Document:

EX-10.3

 Exhibit 10.3 

EXCHANGE AGREEMENT 
 This Exchange
Agreement (this “Agreement”) is made and entered into as September     , 2016, by and between
                     (the “Holder”), and Gevo, Inc., a Delaware corporation (the “Company”). 

RECITALS 
 WHEREAS, the Holder is
the beneficial owner of certain of the Company’s 7.5% Convertible Senior Notes due 2022 (the “Notes”) issued pursuant to a note in global form registered in the name of Cede & Co. (the “Global Note”) in
accordance with that certain Indenture, dated July 5, 2012, by and between the Company and Wells Fargo Bank, National Association (the “Trustee”), as amended by that certain First Supplemental Indenture, dated July 5, 2012 (the
“Indenture”); 
 WHEREAS, pursuant to the terms and conditions set forth in the Indenture, the Holder has the right to convert the
Notes into shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), at a rate of 11.7113 shares per $1,000 principal amount, which reflects an adjustment to account for the reverse split of the Common
Stock effected April 20, 2015 (the “Conversion Rate”); 
 WHEREAS, as of the date of this Agreement, the Conversion Rate exceeds the
trading price of the Common Stock; 
 WHEREAS, subject to the terms and conditions set forth herein, the Company and the Holder desire to exchange
the principal amount of the Notes set forth on the signature page hereto (the “Exchange Notes”), in advance of the maturity date, for 1,228 shares of Common Stock per $1,000 principal amount (the “Exchange Shares”);
and 
 WHEREAS, the Exchange Shares to be issued are intended to be exempt from registration pursuant to Section 3(a)(9) of the Securities Act of
1933, as amended (the “Securities Act”). 
 NOW, THEREFORE, in consideration of the premises and the agreements set forth below, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 

ARTICLE I 
 Exchange

 Section 1.01 Exchange. Upon the terms and subject to the conditions of this Agreement, the Holder and the Company shall, pursuant to Section
3(a)(9) of the Securities Act, exchange the Exchange Notes for the Exchange Shares without the payment of any additional consideration. At the Closing (as defined below), the following transactions shall occur (collectively, the
“Exchange”): 
 (a) Pursuant to Section 2.08 of the Indenture, the Holder shall surrender the Exchange Notes for cancellation. Upon
cancellation of the Exchange Notes, the Holder hereby releases all claims arising out of or related to the Exchange Notes, including, but not limited to, any accrued and unpaid interest payable with respect to the Exchange Notes. 

 (b) The Company shall issue to the Holder the Exchange Shares (plus cash in lieu of fractional shares if
applicable, to be paid in immediately available funds at the Closing). The issuance of the Exchange Shares to the Holder will be made without registration of the Exchange Shares under the Securities Act, in reliance upon the exemption therefrom
provided by Section 3(a)(9) of the Securities Act and in reliance on similar exemptions under state securities or Blue Sky laws. 
 Section 1.02
Closing. The closing of the Exchange (the “Closing”) will take place at the offices of Perkins Coie LLP, 1900 Sixteenth Street, Suite 1400, Denver, CO 80202, or such other location as may be agreed upon by the parties, on
September 13, 2016 (the “Closing Date”). The parties shall exchange closing deliverables as follows: 
 (a) At or prior to the Closing,
each party shall execute this Agreement and deliver the same to the other; 
 (b) At or prior to the Closing, the Holder shall have its custodian instruct
The Depository Trust Company to deliver the Exchange Notes to Wells Fargo Bank, National Association (DTC No. 2027) via DWAC; 
 (c) At or prior to the
Closing, the Company shall instruct the Trustee to cancel the Exchange Notes upon receipt thereby reducing the outstanding principal amount of the Global Note; and 

(d) At the Closing, the Company shall instruct American Stock Transfer & Trust Company, LLC to electronically issue the Exchange Shares, in book-entry
form, to the Holder or, if the Holder so instructs in advance of the Closing Date, its designee. The Company agrees to issue the Exchange Shares at the Closing without any restrictions on transfer and without any restrictive legend.

The Company shall not issue fractional shares upon Exchange of the Exchange Notes. If any fractional share would be issuable upon the Exchange, the
Company shall pay to the Holder an amount in cash equal to the current market value of the fractional share, which shall be determined based on the closing price of the Company’s Common Stock on the business day immediately preceding
the Closing Date and paid in immediately available funds at the Closing. 
 ARTICLE II 

Representations, Warranties and Covenants of the Holder 

The Holder represents and warrants to, and agrees with, the Company as set forth below in this Article II, as of the date hereof, each of which is being
relied upon by the Company, as the case may be, as a material inducement to enter into and perform this Agreement: 
 Section 2.01 Existence and
Power. 
 (a) The Holder is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has all
requisite entity power and authority to carry out the transactions contemplated hereby in accordance with the terms hereof. 
 (b) The execution, delivery
and performance by the Holder of this Agreement has been duly authorized by all requisite entity action. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby by the Holder will contravene any

 
formation documents of the Holder or will constitute a violation of or a default under, or conflict with or require a consent under, any contract, commitment, agreement, understanding,
arrangement, restriction, law, statute, rule, regulation, judgment, order, injunction, suit, action or proceeding of any kind to which the Holder is a party or by which the Holder or any of its assets are bound. 

