Document:

ex10-2.htm

    Exhibit
10.2

     

    CHANGE
OF CONTROL AGREEMENT

     

    This
CHANGE OF CONTROL AGREEMENT (this “Agreement”) is made and entered into as of
January 1, 2008, by and between IR BioSciences Holdings, Inc., a Delaware
corporation (the “Company”) and John Fermanis (the “Executive”).

     

    RECITALS

     

    WHEREAS,
Executive is the Chief Financial Officer of the Company;

     

    WHEREAS,
Board recognizes the possibility of a future Change of Control (as hereinafter
defined), which may alter the nature and structure of Company, and recognizes
that the uncertainty regarding the consequences of such an event adversely
affects Company’s ability to retain Executive;

     

    WHEREAS,
in order to induce Executive to retain employment with the Company, the Board
and Company desire to provide benefits to Executive in the event Executive’s
employment is terminated under certain circumstances involving a Change of
Control, and the Executive desires to be so induced; and

     

    WHEREAS,
Company and Executive desire to set forth in writing the terms and conditions of
their agreement with respect to Company’s provision of benefits to Executive in
the event Executive’s employment is terminated under certain circumstances
involving a Change of Control.

     

    AGREEMENT

     

    NOW,
THEREFORE, in consideration of the mutual covenants and obligations herein
contained, it is mutually agreed between the parties hereto as
follows:

     

    1. Term.  This
Agreement shall commence on the Execution Date of this Agreement and shall
continue until the earlier of the following:  (a) prior to a Change of
Control Date, the date of termination of Executive’s employment with Company; or
(b) subsequent to a Change of Control Date the earlier of (x) the date of
termination of Executive’s employment with the Company absent Involuntary
Termination or (y) the one-year anniversary of a Change of Control
Date.

     

    2. At-Will
Status.  Notwithstanding any provision of this Agreement,
Executive is employed at-will , so that Executive, on the one
hand,  or Company, on the other hand, may terminate Executive’s
employment at any time, with or without notice, for any or no
reason.  

     

    3. Definitions.  As
used in this Agreement, the following terms shall have the meanings set forth
herein:

     

    “Affiliate”
means any entity that is part of a controlled group of corporations or is under
common control with Company, as applicable, within the meaning of Sections
1563(a), 404(b) or 414(c) of the Code.

     

    “Board”
means the Board of Directors of Company.

     

    “Cause”
shall mean (i) a material act of dishonesty in connection with the Executive’s
responsibilities as an Executive of Company; (ii) the Executive’s conviction of,
or plea of nolo
contendere to, a felony or a crime involving moral turpitude, (iii) the
Executive’s gross misconduct which has a material adverse effect on the Company,
or (iv) the Executive’s consistent and willful failure to perform his or her
employment duties where such failure is not cured within thirty (30) days after
written notice to Executive by Company.

     

     “Change
of Control” shall mean a Company Change in Control.

     

    “Change
of Control Date” means the date on which a Change of Control
occurs.  If any such change in control occurs on account of a series
of transactions, the “Change of Control Date” is the date of the last of such
transactions.

     

    “Code”
means the Internal Revenue Code of 1986, and any amendments
thereto.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Company
Acquiring Person” means that a Person, considered alone or as part of a “group”
within the meaning of Section 13(d)(3) of the Exchange Act, as amended, other
than an Initial Member or any Affiliate, is or becomes directly or indirectly
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
securities representing more than fifty percent (50%) of the Company’s then
outstanding securities entitled to vote generally in the election of the
Board.

     

    “Company
Change in Control” means (i) a Person is or becomes a Company Acquiring Person;
(ii) holders of the securities of Company entitled to vote thereon approve any
agreement with a Person, (or, if such approval is not required by applicable law
and is not solicited by Company, the closing of such an agreement) that involves
the transfer of all or substantially all of Company’s assets on a consolidated
basis; (iii) holders of the securities of Company entitled to vote thereon
approve a transaction (or, if such approval is not required by applicable law
and is not solicited by the Company, the closing of such a transaction) pursuant
to which Company will undergo a merger, consolidation, statutory share exchange
or similar event with a Person, regardless of whether Company is intended to be
the surviving or resulting entity after the merger, consolidation, statutory
share exchange or similar event, other than a transaction that results in the
voting securities of Company carrying the right to vote in elections of persons
to the Board outstanding immediately prior to the closing of the transaction
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% (fifty percent) of
Company’s voting securities carrying the right to vote in elections of persons
to Company’s Board, or voting securities of such surviving entity carrying the
right to vote in elections of persons to the Board of Directors or similar
authority of such surviving entity, outstanding immediately after the closing of
such transaction; (iv) the Continuing Directors cease for any reason to
constitute at least half of the number of members of the Board; (v) holders of
the securities of Company entitled to vote thereon approve a plan of complete
liquidation of Company or an agreement for the liquidation by the Company of all
or substantially all of Company’s assets (or, if such approval is not required
by applicable law and is not solicited by Company, the commencement of actions
constituting such a plan or the closing of such an agreement); or (vi) the Board
adopts a resolution to the effect that, in its judgment, as a consequence of any
one or more transactions or events or series of transactions or events, a change
in control of Company has effectively occurred.  Notwithstanding the
foregoing, no event resulting from an initial public offering of securities of
Company shall constitute a Company Change in Control.  The Board shall
be entitled to exercise its discretion in exercising its judgment and in the
adoption of such resolution, whether or not any such transaction(s) or event(s)
might be deemed, individually or collectively, to satisfy any of the criteria
set forth in subparagraphs (i) through (v) above.

     

    “Continuing
Director” means any member of the Board (i) who was a member of the Board on the
date hereof, or (ii) whose nomination for or election to the Board was
recommended or approved by a majority of the Continuing Directors.

     

    “Control”
(and “Controlling” and “Controlled”) shall mean possession, directly or
indirectly, of the power to direct or cause the direction of management policies
of such Entity through the ownership of voting securities or by
contract.

     

    “Constructive
Termination”  means Executive’s voluntary termination, upon thirty
(30) days’ prior written notice to the Company, following:  (A)
Executive being designated to a divisional as opposed to corporate role with the
Company or Operating Company; (B) a material reduction or change in job duties,
responsibilities and requirements, including, without limitation, any material
increase in travel responsibilities, inconsistent with Executive’s position with
Company and Executive’s duties, responsibilities and requirements; (C) any
reduction of Executive’s base compensation or inactive pay (bonus); or (D)
Executive’s refusal to relocate to a facility or location more than fifty (50)
miles from Company’s current headquarters.

     

    “Entity”
means any corporation, firm, unincorporated organization, association,
partnership, limited partnership, limited liability company, limited liability
partnership, business trust, joint stock company, joint venture organization,
entity or business.

     

    “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

     

    “Involuntary
Termination” shall mean, at any time within that period which is one-year from
the Change of Control Date (including such date), the termination of the
employment of Executive (i) by Company without Cause or (ii) due to Constructive
Termination.

