Common use of Conversion Rights Clause in Contracts

Conversion Rights. The Holder shall have the right, at any time on or after the Issuance Date prior to the Maturity Date to convert all or any portion of the then outstanding and unpaid Principal Amount and accrued interest (including any Default Interest) thereon into fully paid and non-assessable shares of Common Stock, or any shares of capital stock or other securities of the Company into which such Common Stock shall hereafter be changed or reclassified, at the Conversion Price (as defined below) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the then outstanding shares of Common Stock. For purposes of the proviso set forth in the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, however, that the limitations on conversion may be waived (up to 9.99%) by the Holder upon, at the election of the Holder, not less than 61 days’ prior written notice to the Company, and the provisions of the conversion limitation 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). The Holder shall exercise its rights to conversion pursuant to this Section 4.1(a) by delivering to the Company a written notice of its election to so convert in the form attached hereto as Exhibit B (the “Notice of Conversion”), delivered by the Holder to the Company; provided that the Notice of Conversion is submitted by e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Company before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2).

Conversion Rights. The Holder shall have the rightright from time to time, and at any time during the period beginning on or after the Issuance Date prior to date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any portion part of the then outstanding and unpaid Principal Amount and accrued interest (including any Default Interest) thereon principal amount of this Note into fully paid and non-non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Company Borrower into which such Common Stock shall hereafter be changed or reclassified, reclassified at the conversion price (the “Conversion Price (as defined belowPrice”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note the Notes or the unexercised or unconverted portion of any other security of the Company Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.999.99% of the then outstanding shares of Common Stock. For purposes of the proviso set forth in to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived (up to 9.99%) by the Holder upon, at the election of the Holder, not less than 61 days’ prior written notice to the CompanyBorrower, and the provisions of the conversion limitation 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). .. The Holder shall exercise its rights number of shares of Common Stock to conversion pursuant to this Section 4.1(a) by delivering to the Company a written notice of its election to so convert in the form attached hereto as Exhibit B (the “Notice of Conversion”), delivered by the Holder to the Company; provided that the Notice of Conversion is submitted by e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Company before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any be issued upon each conversion of this Note, the sum of (1) the Principal Amount to Note shall be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2).determined by

Conversion Rights. The Holder shall have the right, at At any time on or after the Issuance Date prior to the Maturity Date to convert Date, at the sole option of the Holder except in the event of the closing price threshold noted below, all or any portion but not less than all, of the then outstanding and unpaid Principal Amount and accrued interest (including any Default Interest) thereon into fully paid and non-assessable shares of Common Stock, or any shares of capital stock or other securities of the Company into which such Common Stock shall hereafter be changed or reclassified, at the Conversion Price (as defined below) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of may be converted (1an "Optional Conversion") the into a number of shares of Common Stock beneficially owned by Obligor’s common stock (the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous "Optional Conversion Shares") equal to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% amount of the then outstanding shares of Common Stock. For purposes of the proviso set forth in the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, however, that the limitations on conversion may be waived (up to 9.99%) by the Holder upon, at the election of the Holder, not less than 61 days’ prior written notice to the Company, and the provisions of the conversion limitation 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). The Holder shall exercise its rights to conversion pursuant to this Section 4.1(a) by delivering to the Company a written notice of its election to so convert in the form attached hereto as Exhibit B (the “Notice of Conversion”), delivered by the Holder to the Company; provided that the Notice of Conversion is submitted by e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Company before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount to be converted in such conversion plus divided by the Conversion Price (2herein so called) which price shall be $1.50 (one dollar and fifty cents) per Optional Conversion Share. If the Obligor’s common stock has traded at $1.50 or above for 4 consecutive weeks on a nationally recognized market (based on daily closing prices), then any Optional Conversion under this Section 8 may also occur at the Holder’s optionoption of the Obligor. In order to exercise the right of Optional Conversion, accrued Holder shall surrender this Note at the principal office of Obligor and unpaid interestshall give written notice of such exercise (the "Optional Conversion Notice"), if anyto Obligor at such office. Such Optional Conversion shall be deemed to have been effected at the close of business on the date on which such Optional Conversion Notice, on duly completed and executed, shall have been given as aforesaid, and, subject to the last sentence of this Section 8, at such time the Principal Amount at subject to such Optional Conversion shall be applied by Obligor in full payment of the Interest Rate Optional Conversion Shares to be issued in consequence of the Conversion Dateand that application shall discharge Obligor from all liability in respect of the Principal Amount converted, plus (3) at and Holder shall be deemed for all purposes to have become the Holder’s option, Default Interest, if any, on holder of the amounts referred to in the immediately preceding clauses (1) and/or (2)Optional Conversion Shares.