Section 2.02 Valid and Enforceable Agreement; Authorization. The execution, delivery and performance by the Holder of this Agreement has been duly
authorized by all requisite entity action. This Agreement constitutes the legal, valid and binding obligation of the Holder, enforceable against the Holder in accordance with its terms, subject, as to enforcement of remedies, to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights and remedies of creditors generally and to the effect of general principles of equity. 

Section 2.03 Title to Exchange Notes. The Holder is the sole beneficial owner of and has good and valid title to the Exchange Notes, free and clear of
any mortgage, lien, pledge, charge, security interest, encumbrance, title retention agreement, option, equity or other adverse claim thereto. The Holder has not, in whole or in part, (a) assigned, transferred, hypothecated, pledged or otherwise
disposed of the Exchange Notes or its rights in the Exchange Notes, or (b) given any person or entity any transfer order, power of attorney or other authority of any nature whatsoever with respect to the Exchange Notes. 

Section 2.04 Affiliate Status. The Holder is not, and has not been during the preceding three (3) months, an “affiliate” of the Company as
such term is defined in Rule 144 under the Securities Act. 
 Section 2.05 Reliance on Exemptions. The Holder acknowledges that the Exchange
Shares are being offered and exchanged in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Holder set forth herein in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the Exchange Shares. The Holder acknowledges that the
Exchange Shares shall be issued to the Holder solely in exchange for the Exchange Notes without the payment of any additional consideration. As of the date hereof and as of the Closing Date, the Holder has not and will not pay any commission or
other remuneration, directly or indirectly, to any broker or other intermediary, in connection with the Exchange. 
 ARTICLE III 

Representations, Warranties and Covenants of the Company 

The Company represents and warrants to, and agrees with, the Holder as set forth below in this Article III, as of the date hereof, each of which is being
relied upon by the Holder, as the case may be, as a material inducement to enter into and perform this Agreement: 
 Section 3.01 Existence and
Power. 
 (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the
power, authority and capacity to execute and deliver this Agreement, to perform the Company’s obligations hereunder, and to consummate the transactions contemplated hereby. 

 (b) Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby by the
Company will contravene the certificate of incorporation or the bylaws of the Company or will constitute a violation of or a default under, or conflict with or require a consent under, any contract, commitment, agreement, understanding, arrangement,
restriction, law, statute, rule, regulation, judgment, order, injunction, suit, action or proceeding of any kind to which the Company is a party or by which the Company or any of its assets are bound. 

Section 3.02 Valid and Enforceable Agreement; Authorization. The execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action. This Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with
its terms, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights and remedies of creditors generally and to the effect of general principles of equity. 

Section 3.03 Capitalization. The entire authorized capital stock of the Company consists of 250,000,000 shares of Common Stock, of which 89,523,003
shares were issued and outstanding as of July 29, 2016, and 10,000,000 shares of the Company’s preferred stock, $0.01 par value per share, of which no shares are issued and outstanding. 

Section 3.04 Disclosure. The Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission (the “SEC”) pursuant to the reporting requirements of the Securities Act and the Securities Exchange Act of 1934 (the “Exchange Act”) (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC
Documents”), or has timely filed for a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 

Section 3.05 Listing. The Company is currently listed on the Nasdaq Capital Market (“NASDAQ”). 

Section 3.06 Registration. The Company has taken no action designed to, or which, to the knowledge of the Company, is likely to have the effect of,
terminating the registration of its common shares under the Exchange Act. 
 Section 3.07 Section 3(a)(9) Compliance. The Company acknowledges that
the Exchange Shares are being offered and exchanged in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act. As of the date hereof and as of the Closing Date, the Company has not and will not pay any
commission or other remuneration, directly or indirectly, to any broker or other intermediary, in connection with the Exchange. 

 ARTICLE IV 

Miscellaneous Provisions 
 Section 4.01
Specific Performance. The parties acknowledge that money damages are not an adequate remedy for violations of this Agreement and that any party may, in its sole discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper in order to enforce this Agreement or prevent any violation hereof and, to the extent permitted by applicable law, each party waives any objection to the imposition of such
relief, this being in addition to any other remedy to which such party is entitled at law or in equity. 
 Section 4.02 Disclosure of Transaction and
Other Material Information. On or before 9:30 a.m., New York time, on September 8, 2016, the Company shall publicly disclose all the material terms of the transactions contemplated by this Agreement. In addition, if the Company does not announce
a proposed public offering of equity securities by 5:00 p.m., New York time, on September 8, 2016, the Holder shall not be deemed to have any material non-public information regarding a potential equity offering by the Company. 

