**Exhibit 10.83**

**NEITHERTHE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THESECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTEREDUNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVEREGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, ASAMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THECOMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLDPURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIESMAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN ORFINANCING ARRANGEMENT SECURED BY THE SECURITIES.  ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLYREVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iv) AND 19(a) HEREOF.  THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTEAND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESSTHAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iv) OFTHIS NOTE.**

**EarthBiofuels, Inc.**

**SENIOR CONVERTIBLE NOTE**
| Issuance  Date:  August 11, 2006 | Original Principal Amount: U.S. $500,000.00 |
|---------------------------------------|---------------------------------------------|

 

**FORVALUE RECEIVED,** Earth Biofuels, Inc., a Delaware corporation(the “**Company**”), hereby promisesto pay to the order of **GUNDYCO ITF****EXCALIBUR LIMITED PARTNERSHIP**or registered assigns (“**Holder**”) the amount set out above as theOriginal Principal Amount (as reduced pursuant to the terms hereof pursuant toredemption, conversion or otherwise, the “**Principal**”)when due, whether upon the Maturity Date (as defined below), on any InstallmentDate with respect to the Installment Amount due on such Installment Date (each,as defined herein), acceleration, redemption or otherwise (in each case inaccordance with the terms hereof) and to pay interest (“**Interest**”) on any outstanding Principal atthe applicable Interest Rate from the date set out above as the Issuance Date(the “**Issuance****Date**”) until the same becomes due andpayable, whether upon an Interest Date (as defined below), any Installment Dateor the Maturity Date or acceleration, conversion, redemption or otherwise (ineach case in accordance with the terms hereof). This Senior Convertible Note (including all Senior Convertible Notesissued in exchange, transfer or replacement hereof, this “**Note**”) is one of an issue of SeniorConvertible Notes issued pursuant to the Securities Purchase Agreement on theClosing Date (collectively, the “**Notes**”and such other Senior Convertible Notes, the “**Other****Notes**”).  Certain capitalized terms used herein aredefined in Section 29.

# (1)           PAYMENTSOF PRINCIPAL.  On each InstallmentDate, the Company shall pay to the Holder an amount equal to the InstallmentAmount due on such Installment Date

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# in accordance with Section 8.  On the Maturity Date, the Company shall payto the Holder an amount in cash representing all outstanding Principal, accruedand unpaid Interest and accrued and unpaid Late Charges on such Principal andInterest.  The “**Maturity****Date**”shall be August 11, 2011, as may be extended at the option of the Holder (i) inthe event that, and for so long as, an Event of Default (as defined in Section4(a)) shall have occurred and be continuing on the Maturity Date (as may beextended pursuant to this Section 1) or any event shall have occurred and becontinuing on the Maturity Date (as may be extended pursuant to this Section 1)that with the passage of time and the failure to cure would result in an Eventof Default and (ii) through the date that is ten (10) Business Days after theconsummation of a Change of Control in the event that a Change of Control ispublicly announced or a Change of Control Notice (as defined in Section 5(b))is delivered prior to the Maturity Date. Other than as specifically permitted by this Note, the Company may notprepay any portion of the outstanding Principal, accrued and unpaid interest oraccrued and unpaid Late Charges on Principal and Interest, if any.

# (2)           INTEREST;INTEREST RATE.  Interest on this Noteshall commence accruing on the Issuance Date and shall be computed on the basisof a 360-day year comprised of twelve (12) thirty (30) day months and shall bepayable in arrears for each Calendar Quarter on the first day of the succeedingCalendar Quarter during the period beginning on the Issuance Date and endingon, and including, the Maturity Date (each, an “**Interest****Date**”) with the first Interest Date being November 1, 2006.  Interest shall be payable on each InterestDate, to the record holder of this Note on the applicable Interest Date, and to the extent that any Principal amountof this Note is converted prior to such Interest Date, accrued and unpaidInterest with respect to such converted Principal amount and accrued and unpaidLate Charges with respect to such Principal and Interest shall be paid on theConversion Date (as defined below) to the record holder of this Note on theapplicable Conversion Date, in cash. From and after the occurrence and during the continuance of an Event ofDefault, the Interest Rate shall be increased to fifteen percent (15.0%).  In the event that such Event of Default issubsequently cured, the adjustment referred to in the preceding sentence shallcease to be effective as of the date of such cure; provided that the Interestas calculated and unpaid at such increased rate during the continuance of suchEvent of Default shall continue to apply to the extent relating to the daysafter the occurrence of such Event of Default through and including the date ofcure of such Event of Default.

# (3)           CONVERSIONOF NOTES.  This Note shall beconvertible into shares of the Company’s common stock, par value $0.001 pershare (the “**Common Stock**”), on the terms andconditions set forth in this Section 3.

## (a)           Conversion Right.  Subject to the provisions of Section 3(d), atany time or times on or after the Issuance Date, the Holder shall be entitledto convert any portion of the outstanding and unpaid Conversion Amount (asdefined below) into fully paid and nonassessable shares of Common Stock inaccordance with Section 3(c), at the Conversion Rate (as defined below).  The Company shall not issue any fraction of ashare of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share ofCommon Stock, the Company shall round such fraction of a share of Common Stockup to the nearest whole share.  TheCompany shall pay any and all transfer, stamp and similar taxes that may bepayable with respect to the issuance and delivery of Common Stock uponconversion of any Conversion Amount.

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## (b)           Conversion Rate.  The number of shares of Common Stock issuableupon conversion of any Conversion Amount pursuant to Section 3(a) shall be determinedby dividing (x) such Conversion Amount by (y) the Conversion Price (the “**ConversionRate**”).

### (i)            “**ConversionAmount**” means the portion of the Principal to be converted, redeemedor otherwise with respect to which this determination is being made.

### (ii)           “**ConversionPrice**” means, as of any Conversion Date (as defined below) or otherdate of determination, $2.90, subject to adjustment as provided herein.

## (c)           Mechanics ofConversion.

### (i)            Optional Conversion.  To convert any Conversion Amount into sharesof Common Stock on any date (a “**Conversion Date**”), the Holder shall (A) transmit by facsimile (or otherwisedeliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, acopy of an executed notice of conversion in the form attached hereto as ExhibitI (the “**Conversion Notice**”) to the Company and (B) if required by Section 3(c)(iv),surrender this Note to a nationally recognized overnight delivery service fordelivery to the Company (or an indemnification undertaking with respect to thisNote in the case of its loss, theft or destruction).  On or before the first (1st) Business Day following the date ofreceipt of a Conversion Notice, the Company shall transmit by facsimile aconfirmation of receipt of such Conversion Notice to the Holder and the Company’stransfer agent (the “**Transfer Agent**”).  On or before the second Business Dayfollowing the date of receipt of a Conversion Notice (the “**ShareDelivery****Date**”),the Company shall (1) (X) if legends are not required to be placed on certificatesof Common Stock pursuant to the Securities Purchase Agreement and provided thatthe Transfer Agent is participating in the Depository Trust Company’s (“**DTC**”) Fast Automated Securities Transfer Program, creditsuch aggregate number of shares of Common Stock to which the Holder shall beentitled to the Holder’s or its designee’s balance account with DTC through itsDeposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is notparticipating in the DTC Fast Automated Securities Transfer Program, issue anddeliver to the address as specified in the Conversion Notice, a certificate,registered in the name of the Holder or its designee, for the number of sharesof Common Stock to which the Holder shall be entitled which certificates shallnot bear any restrictive legends unless required pursuant to Section 2(g) ofthe Securities Purchase Agreement; (2) pay to the Holder in cash an amountequal to the accrued and unpaid Interest on the Conversion Amount up to andincluding the Conversion Date; and (3) for any conversions prior to the third(3rd)anniversary of the Issuance Date, pay any applicable Make-Whole Amount inaccordance with Section 3(c)(ii).  Ifthis Note is physically surrendered for conversion as required by Section3(c)(iv) and the outstanding Principal of this Note is greater than thePrincipal portion of the Conversion Amount being converted, then the Companyshall as soon as practicable and in no event later than three (3) Business Daysafter receipt of this Note and at its own expense, issue and deliver to theholder a new Note (in accordance with Section 19(d)) representing theoutstanding Principal not converted.  ThePerson or Persons entitled to receive the shares of Common Stock issuable upona conversion of this Note shall be treated for all purposes as the recordholder or holders of such shares of Common Stock on the Conversion Date.  In the event of a partial conversion of thisNote pursuant hereto, the principal amount

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### convertedshall be deducted from the Installment Amounts relating to the InstallmentDates as set forth in the Conversion Notice.

### (ii)           Make-Whole Amount.  If prior to the third (3rd) anniversary of the Issuance Date, theHolder converts all or any portion of this Note pursuant to Section 3(c) or theCompany requires conversion of all or any portion of this Note pursuant toSection 9, then upon delivery of the applicable shares of Common Stock uponsuch conversion, the Holder shall receive the Make-Whole Amount; provided,however, that in the event that the Average Market Price on a Conversion Dateor Mandatory Conversion Date, as applicable, occurring after the Effective Date(as defined in the Registration Rights Agreement) exceeds 175% of theConversion Price on the Conversion Date or Mandatory Conversion Date, asapplicable, then the Holder shall not be entitled to receive the Make-WholeAmount; provided, further, that in the event that the Closing Sale Price of the Common Stock for eachTrading Day of any forty (40) consecutive Trading Day period after the EffectiveDate exceeds 200% of the Conversion Price on the Issuance Date (asadjusted for any stock split, combination, reclassification or similartransaction), then the Holder shall no longer have the right to receive a Make-WholeAmount.  The Company shall pay theMake-Whole Amount in shares of Common Stock or, at the Company’s option, incash.  Following receipt of anyConversion Notice during the period when a Holder is entitled to receive aMake-Whole Amount hereunder, the Company shall, in its confirmation of receiptof such Conversion Notice as required by Section 3(c)(i) (the “**Conversion Notice Confirmation**”), (A) specify whether theMake-Whole Amount shall not be paid in shares of Common Stock but rather incash and (B) if the Make-Whole Amount is to be paid in shares of Common Stock,certify that there has been no Equity Conditions Failure.  Any Make-Whole Amount to be paid in shares ofCommon Stock shall be paid in a number of fully paid and nonassessable sharesof Common Stock equal to the quotient of (1) the Make-Whole Amount and (2) theMake-Whole Conversion Price.  If theMake-Whole Amount shall be paid in Common Stock on the Share Delivery Date, theCompany shall (x) if legends are not required to be placed on certificates ofCommon Stock pursuant to the Securities Purchase Agreement and provided theTransfer Agent is participating in the DTC Fast Automated Securities TransferProgram, credit such aggregate number of Common Shares to which the Holdershall be entitled to the Holder or its designee’s balance account with DTCthrough its Deposit Withdrawal Agent Commission system, or (y) if the TransferAgent is not participating in the DTC Fast Automated Securities TransferProgram, issue and deliver to the address as specified in the Conversion Noticeor in the register maintained by the Company for such purpose pursuant to theSecurities Purchase Agreement, a certificate, registered in the name of theHolder or its designee, for the number of Common Shares to which the Holdershall be entitled which certificates shall not bear any restrictive legendsunless required pursuant to Section 2(g) of the Securities PurchaseAgreement.  If the Make-Whole Amountshall be paid in cash, then the Company shall make such payment on the ShareDelivery Date by wire transfer of immediately available funds to an accountdesignated in writing by the Holder. Notwithstanding the foregoing the Company shall not be entitled to paythe Make-Whole Amount in shares of Common Stock and shall be required to paysuch Make-Whole Amount in cash on the applicable Share Delivery Date, if theEquity Conditions are not then satisfied or if the Weighted Average Price ofthe Common Stock on any Trading Day during the Make-Whole Conversion MeasuringPeriod is less than $1.00.

### (iii)          Company’s Failure toTimely Convert.  If within three (3)Trading Days after the Company’s receipt of the facsimile copy of a ConversionNotice the

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### Company shallfail to issue and deliver a certificate to the Holder or credit the Holder’sbalance account with DTC for the number of shares of Common Stock to which theHolder is entitled upon such holder’s conversion of any Conversion Amount (a “**Conversion Failure**”), and if on or after such Trading Daythe Holder purchases (in an open market transaction or otherwise) Common Stockto deliver in satisfaction of a sale by the Holder of Common Stock issuableupon such conversion that the Holder anticipated receiving from the Company (a “**Buy-In**”), then the Company shall, within three (3) BusinessDays after the Holder’s request and in the Holder’s discretion, either (i) paycash to the Holder in an amount equal to the Holder’s total purchase price(including brokerage commissions and other out of pocket expenses, if any) forthe shares of Common Stock so purchased (the **“Buy-InPrice”**), at which point the Company’s obligation to deliver suchcertificate (and to issue such Common Stock) shall terminate, or (ii) promptlyhonor its obligation to deliver to the Holder a certificate or certificatesrepresenting such Common Stock and pay cash to the Holder in an amount equal tothe excess (if any) of the Buy-In Price over the product of (A) such number ofshares of Common Stock, times (B) the Closing Bid Price on the Conversion Date.

### (iv)          Book-Entry.Notwithstanding anything to the contrary set forth herein, upon conversion ofany portion of this Note in accordance with the terms hereof, the Holder shallnot be required to physically surrender this Note to the Company unless (A) thefull Conversion Amount represented by this Note is being converted or (B) theHolder has provided the Company with prior written notice (which notice may beincluded in a Conversion Notice) requesting reissuance of this Note uponphysical surrender of this Note.  TheHolder and the Company shall maintain records showing the Principal, Interestand Late Charges converted and the dates of such conversions or shall use suchother method, reasonably satisfactory to the Holder and the Company, so as notto require physical surrender of this Note upon conversion.

### (v)           Pro Rata Conversion;Disputes.  In the event that theCompany receives a Conversion Notice from more than one holder of Notes for thesame Conversion Date and the Company can convert some, but not all, of suchportions of the Notes submitted for conversion, the Company, subject to Section3(d), shall convert from each holder of Notes electing to have Notes convertedon such date a pro rata amount of such holder’s portion of its Notes submittedfor conversion based on the principal amount of Notes submitted for conversionon such date by such holder relative to the aggregate principal amount of allNotes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stockissuable to the Holder in connection with a conversion of this Note, theCompany shall issue to the Holder the number of shares of Common Stock not indispute and resolve such dispute in accordance with Section 24.