Conversion Rights. The Holder shall have the rightright from time to time, and at any time during the period beginning on or after the Issuance Date prior to date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any portion part of the then outstanding and unpaid Principal Amount and accrued interest (including any Default Interest) thereon principal amount of this Note into fully paid and non-non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Company Borrower into which such Common Stock shall hereafter be changed or reclassified, reclassified at the conversion price (the “Conversion Price (as defined belowPrice”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note the Notes or the unexercised or unconverted portion of any other security of the Company Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.999.99% of the then outstanding shares of Common Stock. For purposes of the proviso set forth in to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived (up to 9.99%) by the Holder upon, at the election of the Holder, not less than 61 days’ prior written notice to the CompanyBorrower, and the provisions of the conversion limitation 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). .. The Holder shall exercise its rights to conversion pursuant to this Section 4.1(a) by delivering to the Company a written notice number of its election to so convert in the form attached hereto as Exhibit B (the “Notice of Conversion”), delivered by the Holder to the Company; provided that the Notice of Conversion is submitted by e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Company before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2).shares

Conversion Rights. The (a) Subject to and upon compliance with the provisions of this Note, prior to the Stated Maturity Date, the Holder shall have the right, at its option at any time, to convert some or all of the Note into such number of fully paid and nonassessable Ordinary Shares as is obtained by: (i) adding (A) the principal amount of this Note to be converted and (B) the amount of any accrued but unpaid interest with respect to such portion of this Note to be converted; and (ii) dividing the result obtained pursuant to clause (i) above by the Conversion Price then in effect The rights of conversion set forth in this Section 6 shall be exercised by the Holder by giving written notice to the Company that the Holder elects to convert a stated amount of this Note into Ordinary Shares and by surrender of this Note (or, in lieu thereof, by delivery of an appropriate lost security affidavit in the event this Note shall have been lost or destroyed) to the Company at its principal office (or such other office or agency of the Company as the Company may designate by notice in writing to the Holder) at any time on the date set forth in such notice (which date shall not be earlier than the Company’s receipt of such notice), together with a statement of the name or names (with address) in which the certificate or certificates for Ordinary Shares shall be issued. (b) Promptly after receipt of the Issuance Date written notice referred to in Section 6(a) above and surrender of this Note (or, in lieu thereof, by delivery of an appropriate lost security affidavit in the event this Note shall have been lost or destroyed), but in no event more than three (3) Business Days thereafter, the Company shall issue and deliver, or cause to be issued and delivered, to the Holder, registered in such name or names as the Holder may direct in writing, a certificate or certificates for the number of whole Ordinary Shares issuable upon the conversion of such portion of this Note. To the extent permitted by law, such conversion shall be deemed to have been effected, and the Conversion Price shall be determined, as of the close of business on the date on which such written notice shall have been received by the Company and this Note shall have been surrendered as aforesaid (or, in lieu thereof, an appropriate lost security affidavit has been delivered to the Company), and at such time, the rights of the Holder shall cease with respect to the principal amount of the Notes being converted, and the Person or Persons in whose name or names any certificate or certificates for Ordinary Shares shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby. (c) No fractional shares shall be issued upon any conversion of this Note into Ordinary Shares. If any fractional share of Ordinary Shares would, except for the provisions of the first sentence of this Section 6(c), be delivered upon such conversion, the Company, in lieu of delivering such fractional share, shall pay to the Holder an amount in cash equal to the Market Price of such fractional share of Ordinary Shares. In case the principal amount of this Note exceeds the principal amount being converted, the Company shall, upon such conversion, execute and deliver to the Holder, at the expense of the Company, a new Note for the principal amount of this Note surrendered which is not to be converted. (d) If the Company shall, at any time or from time to time while this Note is outstanding, pay a dividend or make a distribution on its Ordinary Shares in Ordinary Shares, subdivide its outstanding Ordinary Shares into a greater number of shares or combine its outstanding Ordinary Shares into a smaller number of shares or issue by reclassification of its outstanding Ordinary Shares any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the Conversion Price in effect immediately prior to the Maturity Date date upon which such change shall become effective, shall be adjusted by the Company so that the Holder thereafter converting this Note shall be entitled to convert receive the number of Ordinary Shares or other capital stock which the Holder would have received if the Note had been converted immediately prior to such event upon payment of a Conversion Price that has been adjusted to reflect a fair allocation of the economics of such event to the Holder, without regard to any conversion limitation specified in this Section 6. Such adjustments shall be made successively whenever any event listed above shall occur. (e) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all or any portion substantially all of the then outstanding Company’s assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and unpaid Principal Amount adequate provision shall be made whereby the Holder shall thereafter have the right to purchase and accrued interest receive upon the basis and upon the terms and conditions herein specified and in lieu of the Ordinary Shares immediately theretofore issuable upon conversion of this Note, without regard to any conversion limitation specified in Section 6, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Ordinary Shares equal to the number of Ordinary Shares immediately theretofore issuable upon conversion of this Note, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, without regard to any conversion limitation specified in Section 6, and in any such case appropriate provision shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Conversion Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion hereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, at the last address of the Holder appearing on the books of the Company, such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase, without regard to any conversion limitation specified in Section 6, and the other obligations under this Note. The provisions of this paragraph (e) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions. (f) In case the Company shall fix a payment date for the making of a distribution to all holders of Ordinary Shares (including any Default Interestsuch distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) thereon