Contract

Exhibit 10.2

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO A SECOND AMENDED AND RESTATED SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT, DATED AS OF OCTOBER 15, 2009, BY AND BETWEEN THE COMPANY AND THE INVESTOR REFERRED TO THEREIN (THE “NOTE PURCHASE AGREEMENT”), AND THE HOLDER OF THE NOTE, BY ACCEPTANCE OF THIS NOTE, AGREES TO BE BOUND BY ALL APPLICABLE PROVISIONS OF THE PURCHASE AGREEMENT. THE SECURITIES REPRESENTED HEREBY ARE ALSO SUBJECT TO AN AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, DATED AS OF APRIL 24, 2008, BY AND BETWEEN THE COMPANY AND THE INVESTOR REFERRED TO THEREIN (THE “REGISTRATION RIGHTS AGREEMENT”) AND THE HOLDER OF THE NOTE, BY ACCEPTANCE OF THIS NOTE, AGREES TO BE BOUND BY ALL APPLICABLE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT.

THIS NOTE AMENDS AND RESTATES THAT CERTAIN 8% SECURED CONVERTIBLE PROMISSORY NOTE DATED APRIL 5, 2007, IN THE ORIGINAL PRINCIPAL AMOUNT OF $10,000,000 (THE “APRIL 2007 NOTE”), AND THAT CERTAIN 12% AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE DATED APRIL 24, 2008 IN THE ORIGINAL PRINCIPAL AMOUNT OF $15,000,000 (THE “APRIL 2008 NOTE” AND TOGETHER WITH THE APRIL 2007 NOTE, THE “PRIOR NOTES”) ISSUED BY THE UNDERSIGNED TO THE ORDER OF WHITEBOX PHARMACEUTICAL GROWTH FUND, LTD. (THE “HOLDER”). IT IS EXPRESSLY INTENDED, UNDERSTOOD AND AGREED THAT THIS NOTE AND THE ACCOMPANYING $5,000,000 SECOND AMENDED AND RESTATED 12%

SECURED CONVERTIBLE PROMISSORY NOTE DATED OCTOBER 31, 2013 (COLLECTIVELY, THE “OCTOBER 2009 NOTES”) SHALL REPLACE THE PRIOR NOTES AS EVIDENCE OF SUCH INDEBTEDNESS OF THE UNDERSIGNED TO THE HOLDER, AND SUCH INDEBTEDNESS OF THE UNDERSIGNED TO THE HOLDER HERETOFORE REPRESENTED BY THE PRIOR NOTES, AS OF THE DATE HEREOF, SHALL BE CONSIDERED OUTSTANDING HEREUNDER FROM AND AFTER THE DATE HEREOF AND SHALL NOT BE CONSIDERED PAID (NOR SHALL THE UNDERSIGNED’S OBLIGATION TO PAY THE SAME BE CONSIDERED DISCHARGED OR SATISFIED) AS A RESULT OF THE ISSUANCE OF THE OCTOBER 2009 NOTES.

Original Issue Date: April 5, 2007

Conversion Price: $1.50, subject to adjustment as described herein


October 15, 2009		$	10,000,000

SECOND AMENDED AND RESTATED

12% SECURED CONVERTIBLE PROMISSORY NOTE

DUE OCTOBER 31, 2013

FOR VALUE RECEIVED, GeoPharma, Inc., a Florida corporation with its principal place of business at 0000 Xxxxx Xxxxx Xxxx, Xxxxx, Xxxxxxx 00000 (the “Company”), hereby promises to pay in lawful money of the United States to the order of Whitebox Pharmaceutical Growth Fund, Ltd. or its registered successors or assigns (the “Holder”), at the office of the Holder at 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000, or at such other place as the Holder may from time to time designate in writing:

(1) the principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000) in cash on October 31, 2013 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder; provided, however, that (i) the principal amount due under this Note shall be increased by any Accreted Principal Amount due and payable hereunder, and (ii) the principal amount due under this Note shall be decreased by $2,500,000 if and to the extent that the Company’s headquarters building located at 0000 Xxxxx Xxxxx Xxxx, Xxxxx, Xxxxxxx 00000, is sold to the Holder in the manner specified under Section 9.1 of the Purchase Agreement; and provided further, that notwithstanding the foregoing, the Company shall pay to Holder (i) $66,667 per month in cash commencing on January 1, 2010 (and the first day of each month thereafter) until the Maturity Date, which monthly amortization payments shall reduce the principal payable hereunder and (ii) the Partial Balloon Payment (as defined below) in cash on or prior to July 1, 2012; provided, however, that the Partial Balloon Payment may be reduced from time to time as a result of any Debt-for-Equity Exchanges (as defined below), any Conversion Amount and any prepayments of principal (including Accreted Principal) by the Company under the Notes after the date hereof.

(2) interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof.

This Note is being issued in connection with that certain Second Amended and Restated Secured Convertible Note Purchase Agreement, dated as of October 15, 2009, by and between the Company and the Holder (the “Purchase Agreement”). This Note is subject to the following additional provisions:

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 Purchase Agreement and (b) the following terms shall have the following meanings:

“Accreted Principal” means the amount of interest payable on each Interest Payment Date by adding such accrued interest to the principal amount of the Note.

