Document:

NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES WHICH MAY BE ISSUABLE PURSUANT HERETO HAVE BEEN REGISTERED UNDER
      THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE BEING OFFERED PURSUANT
      TO AN EXEMPTION FROM REGISTRATION UNDER [REGULATION S (“REGULATION S”)]
      [REGULATION D (“REGULATION D”)] PROMULGATED UNDER THE ACT. 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 ACT, OR (B)
      AN
      OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, IN A GENERALLY
      ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR (II) UNLESS
      SOLD PURSUANT TO, AND IN ACCORDANCE WITH, RULE 144 OR RULE 144A UNDER THE ACT
      OR
      OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER
      THE
      ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS.
      NOTWITHSTANDING THE FOREGOING, SUBJECT TO COMPLIANCE WITH APPLICABLE SECURITIES
      LAWS, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
      SECURITIES.

    

    THIS
      NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THIS NOTE IN THE EVENT OF A PARTIAL
      CONVERSION. AS A RESULT, FOLLOWING ANY CONVERSION OF ANY PORTION OF THIS NOTE,
      THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN
      THE
      PRINCIPAL AMOUNT SET FORTH BELOW.

    

    SJ
      ELECTRONICS, INC.

    

    15%
      SENIOR SECURED CONVERTIBLE NOTE DUE 2009

    

    
      	
              Issuance
                Date: May___, 2008

            	
              Original
                Principal Amount:

              U.S.
                $_____________

            

    

    

    FOR
      VALUE RECEIVED,
      SJ ELECTRONICS, INC. (f/k/a ACHERON, INC.),
      a Nevada
      corporation (hereinafter called the “Company”), hereby promises to pay to the
      order of [NAME],
      [ADDRESS],
      or
      registered assigns (the “Holder”), the sum of                  
      Dollars
      ($                                        ),
      on the
      Maturity Date, and to pay interest on the unpaid principal balance hereof at
      the
      Applicable Rate from the date hereof, until the same becomes due and payable,
      whether at maturity or upon acceleration or by prepayment or repurchase in
      accordance with the terms hereof or otherwise. Any amount, including, without
      limitation, principal of or interest on this Note, the Optional Prepayment
      Price
      and the Repurchase Price, that is payable under this Note that is not paid
      when
      due shall bear interest at the Default Rate from the due date thereof until
      the
      same is paid (“Default Interest”). Regular interest shall accrue monthly and be
      payable on the Maturity Date. Regular interest on this Note shall be computed
      on
      the basis of a 360-day year of twelve 30-day months and actual days elapsed.
      No
      regular interest shall be payable on an interest payment date on any portion
      of
      the principal amount of this Note which shall have been prepaid prior to such
      interest payment date so long as the Company shall have complied in full with
      its obligations with respect to such prepayment.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    All
      payments of principal, premium, if any, interest, and other amounts on this
      Note
      shall be made in lawful money of the United States of America. All payments
      shall be made by wire transfer of immediately available funds to such account
      as
      the Holder may from time to time designate by written notice in accordance
      with
      the provisions of this Note. 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. Certain
      capitalized terms used in this Note are defined in Article I.

    

    The
      obligations of the Company under this Note shall rank in right of payment on
      a
      parity with all other unsubordinated obligations of the Company for indebtedness
      for borrowed money or the purchase price of property. This Note is issued
      pursuant to the Note Purchase Agreement and the Holder and this Note are subject
      to the terms and entitled to the benefits of the Note Purchase Agreement. This
      Note is entitled to the benefits of the Pledge and Security
      Agreement.

    

    This
      Note
      is one of a duly authorized issue of the Company’s 15% Senior Secured
      Convertible Notes due 2009 limited to an aggregate principal amount of
      $7,000,000.00 (excluding 15% Senior Secured Convertible Notes due 2009 issued
      in
      replacement of lost, stolen, destroyed or mutilated notes or issued on transfer
      of such notes). 

    

    The
      following terms shall apply to this Note:

    

    ARTICLE
      I

    

    DEFINITIONS

    

    1.1 Certain
      Defined Terms. (a)
      All
      the agreements or instruments herein defined shall mean such agreements or
      instruments as the same may from time to time be supplemented or amended or
      the
      terms thereof waived or modified to the extent permitted by, and in accordance
      with, the terms thereof and of this Note.

