Document:

EX-10.2

Exhibit 10.2

[FORM OF TRANSFERRED STOCK LETTER]

April 30, 2008

	 	 	 	Re: Asset Purchase Agreement by and among Grand Avenue Incorporated, Assad Iron &
Metals, Inc., Heidelberg Metals, Inc., Neville Recycling LLC, Platt Properties
LLC, and Metalico Neville, Inc.

Dear      :

We refer to that certain Asset Purchase Agreement dated as of April      , 2008 (the “Purchase
Agreement”) by and among Grand Avenue Incorporated, Assad Iron & Metals, Inc., Heidelberg Metals,
Inc., Neville Recycling LLC and Platt Properties LLC (collectively, “Seller”), and Metalico
Neville, Inc. (“Buyer”). Capitalized terms used in this letter agreement (this “Letter”) and not
otherwise defined have the meanings attributed to them in the Purchase Agreement.

Under the terms of §2.1(c) of the Purchase Agreement, Metalico, Inc., as parent of Buyer
(“Metalico”), has agreed to deliver part or all of the Transferred Shares to you as a component of
the Purchase Price.

In consideration of Seller entering into the Purchase Agreement and other good and valuable
consideration the sufficiency of which is hereby acknowledged, and in order to provide for an
orderly liquidation of the Transferred Shares via the public trading markets under the
circumstances set forth herein, you and Metalico hereby agree as follows:

1. On or before the date occurring six months after the Closing Date (the “Opening Sales
Date”), the Transferred Shares shall be deposited in an appropriate account with a licensed broker
of your choosing (“Broker”).

2. For the period of four months commencing on the Opening Sales Date (such period the
“Window”), you will direct Broker to deliver prompt notification of each sale of Transferred Shares
(each such notification a “Transaction Advice”) to both you and Metalico.

3. If any portion or lot of the Transferred Shares is sold for proceeds (net of commissions
and transaction costs) of less than the Price Per Share (a “Shortfall”), during the Window, then,
within three days of its receipt of the Transaction Advice for such sale, Metalico shall mail to
you a check in the aggregate amount of the Shortfall for such sale. You shall retain any proceeds
of a sale (net of commissions and transaction costs) in excess of the Price Per Share. Metalico
will have no obligation to make any payment pursuant to this Paragraph 3 unless and until it has
received an appropriate Transaction Advice from Broker.

4. Jointly and severally with Seller and all other Transferred Share Holders, you hereby
represent and warrant to Buyer and Metalico that all of the representations and warranties
contained in Section 3.27 of the Purchase Agreement are true and correct with respect to you as if
set forth in full in this Letter, mutatis mutandis.

5. You agree to cooperate with the reasonable requests and requirements of Broker in order to
facilitate the sales of the Transferred Shares contemplated hereunder. You will supply Metalico
with a contact at Broker for purposes of notice and any other communications.

6. All transaction, brokerage, and account expenses imposed or collected by Broker in
connection with the sale of the Transferred Shares shall be for the account of Metalico.

The rights granted to you under this Letter are and shall be personal to you and your estate
and may not be assigned or transferred to any other holder of any of the Transferred Shares.

Except as expressly set forth herein, nothing in this Letter shall modify or be deemed to
modify any of the terms or conditions of the Purchase Agreement.

Please indicate your agreement with the terms set forth above by executing this Letter in the
space provided below.

Sincerely,

METALICO, INC.

By:

Carlos E. Agüero

President

ACCEPTED AND AGREED:

Name:EX-10.3

Exhibit 10.3

[FORM OF SENIOR CONVERTIBLE NOTE]

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT (II) UNLESS SOLD OR TRANSFERRED
TO A “QUALIFIED INSTITUTIONAL BUYER” WITHIN THE MEANING OF RULE 144A UNDER THE 1933 ACT OR TO AN
“ACCREDITED INVESTOR” AS THAT TERM IS DEFINED IN RULE 501(A) OF REGULATION D UNDER SAID ACT OR
(III) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY
REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 17(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE
LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

Anything herein to the contrary notwithstanding, the exercise of any right or remedy with
respect to this note and certain of the rights of the holder hereof are subject to the provisions
of the Subordination Agreement dated as of May 1, 2008 (as amended, restated, supplemented, or
otherwise modified from time to time, the “Subordination Agreement”), by and among Wells Fargo
Foothill, Inc., as First Lien Agent, Ableco Finance LLC, as Second Lien Agent, and the Junior
Lenders (as that term is defined therein). In the event of any conflict between the terms of the
Subordination Agreement and this note, the terms of the Subordination Agreement shall govern and
control.

Metalico, Inc.

Senior Convertible Note

	 	 	 
	Issuance Date: May 1, 2008

	 	Original Principal Amount: U.S. $[?]

FOR VALUE RECEIVED, METALICO, INC., a Delaware corporation (the “Company”), hereby promises to pay
to [?] or registered assigns (the “Holder”) the amount set out above as the Original Principal
Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise,
the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration,
redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest
(“Interest”) on any outstanding Principal at a rate per annum equal to the Interest Rate (as
defined below) from the date set out above as the Issuance Date (the “Issuance Date”) until the
same becomes due and payable, whether upon an Interest Date (as defined below), the Maturity Date,
acceleration, conversion, redemption or otherwise (in each case in accordance with the terms
hereof). This Senior Convertible Note (including all Senior Convertible Notes issued in exchange,
transfer or replacement hereof, this “Note”) is one of an issue of Senior Convertible Notes issued
pursuant to the Securities Purchase Agreement on the Closing Date (collectively, the “Notes” and
such other Senior Convertible Notes, the “Other Notes”). Certain capitalized terms used herein are
defined in Section 28.

1. MATURITY. On the Maturity Date, the Company shall pay to the Holder an amount in
cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid
Late Charges, if any, on such Principal and Interest. The “Maturity Date” shall be April 30, 2028,
as may be extended at the option of the Holder (i) in the event that, and for so long as, an Event
of Default (as defined in Section 4(a)) shall have occurred and be continuing on the Maturity Date
(as may be extended pursuant to this Section 1) or any event shall have occurred and be continuing
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 Event of Default, and (ii) through the date that is ten
(10) Business Days after the consummation of a Change of Control in the event that a Change of
Control is publicly announced or a Change of Control Notice (as defined in Section 5(b)) is
delivered prior to the Maturity Date.

2. INTEREST; INTEREST RATE. a. Interest on this Note shall commence
accruing on the Issuance Date and shall be computed on the basis of a 360-day year and twelve
30-day months and shall be payable in arrears for each three-month period following the Issuance on
January 31, April 30, July 31 and October 31 of each year and on the Maturity Date (each, an
“Interest Date”) with the first Interest Date being July 31, 2008. Interest shall be payable on
each Interest Date in cash to the record holder of this Note on each January 15, April 15, July 15
and October 15 immediately preceding the applicable Interest Date and on the Maturity Date, with
respect to the Interest to be paid on such date.

b. Prior to the payment of Interest on an Interest Date, Interest on this Note shall accrue at
the Interest Rate. From and after the occurrence and during the continuance of an Event of
Default, the Interest Rate shall be increased to twelve percent (12.0%), with nine percent (9%)
payable in cash beginning with the first Interest Date following such Event of Default and three
percent (3%) paid in kind, which shall accrete as additional Principal and be payable or
convertible in accordance with the terms of this Note, including the provisions of Section 3(d).
In the event that such Event of Default is subsequently cured, the adjustment referred to in the
preceding sentence shall cease to be effective as of the date of such cure; provided that the
Interest as calculated and unpaid at such increased rate during the continuance of such Event of
Default shall continue to apply to the extent relating to the days after the occurrence of such
Event of Default through and including the date of cure of such Event of Default.

3. CONVERSION OF NOTES. This Principal of this Note shall be convertible into shares
of the Company’s common stock, par value $0.001 per share (the “Common Stock”), on the terms and
conditions set forth in this Section 3.

a. Conversion Right. Subject to the provisions of Section 3(d), at any time or times
on or after the Issuance Date, the Holder shall be entitled to convert any portion of the Principal
into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the
Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common
Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share
of Common Stock, the Holder shall be entitled, at the Holder’s option, to receive either (x) a cash
payment equal to the excess of the amount of the Principal to be converted for such fractional
share or (y) a whole share if the Holder converts an additional portion of its Principal so as to
acquire one whole share. The Company shall pay any and all transfer, stamp and similar taxes that
may be payable with respect to the issuance and delivery of Common Stock upon conversion of any
Principal.

b. Conversion Rate. The number of shares of Common Stock issuable upon conversion of
the amount of Principal to be converted pursuant to Section 3(a) shall be determined by dividing
(x) such Principal amount by (y) the Conversion Price (the “Conversion Rate”). The “Conversion
Price” means, as of any Conversion Date (as defined below) or other date of determination, $14.00,
subject to adjustment as provided herein.

c. Mechanics of Conversion.

i. Optional Conversion. To convert any or all of the Principal into shares of Common
Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by facsimile (or otherwise
deliver), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed
notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to
the Company and (B) if required by Section 3(c)(iii), surrender this Note to a common carrier for
delivery to the Company as soon as practicable on or following such date (or an indemnification
undertaking with respect to this Note in the case of its loss, theft or destruction). On or before
the first (1st) Trading Day following the date of receipt of a Conversion Notice, the
Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the
Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the second
(2nd) Trading Day following the date of receipt of a Conversion Notice (the “Share
Delivery Date”), the Company shall (x) provided that the Transfer Agent is participating in the
Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer Program, credit such
aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or
its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or
(y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer
Program, issue and deliver 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 shares of Common Stock to
which the Holder shall be entitled. If this Note is physically surrendered for conversion as
required by Section 3(c)(iii) and less than all of the Principal of this Note is being converted,
then the Company shall as soon as practicable and in no event later than three (3) Trading Days
after receipt of this Note and at its own expense, issue and deliver to the holder a new Note (in
accordance with Section 17(d)) representing the outstanding Principal not converted. The Person or
Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note
shall be treated for all purposes as the record holder or holders of such shares of Common Stock on
the Conversion Date.

ii. Company’s Failure to Timely Convert. If the Company shall fail to issue a
certificate to the Holder or credit the Holder’s balance account with DTC, as applicable, for the
number of shares of Common Stock to which the Holder is entitled upon conversion of any Principal
on or prior to the date which is three (3) Trading Days after the Conversion Date (a “Conversion
Failure”), then (A) the Company shall pay damages to the Holder for each Trading Day of such
Conversion Failure in an amount equal to 1.5% of the product of (1) the sum of the number of shares
of Common Stock not issued to the Holder on or prior to the Share Delivery Date and to which the
Holder is entitled, and (2) the Closing Sale Price of the Common Stock on the Share Delivery Date
and (B) the Holder, upon written notice to the Company, may void its Conversion Notice with respect
to, and retain or have returned, as the case may be, any portion of this Note that has not been
converted pursuant to such Conversion Notice; provided that the voiding of a Conversion
Notice shall not affect the Company’s obligations to make any payments which have accrued prior to
the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In addition to the
foregoing, if within three (3) Trading Days after the Company’s receipt of the facsimile copy of a
Conversion Notice the Company shall fail to issue and deliver a certificate to the Holder or credit
the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder
is entitled upon such holder’s conversion of any Principal so elected for conversion or on any date
of the Company’s obligation to deliver shares of Common Stock as contemplated pursuant to clause
(y) below, and if on or after such Trading Day the Holder purchases (in an open market transaction
or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock
issuable upon such conversion that the Holder anticipated receiving from the Company (a “Buy-In”),
then the Company shall, within three (3) Trading Days after the Holder’s request and in the
Holder’s discretion, either (x) pay cash 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) for the
shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation
to deliver such certificate (and to issue such Common Stock) shall terminate, or (y) promptly honor
its obligation to deliver to the Holder a certificate or certificates representing such Common
Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over
the product of (I) such number of shares of Common Stock, times (II) the Closing Bid Price on the
Conversion Date.

iii. Registration; Book-Entry. The Company shall maintain a register (the “Register”)
for the recordation of the names and addresses of the holders of each Note and the principal amount
of the Notes held by such holders (the “Registered Notes”). The entries in the Register shall be
conclusive and binding for all purposes absent manifest error. The Company and the holders of the
Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all
purposes, including, without limitation, the right to receive payments of Principal and Interest
hereunder, notwithstanding notice to the contrary. A Registered Note may be assigned or sold in
whole or in part only by registration of such assignment or sale on the Register. Upon its receipt
of a request to assign or sell all or part of any Registered Note by a Holder, the Company shall
record the information contained therein in the Register and issue one or more new Registered Notes
in the same aggregate principal amount as the principal amount of the surrendered Registered Note
to the designated assignee or transferee pursuant to Section 17. Notwithstanding anything to the
contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to the Company unless
(A) the full Principal amount represented by this Note is being converted or (B) the Holder has
provided the Company with prior written notice (which notice may be included in a Conversion
Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and
the Company shall maintain records showing the Principal, Interest and Late Charges, if any,
converted and the dates of such conversions or shall use such other method, reasonably satisfactory
to the Holder and the Company, so as not to require physical surrender of this Note upon
conversion.

iv. Pro Rata Conversion; Disputes. In the event that the Company receives a
Conversion Notice from more than one holder of Notes for the same Conversion Date and the Company
can convert some, but not all, of such portions of the Notes submitted for conversion, the Company,
subject to Section 3(d), shall convert from each holder of Notes electing to have Notes converted
on such date a pro rata amount of such holder’s portion of its Notes submitted for conversion based
on the principal amount of Notes submitted for conversion on such date by such holder relative to
the aggregate principal amount of all Notes submitted for conversion on such date;
provided, the Company shall also comply with the provisions of Section 3(a) in respect of
fractional shares that would otherwise be issued. In the event of a dispute as to the number of
shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the
Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve
such dispute in accordance with Section 22.

d. Limitations on Conversions.

i. Beneficial Ownership. The Company shall not effect any conversion of this Note,
and the Holder of this Note shall not have the right to convert any portion of this Note pursuant
to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together
with the Holder’s affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”)
of the number of shares of Common Stock outstanding immediately after giving effect to such
conversion. For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its affiliates shall include the number of shares of Common
Stock issuable upon conversion of this Note with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock which would be
issuable upon (A) conversion of the remaining, unconverted portion of this Note beneficially owned
by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company (including, without limitation, any
Other Notes) subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in
the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). For purposes of this Section 3(d)(i), in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as
reflected in (1) the Company’s most recent Form 10-K, Form 10-Q, Form 8-K or other public filing
with the SEC, as the case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or the Transfer Agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the
Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of securities of the
Company, including this Note, by the Holder or its affiliates and any Other Notes since the date as
of which such number of outstanding shares of Common Stock was reported. By written notice to the
Company, the Holder may increase or decrease the Maximum Percentage to any other percentage not in
excess of 9.99% specified in such notice; provided that (x) any such increase will not be effective
until the sixty-first (61st) day after such notice is delivered to the Company, and (y)
any such increase or decrease will apply only to the Holder and not to any holder of Other Notes.
The provisions of this paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 3(d)(i) to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended beneficial ownership limitation
herein contained or to make changes or supplements necessary or desirable to properly give effect
to such limitation.