Section 4.03 Entire Agreement. This Agreement and the other documents and agreements executed in connection with the Exchange embody the entire
agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous oral or written agreements, representations, warranties, contracts, correspondence, conversations, memoranda and
understandings between or among the parties or any of their agents, representatives or affiliates relative to such subject matter, including, without limitation, any term sheets, emails or draft documents. 

Section 4.04 Assignment; Binding Agreement. This Agreement and the various rights and obligations arising hereunder shall inure to the benefit of and
be binding upon the parties hereto and their successors and assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Holder. 

Section 4.05 Counterparts. This Agreement may be executed in multiple counterparts, and on separate counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same instrument. Any counterpart or other signature hereupon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery of this
Agreement by such party. 
 Section 4.06 Remedies Cumulative. Except as otherwise provided herein, all rights and remedies of the parties under this
Agreement are cumulative and without prejudice to any other rights or remedies available at law. 
 Section 4.07 Governing Law; Jurisdiction; Jury
Trial. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to its conflicts of laws provisions. Each of the Parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York, City of New York, for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding 

 
may be served on each Party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the Parties hereto irrevocably consents to
the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each Party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such
courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH
RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. The Parties hereto agree and acknowledge that each Party has retained counsel in connection with the negotiation and preparation of this
Agreement, and that any rule of construction to the effect that any ambiguities are to be resolved against the drafting Party shall not be employed in the interpretation of the foregoing agreements or any amendment, schedule or exhibits thereto.

 Section 4.08 Survival. The representations, warranties and covenants of the Company and Holder contained in Articles II, III and IV shall survive
the survive cancellation of the Exchange Notes and issuance of the Exchange Shares, until the expiration of the applicable statute of limitations. 

Section 4.09 No Third Party Beneficiaries or Other Rights. Nothing herein shall grant to or create in any person not a party hereto, or any such
person’s dependents or heirs, any right to any benefits hereunder, and no such party shall be entitled to sue any party to this Agreement with respect thereto. 

Section 4.10 Waiver; Consent. This Agreement may not be changed, amended, terminated, augmented, rescinded or discharged (other than in accordance with
its terms), in whole or in part, except by a writing executed by the parties hereto. No waiver of any of the provisions or conditions of this Agreement or any of the rights of a party hereto shall be effective or binding unless such waiver shall be
in writing and signed by the party claimed to have given or consented thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided. 
 Section 4.11 Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (a) upon receipt, when delivered personally, (b) upon receipt, when sent by facsimile or other
electronic transmission (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party), or (c) one (1) business day after deposit with an overnight courier service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: 
 If to the Company: 

Gevo, Inc. 
 345 Inverness Drive South, Building C, Suite 310

 Englewood, CO 80112 
 Telephone: (303) 858-8358 

Facsimile: (303) 858-8431 
 Attention: Michael J. Willis 

 with a copy (for informational purposes only) to: 

Perkins Coie LLP 
 1900 Sixteenth Street, Suite 1400 

Denver, CO 80202 
 Telephone: (303) 291-2362 

Facsimile: (303) 291-2300 
 Attention: Jason Day 

If to Holder, to the address specified on the signature page hereto. 

Any party hereto may change his or its address for notice by giving notice thereof in the manner herein above provided. 

Section 4.12 Interpretations. The words such as “herein,” “hereinafter,” “hereof,” and “hereunder” refer to
this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires. The singular shall include the plural, and vice versa, unless the context otherwise requires. The masculine shall include the
feminine and neuter, and vice versa, unless the context otherwise requires. 
 Section 4.13 Further Assurances. The Holder and the Company each
hereby agree to execute and deliver, or cause to be executed and delivered, such other documents, instruments and agreements, and take such other actions, as either party may reasonably request in connection with the transactions contemplated by
this Agreement. 
 Section 4.14 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. 
 Section 4.15 Severability. If any one or more of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.] 

 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first
above written. 
  

			
	 THE COMPANY:

	
	 GEVO, INC.

		
	By:	 	  

	Name:	 	Michael J. Willis
	Title:	 	Chief Financial Officer

  

			
	 HOLDER:

	
	
[                   
 ]

	By:	 	  

	Name:	 	
	Title:	 	
		
		 	Address:
		
		 	Holder’s Tax ID Number:
		
		 	DTC Participant Name:
		
		 	DTC Participant Number:
		
		 	Principal Amount to be Exchanged:Lithium Exploration Group, Inc.: Exhibit 10.2 - Filed by newsfilecorp.com

THIS NOTE HAS 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 COMPANY OF AN OPINION OF COUNSEL IN THE FORM,
SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT THIS NOTE MAY BE
SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM
REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS. 