     

    “Person”
means any human being, firm, corporation, partnership, or other
entity.  “Person” also includes any human being, firm, corporation,
partnership, or other entity as defined in sections 13(d)(3) and 14(d)(2) of the
Exchange Act.  The term “Person” does not include Company or any of
its Affiliates, and the term Person does not include any employee-benefit plan
maintained by the Company or any of its Affiliates, or any person or entity
organized, appointed, or established by the Company, or any of its Affiliates
for or pursuant to the terms of any such employee-benefit plan, unless the Board
determines that such an employee-benefit plan or such person or entity is a
“Person”.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4. Effect of
Termination.  If Executive’s employment is terminated with
Company at any time for any reason, Executive shall be entitled to (i)
reimbursement for final expenses that Executive reasonably and necessarily
incurred on behalf of the Company prior to Executive’s termination of employment
(provided that Executive submits expense reports and supporting documentation as
required by Company practice or policy), (ii) unpaid compensation and benefits
and (iii) unused vacation, accrued through the date of Executive’s termination
of employment.

     

    5. Effect of Involuntary
Termination.  Only in the event of an Involuntary Termination,
Executive shall be entitled to the following, subject to Section 7 hereof:

     

    a.           continuation
of Executive’s base salary in effect on the date of such Involuntary Termination
for a period of eighteen (18) months from the date of termination (the “Payment
Period”), payable in accordance with the Operating Company’s prevailing
compensation practice, as such practice may be modified from time to
time;

     

    b.           Notwithstanding
any provision of any annual or long-term incentive plan to the contrary, the
Company shall pay to the Executive a lump sum amount, in cash, equal to the sum
of (i) any unpaid incentive compensation which has been allocated or
awarded to the Executive for a completed fiscal year or other measuring period
preceding the date of Involuntary Termination under any such plan and which, as
of the date of Involuntary Termination, is contingent only upon the continued
employment of the Executive to a subsequent date, and (ii) a pro rata
portion to the date of Involuntary Termination of the aggregate value of all
contingent incentive compensation awards to the Executive for all then
uncompleted periods under any such plan, calculated as to each such award by
multiplying the award that the Executive would have earned on the last day of
the performance award period, assuming the achievement, at the target level (or,
if greater, based on actual results to date of Involuntary Termination), of the
individual and corporate performance goals established with respect to such
award, by the fraction obtained by dividing the number of full months and any
fractional portion of a month during such performance award period through the
date of Involuntary Termination by the total number of months contained in such
performance award period;

     

    c.           should
Executive elect continued medical insurance coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and the Company is eligible
under COBRA requirements, payment of Executive’s COBRA premiums during the
Payment Period, subject to and in accordance with the provisions of
COBRA.  If Company is not eligible for COBRA insurance coverage, then
Company will reimburse the monthly expense associated with private medical
insurance coverage during the Payment Period;

     

    d.           one-hundred
percent (100%) of the unvested portion of each outstanding stock option granted
to Executive shall be accelerated so that they become immediately exercisable
upon the date of Involuntary Termination and may be exercised during the Payment
Period; provided
that, such stock options that remain unexercised upon expiration of the
Payment Period shall then terminate and cease to be outstanding;
and

     

    e.           notwithstanding
the terms and conditions of any written stock option agreement between Executive
and Company, as amended (“Stock Option Agreements”), Executive shall have during
the Payment Period the ability to exercise any stock options that are vested as
of Executive’s date of termination pursuant to the terms the applicable Stock
Option Agreement or Change of Control provisions herein, but in no event shall
any stock option be exercisable at any time after the expiration date of such
stock option, and upon the expiration of the Payment Period, such stock options
shall terminate and cease to be outstanding.

     

    6. Taxes.                (a)           If  any
of the payments or benefits received or to be received by the Executive whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement) (all such payments and benefits, excluding the Gross-Up Payment,
being hereinafter referred to as the "Total Payments") will be subject to the
Excise Tax, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Total Payments and any federal, state and
local income and employment taxes and Excise Tax upon the Gross-Up Payment, and
after taking into account the phase out of itemized deductions and personal
exemptions attributable to the Gross-Up Payment, shall be equal to the Total
Payments.

     

    (b)           For
purposes of determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments
shall be treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
“Code”) unless, in the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to the Executive and selected by the accounting firm which was,
immediately prior to the Change in Control, the Company's independent auditor
(the "Auditor"), such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of section 280G(b)(4)(A)
of the Code, (ii) all "excess parachute payments" within the meaning of
section 280G(b)(l) of the Code shall be treated as subject to the Excise
Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of section 280G(b)(4)(B) of the Code) in
excess of the amount allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax, and (iii) the value of any noncash benefits
or any deferred payment or benefit shall be determined by the Auditor in
accordance with the principles of sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income tax at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the date
Involuntary of Termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local
taxes.

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)           In
the event that the Excise Tax is finally determined to be less than the amount
taken into account hereunder in calculating the Gross-Up Payment, the Executive
shall repay to the Company, within five (5) business days following the
time that the amount of such reduction in the Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up Payment
being repaid by the Executive), to the extent that such repayment results in a
reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's
taxable income and wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at the rate
provided in section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) within five (5) business days following the
time that the amount of such excess is finally determined. The Executive and the
Company shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.

     

    (d)           The
payments provided in subsections (a) and (b) of this Section 6 shall
be made not later than the fifth day following the date of Involuntary
Termination provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Executive or, in the
case of payments referenced above of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments when due) at the
rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the date of Involuntary Termination.  At the time that payments
are made under this Agreement, the Company shall provide the Executive with a
written statement setting forth the manner in which such payments were
calculated and the basis for such calculations including, without limitation,
any opinions or other advice the Company has received from Tax Counsel, the
Auditor or other advisors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).

    

    (e)           The
Company also shall pay to the Executive all legal fees and expenses incurred by
the Executive in disputing in good faith any issue hereunder relating to the
termination of the Executive's employment, in seeking in good faith to obtain or
enforce any benefit or right provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the application of
section 4999 of the Code to any payment or benefit provided hereunder. Such
payments shall be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such evidence of fees
and expenses incurred as the Company reasonably may require.

    

    7. Conditions of
Benefits. Executive shall receive the benefits set forth in Section 5 and
6 hereof only if Executive (i) executes a separation agreement, which includes a
general release, in a form and of a scope acceptable to Company in its
discretion; (ii) presents satisfactory evidence to Company that he has returned
all Company property, confidential information and documentation to Company;
(iii) complies with, and does not violate, any provision of any confidentiality
and/or non-solicitation agreements that Executive may have entered into
with  Company (a “Confidentiality Agreement”); (iv) provides the
Operating Company and Company with a signed, written resignation of Executive’s
status as an employee, officer and/or director of Company, as applicable; and
(v) shall not be entitled to receive any compensation, benefits, or other
payments from Company, except as set forth in this Agreement, as a result of or
in connection with the termination of Executive’s employment at any time and for
any reason.  In the event Company reasonably believes that Executive
has breached, or has threatened to breach, any provision of any Confidentiality
Agreement, Company shall immediately terminate all benefits and Executive shall
no longer be entitled to such benefits and payments under this Agreement and
further shall be required to reimburse all payments previously made by Company
pursuant to this Agreement.  Such termination of benefits shall be in
addition to any and all legal and equitable remedies available to Company,
including injunctive relief.

     

    8. Governing
Law/Interpretation. Executive and Company agree that this Agreement and
any claims arising out of or in connection with this Agreement shall be governed
by and construed in accordance with the laws of the State in which Executive
substantially performs his/her employment responsibilities or, if none, the
State of Arizona and shall in all respects be interpreted, enforced and governed
under the internal and domestic laws of such State, without giving effect to the
principles of conflicts of laws thereof.