into fully paid and non-assessable shares of Common Stockevidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 6(d)), or subscription rights or Notes, the Conversion Price to be in effect after such payment date shall be determined by multiplying the Conversion Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of Ordinary Shares outstanding multiplied by the Market Price of Ordinary Shares immediately prior to such payment date, less the fair market value (as determined by the Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or Notes, and the denominator of which shall be the total number of Ordinary Shares outstanding multiplied by such Market Price immediately prior to such payment date. Such adjustment shall be made successively whenever such a payment date is fixed. (g) An adjustment to the Conversion Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment. (h) In the event that, as a result of an adjustment made pursuant to this Section 6, the Holder shall become entitled to receive any shares of capital stock or other securities of the Company into which other than Ordinary Shares, the number of such Common Stock other shares so receivable upon conversion of this Note shall hereafter be changed or reclassifiedsubject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in this Note. (i) Notwithstanding anything herein to the contrary, at the Conversion Price (as defined below) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock Ordinary Shares beneficially owned by the such Holder and its affiliates Affiliates (other than shares of Common Stock Ordinary Shares which may be deemed beneficially owned through the ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any other security of the Company holder subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock Ordinary Shares issuable upon the conversion of the that portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates Affiliates of more than 4.999.99% of the then outstanding shares Ordinary Shares. The waiver by the Holder of Common Stockany limitation contained in an Option or Convertible Security now or hereafter held by such holder that is similar or analogous to the limitations set forth in this Section 6(i) shall not be deemed a waiver or otherwise effect the limitation set forth in this Section 6(i), unless such waiver expressly states it is a waiver of the provisions of this Section 6(i). For purposes of the proviso set forth in the immediately preceding sentencethis Section 6(i), beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, however, that . The Holder may waive the limitations on conversion may be waived set forth herein by sixty-one (up to 9.99%61) by the Holder upon, at the election of the Holder, not less than 61 days’ prior days written notice to the Company. (j) In case at any time: (i) the Company shall declare any dividend upon its Ordinary Shares or any other class or series of capital stock of the Company payable in cash or stock or make any other distribution to the holders of its Ordinary Shares or any such other class or series of capital stock; (ii) the Company shall offer for subscription pro rata to the holders of its Ordinary Shares or any other class or series of capital stock of the Company any additional shares of stock of any class or other rights; or (iii) there shall be any capital reorganization or reclassification of the capital stock of the Company, any acquisition or a liquidation, dissolution or winding up of the Company; then, in any one or more of said cases, the Company shall give, by delivery in person or by certified or registered mail, return receipt requested, addressed to the Holder at the address of such Holder as shown on the books of the Company, (a) at least ten (10) Business Days’ prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any event set forth in clause (iii) of this Section 6(j) and (b) in the case of any event set forth in clause (iii) of this Section 6(j), at least ten (10) Business Days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Ordinary Shares or such other class or series of capital stock shall be entitled thereto and such notice in accordance with the foregoing clause (b) shall also specify the date on which the holders of Ordinary Shares and such other series or class of capital stock shall be entitled to exchange their Ordinary Shares and other stock for securities or other property deliverable upon consummation of the applicable event set forth in clause (iii) of this Section 6(j). (k) Upon any adjustment of the Conversion Price, then and in each such case the Company shall give prompt written notice thereof, by delivery in person or by certified or registered mail, return receipt requested, addressed to the Holder at the address of such Holder as shown on the books of the Company, which notice shall state the Conversion Price resulting from such adjustment and setting forth in reasonable detail the method upon which such calculation is based. (l) The Company shall at all times to reserve and keep available out of its authorized Ordinary Shares, solely for the purpose of issuance upon conversion of this Note as herein provided, such number of Ordinary Shares as shall then be issuable upon the conversion of this Note without regard to the conversion limitations set forth in Section 6. The Company covenants that all Ordinary Shares which shall be so issued shall be duly and validly issued and fully paid and nonassessable, and free from all taxes, liens and charges with respect to the provisions issue thereof, and, without limiting the generality of the conversion limitation shall continue foregoing, and that the Company will from time to apply until time take all such 61st day (or such later date, as determined by the Holder, action as may be specified requisite to assure that the par value per share of the Ordinary Shares is at all times equal to or less than the Conversion Price in such notice of waiver)effect at the time. The Holder Company shall exercise its rights take all such action as may be necessary to assure that all such Ordinary Shares may be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange upon which the Ordinary Shares may be listed. The Company shall not take any action which results in any adjustment of the Conversion Price if the total number of Ordinary Shares issued and issuable after such action upon conversion pursuant to of this Section 4.1(aNote would exceed the total number of Ordinary Shares then authorized by the Company’s articles of association or memorandum of association. (m) by delivering The issuance of certificates for Ordinary Shares upon conversion of this Note shall be made without charge to the Company a written notice of its election to so convert holders thereof for any issuance tax in the form attached hereto as Exhibit B (the “Notice of Conversion”)respect thereof, delivered by the Holder to the Company; provided that the Notice Company shall not be required to pay any tax which may be payable in respect of Conversion is submitted by e-mail any transfer involved in the issuance and delivery of any certificate in a name other than that of the Holder. (n) The Company will not at any time close its transfer books against the transfer, as applicable, of this Note or by other means resulting in, of any Ordinary Shares issued or reasonably expected to result in, notice) to issuable upon the Company before 11:59 p.m., New York, New York time on such conversion date (of this Note in any manner which interferes with the “Conversion Date”). The term “Conversion Amount” means, with respect to any timely conversion of this Note, the sum of (1) the Principal Amount except as may otherwise be required to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2)comply with applicable securities laws.