LITHIUM EXPLORATION GROUP, INC. 
10% OID Convertible
Promissory Note 
Due August 12, 2017 

August 12, 2016

		Purchase Price: 	USD $42,500 
		Principal Price: 	$46,750 

For value received, Lithium Exploration Group, Inc., a
Nevada corporation (the "Company"), hereby promises to pay to the order of
JDF Capital Inc. (together with its successors, representatives, and
permitted assigns, the "Holder"), in accordance with the terms hereinafter
provided, up to an aggregate of $46,750 (forty-six thousand seven hundred fifty dollars) (the "Principal Amount"), which includes the
aggregate principal sum of $42,500 (forty-two thousand f i f t y dollars)
advanced by the Holder, $4250 Original Issue Discount incurred by the Holder,
and $2500 legal fees. The Principal Amount outstanding shall be due and payable
on August 12, 2017.

The due dates of any outstanding principal balance are referred
to herein as the "Maturity Date", respectively. 

All payments under or pursuant to this Note refer to and 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 Company or by wire
transfer of funds to the Holder's account, instructions for which are attached
hereto as Exhibit A. 

ARTICLE I 

Section 1.1 Purchase Agreement. This Note has been
executed and delivered pursuant to the Security Purchase Agreement dated as of
August 12, 2016 (the "Purchase Agreement'') by and among the Company 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. 

(a) Beginning on the issuance date of this Note (the "Issuance
Date"), the outstanding principal balance of this Note shall bear interest at a
rate per annum equal to 10 percent (10%) accruing on an 12 month basis, which
shall consist of the pre-paid interest referred to above, which may be converted
to shares of the Company's common stock, par value $0.001 per share (the "Common
Stock") at the option of the Holder on the same terms as the Note. 

1 

Section 1.3 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 Nevada, 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 1.4 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 1.5 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
without requiring an indemnity bond or other security, or, in the case of a
mutilation of this Note, upon surrender and cancellation of such Note, the
Company shall issue a new Note, of like tenor and amount, in lieu of such lost,
stolen, destroyed or mutilated Note. 

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 Company shall fail to make the payment of any amount of
principal outstanding on the date such payment is due hereunder; 

(b) the Company shall fail to make any payment of interest in
shares of Common Stock for a period of three (3) days after the date such
interest is due; 

(c) the suspension from listing, without subsequent listing on
any one of, or the failure of the Common Stock to be listed on at least one of
the OTC Bulletin Board, Nasdaq Small Cap Market, Nasdaq National Market,
American Stock Exchange or The New York Stock Exchange, Inc. for a period of
five (5) consecutive Trading Days; 

(d) the Company's notice to the Holder, including by way of
public announcement, at any time, of its inability to comply or its intention
not to comply with proper requests for conversion of this Note into shares of
Common Stock;

(e) the Company shall fail to (i) timely deliver the shares of
Common Stock upon conversion of the Note or any accrued and unpaid interest, or
(ii) make the payment of any fees and/or liquidated damages under this Note or
the Purchase Agreement, which failure in the case of items (i) and (ii) of this
Section 2.1(e) is not remedied within three (3) business days after the
incurrence thereof; 

(f) 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 (e) of this Section 2.1) and such default is not
fully cured within five (5) business days after the occurrence thereof or (ii)
any material covenant, condition or agreement contained in the Purchase
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 occurrence thereof; 

(g) any material representation or warranty made by the Company
herein or in the Purchase Agreement 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; 

2 

(h) the Company 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 $50,000 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 perm it 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; 

(i) the Company 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; 

(j) a proceeding or case shall be commenced in respect of the
Company, 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 Company 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 sixty (60) 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 Company or action under the laws of any jurisdiction
(foreign or domestic) analogous to any of the foregoing shall be taken with
respect to the Company and shall continue undismissed, or unstayed and in effect
for a period of sixty (60) days; or 

(k) the failure of the Company 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 five (5) business days of the Holder's request so long as the Holder has
provided reasonable assurances and opinions of counsel to the Company that such
shares of Common Stock can be resold pursuant to Rule 144; or 

(I) the failure of the Company to pay any amounts due to the
Holder herein within three (3) business days of receipt of notice to the
Company. 

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) 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 Company; provided,
however, that upon the occurrence of an Event of Default described in (i)
Sections 2.1 (k) or (I), the outstanding principal balance and interest
hereunder shall be automatically due and payable and (ii) Sections 2.1 (a)-(j) and 2.l (m)-(n), demand
the prepayment of this Note pursuant to Section 3.6 hereof, (b) subject to
Section 3.4 hereof, demand that the principal amount of this Note then
outstanding shall be converted into shares of Common Stock at a Conversion Price
(as defined in Section 3.2(a) hereof) per share calculated pursuant to Section
3.1 hereof assuming that the date that the Event of Default occurs is the
Conversion Date and demand that all accrued and unpaid interest under this Note
shall be converted into shares of Common Stock in accordance with Section 1 .2
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, other Transaction Document 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. 