     

    9. Entire
Agreement.  This Agreement embodies the entire agreement among
the parties with respect to benefits payable upon an Involuntary Termination and
there have been and are no agreements, representations or warranties, oral or
written among the parties regarding the subject matter of this Agreement other
than those set forth or provided for in this Agreement.

     

    10. Assignment. Executive
acknowledges that the services to be rendered hereunder are unique and personal
in nature.  Accordingly, Executive may not assign any rights or
delegate any duties or obligations under this Agreement.  The rights
and obligations of Company under this Agreement shall automatically be assigned
to the successors and assigns of Company (including, but not limited to, any
successor in the event of a Change of Control, as well as any other entity that
Controls, is Controlled by, or is under common Control with, any such
successor), and shall inure to the benefit of, and be binding upon, such
successors and assigns, as well as Executive’s heirs and
representatives.

     

    11. Notices.  All
notices required hereunder shall be in writing and shall be delivered in person,
by facsimile or by certified or registered mail, return receipt requested, and
shall be effective upon sending if by facsimile, or upon receipt if by personal
delivery or certified or registered mail.  All notices shall be
addressed as follows or to such other address as the parties may later provide
in writing:

     

    if to
Company:

     

    IR
BioSciences Holdings, Inc.

    8767 E.
Via de Ventura Suite # 190

    Scottsdale,
Arizona  85258

    Attn:
Michael Wilhelm, CEO

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    and, if to Executive: at the home
address specified on the signature page of this Agreement.

     

    12. Severability/Reformation.  If
any one or more of the provisions (or any part thereof) of this Agreement shall
be held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions (or any part thereof) shall not
in any way be affected or impaired thereby, and this Agreement shall be
construed and reformed to the maximum extent permitted by law.  The
language of all parts of this Agreement shall in all cases be construed as a
whole according to its fair meaning and not strictly for or against either of
the parties.

     

    13. Modification and
Waiver. This Agreement and the rights, remedies and obligations contained
in any provision hereof, may be modified or waived only in accordance with this
Section 13.  No waiver by either
party of any breach by the other or any provision hereof shall be deemed to be a
waiver of any later or other breach thereof or as a waiver of any other
provision of this Agreement.  This Agreement and its terms may not be
waived, changed, discharged or terminated orally or by any course of dealing
between the parties, but only by a written instrument signed by the party
against whom any waiver, change, discharge or termination is sought.

     

    14. Arbitration. Any
dispute, controversy or claim arising out of or in connection with this
Agreement shall be exclusively subject to arbitration before the American
Arbitration Association (“AAA”).  Such arbitration shall take place in
the State as determined under Section 8 hereof,
before a single arbitrator in accordance with AAA’s then current National Rules
for the Resolution of Employment Disputes.  Judgment upon any
arbitration award may be entered in any court of competent
jurisdiction.  All parties shall cooperate in the process of
arbitration for the purpose of expediting discovery and completing the
arbitration proceedings.  Nothing contained in this Section or
elsewhere in this Agreement shall in any way deprive the Company or Operating
Company of its right to obtain injunctive relief in a court of competent
jurisdiction for purposes of enforcing any confidentiality agreement entered
into between the Company or Operating Company and Executive.

     

    15. Survival of Obligations and
Rights.  The obligations and rights contained in Sections 4 through 8, inclusive, and 10 hereof shall survive the termination of Executive’s
employment due to an Involuntary Termination.  Moreover, Section 14 hereof shall survive the termination of Executive’s
employment for any reason.

     

    16. Counterparts.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument.

     

    17. Section
Headings.  The descriptive section headings herein have been
inserted for convenience only and shall not be deemed to define, limit, or
otherwise affect the construction of any provision hereof.

     

    [REMAINDER
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    IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
and year first written above.

     

    IR
BIOSCIENCES HOLDINGS, INC.

     

    By:/s/ Michael K.
Wilhelm                         

     

    Name: Michael K.
Wilhelm                                                      

     

    Title:
C.E.O.

    EXECUTIVE

    

    /s/
John
Fermanis             

    John
Fermanisex4-11.htm

    
      

    

    EXHIBIT
4.11

     

    THIS
NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THIS NOTE
AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT
REQUIRED

     

    
      	
              Principal
      Amount: $1,544,000.00

            	
              Issue
      Date: April 2, 2008

            

    

     

    Unsecured Convertible
Promissory Note

     

    FOR  VALUE  RECEIVED,  Visual
Management Systems,  Inc., a Nevada corporation with an address at
1000 Industrial Way North Suite C, Toms River, NJ 08755 (the "Company"), hereby
promises to pay to the order of Intelligent Digital Systems, LLC, a Delaware
limited liability company, with an address at 543 Broadway, Massapequa, New York
11758 or its
registered  assigns  or  successors  in  interest
(the “Holder”), the sum of One Million Five-Hundred Forty Four Thousand
Dollars  ($1,544,000.00), on April 2, 2011 (the "Maturity Date") or
such earlier date as this Unsecured Convertible Promissory Note (this “Note”) is
required or permitted to be repaid as provided hereunder  If not
converted, or paid within 30 days of maturity, then from and after the maturity
date this Note shall bear interest at the rate 12% per annum.

     

    Section 1.
Definitions.

     

    
      	 
      	
              For
      the purposes hereof, in addition to the terms defined elsewhere in this
      Note, (a) capitalized terms not otherwise defined herein shall have the
      meanings set forth in the Asset Purchase Agreement dated as of even date
      herewith among the Company, Holder, Jay Russ and IDS Patent Holding, LLC
      (the “Asset Purchase Agreement”) and (b) the following terms shall have
      the following meanings:

            
	 	 
	
              1.1

            	
              “Affiliate”
      of a specified Person means a Person that directly, or indirectly through
      one or more intermediaries, controls, or is controlled by, or is under
      common control with, that Person, as such terms are used in and construed
      under Rule 405 under the Securities Act.

            
	 	 
	
              1.2

            	
              “Common
      Stock” means the Company’s common stock, par value $0.001 per
      share.

            
	 	 
	
              1.3

            	
               “Conversion
      Date” means the date upon which the Company receives written notice from
      Holder, of Holder’s desire and right (pursuant to the terms of this Note)
      to convert any or all of the principal amount or accrued interest under
      this Note into shares of Common Stock of the Company.  For the
      purposes of this definition, the date of receipt of said notice shall be
      the date such notice is sent in accordance with Section 8.1
      below

            
	 	 
	
              1.4

            	
              “Conversion
      Price” means the conversion price in effect on any given date, which
      initially shall be equal to $1.15 but which shall be subject to adjustment
      as described herein.

            
	 	 
	
              1.5

            	
              “Conversion
      Shares” or “Shares” means the shares of Common Stock issued or issuable
      upon conversion of any or all of the principal amount or accrued interest
      under this Note.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              1.6

            	
              “Effective
      Date” means the effective date of any registration statement filed with
      the SEC covering all or such portion of the Conversion Shares as may be
      specified in such registration statement.

            
	 	 
	
              1.7

            	
              “Exchange
      Act” means the Securities Exchange Act of 1934, as amended to
      date.

            
	 	 
	
              1.8

            	
              “Mandatory
      Default Amount” means the sum of (a) the outstanding principal amount of
      this Note, plus interest thereon calculated at the rate of 12% per annum
      from the date of the Event of Default and (b) all other amounts, costs,
      expenses due in respect of this Note.