Conversion Rights. The (a) From and after the earliest of (i) January 31, 1999, (ii) the consummation of a Qualifying Offering, or (iii) the date of any repayment notice given by the Company pursuant to Section 2(d) hereof, the Holder of this Debenture shall have the rightright (the "Conversion Right"), exercisable at his, her or its option at any time on or after during which the Issuance Date prior to the Maturity Date principal amount of this Debenture is outstanding, to convert all or any portion this Debenture, but only in whole, into a number of the then outstanding and unpaid Principal Amount and accrued interest (including any Default Interest) thereon into fully paid and non-assessable shares equal to (i) the result obtained by dividing the stated principal amount of this Debenture by the conversion rate established for any equity security issued in a Qualifying Offering, if this Debenture is converted on or after the consummation of a Qualifying Offering, or (ii) if no Qualifying Offering has occurred on or prior to such conversion, the result obtained by dividing the stated principal amount of this Debenture by (X) $0.52 per share if this Debenture is converted on or prior to January 31, 1999, (Y) $0.45 per share if this Debenture is converted on or after February 1, 1999 and on or prior to April 30, 1999, or (Z) $0.31 per share if this Debenture is converted on or after May 1, 1999. The respective conversion prices set forth above shall be subject to adjustment in certain circumstances as provided herein. The conversion price in effect at the time of the conversion of this Debenture is hereinafter referred to as the "Conversion Price." No fractional shares shall be issuable upon the conversion of this Debenture. In lieu of any such fractional share interest, upon conversion the Holder shall be entitled to a cash payment equal to such fractional interest multiplied by the Conversion Price in effect at the time of such conversion. (b) The Conversion Right is exercisable upon surrender of this Debenture, together with a conversion notice, in the form attached hereto as Exhibit A, duly executed and completed, evidencing the election of the Holder to exercise the Conversion Right, at the Company's principal office at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, Bohemia, New York 11716. The registered owner of this Debenture shall become the record holder of the shares of Common StockStock issuable upon conversion as of the date of exercise of the Conversion Right (the "Conversion Date"). The shares issued in connection with the Conversion Right shall be registered initially in the name of the Holder, and delivered to the Holder no later than two (2) business days after receipt of a properly completed conversion notice. Upon conversion, the Company shall pay to the Holder accrued but unpaid interest on this Debenture up to, but excluding, the Conversion Date. (c) In case, at any time or from time to time after the date of issuance of this Debenture ("Issuance Date"), the Company shall issue or sell shares of its Common Stock (other than any Common Stock issuable upon the exercise or conversion of (i) the Debentures (and any replacement Debenture or Debentures issued upon transfer or exchange of this Debenture), (ii) the Company's Class A 13% Convertible Senior Subordinated Pay-in-Kind Debentures due 1999 (the "Class A Debentures") (and any replacement Class A Debenture or Class A Debentures issued upon transfer or exchange of the Class A Debentures), (iii) any additional securities issued in lieu of cash interest otherwise payable on the Class A Debentures (the "Class A Accrued Interest Debentures") (and any replacement Class A Accrued Interest Debenture or Class A Accrued Interest Debentures issued upon transfer or exchange of the Class A Accrued Interest Debentures), (iv) the Company's Amended and Restated Class B 13% Convertible Senior Subordinated Pay-in-Kind Debentures due 1999 (the "Class B Debentures") (and any replacement Class B Debenture or Class B Debentures issued upon transfer or exchange of the Class B Debentures), (v) any additional securities issued in lieu of cash interest otherwise payable on the Class B Debentures (the "Class B Accrued Interest Debentures") (and any replacement Class B Accrued Interest Debenture or Class B Accrued Interest Debentures issued upon transfer or exchange of the Class B Accrued Interest Debentures), (vi) securities outstanding on the date hereof, (vii) awards made from and after the Issuance Date pursuant to the Company's Stock Compensation Program (the "Plan"), or (viii) awards made from and after the Issuance Date pursuant to any incentive compensation plan or arrangement approved by the Company's Board of Directors or by the Compensation Committee of the Company's Board of Directors subject to an aggregate limit of 2,000,000 shares of capital stock or other securities of the Company into which such Common Stock shall hereafter be changed for issuances pursuant to clauses (vii) and (viii) (subject to adjustment in the circumstances set forth in the Plan or reclassifiedsuch arrangements) (such securities, at collectively, the "Subject Securities") for a consideration per share less than the Conversion Price (as defined belowthe "Trigger Price"), or, if a Pro Forma Adjusted Trigger Price (hereinafter defined) determined shall be in effect as provided herein below in this paragraph (a “Conversion”c); provided, howeverthen less than such Pro Forma Adjusted Trigger Price per share, that then and in no event shall each such case the Holder of this Debenture, upon the conversion hereof as provided in paragraph (a) hereof, shall be entitled to convert any portion receive, in lieu of the shares of Common Stock theretofore receivable upon the conversion of this Note Debenture, a number of shares of Common Stock determined by (a) dividing the Trigger Price by a Pro Forma Adjusted Trigger Price per share to be computed as provided below in excess this paragraph (c), and (b) multiplying the resulting quotient by the number of that portion shares of Common Stock into which this Note upon conversion Debenture is then convertible. A Pro Forma Adjusted Trigger Price per share shall be the price computed (to the nearest cent, a fraction of which half cent or more being considered a full cent): by dividing (i) the sum of (1x) the result obtained by multiplying the number of shares of Common Stock of the Company outstanding immediately prior to such issue or sale by the Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in effect, by such Price), and (y) the consideration, if any, received by the Company upon such issue or sale, by (ii) the number of shares of Common Stock beneficially owned of the Company outstanding immediately after such issue or sale. For the purpose of this