ii. Market Regulation. Unless and until the Stockholder Approval (as defined in the
Securities Purchase Agreement) has been obtained, the Company shall not be obligated to issue any
shares of Common Stock upon conversion of this Note if the issuance of such shares of Common Stock
would exceed the aggregate number of shares of Common Stock which the Company may issue upon
conversion of the Notes without breaching the Company’s obligations under the rules or regulations
of the Principal Market (the “Exchange Cap”), except that such limitation shall not apply in the
event that the Company obtains a written opinion from outside counsel to the Company that such
approval is not required, which opinion shall be reasonably satisfactory to the Required Holders
and the Principal Market (or such other Eligible Market on which the Common Stock may then be
listed). Until such Stockholder Approval or written opinion is obtained, no purchaser of the Notes
pursuant to the Securities Purchase Agreement (the “Purchasers”) shall be issued in the aggregate,
upon conversion of Notes, shares of Common Stock in an amount greater than the product of the
Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of Notes
issued to a Purchaser pursuant to the Securities Purchase Agreement on the Closing Date and the
denominator of which is the aggregate principal amount of all Notes issued to the Purchasers
pursuant to the Securities Purchase Agreement on the Closing Date (with respect to each Purchaser,
the “Exchange Cap Allocation”). Unless and until the Stockholder Approval has been obtained, the
Holder shall not convert any portion of this Note at a Conversion Price that is less than the
Conversion Price in effect on the Issuance Date. In the event that any Purchaser shall sell or
otherwise transfer any of such Purchaser’s Notes, the transferee shall be allocated a pro rata
portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence
shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated
to such transferee. In the event that any holder of Notes shall convert all of such holder’s Notes
into a number of shares of Common Stock which, in the aggregate, is less than such holder’s
Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the
number of shares of Common Stock actually issued to such holder shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of Notes on a pro rata basis in
proportion to the aggregate principal amount of the Notes then held by each such holder. This
Exchange Cap limitation shall in no way limit the application of the Conversion Price Adjustment
provisions of Section 7 of the Notes other than in respect of the number of shares of Common Stock
which may be issued by the Company as a result thereof.

e. Additional Interest Amount.

i. Upon a Company Redemption pursuant to Section 8(b) of this Note at any time during the
period beginning on June 30, 2011 and ending on June 30, 2014, the Company shall deliver, in
addition to the Company Optional Redemption Price to be paid pursuant to the terms of Section
8(b)(i)(A), an amount in cash by wire transfer of immediately available funds equal to the
Additional Interest Amount on the applicable Company Optional Redemption Date; provided,
that the Company may elect to pay all or a portion of such Additional Interest Amount in shares of
registered and unrestricted Common Stock (“Additional Interest Shares” and any portion of the
Additional Interest Amount to be paid in cash, the “Cash Portion”) so long as (i) Stockholder
Approval has been obtained, (ii) such Common Stock shall be eligible for resale without restriction
and without the need for further registration under any applicable federal or state securities
laws, (iii) the Common Stock is at the time of issuance designated for quotation on the Principal
Market or any other Eligible Market and shall not have been suspended from trading on such exchange
or market (collectively, the “Additional Interest Shares Equity Conditions”), and (iv) there shall
not have been an Equity Conditions Failure. If any portion of the Additional Interest Amount shall
be paid in Additional Interest Shares, then the Company shall issue to the Holder, subject to
Section 3(d), a number of shares of Common Stock, equal to (x) the Additional Interest Amount less
the Cash Portion payable on the applicable Company Optional Redemption Date divided by (y) the
Optional Interest Price. Any Additional Interest Shares shall be paid in a number of fully paid
and nonassessable shares of Common Stock (rounded down to the nearest whole share, with any
remaining Additional Interest Amount paid in cash).

ii. When any Additional Interest Shares are to be paid on a Company Optional Redemption Date,
the Company shall (i) (A) provided that the Company’s transfer agent (the “Transfer Agent”) is
participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program
and such action is not prohibited by applicable law or regulation or any applicable policy of DTC,
credit such aggregate number of Additional Interest Shares to which the Holder shall be entitled to
the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent
Commission system, or (B) if the foregoing shall not apply, issue and deliver on the applicable
Company Optional Redemption Date, to the address set forth in the register maintained by the
Company for such purpose pursuant to the Securities Purchase Agreement or to such address as
specified by the Holder in writing to the Company at least two (2) Trading Days prior to the
applicable Company Optional Redemption Date, a certificate, registered in the name of the Holder or
its designee, for the number of Additional Interest Shares to which the Holder shall be entitled
and (ii) with respect to each Company Optional Redemption Date, pay to the Holder, in cash by wire
transfer of immediately available funds, the amount of any Cash Portion. Notwithstanding the
foregoing, the Company shall not be entitled to pay the Additional Interest Amount in Additional
Interest Shares and shall be required to pay such Additional Interest Amount in cash on the
applicable Company Optional Redemption Date if, unless waived in writing by the Holder, the
Additional Interest Shares Equity Conditions have not been satisfied. If an Event of Default
occurs or the Additional Interest Shares Equity Conditions are no longer satisfied during the
Measuring Period, then on the Company Optional Redemption Date, at the Holder’s option, the Holder
may require the Company to pay all or any specified portion of the Additional Interest Amount due
on the applicable Company Optional Redemption Date in cash.

f. Conversion Upon Fundamental Change. The conversion by the Holder at any time
following the earlier of (a) public announcement of a Change of Control or (b) its receipt of a
Change of Control Notice during the Change of Control Conversion/Redemption Period shall be a
“Change of Control Conversion”. In connection with a Change of Control Conversion, the Company
shall deliver, in addition to the delivery of shares of Common Stock issuable pursuant to the terms
of this Section 3, an amount in cash by wire transfer of immediately available funds equal to the
greater of (i) fifty percent (50%) of the Additional Interest Amount and (ii) the Make-Whole
Premium, with respect to any amount of Principal converted in accordance with Section 3(c);
provided, that the Company may pay all or a portion of such Additional Interest Amount or
Make-Whole Premium, as the case may be, in shares of registered and unrestricted Common Stock so
long the Additional Interest Shares Equity Conditions have been satisfied and so long as such
shares of Common Stock are convertible or exchangeable into the form of consideration paid to
holders of Common Stock in connection with such Change of Control. If any portion of the
Additional Interest Amount or Make-Whole Premium, as the case may be, shall be paid in shares of
Common Stock, then the Company shall pay to the Holder, subject to Section 3(d), a number of shares
of Common Stock equal to (x) the Additional Interest Amount or Make-Whole Premium, as the case may
be, less the Cash Portion payable on the applicable Conversion Date divided by (y) the Optional
Interest Price. Any shares of Common Stock shall be paid in a number of fully paid and
nonassessable shares of Common Stock (rounded down to the nearest whole share, with any remaining
amount to be paid in cash).

g. Concurrent Conversions. Notwithstanding the foregoing, if the provisions of both
Sections 3(e) and 3(f) could be applicable (e.g., during the time period set forth in Section
3(e)(i) above a Change of Control Notice is delivered to the Holder by the Company or the Company
publicly announces a Change of Control), the Holder shall be entitled to receive the greater of the
amounts to which it may be entitled under Sections 3(e) and 3(f).

4. RIGHTS UPON EVENT OF DEFAULT.

a. Event of Default. Each of the following events shall constitute an “Event of
Default”:

i. the suspension from trading or failure of the Common Stock to be listed on an Eligible
Market for a period of five (5) consecutive Trading Days or for more than an aggregate of ten (10)
Trading Days in any 365-day period;

ii. the Company’s (A) failure to cure a Conversion Failure by delivery of the required number
of shares of Common Stock, Additional Interest Shares or Make-Whole Amount within ten (10) Trading
Days after the applicable Conversion Date, Company Optional Redemption Date or redemption pursuant
to a Change of Control, as the case may be, or (B) notice, written or oral, to any holder of the
Notes, including by way of public announcement or through any of its agents, at any time, of its
intention not to comply with a proper request for conversion of any Notes into shares of Common
Stock that is tendered in accordance with the provisions of the Notes, other than pursuant to
Section 3(d);

iii. at any time following the tenth (10th) consecutive Business Day that the
Holder’s Authorized Share Allocation is less than the number of shares of Common Stock that the
Holder would be entitled to receive upon a conversion of the full amount of Principal of this Note
(without regard to any limitations on conversion set forth in Section 3(d) or otherwise);

iv. the Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges
or other amounts when and as due under this Note (including, without limitation, the Company’s
failure to pay any redemption amounts due hereunder) or any other Transaction Document (as defined
in the Securities Purchase Agreement) or any other agreement, document, certificate or other
instrument delivered in connection with the transactions contemplated hereby and thereby to which
the Holder is a party, except, in the case of a failure to pay Interest and/or Late Charges when
and as due, in which case only if such failure continues for a period of at least five (5) Business
Days;

v. any default under or acceleration prior to maturity of any Indebtedness of the Company or
any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) in the
principal amount of at least $10,000,000 in respect of any default (other than in respect of a
default under the Ableco Loan Agreement or the Foothill Loan Agreement, which shall not result in
an Event of Default) or at least $5,000,000 in respect of any acceleration prior to maturity other
than with respect to any Other Notes;

vi. the Company or any of its Subsidiaries, pursuant to or within the meaning of Title 11,
U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively,
“Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a receiver, trustee,
assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the
benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as
they become due;

vii. a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that
(A) is for relief against the Company or any of its material Subsidiaries in an involuntary case,
(B) appoints a Custodian of the Company or any of its material Subsidiaries or (C) orders the
liquidation of the Company or any of its material Subsidiaries;

viii. a final judgment or judgments for the payment of money aggregating in excess of
$10,000,000 are rendered against the Company 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 an indemnity from a credit worthy party shall
not be included in calculating the $10,000,000 amount set forth above so long as the Company
provides the Holder a written statement from such insurer or indemnity provider (which written
statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is
covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or
indemnity within thirty (30) days of the issuance of such judgment;

ix. other than as specifically set forth in another clause of this Section 4(a), the Company
breaches (subject to the materiality thresholds, if any, applicable in the related Transaction
Document in the provisions thereof relating to events of default, termination rights of any Buyer
or the right to any damages to be paid by the Company under such Transaction) any representation,
warranty, covenant or other term or condition of any Transaction Document, except, in the case of a
breach of a covenant or other term or condition of any material Transaction Document (including,
without limitation, the Securities Purchase Agreement, the Registration Rights Agreement and the
voting agreements, the common stock purchase warrants and the share borrow agreement of Carlos
Aguero, all of which are being executed in connection with the sale and issuance of the Notes)
which is curable, only if such breach continues for a period of at least ten (10) consecutive
Business Days;

x. any breach or failure in any respect to comply with either of Sections 8 or 13 of this
Note; or

xi. any Event of Default (as defined in the Other Notes) occurs and is continuing with respect
to any Other Notes.

b. Redemption Right. Upon the occurrence of an Event of Default with 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’s receipt of an Event of Default Notice and the Holder
becoming aware of an Event of Default, the Holder may require the Company to redeem all or any
portion of this Note by delivering written notice thereof (the “Event of Default Redemption
Notice”) to the Company, which Event of Default Redemption Notice shall indicate the amount of
Principal of this Note the Holder is electing to require the Company to redeem. Each portion of
this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by
the Company at a price (the “Event of Default Redemption Price”) equal to the greater of (i) the
product of (A) the amount of Principal to be redeemed and (B) the Redemption Premium and (ii) the
product of (A) the Conversion Rate with respect to such amount of Principal in effect at such time
as the Holder delivers an Event of Default Redemption Notice and (B) the greater of (1) the Closing
Sale Price of the Common Stock on the date immediately preceding such Event of Default, (2) the
Closing Sale Price of the Common Stock on the date immediately after such Event of Default and (3)
the Closing Sale Price of the Common Stock on the date the Holder delivers the Event of Default
Redemption Notice. Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 9. To the extent redemptions required by this Section 4(b) are deemed or
determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be voluntary prepayments. If an Event of Default occurs as a result
of the Company’s failure to timely pay the amounts payable pursuant to Section 5(b), the Event of
Default Redemption Price shall be the amount that was otherwise payable under Section 8(b) plus the
greater of (a) fifty percent (50%) of the Additional Interest Amount and (b) the Make-Whole
Premium. If an Event of Default occurs as a result of the Company’s failure to timely pay the
amounts payable pursuant to Section 8(b), the Event of Default Redemption Price shall be the amount
that was otherwise payable under Section 8(b) plus the Additional Interest Amount. If a Change of
Control transaction is publicly announced at a time when an Event of Default has occurred and is
continuing but prior to redemption pursuant to an Event of Default Redemption Notice, the Holder
may elect to receive the Change of Control Redemption Price instead of the Event of Default
Redemption Price. If a Change of Control transaction is publicly announced within thirty (30) days
following a redemption pursuant to an Event of Default Redemption Notice, the Holder shall be
entitled to an additional payment equal to the additional amount the Holder would have been
entitled to receive had the Change of Control been publicly announced pursuant to this Section
4(b). The parties hereto agree that in the event of the Company’s redemption of any portion of the
Note or other payment payable under this Section 4(b), the Holder’s damages would be uncertain and
difficult to estimate because of the parties’ inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any Redemption Premium due under this Section 4(b) is intended by the parties to be,
and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment
opportunity and not as a penalty.

5. RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

a. Assumption. The Company shall not enter into or be party to a Fundamental
Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the
Company under this Note and the other Transaction Documents in accordance with the provisions of
this Section 5(a) pursuant to written agreements in form and substance reasonably satisfactory to
the Required Holders and approved by the Required Holders prior to such Fundamental Transaction.
Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental Transaction, the provisions of
this Note referring to the “Company” shall refer instead to the Successor Entity), and may exercise
every right and power of the Company and shall assume all of the obligations of the Company under
this Note with the same effect as if such Successor Entity had been named as the Company herein.
Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this Note at any time
after the consummation of the Fundamental Transaction, in lieu of the shares of the Company’s
Common Stock (or other securities, cash, assets or other property) issuable upon the conversion or
redemption of the Notes prior to such Fundamental Transaction, such shares of the common stock (or
their equivalent) of the Successor Entity, as adjusted in accordance with the provisions of this
Note. The provisions of this Section shall apply similarly and equally to successive Fundamental
Transactions and shall be applied without regard to any limitations on the conversion or redemption
of this Note.

b. Redemption Right. No sooner than sixty (60) days nor later than ten (10) days
prior to the consummation of a Change of Control, but not prior to the public announcement of such
Change of Control, the Company shall deliver written notice thereof via facsimile and overnight
courier to the Holder (a “Change of Control Notice”). At any time during the period beginning
after the earlier of Holder’s receipt of a Change of Control Notice or public announcement of a
Change of Control and ending twenty (20) Trading Days after the date of the consummation of such
Change of Control, the Holder may require the Company to redeem all or any portion of this Note by
delivering written notice thereof (“Change of Control Redemption Notice”) to the Company, which
Change of Control Redemption Notice shall indicate the amount of Principal the Holder is electing
to require the Company to redeem. The portion of this Note subject to redemption pursuant to this
Section 5(b) shall be redeemed by the Company in cash at a price (the “Change of Control Redemption
Price”) equal to the sum of (i) the amount of Principal being redeemed plus accrued unpaid Interest
thereon to but not including the redemption date plus (ii) an amount in cash equal to the greater
of (a) fifty percent (50%) of the Additional Interest Amount and (b) the Make-Whole Premium.
Redemptions required by this Section 5 shall be made in accordance with the provisions of Section 9
and shall have priority to payments to stockholders in connection with a Change of Control as such
redemption obligation shall constitute a debt obligation of the Company. To the extent redemptions
required by this Section 5(b) are deemed or determined by a court of competent jurisdiction to be
prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary
prepayments. Notwithstanding anything to the contrary in this Section 5, but subject to Section
3(d), until the Change of Control Redemption Price (together with any interest thereon) is paid in
full, the amount of Principal to be redeemed under this Section 5(b) (together with any interest
thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section
3 (including, without limitation, the right to receive the amounts set forth in Section 3(f)). The
Change of Control Redemption Price will be payable regardless of whether the amount of Principal to
be redeemed is redeemed for cash or converted to shares of Common Stock pursuant to Section 3(f).
The parties hereto agree that in the event of the Company’s redemption of any portion of the Note
under this Section 5(b), the Holder’s damages would be uncertain and difficult to estimate because
of the parties’ inability to predict future interest rates and the uncertainty of the availability
of a suitable substitute investment opportunity for the Holder. Accordingly, any Change of Control
redemption premium due under this Section 5(b) is intended by the parties to be, and shall be
deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as
a penalty.

c. Make-Whole Premium.

i. (a) The Make-Whole Premium shall equal an amount calculated in accordance with
this Section 5(c). The Make-Whole Premium will be in addition to, and not in substitution for, any
cash, securities or other assets otherwise due to the Holder upon conversion as described in this
Convertible Note.

(b) The applicable “Make-Whole Premium” shall be determined by reference to the table attached
hereto as Annex I (the “Make-Whole Premium Table”), and shall be payable per each $1,000
principal amount and is based on the Effective Date and the Stock Price.

(c) The exact Stock Price and Effective Date may not be set forth on the Make-Whole Premium
Table, in which case, if the Stock Price is between two Stock Prices on the Make-Whole Premium
Table or the Effective Date is between two Effective Dates on the Make-Whole Premium Table, the
Make-Whole Premium shall be determined by straight-line interpolation between Make-Whole Premium
amounts set forth for the higher and lower Stock Prices and the two Effective Dates, as applicable,
based on a 365-day year (or a 366-day year if the Effective Date occurs in a leap year). The Stock
Prices set forth in the column headers are subject to adjustment pursuant to Section 5(c)(iii).

(i) If the Stock Price is less than or equal to $8.00 (subject to adjustment pursuant
to Section 5(c)(iii), the “Stock Price Threshold”), the Make-Whole Premium shall be equal to
zero.

(ii) If the Stock Price is equal to or greater than $36.00 (subject to adjustment
pursuant to Section 5(c)(iii), the “Stock Price Cap”), the Make-Whole Premium shall be equal
to zero.

(iii) “Stock Price” means the price paid per share of Common Stock in the transaction
constituting the Change of Control, determined as follows: (i) if holders of Common Stock
receive only cash in the transaction constituting the Change of Control, the Stock Price
shall equal the cash amount paid per share of Common Stock; and (ii) in all other cases, the
Stock Price shall equal the arithmetic average of the Closing Sale Price of a share of
Common Stock over the five Trading Day period ending on the Trading Day immediately
preceding the Effective Date; and “Effective Date” means the date that a Change of Control
becomes effective.

ii. At the Holder’s election, the Company shall pay the Make-Whole Premium in cash or if the
conditions set forth in Section 3(f) have been satisfied in shares of Common Stock (other than cash
paid in lieu of fractional shares) and so long as such shares of Common Stock are convertible or
exchangeable into the form of consideration paid to holders of Common Stock in connection with the
Make-Whole Premium shall be calculated in the manner set forth in Section 3(f).

iii. Whenever the Conversion Price shall be adjusted from time to time by the Company pursuant
to Section 7, the Stock Price Threshold and the Stock Price Cap shall be adjusted and each of the
Stock Prices set forth in the Make-Whole Premium Table shall be adjusted. The adjusted Stock Price
Threshold, Stock Price Cap and Stock Prices set forth in the Make-Whole Premium Table shall equal
the Stock Price Threshold, the Stock Price Cap and such Stock Prices, as the case may be,
immediately prior to such adjustment multiplied by a fraction, the numerator of which is the
Conversion Price as so adjusted and the denominator of which is the Conversion Price immediately
prior to the adjustment giving rise to such adjustment. The Company shall distribute to the Holder
and the holders of the Other Notes a copy of the adjusted Make-Whole Premium Table in accordance
with Section 23(a)(i).

6. RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

a. Purchase Rights. If at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase
Rights which the Holder could have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete conversion of this Note (without taking into account any limitations
or restrictions on the convertibility of this Note) 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,
the date as of which the record holders of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights. The provisions of this Section shall apply similarly and equally
to successive Purchase Rights. The provisions of Section 7(a) shall not apply with respect to any
Purchase Rights, if the Holder elects to exercise such Purchase Rights.

b. Other Corporate Events. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right to receive upon a
conversion of this Note, at the Holder’s option, (i) in addition to the shares of Common Stock
receivable upon such conversion, such securities or other assets to which the Holder would have
been entitled with respect to such shares of Common Stock had such shares of Common Stock been held
by the Holder upon the consummation of such Corporate Event (without taking into account any
limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of
Common Stock otherwise receivable upon such conversion, such securities or other assets received by
the holders of shares of Common Stock in connection with the consummation of such Corporate Event
in such amounts as the Holder would have been entitled to receive had this Note initially been
issued with conversion rights for the form of such consideration (as opposed to shares of Common
Stock) at a conversion rate for such consideration commensurate with the Conversion Rate.
Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to
the Required Holders. The provisions of this Section shall apply similarly and equally to
successive Corporate Events and shall be applied without regard to any limitations on the
conversion or redemption of this Note.

7. RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

a. Adjustment of Conversion Price upon Issuance of Common Stock. Subject to the
provisions of Section 6(a), if and whenever on or after the Subscription Date, the Company issues
or sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of
Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the
account of the Company, but excluding shares of Common Stock deemed to have been issued or sold by
the Company in connection with any Excluded Security) for a consideration per share less than a
price (the “Applicable Price”) equal to the Conversion Price in effect immediately prior to such
issue or sale (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance
the Conversion Price then in effect shall be reduced to an amount equal to the product of (x) the
Applicable Price and (y) the quotient determined by dividing (A) the sum of (I) the product derived
by multiplying the Conversion Price in effect immediately prior to such Dilutive Issuance and the
number of shares of Common Stock Deemed Outstanding immediately prior to such Dilutive Issuance
plus (II) the consideration, if any, received by the Company upon such Dilutive Issuance, by (B)
the product derived by multiplying (I) the Applicable Price by (II) the number of shares of Common
Stock Deemed Outstanding immediately after such Dilutive Issuance. For purposes of determining the
adjusted Conversion Price under this Section 7(a), the following shall be applicable (except in
connection with the issuance of Excluded Securities), unless holders of the Notes representing more
than 50% of the aggregate outstanding principal amount of the Notes waive, prospectively or
retroactively, the provisions of this Section 7 for such Dilutive Issuance, in which case no
adjustment to the Conversion Price shall be made, or if waived retroactively, any such adjustment
shall be reversed, in such instance:

i. Issuance of Options. If the Company in any manner grants or sells any Options and
the lowest price per share for which one share of Common Stock is issuable upon the exercise of any
such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon
exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i),
the “lowest price per share for which one share of Common Stock is issuable upon the exercise of
any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable
upon exercise of such Option” shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to any one share of Common Stock upon
granting or sale of the Option, upon exercise of the Option and upon conversion or exchange or
exercise of any Convertible Security issuable upon exercise of such Option. No further adjustment
of the Conversion Price shall be made upon the actual issuance of such share of Common Stock or of
such Convertible Securities upon the exercise of such Options or upon the actual issuance of such
Common Stock upon conversion or exchange or exercise of such Convertible Securities.

ii. Issuance of Convertible Securities. If the Company in any manner issues or sells
any Convertible Securities and the lowest price per share for which one share of Common Stock is
issuable upon such conversion or exchange or exercise thereof is less than the Applicable Price,
then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold
by the Company at the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 7(a)(ii), the “lowest price per share for which one
share of Common Stock is issuable upon such conversion or exchange or exercise” shall be equal to
the sum of the lowest amounts of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and
upon the conversion or exchange or exercise of such Convertible Security. No further adjustment of
the Conversion Price shall be made upon the actual issuance of such share of Common Stock upon
conversion or exchange or exercise of such Convertible Securities, and if any such issue or sale of
such Convertible Securities is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no
further adjustment of the Conversion Price shall be made by reason of such issue or sale.

iii. Change in Option Price or Rate of Conversion. If the purchase price provided for
in any Options, the additional consideration, if any, payable upon the issue, conversion, exchange
or exercise of any Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exchangeable or exercisable for Common Stock changes at any time, the
Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price
which would have been in effect at such time had such Options or Convertible Securities provided
for such changed purchase price, additional consideration or changed conversion rate, as the case
may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if
the terms of any Option or Convertible Security that was outstanding as of the Subscription Date
are changed in the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be
made if such adjustment would result in an increase of the Conversion Price then in effect.

iv. Calculation of Consideration Received. In case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Options by the parties thereto,
(x) the Options will be deemed to have been issued for a value determined by use of the
Black-Scholes Option Pricing Model (the “Option Value”) and (y) the other securities issued or sold
in such integrated transaction shall be deemed to have been issued for the difference of (I) the
aggregate consideration received by the Company, less (II) the Option Value. If any Common Stock,
Options or Convertible Securities 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 amount received by the
Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company will be the Closing
Sale Price of such securities on the date of receipt. If any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection with any merger in
which the Company is the surviving entity, the amount of consideration therefor will be deemed to
be the fair value of such portion of the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair
value of any consideration other than cash or securities will be determined jointly by the Company
and the Required Holders. If such parties are unable to reach agreement within ten (10) days after
the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such
consideration will be determined within five (5) Business Days after the tenth (10th)
day following the Valuation Event by an independent, reputable appraiser jointly selected by the
Company and the Required Holders. The determination of such appraiser shall be deemed binding upon
all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the
Company.

v. Record Date. If the Company takes a record of the holders of Common Stock for the
purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date will be deemed to be the date of the issue or sale of
the Common Stock deemed to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

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

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

d. Voluntary Decrease. The Company may at any time during the term of this Note
reduce the then current Conversion Price to any amount and for any period of time deemed
appropriate by the Board of Directors.

8. MANDATORY REDEMPTION AND OPTIONAL REDEMPTION.

a. Holder’s Right of Mandatory Redemption.

i. General. On each Holder Mandatory Redemption Date, the Holder shall have the
right, in its sole discretion, to require that the Company redeem all or any portion of this Note
(a “Holder Mandatory Redemption”) by delivering written notice thereof to the Company (a “Holder
Mandatory Redemption Notice”) at any time on or prior to such Holder Mandatory Redemption Date.
The Holder Mandatory Redemption Notice shall indicate the amount of Principal the Holder is
electing to have redeemed (the “Holder Mandatory Redemption Amount”) on the Holder Mandatory
Redemption Date. The portion of this Note subject to redemption pursuant to this Section 8 shall
be redeemed by the Company in cash at a price equal to the amount of Principal being redeemed (the
“Holder Mandatory Redemption Price”). Notwithstanding anything to the contrary, in the event a
Holder Mandatory Redemption occurs on June 30, 2014, the Company shall also pay to the Holder the
accrued but unpaid interest allocable to the Principal being so redeemed. Redemptions required by
this Section 8 shall be made in accordance with the provisions of this Section 8 and Section 9.
Notwithstanding anything to the contrary in this Section 8, but subject to Section 3(d), until the
Holder receives the Holder Mandatory Redemption Price, the Holder Mandatory Redemption Amount may
be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3, and any
such conversion shall reduce the Holder Mandatory Redemption Amount. The Company shall deliver
written notice (the “Company Notice”) to the Holder no earlier than twenty (20) Business Days and
no later than five (5) Business Days prior each Holder Mandatory Redemption Date stating the
Holder’s right of redemption under this Section 8 for the applicable Holder Mandatory Redemption
Date.

ii. Mechanics of Holder Mandatory Redemption. If the Holder elects a Holder Mandatory
Redemption in accordance with Section 8(a)(i), then the Holder Mandatory Redemption Amount which is
to be paid to the Holder on the applicable Holder Mandatory Redemption Date shall be redeemed by
the Company, and the Company shall pay to the Holder on the later of (A) the applicable Holder
Mandatory Redemption Date and (B) the second (2nd) Business Day following receipt by the Company of
the Holder Mandatory Redemption Notice (the “Holder Mandatory Redemption Payment Date”), by wire
transfer of immediately available funds, the Holder Mandatory Redemption Price. If the Company
fails to redeem the Holder Mandatory Redemption Amount on the Holder Mandatory Redemption Payment
Date by payment of the Holder Mandatory Redemption Price on such date, then at the option of the
Holder designated in writing to the Company (any such designation shall be deemed a “Conversion
Notice” pursuant to Section 3(c) for purposes of this Note), the Holder may require the Company to
convert all or any part of the Holder Mandatory Redemption Amount at 75% of the Optional Interest
Price. Conversions made pursuant to this Section 8(a) shall be made in accordance with the
provisions of Section 3(c).

b. Company’s Right of Optional Redemption.

i. General.