## (d)           Limitations onConversions.

### (i)            BeneficialOwnership.  The Company shall noteffect any conversion of this Note or otherwise issue shares of Common Stockpursuant to Section 3(c)(ii) hereof or Sections 8 or 9 hereof, and the Holderof this Note shall not have the right to convert any portion of this Notepursuant to Section 3(a), to the extent that after giving effect to suchconversion, the Holder (together with the Holder’s affiliates) wouldbeneficially own in excess of 4.99% (the “**Maximum Percentage**”)of the number of shares of Common Stock outstanding immediately after givingeffect to such conversion.  For purposesof the foregoing sentence, the

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### number ofshares of Common Stock beneficially owned by the Holder and its affiliatesshall include the number of shares of Common Stock issuable upon conversion ofthis Note with respect to which the determination of such sentence is beingmade, but shall exclude the number of shares of Common Stock which would beissuable upon (A) conversion of the remaining, nonconverted portion of thisNote beneficially owned by the Holder or any of its affiliates and (B) exerciseor conversion of the unexercised or nonconverted portion of any othersecurities of the Company (including, without limitation, any Other Notes orwarrants) subject to a limitation on conversion or exercise analogous to thelimitation contained herein beneficially owned by the Holder or any of itsaffiliates.  Except as set forth in thepreceding sentence, for purposes of this Section 3(d)(i), beneficial ownershipshall be calculated in accordance with Section 13(d) of the Securities ExchangeAct of 1934, as amended (the “**1934 Act**”).  For purposes of this Section 3(d)(i), indetermining the number of outstanding shares of Common Stock, the Holder mayrely on the number of outstanding shares of Common Stock as reflected in (x)the Company’s most recent Form 10-KSB, Form 10-QSB or Form 8-K, as the case maybe (y) a more recent public announcement by the Company or (z) any other noticeby the Company or the Transfer Agent setting forth the number of shares ofCommon Stock outstanding.  For any reasonat any time, upon the written request of the Holder, the Company shall withinone (1) Business Day confirm in writing to the Holder the number of shares ofCommon Stock then outstanding.  In anycase, the number of outstanding shares of Common Stock shall be determinedafter giving effect to the conversion or exercise of securities of the Company,including this Note, by the Holder or its affiliates since the date as of whichsuch number of outstanding shares of Common Stock was reported.

### (ii)           Principal MarketRegulation.  The Company shall not beobligated to issue any shares of Common Stock upon conversion of this Note, andthe Holder of this Note shall not have the right to receive upon conversion ofthis Note any shares of Common Stock, if the issuance of such shares of CommonStock would exceed the aggregate number of shares of Common Stock which theCompany may issue upon conversion or exercise, as applicable, of the Notes andWarrants without breaching the Company’s obligations under the rules orregulations of the applicable Eligible Market (the number of shares which maybe issued without violating such rules and regulations, the “**ExchangeCap**”), except thatsuch limitation shall not apply in the event that the Company (A) obtains theapproval of its stockholders as required by the applicable rules of suchEligible Market for issuances of Common Stock in excess of such amount or (B)obtains a written opinion from outside counsel to the Company that suchapproval is not required, which opinion shall be reasonably satisfactory to theRequired Holders.  Unless and until suchapproval or written opinion is obtained, no purchaser of the Notes pursuant tothe Securities Purchase Agreement (the “**Purchasers**”) shall be issued in the aggregate, upon conversion or exerciseor otherwise, as applicable, of Notes or Warrants, shares of Common Stock in anamount greater than the product of the Exchange Cap multiplied by a fraction,the numerator of which is the principal amount of Notes issued to suchPurchasers pursuant to the Securities Purchase Agreement on the Closing Dateand the denominator of which is the aggregate principal amount of all Notesissued to the Purchasers pursuant to the Securities Purchase Agreement on theClosing Date (with respect to each Purchaser, the “**Exchange Cap Allocation**”). In the event that any Purchaser shall sell or otherwise transfer any ofsuch Purchaser’s Notes, the transferee shall be allocated a pro rata portion ofsuch Purchaser’s Exchange Cap Allocation, and the restrictions of the priorsentence shall apply to such transferee with respect to the portion of theExchange Cap Allocation allocated to such

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### transferee.  In the event that any holder of Notes shallconvert all of such holder’s Notes into a number of shares of Common Stockwhich, in the aggregate, is less than such holder’s Exchange Cap Allocation,then the difference between such holder’s Exchange Cap Allocation and thenumber of shares of Common Stock actually issued to such holder shall be allocatedto the respective Exchange Cap Allocations of the remaining holders of Notes ona pro rata basis in proportion to the aggregate principal amount of the Notesthen held by each such holder.

# (4)           RIGHTSUPON EVENT OF DEFAULT.

## (a)           Event of Default.  Each of the following events shall constitutean “**Event of Default**”:

### (i)            the failure of theapplicable Registration Statement required to be filed pursuant to theRegistration Rights Agreement to be declared effective by the SEC on or priorto the date that is sixty (60) days after the applicable Effectiveness Deadline(as defined in the Registration Rights Agreement), or, while the applicableRegistration Statement is required to be maintained effective pursuant to theterms of the Registration Rights Agreement, the effectiveness of the applicableRegistration Statement lapses for any reason (including, without limitation,the issuance of a stop order) or is unavailable to any holder of the Notes forsale of all of such holder’s Registrable Securities (as defined in theRegistration Rights Agreement) in accordance with the terms of the RegistrationRights Agreement, and such lapse or unavailability continues for a period often (10) consecutive days (other than days during an Allowable Grace Period (asdefined in the Registration Rights Agreement)or for more than an aggregate ofthirty (30) days in any 365-day period (other than days during an AllowableGrace Period);

### (ii)           the suspension fromtrading or failure of the Common Stock to be listed on an Eligible Market for aperiod of five (5) consecutive Trading Days or for more than an aggregate often (10) Trading Days in any 365-day period;

### (iii)          the Company’s (A)failure to cure a Conversion Failure by delivery of the required number ofshares of Common Stock within ten (10) Business Days after the applicableConversion Date or (B) notice, written or oral, to any holder of the Notes,including by way of public announcement, at any time, of its intention not tocomply with a request for conversion of any Notes into shares of Common Stockthat is tendered in accordance with the provisions of the Notes, other thanpursuant to Section 3(d);

### (iv)          at any time followingthe tenth (10th)consecutive Business Day following the Authorized Share Failure Deadline thatthe Holder’s Authorized Share Allocation is less than the number of shares ofCommon Stock that the Holder would be entitled to receive upon a conversion ofthe full Conversion Amount of this Note (without regard to any limitations onconversion set forth in Section 3(d) or otherwise);

### (v)           the Company’s failureto pay to the Holder any amount of Principal, Interest, Late Charges or otheramounts when and as due under this Note (including, without limitation, theCompany’s failure to pay any redemption payments or amounts hereunder) or anyother Transaction Document (as defined in the Securities Purchase

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### Agreement) orany other agreement, document, certificate or other instrument delivered inconnection with the transactions contemplated hereby and thereby to which theHolder is a party, except, in the case of a failure to pay Interest and LateCharges when and as due, in which case only if such failure continues for aperiod of at least ten (10) Business Days;

### (vi)          the occurrence of any default under,redemption of or acceleration prior to maturity of any Indebtedness of theCompany or any of its Subsidiaries (as defined in Section 3(a) of theSecurities Purchase Agreement) which, individually or in the aggregate, exceeds$500,000, other than with respect to any Other Notes;

### (vii)         the Company or any of itsSubsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or anysimilar Federal, foreign or state law for the relief of debtors (collectively, “**BankruptcyLaw**”), (A)commences a voluntary case, (B) consents to the entry of an order for reliefagainst it in an involuntary case, (C) consents to the appointment of areceiver, trustee, assignee, liquidator or similar official (a “**Custodian**”), (D) makes a general assignmentfor the benefit of its creditors or (E) admits in writing that it is generallyunable to pay its debts as they become due;

### (viii)        a court of competentjurisdiction enters an order or decree under any Bankruptcy Law that (A) is forrelief against the Company or any of its Subsidiaries in an involuntary case,(B) appoints a Custodian of the Company or any of its Subsidiaries or (C)orders the liquidation of the Company or any of its Subsidiaries;

### (ix)           a final judgment orjudgments for the payment of money aggregating in excess of $1,500,000 are rendered against theCompany or any of its Subsidiaries and which judgments are not, within sixty(60) days after the entry thereof, bonded, discharged or stayed pending appeal,or are not discharged within sixty (60) days after the expiration of such stay;provided, however, that any judgment which is covered by insurance or anindemnity from a credit worthy party shall not be included in calculating the $1,500,000****amountset forth above so long as the Company provides the Holder a written statementfrom such insurer or indemnity provider (which written statement shall bereasonably satisfactory to the Holder) to the effect that such judgment iscovered by insurance or an indemnity and the Company will receive the proceedsof such insurance or indemnity within thirty (30) days of the issuance of suchjudgment;

### (x)            the Company breaches any representation, warranty, covenant or other term or condition ofany Transaction Document, which breach has or is likely to have a cost oradverse impact on the Company or the Holders (including by reduction in thevalue of the shares of Common Stock deliverable in connection with theTransaction Documents) in excess of $250,000, except, in the case of a breachof a covenant or other term or condition of any Transaction Document which iscurable, only if such breach continues for a period of at least ten (10)consecutive Business Days;

### (xi)           any breach or failurein any respect to comply with either of Sections 8 or 15 of this Note; or

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### (xii)          any Event of Default (asdefined in the Other Notes) occurs with respect to any Other Notes.

## (b)           Redemption Right.  Upon the occurrence of an Event of Defaultwith respect to this Note or any Other Note, the Company shall within one (1)Business Day 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’sreceipt of an Event of Default Notice and the Holder becoming aware of an Eventof Default, the Holder may require the Company to redeem all or any portion ofthis Note by delivering written notice thereof (the “**Event of Default RedemptionNotice**”) to theCompany, which Event of Default Redemption Notice shall indicate the portion ofthis Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuantto this Section 4(b) shall be redeemed by the Company at a price equal to thegreater of (i) the product of (A) thesum of the Conversion Amount to be redeemed together with accrued and unpaidInterest with respect to such Conversion Amount and accrued and unpaid LateCharges with respect to such Conversion Amount and Interest and (B) the Redemption Premium and(ii) the product of (A) the Conversion Rate with respect to such sum of theConversion Amount together with accrued and unpaid Interest with respect tosuch Conversion Amount and accrued and unpaid Late Charges with respect to suchConversion Amount and Interest ineffect at such time as the Holder delivers an Event of Default RedemptionNotice and (B) the product of (1) the Equity Value Redemption Premium and (2)the greater of (x) the Closing Sale Price of the Common Stock on the dateimmediately preceding such Event of Default, (y) the Closing Sale Price of theCommon Stock on the date immediately after such Event of Default and (z) theClosing Sale Price of the Common Stock on the date the Holder delivers theEvent of Default Redemption Notice (the “**Event of Default****Redemption Price**”). Redemptions required by this Section 4(b) shall be made in accordancewith the provisions of Section 13.  Tothe extent redemptions required by this Section 4(b) are deemed or determinedby a court of competent jurisdiction to be prepayments of the Note by the Company,such redemptions shall be deemed to be voluntary prepayments. In the event of apartial redemption of this Note pursuant hereto, the principal amount redeemedshall be deducted from the Installment Amounts relating to the applicableInstallment Dates as set forth in the Event of Default Redemption Notice.  The parties hereto agree that in the event ofthe Company’s redemption of any portion of the Note under this Section 4(b),the Holder’s damages would be uncertain and difficult to estimate because ofthe parties’ inability to predict future interest rates and the uncertainty ofthe availability of a suitable substitute investment opportunity for theHolder.  Accordingly, any RedemptionPremium due under this Section 4(b) is intended by the parties to be, and shallbe deemed, a reasonable estimate of the Holder’s actual loss of its investmentopportunity and not as a penalty.

# (5)           RIGHTSUPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

## (a)           Assumption.  TheCompany shall not enter into or be party to a Fundamental Transaction unless(i)  the Successor Entity assumes in writing all of the obligations of theCompany under this Note and the other Transaction Documents in accordance withthe provisions of this Section 5(a) pursuant to written agreements inform and substance reasonably satisfactory to the Required Holders and approvedby the Required Holders prior to such Fundamental Transaction, includingagreements to deliver to each holder of Notes in

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## exchange forsuch Notes a security of the Successor Entity evidenced by a written instrument substantiallysimilar in form and substance to the Notes, including, without limitation,having a principal amount and interest rate equal to the principal amounts andthe interest rates of the Notes then outstanding held by such holder, havingsimilar conversion rights and having similar ranking to the Notes, andreasonably satisfactory to the Required Holders and (ii)  the Successor Entity (including its Parent Entity) isa publicly traded corporation whose common stock is quoted on or listed fortrading on an Eligible Market (a “**PublicSuccessor Entity**”).  Upon the occurrence of anyFundamental Transaction, the Successor Entity shall succeed to, and besubstituted for (so that from and after the date of such FundamentalTransaction, the provisions of this Note referring to the “Company” shall referinstead to the Successor Entity), and may exercise every right and power of theCompany and shall assume all of the obligations of the Company under this Notewith the same effect as if such Successor Entity had been named as the Companyherein.  Upon consummation of theFundamental Transaction, the Successor Entity shall deliver to the Holderconfirmation that there shall be issued upon conversion of this Note at any time after the consummation of the FundamentalTransaction, in lieu of the shares of the Company’s Common Stock (orother securities, cash, assets or other property) issuable upon the conversion of the Notes prior to such FundamentalTransaction, such shares of the publiclytraded common stock (or their equivalent) of the Successor Entity (includingits Parent Entity), as adjusted in accordance with the provisions of thisNote.  The provisions of thisSection shall apply similarly and equally to successive FundamentalTransactions and shall be applied without regard to any limitations on theconversion of this Note.