    

    (b) The
      following terms shall have the following meanings (such meanings to be equally
      applicable to both the singular and plural forms of the terms
      defined):

    

    
      
         

      

      
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    “Accredited
      Investor” means an “accredited investor” as that term is defined in Rule 501 of
      Regulation D under the 1933 Act.

    

    “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 the subject Person. For purposes of this definition,
“control” (including, with correlative meaning, the terms “controlled by” and
“under common control with”), as used with respect to any Person, shall mean the
      possession, directly or indirectly, of the power to direct or cause the
      direction of the management and policies of such Person, whether through the
      ownership of voting securities or by contract or otherwise.

    

    “Aggregation
      Parties” shall have the meaning provided in Section 6.7(a).

    

    “AMEX”
      means the American Stock Exchange, Inc.

    

    “Applicable
      Rate” means 6 percent per annum; provided, however,
      that if
      an Event of Default shall have occurred, then the Applicable Rate shall be
      increased to 12 percent per annum during the period from the date of such Event
      of Default until the date no Event of Default is continuing (or such lesser
      rate
      as shall be the highest rate permitted by applicable law).

    

    “Board
      of
      Directors” means the Board of Directors of the Company.

    

    “Board
      Resolution” means
      a
      copy of a resolution certified by the Secretary or an Assistant Secretary of
      the
      Company to have been duly adopted by the Board of Directors, or duly authorized
      committee thereof (to the extent permitted by applicable law), and to be in
      full
      force and effect on the date of such certification, and delivered to the
      Holder.

    

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

    

    “Collateral”
      shall have the meaning provided in the Security Agreement.

    

    “Collateral
      Agent” means Tri-State Title & Escrow, LLC, as collateral agent under the
      Security Agreement, or its successors.

    

    “Common
      Stock” means the Common Stock, par value $.001 per share, of the Company, or any
      shares of capital stock of the Company into which such shares shall be changed
      or reclassified after the Issuance Date.

    

    “Common
      Stock Equivalent” means any warrant, option, subscription or purchase right with
      respect to shares of Common Stock, any security convertible into, exchangeable
      for, or otherwise entitling the holder thereof to acquire, shares of Common
      Stock or any warrant, option, subscription or purchase right with respect to
      any
      such convertible, exchangeable or other security.

     

    
      
         

      

      
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    “Company”
      shall have the meaning provided in the first paragraph of this
      Note.

    

    “Company
      Certificate” means a certificate of the Company signed by an
      Officer.

    

    “Company
      Notice” means a Company Notice in the form attached hereto as Exhibit
      A.

    

    “Computed
      Market Price” shall
      mean the arithmetic average of the daily VWAPs for each of the three Trading
      Days immediately preceding the applicable Measurement Date (such VWAPs being
      appropriately and equitably adjusted for any stock splits, stock dividends,
      recapitalizations and the like occurring or for which the record date occurs
      during such three Trading Days).

    

    “Conversion
      Date” means the date on which a Conversion Notice is given in accordance with
      Section 6.2(a).

    

    “Conversion
      Notice” means
      a
      duly executed Notice of Conversion of 15% Senior Secured Convertible Note Due
      2009 substantially in the form of Exhibit
      C
      to this
      Note.

    

    “Conversion
      Price” means
      $1.30, subject to adjustment as provided in Section 6.3 hereof and Section
      6(i)
      of the Note Purchase Agreement.

    