(a) At any time and from time to time on or after and from and after June 30, 2011 (the
“Company Optional Redemption Triggering Date”) and prior to June 30, 2014, so long as there shall
not have been an Equity Conditions Failure, the Company shall have the right, in its sole
discretion, to redeem all or any portion of this Note (a “Company Redemption”). The portion of
this Note subject to redemption pursuant to this Section 8(b)(i)(A) shall be redeemed by the
Company in cash at a price (the “Company Optional Redemption Price”) equal to (i) the product of
the Principal being redeemed and 150% plus (ii) the sum of (x) accrued and unpaid Interest, if any,
with respect to such Principal, and (y) accrued and unpaid Late Charges, if any, with respect to
such Principal and Interest. The Additional Interest Amount, if any, for such Principal to be
redeemed shall also be payable to the Holder in cash, or, at the election of the Company, in shares
of Common Stock as described in Section 3(e)(i) upon a Company Redemption that occurs at any time
from the Company Optional Redemption Triggering Date through but not including June 30, 2014;
provided, however, if the amount that the Holder could receive under Section 3(f)
is greater (as well as the holders of the Other Notes under the analogous provision thereof), the
Holder and the holders of the Other Notes shall receive such greater amount. For the avoidance of
doubt, the amount that would otherwise be payable to the Holder pursuant to the immediately
preceding sentence upon a Company Redemption shall be payable to the Holder if the Holder exercises
its conversion right herein following the Company’s issuance of a Company Optional Redemption
Notice (as defined below) but prior to the corresponding Company Redemption.

(b) At any time and from time to time on or after June 30, 2014, so long as there shall not
have been an Equity Conditions Failure, the Company shall have the right, in its sole discretion,
to initiate a Company Redemption for any or all of the Principal of this Note. The portion of this
Note subject to redemption pursuant to this Section 8(b)(i)(B) shall be redeemed by the Company in
cash at a Company Optional Redemption Price equal to (i) 100% of the Principal being redeemed plus
(ii) the sum of (x) accrued and unpaid Interest, if any, with respect to such Principal, and (y)
accrued and unpaid Late Charges, if any, with respect to such Principal and Interest.

ii. Mechanics. The Company may exercise its redemption right under this Section 8(b)
by delivering a written notice thereof by confirmed facsimile and overnight courier to all, but not
less than all, of the holders of the Notes (the “Company Optional Redemption Notice” and the date
such notice is delivered to all the holders is referred to as the “Company Optional Redemption
Notice Date”). A Company Optional Redemption Notice shall be irrevocable. Each Company Optional
Redemption Notice shall state the aggregate Principal of the Notes which the Company has elected to
be subject to such Company Optional Redemption from all of the holders of the Notes pursuant to
this Section 8(b) (and analogous provisions under the Other Notes) on the Company Optional
Redemption Date plus accrued and unpaid Late Charges with respect to such Principal and Interest
(the “Company Redemption Amount”), provided, however, that the aggregate principal amount subject
to the Company Redemption pursuant to Section 8(b)(i)(A) for all Notes in any consecutive twelve
(12) month period beginning June 30, 2011 shall not exceed more than $30,000,000, including for
purposes of this calculation, the Principal converted pursuant to Section 3(e) equal to the
Holder’s pro rata allocation of the aggregate principal amount of the Notes that could be redeemed
by the Company in that calendar year (and analogous provisions under the Other Notes). Upon
receipt of a Company Optional Redemption Notice, if the Holder elects to convert any or all of the
Principal to be so redeemed hereby, the Holder shall deliver to the Company written notice of such
election, and the Principal to be converted shall be so converted in accordance with Section 3(e)
no later than three (3) Business Days prior to the date on which the Company Optional Redemption
shall occur (the “Company Optional Redemption Date”) which date (A) shall be set forth in the
Company Optional Redemption Notice and (B) shall not be less than twenty (20) Business Days nor
more than seventy-five (75) Business Days after the Company Optional Redemption Notice Date.

iii. Pro Rata Redemption Requirement. If the Company elects to cause a Company
Optional Redemption pursuant to Section 8(b), then it must simultaneously take the same action with
respect to the Other Notes. If the Company elects to cause a Company Optional Redemption pursuant
to this Section 8(b) (or similar provisions under the Other Notes) with respect to less than all of
the principal amount of the Notes then outstanding, then the Company shall require redemption of a
Principal amount from the Holder and each holder of the Other Notes equal to the product of (A) the
aggregate principal amount of Notes which the Company has elected to cause to be redeemed pursuant
to Section 8(b), multiplied by (B) the fraction, the numerator of which is the sum of the initial
principal amount of Notes purchased by such holder and the denominator of which is the initial
principal amounts of Notes purchased by all holders holding outstanding Notes (such fraction with
respect to each holder is referred to as its “Redemption Allocation Percentage”, and such amount
with respect to each holder is referred to as its “Pro Rata Redemption Amount”); provided that in
the event that the initial holder of any Notes has sold or otherwise transferred any of such
holder’s Notes, the transferee shall be allocated a pro rata portion of such holder’s Redemption
Allocation Percentage and Pro Rata Redemption Amount.

c. Redemptions Generally. Any redemptions made pursuant to this Section 8 shall be
made in accordance with Section 9. No later than one (1) Trading Day following any Holder
Mandatory Redemption Date or Company Optional Redemption Date, the Company shall file a Current
Report on Form 8-K describing the terms of such Holder Mandatory Redemption or Company Optional
Redemption, as the case may be. To the extent redemptions required by this Section 8 are deemed or
determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be voluntary prepayments. The parties hereto agree that in the
event of the Company’s redemption of any portion of the Note under this Section 8, the Holder’s
damages would be uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any redemption premium due under this Section 8 is
intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual
loss of its investment opportunity and not as a penalty.

9. REDEMPTIONS.

a. Mechanics. The Company shall deliver the applicable Event of Default Redemption
Price to the Holder within five (5) Business Days after the Company’s receipt of the Holder’s Event
of Default Redemption Notice. If the Holder has submitted a Change of Control Redemption Notice in
accordance with Section 5(b), the Company shall deliver the applicable Change of Control Redemption
Price to the Holder (i) concurrently with the consummation of such Change of Control if such notice
is received prior to the consummation of such Change of Control and (ii) within five (5) Business
Days after the Company’s receipt of such notice otherwise. The Company shall deliver the
applicable Holder Mandatory Redemption Price on the applicable Holder Mandatory Redemption Payment
Date and the applicable Company Optional Redemption Price on the applicable Company Optional
Redemption Date. The deadlines for payment set forth in the foregoing sentences of this Section
9(a) shall apply to cash payments or issuances of shares of Common Stock issuable upon conversion
of the amount of Principal selected for redemption or redemption premiums in accordance with the
other provisions of this Note. In the event of a redemption or conversion of less than all of the
Principal of this Note, the Company shall promptly cause to be issued and delivered to the Holder a
new Note (in accordance with Section 17(d)) representing the outstanding Principal which has not
been redeemed. If the Company does not pay the applicable Redemption Price to the Holder within
the time period required, at any time thereafter and until the Company pays such unpaid Redemption
Price in full, the Holder shall have the option, in lieu of redemption or conversion, to require
the Company to promptly return to the Holder all or any portion of this Note representing the
amount of Principal that was submitted for or subject to redemption and for which the applicable
Redemption Price (together with any Late Charges thereon) has not been paid or shares of Common
Stock have not been issued therefore, or any combination thereof. Upon the Company’s receipt of
such cancellation notice, (x) the applicable Redemption Notice shall be null and void with respect
to such amount of Principal that was not redeemed or converted, (y) the Company shall immediately
return this Note, or issue a new Note (in accordance with Section 17(d)) to the Holder representing
such amount of Principal to be redeemed and (z) the Conversion Price of this Note or such new Notes
shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the
applicable Redemption Notice is voided and (B) the lowest Closing Bid Price of the Common Stock
during the period beginning on and including the date on which the applicable Redemption Notice is
delivered to the Company and ending on and including the date on which the applicable Redemption
Notice is voided. The Holder’s delivery of a notice voiding a Redemption Notice and exercise of
its rights following such notice shall not affect the Company’s obligations to make any payments of
Late Charges which have accrued prior to the date of such notice with respect to the amount of
Principal subject to such notice.

b. Redemption by Other Holders. Upon the Company’s receipt of notice from any of the
holders of the Other Notes for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 4(b), Section 5(b) or
Section 8 (each, an “Other Redemption Notice”), the Company shall immediately, but no later than
one (1) Business Day of its receipt thereof, forward to the Holder by facsimile a copy of such
notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices,
during the seven (7) Business Day period beginning on and including the date which is three (3)
Business Days prior to the Company’s receipt of the Holder’s Redemption Notice and ending on and
including the date which is three (3) Business Days after the Company’s receipt of the Holder’s
Redemption Notice and the Company is unable to redeem all principal, interest and other amounts
designated in such Redemption Notice and such Other Redemption Notices received during such seven
(7) Business Day period, then the Company shall redeem a pro rata amount from each holder of the
Notes (including the Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during
such seven Business Day period.

10. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Note, and will at all times in good faith carry out all of the provisions
of this Note and take all action as may be required to protect the rights of the Holder of this
Note.

11. RESERVATION OF AUTHORIZED SHARES.

a. Reservation. The Company shall initially reserve out of its authorized and
unissued Common Stock a number of shares of Common Stock for each of the Notes equal to 115% of the
Conversion Rate with respect to the Principal of each such Note as of the Issuance Date; provided
that within seventy-five (75) days after the Issuance Date, the Company shall have reserved out of
its authorized and unissued Common Stock a number of shares of Common Stock for each of the Notes
equal to 130% of the Conversion Rate with respect to the Principal of each such Note as of such
date. So long as any of the Notes are outstanding, the Company shall take all action necessary to
reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Notes, initially 115%, and at all times following the
seventy-fifth (75th) day following the Issuance Date, 130%, of the number of shares of
Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes
then outstanding; provided that at no time shall the number of shares of Common Stock so reserved
be less than the number of shares required to be reserved by the previous sentence (without regard
to any limitations on conversions) (the “Required Reserve Amount”). The initial number of shares
of Common Stock reserved for conversions of the Notes and each increase in the number of shares so
reserved shall be allocated pro rata among the holders of the Notes based on the principal amount
of the Notes held by each holder at the Closing (as defined in the Securities Purchase Agreement)
or increase in the number of reserved shares, as the case may be (the “Authorized Share
Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s
Notes, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share
Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold
any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal
amount of the Notes then held by such holders.

b. Insufficient Authorized Shares. If at any time while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and unreserved shares of
Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at
least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the
Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share
Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in
the number of authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its
stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board
of directors to recommend to the stockholders that they approve such proposal.

12. VOTING RIGHTS. The Holder shall have no voting 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, and as expressly provided in this Note.

13. COVENANTS.

a. Rank. All payments due under this Note (a) shall rank pari passu with all Other
Notes and, subject to the terms and conditions of the Subordination Agreement, shall be
unsubordinated obligations of the Company and (b) shall be senior to all other Indebtedness of the
Company permitted to be incurred pursuant to clause (iv) of the definition of “Permitted
Indebtedness.”

b. Incurrence of Indebtedness.

i. So long as this Note is outstanding, the Company shall not, and the Company shall not
permit any of its Subsidiaries to, directly or indirectly, incur or guarantee or assume any
Indebtedness other than (x) Permitted Indebtedness and (y) any additional Indebtedness (other than
Indebtedness described in clause (iv) of the definition of “Permitted Indebtedness”) that has no
material equity component and where the ratio of Consolidated Funded Indebtedness of the Company
and its Subsidiaries to TTM EBITDA of the Company and its Subsidiaries for the twelve month period
most recently ended (as measured as of the end of the most recently completed fiscal quarter) does
not exceed 3.50 to 1.00 (both immediately prior to the incurrence, guarantee or assumption of such
additional Indebtedness and immediately after giving effect thereto). For the avoidance of doubt,
this Note and the Other Notes shall not be included in the incurred indebtedness calculation of
clause 13(b)(i)(y) above.

ii. For purposes of this Section 13(b), “Consolidated Funded Indebtedness” and “TTM EBITDA”
shall have the meanings given to them in the Financing Agreement by and among the Company, each
Subsidiary listed as “Guarantor” thereto, the lenders from time to time party thereto, Ableco, as
collateral agent for the lenders, and Ableco, as administrative agent for the lenders, dated as of
July 3, 2007, as amended, supplemented or otherwise modified through and including May 1, 2008.
For avoidance of doubt, the definitions of such terms are set forth on Annex II hereto. In
the event of any conflict between the definitions set forth on Annex II and in such financing
agreement, the definitions set forth on Annex II shall govern and control.

iii. The Company shall provide a written report to the Holders of the results of the ratio
analysis set forth in Section 13(b)(i) no later than the date the Company first announces its
financial results for a fiscal quarter or fiscal year. If the Company is not in compliance with
such ratio as of the applicable Incurred Indebtedness Measurement Date, the Company shall publicly
disclose such results concurrently with its disclosure to the Holders.

c. Restriction on Redemption and Cash Dividends. Until all of the Notes have been
converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not,
directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on
its capital stock without the prior express written consent of the Required Holders;
provided, however, the provisions of this Section 13(c) shall not apply if the
Closing Sale Price or Closing Bid Price, as applicable, of the Common Stock is greater than 125% of
the Conversion Price in effect for the 10 Trading Day period ending on the date immediately prior
to the date the Company’s board of directors approves a record date for a cash dividend, the public
announcement of which shall be made no later than the next Business Day.

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

15. VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting
duly called for such purpose or the written consent without a meeting of the Required Holders shall
be required for any change or amendment to this Note or the Other Notes. No consideration shall be
offered or paid to any holder of Notes to amend or consent to a waiver or modification of the Notes
unless the same consideration also is offered to all of the holders of Notes.

16. TRANSFER. This Note and any shares of Common Stock issued upon conversion of this
Note may be offered, sold, assigned or transferred by the Holder without the consent of the
Company, subject only to the provisions of Section 2(f) of the Securities Purchase Agreement.

17. REISSUANCE OF THIS NOTE.

a. Transfer. If this Note is to be transferred, the Holder shall surrender this Note
to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder
a new Note (in accordance with Section 17(d)), registered as the Holder may request, representing
the outstanding Principal being transferred by the Holder and, if less then the entire outstanding
Principal is being transferred, a new Note (in accordance with Section 17(d)) to the Holder
representing the outstanding Principal not being transferred. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section
3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal
represented by this Note may be less than the Principal stated on the face of this Note.

b. Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the
case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company
in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance with Section 17(d))
representing the outstanding Principal.

c. Note Exchangeable for Different Denominations. This Note is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in
accordance with Section 17(d) and in principal amounts of at least $100,000) representing in the
aggregate the outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

d. Issuance of New Notes. Whenever the Company is required 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 indicated on the face of such new Note, the Principal remaining outstanding (or
in the case of a new Note being issued pursuant to Section 17(a) or Section 17(c), the Principal
designated by the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining outstanding under
this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as
indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv)
shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest and Late Charges, if any, on the Principal and Interest of this Note, from the Issuance
Date.

18. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
The remedies provided in this Note shall be cumulative and in addition to all other remedies
available under this Note and any of the other Transaction Documents at law or in equity (including
a decree of specific performance and/or other injunctive relief), and nothing herein shall limit
the Holder’s right to pursue actual and consequential damages for any failure by the Company to
comply with the terms of this Note. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the amounts to be received
by the Holder and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at
law for any such breach may be inadequate. The Company therefore agrees that, in the event of any
such breach or threatened breach, the Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of showing economic loss
and without any bond or other security being required.

19. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in
the hands of an attorney for collection or enforcement or is collected or enforced through any
legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to
enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization,
receivership of the Company or other proceedings affecting Company creditors’ rights and involving
a claim under this Note, then the Company 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.

20. CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the
Company and all the Purchasers and shall not be construed against any person as the drafter hereof.
The headings of this Note are for convenience of reference and shall not form part of, or affect
the interpretation of, this Note.

21. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.

22. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Closing Bid Price, the Closing Sale Price or the Weighted Average Price or the arithmetic
calculation of the Conversion Rate, the Conversion Price or any Redemption Price, the Company shall
submit the disputed determinations or arithmetic calculations via facsimile within one (1) Business
Day of receipt, or deemed receipt, of the Conversion Notice or Redemption Notice or other event
giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are
unable to agree upon such determination or calculation within one (1) Business Day of such disputed
determination or arithmetic calculation being submitted to the Holder, then the Company shall,
within one (1) Business Day submit via facsimile (a) the disputed determination of the Closing Bid
Price, the Closing Sale Price or the Weighted Average Price to an independent, reputable investment
bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation
of the Conversion Rate, Conversion Price or any Redemption Price to the Company’s independent,
outside accountant. The Company, at the Company’s expense, shall cause the investment bank or the
accountant, as the case may be, to perform the determinations or calculations and notify the
Company and the Holder of the results no later than five (5) Business Days from the time it
receives the disputed determinations or calculations. Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.

23. NOTICES; PAYMENTS.

a. Notices. Whenever notice is required to be given under this Note, unless otherwise
provided herein, such notice shall be given in accordance with Section 9(f) of the Securities
Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions
taken pursuant to this Note, including in reasonable detail a description of such action and the
reason therefor. Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty (20)
days prior to the date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription
offer to holders of Common Stock or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case that such information
shall be made known to the public prior to or in conjunction with such notice being provided to the
Holder.

b. Payments. Whenever any payment of cash is to be made by the Company to any Person
pursuant to this Note, such payment shall be made in lawful money of the United States of America
by a check drawn on the account of the Company and sent via overnight courier service to such
Person at such address as previously provided to the Company in writing (which address, in the case
of each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to
the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash
via wire transfer of immediately available funds by providing the Company with prior written notice
setting out such request and the Holder’s wire transfer instructions. Whenever any amount
expressed to be due by the terms of this Note is due on any day which is not a Business Day, the
same shall instead be due on the next succeeding day which is a Business Day and, in the case of
any Interest Date which is not the date on which this Note is paid in full, the extension of the
due date thereof shall not be taken into account for purposes of determining the amount of Interest
due on such date. Any amount of Principal or other amounts due under this Note which is not paid
when due shall result in a late charge being incurred and payable by the Company in an amount equal
to interest on such amount at the rate that would have applied during the incurrence and
continuance of an Event of Default (“Late Charge”).

24. CANCELLATION. After all Principal, accrued Interest and other amounts at any time
owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall
be surrendered to the Company for cancellation and shall not be reissued.

25. WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives
demand, notice, protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

26. GOVERNING LAW; JURISDICTION; JURY. This Note shall be construed and enforced in
accordance with, and all questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. The Company hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not
to assert in any suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient
forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law. The
Company hereby irrevocably waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party at the address as
provided in Section 23 hereof and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed or operate to
preclude the Holder from bringing suit or taking other legal action against the Company in any
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 to enforce a judgment or other court
ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

27. SEVERABILITY. If any provision of this Note is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that
would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of
such provision shall not affect the validity of the remaining provisions of this Note so long as
this Note as so modified continues to express, without material change, the original intentions of
the parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical realization of the benefits
that would otherwise be conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

28. CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have
the following meanings:

a. “Ableco Loan Agreement” means the Financing Agreement by and among the Company, each
Subsidiary listed as a “Guarantor” thereto, the lenders from time to time party hereto, Ableco
Finance LLC (“Ableco”), as collateral agent for the lenders, and Ableco, as administrative agent
for the lenders dated as of July 3, 2007, as amended, restated, supplemented, extended, renewed,
refinanced or otherwise modified from time to time.

b. “Additional Interest Amount” means an amount equal to the difference between (i) an amount
of Interest that, but for the applicable conversion or redemption, would have been paid to the
Holder on such amount of Principal subject to such conversion or redemption from the Issuance Date
through but not including June 30, 2014 discounted to the present value of such interest using a
discount rate equal to three and one-half percent (3.50%) and (ii) the amount of Interest already
paid to the Holder through the applicable Conversion Date, Company Optional Redemption Date or
effective date of a Change of Control, as applicable.

c. “Approved Stock Plan” means any employee benefit plan which has been approved by the Board
of Directors of the Company, pursuant to which the Company’s securities may be issued to any
employee, consultant, officer or director for services provided to the Company.

d. “Bloomberg” means Bloomberg Financial Markets.

e. “Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.

f. “Change of Control” means any Fundamental Transaction other than (i) any reorganization,
recapitalization or reclassification of the Common Stock in which holders of the Company’s voting
power immediately prior to such reorganization, recapitalization or reclassification continue after
such reorganization, recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other than a corporation)
of such entity or entities, or (ii) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company.

g. “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing trade 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, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any
market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Sale Price, as the case may be, of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 22. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination, reclassification or similar transaction during the
applicable calculation period.

h. “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which
date is the date the Company initially issued Notes pursuant to the terms of the Securities
Purchase Agreement.

i. “Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common
Stock outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding
pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible
Securities are actually exercisable at such time or exercised at any time, but excluding any Common
Stock owned or held by or for the account of the Company or issuable upon conversion of the Notes.

j. “Contingent Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto.

k. “Convertible Securities” means any stock, warrants, rights or other securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable for Common Stock.

l. “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., The NASDAQ
Global Market, The NASDAQ Capital Market or The NASDAQ Global Select Market.

m. “Equity Conditions” means that each of the following conditions is satisfied: (i) on each
day during the period beginning six (6) month prior to the applicable date of determination and
ending on and including the applicable date of determination (the “Equity Conditions Measuring
Period”), either (x) the Registration Statement filed pursuant to the Registration Rights Agreement
shall be effective and available for the resale of all remaining Registrable Securities in
accordance with the terms of the Registration Rights Agreement and there shall not have been any
Grace Periods (as defined in the Registration Rights Agreement) or (y) all shares of Common Stock
issuable upon conversion of the Notes shall be eligible for sale without restriction and without
the need for registration under any applicable federal or state securities laws; (ii) on each day
during the Equity Conditions Measuring Period, the Common Stock is designated for quotation on the
Principal Market or any other Eligible Market and shall not have been suspended from trading 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 to business announcements by the Company) nor shall
delisting or suspension by such exchange or market been threatened or pending either (A) in writing
by such exchange or market or (B) by falling below the then effective minimum listing maintenance
requirements of such exchange or market; (iii) during the Equity Conditions Measuring Period, the
Company shall have delivered shares of Common Stock upon conversion of the Notes to the holders on
a timely basis as set forth in Section 3(c)(ii) hereof (and analogous provisions under the Other
Notes); (iv) any applicable shares of Common Stock to be issued in connection with the event
requiring determination may be issued in full without violating Section 3(d) hereof and the rules
or regulations of the Principal Market or any applicable Eligible Market; (v) the Company shall not
have failed to timely make any payments within five (5) Business Days of when such payment is due
pursuant to any Transaction Document; (vi) during the Equity Conditions Measuring Period, there
shall 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 with the 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) the
Registration Statements required pursuant to the Registration Rights Agreement not to be effective
and available for the resale of all remaining Registrable Securities in accordance with the terms
of the Registration Rights Agreement or (y) any shares of Common Stock issuable upon conversion of
the Notes not to be eligible for sale without restriction pursuant to Rule 144 (and not subject to
the provisions of Rule 144(c)(i) and any applicable state securities laws and (viii) the Company
otherwise shall have been in material compliance with and shall not have breached any provision,
covenant, representation or warranty of any material Transaction Document.

n. “Equity Conditions Failure” means that on any day during the period commencing ten (10)
Trading Days prior to the applicable (i) Mandatory Conversion Notice Date through the applicable
Mandatory Conversion Date, (ii) the Company Optional Redemption Notice Date through the applicable
Company Optional Redemption Date or (iii) conversion date pursuant to a conversion event set forth
in Section 3(e)(i), the Equity Conditions have not been satisfied (or waived in writing by the
Holder).

o. “Excluded Security” means any Common Stock issued or issuable: (i) in connection with
acquisitions with one or more non-affiliated third parties on an arm’s length basis, the primary
purpose of which is not to raise additional capital; (ii) in connection with the grant of options
to purchase Common Stock, restricted stock awards or other stock-based awards or sales, with, in
the case of stock options or other stock-based awards requiring payment therefor, exercise or
purchase prices not less than the market price of the Common Stock on the date of grant or
issuance, which are issued, granted or sold to employees, officers or directors of the Company for
the primary purpose of soliciting or retaining their employment or service pursuant to an Approved
Stock Plan, and the Common Stock issued upon the exercise thereof; (iii) upon conversion or
redemption of this Note and the Other Notes; (iv) upon the exercise of the Warrants; (v) pursuant
to any bona fide firm commitment underwritten public offering with a nationally recognized
underwriter, which generates gross proceeds to the Company in excess of $25,000,000 (other than an
“at-the-market offering” as defined in Rule 415(a)(4) under the 1933 Act and “equity lines”); and
(vi) upon exercise of any Options or Convertible Securities which are outstanding on the
Subscription Date, provided that the terms of such Options or Convertible Securities are
not amended, modified or changed on or after the Subscription Date to lower the exercise or
conversion price, to increase the number of shares of capital stock issuable upon conversion or
exercise, to extend the expiration or termination date or to change the antidilution provisions.

p. “Foothill Loan Agreement” means the Amended and Restated Loan and Security Agreement by and
among the Company, and each of the Subsidiaries that are signatories thereto as Borrowers, the
lenders that are signatories thereto as the Lenders, and Wells Fargo Foothill, Inc. as the Arranger
and Administrative Agent dated as of July 3, 2007, as amended, restated, supplemented, extended,
renewed, refinanced or otherwise modified from time to time.

q. “Fundamental Transaction” 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
surviving corporation) another Person or Persons, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of the Company to another
Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted
by the holders of more than 50% of the outstanding shares of Voting Stock (not including any shares
of Voting Stock held by the Person or Persons making or party to, or associated or affiliated with
the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a
stock purchase agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than the 50% of the outstanding shares of Voting Stock (not
including any shares of Voting Stock held by the other Person or other Persons making or party to,
or associated or affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), or (v) reorganize, recapitalize or reclassify its Common
Stock or (vi) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of 50% of the aggregate Voting Stock of the
Company.

r. “GAAP” means United States generally accepted accounting principles, consistently applied.

s. “Holder Pro Rata Amount” means a fraction (i) the numerator of which is the Principal
amount of this Note on the Closing Date and (ii) the denominator of which is the aggregate
principal amount of all Notes issued to the initial purchasers pursuant to the Securities Purchase
Agreement on the Closing Date.

t. “Holder Mandatory Redemption Date” means each of June 30, 2014, April 30, 2016, and April
30, 2020.

u. “Indebtedness” of any Person means, without duplication (i) all indebtedness for borrowed
money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including (without limitation) “capital leases” in accordance with GAAP
(other than trade payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses, (v) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case with respect to any
property or assets acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (vi) all monetary obligations under any leasing or similar
arrangement which, in connection with GAAP, consistently applied for the periods covered thereby,
is classified as a capital lease, (vii) all indebtedness referred to in clauses (i) through (vi)
above secured by (or for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract rights) owned by any
Person, even though the Person which owns such assets or property has not assumed or become liable
for the payment of such indebtedness, and (viii) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (i) through (vii) above.
For the avoidance of doubt, “Indebtedness” shall not include unsecured indebtedness to trade
creditors incurred in the ordinary course of business.

v. “Interest Rate” means 7.00% per annum, subject to adjustment as set forth in Section 2.

w. “Lien” means any mortgage, lien, pledge, charge, security interest or other encumbrance
upon or in any property or assets (including accounts and contract rights) owned by the Company or
any of its Subsidiaries.

x. “Optional Interest Price” means, the lower of (i) the applicable Conversion Price and (ii)
that price which shall be computed as 90% of the arithmetic average of the Weighted Average Price
of the Common Stock on each five (5) consecutive Trading Days immediately preceding the applicable
Conversion Date (each such period, an “Optional Interest Measuring Period”). All such
determinations to be appropriately adjusted for any stock dividend, stock split, stock combination,
reclassification or similar transaction that proportionately decreases or increases the Common
Stock during the applicable such Optional Interest Measuring Period.

y. “Options” means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.

z. “Parent Entity” of a Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent
Entity with the largest public market capitalization as of the date of consummation of the
Fundamental Transaction.

aa. “Permitted Indebtedness” means (i) Indebtedness under the Foothill Loan Agreement in an
aggregate principal amount not to exceed  $100,000,000 at any time, (ii) Indebtedness other than
described in clause (i) or (vi) of this definition outstanding on the Subscription Date, (iii) the
Indebtedness evidenced by this Note and the Other Notes, (iv) unsecured Indebtedness incurred by
the Company that is made expressly subordinate in right of payment to the Indebtedness evidenced by
this Note, as reflected in a written agreement reasonably acceptable to the Holder, and which
Indebtedness does not provide at any time for (1) the payment, prepayment, repayment, repurchase or
defeasance, directly or indirectly, of any principal or premium, if any, thereon until ninety-one
(91) days after the Maturity Date or later and (2) total interest and fees at a rate in excess of
nine percent (9.00%) per annum, (v) Indebtedness secured by Permitted Liens, (vi) Indebtedness
under the Ableco Loan Agreement in an aggregate principal amount not to exceed $ 67,150,000 at any
time; provided, that such amount may be increased by up to $10,000,000 notwithstanding the
Company’s noncompliance with Section 13 (b) so long as: (1) a Default or an Event of Default has
occurred and is continuing under the Ableco Loan Agreement; and (2) such additional Indebtedness is
necessary (A) to protect all or any portion of the Collateral (as such term is defined in the
Ableco Loan Agreement) or (B) to enhance the likelihood, or maximize the amount of, repayment of
the Indebtedness incurred pursuant to the Ableco Loan Agreement, and (vii) extensions, refinancings
and renewals of any items of Permitted Indebtedness and any Indebtedness that was permitted to be
incurred pursuant to Section 13(b) hereof, provided that no material equity component is
contained in such extensions, refinancings or renewals and the principal amount (or in the case of
revolving credit facilities, the maximum amount of revolving commitments thereunder) is not
increased (other than to account for costs, expenses and fees relating to such extensions,
refinancings or renewals) or the terms modified to impose materially more burdensome terms upon the
Company or its Subsidiaries, as the case may be, other than with respect to an increase in the
interest rate applicable to such Indebtedness so long as the interest rate applicable thereto is on
terms consistent with then prevailing market terms.