3 

ARTICLE III 

CONVERSION; ANTIDILUTION; PREPAYMENT 

Section 3.1 Conversion Option. 

(a) 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 that portion of the outstanding principal balance under this Note as of
such date that the Holder elects to convert by 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
Company (the "Voluntary Conversion Date"), provided, however, that the
Conversion Price shall be subject to adjustment as described in Section 3.5
below. The Holder shall deliver this Note to the Company 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 Company shall
keep written records of the amount of this Note converted as of each Conversion
Date. 

(b) On any Voluntary Conversion Date, the Holder may cause the
any outstanding Principal Amount of this Note plus all accrued and unpaid
interest to convert into a number of fully paid and non-assessable shares of
Common Stock equal to the quotient of the elected outstanding principal amount
of this Note plus all accrued interest on the elected outstanding on the
Voluntary Conversion Date (as described in this Section below) divided by the
Conversion Price as described in Section 3.2(a) below. Furthermore, upon the
occurrence of an Event of Default (as defined in Section 2.1 hereof), then to
the extent permitted by law, the Company will pay interest 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. 

(B) Conversion Limitations; Holder's Restriction on
Conversion. The Company shall not effect any conversion of this Note, and
the Holder shall not have the right to convert any portion of this Note, to the
extent that after giving effect to such conversion, the Holder (together with
the Holder's affiliates), as set forth on the applicable Conversion Notice,
would beneficially own in excess of 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to such conversion. For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Note with respect to
which the determination of such sentence is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon (A) conversion of
the remaining, nonconverted portion of this Note beneficially owned by the
Holder or any of its affiliates and (B) Exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Notes or the
Warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding sentence, for purposes of this
Section, beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act. To the extent that the limitation contained in this
section applies, the determination of whether this Note is convertible (in
relation to other securities owned by the Holder) and of which a portion of this
Note is convertible shall be in the sole discretion of such Holder. To ensure
compliance with this restriction, the Holder will be deemed to represent to the
Company each time it delivers a Conversion Notice that such Conversion Notice
has not violated the restrictions set forth in this paragraph and the Company
shall have no obligation to verify or confirm the accuracy of such
determination. For purposes of this Section, in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company's most recent
Form 10-Q or Form 10-K (or such related form), as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by the Company
or the Company's Transfer Agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of the Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Note, by
the Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The provisions of this Section
may be waived by the Holder upon, at the election of the Holder, not less than
61 days' prior notice to the Company, and the provisions of this Section shall
continue to apply until such 61st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver). 

4 

Section 3.2 Conversion Price. 

The Holder of this Note is entitled, at its option, at any
time, to convert all or any amount of the principal face amount of this Note
then outstanding into shares of the Company's common stock (the "Common
Stock") at a price ("Conversion Price") for each share of Common
Stock equal to 65% of the lowest trading price of
the Common Stock as reported on the OTC Markets electronic quotation service or
such marketplace upon which the Company’s shares are traded or any exchange upon
which the Common Stock may be traded in the future ("Exchange"), for the
twenty prior trading days including the day
upon which a Notice of Conversion is received by the Company or its transfer
agent (provided such Notice of Conversion is delivered by fax or other
electronic method of communication to the Company or its transfer agent after 4
P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include
the same day closing price). No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. To the extent the
Conversion Price of the Company’s Common Stock closes below the par value per
share, the Company will take all steps necessary to solicit the consent of the
stockholders to reduce the par value to the lowest value possible under law. The
Company agrees to honor all conversions submitted pending this increase. In
the event the Company experiences a DTC “Chill” on its shares, the conversion
price shall be decreased to 55% instead of 65% while that “Chill” is in
effect. 

Section 3.3 Mechanics of Conversion. 

(a) Not later than three (3) Trading Days after any Conversion
Date, the Company 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,
for the number of shares of Common Stock to which the Holder shall be entitled.
I n the alternative, not later than three (3) Trading Days after any
Conversion Date, the Company 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. l 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 Company or
its transfer agent shall only be obligated to issue and deliver the shares to
the OTC on the Holder's behalf via DWAC (or certificates free of restrictive
legends) if such conversion is in connection with a sale and the Holder has
complied with the applicable prospectus delivery requirements. lf 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 Company at any time on or before its receipt
of such certificate or certificates thereafter, to rescind such conversion, in
which event the Company shall immediately return this Note if tendered for
conversion, whereupon the Company 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 Company. 

5 

(b) The Company 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. If the Company 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 Company 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 l 0% 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 Note 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 Note 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 Company'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 Company 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) ln addition to any other rights available to the
Holder, if the Company 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 Company 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 multi plying (A) the number of shares of
Common Stock issuable upon conversion of this Note that the Company 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 Company 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 Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by the
Company. Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with respect to the
Company's failure to timely deliver certificates representing shares of Common
Stock upon conversion of this Note as required pursuant to the terms hereof. 