“Accreted Principal Amount” means, at any time, the outstanding principal amount of this Note, including all accretion amounts added thereto through such date, in each case computed on the basis of a 365-day year and the actual number of days elapsed in any year.

“Alternate Consideration” shall have the meaning set forth in Section 5(e).

“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof; provided, however, that this clause (a) shall not apply to any such case or proceeding against the GeoPharma Excluded Entities; (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or any Significant Subsidiary thereof 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 or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Company or any Significant Subsidiary thereof, 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.

“Base Conversion Price” shall have the meaning set forth in Section 5(b).

“BOSS Subsidiaries” shall mean Dynamic Health Products, inc. and its subsidiaries, including Online Meds Rx., Inc., Herbal Health Products, Inc., Dynamic Marketing I, Inc., Pharma Labs Rx., Inc. and Xxx X’Xxxxx Health Food Distributor Co., Inc.

“Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Change in Control Date” shall mean the date on which a Change of Control Transaction shall occur.

“Change in Control Optional Redemption” shall have the meaning set forth in Section 6(a).

“Change in Control Put” shall have the meaning set forth in Section 6(a).

“Change of Control Transaction” means the occurrence after the date hereof of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act), other than the Holder or its affiliates, of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 40% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued together with the Notes), or (ii) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 66% of the aggregate voting power of the Company or the successor entity of such transaction, or (iii) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, or (iv) a replacement at one time or within a three-year period of more than one-half of the members of the Company’s board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (v) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (i) through (iv) above.

“Common Stock” means the common stock, par value $.01 per share, of the Company and stock of any other class of securities into which such securities may hereafter be reclassified or changed into.

“Conversion Amount” means the principal amount of the Note being converted pursuant to the terms of this Note.

“Conversion Date” shall have the meaning set forth in Section 4(a).

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms hereof.

“Debt-for-Equity Exchange” shall mean the Holder’s right, in its sole discretion, from the date hereof until the Maturity Date, to exchange up to $250,000 of principal due hereunder on a monthly basis into the Company’s Common Stock based on the Market Price of the Common Stock (which shall be based on the date the Company receives an Exchange Notice from the Holder). Any amounts converted into Common Stock pursuant to a Debt-for-Equity Exchange shall reduce the amount of the Partial Balloon Payment on a dollar-for-dollar basis, and any amounts exchanged pursuant to a Debt-for-Equity Exchange shall be deemed to reduce the amounts due under this Note.

“Dilutive Issuance” shall have the meaning set forth in Section 5(b).

“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b).

“Effectiveness Period” shall have the meaning set forth in the Registration Rights Agreement.

“Effective Date” shall mean 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.

“Equity Conditions” shall mean, during the period in question, (i) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (ii) the Company shall have paid all liquidated damages and other amounts owing and then due to the Holder in respect of this Note, (iii) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell 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 (and the Company

believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future), (iv) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (v) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the Transaction Documents, (vi) there is no existing Event of Default or no existing event which, with the passage of time or the giving of notice, would constitute an Event of Default, (vii) the issuance of the shares in question to the Holder would not violate the limitations set forth in Section 4(c)(i) and Section 4(c)(ii) herein, (viii) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated and (ix) the Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material non-public information.

“Event of Default” shall have the meaning set forth in Section 8.

“Event of Default Notice” shall have the meaning set forth in Section 8(b).

“Event of Default Redemption Notice” shall have the meaning set forth in Section 8(b).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Exchange Notice” shall mean a notice submitted by the Holder to the Company indicating the Holder’s exercise of its option to engage in a Debt-for-Equity Exchange, with such exchange to be based on the closing price of the Common Stock on the Trading Market on the day prior to the receipt of the Exchange Notice from the Holder. Holder shall have the right to submit up to three (3) Exchange Notices each month, with each Exchange Notice covering not less than $50,000 of the Notes. If the shares of Common Stock are not delivered to Holder within three (3) Trading Days of Holder’s exercise of the Exchange Notice, Holder shall have the right to rescind such Exchange Notice and, at its discretion, submit a new Exchange Notice (which new Exchange Notice shall not count against the Holder’s limit of 3 Exchange Notices in a given month).

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, consultants or directors of the Company pursuant to the Company’s 1999 Employee Stock Option Plan, 1999 Non-Employee Director Stock Option Plan, Treasury Stock Repurchase Plan or Annual Performance Incentive Plan (provided that any such issuances shall not exceed 10% of the Company’s outstanding shares and/or options, in the aggregate, in any twelve-month period), (b) securities upon

the exercise or exchange of or conversion of any securities issued pursuant to the Purchase Agreement and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities, (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided any such issuance shall only be to a person which is, itself or through its subsidiaries, an operating company in a business synergistic with or complementary to the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities and (d) securities issued to raise funds to repay Indebtedness.

“Forced Conversion” shall have the meaning set forth in Section 6(b).

“Forced Conversion Date” shall have the meaning set forth in Section 6(b).

“Forced Conversion Notice” shall have the meaning set forth in Section 6(b).

“Forced Conversion Notice Date” shall have the meaning set forth in Section 6(b).

“Fundamental Transaction” shall have the meaning set forth in Section 5(e).

“GeoPharma Entities” means the Company and each of its Subsidiaries.