    “Current
      Fair Market Value” when used with respect to the Common Stock as of a specified
      date means with respect to each share of Common Stock the average of the closing
      prices of the Common Stock sold on all securities exchanges (including the
      NYSE,
      the AMEX, the Nasdaq and the Nasdaq Capital Market) on which the Common Stock
      may at the time be listed, or, if there have been no sales on any such exchange
      on such day, the average of the highest bid and lowest asked prices on all
      such
      exchanges at the end of regular trading on such day, or, if on such day the
       Common Stock is not so listed, the average of 
the representative bid and asked prices quoted in  the  NASDAQ
      System as  of  4:00 p.m., New York City time, or, if on such day the
      Common Stock is not quoted in the NASDAQ System, the average of the highest
      bid
      and lowest asked price on such day in the domestic over-the-counter market
      as
      reported by the Pink Sheets, LLC, or any similar successor organization, in
      each
      such case averaged over a period of five Trading Days consisting of the day
      as
      of which the Current Fair Market Value of Common Stock is being determined
      (or
      if such day is not a Trading Day, the Trading Day next preceding such day)
      and
      the four consecutive Trading Days prior to such day. If on the date for which
      Current Fair Market Value is to be determined the Common Stock is not listed
      on
      any securities exchange or quoted in the NASDAQ System or the over-the-counter
      market, the Current Fair Market Value of Common Stock shall be the greater
      of
      (i) the highest price per share of Common Stock at which the Company has sold
      shares of Common Stock or Common Stock Equivalents during the 365 days prior
      to
      the date of such determination and (ii) the highest price per share which the
      Company could then obtain from a willing buyer (not an employee or director
      of
      the Company at the time of determination) for shares of Common Stock sold by
      the
      Company, from authorized but unissued shares, as determined in good faith by
      the
      Board of Directors.

     

    
      
         

      

      
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    “Current
      Market Price” shall
      mean the arithmetic average of the daily Market Prices per share of Common
      Stock
      for the five consecutive Trading Days immediately prior to the date in question;
      provided,
      however, that
      (1)
      if the “ex” date (as hereinafter defined) for any event (other than the issuance
      or distribution requiring such computation) that requires an adjustment to
      the
      Conversion Price pursuant to Section 6.3(a), (b), (c), (d) or (e), occurs during
      such five consecutive Trading Days, the Market Price for each Trading Day prior
      to the “ex” date for such other event shall be adjusted by multiplying such
      Market Price by the same fraction by which the Conversion Price is so required
      to be adjusted as a result of such other event, (2) if the “ex” date for any
      event (other than the issuance or distribution requiring such computation)
      that
      requires an adjustment to the Conversion Price pursuant to Section 6.3(a),
      (b),
      (c), (d) or (e), occurs on or after the “ex” date for the issuance or
      distribution requiring such computation and prior to the day in question, the
      Market Price for each Trading Day on and after the “ex” date for such other
      event shall be adjusted by multiplying such Market Price by the reciprocal
      of
      the fraction by which the Conversion Price is so required to be adjusted as
      a
      result of such other event, and (3) if the “ex” date for the issuance or
      distribution requiring such computation is prior to the day in question, after
      taking into account any adjustment required pursuant to clause (1) or (2) of
      this proviso, the Market Price for each Trading Day on or after such “ex” date
      shall be adjusted by adding thereto the amount of any cash and the fair market
      value (as determined by the Board of Directors in a manner consistent with
      any
      determination of such value for purposes of Section 6.3(d), whose determination
      shall be conclusive and described in a Board Resolution) of the evidences of
      indebtedness, shares of capital stock or assets being distributed applicable
      to
      one share of Common Stock as of the close of business on the day before such
      “ex” date. Notwithstanding the foregoing, whenever successive adjustments to the
      Conversion Price are called for pursuant to Section 6.3, such adjustments shall
      be made to the Current Market Price as may be necessary or appropriate to
      effectuate the intent of Section 6.3 and to avoid unjust or inequitable results
      as determined in good faith by the Board of Directors. For purposes of this
      definition, “‘ex’ date” shall mean, with respect to an event, a security, and a
      sale of such security, the first date on which the seller of such security,
      and
      not the buyer, will receive the benefit (or other effect) of the event as to
      such security.

    

    “Default
      Interest” shall have the meaning provided in the first paragraph of this
      Note.

    

    “Default
      Rate” means 20 percent per annum (or such lesser rate equal to the highest rate
      permitted by applicable law).

    

    “Disclosure
      Documents” shall have the meaning provided in the Note Purchase
      Agreement.

    

    “DTC”
      shall have the meaning provided in Section 6.2(b).

    

    “Eligible
      Bank” means a corporation organized or existing under the laws of the United
      States or any state, having combined capital and surplus of at least $100
      million and subject to supervision by federal or state authority and which
      has a
      branch located in New York, New York.