            
	 	 
	
              1.9

            	
              “Permitted
      Issuances” means an issuance of (a) shares of Common Stock issued in
      connection with a stock split or stock dividend described in Section 4.1,
      (b) shares of Common Stock issued upon conversion of any or all of the
      principal amount or accrued interest under this Note, (c) shares of
      capital stock of the Company (or options, warrants or other rights to
      purchase such capital stock) issuable or issued to employees, officers,
      consultants or directors of the Company pursuant to agreements or plans
      approved by the Board of Directors of the Company, or (d) shares of
      capital stock of the Company subject to options, warrants or convertible
      securities that are outstanding as of the date hereof.

            
	 	 
	
              1.10

            	
              “Registration
      Statement” means a registration statement that registers the resale of
      such number of Conversion Shares of the Holder as shall be permitted or
      required to be registered under the terms of the Registration Rights
      Agreement, names such Holder as a “selling stockholder” therein, and meets
      all other requirements of the Registration Rights
    Agreement.

            
	 	 
	
              1.11

            	
              “Specified
      Debenture Holders” shall mean the holders of a majority of the then
      outstanding 5% Senior Secured Original Issue Discount Convertible
      Debentures (the “Debentures”) issued by the Company.

            
	 	 
	
              1.12

            	
              “Trading
      Day” means a day on which the New York Stock Exchange is open for
      business.

            

    

     

    Section 2. Principal and
Interest

     

    
      	
              2.1

            	
              Principal.  The
      principal amount due to the Holder of this Note shall be One Million
      Five-Hundred Forty Four Thousand Dollars ($1,544,000.00), which shall be
      payable in full on the Maturity Date to Holder or its registered assigns
      or successors, unless otherwise previously paid in full or
      converted.  The principal of this Note may not be prepaid, in
      whole or in part, prior to the Maturity Date except with the prior consent
      of Holder.

            
	 	 
	
              2.2

            	
              Interest.  No
      interest shall accrue hereunder until the Maturity Date.  If not
      paid in full or converted in full prior to the Maturity Date, then from
      and after the Maturity Date simple interest shall accrue on the
      outstanding principal amount at the annual rate of 12%.

            
	 	 
	
              2.3

            	
              Interest
      Calculations. Interest shall be calculated on the basis of a 365-day year,
      and shall accrue daily commencing on the Maturity Date. until payment or
      conversion in full of the principal amount due hereunder, together with
      all accrued and unpaid interest, liquidated damages and other amounts
      which may become due hereunder, has been made. Interest shall not accrue
      with respect to any principal amount previously
  converted.

            

    

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Section
3.  Conversion

     

    
      	
              3.1

            	
              Voluntary
      Conversion.  This Note will be convertible in whole or in part
      at any time and from time to time at the discretion of the Holder, into
      the Company’s Common Stock from and after the earliest to occur of the
      following:

            
	 	 
	 
      	
              3.1.1

            	
              May
      31, 2010;

            
	 	 	 
	 
      	
              3.1.2

            	
              The
      approval of the conversion of this Note by the Specified Debenture
      Holders; provided, however, that such
      approval shall be deemed to have been given from and after the first date
      on which no Debentures that are outstanding on the date hereof remain
      outstanding; or

            
	 	 	 
	 
      	
              3.1.3

            	
              Any
      of the following is agreed to or publicly announced: (i) the sale of all
      or substantially all of the assets of the Company, (ii) the purchase by
      any party of more than 25% of the outstanding common stock of the Company,
      (iii) the commencement of a tender offer with respect to 25% or more of
      the outstanding common stock of the Company, (iv) a merger transaction
      which results in the shareholders of Company immediately before the
      transaction owning less than 50% of the outstanding common stock of the
      surviving entity after the transaction or (v) a secondary registered
      offering by one or more holders of more than 5% of the outstanding common
      stock of the Company, other than pursuant to the Form SB-2 Registration
      Statement filed by the Company on December 21, 2007 which has been
      converted to a Form S-1 Registration Statement (any such transaction, a
      “Company Sale Transaction”).

            
	 	 	 
	
              3.2

            	
              Conversion
      Price. The initial conversion price in effect on any Conversion Date shall
      be equal to $1.15, subject to adjustment as described herein (the
      “Conversion Price”).

            
	 	 
	
              3.3

            	
              [Reserved]

            
	 	 
	
              3.4

            	
              Mechanics
      of Conversion.

            
	 	 
	 
      	
              3.4.1

            	
              Conversion
      Shares Issuable Upon Conversion of Principal Amount. Subject to and in
      compliance with the provisions of this Note and the Asset Purchase
      Agreement, the Holder has the right to convert the principal or any
      portion thereof, into, an amount of shares of Common Stock equal to the
      amount of principal plus any accrued interest thereon being converted
      divided by the Conversion Price (the number of shares so calculated the
      “Conversion Number”). Upon conversion, the Company will issue to Holder a
      number of shares of Common Stock equal to the Conversion
      Number.

            
	 	 	 
	 
      	
              3.4.2

            	
              Approval
      of the Specified Debenture Holders.  Except where approval is
      deemed given pursuant to Section 3.1.2 of this Note, all requests by the
      Holder for the permission of the Specified Debenture Holders to initiate
      conversion pursuant to Section 3.1.2 of this Note shall be made through
      the Company.  Upon receipt of written notice from the Holder,
      the Company shall promptly submit the Holder’s request to the Specified
      Debenture Holders.  The Company shall not be responsible for the
      timeliness of any response to the Holder’s request by the Specified
      Debenture Holders, nor for the substance of their response.  In
      the case of the Specified Debenture Holder’s denial of Holder’s request to
      initiate conversion, Holder agrees to hold the Specified Debenture Holders
      and the Company blameless and without liability for any injury or loss to
      the Holder resulting from the inability to initiate
      conversion.  Holder agrees that it has no recourse against the
      Company or the Specified Debenture Holder’s for the Specified Debenture
      Holder’s denial of Holder’s request to initiate
  conversion.

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	 
      	
              3.4.3

            	
              Notice
      of Conversion.  In compliance with the terms of section 3.1 of
      this Note relevant to Holder’s right to initiate conversion of principal
      or accrued interest, Holder shall indicate to Company its intention to
      initiate conversion by delivering to the Company written notice of its
      intention in a form substantially compliant with that of the Notice of
      Conversion included as Annex A of this Note.  The date upon
      which the Company receives said notice shall be deemed the Conversion
      Date.  Except where approval is deemed given pursuant to Section
      3.1.2 of this Note, for purposes of conversions requiring approval of the
      Specified Debenture Holders, the conversion date shall be deemed the date
      upon which the Company receives notice from the Specified Debenture
      Holders as to their approval of the conversion.

            
	 	 	 
	 
      	
              3.4.4

            	
              Tolling
      of Conversion Date.  If the Company shall reasonably believe
      that Holder is as of the date notice of conversion is received, not
      entitled to initiate conversion under the terms of this Section 3, the
      Company shall as soon as practicable indicate said belief in writing to
      the Holder.  The Conversion Date shall then be tolled until
      receipt of written proof to the Company’s reasonable satisfaction that the
      Holder is entitled to initiate conversion.