## (b)           Redemption Right.  No sooner than twenty (20) Trading Days norlater than ten (10) Trading Days prior to the consummation of a Change ofControl, but not prior to the public announcement of such Change of Control,the Company shall deliver written notice thereof via facsimile and overnightcourier to the Holder (a “**Change of Control****Notice**”). At any time during the period beginning after the Holder’s receipt of aChange of Control Notice and ending on the later of (A) one (1) Business Dayprior to consummation of such Change of Control or (B) twenty (20) Trading Daysafter the date of receipt of such Change of Control Notice, the Holder mayrequire the Company to redeem all or any portion of this Note by deliveringwritten notice thereof (“**Change of Control Redemption Notice**”) to the Company, which Change ofControl Redemption Notice shall indicate the Conversion Amount the Holder iselecting to redeem.  The portion of thisNote subject to redemption pursuant to this Section 5 shall be redeemed by theCompany in cash at a price equal to the greater of (i) the sum of (x) theproduct of the Change of Control Redemption Premium and the Conversion Amountbeing redeemed and (y) the amount of any accrued but unpaid Interest on suchConversion Amount being redeemed and accrued and unpaid Late Charges, if any,with respect to such Conversion Amount and Interest through the date of suchredemption payment and (ii) the product of (x) the Equity Value RedemptionPremium and (y) the sum of (1) the product of (A) the Conversion Amount beingredeemed multiplied by (B) the quotient determined by dividing (I) theaggregate cash consideration and the aggregate cash value of any non-cashconsideration per Common Share to be paid to the holders of the Common Sharesupon consummation of the Change of Control (any such non-cash consideration tobe valued at the higher of the Closing Sale Price of such securities as of theTrading Day immediately prior to the consummation of such Change of Control,the Closing Sale Price on the Trading Day immediately following the publicannouncement of such proposed Change of Control and the Closing Sale Price onthe Trading Day immediately prior to the public announcement of such proposedChange of Control) by (II)

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## the ConversionPrice plus (2) the amount of any accrued but unpaid Interest on such ConversionAmount being redeemed and accrued and unpaid Late Charges, if any, with respectto such Conversion Amount and Interest through the date of such redemptionpayment, (the “**Change of ControlRedemption Price**”). Redemptions required by this Section 5 shall be made in accordance withthe provisions of Section 13 and shall have priority to payments tostockholders in connection with a Change of Control.  To the extent redemptions required by thisSection 5(b) are deemed or determined by a court of competent jurisdiction tobe prepayments of the Note by the Company, such redemptions shall be deemed tobe voluntary prepayments.  Notwithstandinganything to the contrary in this Section 5, but subject to Section 3(d), untilthe Change of Control Redemption Price (together with any interest thereon) ispaid in full, the Conversion Amount submitted for redemption under this Section5(c) (together with any interest thereon) may be converted, in whole or inpart, by the Holder into Common Stock pursuant to Section 3.  In the event of a partial redemption of thisNote pursuant hereto, the principal amount redeemed shall be deducted from theInstallment Amounts relating to the applicable Installment Dates as set forthin the Change of Control Redemption Notice. The parties hereto agree that in the event of the Company’s redemptionof any portion of the Note under this Section 5(b), the Holder’s damages wouldbe uncertain and difficult to estimate because of the parties’ inability topredict future interest rates and the uncertainty of the availability of asuitable substitute investment opportunity for the Holder.  Accordingly, any Change of Control RedemptionPremium due under this Section 5(b) is intended by the parties to be, and shallbe deemed, a reasonable estimate of the Holder’s actual loss of its investmentopportunity and not as a penalty.

# (6)           RIGHTSUPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

## (a)           Purchase Rights.  If at any time the Company grants, issues orsells any Options, Convertible Securities or rights to purchase stock,warrants, securities or other property pro rata to the record holders of anyclass of Common Stock (the “**Purchase Rights**”), then the Holder will be entitled to acquire, upon the termsapplicable to such Purchase Rights, the aggregate Purchase Rights which theHolder could have acquired if the Holder had held the number of shares ofCommon Stock acquirable upon complete conversion of this Note (without takinginto account any limitations or restrictions on the convertibility of thisNote) immediately before the date on which a record is taken for the grant,issuance or sale of such Purchase Rights, or, if no such record is taken, thedate as of which the record holders of Common Stock are to be determined forthe grant, issue or sale of such Purchase Rights.

## (b)           Other CorporateEvents.  In addition to and not insubstitution for any other rights hereunder, prior to the consummation of anyFundamental Transaction pursuant to which holders of shares of Common Stock areentitled to receive securities or other assets with respect to or in exchangefor shares of Common Stock (a “**Corporate Event**”), the Company shall make appropriate provision to insure thatthe Holder will thereafter have the right to receive upon a conversion of thisNote, at the Holder’s option, (i) in addition to the shares of Common Stockreceivable upon such conversion, such securities or other assets to which theHolder would have been entitled with respect to such shares of Common Stock hadsuch shares of Common Stock been held by the Holder upon the consummation ofsuch Corporate Event (without taking into account any limitations or restrictionson the convertibility of this Note) or (ii) in lieu of the shares of CommonStock otherwise receivable upon such conversion, such securities or other

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## assetsreceived by the holders of shares of Common Stock in connection with theconsummation of such Corporate Event in such amounts as the Holder would havebeen entitled to receive had this Note initially been issued with conversionrights for the form of such consideration (as opposed to shares of CommonStock) at a conversion rate for such consideration commensurate with theConversion Rate.  The provisions of thisSection shall apply similarly and equally to successive Corporate Events andshall be applied without regard to any limitations on the conversion orredemption of this Note.

# (7)           RIGHTSUPON ISSUANCE OF OTHER SECURITIES.

## (a)           Adjustment ofConversion Price upon Issuance of Common Stock.  If and whenever on or after the SubscriptionDate, the Company issues or sells, or in accordance with this Section 7(a) isdeemed to have issued or sold, any shares of Common Stock (including theissuance or sale of shares of Common Stock owned or held by or for the accountof the Company, but excluding shares of Common Stock deemed to have been issuedor sold by the Company in connection with any Excluded Security) for aconsideration per share less than a price equal to the Conversion Price ineffect immediately prior to such issue or sale (such price the “**ApplicablePrice**”) (theforegoing a “**Dilutive Issuance**”), then immediately after such Dilutive Issuance the ConversionPrice then in effect shall be reduced to an amount equal to the product of(A) the Conversion Price in effect immediately prior to such DilutiveIssuance and (B) the quotient determined by dividing (1) the sum of(I) the product derived by multiplying the Conversion Price in effectimmediately prior to such Dilutive Issuance and the number of shares of CommonStock Deemed Outstanding immediately prior to such Dilutive Issuance plus(II) the consideration, if any, received by the Company upon such DilutiveIssuance, by (2) the product derived by multiplying (I) the ConversionPrice in effect immediately prior to such Dilutive Issuance by (II) thenumber of shares of Common Stock Deemed Outstanding immediately after suchDilutive Issuance.  For purposes ofdetermining the adjusted Conversion Price under this Section 7(a), thefollowing shall be applicable:

### (i)            Issuance of Options.  If the Company in any manner grants or sellsany Options and the lowest price per share for which one share of Common Stockis issuable upon the exercise of any such Option or upon conversion or exchangeor exercise of any Convertible Securities issuable upon exercise of such Optionis less than the Applicable Price, then such share of Common Stock shall be deemedto be outstanding and to have been issued and sold by the Company at the timeof the granting or sale of such Option for such price per share.  For purposes of this Section 7(a)(i), the “lowestprice per share for which one share of Common Stock is issuable upon theexercise of any such Option or upon conversion or exchange or exercise of anyConvertible Securities issuable upon exercise of such Option” shall be equal tothe sum of the lowest amounts of consideration (if any) received or receivableby the Company with respect to any one share of Common Stock upon granting orsale of the Option, upon exercise of the Option and upon conversion or exchangeor exercise of any Convertible Security issuable upon exercise of such Option.  No further adjustment of the Conversion Priceshall be made upon the actual issuance of such share of Common Stock or of suchConvertible Securities upon the exercise of such Options or upon the actualissuance of such Common Stock upon conversion or exchange or exercise of such ConvertibleSecurities.

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### (ii)           Issuance of Convertible Securities.  If the Company in any manner issues or sellsany Convertible Securities and the lowest price per share for which one shareof Common Stock is issuable upon such conversion or exchange or exercisethereof is less than the Applicable Price, then such share of Common Stockshall be deemed to be outstanding and to have been issued and sold by theCompany at the time of the issuance or sale of such Convertible Securities forsuch price per share.  For the purposesof this Section 7(a)(ii), the “lowest price per share for which one share ofCommon Stock is issuable upon such conversion or exchange or exercise” shall beequal to the sum of the lowest amounts of consideration (if any) received orreceivable by the Company with respect to any one share of Common Stock uponthe issuance or sale of the Convertible Security and upon the conversion orexchange or exercise of such Convertible Security.  No further adjustment of the Conversion Priceshall be made upon the actual issuance of such share of Common Stock uponconversion or exchange or exercise of such Convertible Securities, and if anysuch issue or sale of such Convertible Securities is made upon exercise of anyOptions for which adjustment of the Conversion Price had been or are to be madepursuant to other provisions of this Section 7(a), no further adjustment of theConversion Price shall be made by reason of such issue or sale.

### (iii)          Change in Option Price or Rate ofConversion.  If the purchase priceprovided for in any Options, the additional consideration, if any, payable uponthe issue, conversion, exchange or exercise of any Convertible Securities, orthe rate at which any Convertible Securities are convertible into orexchangeable or exercisable for Common Stock changes at any time, theConversion Price in effect at the time of such change shall be adjusted to theConversion Price which would have been in effect at such time had such Optionsor Convertible Securities provided for such changed purchase price, additionalconsideration or changed conversion rate, as the case may be, at the timeinitially granted, issued or sold.  Forpurposes of this Section 7(a)(iii), if the terms of any Option or ConvertibleSecurity that was outstanding as of the Subscription Date are changed in themanner described in the immediately preceding sentence, then such Option orConvertible Security and the Common Stock deemed issuable upon exercise,conversion or exchange thereof shall be deemed to have been issued as of thedate of such change.  No adjustment shallbe made if such adjustment would result in an increase of the Conversion Pricethen in effect.

### (iv)          Calculation of Consideration Received.  In case any Option is issued in connectionwith the issue or sale of other securities of the Company, together comprisingone integrated transaction in which no specific consideration is allocated tosuch Options by the parties thereto, the Options will be deemed to have beenissued for the difference of (x) the aggregate fair market value of suchOptions and other securities issued or sold in such integrated transaction,less (y) the fair market value of the securities other than such Option, issuedor sold in such transaction and the other securities issued or sold in suchintegrated transaction will be deemed to have been issued or sold for thebalance of the consideration received by the Company.  If any Common Stock, Options or ConvertibleSecurities are issued or sold or deemed to have been issued or sold for cash,the consideration received therefor will be deemed to be the gross amountraised by the Company; provided, however, that such gross amount is not greaterthan 110% of the net amount received by the Company therefor.  If any Common Stock,

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### Options or Convertible Securities are issuedor sold for a consideration other than cash, the amount of the considerationother than cash received by the Company will be the fair value of suchconsideration, except where such consideration consists of securities, in whichcase the amount of consideration received by the Company will be the ClosingSale Price of such securities on the date of receipt.  If any Common Stock, Options or ConvertibleSecurities are issued to the owners of the non-surviving entity in connectionwith any merger in which the Company is the surviving entity, the amount ofconsideration therefor will be deemed to be the fair value of such portion ofthe net assets and business of the non-surviving entity as is attributable tosuch Common Stock, Options or Convertible Securities, as the case may be.  The fair value of any consideration otherthan cash or securities will be determined jointly by the Company and theRequired Holders.  If such parties areunable to reach agreement within ten (10) days after the occurrence of an eventrequiring valuation (the “**Valuation Event**”), the fair value of suchconsideration will be determined within five (5) Business Days after the tenth(10th) dayfollowing the Valuation Event by an independent, reputable appraiser jointlyselected by the Company and the Required Holders.  The determination of such appraiser shall bedeemed binding upon all parties absent manifest error and the fees and expensesof such appraiser shall be borne by the Company.

### (v)           Record Date.  If the Company takes a record of the holdersof Common Stock for the purpose of entitling them (A) to receive a dividend orother distribution payable in Common Stock, Options or in ConvertibleSecurities or (B) to subscribe for or purchase Common Stock, Options orConvertible Securities, then such record date will be deemed to be the date ofthe issue or sale of the Common Stock deemed to have been issued or sold uponthe declaration of such dividend or the making of such other distribution orthe date of the granting of such right of subscription or purchase, as the casemay be.

## (b)           Adjustment ofConversion Price upon Subdivision or Combination of Common Stock.  If the Company at any time on or after theSubscription Date subdivides (by any stock split, stock dividend,recapitalization or otherwise) one or more classes of its outstanding shares ofCommon Stock into a greater number of shares, the Conversion Price in effectimmediately prior to such subdivision will be proportionately reduced.  If the Company at any time on or after theSubscription Date combines (by combination, reverse stock split or otherwise)one or more classes of its outstanding shares of Common Stock into a smallernumber of shares, the Conversion Price in effect immediately prior to suchcombination will be proportionately increased.

## (c)           Other Events.  If any event occurs of the type contemplatedby the provisions of this Section 7 but not expressly provided for by suchprovisions (including, without limitation, the granting of stock appreciationrights, phantom stock rights or other rights with equity features), then theCompany’s Board of Directors will make an appropriate adjustment in theConversion Price so as to protect the rights of the Holder under this Note;provided that no such adjustment will increase the Conversion Price asotherwise determined pursuant to this Section 7.

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# (8)           COMPANYINSTALLMENT CONVERSION OR REDEMPTION.

