4.Business Days 

If any payment is due, or any time period for giving notice or taking action expires, on a day which is a Saturday, Sunday or legal holiday in the State of California, the payment shall be due and payable on, and the time period shall automatically be extended to, the next business day immediately following such Saturday, Sunday or legal holiday, and interest shall continue to accrue at the required rate hereunder until any such payment is made.

5.Conversion 

The Holder of this Note shall have the right, at its option, to convert the Principal Sum and any accrued interest, in whole or part, into shares of PRLX Common Stock par value $.001 (the “Common Stock”) at any time on or before 6 PM PST on the Maturity Date. The conversion price shall be ten ($.10) cents per share (the “Conversion Price”).

The Holder, or its representative shall deliver to the Company, by facsimile or email, the Holder’s completed and signed Notice of Conversion.  The date on which the Notice of Conversion is sent to the Company shall be the conversion date (the “Conversion Date”) for the applicable conversion.

In the event of (i) any reclassification (including, without limitation, a reclassification effected by means of an exchange or tender offer by PRLX), (ii) any consolidation, merger or combination of PRLX with another corporation as a result of which holders of Common Stock shall be entitled to receive securities or other property (including cash) with respect to or in exchange for Common Stock or (iii) any sale or conveyance of the property of PRLX as, or substantially as, an entirety to any other corporation as a result of which holders of Common Stock shall be entitled to receive securities or other property (including cash) with respect to or in exchange for Common Stock, then PRLX or the successor or purchasing corporation, as the case may be, shall enter into an Amended and Restated Note providing that this Note shall be convertible into the kind and amount of securities or other property (including cash) receivable upon such reclassification, change, consolidation, merger, combination, sale or conveyance which the Holder of this Note would have received if this Note had been converted immediately prior to such reclassification, change, consolidation, merger, combination, sale or conveyance. Such Amended and Restated Note shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for herein.

Upon receipt by the Company or its designated attorney of a facsimile or original of Holder’s signed Notice of Conversion followed by receipt of the original Note to be converted within three business days, PRLX shall instruct its transfer agent to issue one or more certificates representing Common Stock in accordance with the provisions regarding conversion set forth in this Note.

Upon the conversion of this Note and upon receipt by PRLX of a facsimile or original of Holders signed Notice of Conversion, PRLX shall instruct its transfer agent to issue Stock Certificates with proper restrictive legend, if an available exemption from registration is not then available, in the name of Holder (or its nominee) and in such denominations to be specified at conversion representing the number of shares of Common Stock issuable upon such conversion, as applicable.

PRLX shall take all necessary actions and to bear all costs to issue the certificates for the Common Stock issuable upon conversion of the Note as provided herein, including the responsibility and cost for delivery of an opinion letter to the transfer agent, if so required.  The person in whose name the certificate of Common Stock is to be registered shall be treated as a shareholder of record on and after the Conversion Date. Upon surrender of any Notes that are to be converted in part, PRLX or its assigns shall issue to the Holder a new Note equal to the accrued interest on the Note through the Conversion Date.

The Holder shall have piggyback registration rights as set forth in the Registration Rights Agreement for the Common Stock that are issued upon conversion.

6.Events of Default 

The occurrence of any of the following shall constitute an "Event of Default" under this Note:

a)Failure to Pay. The Company fails to pay any sum when due under this Note, whether at maturity or by acceleration or otherwise; or 

b)Voluntary Bankruptcy or Insolvency Proceedings. The Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) makes a general assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due, (iii) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (iv) take any action for the purpose of effecting any of the foregoing; 

c)Involuntary Bankruptcy or Insolvency Proceedings. If proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or the debts thereof under any bankruptcy, insolvency or other similar law or hereafter in effect shall be commenced, and an order for relief entered in such proceeding shall not be dismissed or discharged within thirty (30) days of the entry of such an order. 

d)Judgment. Any money judgment, writ or similar process shall be entered or filed against the Company or any subsidiary of the Company or any of its property or other assets for more than $25,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days 

e)Maintain Assets. The Company fails to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future) of the Company; 

7.Rights of Holder Upon Default 

In no event shall interest pursuant to this Note be payable at a rate in excess of the maximum rate permitted by applicable law and solely to the extent necessary to result in such interest not being payable at a rate in excess of such maximum rate, any amount that would be treated as part of such interest under a final judicial interpretation of applicable law shall be deemed to have been a mistake and automatically canceled, and, if received by the Holder, shall be refunded to the Company, it being the intention of the Holder and of the Company that such interest not be payable at a rate in excess of such maximum rate.

The Holder may, at its election, may foreclose on the Note and take possession of the Collateral as described in the Security Agreement, if the default is not cured within fifteen (15) days.

In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise any other right, power or remedy granted to it or otherwise permitted to it by law, either by suit in equity or by action at law, or both.

THIS NOTE AND ALL ACTIONS ARISING OUT OF OR IN CONNECTION WITH THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF CALIFORNIA, OR OF ANY OTHER STATE.

COMPANY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT COMPANY MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION, WHETHER BASED ON ANY CONTRACT OR NEGLIGENT, INTENTIONAL OR OTHER TORT OR OTHERWISE, IN CONNECTION WITH (1) THIS NOTE OR (2) ANY ACTION HERETOFORE OR HEREAFTER TAKEN OR NOT TAKEN, ANY COURSE OF CONDUCT HERETOFORE OR HEREAFTER PURSUED, ACCEPTED OR ACQUIESCED IN, OR ANY ORAL OR WRITTEN AGREEMENT OR REPRESENTATION HERETOFORE OR HEREAFTER MADE, BY OR ON BEHALF OF HOLDER IN CONNECTION WITH THIS NOTE.

8.Miscellaneous 

In the event any action is taken to enforce the rights of the Holder, in addition to such other relief as may be granted, the Company shall be responsible for all reasonable costs and expenses, including reasonable attorneys’ fees incurred in such action unless such action is without merit.

This Note shall be binding upon the successors, endorsees or assigns of the Company and inure to the benefit of the Holder, its successors, endorsees and assigns. The Company may not delegate any of its obligations, or assign any of its rights, under this Note without the prior written consent of the Holder.

This Note may only be amended by an instrument in writing signed by the Company and the Holder.

Any notice, request or other communication required or permitted hereunder shall be in accordance with the Agreement to the addresses set forth above or any other addresses designated by the parties from time to time.

If any term or provision of this Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby.  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.

All rights and remedies available to the Holder pursuant to the provisions of applicable law and otherwise are cumulative, not exclusive and enforceable alternatively, successively and/or concurrently after default by the Company pursuant to the provisions of this Note.  No delay or failure on the part of the Holder in exercising any right, privilege or option hereunder shall operate as a waiver thereof or of any event of default, nor shall any single or partial exercise of any such right, privilege or option preclude any further exercise thereof, or the exercise of any other right, privilege or option.

(page intentionally left blank – signature page follows)

IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first written above.

PARALLAX HEALTH SCIENCES, INC.    

By:________________________________ 

Paul R. Arena, CEO