paragraph (c): (i) In case the Company splits its Common Stock or shall declare any dividend, or make any other distribution, upon any stock of the Company of any class payable in Common Stock, or in any stock or other securities directly or indirectly convertible into or exchangeable for Common Stock (any such stock or other securities being hereinafter called "Convertible Securities"), such split, declaration or distribution shall be deemed to be an issue or sale (as of the record date for such split, dividend or other distribution), without consideration, of such Common Stock or such Convertible Securities, as the case may be. (ii) In case the Company shall issue or sell any Convertible Securities other than the Subject Securities, there shall be determined the price per share for which Common Stock is issuable upon the conversion or exchange thereof, such determination to be made by dividing (a) the total amount received or receivable by the Holder and its affiliates Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (other than b) the maximum number of shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any other security of the Company subject to a limitation on issuable upon the conversion or exercise analogous exchange of all such Convertible Securities. If the price per share so determined shall be less than the Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in effect, less than such Price) as of the date of such issue or sale, then such issue or sale shall be deemed to be an issue or sale for cash (as of the date of issue or sale of such Convertible Securities) of such maximum number of shares of Common Stock at the price per share so determined, provided that, if such Convertible Securities shall by their terms provide for an increase or increases, with the passage of time, in the amount of additional consideration, if any, payable to the limitations contained hereinCompany, or in the rate of exchange, upon the conversion or exchange thereof, the Pro Forma Adjusted Trigger Price per share shall, forthwith upon any such increase becoming effective, be readjusted to reflect the same, and provided, further, that upon the expiration of such rights of conversion or exchange of such Convertible Securities, if any thereof shall not have been exercised, the Pro Forma Adjusted Trigger Price per share shall forthwith be readjusted and thereafter be the price which it would have been had an adjustment been made on the basis that the only shares of Common Stock so issued or sold were those issued or sold upon the conversion or exchange of such Convertible Securities, and that they were issued or sold for the consideration actually received by the Company upon such conversion or exchange, plus the consideration, if any, actually received by the Company for the issue or sale of all such Convertible Securities which shall have been converted or exchanged. (iii) and In case the Company shall grant any rights or options to subscribe for, purchase or otherwise acquire Common Stock of any class other than the Subject Securities, there shall be determined the price per share for which Common Stock is issuable upon the exercise of such rights or options, such determination to be made by dividing (2a) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of such rights or options, by (b) the maximum number of shares of Common Stock issuable upon the conversion exercise of such rights or options. If the price per share so determined shall be less than the Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in effect, less than such Price) as of the portion date of this Note with respect such issue or sale, then the granting of such rights or options shall be deemed to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% be an issue or sale for cash (as of the then outstanding date of the granting of such rights or options) of such maximum number of shares of Common Stock. For Stock at the price per share so determined, provided that, if such rights or options shall by their terms provide for an increase or increases, with the passage of time, in the amount of additional consideration, if any, payable to the Company upon the exercise thereof, the Pro Forma Adjusted Trigger Price per share shall, forthwith upon any such increase becoming effective, be readjusted to reflect the same, and provided, further, that upon the expiration of such rights or options, if any thereof shall not have been exercised, the Pro Forma Adjusted Trigger Price per share shall forthwith be readjusted and thereafter be the price which it would have been had an adjustment been made on the basis that the only shares of Common Stock so issued or sold were those issued or sold upon the exercise of such rights or options and that they were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights or options, whether or not exercised. (iv) In case the Company shall grant any rights or options to subscribe for, purchase or otherwise acquire Convertible Securities other than the Subject Securities, such Convertible Securities shall be deemed, for the purposes of subparagraph (iii) above, to have been issued or sold for the proviso set forth total amount received or receivable by the Company as consideration for the granting of such rights or options plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of such rights or options, provided that, upon the expiration of such rights or options, if any thereof shall not have been exercised, the Pro Forma Adjusted Trigger Price per share shall forthwith be readjusted and thereafter be the price which it would have been had an adjustment been made upon the basis that the only Convertible Securities so issued or sold were those issued or sold upon the exercise of such rights or options and that they were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights or options, whether or not exercised. (v) In case any shares of stock or other securities, other than Common Stock of the Company, shall at any time be receivable upon the conversion of this Debenture, and in case any additional shares of such stock or any additional such securities (or any stock or other securities convertible into or exchangeable for any such stock or securities) shall be issued or sold for a consideration per share such as to dilute the purchase rights evidenced by this Debenture, then and in each such case the Pro Forma Adjusted Trigger Price per share shall forthwith be adjusted, substantially in the immediately preceding sentencemanner provided for above in this paragraph (c), beneficial ownership so as to protect the Holder of this Debenture against the effect of such dilution. (vi) In case any shares of Common Stock or Convertible Securities or any rights or options to subscribe for, purchase or otherwise acquire any Common Stock or Convertible