Liquidating Dividend, or, if no record is taken,
      the
      date as of which the record holders of Common Equity entitled to such dividends
      are to be determined.

     

    8.  Amendments
      and Waivers

     

    A.  The
      provisions of this Note may from time to time be amended, modified or waived,
      if
      such amendment, modification or waiver is in writing and consented to in writing
      by the Company and the Holder of this Note.

     

    B.  No
      failure or delay on the part of the Payee in exercising any power or right
      under
      this Note shall operate as a waiver thereof, nor shall any single or partial
      exercise of any such power or right preclude any other or further exercise
      thereof or the exercise of any other power or right. No notice to or demand
      on
      the Company in any case shall entitle it to any notice or demand in similar
      or
      other circumstances. No waiver or approval by the Payee shall, except as may
      be
      otherwise stated in such waiver or approval, be applicable to subsequent
      transactions. No waiver or approval hereunder shall require any similar or
      dissimilar waiver or approval thereafter to be granted hereunder.

     

    C.  To
      the
      extent that the Company makes a payment or payments to the Payee, and such
      payment or payments or any part thereof are subsequently for any reason
      invalidated, set aside and/or required to be repaid to a trustee, receiver
      or
      any other party under any bankruptcy law, state or federal law, common law
      or
      equitable cause, then to the extent of such recovery, the obligation or part
      thereof originally intended to be satisfied, and all rights and remedies
      therefor, shall be revived and continued in full force and effect as if such
      payment had not been made or such enforcement or setoff had not
      occurred.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    D.  After
      any
      waiver, amendment or supplement under this section becomes effective, the
      Company shall mail to the Holders of this Note a copy thereof.

     

    9.  Miscellaneous.

     

    A.  Parties
      in Interest.
      All
      covenants, agreements and undertakings in this Note binding upon the Company
      or
      the Payee shall bind and inure to the benefit of the successors and permitted
      assigns of the Company and the Payee, respectively, whether so expressed or
      not.

     

    B.  Governing
      Law.
      This
      Note shall be governed by and construed exclusively in accordance with the
      laws
      of the State of New York without regard to the conflicts of laws principles
      thereof. The parties hereto hereby agree that any suit or proceeding arising
      directly and/or indirectly pursuant to or under this instrument or the
      consummation of the transactions contemplated hereby, shall be brought solely
      in
      a federal or state court located in the City, County and State of New York.
      By
      its execution hereof, the parties hereby covenant and irrevocably submit to
      the
in personam
      jurisdiction of the federal and state courts located in the City, County and
      State of New York and agrees that any process in any such action may be served
      upon any of them personally, or by certified mail or registered mail upon them
      or their agent, return receipt requested, with the same full force and effect
      as
      if personally served upon them in New York City. The parties hereto waive any
      claim that any such jurisdiction is not a convenient forum for any such suit
      or
      proceeding and any defense or lack of in personam
      jurisdiction with respect thereto. In the event of any such action or
      proceeding, the party prevailing therein shall be entitled to payment from
      the
      other party hereto of its reasonable and documented counsel fees and
      disbursements in an amount judicially determined.

     

    C.  Notices.
      All
      notices and other communications from the Company to the Holder of this Note
      shall be mailed by first class, registered or certified mail, postage prepaid,
      and/or a nationally recognized overnight courier service to the address
      furnished to the Company in writing by the Holder.

     

    D.  Notice
      of Certain Transactions.
      In case
      at any time: 

     

    (i)  The
      Company shall declare any dividend upon, or other distribution in respect of,
      its Common Stock; or 

     

    (ii)  The
      Company shall offer for subscription to the holders of its Common Stock any
      additional shares of stock of any class or any other securities convertible
      into
      shares of stock or any rights to subscribe thereto; or 

     

    (iii)  There
      shall be any capital reorganization or reclassification of the capital stock
      of
      the Company, or a sale of all or substantially all of the assets of the Company,
      or a consolidation or merger of the Company with another corporation (other
      than
      a merger with a subsidiary in which merger the Company is the continuing
      corporation and which does not result in any reclassification); or 

     

    (iv)  There
      shall be a voluntary or involuntary dissolution; liquidation or winding-up
      of
      the Company; 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    then,
      in
      any one or more of said cases, the Company shall cause to be mailed to the
      Payee
      at the earliest practicable time (and, in any event not less than twenty (20)
      days before any record date or other date set for definitive action), written
      notice of the date on which the books of the Company shall close or a record
      shall be taken for such dividend, distribution or subscription rights or such
      reorganization, reclassification, sale, consolidation, merger or dissolution,
      liquidation or winding-up shall take place, as the case may be. Such notice
      shall also set forth such facts as shall indicate the effect of such action
      (to
      the extent such effect may be known at the date of such notice) on the
      Conversion Price and the kind and amount of the shares of stock and other
      securities and property deliverable upon the conversion of this Note. Such
      notice shall also specify the date as of which the holders of the Common Stock
      of record shall participate in said dividend, distribution or subscription
      rights or shall be entitled to exchange their Common Stock for securities or
      other property deliverable upon such reorganization, reclassification, sale,
      consolidation, merger or dissolution, liquidation or winding-up, as the case
      may
      be.