“GeoPharma Excluded Entities” means, as used in this Note, the BOSS Subsidiaries, American Antibiotics, LLC and Breakthrough Engineered Nutrition, Inc., each of which is a subsidiary of the Company as of the date hereof.

“Indebtedness” means, with respect to each of the GeoPharma Entities, at the time of any determination, without duplication, all of the following obligations of the GeoPharma Entities, contingent or otherwise, of such entity: (a) all obligations of the GeoPharma Entities for borrowed money (including non-recourse obligations), (b) all obligations of the GeoPharma Entities evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of the GeoPharma Entities upon which interest charges are customarily paid or accrued, (d) all obligations of the GeoPharma Entities under conditional sale or other title retention agreements relating to property purchased by the GeoPharma Entities, (e) all obligations of others secured by any Lien on property owned or acquired by the GeoPharma Entities, whether or not the obligations secured thereby have been assumed, (f) all obligations of the GeoPharma Entities in respect of

interest rate swap agreements, cap or collar agreements, interest rate futures or option contracts, currency swap agreements, currency futures or option agreements and other similar contracts (g) all obligations of the GeoPharma Entities, actual or contingent, as an account party in respect of letters of credit or bankers’ acceptances, (h) all obligations of any partnership or joint venture as to which any of the GeoPharma Entities is or may become personally liable and (i) all contingent obligations of the GeoPharma Entities; provided, however, that the term “Indebtedness” shall not prohibit the incurrence of trade payables, capital leases and accrued expenses by any of the GeoPharma Entities in the ordinary course of business.

“Interest Payment Date” shall have the meaning set forth in Section 2(a).

“Issuable Maximum” shall have the meaning set forth in Section 4(c)(ii).

“Make-Whole Amount” means, in connection with any conversion of this Note, the sum of each coupon that would have otherwise have been paid on the Notes, for the lesser of (x) three (3) years’ worth of such coupons or (y) the coupons otherwise payable between such Conversion Date and the Maturity Date of the Notes; provided, however, that any coupons payable in connection with the Make-Whole Amount shall be discounted at the Prime Rate from the date on which such coupons otherwise would have been payable to the Conversion Date; provided further, that the Company and the Holder shall agree upon the applicable Prime Rate and the calculation of the applicable discount.

“Mandatory Default Amount” means the sum of (i) the greater of (A) 115% of the outstanding principal amount of this Note, plus all accrued and unpaid interest hereon, or (B) the outstanding principal amount of this Note, plus all accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (a) demanded (if demand or notice is required to create an Event of Default) or otherwise due or (b) paid in full, whichever has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of this Note.

“Market Price” shall mean the average closing price of the Company’s Common Stock on the Trading Market for the five (5) Trading Days prior to the date the Company receives an Exchange Notice from the Holder.

“Minnesota Courts” shall have the meaning set forth in Section 9(d).

“Note Register” shall have the meaning set forth in Section 2(c).

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

“Original Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.

“Partial Balloon Payment” shall mean the requirement that the Company pay to the Holder the principal sum of $1,666,667 in cash, representing a partial balloon payment on this Note, on or prior to July 1, 2012; provided, however, that the amount of the required Partial Balloon Payment will be reduced on a dollar-for-dollar basis to the extent of any Debt-for-Equity Exchanges and any Conversion Amount.

“Permitted Acquisition Indebtedness” means acquisition Indebtedness incurred by the Company or any of its subsidiaries (whether or not a Subsidiary on the Original Issue Date), whether by asset purchase, stock or similar purchase or by merger, through assumption of such Indebtedness in connection with such acquisition if by asset purchase or successor liability of such Indebtedness if by stock or similar purchase or by merger, if each of the conditions is satisfied: (i) such acquired Indebtedness will not be secured by any of the Collateral (as defined in the Security Agreement) other than the specific assets already financed thereby on the date of the acquisition and the identifiable cash proceeds thereof, and (b) the principal amount of such acquisition Indebtedness will not, at the time of the incurrence thereof, exceed the value of the property so acquired

“Permitted Indebtedness” means, except as otherwise approved by the Holder, (a) the Indebtedness existing on the Original Issue Date and set forth in the Purchase Agreement, (b) any additional Indebtedness as permitted by the Purchase Agreement, including without limitation the Indebtedness contemplated by Section 9.2 of the Purchase Agreement, (c) Permitted Purchase Money Indebtedness, (d) Permitted Acquisition Indebtedness and (e) additional non-equity linked Indebtedness incurred directly by the Company with a nationally recognized commercial lending institution whose primary business is not investing in securities to be incurred in connection with the replacement of the Company’s existing direct Indebtedness set forth in the Purchase Agreement.

“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested

in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien; (c) Liens incurred in connection with Permitted Indebtedness under clause (c) thereunder, to the extent such Permitted Indebtedness replaces Permitted Indebtedness described in clause (a) that is secured; (d) Liens incurred in connection with Permitted Indebtedness under clause (a) thereunder (to the extent such Indebtedness is secured); and (e) Liens incurred in connection with Permitted Indebtedness under clauses (b) and (c) thereunder.