            
	 	 	 
	 
      	
              3.4.5

            	
              Delivery
      of Certificate Upon Conversion. Not later than seven Trading Days after
      each Conversion Date, the Company shall deliver, or cause to be delivered,
      to the Holder a certificate or certificates representing the Conversion
      Shares which prior to the Effective Date with respect to such Conversion
      Shares, shall contain such restrictive legends as may be required pursuant
      to the Securities Act. Such certificate or certificates shall represent
      the number of shares of Common Stock being acquired upon the conversion of
      this Note. On or after the Effective Date with respect to such Conversion
      Shares, the Company shall use its best efforts to deliver any certificate
      or certificates required to be delivered by the Company under this Section
      3 electronically through the Depository Trust Company or another
      established clearing corporation performing similar
    functions.

            
	 	 	 
	
              3.5

            	
              Reservation
      of Shares Issuable Upon Conversion. The Company covenants that it will at
      all times reserve and keep available out of its authorized and unissued
      shares of Common Stock for the sole purpose of issuance upon conversion of
      this Note free from preemptive rights or any other actual contingent
      purchase rights of Persons other than the Holder (and the other Holders of
      the Notes), not less than such aggregate number of shares of the Common
      Stock as shall (subject to the terms and conditions set forth in the
      Purchase Agreement) be issuable (taking into account the adjustments and
      restrictions of Section 4) upon the conversion of the outstanding
      principal amount of this Note. The Company covenants that all shares of
      Common Stock that shall be so issuable shall, upon issue, be duly
      authorized, validly issued, fully paid and nonassessable and, if the
      Registration Statement is then effective under the Securities Act, shall
      be registered for public sale in accordance with such Registration
      Statement.

            

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      	
              3.6

            	
              Fractional
      Shares. Upon a conversion hereunder, the Company shall not be required to
      issue stock certificates representing fractions of shares of Common Stock,
      but may if otherwise permitted, make a cash payment in respect of any
      final fraction of a share based on the Conversion Price at such
      time.

            
	 	 
	
              3.7

            	
              Transfer
      Taxes. Company shall not be required to pay any documentary, stamp or
      similar taxes that may be payable in respect of the issue or delivery of
      certificates representing conversion shares, and the Company shall not be
      required to issue or deliver such certificates unless or until the Person
      or Persons requesting the issuance thereof shall have paid to the Company
      the amount of such tax or shall have established to the satisfaction of
      the Company that such tax has been
paid.

            

    

    
    

     

    
      Section
4.  Certain Adjustments

    

     

    
      	 
      	
              The
      Conversion Price shall be adjusted from time to time by the Company as
      follows:.

            
	 	 
	
              4.1

            	
              Stock
      Dividends and Stock Splits.  If the Company, at any time while
      this Note is outstanding: (A) pays a stock dividend or otherwise makes a
      distribution or distributions payable in shares of Common Stock on shares
      of Common Stock or any Common Stock Equivalents (which shall not include
      any shares of Common Stock issued by the Company upon conversion of, or
      payment of interest on, this Note); (B) subdivides outstanding shares of
      Common Stock into a larger number of shares; (C) combines (including by
      way of a reverse stock split) outstanding shares of Common Stock into a
      smaller number of shares; or (D) issues, in the event of a
      reclassification of shares of the Common Stock, any shares of capital
      stock of the Company, then the Conversion Price shall be multiplied by a
      fraction of which the numerator shall be the number of shares of Common
      Stock (excluding any treasury shares of the Company) outstanding
      immediately before such event and of which the denominator shall be the
      number of shares of Common Stock outstanding immediately after such
      event.  Any adjustment made pursuant to this Section shall
      become effective immediately after the record date for the determination
      of stockholders entitled to receive such dividend or distribution and
      shall become effective immediately after the effective date in the case of
      a subdivision, combination or re-classification.

            
	 	 
	
              4.2

            	
              Dilutive
      Issuances.  

            
	 	 
	
              4.2.1

            	
              If,
      at any time while this Note is outstanding, the Company shall: (A) issue
      any options, warrants or other rights (excluding Permitted Issuances)
      entitling the record or beneficial holder thereof to subscribe for, or
      purchase, shares of Common Stock for a consideration per share less than
      the then-effective Conversion Price; (B) issue or sell securities of the
      Company convertible into, or exchangeable for, shares of Common Stock for
      a consideration per share less than the then-effective Conversion Price;
      or (C) issue or sell additional shares of Common Stock for a consideration
      per share less than the then-effective Conversion Price (any of the
      foregoing events described in clauses (A), (B), and (C), a “Dilutive
      Issuance”); then the Conversion Price shall be adjusted to a price
      determined by multiplying the Conversion Price in effect immediately prior
      to such Dilutive Issuance by a fraction the numerator of which shall be
      the sum of the number of shares of Common Stock (i) outstanding
      immediately prior to such Dilutive Issuance, (ii) issuable upon exchange
      or conversion of any exchangeable or convertible securities outstanding
      immediately prior to such Dilutive Issuance, (iii) issuable upon the
      exercise of all options, warrants or similar rights outstanding
      immediately prior to such Dilutive Issuance and (iv) which the aggregate
      consideration received by the Company for such Dilutive Issuance would
      purchase at the Conversion Price in effect immediately prior to such
      Dilutive Issuance, and the denominator of which shall be the sum of the
      number of shares of Common Stock in clauses (i), (ii) and (iii) above plus
      the number of shares of Common Stock issued or issuable in such Dilutive
      Issuance at the stated issue or exercise price thereof.
  

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	
              4.2.2

            	
              In
      the case of a Dilutive Issuance of securities for cash, the consideration
      shall be deemed to be the amount of cash paid therefor before deducting
      any discounts, commissions or other expenses allowed, paid or incurred by
      the Company for any underwriting or otherwise in connection with the
      issuance and sale thereof.

            
	 	 
	
              4.2.3

            	
              In
      the case of a Dilutive Issuance of securities for consideration in whole
      or in part other than cash, the consideration other than cash shall be
      deemed to be the fair value thereof as determined in good faith by the
      Board of Directors of the Company irrespective of any accounting
      treatment.

            
	 	 
	
              4.2.4

            	
              In
      the case of a Dilutive Issuance of options to purchase or rights to
      subscribe for Common Stock, securities by their terms convertible into or
      exchangeable for Common Stock or options to purchase or rights to
      subscribe for such convertible or exchangeable securities, the following
      provisions shall apply for all purposes of this Section
  4:

            
	 	 
	
                

            	 
      	
              4.2.4.1

            	
              The
      aggregate maximum number of shares of Common Stock deliverable upon
      exercise (assuming the satisfaction of any conditions to exercisability,
      including, without limitation, the passage of time, but without taking
      into account potential antidilution adjustments) of such options to
      purchase or rights to subscribe for Common Stock shall be deemed to have
      been issued at the time such options or rights were issued and for a
      consideration equal to the consideration (determined in the manner
      provided in Sections 4.2.2 and 4.2.3), if any, received by the Company
      upon the issuance of such options or rights plus the minimum aggregate
      exercise price provided in such options or rights (without taking into
      account potential antidilution adjustments) for the Common Stock covered
      thereby.