Securities shall be determined issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor, after deducting any expenses incurred and any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in accordance connection with Section 13(dsuch issue or sale. (vii) In case any shares of Common Stock or Convertible Securities or any rights or options to subscribe for, purchase or otherwise acquire any Common Stock or Convertible Securities shall be issued or sold for a consideration other than cash (or a consideration which includes cash and other assets) then, for the purpose of this paragraph (c), the Board of Directors of the Company shall promptly determine the fair value of such consideration, and such Common Stock, Convertible Securities, rights or options shall be deemed to have been issued or sold on the date of such determination in good faith. Such value shall not be more than the amount at which such consideration is recorded in the books of the Company for accounting purposes except in the case of an acquisition accounted for on a pooling of interest basis. In case any Common Stock or Convertible Securities Exchange Act or any rights or options to subscribe for, purchase or otherwise acquire any Common Stock or Convertible Securities shall be issued or sold together with other stock or securities or other assets of 1934the Company for a consideration which covers both, as amended the Board of Directors of the Company shall promptly determine in good faith what part of the consideration so received is to be deemed to be the consideration for the issue or sale of such Common Stock or Convertible Securities or such rights or options. The Company covenants and agrees that, should any determination of fair value of consideration or of allocation of consideration be made by the Board of Directors of the Company, pursuant to this subparagraph (the “1934 Act”vii), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, however, that the limitations on conversion may be waived (up to 9.99%) by the Holder upon, at the election of the Holderit will, not less than 61 days’ prior written notice seven (7) days after any and each such determination, deliver to the CompanyHolder of this Debenture a certificate signed by the President or a Vice President and the Treasurer or an Assistant Treasurer of the Company reciting such value as thus determined and setting forth the nature of the transaction for which such determination was required to be made, the nature of any consideration, other than cash, for which Common Stock, Convertible Securities, rights or options have been or are to be issued, the basis for its valuation, the number of shares of Common Stock which have been or are to be issued, and a description of any Convertible Securities, rights or options which have been or are to be issued, including their number, amount and terms. (viii) In case the provisions Company shall take a record of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice holders of waiver). The Holder shall exercise its rights to conversion pursuant to this Section 4.1(a) by delivering to the Company a written notice shares of its election to so convert in stock of any class for the form attached hereto as Exhibit B purpose of entitling them (the “Notice of Conversion”), delivered by the Holder to the Company; provided that the Notice of Conversion is submitted by e-mail (or by other means resulting in, or reasonably expected to result in, noticea) to the Company before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2).receive a dividend o

Conversion Rights. The Upon written notice to the Borrower as set forth below, the Holder shall have the rightmay, at any time on or after its sole option, simultaneously with the Issuance Date prior to the Maturity Date to convert all or any portion initial closing of the then Borrower’s next round of equity financing (the “Next Financing”), convert the entire outstanding principal hereunder and unpaid Principal Amount and all interest accrued interest (including any Default Interest) thereon into such number of shares of fully paid and non-assessable shares of Common Stock, securities issued by the Borrower (or any shares of capital stock or other securities the parent of the Company into which Borrower, as the case may be) in such Common Stock shall hereafter be changed or reclassifiedfinancing (the “New Securities”, at and such securities that this Note is converted into, the “Conversion Shares”), that is equal to the quotient of (A) the outstanding principal hereunder plus all accrued and unpaid interest thereon divided by (B) the Conversion Price (as defined below) determined ). In addition, in connection with such conversion, the Holder shall, upon execution by the Holder of the same transaction documents as provided herein the other purchasers of the New Securities (a the “ConversionNext Financing Transaction Documents”); provided, howeverreceive rights as a purchaser and holder of New Securities (including, without limitation, customary registration rights) no less favorable in the aggregate and in any single instance than those granted to any other purchaser of New Securities. The Borrower agrees that in it has no event shall right to prevent the Holder from effecting such conversion without the Holder’s consent, whether by attempting to prepay this Note (whether or not there shall have been a default hereunder) or otherwise. The “Conversion Price” shall be entitled to that amount which is 50% of the price per share of the New Securities paid by the cash purchasers in the Next Financing. If the Holder does not convert any portion this Note into the Next Financing, then the conversion rights under this Section 2.1 shall lapse and be of no further force and effect, provided that the other provisions of this Note shall remain in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder full force and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the then outstanding shares of Common Stock. For purposes of the proviso set forth in the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, however, that the limitations on conversion may be waived (up to 9.99%) by the Holder upon, at the election of the Holder, not less than 61 days’ prior written notice to the Company, and the provisions of the conversion limitation 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). The Holder shall exercise its rights to conversion pursuant to this Section 4.1(a) by delivering to the Company a written notice of its election to so convert in the form attached hereto as Exhibit B (the “Notice of Conversion”), delivered by the Holder to the Company; provided that the Notice of Conversion is submitted by e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Company before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2)effect.