“Permitted Purchase Money Indebtedness” means purchase money or capital lease Indebtedness incurred by the Company or any of its subsidiaries (whether or not a Subsidiary on the Original Issue Date) from a source other than Holder to acquire any equipment if each of the conditions is satisfied: (i) such purchase money and capital lease Indebtedness will not be secured by any of the Collateral (as defined in the Security Agreement) other than the specific equipment financed thereby and the identifiable cash proceeds thereof, and (b) the principal amount of such purchase money and capital lease Indebtedness will not, at the time of the incurrence thereof, exceed the value of the property so acquired.

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

“Purchase Agreement” means the Second Amended and Restated Secured Convertible Note Purchase Agreement, dated as of October 15, 2009, between the Company and the original Holder, as the same may be amended, modified or supplemented from time to time in accordance with its terms.

“Redemption Premium” means a premium equal to 115% of the Conversion Amount elected to be redeemed by the Holder upon an Event of Default.

“Registration Rights Agreement” means the Amended and Restated Registration Rights Agreement, dated as of April 24, 2008, between the Company and the original Holder, as the same may be amended, modified or supplemented from time to time in accordance with its terms.

“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.

“SEC” shall mean the United States Securities and Exchange Commission.

“SEC Reports” means all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) and 15(d) thereof.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Share Delivery Date” shall have the meaning set forth in Section 4(d).

“Securities Purchase Agreement” shall mean that certain Securities Purchase Agreement, dated as of April 5, 2007, by and between the Company and the Holder, governing the issuance of certain shares of Common Stock and Warrants to the Holder by the Company.

“Shareholder Approval” means such approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market (or any successor entity) from the shareholders of the Company with respect to the transactions contemplated by the Transaction Documents, including the issuance of Shares in excess of 19.99% of the issued and outstanding Common Stock on the Closing Date.

“Subsidiary” shall have the meaning set forth in the Purchase Agreement.

“Threshold Period” shall have the meaning set forth in Section 6(b).

“Trading Day” means a day on which the Nasdaq Stock Market is open for trading.

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.

“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board;

(c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company.

“Warrants” means warrants issued to Holder by the Company on the date hereof pursuant to the terms of the Securities Purchase Agreement and accompanying Warrant.

Section 2. Interest.

a) Payment of Interest. Between the Original Issue Date and April 24, 2008, interest accrued on the Accreted Principal Amount at the rate of 8% per annum. In connection with the execution of the April 2008 Note, the Company and the Holder agreed that the accrued interest between the Original Issue Date and April 24, 2008 was $865,058, all of which was converted by the Holder as of the date of the April 2008 Note into a total of 389,666 shares of the Company’s Common Stock in full satisfaction of such accrued interest. Beginning on April 24, 2008, interest shall accrue on the Accreted Principal Amount at the rate of 12% per annum. Interest shall be payable on a quarterly basis on January 1, April 1, July 1 and October 1 of each year (if any such date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), beginning on the first such date after the Original Issue Date, on each Forced Conversion Date and on the Maturity Date (each such date, an “Interest Payment Date”). Prior to the July 1, 2009 Interest Payment Date, there was no Accreted Principal Amount accumulated under this Note. In connection with the July 1, 2009 Interest Payment Date and the October 1, 2009 Interest Payment, a total of $300,000 of accrued interest due on each such Interest Payment Date became Accreted Principal under this Note. In connection with the January 1, 2010 Interest Payment Date and all subsequent Interest Payment Dates under this Note, interest shall be payable on each Interest Payment Date as follows: 4% of each Interest Payment shall be paid in cash by the Company to the Holder and 8% of each Interest Payment shall be, at Holder’s sole discretion, (i) accreted to the outstanding Accreted Principal Amount or (ii) if the Equity Conditions have been met, paid out to the Holder in shares of Common Stock, which shares shall be valued at 95% of the average of the VWAP for the 5 Trading Days immediately prior to the Interest Payment Date; provided, however, that if the Company is unable to pay the 4% interest in cash on any Interest Payment Date, such failure shall constitute an Event of Default hereunder, and any amounts due under this Note shall become immediately due and payable; provided further, that if the Equity Conditions have not been met, then, at the election of the Holder, such interest payment shall accrue to the next Interest Payment Date or shall be accreted to the outstanding Accreted Principal Amount. The Holder shall have the same rights and remedies with respect to the delivery of any such shares of

Common Stock as if such shares were being issued pursuant to Section 4 below. The Company shall notify the Holder if at any time the Company shall become unable to lawfully pay interest in cash. If at any time the Company has the right to pay interest in cash or Common Stock in the manner specified in subsection (ii) above, the Company must provide the Holder with at least 10 Trading Days’ notice of its election to pay such interest payment in shares of Common Stock. Any interest payment, whether paid in cash or shares, that is not paid within three Trading Days following an Interest Payment Date must be paid in cash, at the rate of 18% per annum or the maximum rate permitted by applicable law, until such amount is paid in full. From and after the occurrence of an Event of Default, regardless when the knowledge of such an Event of Default is acquired by the Holder, interest shall accrue on the Accreted Principal Amount at the rate of 18% per annum. In the event that such Event of Default is subsequently cured or waived, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided, however, that the interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply for the period from the initial occurrence of such Event of Default through and including the date of cure of such Event of Default. Any such additional interest accrued as a result of an Event of Default will be paid on the next Interest Payment Date.