            
	 	 	 	 
	
                

            	 
      	
              4.2.4.2

            	
              The
      aggregate maximum number of shares of Common Stock deliverable upon
      conversion of or in exchange (assuming the satisfaction of any conditions
      to convertibility or exchangeability, including, without limitation, the
      passage of time, but without taking into account potential antidilution
      adjustments) for any such convertible or exchangeable securities or upon
      the exercise of options to purchase or rights to subscribe for such
      convertible or exchangeable securities and subsequent conversion or
      exchange thereof shall be deemed to have been issued at the time such
      securities were issued or such options or rights were issued and for a
      consideration equal to the consideration, if any, received by the Company
      for any such securities and related options or rights (excluding any cash
      received on account of accrued interest or accrued dividends), plus the
      minimum aggregate additional consideration, if any, to be received by the
      Company (without taking into account potential antidilution adjustments)
      upon the conversion or exchange of such securities or the exercise of any
      related options or rights (the consideration in each case to be determined
      in the manner provided in Sections 4.2.2 and
  4.2.3).

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      	
                

            	 
      	
              4.2.4.3

            	
              In
      the event of any change in the number of shares of Common Stock
      deliverable or in the consideration payable to the Company upon exercise
      of such options or rights or upon conversion of or in exchange for such
      convertible or exchangeable securities, including, but not limited to, a
      change resulting from the antidilution provisions hereof, the Conversion
      Price, to the extent in any way affected by or computed using such
      options, rights or securities, shall be recomputed to reflect such change,
      but no further adjustment shall be made for the actual issuance of Common
      Stock or any payment of such consideration upon the exercise of any such
      options or rights or the conversion or exchange of such
      securities.

            
	 	 	 	 
	
                

            	 
      	
              4.2.4.4

            	
              The
      number of shares of Common Stock deemed issued and the consideration
      deemed paid therefor pursuant to Sections 4.2.4.1 and 4.2.4.2 shall be
      appropriately adjusted to reflect any change, termination or expiration of
      the type described in Section 4.2.4.3.

            
	 	 	 	 
	
              4.3

            	
              Fundamental
      Transaction. If, at any time while this Note is outstanding, (A) the
      Company effects any merger or consolidation of the Company with or into
      another Person, (B) the Company effects any sale of all or substantially
      all of its assets in one transaction or a series of related transactions,
      (C) the Company effects any reclassification of the Common Stock or any
      compulsory share exchange pursuant to which the Common Stock is
      effectively converted into or exchanged for other securities, cash or
      property (in any such case, a “Fundamental Transaction”), then, upon any
      subsequent conversion of this Note, the Holder shall have the right to
      receive, for each Conversion Share that would have been issuable upon such
      conversion immediately prior to the occurrence of such Fundamental
      Transaction, the same kind and amount of securities, cash or property as
      it would have been entitled to receive upon the occurrence of such
      Fundamental Transaction if it had been, immediately prior to such
      Fundamental Transaction, the holder of one (1) share of Common Stock (the
      “Alternate Consideration”).  For purposes of any such
      conversion, the determination of the Conversion Price shall be
      appropriately adjusted to apply to such Alternate Consideration based on
      the amount of Alternate Consideration issuable in respect of one (1) share
      of Common Stock in such Fundamental Transaction, and the Company shall
      apportion the Conversion Price among the Alternate Consideration in a
      reasonable manner reflecting the relative value of any different
      components of the Alternate Consideration.  If holders of Common
      Stock are given any choice as to the securities, cash or property to be
      received in a Fundamental Transaction, then the Holder shall be given the
      same choice as to the Alternate Consideration it receives upon any
      conversion of this Note following such Fundamental
      Transaction.  To the extent necessary to effectuate the
      foregoing provisions, any successor to the Company or surviving entity in
      such Fundamental Transaction shall issue to the Holder a new note
      consistent with the foregoing provisions and evidencing the Holder’s right
      to convert such note into Alternate Consideration. The terms of any
      agreement pursuant to which a Fundamental Transaction is effected shall
      include terms requiring any such successor or surviving entity to comply
      with the provisions of this Section 4 and insuring that this Note (or any
      such replacement security) will be similarly adjusted upon any subsequent
      transaction analogous to a Fundamental
  Transaction.

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	
              4.4

            	
              For
      purposes of this Section 4, the number of shares of Common Stock at any
      time outstanding shall not include shares held in the treasury of the
      Company so long as the Company does not pay any dividend or make any
      distribution on shares of Common Stock held in the treasury of the
      Company, but shall include shares issuable in respect of scrip
      certificates issued in lieu of fractions of shares of Common
      Stock.

            
	 	 
	
              4.5

            	
              Notice
      to the Holder.

            
	 	 
	 
      	
              4.5.1

            	
              Adjustment
      to Conversion Price. Whenever the Conversion Price is adjusted pursuant to
      any provision of this Section 4, the Company shall promptly mail to the
      Holder a notice setting forth the Conversion Price after such adjustment
      and setting forth a brief statement of the facts requiring such
      adjustment.

            
	 	 	 
	 
      	
              4.5.2

            	
              Notice
      to Allow Conversion by Holder. If (A) the Company shall declare a dividend
      (or any other distribution in whatever form) on the Common Stock, (B) the
      Company shall declare a special nonrecurring cash dividend on or a
      redemption of the Common Stock, (C) the Company shall authorize the
      granting to all holders of the Common Stock of rights or warrants to
      subscribe for or purchase any shares of capital stock of any class or of
      any rights, (D) the approval of any stockholders of the Company shall be
      required in connection with any reclassification of the Common Stock, any
      consolidation or merger to which the Company is a party, any sale or
      transfer of all or substantially all of the assets of the Company, of any
      compulsory share exchange whereby the Common Stock is converted into other
      securities, cash or property or (E) the Company shall authorize the
      voluntary or involuntary dissolution, liquidation or winding up of the
      affairs of the Company, then, in each case, the Company shall cause to be
      filed at each office or agency maintained for the purpose of conversion of
      this Note, and shall cause to be delivered to the Holder at its last known
      address, at least 20 calendar days prior to the applicable record or
      effective date hereinafter specified, a notice stating (x) the date on
      which a record is to be taken for the purpose of such dividend,
      distribution, redemption, rights or warrants, or if a record is not to be
      taken, the date as of which the holders of the Common Stock of record to
      be entitled to such dividend, distributions, redemption, rights or
      warrants are to be determined or (y) the date on which such
      reclassification, consolidation, merger, sale, transfer or share exchange
      is expected to become effective or close, and the date as of which it is
      expected that holders of the Common Stock of record shall be entitled to
      exchange their shares of Common Stock for securities, cash or other
      property deliverable upon such reclassification, consolidation, merger,
      sale, transfer or share exchange, provided that the failure to deliver
      such notice or any defect therein or in the delivery thereof shall not
      affect the validity of the corporate action required to be specified in
      such notice. The Holder is entitled to convert this Note during the 20-day
      period commencing on the date of such notice through the effective date of
      the event triggering such notice.

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    Section 5.  Event
of Default

     

    
      	
              5.1.

            	
              Event
      of Default.  “Event of Default” means, wherever used herein, any
      of the following events (whatever the reason for such event and whether
      such event shall be voluntary or involuntary or effected by operation of
      law or pursuant to any judgment, decree or order of any court, or any
      order, rule or regulation of any administrative or governmental
      body):

            
	 	 
	 
      	
              5.1.1.

            	
              The
      Company shall fail to pay the principal amount of this Note within ten
      (10) days of when due;

            
	 	 	 
	 
      	
              5.1.2.

            	
              The
      Company shall fail to observe or perform any other covenant or agreement
      contained in this Note (other than a breach by the Company of its
      obligations to deliver shares of Common Stock to the Holder upon
      conversion), which failure is not cured, if possible to cure, within 30
      calendar days after notice of such failure sent by the Holder to the
      Company;

            
	 	 	 
	 
      	
              5.1.3.