     

    
      
         

      

      
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    “Event
      of
      Default” shall have the meaning provided in Section 4.1.

    

    “Excluded
      Shares” shall have the meaning provided in Section 6.7.

    

    “Extended
      Optional Prepayment Date” means with respect to any portion of this Note to
      which Section 2.1(d) applies, the date that is 30 Trading Days after the latest
      date on which the Restricted Ownership Percentage no longer restricts the
      Holder’s right to convert the remaining Unconverted Portion, but in no event
      later than the Final Maturity Date.

    

    “FAST”
      shall have the meaning provided in Section 6.2(b)

    

    “Fundamental
      Change” means

    

     
      (a) Any
      consolidation or merger of the Company or any Subsidiary with or into another
      entity (other than a merger or consolidation of a Subsidiary into the Company
      or
      a wholly-owned Subsidiary in connection with which no change in outstanding
      Common Stock occurs) where the stockholders of the Company immediately prior
      to
      such transaction do not collectively own at least 51% of the outstanding voting
      securities of the surviving corporation of such consolidation or merger
      immediately following such transaction; or the sale of all or substantially
      all
      of the assets of the Company and the Subsidiaries in a single transaction or
      a
      series of related transactions; or

    

    (b) The
      occurrence of any transaction or event in connection with which all or
      substantially all the Common Stock shall be exchanged for, converted into,
      acquired for or constitute the right to receive consideration (whether by means
      of an exchange offer, liquidation, tender offer, consolidation, merger,
      combination, reclassification, recapitalization or otherwise) which is not
      all
      or substantially all common stock which is (or, upon consummation of or
      immediately following such transaction or event, will be) listed on a national
      securities exchange or approved for quotation on Nasdaq or any similar United
      States system of automated dissemination of transaction reporting of securities
      prices; or

    

    (c) The
      acquisition by a Person or entity or group of Persons or entities acting in
      concert as a partnership, limited partnership, syndicate or group, as a result
      of a tender or exchange offer, open market purchases, privately negotiated
      purchases or otherwise, of beneficial ownership of securities of the Company
      representing 50% or more of the combined voting power of the outstanding voting
      securities of the Company ordinarily (and apart from rights accruing in special
      circumstances) having the right to vote in the election of
      directors.

     

    
      
         

      

      
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    “Generally
      Accepted Accounting Principles” for any Person means the generally accepted
      accounting principles and practices applied by such Person from time to time
      in
      the preparation of its audited financial statements.

    

    “Holder”
      shall have the meaning provided in the first paragraph of this
      Note.

    

    “Holder
      Notice” means a Holder Notice in the form attached hereto as Exhibit
      B.

    

    “Indebtedness”
      means, when used with respect to any Person, without duplication:

    

    (1) all
      indebtedness, obligations and other liabilities (contingent or otherwise) of
      such Person for borrowed money (including obligations of such Person in respect
      of overdrafts, foreign exchange contracts, currency exchange agreements,
      currency purchase or similar agreements, Interest Rate Protection Agreements,
      and any loans or advances from banks, whether or not evidenced by notes or
      similar instruments) or evidenced by bonds, debentures, notes or other
      instruments for the payment of money, or incurred in connection with the
      acquisition of any property, services or assets (whether or not the recourse
      of
      the lender is to the whole of the assets of such Person or to only a portion
      thereof), other than any account payable or other accrued current liability
      or
      obligation to trade creditors incurred in the ordinary course of business in
      connection with the obtaining of materials or services; 

     

    (2) all
      reimbursement obligations and other liabilities (contingent or otherwise) of
      such Person with respect to letters of credit, bank guarantees, bankers’
acceptances, surety bonds, performance bonds or other guaranty of contractual
      performance; 

    

    (3) all
      obligations and liabilities (contingent or otherwise) in respect of (a) leases
      of such Person required, in conformity with Generally Accepted Accounting
      Principles, to be accounted for as capitalized lease obligations on the balance
      sheet of such Person and (b) any lease or related documents (including a
      purchase agreement) in connection with the lease of real property which provides
      that such Person is contractually obligated to purchase or cause a third party
      to purchase the leased property and thereby guarantee a minimum residual value
      of the leased property to the landlord and the obligations of such Person under
      such lease or related document to purchase or to cause a third party to purchase
      the leased property; 