bb. “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of
business by operation of law with respect to a liability that is not yet due or delinquent, (iii)
any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other
similar liens, arising in the ordinary course of business with respect to a liability that is not
yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv)
Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to
secure the purchase price of such equipment or indebtedness incurred solely for the purpose of
financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time
of its acquisition, provided that the Lien is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment, (v) Liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by Liens of the type described in
clauses (i) and (iv) above, provided that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and the principal amount of the
Indebtedness being extended, renewed or refinanced does not increase, (vi) leases or subleases and
licenses and sublicenses granted to others in the ordinary course of the Company’s business, not
interfering in any material respect with the business of the Company and its Subsidiaries taken as
a whole, (vii) Liens in favor of customs and revenue authorities arising as a matter of law to
secure payments of custom duties in connection with the importation of goods and (viii) Liens
arising from judgments, decrees or attachments in circumstances not constituting an Event of
Default under Section 4(a)(ix).

cc. “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

dd. “Principal Market” means The American Stock Exchange.

ee. “Redemption Notices” means, collectively, the Event of Default Redemption Notices, the
Change of Control Redemption Notices, the Company Optional Redemption Notice and the Holder
Mandatory Redemption Notice, each of the foregoing, individually, a Redemption Notice.

ff. “Redemption Premium” means (i) in the case of the Events of Default described in Section
4(a)(i) — (v) and (viii) — (xi), 125% or (ii) in the case of the Events of Default described in
Section 4(a)(vi) — (vii), 100%.

gg. “Redemption Prices” means, collectively, the Event of Default Redemption Price, the Change
of Control Redemption Price, the Company Optional Redemption Price and the Holder Mandatory
Redemption Price (each of the foregoing, individually, a “Redemption Price”).

hh. “Registration Rights Agreement” means that certain registration rights agreement dated as
of the Subscription Date by and among the Company and the initial holders of the Notes relating to,
among other things, the registration of the resale of the Common Stock issuable upon conversion of
the Notes.

ii. “Required Holders” means the holders of Notes representing at least a majority of the
aggregate principal amount of the Notes then outstanding.

jj. “SEC” means the United States Securities and Exchange Commission.

kk. “Securities Purchase Agreement” means that certain securities purchase agreement dated as
of the Subscription Date by and among the Company and the initial holders of the Notes, as amended
by that certain letter agreement dated May 1, 2008, pursuant to which the Company issued the Notes.

ll. “Subscription Date” means April 23, 2008.

mm. “Subsidiary” means any entity in which the Company, directly or indirectly, owns any of
the capital stock or holds an equity or similar interest.

nn. “Successor Entity” means the Person, which may be the Company, formed by, resulting from
or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded entity whose common
stock or equivalent equity security is quoted or listed for trading on an Eligible Market,
Successor Entity shall mean such Person’s Parent Entity.

oo. “Trading Day” means any day on which the Common Stock is traded on the Principal Market,
or, if the Principal Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is then traded;
provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to
trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is
suspended from trading during the final hour of trading on such exchange or market (or if such
exchange or market does not designate 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).

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

qq. “Warrants” means the common stock purchase warrants issued to the initial Holders of the
Notes pursuant to and as contemplated by the Securities Purchase Agreement.

rr. “Weighted Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during the period beginning
at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is
the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the
Principal Market publicly announces is the official close of trading) as reported by Bloomberg
through its “Volume at Price” functions, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m., New York time (or
such other time as such market publicly announces is the official open of trading), and ending at
4:00:00 p.m., New York time (or such other time as such market publicly announces is the official
close of trading) as reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the
Weighted Average Price cannot be calculated for a security on a particular date on any of the
foregoing bases, the Weighted Average Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and the Holder are
unable to agree upon the fair market value of such security, then such dispute shall be resolved
pursuant to Section 22. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination, reclassification or similar transaction during the
applicable calculation period.

29. DISCLOSURE. Upon receipt or delivery by the Company of any notice in accordance
with the terms of this Note, unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, nonpublic information relating to the Company
or its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or
delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or
otherwise. In the event that the Company believes that a notice contains material, nonpublic
information relating to the Company or its Subsidiaries, the Company so shall indicate to such
Holder contemporaneously with delivery of such notice, and in the absence of any such indication,
the Holder shall be allowed to presume that all matters relating to such notice do not constitute
material, nonpublic information relating to the Company or its Subsidiaries.

[Signature Page Follows]

1

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance
Date set out above.

	 	 	 
	Metalico, Inc.

	By:

	 	

	
 
	 	Name:
	
 
	 	Title:

2

ANNEX I

MAKE-WHOLE TABLE

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Additional Amounts Payable Per $1,000 Principal Amount
	 	 	Effective Date
	Stock Price

	 	 	5/1/2008	 	 	 	10/30/2008	 	 	 	4/30/2009	 	 	 	10/30/2009	 	 	 	4/30/2010	 	 	 	10/30/2010	 	 	 	4/30/2011	 	 	 	10/30/2011	 	 	 	4/30/2012	 	 	 	10/30/2012	 	 	 	4/30/2013	 	 	 	10/30/2013	 	 	 	6/30/2014	 
	$ 8.00

	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 
	$ 8.80

	 	 	4.81	 	 	 	5.53	 	 	 	2.58	 	 	 	1.28	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 
	$ 9.60

	 	 	46.19	 	 	 	45.76	 	 	 	41.14	 	 	 	37.94	 	 	 	32.68	 	 	 	22.73	 	 	 	23.67	 	 	 	29.93	 	 	 	27.76	 	 	 	22.37	 	 	 	12.48	 	 	 	0.00	 	 	 	0.00	 
	$ 10.40

	 	 	88.63	 	 	 	87.15	 	 	 	80.98	 	 	 	75.97	 	 	 	68.26	 	 	 	55.21	 	 	 	54.65	 	 	 	59.86	 	 	 	56.28	 	 	 	48.78	 	 	 	35.24	 	 	 	12.85	 	 	 	0.00	 
	$ 11.20

	 	 	132.03	 	 	 	129.58	 	 	 	121.97	 	 	 	115.23	 	 	 	105.13	 	 	 	88.76	 	 	 	86.49	 	 	 	90.93	 	 	 	86.34	 	 	 	77.33	 	 	 	61.02	 	 	 	32.23	 	 	 	0.00	 
	$ 12.00

	 	 	176.29	 	 	 	172.94	 	 	 	164.00	 	 	 	155.64	 	 	 	143.21	 	 	 	123.38	 	 	 	119.01	 	 	 	122.90	 	 	 	117.70	 	 	 	107.73	 	 	 	89.52	 	 	 	55.84	 	 	 	0.00	 
	$ 12.80

	 	 	221.31	 	 	 	217.14	 	 	 	206.98	 	 	 	197.10	 	 	 	182.45	 	 	 	159.05	 	 	 	152.08	 	 	 	155.61	 	 	 	150.10	 	 	 	139.68	 	 	 	120.42	 	 	 	83.51	 	 	 	0.00	 
	$ 13.60

	 	 	267.04	 	 	 	262.10	 	 	 	250.83	 	 	 	239.55	 	 	 	222.79	 	 	 	195.80	 	 	 	185.55	 	 	 	188.88	 	 	 	183.37	 	 	 	172.95	 	 	 	153.41	 	 	 	114.90	 	 	 	0.00	 
	$ 14.40

	 	 	308.48	 	 	 	305.24	 	 	 	300.69	 	 	 	295.32	 	 	 	282.31	 	 	 	273.42	 	 	 	262.00	 	 	 	253.34	 	 	 	234.13	 	 	 	208.88	 	 	 	174.70	 	 	 	123.86	 	 	 	0.00	 
	$ 15.20

	 	 	299.13	 	 	 	295.54	 	 	 	290.61	 	 	 	284.79	 	 	 	271.27	 	 	 	261.78	 	 	 	249.68	 	 	 	240.21	 	 	 	220.07	 	 	 	193.71	 	 	 	158.20	 	 	 	105.85	 	 	 	0.00	 
	$ 16.00

	 	 	290.23	 	 	 	286.34	 	 	 	281.07	 	 	 	274.85	 	 	 	260.90	 	 	 	250.90	 	 	 	238.22	 	 	 	228.10	 	 	 	207.21	 	 	 	180.03	 	 	 	143.63	 	 	 	90.71	 	 	 	0.00	 
	$ 16.80

	 	 	281.74	 	 	 	277.58	 	 	 	272.01	 	 	 	265.46	 	 	 	251.13	 	 	 	240.71	 	 	 	227.55	 	 	 	216.90	 	 	 	195.43	 	 	 	167.66	 	 	 	130.77	 	 	 	78.07	 	 	 	0.00	 
	$ 17.60

	 	 	273.62	 	 	 	269.23	 	 	 	263.41	 	 	 	256.56	 	 	 	241.92	 	 	 	231.13	 	 	 	217.59	 	 	 	206.51	 	 	 	184.62	 	 	 	156.48	 	 	 	119.41	 	 	 	67.54	 	 	 	0.00	 
	$ 18.40

	 	 	265.84	 	 	 	261.25	 	 	 	255.20	 	 	 	248.11	 	 	 	233.20	 	 	 	222.12	 	 	 	208.26	 	 	 	196.87	 	 	 	174.67	 	 	 	146.34	 	 	 	109.37	 	 	 	58.82	 	 	 	0.00	 
	$ 19.20

	 	 	258.38	 	 	 	253.61	 	 	 	247.38	 	 	 	240.07	 	 	 	224.94	 	 	 	213.62	 	 	 	199.52	 	 	 	187.88	 	 	 	165.51	 	 	 	137.14	 	 	 	100.50	 	 	 	51.60	 	 	 	0.00	 
	$ 20.00

	 	 	251.21	 	 	 	246.28	 	 	 	239.89	 	 	 	232.41	 	 	 	217.10	 	 	 	205.58	 	 	 	191.29	 	 	 	179.50	 	 	 	157.04	 	 	 	128.76	 	 	 	92.63	 	 	 	45.63	 	 	 	0.00	 
	$ 20.80

	 	 	244.30	 	 	 	239.25	 	 	 	232.72	 	 	 	225.09	 	 	 	209.64	 	 	 	197.97	 	 	 	183.55	 	 	 	171.67	 	 	 	149.20	 	 	 	121.13	 	 	 	85.65	 	 	 	40.69	 	 	 	0.00	 
	$ 21.60

	 	 	237.65	 	 	 	232.48	 	 	 	225.84	 	 	 	218.09	 	 	 	202.53	 	 	 	190.75	 	 	 	176.24	 	 	 	164.32	 	 	 	141.93	 	 	 	114.15	 	 	 	79.45	 	 	 	36.61	 	 	 	0.00	 
	$ 22.40

	 	 	231.23	 	 	 	225.97	 	 	 	219.24	 	 	 	211.39	 	 	 	195.74	 	 	 	183.89	 	 	 	169.33	 	 	 	157.43	 	 	 	135.17	 	 	 	107.76	 	 	 	73.92	 	 	 	33.22	 	 	 	0.00	 
	$ 23.20

	 	 	225.03	 	 	 	219.69	 	 	 	212.88	 	 	 	204.96	 	 	 	189.25	 	 	 	177.36	 	 	 	162.79	 	 	 	150.95	 	 	 	128.88	 	 	 	101.90	 	 	 	68.98	 	 	 	30.40	 	 	 	0.00	 
	$ 24.00

	 	 	219.03	 	 	 	213.63	 	 	 	206.77	 	 	 	198.79	 	 	 	183.04	 	 	 	171.13	 	 	 	156.59	 	 	 	144.84	 	 	 	123.00	 	 	 	96.51	 	 	 	64.56	 	 	 	28.03	 	 	 	0.00	 
	$ 24.80

	 	 	213.22	 	 	 	207.77	 	 	 	200.87	 	 	 	192.86	 	 	 	177.09	 	 	 	165.18	 	 	 	150.69	 	 	 	139.07	 	 	 	117.50	 	 	 	91.54	 	 	 	60.58	 	 	 	26.05	 	 	 	0.00	 
	$ 25.60

	 	 	207.60	 	 	 	202.11	 	 	 	195.18	 	 	 	187.14	 	 	 	171.37	 	 	 	159.49	 	 	 	145.07	 	 	 	133.61	 	 	 	112.35	 	 	 	86.94	 	 	 	57.00	 	 	 	24.36	 	 	 	0.00	 
	$ 26.40

	 	 	202.14	 	 	 	196.63	 	 	 	189.68	 	 	 	181.63	 	 	 	165.88	 	 	 	154.05	 	 	 	139.72	 	 	 	128.45	 	 	 	107.51	 	 	 	82.68	 	 	 	53.75	 	 	 	22.92	 	 	 	0.00	 
	$ 27.20

	 	 	196.85	 	 	 	191.32	 	 	 	184.36	 	 	 	176.32	 	 	 	160.60	 	 	 	148.83	 	 	 	134.62	 	 	 	123.54	 	 	 	102.95	 	 	 	78.72	 	 	 	50.81	 	 	 	21.68	 	 	 	0.00	 
	$ 28.00

	 	 	191.71	 	 	 	186.17	 	 	 	179.21	 	 	 	171.19	 	 	 	155.51	 	 	 	143.81	 	 	 	129.74	 	 	 	118.88	 	 	 	98.66	 	 	 	75.04	 	 	 	48.12	 	 	 	20.59	 	 	 	0.00	 
	$ 28.80

	 	 	186.71	 	 	 	181.17	 	 	 	174.23	 	 	 	166.23	 	 	 	150.61	 	 	 	139.00	 	 	 	125.07	 	 	 	114.45	 	 	 	94.60	 	 	 	71.60	 	 	 	45.67	 	 	 	19.64	 	 	 	0.00	 
	$ 29.60