Conversion Rights. The Holder shall have (a) Upon the right, at any time on satisfaction or after the Issuance Date prior to the Maturity Date to convert all or any portion ----------------- waiver of the then outstanding conditions contained in Sections 4.01(c) and 4.01(d) below, the full unpaid Principal Amount principal amount of the Notes and accrued interest (including any Default Interest) thereon the Related Accrued Interest Rights shall be converted into fully paid and non-assessable nonassessable shares of Common StockStock in accordance with the following provisions of this Article IV, which conversion shall occur automatically upon the satisfaction or waiver of such conditions, without any shares of capital stock or other securities further action on the part of the Company into which Holders. Upon the occurrence of such conversion, the Notes shall cease to represent Debt and shall instead be deemed to represent rights to receive the Common Stock shall hereafter be changed or reclassified, at the Conversion Price (as defined below) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note issuable upon conversion of which the sum Notes. (b) In addition, any Holder may at any time, at its option upon the satisfaction or waiver of (1the conditions contained in Section 4.01(c) below, convert a portion of its Notes and the Related Accrued Interest Rights into fully paid and nonassessable shares of Common Stock by delivery to Merisel Parent of a conversion notice in accordance with Section 4.02. The maximum aggregate principal amount of Notes and Related Accrued Interest Rights that may be converted by all Holders pursuant to this Section 4.01(b) shall be limited to such amount as shall be convertible into 19.9% of the Common Stock issued and outstanding immediately prior to any such proposed conversion, reduced by the number of shares of Common Stock beneficially owned previously purchased by any of the Holders pursuant to the Stock and Note Purchase Agreement. A partial conversion pursuant to this Section 4.01(b) shall be effected in accordance with the following provisions of this Article IV. (c) The conversion of the Notes and Related Accrued Interest Rights pursuant to Sections 4.01(a) and 4.01(b) above shall be subject to the satisfaction or, to the extent permissible, to the waiver by (a) in the case of a conversion under Section 4.01(a), all Holders or (b) in the case of a conversion under Section 4.01(b), Holders that wish to convert their Notes, of the following conditions: (i) No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any Governmental Entity or other legal restraint or prohibition preventing the conversion of the Notes and the Related Accrued Interest Rights shall be in effect; provided, however, that, in the case of a -------- ------- decree, injunction or order, each of Merisel Parent, Merisel Americas and each Holder shall have used its best efforts to prevent the entry of any such decree, injunction or order and its affiliates (other than shares of Common Stock which to appeal as promptly as possible any decree, injunction or order that may be deemed beneficially owned through entered. (ii) All consents, approvals and authorizations from any third party in connection with the ownership conversion of the unconverted portion of this Note or Notes and the unexercised or unconverted portion of Related Accrued Interest Rights shall have been obtained, except where the failure to obtain same would not have a Material Adverse Effect. (iii) The waiting period (and any other security extension thereof) applicable to the conversion of the Company subject to a limitation on conversion or exercise analogous Notes and the Related Accrued Interest Rights under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1996, to the limitations contained hereinextent required, shall have expired or been terminated. (iv) and (2) the Merisel Parent shall have a sufficient number of shares of Common Stock issuable upon to effect such conversion. (v) The shares of Common Stock to be issued pursuant to Sections 4.01(a) or (b), as the case may be, shall have been authorized for listing on the NASDAQ National Market System, subject to official notice of issuance. (d) The conversion of the portion Notes and the Related Accrued Interest Rights pursuant to Section 4.01(a) above shall be subject to the satisfaction or waiver by all the Holders of this the following additional conditions: (i) Each of the representations and warranties of Merisel Parent and Merisel Americas contained in the Stock and Note Purchase Agreement (i) that is qualified as to materiality shall be true and correct and (ii) that is not so qualified shall be true and correct in all material respects, in each case as of the Conversion Date as though made as of the Conversion Date (except that the accuracy of representations and warranties that by their terms speak only as to an earlier date will be determined as of such earlier date), and the Holders shall have received a certificate of the Chief Executive Officer of each of Merisel Parent and Merisel Americas dated the Conversion Date to that effect. (ii) No Event of Default or Incipient Default under the Notes shall have occurred or be in effect, and the Holders shall have received a certificate of the Chief Executive Officer of each of Merisel Parent and Merisel Americas dated the Conversion Date to that effect. (iii) There shall have been no Material Adverse Effect. (iv) The Company Stockholder Approvals, to the extent required, shall have been obtained. (v) There shall be no (A) injunction, order or similar restraint issued by any Governmental Entity that imposes limitations on any Holder's ability to exercise full rights of ownership with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the then outstanding shares of Common Stock. For purposes Stock to be issued pursuant to Section 4.01(a) or (B) finding that Merisel Parent has breached or is in breach of any material obligation under either the Limited Waiver and Agreement to Amend or the Limited Waiver and Voting Agreement, whether preliminary, interlocutory or final, by a Governmental Entity. (e) The conversion of the proviso set forth in the immediately preceding sentence, beneficial ownership Notes and Related Accrued Interest Rights pursuant to Section 4.01(a) above shall be determined subject to the satisfaction or, to the extent permissible, to the waiver by Merisel Parent and all Holders of the condition that Phoenix Acquisition Company II, L.L.C., as initial Holder of this Note, shall have delivered to Merisel Parent in accordance with Section 13(d5.03(b) of the Securities Exchange Act of 1934Stock and Note Purchase Agreement an executed commitment letter from one or more financial institutions for a stand-by credit or remarketing facility having commercially reasonable terms and conditions for the repurchase or remarketing, as amended the case may be, of any 12 1/2% Senior Notes put to Merisel Parent pursuant to Section 4.15 of the Indenture following such conversion. (f) The conversion of the “1934 Act”)Notes and the Related Accrued Interest Rights pursuant to Section 4.01(a) above shall be subject to the satisfaction or waiver by Merisel Parent of the condition that Phoenix Acquisition Company II, and Regulations 13D-G thereunderL.L.C., except as otherwise provided initial Holder of this Note, shall have delivered to Merisel Parent in clause (1accordance with Section 5.03(a) of the Stock and Note Purchase Agreement either (A) an executed commitment letter from one or more financial institutions reasonably satisfactory to Merisel Parent for a revolving credit facility to provide working capital for the operating Subsidiaries of Merisel Parent following the Conversion Date in the aggregate amount of $50,000,000 and otherwise having terms and conditions which are commercially reasonable and reasonably satisfactory to Merisel Parent and such proviso, initial Holder or (B) a revolving credit facility to provide working capital for the operating Subsidiaries of Merisel Parent following the Conversion Date in the aggregate amount of $50,000,000 and otherwise having terms and conditions substantially similar to those set forth on Exhibit B to the Stock and Note Purchase Agreement. (g) Each of Merisel Parent and Merisel Americas shall give prompt notice to the Holders of the occurrence of any event that could cause the conditions contained in Section 4.01(c) or 4.01(d) not to be satisfied; provided, however, that no such notification shall affect the limitations on conversion may be waived (up to 9.99%) by the Holder upon, at the election of the Holder, not less than 61 days’ prior written notice conditions to the Company-------- ------- obligations of Merisel Parent, and Merisel Americas or the provisions of the conversion limitation shall continue to apply until Holders under such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The Holder shall exercise its rights to conversion pursuant to this Section 4.1(a) by delivering to the Company a written notice of its election to so convert in the form attached hereto as Exhibit B (the “Notice of Conversion”), delivered by the Holder to the Company; provided that the Notice of Conversion is submitted by e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Company before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2)Sections.