    

    (4) all
      direct or indirect guaranties or similar agreements by such Person in respect
      of, and obligations or liabilities (contingent or otherwise) of such Person
      to
      purchase or otherwise acquire or otherwise assure a creditor against loss in
      respect of, indebtedness, obligations or liabilities of another Person of the
      kind described in clauses (1) through (3); 

    

    (5) any
      indebtedness or other obligations described in clauses (1) through (4) secured
      by any mortgage, pledge, lien or other encumbrance existing on property which
      is
      owned or held by such Person, regardless of whether the indebtedness or other
      obligation secured thereby shall be payable by or shall have been assumed by
      such Person; and 

     

    
      
         

      

      
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    (6) any
      and
      all deferrals, renewals, extensions and refundings of, or amendments,
      modifications or supplements to, any indebtedness, obligation or liability
      of
      the kind described in clauses (1) through (5). 

    

    “Interest
      Rate Protection Agreement” means, with respect to any Person, any interest rate
      swap agreement, interest rate cap or collar agreement or other financial
      agreement or arrangement designed to protect such Person against fluctuations
      in
      interest rates, as in effect from time to time.

    

    “Issuance
      Date” means May __, 2008.

    

    “Lien”
      means any mortgage, lien, pledge, security interest or other charge or
      encumbrance, including, without limitation, the lien or retained security title
      of a conditional vendor.

    

    “Majority
      Holders” means, at any time, the holders of a majority of
      the
      aggregate principal amount of this Note and the Other Notes outstanding at
      such
      time.

    

    “Market
      Price” with
      respect to any security on any day shall mean the closing bid price of such
      security on such day on the Nasdaq, the Nasdaq Capital Market, the NYSE or
      the
      AMEX, as applicable, or, if such security is not listed or admitted to trading
      on the Nasdaq, the Nasdaq Capital Market, the NYSE or the AMEX, on the principal
      national securities exchange or quotation system on which such security is
      quoted or listed or admitted to trading, in any such case as reported by
      Bloomberg, L.P. (or if such source ceases to be available, comparable source
      selected by the Holder and acceptable to the Company in its reasonable judgment)
      or, if not quoted or listed or admitted to trading on any national securities
      exchange or quotation system, the average of the closing bid and asked prices
      of
      such security on the over-the-counter market on the day in question, as reported
      by Pink Sheets, LLC, or a similar generally accepted reporting service, or
      if
      not so available, in such manner as furnished by any NYSE member firm selected
      from time to time by the Board of Directors for that purpose, or a price
      determined in good faith by the Board of Directors, whose determination shall
      be
      conclusive and described in a Board Resolution.

    

    “Maturity
      Date” means May __, 2009.

    

    “Measurement
      Date” means a date on which Computed Market Price is calculated.___

    

    “Nasdaq”
      means the Nasdaq Global Market.

    

    “1934
      Act” means the Securities Exchange Act of 1934, as amended.

    

    “1933
      Act” means the Securities Act of 1933, as amended.

     

    
      
         

      

      
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    “Note”
      means this instrument as originally executed, or if later amended or
      supplemented in accordance with its terms, then as so amended or supplemented.
      

    

    “Note
      Purchase Agreement” means the Note Purchase Agreement, dated as of May __, 2008,
      by and between the Company and the original Holder of this Note or its
      predecessor instrument.

    

    “NYSE”
      means the New York Stock Exchange, Inc.

    

    “Officer”
      means the Chairman of the Board, the Chief Executive Officer, the President
      or
      the Chief Financial Officer of the Company.

    

    “Optional
      Prepayment Date” means the Business Day on which this Note is to be prepaid
      pursuant to Section 2.1.

    

    “Optional
      Prepayment Notice” means an Optional Prepayment Notice in the form attached
      hereto as Exhibit
      D.

    

    “Optional
      Prepayment Period” means the period which commences on the date hereof and ends
      on the Maturity Date, provided
      that
      all
      conditions set forth in Section 2.1 have been met.