## (a)           General.  On each applicable Installment Date, theCompany shall pay to the Holder of this Note the Installment Amount due on suchdate by converting such Installment Amount, provided that there is not then anEquity Conditions Failure, in accordance with this Section 8 (a “**Company Conversion**”); provided, however, that the Companymay, at its option following notice to the Holder, pay the Installment Amountby redeeming such Installment Amount (a “**Company Redemption**”)or by any combination of a Company Conversion and a Company Redemption so longas all of the outstanding applicable Installment Amount shall be convertedand/or redeemed by the Company on the applicable Installment Date, subject tothe provisions of this Section 8; provided further, however, that the Companyshall not be entitled to pay any portion of the Installment Amount in shares ofCommon Stock pursuant to a Company Conversion and shall be required to pay suchInstallment Amount in cash pursuant to a Company Redemption if the WeightedAverage Price of the Common Stock on any Trading Day during the CompanyConversion Measuring Period is less than $1.00. Notwithstanding the foregoing,the Company may not effect a Company Conversion of any Installment Amount underthis Section in excess of the Holder Pro Rata Amount of the applicableInstallment Volume Limitation.  Onor prior to the date which is the eighth (8th) Trading Day prior to each Installment Date (each, an “**Installment Notice Due Date**”), the Company shall deliverwritten notice (each, a “**Company Installment Notice**”and the date all of the holders receive such notice is referred to as to the “**Company Installment Notice Date**”), to eachholder of Notes which Company Installment Notice shall (i) either (A) confirmthat the applicable Installment Amount of such holder’s Note shall be convertedin whole pursuant to a Company Conversion (such amount to be converted, the “**Company Conversion Amount**”) or (B) (1) state that theCompany elects to redeem, or is required to redeem in accordance with theprovisions of the Notes, in whole or in part, the applicable Installment Amountpursuant to a Company Redemption and (2) specify the portion (includingInterest and Late Charges, if any, on such amount and Interest) which theCompany elects or is required to redeem pursuant to a Company Redemption (suchamount to be redeemed, the “**Company Redemption Amount**”)and the portion (including Interest and Late Charges, if any, on such amountand Interest), if any, that the Company elects to convert pursuant to a CompanyConversion (such amount a “**Company Conversion Amount**”)which amounts when added together, must equal the applicable Installment Amountand (ii) if the Installment Amount is to be paid, in whole or in part, pursuantto a Company Conversion, certify that thereis not then an Equity Conditions Failure as of the date of the CompanyInstallment Notice.  Each CompanyInstallment Notice shall be irrevocable. If the Company does not timely deliver a Company Installment Notice inaccordance with this Section 8, then the Company shall be deemed to havedelivered an irrevocable Company Installment Notice confirming a CompanyConversion and shall be deemed to have certified that there is not then anEquity Conditions Failure in connection with any such conversion. Except asexpressly provided in this Section 8(a), the Company shall convert and/orredeem the applicable Installment Amount of this Note pursuant to this Section8 and the corresponding Installment Amounts of the Other Notes pursuant to thecorresponding provisions of the Other Notes in the same ratio of theInstallment Amount being converted and/or redeemed hereunder.  The Company Conversion Amount (whether setforth in the Company Installment Notice or by operation of this Section 8)shall be converted in accordance with Section 8(b) and the Company RedemptionAmount shall be redeemed in accordance with Section 8(c).

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## (b)           Mechanics of CompanyConversion.  Subject to Section 3(d),if the Company delivers a Company Installment Notice and elects, or is deemedto have elected, in whole or in part, a Company Conversion in accordance withSection 8(a), then the applicable Company Conversion Amount, if any, whichremains outstanding as of the applicable Installment Date shall be converted asof the applicable Installment Date by converting on such Installment Date suchCompany Conversion Amount at the Company Conversion Price; provided that theEquity Conditions are then satisfied (or waived in writing by the Holder) onsuch Installment Date and that the Holder Pro Rata Amount of the InstallmentVolume Limitation is not exceeded.  Ifthe Equity Conditions are not satisfied (or waived in writing by the Holder) onsuch Installment Date or the Holder Pro Rata Amount of the Installment VolumeLimitation is exceeded, then at the option of the Holder designated in writingto the Company, the Holder may require the Company to do any one or more of thefollowing: (i) the Company shall redeem all or any part designated by theHolder of the unconverted Company Conversion Amount (such designated amount isreferred to as the “**First Redemption Amount**”)and the Company shall pay to the Holder within three (3) days of suchInstallment Date, by wire transfer of immediately available funds, an amount incash equal to 120% of such First Redemption Amount, and/or (ii) the CompanyConversion shall be null and void with respect to all or any part designated bythe Holder of the unconverted Company Conversion Amount and the Holder shall beentitled to all the rights of a holder of this Note with respect to such amountof the Company Conversion Amount; provided, however, that the Conversion Pricefor such unconverted Company Conversion Amount shall thereafter be adjusted toequal the lesser of (A) the Company Conversion Price as in effect on the dateon which the Holder voided the Company Conversion and (B) the CompanyConversion Price as in effect on the date on which the Holder delivers aConversion Notice relating thereto.  Ifthe Company fails to redeem any First Redemption Amount by the third (3rd) day following the applicableInstallment Date by payment of such amount on the applicable Installment Date,then the Holder shall have the rights set forth in Section 13(a) as if theCompany failed to pay the applicable Company Redemption Price and all otherrights under this Note (including, without limitation, such failure constitutingan Event of Default described in Section 4(a)(xi)).  Notwithstanding anything to the contrary inthis Section 8(b), but subject to 3(d), until the Company delivers Common Stockrepresenting the Company Conversion Amount to the Holder, the Company ConversionAmount may be converted by the Holder into Common Stock pursuant to Section3.  In the event that the Holder electsto convert the Company Conversion Amount prior to the applicable InstallmentDate as set forth in the immediately preceding sentence, the Company ConversionAmount so converted shall be deducted from the Installment Amounts relating tothe applicable Installment Dates as set forth in the applicable ConversionNotice.

## (c)           Mechanics of CompanyRedemption.  If the Company elects aCompany Redemption in accordance with Section 8(a), then the Company RedemptionAmount, if any, which is to be paid to the Holder on the applicable InstallmentDate shall be redeemed by the Company on such Installment Date, and the Companyshall pay to the Holder on such Installment Date, by wire transfer ofimmediately available funds, in an amount in cash (the “**CompanyInstallment Redemption Price**”) equal to 100% of the CompanyRedemption Amount.  If the Company failsto redeem the Company Redemption Amount on the applicable Installment Date bypayment of the Company Installment Redemption Price on such date, then at theoption of the Holder designated in writing to the Company (any suchdesignation, “**Conversion Notice**” for purposes ofthis Note), the Holder may require the Company to convert

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## all or anypart of the Company Redemption Amount at the Company Conversion Price.  Conversions required by this Section 8(c)shall be made in accordance with the provisions of Section 3(c).  Notwithstanding anything to the contrary inthis Section 8(c), but subject to Section 3(d), until the Company InstallmentRedemption Price (together with any interest thereon) is paid in full, theCompany Redemption Amount (together with any interest thereon) may beconverted, in whole or in part, by the Holder into Common Stock pursuant toSection 3.  In the event the Holderelects to convert all or any portion of the Company Redemption Amount prior tothe applicable Installment Date as set forth in the immediately preceding sentence,the Company Redemption Amount so converted shall be deducted from theInstallment Amounts relating to the applicable Installment Dates as set forthin the applicable Conversion Notice.

## (d)           Deferred InstallmentAmount.  Notwithstanding anyprovision of this Section 8 to the contrary, the Holder may, at its option andin its sole discretion, deliver a written notice to the Company at least two(2) days prior to any Installment Notice Due Date electing to have the paymentof all or any portion of an Installment Amount payable on the next InstallmentDate deferred to the Maturity Date.  Anyamount deferred to the Maturity Date pursuant to this Section 8(d) shallcontinue to accrue Interest through the Maturity Date and shall be paid on suchdate in cash.

## (e)           Cancellation ofInstallment Amount.  Notwithstandingany provision of this Section 8 to the contrary, in the event that the WeightedAverage Price of the Common Stock equals or exceeds 145% of the applicableConversion Price for each of the five (5) consecutive Trading Days immediatelypreceding the Installment Notice Due Date, then the Installment Amount payableon such Installment Date shall be deferred to the Maturity Date.  Any amount deferred to the Maturity Datepursuant to this Section 8(e) shall continue to accrue Interest through the MaturityDate and shall be paid on such date in cash.

# (9)   COMPANY’SRIGHT OF MANDATORY CONVERSION.

## (a)           Mandatory Conversion.  Subject to Section 3(d), if at any timefrom and after the Effective Date (as defined in the Registration RightsAgreement) (the “**Mandatory Conversion Eligibility Date**”), (i) theClosing Sale Price of the Common Stock for any twenty (20) Trading Days(which need not be consecutive) out of any thirty (30) consecutive Trading Dayperiodfollowing the applicable Mandatory Conversion Eligibility Date (the “**MandatoryConversion Measuring Period**”) equals or exceeds either (A) 150% (the “**FirstConversion Threshold**”) or (B) 175% (the “**Second Conversion Threshold**”) of theConversion Price on the Closing Date (subject to appropriate adjustments forstock splits, stock dividends, stock combinations and other similartransactions after the Subscription Date) and (ii) there is not then an EquityConditions Failure, the Company shall have the right to require the Holder toconvert (1) if the First Conversion Threshold has been met, up to theFirst Conversion Threshold Conversion Amount or (2) if the Second ConversionThreshold has been met, all, but not less than all, of the Conversion Amountthen remaining under this Note, in each case****asdesignated in the Mandatory Conversion Notice (as defined below) into fullypaid, validly issued and nonassessable shares of Common Stock in accordancewith Section 3(c) hereof at the Conversion Rate as of the MandatoryConversion Date (as defined below) (a “**MandatoryConversion**”).  The Company mayexercise its right to require conversion under this Section 9(a) by deliveringwithin not more than three (3) Trading Days following the end of such MandatoryConversion

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## MeasuringPeriod a written notice thereof by facsimile and overnight courier to all, butnot less than all, of the holders of Notes and the Transfer Agent (the **“Mandatory Conversion Notice”** and the dateall of the holders received such notice by facsimile is referred to as the “**Mandatory Conversion Notice Date**”).  The Mandatory Conversion Notice shall beirrevocable.  The Mandatory ConversionNotice shall state (w) the Trading Day selected for the Mandatory Conversion inaccordance with Section 9(a), which Trading Day shall be no later than five (5)Business Days following the Mandatory Conversion Notice Date (the “**Mandatory Conversion Date**”), (v) the aggregate ConversionAmount, including any applicable First Conversion Threshold Conversion Amount,of the Notes subject to mandatory conversion from the Holder and all of theholders of the Notes pursuant to this Section 9 (and analogous provisions underthe Other Notes), (w) the number of shares of Common Stock to be issued to suchHolder on the Mandatory Conversion Date, (x) if the Mandatory Conversion is consummatedprior to the third (3rd)anniversary of the Issuance Date, that the Series B Warrants (as defined in theSecurities Purchase Agreement) issued to the Holder shall become exercisable onthe Mandatory Conversion Date, (y) the Make-Whole Amount, if any, required tobe paid on the Mandatory Conversion and whether such Make-Whole Amount shallnot be paid in shares of Common Stock but rather in cash and (z) certify thatthere is not then an Equity Conditions Failure; provided, however, that the Company may not effect a MandatoryConversion under this Section in excess of the Holder Pro Rata Amount of theapplicable Mandatory Conversion Volume Limitation.  Notwithstanding the foregoing, the Companymay effect only one (1) Mandatory Conversion with respect to the FirstConversion Threshold during any forty (40) consecutive Trading Days.  Any shares of Common Stock delivered inconnection with a Mandatory Conversion hereunder shall be accompanied by (I)any applicable Make-Whole Amount and (II) any accrued and unpaid Interest withrespect to such Conversion Amount subject to such Mandatory Conversion andaccrued and unpaid Late Charges with respect to such Conversion Amount andInterest.

## (b)           Pro Rata ConversionRequirement.  If the Company electsto cause a conversion of any Conversion Amount of this Note pursuant to Section9(a), then it must simultaneously take the same action in the same proportionwith respect to the Other Notes.  If theCompany elects a Mandatory Conversion of this Note pursuant to Section 9(a) (orsimilar provisions under the Other Notes) with respect to less than all of theConversion Amounts of the Notes then outstanding, then the Company shallrequire conversion of a Conversion Amount from each of the holders of the Notesequal to the product of (I) the aggregate Conversion Amount of Notes which theCompany has elected to cause to be converted pursuant to Section 9(a),multiplied by (II) the fraction, the numerator of which is the sum of theaggregate Original Principal Amount of the Notes purchased by such holder ofoutstanding Notes and the denominator of which is the sum of the aggregateOriginal Principal Amount of the Notes purchased by all holders holdingoutstanding Notes (such fraction with respect to each holder is referred to as its“**Conversion****AllocationPercentage**,” and such amount with respect to each holder is referredto as its “**Pro Rata Conversion Amount**”);provided, however, that in the event that any holder’s Pro Rata ConversionAmount exceeds the outstanding Principal amount of such holder’s Note, thensuch excess Pro Rata Conversion Amount shall be allocated amongst the remainingholders of Notes in accordance with the foregoing formula.  In the event that the initial holder of anyNotes shall sell or otherwise transfer any of such holder’s Notes, thetransferee shall be allocated a pro rata portion of such holder’s ConversionAllocation Percentage and the Pro Rata Conversion Amount.

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# (10)         HOLDER’SRIGHT OF OPTIONAL REDEMPTION.  On thethird (3rd)anniversary of the Issuance Date (the “**Optional Redemption Date**”), the Holder shall have the right,in its sole discretion, to require that the Company redeem (each a “**Holder Optional Redemption**”) up to all ofthe Principal amount of the Note (excluding any Principal amount the payment ofwhich has been deferred pursuant to Section 8(d)) plus accrued and unpaidInterest with respect to such Principal and accrued and unpaid Late Chargeswith respect to such Principal and Interest then outstanding (the “**Optional Redemption Amount**”) by delivering written noticethereof (a “**Holder Optional Redemption Notice**”and, collectively with the Event of Default Redemption Notice and the Change ofControl Redemption Notice, the “**RedemptionNotices**” and each a “**RedemptionNotice**”) to the Company no later than three (3) Business Days priorto the Optional Redemption Date.  TheHolder Optional Redemption Notice shall indicate the amount of the applicableOptional Redemption Amount the Holder is electing to have redeemed on suchOptional Redemption Date (the “**HolderOptional Redemption Amount**”). The portion of this Note subject to redemption pursuant to this Section10 shall be redeemed by the Company in cash on the applicable OptionalRedemption Date at a price equal to the Holder Optional Redemption Amount beingredeemed (the “**Holder Optional RedemptionPrice**” and, collectively with the Event of Default Redemption Price,the Change of Control Redemption Price and the Company Installment RedemptionPrice, the “**Redemption Prices**”and, each a “**Redemption****Price**”).