Conversion Rights. The Holder shall have the rightright from time to time, and at any time during the period beginning on or after the Issuance Date prior to date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any portion part of the then outstanding and unpaid Principal Amount and accrued interest (including any Default Interest) thereon principal amount of this Note into fully paid and non-non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Company Borrower into which such Common Stock shall hereafter be changed or reclassified, reclassified at the conversion price (the “Conversion Price (as defined belowPrice”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note the Notes or the unexercised or unconverted portion of any other security of the Company Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.999.99% of the then outstanding shares of Common Stock. For purposes of the proviso set forth in to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived (up to 9.99%) by the Holder upon, at the election of the Holder, not less than 61 days’ prior written notice to the CompanyBorrower, and the provisions of the conversion limitation 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). The Holder shall exercise its rights to conversion pursuant to this Section 4.1(a) by delivering to the Company a written notice of its election to so convert in the form attached hereto as Exhibit B (the “Notice of Conversion”), delivered by the Holder to the Company; provided that the Notice of Conversion is submitted by e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Company before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2).as

Conversion Rights. The Holder shall have the rightright from time to time, and at any time during the period beginning on or after the Issuance Date prior to date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any portion part of the then outstanding and unpaid Principal Amount and accrued interest (including any Default Interest) thereon principal amount of this Note into fully paid and non-non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Company Borrower into which such Common Stock shall hereafter be changed or reclassified, reclassified at the conversion price (the “Conversion Price (as defined belowPrice”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note the Notes or the unexercised or unconverted portion of any other security of the Company Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.999.99% of the then outstanding shares of Common Stock. For purposes of the proviso set forth in to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived (up to 9.99%) by the Holder upon, at the election of the Holder, not less than 61 days’ prior written notice to the CompanyBorrower, and the provisions of the conversion limitation 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). .. The Holder number of shares of Common Stock to be issued upon each conversion of this Note shall exercise its rights to conversion pursuant to this Section 4.1(abe determined by dividing the Conversion Amount (as defined below) by delivering to the Company a written applicable Conversion Price then in effect on the date specified in the notice of its election to so convert conversion, in the form attached hereto as Exhibit B A (the “Notice of Conversion”), delivered to the Borrower by the Holder to the Companyin accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by e-mail facsimile (or by other means resulting in, or reasonably expected to result in, notice) to the Company Borrower before 11:59 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2).

Conversion Rights. The Holder shall have the right, right at any time on or six (6) months after the Issuance Date prior to the Maturity Date to convert all or any portion part of the then outstanding and unpaid Principal Amount and accrued interest (including principal, interest, fees, or any Default Interest) thereon other obligation owed pursuant to this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Company Borrower into which such Common Stock shall hereafter be changed or reclassified, reclassified at the Conversion Price (as defined below) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note the Notes or the unexercised or unconverted portion of any other security of the Company Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the then outstanding shares of Common Stock. For purposes of the proviso set forth in to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, however, that . The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the limitations on conversion may be waived Conversion Amount (up to 9.99%as defined below) (the numerator) by the Holder upon, at applicable Conversion Price then in effect on the election of the Holder, not less than 61 days’ prior written notice to the Company, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be date specified in such the notice of waiverconversion (the denominator). The Holder shall exercise its rights to conversion pursuant to this Section 4.1(a) by delivering to the Company a written notice of its election to so convert , in the form attached hereto as Exhibit B Addendum I (the “Notice of Conversion”), delivered to the Borrower by the Holder to in accordance with the Companyterms outlined herein; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Company Borrower before 11:59 6:00 p.m., New YorkLos Angeles, New York California time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount principal amount at the Interest Rate interest rates provided in this Note to the Conversion Date, provided however, that the Borrower shall have the right to pay any or all interest in cash plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2)) plus (4) at the Holder’s option, any amounts owed to the Holder.