    

    “Optional
      Prepayment Price” means an amount in cash equal to the sum of (1) 125% of the
      outstanding principal amount of this Note plus
      (2)
      accrued and unpaid interest on such principal amount to the Optional Prepayment
      Date plus
      (3)
      accrued and unpaid Default Interest, if any, on the amount referred to in the
      immediately preceding clause (2) at the rate provided in this Note.

    

    “Other
      Notes” means the several 15% Senior Secured Convertible Notes due 2009, issued
      by the Company pursuant to the Note Purchase Agreement.

    

    “Pledge
      and Security Agreement” means the Pledge and Security Agreement, dated as of May
      __, 2008, by and between the Company and the Collateral Agent.

    

    “Permitted
      Indebtedness” means 

    

    (1) Indebtedness
      outstanding on the Issuance Date prior to issuance of this Note and reflected
      in
      the Company’s financial statements included in the Disclosure
      Documents;

    

    (2) Indebtedness
      evidenced by this Note and the Other Notes;

     

    
      
         

      

      
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    (3) Indebtedness
      outstanding on, or incurred after, the Issuance Date so long as (A) such
      Indebtedness (x) is incurred for the purpose of acquiring equipment owned or
      used or to be owned or used by the Company or any Subsidiary (or for the purpose
      of acquiring the capital stock or similar equity interests of a Subsidiary
      that
      is formed for the limited purpose of owning same and does not own or hold any
      other material assets) and does not exceed the purchase price of the equipment,
      capital stock or other equity interest so acquired plus reasonable transaction
      expenses and (y) if secured, is secured solely by the interest of the Company
      or
      one of its Subsidiaries in the equipment so acquired and rights related thereto
      or (B) is the reimbursement obligations and other liabilities (contingent or
      otherwise) of the Company or any Subsidiary with respect to letters of credit
      issued in lieu of cash security deposits for leases of real property or
      equipment used by the Company or any Subsidiary, or commercial or standby
      letters of credit issued in the ordinary course of the business of the Company
      and its Subsidiaries (the amount of which shall for this purpose be deemed
      to be
      the maximum reimbursement obligations and other liabilities (contingent or
      otherwise) with respect to such letters of credit, whether or not a drawing
      thereunder has been made);

    

    (4) Indebtedness
      incurred after the Issuance Date that is secured solely by raw materials, works
      in progress and finished goods inventory and accounts receivable in a financing
      by a bank, finance company or other institutional lender providing receivables
      or inventory financing;

    

    (5) Indebtedness
      incurred after the Issuance Date which is unsecured, subordinated to the Note
      and the Other Notes as to payment on terms approved in advance of such
      incurrence by the Majority Holders as evidenced by the written approval of
      the
      Majority Holders;

    

    (6) endorsements
      for collection or deposit in the ordinary course of business; 

    

    (7) in
      the
      case of any Subsidiary, Indebtedness owed by such Subsidiary to the Company;
      and

    

    (8) Permitted
      Refinancing Indebtedness;

    

    in
      each
      such case so long as at the time of incurrence of such Indebtedness no Event
      of
      Default has occurred and is continuing or would result from such incurrence
      and
      no event which, with notice or passage of time, or both, would become an Event
      of Default has occurred and is continuing or would result from such incurrence
      and so long as in the case of such Indebtedness referred to in the preceding
      clauses (3) through (5), inclusive, incurrence of such Indebtedness shall have
      been approved by the Board of Directors prior to the incurrence
      thereof.

    

    “Permitted
      Liens” means:

    

    (a) Liens
      upon any property of any Subsidiary or Subsidiaries as security for indebtedness
      owing by such Subsidiary to the Company;

     

    
      
         

      

      
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    (b) purchase
      money Liens upon any property acquired by the Company or any Subsidiary or
      Liens
      existing on such property at the time of acquisition and in any such case
      securing Permitted Indebtedness described in clause (3) of the definition of
      the
      term Permitted Indebtedness; provided that (i) no such Lien shall extend to
      or
      cover any other property of the Company or any Subsidiary and (ii) the principal
      amount of Indebtedness secured by each such Lien on any such property shall
      not
      exceed the cost (including such principal amount of the Indebtedness secured
      thereby) to the Company or the Subsidiary of the property subject
      thereto;