	 	 	181.86	 	 	 	176.32	 	 	 	169.40	 	 	 	161.43	 	 	 	145.88	 	 	 	134.37	 	 	 	120.59	 	 	 	110.22	 	 	 	90.77	 	 	 	68.38	 	 	 	43.42	 	 	 	18.79	 	 	 	0.00	 
	$ 30.40

	 	 	177.13	 	 	 	171.60	 	 	 	164.71	 	 	 	156.79	 	 	 	141.31	 	 	 	129.91	 	 	 	116.30	 	 	 	106.18	 	 	 	87.13	 	 	 	65.36	 	 	 	41.34	 	 	 	18.02	 	 	 	0.00	 
	$ 31.20

	 	 	172.53	 	 	 	167.02	 	 	 	160.16	 	 	 	152.29	 	 	 	136.89	 	 	 	125.61	 	 	 	112.18	 	 	 	102.32	 	 	 	83.68	 	 	 	62.52	 	 	 	39.41	 	 	 	17.32	 	 	 	0.00	 
	$ 32.00

	 	 	168.05	 	 	 	162.56	 	 	 	155.74	 	 	 	147.92	 	 	 	132.61	 	 	 	121.46	 	 	 	108.21	 	 	 	98.63	 	 	 	80.39	 	 	 	59.85	 	 	 	37.63	 	 	 	16.67	 	 	 	0.00	 
	$ 32.80

	 	 	163.68	 	 	 	158.22	 	 	 	151.44	 	 	 	143.69	 	 	 	128.48	 	 	 	117.46	 	 	 	104.40	 	 	 	95.10	 	 	 	77.26	 	 	 	57.32	 	 	 	35.96	 	 	 	16.07	 	 	 	0.00	 
	$ 33.60

	 	 	159.42	 	 	 	154.00	 	 	 	147.27	 	 	 	139.58	 	 	 	124.47	 	 	 	113.59	 	 	 	100.72	 	 	 	91.70	 	 	 	74.28	 	 	 	54.93	 	 	 	34.40	 	 	 	15.51	 	 	 	0.00	 
	$ 34.40

	 	 	155.27	 	 	 	149.88	 	 	 	143.21	 	 	 	135.59	 	 	 	120.58	 	 	 	109.85	 	 	 	97.18	 	 	 	88.45	 	 	 	71.43	 	 	 	52.67	 	 	 	32.93	 	 	 	14.97	 	 	 	0.00	 
	$ 35.20

	 	 	151.22	 	 	 	145.87	 	 	 	139.25	 	 	 	131.71	 	 	 	116.82	 	 	 	106.23	 	 	 	93.76	 	 	 	85.31	 	 	 	68.71	 	 	 	50.51	 	 	 	31.55	 	 	 	14.46	 	 	 	0.00	 
	$ 36.00

	 	 	147.27	 	 	 	141.96	 	 	 	135.40	 	 	 	127.94	 	 	 	113.16	 	 	 	102.72	 	 	 	90.46	 	 	 	82.30	 	 	 	66.10	 	 	 	48.46	 	 	 	30.25	 	 	 	13.97	 	 	 	0.00	 

3

ANNEX II

SECTION 13(b) DEBT INCURRENCE TEST DEFINITIONS

Solely for purposes of the debt incurrence test set forth in Section 13(b) of this Note, the
following terms shall have the following meanings:

a. “Ableco” has the meaning specified in the preamble to the Financing Agreement,
dated as of July 3, 2007, by and among METALICO, INC., a Delaware corporation, each subsidiary of
the Borrower listed as a “Guarantor” on the signature pages thereto, the lenders from time to time
party thereto, ABLECO FINANCE LLC, a Delaware limited liability company, as collateral agent for
the Lenders, and Ableco, as administrative agent for the Lenders (the “Ableco Financing
Agreement”).

b. “Administrative Agent” has the meaning specified in the preamble to the Ableco
Financing Agreement.

c. “Affiliate” means, with respect to any Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, “control” of a Person means the power,
directly or indirectly, either to (i) vote 10% or more of the Capital Stock having ordinary voting
power for the election of directors of such Person or (ii) direct or cause the direction of the
management and policies of such Person whether by contract or otherwise. Notwithstanding anything
herein to the contrary, in no event shall any Agent or any Lender be considered an “Affiliate” of
any Loan Party.

d. “Agent” and “Agents” have the respective meanings specified in the preamble
to the Ableco Financing Agreement.

e. “Annaco” means, individually and collectively, Annaco, Inc., an Ohio corporation,
943 Hazel LLC, an Ohio limited liability company, and Ocanna Plant II LLC, an Ohio limited
liability company.

f. “Annaco Acquisition” means the acquisition by Metalico Akron of substantially all
of the assets of Annaco, Inc., an Ohio corporation, and the acquisition by Metalico Akron Realty of
all of the Capital Stock of Elizabeth Hazel LLC, an Ohio limited liability company, a wholly-owned
Subsidiary of 943 Hazel LLC, an Ohio limited liability company, and Melinda Hazel LLC, an Ohio
limited liability company, a wholly-owned Subsidiary of Ocanna Plant II LLC, an Ohio limited
liability company, all in accordance with the terms of the Annaco Acquisition Agreement.

g. “Annaco Acquisition Agreement” means that certain Agreement for Purchase of Assets,
dated as of June 29, 2007, by and among Annaco, Metalico Akron and Metalico Akron Realty.

h. “Beacon” means Beacon Energy Corp. (formerly known as AgriFuel Co.), a Delaware
corporation.

i. “Borrower” has the meaning specified in the preamble to the Ableco Financing
Agreement.

j. “Capitalized Lease” means, with respect to any Person, any lease of real or
personal property by such Person as lessee which is (i) required under GAAP to be capitalized on
the balance sheet of such Person or (ii) a transaction of a type commonly known as a “synthetic
lease” (i.e. a lease transaction that is treated as an operating lease for accounting purposes but
with respect to which payments of rent are intended to be treated as payments of principal and
interest on a loan for Federal income tax purposes).

k. “Capitalized Lease Obligations” means, with respect to any Person, obligations of
such Person and its Subsidiaries under Capitalized Leases, and, for purposes hereof, the amount of
any such obligation shall be the capitalized amount thereof determined in accordance with GAAP.

l. “Capital Stock” means (i) with respect to any Person that is a corporation, any and
all shares, interests, participations or other equivalents (however designated and whether or not
voting) of corporate stock, and (ii) with respect to any Person that is not a corporation, any and
all partnership, membership or other equity interests of such Person.

m. “CatCon Seller Subordinated Note” means a promissory note, dated January 25, 2008,
in the original principal amount of $3,859,786.64, made by Metalico CatCon to the order of American
CatCon Holdings.

n. “CatCon Subordination Agreement” means a Subordination Agreement, substantially in
the form of Exhibit S-2 of the Ableco Financing Agreement, by and among the Collateral Agent,
Foothill, and the holder of the CatCon Seller Subordinated Note.

o. “Collateral Agent” has the meaning specified in the preamble to the Ableco
Financing Agreement.

p. “Consolidated EBITDA” means, with respect to any Person for any period, the
Consolidated Net Income of such Person and its Subsidiaries for such period, plus (i)
without duplication, the sum of the following amounts of such Person and its Subsidiaries for such
period and to the extent deducted in determining Consolidated Net Income of such Person and its
Subsidiaries for such period: (A) Consolidated Net Interest Expense, (B) net income tax expense,
(C) depreciation expense, (D) amortization expense, (E) non-cash compensation charges, (F) non-cash
expenses relating to the Borrower’s ownership of the Capital Stock of Beacon, and (G) to the extent
actually paid during such period, fees and expenses related to the consummation of the transactions
contemplated to be closed on the Effective Date under the Ableco Financing Agreement and the
transactions contemplated by the Annaco Acquisition Agreement, minus non-cash gains
relating to the Borrower’s ownership of the Capital Stock of Beacon; provided that
Consolidated EBITDA of the Borrower and its Subsidiaries for each fiscal month during the period
from July 1, 2006 to June 30, 2007 shall be as mutually agreed to by the Borrower and the Agents;
provided further that, for the purposes of calculating Consolidated EBITDA
(other than for the purposes of calculating Excess Cash Flow) of the Borrower, the Consolidated
EBITDA of any Person acquired by, or of a Person substantially all of whose assets are being
acquired by, the Borrower or one or more of its Subsidiaries pursuant to an acquisition consented
to in writing by the Required Lenders during such period shall be included on a pro forma basis for
such period (as if the consummation of such acquisition and the incurrence or assumption of any
Indebtedness in connection therewith occurred on the first day of such period).

“Consolidated Funded Indebtedness” means, with respect to any Person at any date, all
Indebtedness for borrowed money or letters of credit of such Person, determined on a consolidated
basis in accordance with GAAP, which by its terms matures more than one year after the date of
calculation, and any such Indebtedness maturing within one year from such date which is renewable
or extendable at the option of such Person to a date more than one year from such date, including,
in any event, but without duplication, with respect to the Borrower and its Subsidiaries, the Term
Loan A, the Term Loan B, the Term Loan C, the amount of their Capitalized Lease Obligations, and
the amount of the Foothill Indebtedness, but excluding, in any event, the Convertible Subordinated
Debt to the extent permitted hereunder and the Indebtedness evidenced by the CatCon Subordinated
Note and the Niagara Seller Subordinated Note.

“Consolidated Net Income” means, with respect to any Person for any period, the net income
(loss) of such Person and its Subsidiaries for such period, determined on a consolidated basis and
in accordance with GAAP, but excluding from the determination of Consolidated Net Income (without
duplication) (a) any non-cash extraordinary or non-recurring gains or losses or non-cash gains or
losses from Dispositions, (b) restructuring charges, (c) effects of discontinued operations, (d)
interest that is paid-in-kind, (e) interest income, and (f) any tax refunds, net operating losses
or other net tax benefits received during such period on account of any prior period.

“Consolidated Net Interest Expense” means, with respect to any Person for any period, gross
cash interest expense of such Person and its Subsidiaries for such period determined on a
consolidated basis and in accordance with GAAP (including interest expense paid to Affiliates of
such Person), less (i) the sum of (A) interest income for such period and (B) gains for such period
on Hedging Agreements (to the extent not included in interest income above and to the extent 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 not included in such gross interest expense) and (B)
the upfront costs or fees for such period associated with Hedging Agreements (to the extent not
included in such gross interest expense), in each case, determined on a consolidated basis and in
accordance with GAAP.

“Contingent Obligation” means, with respect to any Person, any obligation of such Person
guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations
(“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly
or indirectly, including (i) the direct or indirect guaranty, endorsement (other than for
collection or deposit in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of the obligation of a primary obligor, (ii) the obligation to
make take-or-pay or similar payments, if required, regardless of nonperformance by any other party
or parties to an agreement, (iii) any obligation of such Person, whether or not contingent, (A) to
purchase any such primary obligation or any property constituting direct or indirect security
therefor, (B) to advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (C) to purchase property, assets,
securities or services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary obligation or (D)
otherwise to assure or hold harmless the holder of such primary obligation against loss in respect
thereof; provided, however, that the term “Contingent Obligation” shall not include any product
warranties extended in the ordinary course of business. The amount of any Contingent Obligation
shall be deemed to be an amount equal to the stated or determinable amount of the primary
obligation with respect to which such Contingent Obligation is made (or, if less, the maximum
amount of such primary obligation for which such Person may be liable pursuant to the terms of the
instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum
reasonably anticipated liability with respect thereto (assuming such Person is required to perform
thereunder), as determined by such Person in good faith.

“Convertible Notes” means the Senior Convertible Notes issued by the Borrower on May 1,
2008 in an aggregate original principal amount of $100,000,000.

“Convertible Notes Subordination Agreement” means the Subordination Agreement.

“Convertible Subordinated Debt” means the Indebtedness evidenced by the Convertible Notes;
provided that such Indebtedness is on terms and conditions (including payment terms, interest
rates, covenants, remedies, defaults and other material terms) reasonably satisfactory to the
Collateral Agent and the Required Lenders and is expressly subordinated in right of payment to all
Indebtedness of the Borrower under the Loan Documents by the execution and delivery of the
Convertible Notes Subordination Agreement.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute of similar import, and regulations thereunder, in each case, as in effect from
time to time. References to sections of ERISA shall be construed also to refer to any successor
sections.

“Effective Date” means the date, on or after July 3, 2007, on which all of the conditions
precedent set forth in Section 5.01 (Conditions to Loans – Conditions Precedent) of the Ableco
Financing Agreement are first satisfied or waived.

“Filing Authorization Letter” means a letter duly executed by each Loan Party authorizing
the Collateral Agent to file financing statements in such office or offices as may be necessary or,
in the opinion of the Collateral Agent, desirable to perfect the security interests purported to be
created by each Security Agreement.

“Financial Statements” means (i) the audited consolidated balance sheet of the Borrower and
its Subsidiaries for the Fiscal Year ended December 31, 2006, and the related consolidated
statement of operations, shareholders’ equity and cash flows for the Fiscal Year then ended, and
(ii) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries for the 3 months
ended March 31, 2007, and the related consolidated statement of operations, shareholder’s equity
and cash flows for the 3 months then ended.

“Foothill” means Wells Fargo Foothill, Inc., a California corporation.

“Foothill Indebtedness” means Indebtedness of the Loan Parties owing under the Foothill
Loan Agreement.

“Foothill Loan Agreement” means that certain Amended and Restated Loan and Security
Agreement, dated as of July 3, 2007, between Borrower, the Guarantors, and Foothill, as the same is
amended or modified from time to time.