b) Accrued Interest. Except as otherwise provided in this Note, the Company shall pay to the Holder of this Note all accrued interest (including any Accreted Principal Amount pursuant to Section 2(a)) on the final maturity date of this Note. Any accrued cash interest required to be paid in connection with the provisions of Section 2(c) below which, for any reason, has not theretofore been paid shall increase the Accreted Principal Amount of the Note and be paid in full on the date on which the final principal payment on this Note is made; provided, that any such reason shall not affect or waive any Event of Default that arises due to the failure to make such payment. Interest shall accrue on any principal payment due under this Note (including any Accreted Principal) until such time as payment therefor is actually delivered to the Holder of this Note.

c) [Reserved].

d) Interest Calculations. Interest shall be calculated on the basis of a 365-day year, and shall accrue daily commencing on the Original Issue Date until payment in full of the principal sum, together with all accrued and unpaid interest, liquidated damages and other amounts (including any Accreted Principal Amount) which may become due hereunder, has been made. Interest shall cease to accrue with respect to any principal amount converted, provided that the Company actually delivers the Conversion Shares within the time period required by Section 4(d)(ii) herein. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”). Except as otherwise provided herein, if at any time the Company pays interest in cash to the holders of the Notes (as required under Section 2(c) above), then such payment of cash shall be distributed ratably among the holders of the then-outstanding Notes based on their (or their predecessor’s) initial purchases of Notes pursuant to the Purchase Agreement.

e) Prepayment. Except for any Forced Conversion of the Notes by the Company in accordance with the terms set forth in Section 6(b) below, the Company may not prepay any portion of the principal amount of this Note without the prior written consent of the Holder.

Section 3. Registration of Transfers and Exchanges.

a) Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.

b) Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

c) Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 4. Conversion.

a) Voluntary Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(c) hereof). The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion. The

Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s). The Holder, and any assignee by acceptance of this Note, acknowledges and agrees that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

b) Conversion Price. The conversion price in effect on any Conversion Date shall be equal to $1.50 with respect to any principal plus any Accreted Principal Amount due under this Note, subject to adjustment as described herein (the “Conversion Price”).

c) Conversion Limitations.

i. Holder’s Restriction on Conversion. The Company shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any other person or entity acting as a group together with such Holder or any of such Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted principal amount of this Note beneficially owned by such Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes) beneficially owned by such Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(c)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(c)(i) applies, the determination of whether this Note is convertible (in relation to other securities owned by such Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination of whether this Note may be converted (in relation to other securities owned by such Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to such aggregate percentage limitations. To ensure compliance with this restriction, each Holder will be deemed to represent to the Company each time it delivers a Notice

of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any “group” status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4(c)(i), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (A) the Company’s most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as the case may be; (B) a more recent public announcement by the Company; or (C) a more recent notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by such Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Beneficial Ownership Limitation provisions of this Section 4(c)(i) may be waived by such Xxxxxx, at the election of such Holder, upon not less than 61 days’ prior notice to the Company, to change the Beneficial Ownership Limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note. In no event shall the Beneficial Ownership Limitation exceed 9.99% of the number of shares of the Company’s Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note (or any portion thereof) held by the Holder. The limitations contained in this paragraph shall apply to a successor holder of this Note.

ii. Company’s Restriction on Conversion. Notwithstanding anything herein to the contrary, if Shareholder Approval is required per the rules of the Nasdaq Stock Market with regard to the transactions contemplated by this Note and the Note Purchase Agreement, the Company may not issue, upon conversion of this Note, a number of shares of Common Stock which, when aggregated with any shares of Common Stock issued on or after the Original Issue Date and prior to such Conversion Date, would exceed 3,891,597 shares of Common Stock (which is 19.99% of the currently outstanding shares of Common Stock) (subject to adjustment for forward and reverse stock splits, recapitalizations and the like) (such number of shares, the “Issuable Maximum”), unless the Company has obtained Shareholder Approval. The Holder shall be entitled to the Issuable Maximum.

d) Mechanics of Conversion.

i. Conversion Shares Issuable Upon Conversion of Principal Amount. The number of shares of Common Stock issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note (which shall include any Accreted Principal) to be converted by (y) the Conversion Price; provided, that the amount of principal to be converted pursuant to clause (x) shall include any accrued interest (including any Accreted Principal) through the date of such conversion (based on the number of days in such interest period up to and including the date of such conversion).

ii. Delivery of Certificate Upon Conversion. Not later than seven Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall (1) deliver, or cause to be delivered, to the Holder a certificate or certificates representing the Conversion Shares to which the Holder shall be entitled, which (A) prior to the effective date of any Registration Statement with respect to such Conversion Shares shall contain such restrictive legends as may be required pursuant to the Securities Act and (B) on an after the effective date of such Registration Statement with respect to such Conversion Shares, shall be free of restrictive legends and (2) pay to the Holder the Make-Whole Amount in shares of the Common Stock to the Holder or such other Person in whose name this Note is registered in the Note Register. The number of shares will calculated by dividing the Make-Whole Amount by 95% of the average of the VWAP for the 5 Trading Days immediately prior to such Conversion Date; provided, however, that any such shares must be registered and must be free of restrictive legends and trading restrictions at the time of such issuance (to the extent permitted by the rules and regulations of the SEC and the applicable Trading Market). Such certificate or certificates shall represent the number of shares of Common Stock being acquired upon the conversion of this Note (including any Accreted Principal Amount to the date of such conversion) and any shares issued as payment for the Make-Whole Amount. 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 4 electronically through the Depository Trust Company or another established clearing corporation performing similar functions.