6 

Section 3.4 Ownership Cap and Certain Conversion
Restrictions. 

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 l3(d)
of the Exchange Act and the rules thereunder) more than 9.9% of all of the
Common Stock outstanding at such time; provided, however, that upon the Holder
providing the Company 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 with regard to any or all shares of Common Stock issuable upon conversion of
this Note, this Section 3.4 will be of no force or effect with regard to all or
a portion of the Note referenced in the Waiver Notice; provided, further, that
this provision shall be of no further force or effect during the sixty-one (61)
days immediately preceding the Maturity Date. 

Section 3.5 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 Company 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 Company 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 3.5(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 Company 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 n umber 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.

(iii) Adjustment for Other Dividends and Distributions.
If the Company 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 Company
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
3.5(a)(iii ) with respect to the rights of the holders of this Note; 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. 

7 

(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 n umber 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
3.5(a)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale
of assets provided for in Section 3.5(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 Company (other than by way of a
stock split or combination of shares or stock dividends or distributions
provided for in Section 3.5(a)(i), (ii) and (iii), or a reclassification,
exchange or substitution of shares provided for in Section 3.5(a)(iv)), or a
merger or consolidation of the Company 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 Company's
properties or assets to any other person (an "Organic Change"),
then as a part of such Organic Change 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 Company or any successor corporation
resulting from Organic Change. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section 3.5(a)(v) with respect
to the rights of the Holder after the Organic Change to the end that the
provisions of this Section 3.5(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) shall be applied after that
event in as nearly an equivalent manner as may be practicable. 

(vi) Issuance of Common Stock Equivalents. If the
Company, 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 Note, 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 Company 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 3.5(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
Company 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. 

8 

(vii) 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
Company is the surviving corporation (other than any consolidation or merger in
which the previously outstanding shares of Common Stock of the Company 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 Company, of such portion of the assets and business of the non-surviving
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 Company
in which the Company is not the surviving corporation or in which the previously
outstanding shares of Common Stock of the Company 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 Company for
stock or other securities of any corporation, the Company 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 Note, the
determination of the applicable Conversion Price or the number of shares of
Common Stock issuable upon conversion of the Note 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 Note. In the event Common Stock is issued with other shares or securities or
other assets of the Company for consideration which covers both, the
consideration computed as provided in this Section 3.5(viii) shall be allocated
among such securities and assets as determined in good faith by the Board of
Directors of the Company. 

9 

(b) Record Date. In case the Company 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 Company 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 a bona fide firm underwritten
public offering of the Company's securities, (iii) securities issued pursuant to
the conversion or exercise of convertible or exercisable securities issued or
outstanding on or prior to the date hereof or issued pursuant to the Purchase
Agreement, (iv) the shares of Common Stock issuable upon the exercise of
Warrants, (v) securities issued i n connection with strategic license agreements
or other partnering arrangements so long as such issuances are not for the
purpose of raising capital, (vi) Common Stock issued or options to purchase
Common Stock granted or issued pursuant to the Company's stock option plans and
employee stock purchase plans as they now exist, (vii) the payment of any
accrued interest in shares of Common Stock pursuant to this Note. 

(d) No Impairment. The Company shall not, by amendment
of its Certificate 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 Company, but will
at all times in good faith, assist in the carrying out of all the provisions of
this Section 3.5 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 Note as provided
herein, the Company cannot refuse conversion based on any claim that such Holder
or anyone 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 Note shall have issued
and the Company 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 Note 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 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 3.5,
the Company 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 Company
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 Company 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 Company 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 Company
shall not be obligated to pay any transfer taxes resulting from any transfer
requested by the Holder in connection with any such conversion. 

10 

(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 Company shall pay
cash equal to the product of such fraction multiplied by the average of the
Closing Bid Prices of the Common Stock for the five (5) consecutive Trading Days
immediately preceding the Conversion Date. 

(h) Reservation of Common Stock. The Company 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 are at any time convertible. The Company shall,
from time to time in accordance with Nevada corporate 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 Company's
obligations under this Section 3.5(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 Company shall, at its sole cost
and expense, i n good faith and as expeditiously as possible, endeavor to secure
such registration, listing or approval, as the case may be. 

Section 3.6 Prepayment. 

(a) Prepayment Upon an Event of Default. Notwithstanding
anything to the contrary contained herein, upon the occurrence of an Event of
Default described i n Sections 2.1 (a)-(j)) and 2.1 (m)- (o) hereof, the Holder
shall have the right, at such Holder's option, to require the Company to prepay
in cash all or a portion of this Note at a price equal to 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 (the "Event of
Default Prepayment Price"). Nothing i n this Section 3.6(a) shall limit the
Holder's rights under Section 2.2 hereof. 

(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 in Section 3.6(e) hereof), the
Holder shall have the right, at the Holder's option, to require the Company to
prepay all or a portion of the Holder's Note 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").