     

    Nothing
      herein shall be construed as the consent of the holder of this Note to any
      action otherwise prohibited by the terms of this Note or as a waiver of any
      such
      prohibition.

     

    E.  Reservation
      of Shares.
      The
      Company covenants and agrees that it will at all times have authorized and
      reserved, solely for the purpose of such possible conversion, out of its
      authorized but unmissed shares, a sufficient number of shares of its Common
      Stock to provide for the exercise in full of the conversion rights contained
      in
      this Note.

     

    F.  Validity
      of Stock.
      All
      shares of Common Stock which may be issued upon conversion of this Note will,
      upon issuance by the Company in accordance with the terms of this Note, be
      validly issued, free from all taxes and liens with respect to the issuance
      thereof (other than those created by the holders), free from all pre-emptive
      or
      similar rights and fully paid and non-assessable.

     

    G.  Cash
      Payments.
      No
      fractional shares (or scrip representing fractional shares) of Common Stock
      shall be issued upon conversion of this Note. In the event that the conversion
      of this Note would result in the issuance of a fractional share of Common Stock,
      the Company shall pay a cash adjustment in lieu of such fractional share to
      the
      holder of this Note based upon the Conversion Price.

     

    H.  Stamp
      Taxes, etc.
      The
      Company shall pay all documentary, stamp or other transactional taxes
      attributable to the issuance or delivery of shares of Common Stock, upon
      conversion of this Note; provided, however, that the Company shall not be
      required to pay any taxes which may be payable in respect of any transfer
      involved in the issuance or delivery of any certificate for such shares in
      a
      name other than that of the holder of this Note, and the Company shall not
      be
      required to issue or deliver any such certificate unless and until the person
      requesting the issuance thereof shall have paid to the Company the amount of
      such tax or shall have established to the Company’s satisfaction that such tax
      has been paid.

     

    I.  Waiver
      of Jury Trial.
      THE
      PAYEE AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
      ANY
      RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
      HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER
      DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY
      COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN),
      OR
      ACTIONS OF THE PAYEE OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT
      FOR
      THE PAYEE’S PURCHASING THIS NOTE.

     

    J.  Registration
      Rights Agreement.
      The
      holder of this Note is entitled to have the Conversion Shares registered for
      resale under the Act, pursuant to and in accordance with the Registration Rights
      Agreement.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      this
      Note has been executed and delivered on the date specified above by the duly
      authorized representative of the Company.

     

    WHERIFY
      WIRELESS, INC.

     

     

    By:________________________________

    Name:

    Title:

    
      
        
        

        
        

      

      
        15

        
          

        

      

      
        
        

        
        

      

    

    Optional
      Conversion Election Form

     

    ____________,
      200_ 

     

    Wherify
      Wireless, INC.

    200
      Bridge Parkway 

    Suite
      201

    Redwood
      Shores, California 94065 

     

    Re:
      Optional Conversion of Promissory Note

     

    Gentlemen:
      

     

    You
      are
      hereby notified that, pursuant to, and upon the terms and conditions of that
      certain 10% Senior Convertible Promissory Note of Wherify Wireless, INC. (the
      “Company”),
      in
      the principal amount of $    
      (the
“Note”),
      held
      by me, I hereby elect to exercise my right of Optional Conversion (as such
      term
      in defined in the Note), effective as of the date of this writing.

     

    Please
      provide me with all applicable instructions for the Optional Conversion of
      the
      Note, and issue certificate(s) for the applicable shares of the Company’s Common
      Stock issuable upon the Optional Conversion, in the name of the person provided
      below. 

     

    Very
      truly yours, 

                                                        
      

    ___________________________
      

    Name:
      

    

     

    Please
      issue certificate(s) for Common Stock as follows: 

     

                                                                                  
                        

    Name
      

     

                                                                                       

    Address

     

    ______________________________________________

    Social
      Security No. of Shareholder

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