    

    (c) Liens
      securing Indebtedness permitted under clause (4) of the definition of the term
      Permitted Indebtedness so long as in each such case such Lien does not extend
      to
      any property of the Company or the Subsidiaries other than the accounts
      receivable or inventory of the Company and the Subsidiaries so
      financed;

    

    (d) Liens
      securing this Note and the Other Notes ratably and not securing any other
      Indebtedness;

    

    (e) Liens
      for
      taxes or assessments or governmental charges or levies on property of the
      Company or a Subisidary if such taxes or assessments or charges or levies shall
      not at the time be due and payable or if the amount, applicability, or validity
      of any such tax, assessment, charge or levy shall currently be contested in
      good
      faith by appropriate proceedings or necessary preliminary steps are being taken
      to contest, compromise or settle the amount thereof or to determine the
      applicability or validity thereof and if the Company or such Subsidiary, as
      the
      case may be, shall have set aside on its books reserves (segregated to the
      extent required by sound accounting practice) deemed by it adequate with respect
      thereto; deposits or pledges to secure payment of worker's compensation,
      unemployment insurance, old age pensions or other social security; deposits
      or
      pledges to secure performance of bids, tenders, contracts (other than contracts
      for the payment of money borrowed or credit extended), leases, public or
      statutory obligations, surety or appeal bonds, or other deposits or pledges
      for
      purposes of like general nature in the ordinary course of business; mechanics',
      carriers', workers', repairmen's or other like Liens arising in the
      ordinary course of business securing obligations which are not overdue for
      a
      period of 180 days, or which are in good faith being contested or litigated,
      or
      deposits to obtain the release of such Liens; Liens created by or resulting
      from
      any litigation or legal proceedings or proceedings being contested in good
      faith
      by appropriate proceedings, provided any execution levied thereon shall be
      stayed; leases made, or existing on property acquired, in the ordinary course
      of
      business; landlords' Liens under leases to which the Company or any Subsidiary
      is a party; and zoning restrictions, easements, licenses or restrictions on
      the
      use of real property or minor irregularities in title thereto; provided that
      all
      such Liens described in this subsection (e) do not, in the aggregate, materially
      impair the use of such property in the operations of the business of the Company
      or any Subsidiary or the value of such property for the purpose of such
      business; and

     

    (f) Liens
      existing on the Issuance Date.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    “Permitted
      Refinancing Indebtedness” means any Indebtedness of the Company issued in
      exchange for, or the net proceeds of which are used to prepay, Indebtedness
      represented by this Note and the Other Notes in accordance with Section 2.1;
      provided that so long as on or before the date of incurrence of such Permitted
      Refinancing Indebtedness the Company shall have (a) given the Optional
      Prepayment Notice to the Holder and the holders of the Other Notes in accordance
      with Section 2.1 and (b) irrevocably deposited in trust with a trustee (other
      than the Company or any Subsidiary), for the exclusive benefit of the Holder
      and
      the holders of the Other Notes being prepaid, an amount at least equal to the
      aggregate amount that the Company will be obligated to pay in respect of such
      Indebtedness from such date to the date of payment in full of such
      Indebtedness.

    

    “Person”
      means any natural person, corporation, partnership, limited liability company,
      trust, incorporated organization, unincorporated association or similar entity
      or any government, governmental agency or political subdivision.

    

    “Principal
      Market” means, at any time, whichever of the OTCBB, Nasdaq, Nasdaq Capital
      Market, AMEX, NYSE or such other U.S. market or exchange is at the time the
      principal market on which the Common Stock is then listed for
      trading.

    

    “Record
      Date” shall
      mean, with respect to any dividend, distribution or other transaction or event
      in which the holders of Common Stock have the right to receive any cash,
      securities or other property or in which the Common Stock (or other applicable
      security) is exchanged for or converted into any combination of cash, securities
      or other property, the date fixed for determination of stockholders entitled
      to
      receive such cash, securities or other property (whether such date is fixed
      by
      the Board of Directors or by statute, contract or otherwise).

    

    “Registration
      Statement” means the Registration Statement required to be filed by the Company
      with the SEC pursuant to Section 8(a)(1) of the Note Purchase
      Agreement.