(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 Company to prepay all or a portion of this Note in cash at a price
equal to the sum of (i) the greater of (A) one hundred twenty percent (120%) of
the aggregate principal amount of this Note plus all accrued and un paid
interest 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 plus all accrued but unpaid interest hereon, 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 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"). 

11 

(d) 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 Company with or into another Person (other than (A) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company or (B) a consolidation, merger or other business
combination in which holders of the Company'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); or 

(ii) the sale or transfer of more than fifty percent (50%) of
the Company's assets (based on the fair market value as determined in good faith
by the Company'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. 

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

(i) the suspension from listing, without subsequent listing on
any one of, or the failure of the Common Stock to be listed on at least one of
the OTC Bulletin Board, Nasdaq SmallCap Market, Nasdaq National Market, American
Stock Exchange or The New York Stock Exchange, Inc. for a period of five (5)
consecutive Trading Days; 

(ii) the Company's notice to any
holder of the Note, 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 Note
into shares of Common Stock; or 

(iii) the Company'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 Company of the Conversion
Notice; or 

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

(v) the Company consummates a ''going private" transaction and
as a result the Common Stock is no longer registered under Sections l 2(b) or
12(g) of the Exchange Act. 

(f) 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 Company 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 Company
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 Company, which Notice of
Prepayment at Option of Holder Upon Major Transaction shall indicate (i) the
number of Notes that such holder is electing to prepay and (ii) the applicable
Major Transaction Prepayment Price, as calculated pursuant to Section 3.6(b)
above. 

12 

(g) Mechanics of Prepayment at Option of Holder Upon
Triggering Event. Within one (1) business day after the occurrence of a
Triggering Event, the Company 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 Company to prepay all of the Notes on a pro
rata basis by delivering written notice thereof via facsimile and overnight
courier ("Notice of Prepayment at Option of Holder Upon Triggering
Event") to the Company, 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 3.6(c) above. A holder shall only be
permitted to require the Company to prepay the Note pursuant to Section 3.6
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. 

(h) Payment of Prepayment Price. Upon the Company'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 Company shall immediately notify each holder of the
Notes by facsimile of the Company'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 Company such holder's certificates representing the Notes
which such holder has elected to have prepaid. The Company shall deliver the
applicable Triggering Event Prepayment Price, in the case of a prepayment
pursuant to Section 3.6(i), to such holder within five (5) business days after
the Company's receipt of a Notice of Prepayment at Option of Holder Upon
Triggering Event and, in the case of a prepayment pursuant to Section 3.6(f),
the Company 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 Company; provided
further that if the Company is unable to prepay all of the Notes to be prepaid,
the Company 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 Company 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 Company 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
Company to promptly return to such holder(s) all of the Notes that were
submitted for prepayment by such holder(s) under this Section 3.6 and for which
the applicable Prepayment Price has not been paid, by sending written notice
thereof to the Company via facsimile (the "Void Optional Prepayment Notice").
Upon the Company'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 Company shall immediately return
any Notes submitted to the Company by each holder for prepayment under this
Section 3.6(h) 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 Company and (B) the lowest
Closing Bid 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 Company and ending on the date on which the Void Optional
Prepayment Notice(s) is delivered to the Company; 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 Company's
obligations to make any payments which have accrued prior to the date of such
notice. Payments provided for in this Section 3.6 shall have priority to
payments to other stockholders in connection with a Major Transaction. 

13 

(i) Company Prepayment Option upon Major Transaction.
Upon the consummation of a Major Transaction, the Company 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 at least thirty (30) days prior
written notice to the Holder (the "Company's Prepayment Notice") at a
price equal to one hundred twenty percent (120%) of the aggregate principal
amount of this Note plus any accrued but unpaid interest (the "Company's
Prepayment Price"); provided, however, that if a holder has delivered a
Conversion Notice to the Company or delivers a Conversion Notice within such
thirty (30) day period following delivery of the Company's Prepayment Notice,
the principal amount of the Notes plus any accrued but unpaid interest
designated to be converted may not be prepaid by the Company and shall be
converted in accordance with Section 3.3 hereof; provided further that if during
the period between delivery of the Company's Prepayment Notice and the Company's
Prepayment Date (as defined below), a holder shall become entitled and elects 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 holders shall take precedence over the previously delivered Company
Prepayment Notice if the holder so elects. The Company's Prepayment Notice shall
state the date of prepayment which date shall be the date of the consummation of
the Major Transaction (the "Company's Prepayment Date"), the Company's
Prepayment Price and the principal amount of Notes plus any accrued but unpaid
interest to be prepaid by the Company. The Company shall deliver the Company's
Prepayment Price on the Company's Prepayment Date, provided, that if the
holder(s) delivers a Conversion Notice before the Company's Prepayment Date,
then the portion of the Company's Prepayment Price which would be paid to prepay
the Notes covered by such Conversion Notice shall be returned to the Company
upon delivery of the Common Stock issuable i n connection with such Conversion
Notice to the holder(s). On the Company's Prepayment Date, the Company shall pay
the Company's Prepayment Price, subject to any adjustment pursuant to the
immediately preceding sentence, to the holder(s) on a pro rata basis. If the
Company fails to pay the Company's Prepayment Price by the third (3rd) business
day after the Company's Prepayment Date, the prepayment will be declared null
and void and the Company shall lose its right to serve a Company's Prepayment
Notice pursuant to this Section 3.6(i) in the future. Notwithstanding the
foregoing to the contrary, the Company may effect a prepayment pursuant to this
Section 3.6(i) only if trading in the Common Stock shall not have been suspended
by the Securities and Exchange Commission or the Nasdaq SmallCap Market (or
other exchange or market on which the Common Stock is trading), and and the
Company is in material compliance with the terms and conditions of this Note and
the other Transaction Documents. 