# (11)         NONCIRCUMVENTION.  The Company hereby covenants and agrees thatthe Company will not, by amendment of its Certificate of Incorporation, Bylawsor through any reorganization, transfer of assets, consolidation, merger,scheme of arrangement, dissolution, issue or sale of securities, or any othervoluntary action, avoid or seek to avoid the observance or performance of anyof the terms of this Note, and will at all times in good faith carry out all ofthe provisions of this Note and take all action as may be required to protectthe rights of the Holder of this Note.

# (12)         RESERVATIONOF AUTHORIZED SHARES.

## (a)           Reservation.  The Company shall initially reserve out ofits authorized and unissued Common Stock a number of shares of Common Stock foreach of the Notes equal to 130% of the Conversion Rate with respect to theConversion Amount of each such Note as of the Issuance****Date.  So long as any of the Notes are outstanding,the Company shall take all action necessary to reserve and keep available outof its authorized and unissued Common Stock, solely for the purpose ofeffecting the conversion of the Notes, 130% of the number of shares of CommonStock as shall from time to time be necessary to effect the conversion of allof the Notes then outstanding; provided that at no time shall the number ofshares of Common Stock so reserved be less than the number of shares requiredto be reserved by the previous sentence (without regard to any limitations onconversions) (the “**Required Reserve Amount**”). The initial number of shares of Common Stock reserved for conversions ofthe Notes and each increase in the number of shares so reserved shall beallocated pro rata among the holders of the Notes based on the principal amountof the Notes held by each holder at the Closing (as defined in the SecuritiesPurchase Agreement) or increase in the number of reserved shares, as the casemay be (the “**Authorized Share Allocation**”). In the event that a holder shall sell or otherwise transfer any of suchholder’s Notes, each transferee shall be allocated a pro rata portion of suchholder’s Authorized Share Allocation. Any shares of

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## Common Stockreserved and allocated to any Person which ceases to hold any Notes shall beallocated to the remaining holders of Notes, pro rata based on the principalamount of the Notes then held by such holders.

## (b)           InsufficientAuthorized Shares.  If at any timewhile any of the Notes remain outstanding the Company does not have asufficient number of authorized and unreserved shares of Common Stock tosatisfy its obligation to reserve for issuance upon conversion of the Notes atleast a number of shares of Common Stock equal to the Required Reserve Amount(an “**Authorized Share Failure**”), then the Company shallimmediately take all action necessary to increase the Company’s authorizedshares of Common Stock to an amount sufficient to allow the Company to reservethe Required Reserve Amount for the Notes then outstanding.  Without limiting the generality of theforegoing sentence, as soon as practicable after the date of the occurrence ofan Authorized Share Failure, but in no event later than ninety (90) days afterthe occurrence of such Authorized Share Failure, the Company shall hold ameeting of its stockholders for the approval of an increase in (the “**Authorized Share Failure Deadline**”), thenumber of authorized shares of Common Stock. In connection with such meeting, the Company shall provide eachstockholder with a proxy statement and shall use its best efforts to solicitits stockholders’ approval of such increase in authorized shares of CommonStock and to cause its board of directors to recommend to the stockholders thatthey approve such proposal.

# (13)         HOLDER’SREDEMPTIONS.

## (a)           Mechanics.  The Company shall deliver the applicableEvent of Default Redemption Price to the Holder within five (5) Business Daysafter the Company’s receipt of the Holder’s Event of Default RedemptionNotice.  If the Holder has submitted aChange of Control Redemption Notice in accordance with Section 5(b), the Companyshall deliver the applicable Change of Control Redemption Price to the Holderconcurrently with the consummation of such Change of Control if such notice isreceived prior to the consummation of such Change of Control and within five(5) Business Days after the Company’s receipt of such notice otherwise.  TheCompany shall deliver the applicable Company Installment Redemption Price tothe Holder on the applicable Installment Date and the applicable HolderOptional Redemption Price on the applicable Optional Redemption Date.  In the event of a redemption of lessthan all of the Conversion Amount of this Note, the Company shall promptlycause to be issued and delivered to the Holder a new Note (in accordance withSection 19(d)) representing the outstanding Principal which has not beenredeemed.  In the event that the Companydoes not pay the applicable Redemption Price to the Holder within the timeperiod required, at any time thereafter and until the Company pays such unpaidRedemption Price in full, the Holder shall have the option, in lieu ofredemption, to require the Company to promptly return to the Holder all or anyportion of this Note representing the Conversion Amount that was submitted forredemption and for which the applicable Redemption Price (together with anyLate Charges thereon) has not been paid. Upon the Company’s receipt of such notice, (x) the applicable RedemptionNotice shall be null and void with respect to such Conversion Amount, (y) theCompany shall immediately return this Note, or issue a new Note (in accordancewith Section 19(d)) to the Holder representing the sum of such ConversionAmount to be redeemed together with accrued and unpaid Interest with respect tosuch Conversion Amount and accrued and unpaid Late Charges with respect to suchConversion Amount and Interest and (z) the

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## ConversionPrice of this Note or such new Notes shall be adjusted to the lesser of (A) theConversion Price as in effect on the date on which the applicable RedemptionNotice is voided and (B) the lowest Closing Bid Price of the Common Stockduring the period beginning on and including the date on which the applicableRedemption Notice is delivered to the Company and ending on and including thedate on which the applicable Redemption Notice is voided.  The Holder’s delivery of a notice voiding aRedemption Notice and exercise of its rights following such notice shall notaffect the Company’s obligations to make any payments of Late Charges whichhave accrued prior to the date of such notice with respect to the ConversionAmount subject to such notice.

## (b)           Redemption by OtherHolders.  Upon the Company’s receiptof notice from any of the holders of the Other Notes for redemption orrepayment as a result of an event or occurrence substantially similar to theevents or occurrences described in Section 4(b), Section 5(b) or Section 10(each, an “**Other Redemption Notice**”), the Company shall immediately,but no later than one (1) Business Day of its receipt thereof, forward to theHolder by facsimile a copy of such notice. If the Company receives a Redemption Notice and one or more OtherRedemption Notices, during the seven (7) Business Day period beginning on andincluding the date which is three (3) Business Days prior to the Company’sreceipt of the Holder’s Redemption Notice and ending on and including the datewhich is three (3) Business Days after the Company’s receipt of the Holder’sRedemption Notice and the Company is unable to redeem all principal, interestand other amounts designated in such Redemption Notice and such OtherRedemption Notices received during such seven (7) Business Day period, then theCompany shall redeem a pro rata amount from each holder of the Notes (includingthe Holder) based on the principal amount of the Notes submitted for redemptionpursuant to such Redemption Notice and such Other Redemption Notices receivedby the Company during such seven Business Day period.

# (14)         VOTINGRIGHTS.  The Holder shall have novoting rights as the holder of this Note, except as required by law, including,but not limited to, the General Corporation Law of the State of Delaware, andas expressly provided in this Note.

# (15)         COVENANTS.

## (a)           Rank.      All payments due under thisNote (a) shall rank *pari passu* withall Other Notes and (b) shall be senior to all other Indebtedness of theCompany and its Subsidiaries other than Permitted Indebtedness of the typedescribed in clause (iii) of the definition thereof.

## (b)           Incurrence ofIndebtedness.  So long as this Note is outstanding, theCompany shall not, and the Company shall not permit any of its Subsidiaries to,directly or indirectly, incur or guarantee, assume or suffer to exist anyIndebtedness, other than (i) the Indebtedness evidenced by this Note and theOther Notes and (ii) other Permitted Indebtedness.

## (c)           Existence of Liens.  Solong as this Note is outstanding, the Company shall not, and the Companyshall not permit any of its Subsidiaries to, directly or indirectly, allow orsuffer to exist any mortgage, lien,pledge, charge, security interest or other

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## encumbrance upon or in anyproperty or assets (including accounts and contract rights) owned by theCompany or any of its Subsidiaries (collectively, “**Liens**”) other than Permitted Liens.

## (d)           Restricted Payments.  TheCompany shall not, and the Company shall not permit any of its Subsidiaries to,directly or indirectly, redeem, defease, repurchase, repay or make any paymentsin respect of, by the payment of cash or cash equivalents (in whole or in part,whether by way of open market purchases, tender offers, private transactions orotherwise), all or any portion of any Permitted Indebtedness, whether by way ofpayment in respect of principal of (or premium, if any) or interest on, suchIndebtedness if at the time such payment is due or is otherwise made or, aftergiving effect to such payment, (i) an event constituting an Event of Defaulthas occurred and is continuing or (ii) an event that with the passage of timeand without being cured would constitute an Event of Default has occurred andis continuing.

## (e)           Restriction onRedemption and Cash Dividends.  Untilall of the Notes have been converted, redeemed or otherwise satisfied inaccordance with their terms, the Company shall not, directly or indirectly,redeem, repurchase or declare or pay any cash dividend or distribution on itscapital stock without the prior express written consent of the RequiredHolders.

## (f)            Financial Covenants.

### (i)            EBITDATest.  From and after December 31,2007 and so long as this Noteis outstanding, the Company shall maintain EBITDA which equals to or exceedsthe applicable EBITDA Threshold (the “**EBITDA Test**”).

### (ii)           NetCash Balance Test.  If the EBITDATest is not met for any Fiscal Quarter, the Company shall maintain a Net CashBalance in excess of the applicable Reserved Amount (the “**Net CashBalance Test**”) until such time as the Company satisfies such EBITDATest for any Fiscal Quarter thereafter; provided, however, that if at any timethe Company reports an LTM Consolidated EBITDA equal to or in excess of $60.0million or EBITDA equal to or in excess of $25.0 million for any FiscalQuarter, the Company shall not be required to satisfy the EBITDA Test or theNet Cash Balance Test at any time thereafter. If the Company fails (a “**Failure Date**”)to satisfy the Net Cash Balance Test at any time when such test is required,the Company promptly shall provide to the Holder a certification, executed onbehalf of the Company by the Chief Financial Officer of the Company, as to theamount of the Net Cash Balance as of the Failure Date, and publicly disclose(on a Current Report on Form 8-K or otherwise) such material non-publicinformation (the date of such certification and public announcement, the “**Disclosure Date**”).  On the Disclosure Date, the Company shallalso obtain the Letter of Credit (as defined in the Securities PurchaseAgreement) pursuant to and in accordance with Section 4(q) of the SecuritiesPurchase Agreement from a financial institution satisfactory to the RequiredHolders in the applicable Letter of Credit Amount for the benefit, pro rata byprincipal amount outstanding, of the holders of Notes in the event of anydefault by the Company under any of the Transaction Documents.

### (iii)          OperatingResults Announcement.  The Companyshall announce its operating results (the “**OperatingResults**”) from which compliance with the

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### EBITDA Testand Net Cash Balance Test can be determined for each Fiscal Quarter no laterthan the forty-fifth (45th) day after the end of each FiscalQuarter or, with respect to the last Fiscal Quarter, the ninetieth (90th) day after such quarter (the “**Announcement Date**”) and, in the event theCompany shall have satisfied the EBITDA Test and/or the Net Cash Balance Testat all times during such Fiscal Quarter, as applicable, such announcement shallinclude a statement to the effect that the Company satisfied the EBITDA Testand/or the Net Cash Balance Test, as applicable, at all times throughout suchFiscal Quarter; provided, however, that in the event the Company is delayed inannouncing its Operating Results for any Fiscal Quarter, by the AnnouncementDate the Company shall, in lieu of the foregoing, (A) make a statement to theeffect that it has complied with all of its covenants under the Notes,including, without limitation, the EBITDA Test and/or the Net Cash BalanceTest, as applicable, and (B) provide to the Holders a certification, inaccordance with terms of  the nextsentence, certifying the same.  On theAnnouncement Date, the Company shall also provide to the Holders acertification, executed on behalf of the Company by the Chief Financial Officerof the Company, certifying that the Company satisfied the EBITDA Test and/orthe Net Cash Balance Test, as applicable, at all times throughout such FiscalQuarter.

# (16)         PARTICIPATION.  The Holder, as the holder of this Note, shallbe entitled to receive such dividends paid and distributions made to theholders of Common Stock to the same extent as if the Holder had converted thisNote into Common Stock (without regard to any limitations on conversion hereinor elsewhere) and had held such shares of Common Stock on the record date forsuch dividends and distributions. Payments under the preceding sentence shall be made concurrently withthe dividend or distribution to the holders of Common Stock.

# (17)         VOTETO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called for such purpose or thewritten consent without a meeting of the Required Holders shall be required forany change or amendment to this Note or the Other Notes.

# (18)         TRANSFER.  This Note and any shares of Common Stockissued upon conversion of this Note may be offered, sold, assigned ortransferred by the Holder without the consent of the Company, subject only tothe provisions of Section 2(f) of the Securities Purchase Agreement.

# (19)         REISSUANCEOF THIS NOTE.

## (a)           Transfer.  If this Note is to be transferred, the Holdershall surrender this Note to the Company, whereupon the Company will, subjectto the satisfaction of the transfer provisions of the Securities PurchaseAgreement, forthwith issue and deliver upon the order of the Holder a new Note(in accordance with Section 19(d)), registered in the name of the registeredtransferee or assignee, representing the outstanding Principal beingtransferred by the Holder and, if less then the entire outstanding Principal isbeing transferred, a new Note (in accordance with Section 19(d)) to the Holderrepresenting the outstanding Principal not being transferred.  The Holder and any assignee, by acceptance ofthis Note, acknowledge and agree that, by reason of the provisions of Section3(c)(iv) following conversion or redemption of any

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## portion ofthis Note, the outstanding Principal represented by this Note may be less thanthe Principal stated on the face of this Note.