“GAAP” means generally accepted accounting principles in effect from time to time in the
United States, applied on a consistent basis, provided that for the purpose of Section 7.03
(Covenants of the Loan Parties – Financial Covenants) of the Ableco Financing Agreement and the
definitions used therein, “GAAP” shall mean generally accepted accounting principles in effect on
the date hereof and consistent with those used in the preparation of the Financial Statements,
provided, further, that if there occurs after the date of the Ableco Financing Agreement any change
in GAAP that affects in any respect the calculation of any covenant contained in Section 7.03 of
the Ableco Financing Agreement, the Collateral Agent and the Borrower shall negotiate in good faith
amendments to the provisions of the Ableco Financing Agreement that relate to the calculation of
such covenant with the intent of having the respective positions of the Lenders and the Borrower
after such change in GAAP conform as nearly as possible to their respective positions as of the
date of the Ableco Financing Agreement and, until any such amendments have been agreed upon, the
covenants in Section 7.03 of the Ableco Financing Agreement shall be calculated as if no such
change in GAAP has occurred.

q. “Guarantor” and “Guarantors” (i) have the meanings specified therefor in
the preamble to the Ableco Financing Agreement, and (ii) include each other Person which
guarantees, pursuant to Section 7.01(b) or otherwise, all or any part of the Obligations.

r. “Guaranty” means (i) the guaranty of each Guarantor party hereto contained in
Article XI (“Events of Default”) of the Ableco Financing Agreement, and (ii) each other guaranty
made by any other Guarantor in favor of the Collateral Agent for the benefit of the Agents and the
Lenders pursuant to the requirements of Section 7.01(b) (“Affirmative Covenants – Additional
Guaranties and Collateral Security”) or otherwise.

s. “Hedging Agreement” means any interest rate, foreign currency, commodity or equity
swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to
protect against fluctuations in interest rates or currency, commodity or equity values (including
any option with respect to any of the foregoing and any combination of the foregoing agreements or
arrangements), and any confirmation executed in connection with any such agreement or arrangement.

t. “Indebtedness” means, with respect to any Person, without duplication, (i) all
indebtedness of such Person for borrowed money; (ii) all obligations of such Person for the
deferred purchase price of property or services (other than trade payables or other accounts
payable incurred in the ordinary course of such Person’s business and not outstanding for more than
90 days after the date such payable was created); (iii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments or upon which interest payments are
customarily made; (iv) all reimbursement, payment or other obligations and liabilities of such
Person created or arising under any conditional sales or other title retention agreement with
respect to property used or acquired by such Person, even though the rights and remedies of the
lessor, seller or lender thereunder may be limited to repossession or sale of such property; (v)
all Capitalized Lease Obligations of such Person; (vi) all obligations and liabilities, contingent
or otherwise, of such Person, in respect of letters of credit, acceptances and similar facilities;
(vii) all obligations and liabilities, calculated on a basis satisfactory to the Collateral Agent
and in accordance with accepted practice, of such Person under Hedging Agreements; (viii) all
Contingent Obligations; (ix) liabilities incurred under Title IV of ERISA with respect to any plan
(other than a Multiemployer Plan) covered by Title IV of ERISA and maintained for employees of such
Person or any of its ERISA Affiliates; (x) withdrawal liability incurred under ERISA by such Person
or any of its ERISA Affiliates with respect to any Multiemployer Plan; (xi) all monetary
obligations under any receivables factoring, receivable sales or similar transactions and all
monetary obligations under any synthetic lease, tax ownership/operating lease, off-balance sheet
financing or similar financing; and (xii) all obligations referred to in clauses (i) through (xi)
of this definition of another Person secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) a Lien upon property owned by such
Person, even though such Person has not assumed or become liable for the payment of such
Indebtedness. The Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture in which such Person is a general partner or a joint venturer.

u. “Intercompany Subordination Agreement” means the Intercompany Subordination
Agreement, dated as of the Effective Date, duly executed by each of the Loan Parties, substantially
in the form of Exhibit I-1 of the Ableco Financing Agreement.

v. “Intercreditor Agreement” means an Intercreditor Agreement, dated as of even date
herewith, substantially in the form of Exhibit I-2 of the Ableco Financing Agreement, by and
between the Collateral Agent and Foothill.

w. “Lender” and “Lenders” have the meanings specified in the preamble to the
Ableco Financing Agreement.

x. “Lien” means any mortgage, deed of trust, pledge, lien (statutory or otherwise),
security interest, charge or other encumbrance or security or preferential arrangement of any
nature, including any conditional sale or title retention arrangement, any Capitalized Lease and
any assignment, deposit arrangement or financing lease intended as, or having the effect of,
security.

y. “Loan” means the Term Loan A. the Term Loan B or the Term Loan C.

z. “Loan Document” means the Ableco Financing Agreement, the Term Loan A Funds Flow
Agreement, the Term Loan B Funds Flow Agreement, the Intercompany Subordination Agreement, any
Guaranty, any Security Agreement, any Mortgage, any Filing Authorization Letter, the Convertible
Notes Subordination Agreement, the Intercreditor Agreement, the Niagara Subordination Agreement,
the CatCon Subordination Agreement and any other agreement, instrument, and other document executed
and delivered pursuant hereto or thereto or otherwise evidencing or securing any Loan or any other
Obligation.

aa. “Loan Party” means the Borrower or any Guarantor.

bb. “Mortgage” means a mortgage, deed of trust or deed to secure debt, in form and
substance reasonably satisfactory to the Collateral Agent, made by a Loan Party in favor of the
Collateral Agent for the benefit of the Agents and the Lenders, securing the Obligations and
delivered to the Collateral Agent pursuant to the provisions hereof or otherwise.

cc. “Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3)
of ERISA to which any Loan Party or any of its ERISA Affiliates has contributed to, or has been
obligated to contribute, at any time during the preceding six (6) years.

dd. “Niagara Seller Subordinated Note” means a promissory note, dated October 31,
2005, in the original principal amount of $1,000,000 (with an outstanding principal balance of
approximately $625,000 as of May 31, 2007), made by Metalico Niagara to the order of Ange’s Scrap
Iron and Metal, Inc.

ee. “Niagara Subordination Agreement” means a Subordination Agreement, substantially
in the form of Exhibit S-1 of the Ableco Financing Agreement, by and among the Collateral Agent,
Foothill, and the holder of the Niagara Seller Subordinated Note.

ff. “Obligations” means all present and future indebtedness, obligations, and
liabilities of each Loan Party to the Agents and the Lenders, or any of them, under the Loan
Documents, whether or not the right of payment in respect of such claim is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable,
secured, unsecured, and whether or not such claim is discharged, stayed or otherwise affected by
any proceeding referred to in Section 9.01 of the Ableco Financing Agreement. Without limiting the
generality of the foregoing, the Obligations of each Loan Party under the Loan Documents include
(a) the obligation (irrespective of whether a claim therefor is allowed in any Insolvency
Proceeding) to pay principal, interest, charges, expenses, fees, attorneys’ fees and disbursements,
indemnities and other amounts payable by such Person under the Loan Documents, and (b) the
obligation of such Person to reimburse any amount in respect of any of the foregoing that any Agent
or any Lender (in its sole discretion) may elect to pay or advance on behalf of such Person.

gg. “Pro Rata Share” means:

hh. (a) with respect to a Lender’s obligation to make the Term Loan A and right to
receive payments of interest, fees, and principal with respect thereto, the percentage
obtained by dividing (i) such Lender’s Term Loan A Commitment, by (ii) the Total Term Loan A
Commitment, provided that if the Total Term Loan A Commitment has been reduced to zero, the
numerator shall be the aggregate unpaid principal amount of such Lender’s portion of the
Term Loan A and the denominator shall be the aggregate unpaid principal amount of the Term
Loan A,

ii. (b) with respect to a Lender’s obligation to make the Term Loan B and right to
receive payments of interest, fees, and principal with respect thereto, the percentage
obtained by dividing (i) such Lender’s Term Loan B Commitment, by (ii) the Total Term Loan B
Commitment, provided that if the Total Term Loan B Commitment has been reduced to zero, the
numerator shall be the aggregate unpaid principal amount of such Lender’s portion of the
Term Loan B and the denominator shall be the aggregate unpaid principal amount of the Term
Loan B, and

jj. (c) with respect to a Lender’s obligation to make the Term Loan C and right to
receive payments of interest, fees, and principal with respect thereto, the percentage
obtained by dividing (i) such Lender’s Term Loan C Commitment, by (ii) the Total Term Loan C
Commitment, provided that if the Total Term Loan C Commitment has been reduced to zero, the
numerator shall be the aggregate unpaid principal amount of such Lender’s portion of the
Term Loan C and the denominator shall be the aggregate unpaid principal amount of the Term
Loan C, and

kk. (d) with respect to all other matters (including the indemnification obligations
arising under Section 10.05 of the Ableco Financing Agreement (“Agents – Indemnification”))
regarding a Lender, the percentage obtained by dividing (i) the sum of the unpaid principal
amount of such Lender’s portion of the Term Loan A, the unpaid principal amount of such
Lender’s portion of the Term Loan B and the unpaid principal amount of such Lender’s portion
of the Term Loan C, by (ii) the sum of the aggregate unpaid principal amount of the Term
Loans.

ll. “Person” means an individual, corporation, limited liability company, partnership,
association, joint-stock company, trust, unincorporated organization, joint venture or other
enterprise or entity or Governmental Authority.

mm. “Required Lenders” means Lenders whose Pro Rata Shares (calculated under clause
(d) of the definition thereof) aggregate more than 50%.

nn. “Security Agreement” means a Security Agreement, in form and substance reasonably
satisfactory to Collateral Agent, made by a Loan Party in favor of the Collateral Agent for the
benefit of the Agents and the Lenders, securing the Obligations and delivered to the Collateral
Agent.

oo. “Subsidiary” means, with respect to any Person at any date, any corporation,
limited or general partnership, limited liability company, trust, estate, association, joint
venture or other business entity (i)the accounts of which would be consolidated with those of such
Person in such Person’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP or (ii) of which more than 50% of (A) the outstanding Capital
Stock having (in the absence of contingencies) ordinary voting power to elect a majority of the
board of directors or other managing body of such Person, (B) in the case of a partnership or
limited liability company, the interest in the capital or profits of such partnership or limited
liability company or (C) in the case of a trust, estate, association, joint venture or other
entity, the beneficial interest in such trust, estate, association or other entity business is, at
the time of determination, owned or controlled directly or indirectly through one or more
intermediaries, by such Person; provided, however, that on and prior to the
Effective Date and prior to the consummation of the Annaco Acquisition, all references herein or in
any other Loan Document to the Borrower and its Subsidiaries shall be determined as if the assets
of Annaco have been acquired pursuant to the Annaco Acquisition; provided further,
however, that on the date on which Totalcat Acquisition is to be consummated, but
immediately prior to the consummation thereof, all references herein or in any other Loan Document
to the Borrower and its Subsidiaries shall be determined as if the Capital Stock of Totalcat has
been acquired pursuant to the Totalcat Acquisition; provided further, however, that
so long as Beacon is not a Guarantor under the Ableco Financing Agreement, it shall not be deemed
to be a Subsidiary of the Borrower for any purpose under the Ableco Financing Agreement.

pp. “Term Loan A” has the meaning specified therefor in Section
2.01(a)(i).1

qq. “Term Loan A Commitment” means, with respect to each Lender, the commitment of
such Lender to make its portion of the Term Loan A to the Borrower in the amount set forth in
Schedule C-1 of the Ableco Financing Agreement, as the same may be terminated or reduced from time
to time in accordance with the terms of the Ableco Financing Agreement.

rr. “Term Loan A Funds Flow Agreement” means that certain Term Loan A Funds Flow
Agreement, dated as of the Effective Date, by and among Administrative Agent, the Lenders and each
Loan Party.

ss. “Term Loan B” has the meaning specified therefor in Section 2.01(a)(ii) of the
Ableco Financing Agreement.2

tt. “Term Loan B Funding Date” means the date on which all of the conditions precedent
set forth in Section 5.02 of the Ableco Financing Agreement are first satisfied or waived and the
borrowing of the Term Loan B shall have occurred.

uu. “Term Loan B Funds Flow Agreement” means that certain Term Loan B Funds Flow
Agreement, dated of the Term Loan B Funding Date, by and among Administrative Agent, the Lenders
and each Loan Party.

vv. “Term Loan C” has the meaning specified therefor in Section
2.01(a)(iii).3

ww. “Term Loan C Funding Date” has the meaning specified in the Second Amendment to
the Ableco Financing Agreement.

xx. “Total Term Loan A Commitment” means the sum of the amounts of the Lenders’ Term
Loan A Commitments, which amount is $32,000,000 as of the Effective Date.

yy. “Total Term Loan B Commitment” means the sum of the amounts of the Lenders’ Term
Loan B Commitments, which amount is $18,000,000 as of the Term Loan B Funding Date.

zz. “Total Term Loan C Commitment” means the sum of the amounts of the Lenders’ Term
Loan C Commitments, which amount is $17,150,000 as of the Term Loan C Funding Date.

aaa. “Totalcat” means Totalcat Group, Inc., a Delaware corporation.

bbb. “Totalcat Acquisition” means the acquisition by the Borrower of 82.5% of the
issued and outstanding Capital Stock of Totalcat, together with an option to purchase the remaining
Capital Stock of Totalcat, all in accordance with the terms of the Totalcat Acquisition Agreement.

ccc. “Totalcat Acquisition Agreement” means that certain Stock Purchase Agreement,
dated as of June 25, 2007, by and among each of the stockholders of Totalcat signatory thereto and
the Borrower.

ddd. “TTM EBITDA” means, as of any date of determination and with respect to a Person,
the Consolidated EBITDA of such Person and its Subsidiaries for the period of 12 consecutive months
most recently ended.

4

EXHIBIT I

METALICO, INC.

CONVERSION NOTICE

Reference is made to the Senior Convertible Note (the “Note”) issued to the undersigned by
Metalico, Inc. (the “Company”). In accordance with and pursuant to the Note, the undersigned
hereby elects to convert the amount of Principal (as defined in the Note) of the Note indicated
below into shares of Common Stock par value $0.001 per share (the “Common Stock”) of the Company,
as of the date specified below.

	 
	Date of Conversion:

	Aggregate amount of Principal to be converted:

	Please confirm the following information:

	Conversion Price:

	Number of shares of Common Stock to be issued:

	Please issue the Common Stock into which the Note is being converted in the

following name and to the following address:

	Issue to:

	Facsimile Number:

	Authorization:

	By:

	Title:

	Dated:

	Account Number:

	  (if electronic book entry transfer)

	Transaction Code Number:

	  (if electronic book entry transfer)

5

ACKNOWLEDGMENT

The Company hereby acknowledges this Conversion Notice and hereby directs Corporate Stock Transfer,
Inc. to issue the above indicated number of shares of Common Stock in accordance with the Transfer
Agent Instructions dated May 1, 2008 from the Company and acknowledged and agreed to by Corporate
Stock Transfer, Inc.

	 	 	 
	Metalico, Inc.

	By:

	 	

	
 
	 	Name:
	
 
	 	Title:

	1	 	Each Term Loan A Lender severally agrees to
make a term loan (collectively, the “Term Loan A”) to the Borrower
on the Effective Date, in an aggregate principal amount equal to the amount of
such Lender’s Term Loan A Commitment.

	2	 	During the Term Loan B Funding Period, each
Term Loan B Lender severally agrees to make a term loan (collectively, the
“Term Loan B”) to the Borrower on the Term Loan B Funding Date, in
an aggregate principal amount equal to the amount of such Lender’s Term
Loan Commitment.

	3	 	Each Term Loan C Lender severally agrees to
make a term loan (collectively, the “Term Loan C”) to the Borrower
on the Term Loan C Funding Date, in an aggregate principal amount equal to the
amount of such Lender’s Term Loan C Commitment.

6

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