MEGAMEDIA GROUP, INC. TENPERCENT (10%) CONVERTIBLESECURED PROMISSORY NOTE

1)  

The $250,000 shall be paid by Holder to the Company by wire transfer upon signing to an account specified by the Company at least two (2) business days prior to the Issuance Date.

2)  

Interest- Interest accrued during the term of this Note shall be paid by Company to the Holder on a monthly basis beginning December 5, 2008 and continuing on the 5th day of each consecutive calendar month thereafter. Accrued interest may be converted by the Holder into shares based on the same conversion rate as the principal amount as listed below in Section 2. The Note will bear interest at the rate of ten percent (10%) per annum on the principal balance until this Note shall be paid in full.

3)  

Conversion

a)  

Conversion.   The Holder shall have the right from time to time, and at any time on or prior to the Maturity Date, to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, one thousandth of a cent ($.001) par value per share.  The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the amount of principal and accrued interest to be converted (“Conversion Amount”) by the applicable Conversion Price then in effect on the date specified in the Conversion Notice, in the form attached hereto as Exhibit A (the “Conversion Notice”).  The Conversion Price shall be equal to the average closing bid price of the Common Stock (as reported by Bloomberg L.P.) on the exchange in which the Company’s securities are traded for the ten (10) trading days prior to the date of the Conversion Notice (the “Conversion Date”) multiplied by 0.80 provided that the Conversion Notice is submitted by facsimile (or by other means resulting in, or reasonably expected to result in, notice) to the Company before 6:00 p.m., New York, New York time on such Conversion Date.

b)  

Limitation on Conversion. Notwithstanding the provisions of this Note, in no event shall the Holder be entitled to convert this Note, or shall the Company have the obligation to issue shares upon such conversion of all or any portion of this Note to the extent that, after such conversion the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note), and (2) the number of shares of Common Stock issuable upon the conversion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock (after taking into account the shares to be issued to the Holder upon such conversion).  For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), except as otherwise provided in clause (1) of such sentence.  The Holder, by its acceptance of this Note, further agrees that if the Holder transfers or assigns any of this Note to a party who or which would not be considered such an affiliate, such assignment shall be made subject to the transferee’s or assignee’s specific agreement to be bound by the provisions of this Section 3(b) as if such transferee or assignee were the original Holder hereof.

c)  

Conversion Price Limit.  Notwithstanding the provisions in Section 2(a), the Conversion Price shall not exceed fifteen cents ($0.15).

d)  

Method of Conversion.

i)  

Mechanics of Conversion. This Note may be converted by the Holder in whole or in part at any time from time to time after this Note is issued to the Holder, by (A) submitting to the Company a Conversion Notice (by facsimile or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) surrendering this Note to the principal office of the Company.

ii)  

Delivery of Common Stock Upon Conversion.  Upon receipt by the Company from the Holder of a facsimile transmission (or other reasonable means of communication) of a Conversion Notice, the Company shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within five (5) business days after such receipt (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note).

4)  

Concerning the Shares.  The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless  (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Company or its transfer agent shall have been furnished with an opinion of  counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”).  Until such time as the shares of Common Stock issuable upon conversion of this Debenture have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Debenture that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

5)  

Transfers of Note to Comply with the Securities Act of 1933. As Amended. The Holder agrees that this Note may not be sold, transferred, pledged, hypothecated or otherwise disposed of except as follows: (1) to a person who, in the opinion of counsel to the Company, is a person to whom this Note may legally be transferred without registration and without the delivery of a current prospectus under the Securities Act of 1933, as amended, and then only against receipt of any agreement of such person to comply with the provisions of this Section 3 with respect to any resale or other disposition of this Note; or (ii) to any person upon delivery of a prospectus then meeting the requirements of the Securities Act of 1933, as amended, relating to such Note and the offering thereof for such sale or disposition, and thereafter to all successive assignees.

6)  

Prepayment. The principal amount of this Note with interest due thereon to the date of prepayment may be prepaid by the Company, in whole or in part, without premium or penalty, at any time. To effectuate a prepayment, the Company must provide the Holder with written notice of its intention to do so by certified mail or fax at least ten (10) days prior to any prepayment during which time the Holder may exercise the rights of conversion provided for hereunder.

7)  

Collateral.   While this Note is outstanding, the Holder will have a  first priority perfected security interest (the “Security Interest”) on all assets of Company (the “Assets”) including but not limited to, all present and future inventory, chattel paper, accounts, contract rights, unencumbered equipment, general intangibles, and intellectual property (including, without limitation all trademarks and service marks) (collectively, the “Collateral”).  The Company shall file a UCC-1 Financing Statement with the Office of the City Register, Kings County naming the Company as debtor and the Holder as the secured party and describing the collateral as the Collateral.  The Company further agrees that it will not transfer, assign, pledge or provide a negative pledge to any third party with respect to its intellectual property while any amounts of principal or interest are due and owing to Holder under this Note are outstanding.

8)  

Events of Default by the Company. This Note shall become and be due and payable upon written demand made by the Holder hereof if one or more of the following events, herein called "events of default", shall happen and be continuing and such default shall not be cured by the Company within ten (10) days of such default:

-To the Holder:

_____________[to be provided]

with a copy to:

Howard Kurtzberg, Esq., 380 North Broadway, Suite 300, Jericho, NY 11753

Date of Conversion:

Aggregate Conversion Amount to be converted:

Please confirm the following information:

Conversion Price:

Number of shares of Common Stock to be issued:

Please issue the Common Stock into which this Note is being converted in the following name and to the following address:

Issue to:

Facsimile Number:

Authorization:

By:

Title:

Dated:

Account Number:

  (if electronic book entry transfer)

Transaction Code Number:

  (if electronic book entry transfer)