            	
               (A)
      the Company commences a case or other proceeding under any bankruptcy,
      reorganization, arrangement, adjustment of debt, relief of debtors,
      dissolution, insolvency, liquidation or similar law of any jurisdiction
      relating to the Company; (B) there is commenced against the Company any
      such case or proceeding that is not dismissed within 60 days after
      commencement; (C) the Company is adjudicated insolvent or bankrupt or any
      order of relief or other order approving any such case or proceeding is
      entered; (D) the Company suffers any appointment of any custodian or the
      like for it or any substantial part of its property that is not discharged
      or stayed within 60 calendar days after such appointment; (E) the Company
      makes a general assignment for the benefit of creditors; (F) the Company
      calls a meeting of its creditors with a view to arranging a composition,
      adjustment or restructuring of its debts; or (G) the Company, by any act
      or failure to act, expressly indicates its consent to, approval of or
      acquiescence in any of the foregoing or takes any corporate or other
      action for the purpose of effecting any of the foregoing;
    or

            
	 	 	 
	 
      	
              5.1.4.

            	
              The
      Company shall fail for any reason to deliver certificates to a holder of
      this Note prior to the seventh Trading Day after a Conversion Date or the
      Company shall provide at any time notice to such holder, including by way
      of public announcement, of the Company’s intention to not honor requests
      for conversions of any portion of the principal amount or accrued interest
      under this Note in accordance with the terms hereof.

            
	 	 	 
	
              5.2.

            	
              Remedies
      Upon Event of Default. If any Event of Default shall have occurred, the
      Mandatory Default Amount shall become immediately due and payable in cash.
      Upon the payment in full of the Mandatory Default Amount, the Holder shall
      promptly surrender this Note to or as directed by the Company. In
      connection with such acceleration described herein, the Holder need not
      provide, and the Company hereby waives, any presentment, demand, protest
      or other notice of any kind, and the Holder may immediately and without
      expiration of any grace period enforce any and all of its rights and
      remedies hereunder and all other remedies available to it under applicable
      law. Such acceleration may be rescinded and annulled by Holder at any time
      prior to payment hereunder and the Holder shall have all rights as a
      holder of this Note until such time, if any, as the Holder receives full
      payment pursuant to this Section 5.2. No such rescission or annulment
      shall affect any subsequent Event of Default or impair any right
      consequent thereon.

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
              5.3.

            	
              Company
      Contract Default as Event of Default.  In the event that the
      Company fails to perform or otherwise breaches any obligation or agreement
      under the terms of that certain Consulting Agreement by and between the
      Company and Jay Russ, dated as of the date hereof (the “Consulting
      Agreement”), then in any such case, Holder shall have the right,
      exercisable by delivery of written notice thereof to the Company in
      accordance with the terms of Section 8.1 of this Note, from the date of
      the occurrence of such failure or breach to declare such failure or breach
      thereunder an Event of Default hereunder.  Any declared Event of
      Default pursuant to this Section 5.3 shall be effective as of the date of
      such failure or breach under the Consulting Agreement and shall be subject
      to the terms of Section 5.2 of this Note in all respects as an Event of
      Default hereunder.

            

    

     

    Section 6. Acceleration of Maturity
Date

     

    
      	 	
              Acceleration
      Upon Sale of Company.  In the event the Company consummates a
      transaction involving either (a) the sale of all or substantially all of
      the assets or outstanding shares of capital stock of the Company, or (b) a
      merger pursuant to which 51% or more of the shares of capital stock of the
      Company are converted into the right to receive cash therefor, then in any
      such case, Holder shall have the right at any time thereafter, exercisable
      by delivery of written notice thereof to the Company in accordance with
      the terms of Section 8.1 of this Note, to accelerate the Maturity Date and
      cause any then outstanding indebtedness or obligation under this Note to
      immediately become due and payable.

            

    

     

    Section 7.
Assignments

     

    
      	
              7.1

            	
              Assignable
      in Whole Only.  This Note may only be assigned in whole to a
      third party, and any and all rights and obligations under this Note will
      pass in full to any assignee who shall by accepting the assignment agree
      to all relevant terms of this Note as to their valid and legally binding
      status.

            
	 	 
	
              7.2

            	
              Notice
      to the Company.  The Holder must notify the Company in writing
      of any intent to make assignment of this Note to any party prior to
      execution of any agreements to effectuate such.  Included in
      said notice the Holder must submit to the Company proof of the assignee’s
      legal ability to hold this Note and comply with its terms, and any other
      documentation reasonably requested by the Company regarding assignee’s
      identity.  Upon approval by the Company, not to be unreasonably
      withheld, the Holder may then proceed with the desired
      assignment.

            
	 	 
	
              7.3

            	
              Registration
      of Assignment.  Upon execution of any and all assignments of
      this Note, the Holder shall submit to the Company all relevant agreements
      governing the assignment transaction.  Upon final receipt by the
      Company of said agreements the assignment shall be considered a Registered
      Assignment, and the assignee a Registered Assignee, and the new Holder of
      this Note.

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    Section 8.
Miscellaneous

     

    
      	
              8.1

            	
              Notices.
      Any and all notices or other communications or deliveries to be provided
      by the Holder hereunder, including, without limitation, any Notice of
      Conversion, shall be in writing and delivered personally, by facsimile, or
      sent by a nationally recognized overnight courier service, addressed to
      the Company, at the address set forth above, facsimile number
      732-281-1365, Attention: Chief Financial Officer or such other facsimile
      number or address as the Company may specify for such purpose by notice to
      the Holder delivered in accordance with this Section 8. Any and all
      notices or other communications or deliveries to be provided by the
      Company hereunder shall be in writing and delivered by facsimile addressed
      to the Holder (a) at the facsimile number (516) 541-1077, or (b) if such
      facsimile transmission is unsuccessful after the Company’s good faith
      effort to deliver notice to Holder at such facsimile number, then by a
      nationally recognized overnight courier service to the Holder’s principal
      place of business. Any notice or other communication or deliveries
      hereunder shall be deemed given and effective on the earliest of (i) the
      date of transmission, if such notice or communication is delivered via
      facsimile at the facsimile number specified in this Section 8 prior to
      5:30 p.m. (New Jersey time ), (ii) the date immediately following the date
      of transmission, if such notice or communication is delivered via
      facsimile at the facsimile number specified in this Section 8 between 5:30
      p.m. (New Jersey time) and 11:59 p.m. (New Jersey time) on any date, (iii)
      the second Business Day following the date of mailing, if sent by
      nationally recognized overnight courier service, or (iv) upon actual
      receipt by the party to whom such notice is required to be
      given.

            
	 	 
	
              8.2

            	
              Absolute
      Obligation. Except as expressly provided herein, no provision of this Note
      shall alter or impair the obligation of the Company, which is absolute and
      unconditional, to pay the principal amount and accrued interest, as
      applicable, on this Note at the time, place, and rate, and in the coin or
      currency, herein prescribed.

            
	 	 
	
              8.3

            	
              Lost
      or Mutilated Note. If this Note shall be mutilated, lost, stolen or
      destroyed, the Company shall execute and deliver, in exchange and
      substitution for and upon cancellation of a mutilated Note, or in lieu of
      or in substitution for a lost, stolen or destroyed Note, a new Note for
      the principal amount of this Note so mutilated, lost, stolen or destroyed,
      but only upon receipt of evidence of such loss, theft or destruction of
      such Note, and of the ownership hereof, reasonably satisfactory to the
      Company.