iii. Failure to Deliver Certificates. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the seventh Trading Day after the Conversion Date, the

Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return the Common Stock certificates representing the principal amount of this Note tendered for conversion to the Company.

iv. Obligation Absolute; Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder of this Note shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(d)(i) by the seventh Trading Day after the Conversion Date and the Holder has not elected to rescind such conversion option as specified in Section 4(d)(ii) above, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such seventh Trading Day until such certificates are delivered. Nothing herein shall limit a Xxxxxx’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 hereof for the Company’s failure to deliver Conversion Shares within the period specified

herein, and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

v. [Reserved].

vi. 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 and payment of interest on this Note, each as herein provided, 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 5) upon the conversion of the outstanding principal amount of this Note and payment of interest hereunder. 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 shall be registered for public sale in accordance with the Registration Statement.

vii. 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 VWAP at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, 1 whole share of Common Stock.

viii. Transfer Taxes. The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary, stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted, 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 5. Certain Adjustments.

a) 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, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Notes); (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 shareholders 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.

b) Subsequent Equity Sales. If, at any time while this Note is outstanding, the Company or any Subsidiary, as applicable, sells or grants any option, warrant or other right to purchase or sells or grants any right to reprice, or otherwise disposes of or issues, any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then-current Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to the price (calculated to the nearest cent) determined by dividing (A) an amount equal to the sum of (1) the number of shares of the Company’s Common Stock outstanding immediately prior to such issue or sale multiplied by the then-existing Conversion Price and (2) the consideration, if any, received by the Company upon such issue or sale plus the consideration to be received by the Company upon the exercise of such stock purchase rights by (B) an amount equal to the sum of (1) the number of shares of its Common Stock outstanding immediately prior to such issue or sale and (2) the number of shares of its Common Stock thus issued or sold or saleable upon the exercise of such purchase rights or the conversion of such convertible securities. Such adjustment shall be made whenever such Common Stock or

Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than five (5) Business Days following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, Base Conversion Price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance in the manner calculated above, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

c) Subsequent Rights Offerings. If the Company, at any time while the Note is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share that is lower than the VWAP on the record date referenced below, then the Conversion Price shall be multiplied by a fraction of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming delivery to the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights, options or warrants.

d) Pro Rata Distributions. If the Company, at any time while this Note is outstanding, distributes to all holders of Common Stock (and not to the Holders) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security (other than the Common Stock, which shall be subject to Section 5(b)), then in each such case the Conversion Price shall be adjusted by multiplying such Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such record date of the portion of such evidence of indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security (other than the Common Stock, which shall be subject to Section 5(b)) so distributed applicable to 1 outstanding share of the Common Stock as determined by the Board of Directors of the Company in good faith. In either

case, the adjustments shall be described in a statement delivered to the Holder describing the portion of evidences of indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security (other than the Common Stock, which shall be subject to Section 5(b)) so distributed or such subscription rights applicable to 1 share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

e) 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) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) 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 5(e) and ensuring that this Note (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

f) Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

g) Notice to the Holder.

i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly mail to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

ii. Notice to Allow Conversion by Xxxxxx. 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 address as it shall appear upon the Note Register, 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 the 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.

Section 6. Redemption and Forced Conversion.

a) Redemption Upon a Change in Control. At any time after the date hereof, in the event of a Change of Control Transaction, in addition to any other rights hereunder, the Holder shall have the right (the “Change in Control Optional Redemption”) to put the then-outstanding principal amount of the Note (including any Accreted Principal Amount) to the Company (the “Change in Control Put”). The Holder shall notify the Company of its exercise of the Change in Control put not less than 3 days prior to such Change in Control Date. Upon the exercise of the Change of Control Put, the Company shall be required to pay to the Holder an amount in cash equal to 100% multiplied by the greater of (i) the then-current Accreted Principal Amount or (ii) the VWAP for the 20 Trading Days preceding the Change in Control Date multiplied by the number of Conversion Shares into which this Note shall then be entitled to be converted.

b) Forced Conversion. Notwithstanding anything herein to the contrary, if after the Effective Date, the VWAP for each of any 20 consecutive Trading Days, which period shall have commenced only after the Effective Date (such period, the “Threshold Period”), exceeds $3.00 for such Threshold Period (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the Original Issue Date), the Company may, within one (1) Trading Day after the end of any such Threshold Period, deliver a written notice to the Holder (a “Forced Conversion Notice” and the date such notice is delivered to the Holder, the “Forced Conversion Notice Date”) to cause the Holder to convert (a “Forced Conversion”) all of the then-outstanding principal amount of this Note, plus Accreted Principal, liquidated damages and other amounts owing to the Holder under this Note (collectively, the “Forced Conversion Amount”). Notwithstanding the foregoing, the Accreted Principal Amount subject to Forced Conversion in any 30-day period shall be equal to the average weekly trading volume over the prior 20 Trading Days multiplied by the current Conversion Price. (For the avoidance of doubt, the foregoing provision means that if, for example, the average weekly trading volume over the past month is 150,000 shares of Common Stock, and $1.50 is the applicable Conversion Price, then the Company could call up to $225,000 of the Notes in any such 30-day period.) The “Conversion Date” for purposes of Section 4 shall be deemed to occur on the twentieth Trading Day following the Forced Conversion Notice Date (such twentieth Trading Day, the “Forced Conversion Date”). The Company may not deliver a Forced Conversion Notice, and any Forced Conversion Notice delivered by the Company shall not be effective, unless all of the Equity Conditions are met on each Trading Day occurring during the applicable Threshold Period through and including the later of the Forced Conversion Date and the Trading Day after the date such Conversion Shares pursuant to such conversion are delivered to the Holder. Any Forced Conversion shall be applied to