Section 3.7 Inability to Fully Convert. 

(a) Holder's Option if Company Cannot Fully Convert. If,
upon the Company's receipt of a Conversion Notice, the Company cannot issue
shares of Common Stock for any reason, including, without limitation, because
the Company (w) does not have a sufficient number of shares of Common Stock authorized and available, or (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 Company 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, then the Company 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: 

14 

(i) require the Company to prepay that portion of this Note for
which the Company 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) 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 Company's obligations to make any payments which have accrued prior
to the date of such notice). 

In the event a Holder shall elect to convert any portion of its
Notes as provided herein, the Company cannot refuse conversion based on any
claim that such Holder or anyone 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, on notice, restraining and or adjoining conversion of all or of said
Notes shall have been issued and the Company posts a surety bond for the benefit
of such Holder in an amount equal to 130% of the principal amount of the Notes
the Holder has elected to convert, which bond shall remain i n effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Holder in the event it obtains judgment. 

(b) Mechanics of Fulfilling Holder's Election. The
Company shall immediately 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 3.7(a) above, a notice of the Company'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 Company 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 Company of
its election pursuant to Section 3.7(a) above by delivering written notice via
facsimile to the Company ("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 3.7(a)(i) above, the Company
shall pay the Mandatory Prepayment Price to the Holder within thirty (30) days
of the Company's receipt of the Holder's Notice in Response to Inability to
Convert, provided that prior to the Company's receipt of the Holder's Notice in
Response to Inability to Convert the Company has not delivered a notice to the
Holder stating, to the satisfaction of the Holder, that the event or condition
resulting i n 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 Company shall fail to pay the applicable
Mandatory Prepayment Price to the Holder on a timely basis as described in this
Section 3.7(c) (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 Bid Price during the period
beginning on the Conversion Date and ending on the date the Holder voided the
Mandatory Prepayment. 

15 

(d) Pro-rata Conversion and Prepayment. In the event the
Company receives a Conversion Notice from more than one holder of the Notes on
the same day and the Company can convert and prepay some, but not all, of the
Notes pursuant to this Section 3.7, the Company 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. 

Section 3.8 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 Company or of any other matter, or any
other rights as a shareholder of the Company. 

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 by telex (with correct
answer back received), 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 Company will give written notice to the Holder at least
ten (10) days prior to the date on which the Company 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 Company
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. 

Section 4.2 Governing Law. This Note shall be governed
by and construed in accordance with the internal laws of the State of Nevada,
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. 

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 Company 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 Company
(or the performance thereof). The Company 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
Company 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. 

16 

Section 4.5 Enforcement Expenses. The Company 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
Company 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 many manner except in writing executed by the Company 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 HAS 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 COMPANY OF AN OPINION OF COUNSEL IN THE FORM,
SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT THIS NOTE MAY BE
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS." 

Section 4.9 Consent to Jurisdiction. Each of the Company
and the Holder (i) hereby irrevocably submits to the exclusive jurisdiction of
the State of Nevada 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 Company 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 Company 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. 

17 

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

Section 4.1 1 Failure or Indulgence Not Waiver. No
failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege. 

Section 4.12 Company Waivers. Except as otherwise
specifically provided herein, the Company and all others that may become liable
for all or any part of the obligations evidenced by this Note, 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 Company liable
for the payment of this Note, AND DO HEREBY WAIVE TRlAL 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 COMPANY 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 AN D HEARING 

18 

WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS
SUCCESSORS OR ASSIGNS MAY DESIRE TO USE. 

LITHIUM EXPLORATION GROUP, INC. 

	 	By:  
    
	 	         Name: 	Alexander Walsh 
	 	         Title: 	Chief Executive Officer

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. _____ into shares of Common Stock of Lithium
Exploration Group, Inc. (the "Company") 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:
______________________________________________________

Signature:     
______________________________________________________

Print Name:   
______________________________________________________

Address:       
______________________________________________________

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