## (b)           Lost, Stolen orMutilated Note.  Upon receipt by theCompany of evidence reasonably satisfactory to the Company of the loss, theft,destruction or mutilation of this Note, and, in the case of loss, theft ordestruction, of any indemnification undertaking by the Holder to the Company incustomary form and, in the case of mutilation, upon surrender and cancellationof this Note, the Company shall execute and deliver to the Holder a new Note(in accordance with Section 19(d)) representing the outstanding Principal.

## (c)           Note Exchangeablefor Different Denominations.  ThisNote is exchangeable, upon the surrender hereof by the Holder at the principaloffice of the Company, for a new Note or Notes (in accordance with Section19(d) and in principal amounts of at least $100,000) representing in theaggregate the outstanding Principal of this Note, and each such new Note willrepresent such portion of such outstanding Principal as is designated by theHolder at the time of such surrender.

## (d)           Issuance of NewNotes.  Whenever the Company isrequired to issue a new Note pursuant to the terms of this Note, such new Note(i) shall be of like tenor with this Note, (ii) shall represent, as indicatedon the face of such new Note, the Principal remaining outstanding (or in the caseof a new Note being issued pursuant to Section 19(a) or Section 19(c), thePrincipal designated by the Holder which, when added to the principalrepresented by the other new Notes issued in connection with such issuance,does not exceed the Principal remaining outstanding under this Note immediatelyprior to such issuance of new Notes), (iii) shall have an issuance date, asindicated on the face of such new Note, which is the same as the Issuance Dateof this Note, (iv) shall have the same rights and conditions as this Note, and(v) shall represent accrued and unpaid Interest and Late Charges on thePrincipal and Interest of this Note, from the Issuance Date.

# (20)         REMEDIES,CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this Note shall becumulative and in addition to all other remedies available under this Note andany of the other Transaction Documents at law or in equity (including a decreeof specific performance and/or other injunctive relief), and nothing hereinshall limit the Holder’s right to pursue actual and consequential damages forany failure by the Company to comply with the terms of this Note.  Amounts set forth or provided for herein withrespect to payments, conversion and the like (and the computation thereof)shall be the amounts to be received by the Holder and shall not, except asexpressly provided herein, be subject to any other obligation of the Company(or the performance thereof).  The Companyacknowledges that a breach by it of its obligations hereunder will causeirreparable harm to the Holder and that the remedy at law for any such breachmay be inadequate.  The Company thereforeagrees that, in the event of any such breach or threatened breach, the Holdershall be entitled, in addition to all other available remedies, to aninjunction restraining any breach, without the necessity of showing economicloss and without any bond or other security being required.

# (21)         PAYMENTOF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection orenforcement or is

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# collected or enforced through any legal proceeding orthe Holder otherwise takes action to collect amounts due under this Note or toenforce the provisions of this Note or (b) there occurs any bankruptcy,reorganization, receivership of the Company or other proceedings affectingCompany creditors’ rights and involving a claim under this Note, then theCompany shall pay the costs incurred by the Holder for such collection,enforcement or action or in connection with such bankruptcy, reorganization,receivership or other proceeding, including, but not limited to, attorneys’fees and disbursements.

# (22)         CONSTRUCTION;HEADINGS.  This Note shall be deemedto be jointly drafted by the Company and all the Purchasers and shall not beconstrued against any person as the drafter hereof.  The headings of this Note are for convenienceof reference and shall not form part of, or affect the interpretation of, thisNote.

# (23)         FAILUREOR INDULGENCE NOT WAIVER.  No failureor delay on the part of the Holder in the exercise of any power, right orprivilege hereunder shall operate as a waiver thereof, nor shall any single orpartial exercise of any such power, right or privilege preclude other or furtherexercise thereof or of any other right, power or privilege.

# (24)         DISPUTERESOLUTION.  In the case of a disputeas to the determination of the Closing Bid Price, the Closing Sale Price or theWeighted Average Price or the arithmetic calculation of the Conversion Rate orany Redemption Price, the Company shall submit the disputed determinations orarithmetic calculations via facsimile within two (2) Business Days of receipt,or deemed receipt, of the Conversion Notice or Redemption Notice or other eventgiving rise to such dispute, as the case may be, to the Holder.  If the Holder and the Company are unable toagree upon such determination or calculation within two (2) Business Days ofsuch disputed determination or arithmetic calculation being submitted to theHolder, then the Company shall, within two (2) Business Days submit viafacsimile (a) the disputed determination of the Closing Bid Price, the ClosingSale Price or the Weighted Average Price to an independent, reputableinvestment bank selected by the Company and approved by the Holder or (b) thedisputed arithmetic calculation of the Conversion Rate or any Redemption Priceto the Company’s independent, outside accountant.  The Company, at the Company’s expense, shallcause the investment bank or the accountant, as the case may be, to perform thedeterminations or calculations and notify the Company and the Holder of theresults no later than five (5) Business Days from the time it receives thedisputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, asthe case may be, shall be binding upon all parties absent demonstrable error.

# (25)         NOTICES;PAYMENTS.

## (a)           Notices.  Whenever notice is required to be given underthis Note, unless otherwise provided herein, such notice shall be given inaccordance with Section 10(f) of the Securities Purchase Agreement.  The Company shall provide the Holder withprompt written notice of all actions taken pursuant to this Note, including inreasonable detail a description of such action and the reason therefore.  Without limiting the generality of theforegoing, the Company will give written notice to the Holder (i) immediatelyupon any adjustment of the Conversion Price, setting forth in reasonabledetail, and certifying, the calculation of such adjustment and (ii) at leasttwenty (20) days prior to the date on which the Company closes its

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## books or takesa record (A) with respect to any dividend or distribution upon the CommonStock, (B) with respect to any pro rata subscription offer to holders of CommonStock or (C) for determining rights to vote with respect to any FundamentalTransaction, dissolution or liquidation, provided in each case that suchinformation shall be made known to the public prior to or in conjunction withsuch notice being provided to the Holder.

## (b)           Payments.  Whenever any payment of cash is to be made bythe Company to any Person pursuant to this Note, such payment shall be made inlawful money of the United States of America by a check drawn on the account ofthe Company and sent via overnight courier service to such Person at suchaddress as previously provided to the Company in writing (which address, in thecase of each of the Purchasers, shall initially be as set forth on the Scheduleof Buyers attached to the Securities Purchase Agreement); provided that theHolder may elect to receive a payment of cash via wire transfer of immediatelyavailable funds by providing the Company with prior written notice setting outsuch request and the Holder’s wire transfer instructions.  Whenever any amount expressed to be due bythe terms of this Note is due on any day which is not a Business Day, the sameshall instead be due on the next succeeding day which is a Business Day and, inthe case of any Interest Date which is not the date on which this Note is paidin full, the extension of the due date thereof shall not be taken into accountfor purposes of determining the amount of Interest due on such date.  Any amount of Principal or other amounts dueunder the Transaction Documents, other than Interest, which is not paid whendue shall result in a late charge being incurred and payable by the Company inan amount equal to interest on such amount at the rate of eighteen percent(18%) per annum from the date such amount was due until the same is paid infull (“**Late Charge**”).

# (26)         CANCELLATION.  After all Principal, accrued Interest andother amounts at any time owed on this Note have been paid in full, this Noteshall automatically be deemed canceled, shall be surrendered to the Company forcancellation and shall not be reissued.

# (27)         WAIVEROF NOTICE.  To the extent permittedby law, the Company hereby waives demand, notice, protest and all other demandsand notices in connection with the delivery, acceptance, performance, defaultor enforcement of this Note and the Securities Purchase Agreement.

# (28)         GOVERNINGLAW.  This Note shall be construedand enforced in accor­dance with, and all questions concerning theconstruction, validity, interpretation and performance of this Note shall begoverned by, the internal laws of the State of New York, without giving effectto any choice of law or conflict of law provision or rule (whether of the Stateof New York or any other jurisdictions) that would cause the application of thelaws of any jurisdictions other than the State of New York.  The Company hereby irrevocably submits to theexclusive jurisdiction of the state and federal courts sitting in The City ofNew York, Borough of Manhattan, for the adjudication of any dispute hereunderor in connection herewith or with any transaction contemplated hereby ordiscussed herein, and hereby irrevocably waives, and agrees not to assert inany suit, action or proceeding, any claim that it is not personally subject tothe jurisdiction of any such court, that such suit, action or proceeding isbrought in an inconvenient forum or that the venue of such suit, action orproceeding is improper.  Nothingcontained herein shall be deemed to limit in any way any right to serve processin any manner permitted by law.  In theevent that any provision of this Note is invalid or unenforceable under anyapplicable

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# statute or rule of law, then such provision shall bedeemed inoperative to the extent that it may conflict therewith and shall bedeemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid orunenforceable under any law shall not affect the validity or enforceability ofany other provision of this Note. Nothing contained herein shall be deemed or operate to preclude theHolder from bringing suit or taking other legal action against the Company inany other jurisdiction to collect on the Company’s obligations to the Holder,to realize on any collateral or any other security for such obligations, or toenforce a judgment or other court ruling in favor of the Holder.  **THE COMPANYHEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, AJURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITHOR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.**

# (29)         CERTAINDEFINITIONS.  For purposes of thisNote, the following terms shall have the following meanings:

## (a)           “**Approved Stock Plan**” means any employee benefit planwhich has been approved by the Board of Directors of the Company, pursuant towhich the Company’s securities may be issued to any employee, consultant,officer or director for services provided to the Company.

## (b)           “**Average Market Price**” means, for any givendate, the arithmetic average of the Weighted Average Price of the Common Stockduring the ten (10) consecutive Trading Day period ending on the third (3rd ) Trading Day immediately prior to such givendate, as appropriately adjusted for any stock split, stock dividend, stockcombination or other similar transaction that proportionately decreases orincreases the Common Stock during such period.

## (c)           “**Bloomberg**” means Bloomberg FinancialMarkets.

## (d)           “**Business Day**” means any day other than Saturday,Sunday or other day on which commercial banks in The City of New York areauthorized or required by law to remain closed.

## (e)           “**Calendar Quarter**” means each of: the periodbeginning on and including January 1 and ending on and including March 31; theperiod beginning on and including April 1 and ending on and including June 30;the period beginning on and including July 1 and ending on and includingSeptember 30; and the period beginning on and including October 1 and ending onand including December 31.

## (f)            “**Change ofControl**” means any Fundamental Transaction other than (i) anyreorganization, recapitalization or reclassification of the Common Stock orbusiness combination in which the Company is the publicly traded survivingentity in which holders of the Company’s voting power immediately prior to suchreorganization, recapitalization or reclassification or business combinationcontinue after such reorganization, recapitalization or reclassification orbusiness combination to hold publicly traded securities and, directly orindirectly, the voting power of the surviving entity or entities necessary toelect a majority of the members of the board of directors (or their equivalentif other than a corporation) of such entity

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## or entities(except where Apollo Resources International or its affiliates becomes the “beneficialowner” (as defined in Rule 13d-3 under the Exchange Act), directly orindirectly, of 70% or greater of the aggregate Voting Stock of the Company), or(ii) pursuant to a migratory merger effected solely for the purpose of changingthe jurisdiction of incorporation of the Company.

## (g)           “**Change ofControl Consideration**” means, for any Change of Control, an amount,if any, equal to the sum of the aggregate cash consideration and the aggregatecash value of any marketable securities per share of Common Stock to be paid tothe holders of the Common Stock upon consummation of such Change of Control,with any such non-cash consideration to be valued at the higher of the ClosingSale Price of such securities as of the Trading Day immediately prior to theconsummation of the Change of Control, the Closing Sale Price on the TradingDay immediately following the public announcement of such proposed Change ofControl and the Closing Sale Price of on the Trading Day immediately prior tothe public announcement of such proposed Change of Control.

## (h)           “**Change ofControl Redemption Premium**” means (i) for Change of Control Noticedelivered or required to be delivered in connection with a Change of Controlprior to the third (3rd)anniversary of the Issuance Date, 125% and (ii) for any Change of ControlNotice delivered or required to be delivered in connection with a Change ofControl following the third (3rd)anniversary of the Issuance Date, 115%; provided, however, that, in connectionwith any Change of Control in which the Change of Control Consideration equalsor exceeds $8.00 per share, then the Change of Control Redemption Premium shallequal 100%.

## (i)            “**ClosingBid Price**” and “**ClosingSale Price**” means,for any security as of any date, the last closing bid price and last closingtrade price, respectively, for such security on the Principal Market, asreported by Bloomberg, or, if the Principal Market begins to operate on anextended hours basis and does not designate the closing bid price or the closingtrade price, as the case may be, then the last bid price or last trade price,respectively, of such security prior to 4:00:00 p.m., New York Time, asreported by Bloomberg, or, if the Principal Market is not the principalsecurities exchange or trading market for such security, the last closing bidprice or last trade price, respectively, of such security on the principalsecurities exchange or trading market where such security is listed or tradedas reported by Bloomberg, or if the foregoing do not apply, the last closingbid price or last trade price, respectively, of such security in theover-the-counter market on the electronic bulletin board for such security asreported by Bloomberg, or, if no closing bid price or last trade price,respectively, is reported for such security by Bloomberg, the average of thebid prices, or the ask prices, respectively, of any market makers for suchsecurity as reported in the “pink sheets” by Pink Sheets LLC (formerly theNational Quotation Bureau, Inc.).  If theClosing Bid Price or the Closing Sale Price cannot be calculated for a securityon a particular date on any of the foregoing bases, the Closing Bid Price orthe Closing Sale Price, as the case may be, of such security on such date shallbe the fair market value as mutually determined by the Company and theHolder.  If the Company and the Holderare unable to agree upon the fair market value of such security, then suchdispute shall be resolved pursuant to Section 24.  All such determinations to be appropriatelyadjusted for any stock dividend, stock split, stock combination or othersimilar transaction during the applicable calculation period.

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## (j)            “**Closing Date**”shall have the meaning set forth in the Securities Purchase Agreement, whichdate is the date the Company initially issued Notes pursuant to the terms ofthe Securities Purchase Agreement.

## (k)           “**Common StockDeemed Outstanding**” means, at any given time, the number of sharesof Common Stock outstanding at such time, plus the number of shares of CommonStock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereofregardless of whether the Options or Convertible Securities are actuallyexercisable at such time, but excluding any Common Stock owned or held by orfor the account of the Company or issuable upon conversion or exercise, asapplicable, of the Notes and the Warrants.