the Holder based on its initial purchases of Notes pursuant to the Purchase Agreement, provided that any voluntary conversions by the Holder shall be applied against the Holder’s allocation, thereby decreasing the aggregate amount forcibly converted hereunder if only a portion of this Note is forcibly converted. For purposes of clarification, a Forced Conversion shall be subject to all of the provisions of Section 4, including, without limitation, the provision requiring payment of liquidated damages and limitations on conversions.

c) Redemption Procedure. Any amounts required to be paid pursuant to Section 6(a) and Section 6(b) above shall be payable by the Company in cash on the date of such optional redemption or put set forth in the foregoing sections. If any portion of the payment(s) required to be paid pursuant to Sections 6(a)-6(b) shall not be paid by the Company by the applicable due date, interest shall accrue thereon at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law until such amount is paid in full. Notwithstanding anything herein contained to the contrary, if any portion of such payments remains unpaid after such date, the Holder may elect, by written notice to the Company given at any time thereafter, to invalidate such Change in Control Optional Redemption or Forced Conversion, ab initio, and, with respect to the Company’s failure to honor the Change in Control Optional Redemption or Forced Conversion, the Company shall have no further right to exercise such Change in Control Optional Redemption or Forced Conversion. Notwithstanding anything to the contrary in this Section 6, any payments shall be applied ratably among the Holders of Notes. The Holder may elect to convert or exchange the outstanding Accreted Principal Amount pursuant to Section 4 prior to actual payment for any redemption under this Section 6 by the delivery of a Notice of Conversion or Notice of Exchange.

Section 7. Negative Covenants. As long as any portion of this Note remains outstanding, unless the Holder shall have otherwise given prior written consent, the Company shall not, and shall not permit any of its subsidiaries (whether or not a Subsidiary on the Original Issue Date) to, directly or indirectly:

a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any Indebtedness of any kind; provided, however, that any consent by Holder pursuant to this subsection 7(a) shall not be unreasonably withheld if such Indebtedness relates to Permitted Acquisition Indebtedness;

b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; provided, however, that any consent by Holder pursuant to this subsection 7(b) shall not be unreasonably withheld if such Liens relate to acquisitions of a business whether through merger, asset purchase, stock purchase or similar purchase agreement;

c) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents other than as to (i) the Conversion Shares as permitted or required under the Transaction Documents, (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors during the term of this Note and (iii) repurchases of shares of Common Stock in the open market to replenish shares in the Company’s 2005 Annual Performance Incentive Plan in the ordinary course of business; provided, however, that any such open-market purchases shall not exceed $1,000,000 in the aggregate in any calendar year.

e) pay cash dividends or distributions on any equity securities of the Company;

f) enter into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval); or

g) enter into any agreement with respect to any of the foregoing.

Section 8. Events of Default.

a) “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):

i. any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, in the case of a principal payment or other default under (A) above or an interest payment or other default under clause (B) above, is not cured within 3 Trading Days;

ii. any GeoPharma Entity shall fail to observe or perform any other covenant or agreement contained in the Notes, the Purchase Agreement or the other Transaction Documents (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (x) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) 10 Trading Days after notice of such failure sent by the Holder or by any other Holder and (B) 15 Trading Days after the Company or any other GeoPharma Entity has become or should have become aware of such failure;

iii. a default or event of default by the Company or any other GeoPharma Entity shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, indebtedness, document or instrument to which the Company or any other GeoPharma Entity is obligated (and not covered by clause (vi) below), which default is not cured, if possible to cure, within the lesser of (a) thirty days from such default or event of default or (b) such lesser period as may be provided in the applicable agreement, document or instrument);

iv. any representation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;

v. the Company or any Significant Subsidiary (other than a GeoPharma Excluded Entity) shall be subject to a Bankruptcy Event;

vi. the Company or any other GeoPharma Entity shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $100,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

vii. the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within five Trading Days;

viii. [reserved];

ix. if, during the Effectiveness Period (as defined in the Registration Rights Agreement), either (a) the effectiveness of the Registration Statement lapses for any reason or (b) the Holder shall not be permitted to resell Registrable Securities (as defined in the Registration Rights Agreement) under the Registration Statement in accordance with the terms set forth in the Registration Rights Agreement; provided, however, that if the Company is negotiating a merger, consolidation, acquisition or sale of all or substantially all of its assets or a similar transaction and, in the written opinion of counsel to the Company, the Registration Statement would be required to be amended to include information concerning such pending transaction(s) or the parties thereto which information is not available or may not be publicly disclosed at the time, the Company shall be permitted an additional 10 consecutive Trading Days during any 12-month period pursuant to this Section 8(a)(ix);