            
	 	 
	
              8.4

            	
              Governing
      Law. All questions concerning the construction, validity, enforcement and
      interpretation of this Note shall be governed by and construed and
      enforced in accordance with the internal laws of the State of New York,
      without regard to the principles of conflict of laws thereof. Each party
      agrees that all legal proceedings concerning the interpretation,
      enforcement and defense of the transactions contemplated hereby (whether
      brought against a party hereto or its respective Affiliates, directors,
      officers, shareholders, employees or agents) shall be commenced in the
      state and federal courts sitting in New York, New York (the “New York
      Courts”). Each party hereto hereby irrevocably submits to the exclusive
      jurisdiction of the New York Courts for the adjudication of any dispute
      hereunder or in connection herewith or with any transaction contemplated
      hereby, and hereby irrevocably waives, and agrees not to assert in any
      suit, action or proceeding, any claim that it is not personally subject to
      the jurisdiction of such New York Courts, or such New York Courts are
      improper or inconvenient venue for such proceeding. Each party hereto
      hereby irrevocably waives, to the fullest extent permitted by applicable
      law, any and all right to trial by jury in any legal proceeding arising
      out of or relating to this Note or the transactions contemplated hereby.
      If either party shall commence an action or proceeding to enforce any
      provisions of this Note, then the prevailing party in such action or
      proceeding shall be reimbursed by the other party for its attorneys fees
      and other costs and expenses incurred in the investigation, preparation
      and prosecution of such action or
proceeding.

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
              8.5

            	
              Waiver.
      Any waiver by the Company or the Holder of a breach of any provision of
      this Note shall not operate as or be construed to be a waiver of any other
      breach of such provision or of any breach of any other provision of this
      Note. The failure of the Company or the Holder to insist upon strict
      adherence to any term of this Note on one or more occasions shall not be
      considered a waiver or deprive that party of the right thereafter to
      insist upon strict adherence to that term or any other term of this Note.
      Any waiver by the Company or the Holder must be in
  writing.

            
	 	 
	
              8.6

            	
              Severability.
      If any provision of this Note is invalid, illegal or unenforceable, the
      balance of this Note shall remain in effect, and if any provision is
      inapplicable to any Person or circumstance, it shall nevertheless remain
      applicable to all other Persons and circumstances. If it shall be found
      that any interest or other amount deemed interest due hereunder violates
      the applicable law governing usury, the applicable rate of interest due
      hereunder shall automatically be lowered to equal the maximum rate of
      interest permitted under applicable law. The Company covenants (to the
      extent that it may lawfully do so) that it shall not at any time insist
      upon, plead, or in any manner whatsoever claim or take the benefit or
      advantage of, any stay, extension or usury law or other law which would
      prohibit or forgive the Company from paying all or any portion of the
      principal of or interest on this Note as contemplated herein, wherever
      enacted, now or at any time hereafter in force, or which may affect the
      covenants or the performance of this Note, and the Company (to the extent
      it may lawfully do so) hereby expressly waives all benefits or advantage
      of any such law, and covenants that it will not, by resort to any such
      law, hinder, delay or impeded the execution of any power herein granted to
      the Holder, but will suffer and permit the execution of every such power
      as though no such law has been enacted.

            
	 	 
	
              8.7

            	
              Next
      Business Day. Whenever any payment or other obligation hereunder shall be
      due on a day other than a Business Day, such payment shall be made on the
      next succeeding Business Day.

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
              8.8

            	
              Assumption.
      Except as otherwise provided in Section 4, any successor to the Company or
      any surviving entity in a Fundamental Transaction shall (i) assume, prior
      to such Fundamental Transaction, all of the obligations of the Company
      under this Note pursuant to written agreements in form and substance
      satisfactory to the Holder (such approval not to be unreasonably withheld
      or delayed) and (ii) issue to the Holder a new Note of such successor
      entity evidenced by a written instrument substantially similar in form and
      substance to this Note, including, without limitation, having a principal
      amount and interest rate equal to the principal amount and the interest
      rate of this Note and having similar ranking to this Note, which shall be
      satisfactory to the Holder (any such approval not to be unreasonably
      withheld or delayed). The provisions of this Section 8.8 shall apply
      similarly and equally to successive Fundamental Transactions and shall be
      applied without regard to any limitations of this Note.

            
	 	 

    

    
      [Signature
page follows]

    

     

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

       

    

    IN WITNESS WHEREOF, the Company has
caused this Note to be duly executed by a duly authorized officer as of the date
first above indicated.

     

    

     

    
      	 
      	
              VISUAL
      MANAGEMENT SYSTEMS, INC.

            	 
      
	 	 	 	 
	 	 	 	 
	 
      	
              By:

            	 
      	 
      
	 
      	
              Name:

            	
              Jason
      Gonzalez

            	 
      
	 
      	
              Title:

            	
              Chief
      Executive Officer

            	 
      

    

     

    WITNESS:

     

    _______________________________

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    ANNEX
A

    

    NOTICE
OF CONVERSION

    

    

    The
undersigned hereby elects to convert principal under the Unsecured Convertible
Promissory Note issued April 2, 2008 of Visual Management Systems, Inc., a
Nevada corporation (the “Company”), into
shares of common stock (the “Common Stock”), of
the Company according to the conditions hereof, as of the date written
below.  If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance
therewith.  No fee will be charged to the holder for any conversion,
except for such transfer taxes, if any.

    

    The
undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

     

    

     

    
      	
              Conversion
      calculations:

            	 
      	 
      
	 
      	
              Date
      to Effect Conversion: 

            
	 
      	 
      	 
      
	 
      	
              Principal
      Amount of Note to be Converted: 

            
	 
      	 
      	 
      
	 
      	
              Payment
      of Interest in Common Stock __ yes  __
  no 

            
	 
      	 
      	 
      
	 
      	 
      	
              If
      yes, $_____ of Interest Accrued on Account of Conversion at
      Issue.

            
	 
      	 
      	 
      
	 
      	
              Number
      of shares of Common Stock to be issued: 

            
	 
      	 
      	 
      
	 
      	
              Signature: 

            
	 
      	 
      	 
      
	 
      	
              Name: 

            
	 
      	 
      	 
      
	 
      	
              Address
      for Delivery of Common Stock Certificates: 

            
	 
      	 
      	 
      
	 
      	
              Or 

            
	 
      	 
      	 
      
	 
      	
              DWAC
      Instructions: 

            
	 
      	 
      	 
      
	 
      	
              Broker
      No:     _______________

            
	 
      	
              Account
      No:  _______________ 

            

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    ANNEX
B

    

    CONVERSION
SCHEDULE

    

    The
Unsecured Convertible Promissory Note issued on April 2, 2008 in the aggregate
principal amount of $1,544,000.00 is issued by Visual Management Systems,
Inc.  This Conversion Schedule reflects conversions made under Section
3 of the above referenced Note.

     

    
      	 
      	 
      	
              Dated:

            	 
      

    

    

    

    
      	
              Date
      of Conversion

               

            	
              Amount
      of

              Conversion

            	
              Aggregate

              Principal

              Amount

              Remaining

              Subsequent
      to

              Conversion

               

            	
              Company
      Attest

            
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      

    

     

     

    
 

    16

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