## (l)            “**CompanyConversion Price**” means, thelower of (i) the applicableConversion Price and (ii) that price which shall be computed as 90% of the arithmetic average of the WeightedAverage Price of the Common Stock on each of the five (5) consecutive TradingDays immediately preceding the applicable Installment Date (each such period, a“**Company ConversionMeasuring Period**”).  All such determinations to beappropriately adjusted for any stock split, stock dividend, stock combinationor other similar transaction during such CompanyConversion Measuring Period.

## (m)          “**ConsolidatedNet Income**” means, for any applicable period, the net income (loss)of the Company and its Subsidiaries for such period, determined on aconsolidated basis and in accordance with GAAP, but excluding from thedetermination of Consolidated Net Income (without duplication) (a) anyextraordinary or non recurring gains or losses or gains or losses from Dispositions,(b) restructuring charges, (c) any tax refunds, net operating losses or othernet tax benefits, (d) effects of discontinued operations and (e) interestincome (including interest paid-in-kind).

## (n)           “**ConsolidatedNet Interest Expense**” means, for any applicable period, grossinterest expense of the Company and its Subsidiaries for such period determinedon a consolidated basis and in accordance with GAAP, less (i) the sum of (A)interest income for such period and (B) gains for such period on HedgingAgreements (to the extent not included in interest income above and to theextent not deducted in the calculation of gross interest expense), plus (ii)the sum of (A) losses for such period on Hedging Agreements (to the extent notincluded in gross interest expense) and (B) the upfront costs or fees for suchperiod associated with Hedging Agreements (to the extent not included in grossinterest expense), in each case, determined on a consolidated basis and inaccordance with GAAP.

## (o)           “**ContingentObligation**” means, as to any Person, any direct or indirectliability, contingent or otherwise, of that Person with respect to anyIndebtedness, lease, dividend or other obligation of another Person if theprimary purpose or intent of the Person incurring such liability, or theprimary effect thereof, is to provide assurance to the obligee of suchliability that such liability will be paid or discharged, or that anyagreements relating thereto will be complied with, or that the holders of suchliability will be protected (in whole or in part) against loss with respectthereto.

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## (p)           “**Convertible Securities**” means any stock orsecurities (other than Options) directly or indirectly convertible into orexercisable or exchangeable for Common Stock.

## (q)   “**EBITDA**” means, with respect to any Personand its Subsidiaries for any applicable Fiscal Quarters, the Consolidated NetIncome of such Person and its Subsidiaries as set forth in the financialstatements of the Company contained in the Form 10-QSB or Form 10-KSB of the Companyfor the applicable Fiscal Quarter, *plus*without duplication, the sum of the following amounts of the Company and itsSubsidiaries for such period to the extent deducted in determining ConsolidatedNet Income of such Persons for such period: (i) Consolidated Net Interest Expense, (ii) income tax expense, (iii)depreciation expense and (iv) amortization expense.

## (r)    “**EBITDA Threshold**” means:

### (i)            (A)$30.0 million of LTM Consolidated EBITDA reported for the Fiscal Quarter endingDecember 31, 2007 or (B) $27.5 million of LTM Consolidated EBITDA reported forthe Fiscal Quarter ending December 31, 2007 with at least $10.0 million inEBITDA reported for the Fiscal Quarter ending December 31, 2007;

### (ii)           $35.0million of LTM Consolidated EBITDA reported for the Fiscal Quarter ending March31, 2008 or $11.5 million in EBITDA reported for the Fiscal Quarter endingMarch 31, 2008;

### (iii)          $45.0million of LTM Consolidated EBITDA reported for the Fiscal Quarter ending June30, 2008 or $17.5 million in EBITDA reported for the Fiscal Quarter ending June30, 2008;

### (iv)          $50.0million of LTM Consolidated EBITDA reported for the Fiscal Quarter endingSeptember 30, 2008 or $17.5 million in EBITDA reported for the Fiscal Quarterending September 30, 2008; and

### (v)           $60.0million of LTM Consolidated EBITDA reported for the Fiscal Quarter endingDecember 31, 2008 or $25.0 million in EBITDA reported for the Fiscal Quarterending December 31, 2008.

## (s)           “**EligibleMarket**” means the Principal Market, The New York Stock Exchange,Inc., the American Stock Exchange, the Nasdaq National Market or the NasdaqCapital Market.

## (t)            “**EquityConditions**” meansthat each of the following conditions is satisfied:  (i) on each day during the period beginningthree (3) months prior to the applicable date of determination and ending onand including the applicable date of determination (the “**EquityConditions Measuring Period**”), either (x) the Registration Statementfiled pursuant to the Registration Rights Agreement shall be effective andavailable for the resale of all remaining Registrable Securities in accordancewith the terms of the Registration Rights Agreement and there shall not havebeen for the one (1) month period ending on and including the date immediatelypreceding the applicable date of determination any Grace Periods (as defined inthe

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## RegistrationRights Agreement) or (y) all shares of Common Stock issuable upon conversion ofthe Notes and exercise of the Warrants shall be eligible for sale withoutrestriction and without the need for registration under any applicable federalor state securities laws; (ii) on each day during the Equity ConditionsMeasuring Period, the Common Stock is designated for quotation on the PrincipalMarket or any other Eligible Market and shall not have been suspended fromtrading on such exchange or market (other than suspensions of not more than two(2) days and occurring prior to the applicable date of determination due tobusiness announcements by the Company) nor shall delisting or suspension bysuch exchange or market been threatened or pending either (A) in writing bysuch exchange or market or (B) by falling below the then effective minimumlisting maintenance requirements of such exchange or market; (iii) during theEquity Conditions Measuring Period, the Company shall have delivered ConversionShares upon conversion of the Notes and Warrant Shares upon exercise of theWarrants to the holders on a timely basis as set forth in Section 3(c)(ii)hereof (and analogous provisions under the Other Notes) and Section 2(a) of theWarrants; (iv) any applicable shares of Common Stock to be issued in connectionwith the event requiring determination may be issued in full without violatingSection 3(d) hereof and the rules or regulations of any applicable Eligible Market;(v) for the two (2) Calendar Quarters immediately preceding the applicable dateof determination, the Company shall not have failed to timely make any paymentswithin five (5) Business Days of when such payment is due pursuant to anyTransaction Document; (vi) during the Equity Conditions Measuring Period, thereshall not have occurred either (A) the public announcement of a pending,proposed or intended Fundamental Transaction which has not been abandoned,terminated or consummated, or (B) an Event of Default or (C) an event that withthe passage of time or giving of notice would constitute an Event of Default;(vii) the Company shall have no knowledge of any fact that would cause (x) theRegistration Statements required pursuant to the Registration Rights Agreementnot to be effective and available for the resale of all remaining RegistrableSecurities in accordance with the terms of the Registration Rights Agreement or(y) any shares of Common Stock issuable upon conversion of the Notes and sharesof Common Stock issuable upon exercise of the Warrants not to be eligible forsale without restriction pursuant to Rule 144(k) and any applicable statesecurities laws; and (viii) during the six (6) month period ending on andincluding the date immediately preceding the applicable date of determination,the Company otherwise shall have been in material compliance with and shall nothave materially breached any provision, covenant, representation or warranty ofany Transaction Document.

## (u)           “**EquityConditions Failure**” means that (i) on any day during the periodcommencing ten (10) Trading Days prior to the applicable Conversion Datethrough the applicable Share Delivery Date, (ii) on any day during the periodcommencing ten (10) Trading Days prior to the applicable Company InstallmentNotice Date through the applicable Installment Date or (ii) on any day duringthe period commencing ten (10) Trading Days prior to the applicable MandatoryConversion Notice Date through the applicable Mandatory Conversion Date, the EquityConditions have not been satisfied (or waived in writing by the Holder).

## (v)           “**Equity ValueRedemption Premium**” means (i) for any Change of Control Notice orEvent of Default Notice, as applicable, delivered or required to be deliveredin connection with a Change of Control or Event of Default, as applicable,prior to the third (3rd)anniversary of the Issuance Date, 115% and (ii) for any Change of ControlNotice or Event of Default Notice, as applicable, delivered or required to bedelivered in connection with a Change

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## of Control orEvent of Default, as applicable, following the third (3rd) anniversary of the IssuanceDate, 110%; provided, however, that, in connection with any Change of Controlin which the Change of Control Consideration equals or exceeds $8.00 per share,then the Equity Value Redemption Premium shall equal 100%.

## (w)          “**Excluded Securities**” means any Common Stock issued orissuable: (i) in connection with any Approved Stock Plan; (ii) upon conversion,adjustment or redemption of the Notes or the exercise of the Warrants; (iii)pursuant to a bona fide firm commitment underwritten public offering with anationally recognized underwriter which generates gross proceeds to the Companyin excess of $50,000,000 (other than an “at-the-market offering” as defined inRule 415(a)(4) under the 1933 Act and “equity lines”); (iv) in connection withany acquisition by the Company, whether through an acquisition of stock or amerger of any business, assets or technologies the primary purpose of which isnot to raise equity capital; (v) in connection with any other strategictransaction or alliance the primary purpose of which is not to raise equitycapital including without limitation, the issuance of no more than 10,000,000shares of Common Stock to agricultural conglomerates and (vii) upon conversionor exercise of any Options or Convertible Securities which are outstanding onthe day immediately preceding the Subscription Date, provided that theconversion or exercise price of such Options or Convertible Securities is notamended, modified or changed on or after the Subscription Date.

## (x)            “**First Conversion Threshold Conversion Amount**”means an amount equal to (x) 50% of the Conversion Amount of this Note on theIssuance Date minus (y) the aggregate Conversion Amount of this Noteconverted or redeemed pursuant to the terms of this Note.

## (y)           “**Fiscal Quarter**”****means each of the fiscalquarters adopted by the Company for financial reporting purposes thatcorrespond to the Company’s fiscal year that ends on December 31, or such otherfiscal quarter adopted by theCompany for financial reporting purposes in accordance with GAAP.

## (z)            “**FundamentalTransaction**” means that the Company shall, directly or indirectly, in one or more related transactions, (i)consolidate or merge with or into (whether or not the Company is the survivingcorporation) another Person or Persons, or (ii) sell, assign, transfer, conveyor otherwise dispose of all or substantially all of the properties or assets ofthe Company to another Person, or (iii) allow another Person to make apurchase, tender or exchange offer that is accepted by the holders of more than50% of the outstanding shares of Voting Stock (not including any shares of Voting Stock held by the Person orPersons making or party to, or associated or affiliated with the Persons makingor party to, such purchase, tender or exchange offer), or (iv) consummate astock purchase agreement or other business combination (including,without limitation, a reorganization, recapitalization, spin-off or scheme ofarrangement) with anotherPerson whereby such other Person acquires more than the 50% of theoutstanding shares of Voting Stock (notincluding any shares of Voting Stock held by the other Person or other Personsmaking or party to, or associated or affiliated with the other Persons makingor party to, such stock purchase agreement or other business combination), or (v) reorganize, recapitalizeor reclassify its Common Stock, or (vi) any “person” or “group” (asthese terms are used for purposes of Sections 13(d) and 14(d) of the ExchangeAct) (other than Apollo Resources International) is or shall become the “beneficialowner” (as defined in Rule 13d-3

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## under theExchange Act), directly or indirectly, of 50% of the aggregate Voting Stock ofthe Company, or (vii) Apollo Resources International ceases to be the “beneficialowner” (as defined in Rule 13d-3 under the Exchange Act), directly orindirectly, of at least 50% of the aggregate Voting Stock of the Company, or(viii) Apollo Resources International or its affiliates becomes the “beneficialowner” (as defined in Rule 13d-3 under the Exchange Act), directly orindirectly, of 70% or greater of the aggregate Voting Stock of the Company.

## (aa)         “**GAAP**”means United States generally accepted accounting principles, consistentlyapplied.

## (bb)         “**Holder ProRata Amount**” means a fraction (i) the numerator of which is thePrincipal amount of this Note on the Closing Date and (ii) the denominator ofwhich is the aggregate principal amount of all Notes issued to the initialpurchasers pursuant to the Securities Purchase Agreement on the Closing Date.

## (cc)         “**Indebtedness**”of any Person means, without duplication (i) all indebtedness for borrowedmoney, (ii) all obligations issued, undertaken or assumed as the deferredpurchase price of property or services, including (without limitation) “capitalleases” in accordance with GAAP (other than trade payables entered into in theordinary course of business), (iii) all reimbursement or payment obligationswith respect to letters of credit, surety bonds and other similar instruments,(iv) all obligations evidenced by notes, bonds, debentures or similarinstruments, including obligations so evidenced incurred in connection with theacquisition of property, assets or businesses, (v) all indebtedness created orarising under any conditional sale or other title retention agreement, orincurred as financing, in either case with respect to any property or assetsacquired with the proceeds of such indebtedness (even though the rights andremedies of the seller or bank under such agreement in the event of default arelimited to repossession or sale of such property), (vi) all monetaryobligations under any leasing or similar arrangement which, in connection withGAAP, consistently applied for the periods covered thereby, is classified as acapital lease, (vii) all indebtedness referred to in clauses (i) through (vi)above secured by (or for which the holder of such Indebtedness has an existingright, contingent or otherwise, to be secured by) any mortgage, lien, pledge,charge, security interest or other encumbrance upon or in any property orassets (including accounts and contract rights) owned by any Person, eventhough the Person which owns such assets or property has not assumed or becomeliable for the payment of such indebtedness, and (viii) all ContingentObligations in respect of indebtedness or obligations of others of the kindsreferred to in clauses (i) through (vii) above.

## (dd)         “**InstallmentAmount**” means with respect to any Installment Date, the lesser of(A) the product of (i) $27,777.77, *multiplied*by (ii) Holder Pro Rata Amount and (B) the Principal amount under this Note asof such Installment Date, as any such Installment Amount may be reducedpursuant to the terms of this Note, whether upon conversion, redemption orotherwise, together with, in each case the sum of any accrued and unpaidInterest with respect to such Principal amount and accrued and unpaid LateCharges, if any, with respect to such Principal amount and Interest.  In the event the Holder shall sell orotherwise transfer any portion of this Note, the transferee shall be allocateda pro rata portion of the each unpaid Installment Amount hereunder.