x. the Company shall fail for any reason to deliver certificates to a Holder prior to the third Trading Day after receipt of an Exchange Notice or prior to the seventh Trading Day after a Conversion Date or any Forced Conversion Date pursuant to Section 4(d) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof;

xi. [reserved];

xii. any monetary judgment, writ or similar final process shall be entered or filed against the Company, any other GeoPharma Entity or any of their respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days; provided, however, that the foregoing provision shall not apply to the GeoPharma Excluded Entities;

xiii. the Company shall have failed to file any of its SEC Reports on a timely basis; provided, however, that such SEC Reports shall be deemed to be filed on a timely basis if the Company has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of such extension;

xiv. the Company or any GeoPharma Entity shall have incurred, created, issued, assumed or suffered to exist any Indebtedness, except (a) any obligations arising under this Agreement, (b) Indebtedness existing on the date of this Agreement and disclosed on Schedule 4.40 to the Purchase Agreement, but not including any extension or refinancing thereof, (c) Indebtedness secured by Liens permitted under the Purchase Agreement (which shall include purchase

money security interests); provided, however, that any Indebtedness permitted under this Section 8(a)(xiv) shall be subordinated to any indebtedness of the Company or other GeoPharma Entities to the Holder arising under this Agreement and the other Transaction Documents; and (d) other Indebtedness expressly consented to in writing by the Holder prior to the incurrence of such Indebtedness;

xv. the Company or any other GeoPharma Entity shall have purchased, acquired, disposed of or otherwise engaged in the acquisition or disposition of any other companies or entities, whether by merger, acquisition, consolidation, combination or otherwise, without the prior written consent of the Holder;

xvi. the Company or any other GeoPharma Entity shall have transferred cash or loaned money (or transferred any other cash or cash equivalents or obligated any Subsidiary or Affiliate for any other monetary obligation) to any of its Subsidiaries or Affiliates in violation of Section 6.20 of the Purchase Agreement; or

xvii. the Company shall fail to pay 4% of the interest due on any Interest Payment Date in the form of cash to Holder.

b) Rights Upon Event of Default. Promptly after the occurrence of an Event of Default with respect to this Note, the Company shall deliver written notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder. At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 8(b) shall be redeemed by the Company for an amount in cash equal to the Conversion Amount to be redeemed and the Redemption Premium within 10 business days of receipt of such notice.

c) Remedies Upon Event of Default. If an Event of Default arising under Section 8(a)(v) above shall have occurred, (i) the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become immediately due and payable in cash at the Mandatory Default Amount and (ii) automatically upon the occurrence of an Event of Default, and commencing one (1) day after the occurrence of any Event of Default, regardless of when such Event of Default becomes known to the Holder, the interest rate on this Note shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. 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 Xxxxxx at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 8(c). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. In the event of such rescission, interest at the default rate of 18% shall continue to accrue until such time as the Event of Default has been cured or waived, and such default interest has been paid in full.

Section 9. Miscellaneous.

a) 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 (000) 000-0000, Attention: Xxxxx Xxxx-Xxxxxxx 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 9, with a copy to Xxxxx X. Xxxxxxxx, Shumaker, Loop & Xxxxxxxx, 000 X. Xxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx, XX 00000, facsimile number (000) 000-0000. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Xxxxxx appearing on the books of the Company, or if no such facsimile number or address appears, at the principal place of business of the Holder. 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 9 prior to 5:30 p.m. (New York City 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 9 between 5:30 p.m. (New York City time) and 11:59 p.m. (New York City 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.

b) 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 of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company. This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.

c) 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.

d) 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 Minnesota, 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 by any of the Transaction Documents (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 Minneapolis, Minnesota (the “Minnesota Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Minnesota Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), 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 Minnesota Courts, or such Minnesota 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.

e) 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.

f) 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 indenture, 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 as though no such law has been enacted.

g) 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.

h) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

i) Assumption. 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 and the other Transaction Documents 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 9(i) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations of this Note.

*********************

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.


GEOPHARMA, INC.

By:
		Name:
		Title:

ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the $15,000,000 Second Amended and Restated 12% Secured Convertible Note due October 31, 2013 of GeoPharma, Inc., a Florida corporation (the “Company”), represented by this $10,000,000 Second Amended and Restated 12% Secured Convertible Note due October 31, 2013 into shares of common stock, par value $.01 per share (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.

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.

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:

Conversion Price on Date of Conversion:

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:

A-1

Schedule 1

CONVERSION SCHEDULE

The Second Amended and Restated 12% Secured Convertible Notes due on October 31, 2013, in the aggregate principal amount of $15,000,000 (collectively, the “Notes”), are issued by GeoPharma, Inc. This Conversion Schedule reflects conversions made with respect to the portion of the Notes represented by this $10,000,000 Second Amended and Restated 12% Secured Convertible Note, under Section 4 of the above referenced Note.

Dated:


Date of Conversion (or for first entry, Original Issue Date)	Amount of Conversion	Aggregate Principal Amount Remaining Subsequent to Conversion (or original Principal Amount)	Company Attest

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