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## (ee)         “**InstallmentDate**” means each of the following dates: (i) March 31, 2007, (ii)June 30, 2007, (iii) September 31, 2007, (iv) December 31, 2007, (v) March 31,2008, (vi) June 30, 2008, (vii) September 31, 2008, (viii) December 31, 2008,(ix) March 31, 2009, (x) June 30, 2009, (xi) September 31, 2009, (xii) December31, 2009, (xiii) March 31, 2010, (xiv) June 30, 2010, (xv) September 31, 2010,(xvi) December 31, 2010, (xvii) March 31, 2011 and (xviii) the earlier of theMaturity Date and June 30, 2011.

## (ff)           “**InstallmentVolume Limitation**” means 15%of the aggregate dollar trading volume (as reported on Bloomberg) of the CommonStock on the Principal Market over the forty (40) consecutive Trading Dayperiod ending on the Trading Day immediately preceding the applicableInstallment Notice Date.

## (gg)         “**Interest****Rate**” means, initially eight percent(8.0%) per annum, subject to adjustment at the beginning of each CalendarQuarter beginning with the Calendar Quarter ended March 31, 2007 in the eventthat the Interest Rate Conditions are satisfied as of the applicable CalendarQuarter, then in which case the Interest Rate shall equal six percent (6.0%)per annum thereafter.

## (hh)         “**Interest Rate Conditions**” means that (i)the Equity Conditions are presently satisfied (or waived in writing by theHolder) and (ii) the Company has reported LTM Consolidated EBITDA in excess of$40,000,000.

## (ii)           “**Letter ofCredit Amount**” means, as of any date of determination, an amountequal to 30% of the aggregate Principal Amount outstanding under the Notes.

## (jj)           “**LTMConsolidated EBITDA**” means, with respect to any Person, theaggregate Consolidated Net Income of such Person and its Subsidiaries for thecurrent Fiscal Quarter and the immediately preceding three (3) Fiscal Quartersbut only if and as set forth in the financial statements of the Companycontained in the Form 10-QSB or Form 10-KSB of the Company; plus withoutduplication, the sum of the following amounts of such Person and itsSubsidiaries for such period and to the extent deducted in determiningConsolidated Net Income of such Person for such period:  (i) Consolidated Net Interest Expense, (ii)income tax expense, (iii) depreciation expense, and (iv) amortizationexpense.

## (kk)         “**Make-WholeAmount**” means, as to any Conversion Amount being converted pursuantto Section 3(c) or pursuant to Section 9, an amount equal to the differencebetween (i) an amount of Interest that, but for the applicable conversion,would have been paid to the Holder on such Conversion Amount from the IssuanceDate through the third (3rd)anniversary of the Issuance Date and (ii) the amount of Interest already paidto the Holder from the Issuance Date through the Conversion Date or MandatoryConversion Date, as applicable with respect to that Conversion Amount.

## (ll)           “**Make-WholeConversion Price**” means that price which shall be the lower of (i)the applicable Conversion Price and (ii) the price computed as 90% of thearithmetic average of the Weighted Average Price of the Common Shares duringthe five (5) consecutive Trading Day period ending on the Trading Dayimmediately preceding the

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## ConversionDate or Mandatory Conversion Notice Date, as applicable (each, a “**Make-Whole Conversion Measuring Period**”).  All such determinations to be appropriatelyadjusted for any stock split, stock dividend, stock combination or othersimilar transaction during such Make-Whole Conversion Period.

## (mm)       “**MandatoryConversion Volume Limitation**” means 25% of the aggregate dollar trading volume (as reported on Bloomberg)of the Common Stock on the Principal Market over the thirty (30) consecutiveTrading Day period prior to the applicable Mandatory Conversion Notice Date.

## (nn)         “**Net CashBalance**” means, at any date, (i) an amount equal to the aggregateamount of cash, cash equivalents (including cash collateralizing the Letter ofCredit and not including other restricted cash) and marketable securities,consisting of corporate bonds, commercial paper and medium-term notes, as shownor reflected in the notes to the Company’s consolidated balance sheet as atsuch date *minus* (ii) the unpaidprincipal balance of any Indebtedness for borrowed money (excludingIndebtedness under the Notes and accounts payable).

## (oo)         “**Options**”means any rights, warrants or options to subscribe for or purchase shares ofCommon Stock or Convertible Securities.

## (pp)         “**Parent Entity**” of a Person means an entity that, directly orindirectly, controls the applicable Person and whose common stock orequivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one suchPerson or Parent Entity, the Person or Parent Entity with the largest publicmarket capitalization as of the date of consummation of the FundamentalTransaction.

## (qq)         “**Permitted Indebtedness**” means (i) from theIssuance Date through December 31, 2007, total Indebtedness of the Company notto exceed $77.5 million in the aggregate outstanding at any one time; (ii) onand after January 1, 2008, total aggregate Indebtedness of the Company thatdoes not as of the date on which any such Indebtedness is incurred, or as ofthe end of any Fiscal Quarter, exceed 3.0x LTM Consolidated EBITDA; provided,however, that such Indebtedness permitted pursuant to clauses (i) and (ii)hereof, shall be made expressly subordinate in right of payment to theIndebtedness evidenced by this Note, as reflected in a written agreementacceptable to the Required Holders and approved by the Required Holders inwriting, and which Indebtedness does not provide at any time for (A) thepayment, prepayment, repayment, repurchase or defeasance, directly or indirectly,of any principal or premium, if any, thereon until ninety-one (91) days afterthe Maturity Date or later and (B) total interest and fees at a rate in excessof the initial Interest Rate per annum; (iii) Indebtedness of the Companyoutstanding as of the date hereof, and Indebtedness of any Subsidiary that isnon-recourse to the Company or any other Subsidiary; (iv) Indebtedness incurredin connection with the build up of a Shell terminal which Indebtedness shallnot exceed twenty percent (20.0%) of the total cost of such build up projectand which Indebtedness may only be secured by such Shell terminal beingfinanced; (v) Indebtedness represented by that certain municipal bond financingfor the Company’s facility in Bell Chase, Louisiana which Indebtedness shall benon-recourse to the Company, (vi) the Indebtedness evidenced by this Note andthe Other Notes.

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## (rr)           “**Permitted Liens**” means (i) anyLien for taxes not yet due or delinquent or being contested in good faith byappropriate proceedings for which adequate reserves have been established inaccordance with GAAP, (ii) any statutory Lien arising in the ordinary course ofbusiness by operation of law with respect to a liability that is not yet due ordelinquent, (iii) any Lien created by operation of law, such as materialmen’sliens, mechanics’ liens and other similar liens, arising in the ordinary courseof business with respect to a liability that is not yet due or delinquent orthat are being contested in good faith by appropriate proceedings, (v) Liens (A) upon or in any equipment (as defined in the SecurityAgreement) acquired or held by the Company or any of its Subsidiaries to securethe purchase price of such equipment or indebtedness incurred solely for thepurpose of financing the acquisition or lease of such equipment, or (B)existing on such equipment at the time of its acquisition, provided that theLien is confined solely to the property so acquired and improvements thereon,and the proceeds of such equipment, (v) Liens on Permitted Indebtedness of thetype described in clauses (iii) and (iv) of the definition thereof; (vi) Liensincurred in connection with the extension, renewal or refinancing of theindebtedness secured by Liens of the type described in clauses (i) and (v)above, provided that any extension, renewal or replacement Lien shall belimited to the property encumbered by the existing Lien and the principalamount of the Indebtedness being extended, renewed or refinanced does notincrease, (vii) leases or subleases and licenses and sublicenses granted toothers in the ordinary course of the Company’s business, not interfering in anymaterial respect with the business of the Company and its Subsidiaries taken asa whole, (viii) Liens in favor of customs and revenue authorities arisingas a matter of law to secure payments of custom duties in connection with theimportation of goods, and (ix) Liens arising from judgments, decrees orattachments in circumstances not constituting an Event of Default under Section4(a)(ix).

## (ss)         “**Person**” means an individual, a limitedliability company, a partnership, a joint venture, a corporation, a trust, anunincorporated organization, any other entity and a government or anydepartment or agency thereof.

## (tt)           “**Principal Market**” means the OTC BulletinBoard.

## (uu)         “**RedemptionPremium**” means (i) in the case of the Events of Default described inSection 4(a)(i) - (vi) and (ix) - (xii), 120% or (ii) in the case of the Eventsof Default described in Section 4(a)(vii) - (viii), 100%.

## (vv)         “**Registration Rights Agreement**” means that certain registrationrights agreement dated as of the Subscription Date by and among the Company andthe initial holders of the Notes relating to, among other things, theregistration of the resale of the Common Stock issuable upon conversion of theNotes and exercise of the Warrants.

## (ww)       “**RequiredHolders**” means the holders of Notes representing at least a majorityof the aggregate principal amount of the Notes then outstanding.

## (xx)          “**ReservedAmount**” means, as of any date of determination, an amount equal to35% of the aggregate Principal amount outstanding under all of the Notes.

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## (yy)         “**SEC**” means the United States Securitiesand Exchange Commission.

## (zz)          “**Securities Purchase Agreement**” means that certain securitiespurchase agreement dated as of the Subscription Date by and among the Companyand the initial holders of the Notes pursuant to which the Company issued theNotes and Warrants.

## (aaa)       “**SubscriptionDate**” means August 11, 2006.

## (bbb)      “**Successor Entity**” means the Person, which may be the Company, formed by, resulting from orsurviving any Fundamental Transaction or the Person with which such FundamentalTransaction shall have been made, provided that if such Person is not a publiclytraded entity whose common stock or equivalent equity security is quoted orlisted for trading on an Eligible Market, Successor Entity shall mean suchPerson’s Parent Entity.

## (ccc)       “**Trading Day**” means any day on which the CommonStock is traded on the Principal Market, or, if the Principal Market is not theprincipal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded;provided that “Trading Day” shall not include any day on which the Common Stockis scheduled to trade on such exchange or market for less than 4.5 hours or anyday that the Common Stock is suspended from trading during the final hour oftrading on such exchange or market (or if such exchange or market does notdesignate in advance the closing time of trading on such exchange or market,then during the hour ending at 4:00:00 p.m., New York Time).

## (ddd)      “**Voting Stock**” of a Person means capital stock of such Personof the class or classes pursuant to which the holders thereof have the generalvoting power to elect, or the general power to appoint, at least a majority ofthe board of directors, managers or trustees of such Person (irrespective ofwhether or not at the time capital stock of any other class or classes shallhave or might have voting power by reason of the happening of any contingency).

## (eee)       “**Warrants**” has the meaning ascribed to suchterm in the Securities Purchase Agreement, and shall include all warrantsissued in exchange therefor or replacement thereof.

## (fff)         “**Weighted Average Price**” means, for any security as of anydate, the dollar volume-weighted average price for such security on thePrincipal Market during the period beginning at 9:30:01 a.m., New York Time (orsuch other time as the Principal Market publicly announces is the official openof trading), and ending at 4:00:00 p.m., New York Time (or such other time asthe Principal Market publicly announces is the official close of trading) asreported by Bloomberg through its “Volume at Price” functions, or, if theforegoing does not apply, the dollar volume-weighted average price of suchsecurity in the over-the-counter market on the electronic bulletin board forsuch security during the period beginning at 9:30:01 a.m., New York Time (orsuch other time as such market publicly announces is the official open oftrading), and ending at 4:00:00 p.m., New York Time (or such other time as suchmarket publicly announces is the official close of trading) as reported byBloomberg, or, if no dollar volume-weighted average price is reported for suchsecurity by Bloomberg for such hours, the average of

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## the highestclosing bid price and the lowest closing ask price of any of the market makersfor such security as reported in the “pink sheets” by Pink Sheets LLC (formerlythe National Quotation Bureau, Inc.).  Ifthe Weighted Average Price cannot be calculated for a security on a particulardate on any of the foregoing bases, the Weighted Average Price of such securityon such date shall be the fair market value as mutually determined by the Companyand the Required Holders.  If the Companyand the Required Holders are unable to agree upon the fair market value of suchsecurity, then such dispute shall be resolved pursuant to Section 24.  All such determinations to be appropriatelyadjusted for any stock dividend, stock split, stock combination or othersimilar transaction during the applicable calculation period.

# (30)         DISCLOSURE.Upon receipt or delivery by the Company of any notice in accordance with theterms of this Note, unless the Company has in good faith determined that thematters relating to such notice do not constitute material, nonpublicinformation relating to the Company or its Subsidiaries, the Company shallwithin two (2) Business Days after any such receipt or delivery publicly disclosesuch material, nonpublic information on a Current Report on Form 8-K orotherwise.  In the event that the Companybelieves that a notice contains material, nonpublic information relating to theCompany or its Subsidiaries, the Company so shall indicate to such Holdercontemporaneously with delivery of such notice, and in the absence of any suchindication, the Holder shall be allowed to presume that all matters relating tosuch notice do not constitute material, nonpublic information relating to theCompany or its Subsidiaries.  In theevent of a breach of the foregoing covenant by the Company, any of itsSubsidiaries, or any of its or their respective officers, directors, employeesand agents, in addition to any other remedy provided herein or in theTransaction Documents, a Holder shall have the right to make a publicdisclosure, in the form of a press release, public advertisement or otherwise,of such material, nonpublic information without the prior approval by theCompany, its Subsidiaries, or any of its or their respective officers,directors, employees or agents.  NoHolder shall have any liability to the Company, its Subsidiaries, or any of itsor their respective officers, directors, employees, stockholders or agents forany such disclosure.

[Signature PageFollows]

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IN WITNESS WHEREOF, the Company has caused this Note to be dulyexecuted as of the Issuance Date set out above.
|            | **Earth Biofuels, Inc.** |
|------------|--------------------------|
| ** ** | ** **               | ** ** |
| ** ** | ** **               | ** ** |
|       | By:                      | /s/ Dennis G. McLaughlin, III |
|       |                     | Name: Dennis G. McLaughlin, III |
|       |                     | Title: Chief Executive Officer |
|            |                          |  |  |

 

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