    

    “Repurchase
      Event” means the occurrence of any one or more of the following
      events:

    

    (a) Any
      Fundamental Change; or

    

    (b) The
      adoption of any amendment to the Company's Certificate of Incorporation (other
      than any certificate designating a series of preferred stock of the Company)
      which materially and adversely affects the rights of the Holder or the taking
      of
      any other action by the Company which materially and adversely affects the
      rights of the Holder in respect of the Holder’s interest in the Common Stock in
      a different and more adverse manner than it affects the rights of holders of
      Common Stock generally. 

    

    “Repurchase
      Price” means with respect to any repurchase pursuant to Sections 5.1 and 5.2 an
      amount in cash equal to the sum of (1) 100% of the outstanding principal amount
      of this Note that the Holder has elected to be repurchased plus
      (2)
      accrued and unpaid interest on such principal amount to the date of such
      repurchase plus
      (3)
      accrued and unpaid Default Interest, if any, thereon at the rate provided in
      this Note to the date of such repurchase.

    

    “Restricted
      Ownership Percentage” shall have the meaning provided in Section
      6.7(a).

     

    
      
         

      

      
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    “Rule
      144A” means Rule 144A as promulgated under the 1933 Act.

    

    “SEC”
      means the Securities and Exchange Commission.

     

    “SEC
      Effective Date” means the date the Registration Statement is first declared
      effective by the SEC.

    

    “Security
      Agreement” means the Pledge and Security Agreement.

    

    “Subsidiary”
      means any corporation or other entity of which a majority of the capital stock
      or other ownership interests having ordinary voting power to elect a majority
      of
      the board of directors or other Persons performing similar functions are at
      the
      time directly or indirectly owned by the Company.

    

    “Tender
      Offer” means a tender offer or exchange offer.

    

    “Trading
      Day” means at any time a day on which the Principal Market is open for general
      trading of securities.

    

    “Transaction
      Documents” means this Note, the Note Purchase Agreement, the Pledge and Security
      Agreement, the Collateral Agency Agreement, the Lockbox Agreement, the Guaranty,
      the Purchase Price Escrow Agreement and the other agreements, instruments and
      documents contemplated hereby and thereby.

    

    “Transfer
      Agent” means Interwest Transfer Co., Inc., or its successor as transfer agent
      and registrar for the Common Stock.

    

    “Trigger
      Event” shall have the meaning provided in Section 6.3(d).

    

    “Unconverted
      Portion” shall have the meaning provided in Section 2.1(d).

    

    “VWAP”
of
      any security on any Trading Day means the volume-weighted average price of
      such
      security on such Trading Day on the Principal Market, as reported by Bloomberg
      Financial, L.P., based on a Trading Day from 9:30 a.m., Eastern Time, to 4:00
      p.m., Eastern Time, using the AQR Function, for such Trading Day; provided,
      however,
      that
      during any period the VWAP is being determined, the VWAP shall be subject to
      equitable adjustments from time to time on terms consistent with Section 6.3
      and
      otherwise reasonably acceptable to the Majority Holders for (i) stock splits,
      (ii) stock dividends, (iii) combinations, (iv) capital reorganizations, (v)
      issuance to all holders of Common Stock of rights or warrants to purchase shares
      of Common Stock, (vi) distribution by the Company to all holders of Common
      Stock
      of evidences of indebtedness of the Company or cash (other than regular
      quarterly cash dividends), and (vii) similar events relating to the Common
      Stock, in each case which occur, or with respect to which the “ex” date occurs,
      during such period.

     

    
      
         

      

      
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    ARTICLE
      II

    

    OPTIONAL
      PREPAYMENT

    

    2.1 Optional
      Prepayment. 
      (a) At
      any time during the Optional Prepayment Period, the Company shall have the
      right
      to prepay at any one time all of the outstanding principal amount of this Note
      at the Optional Prepayment Price pursuant to this Section 2.1 on any
      Optional Prepayment Date, so long as the following conditions are
      met:

    

    (1) on
      the
      date the Company gives the Optional Prepayment Notice and at all times to and
      including the Optional Prepayment Date, no Event of Default and no event which,
      with notice or passage of time, or both, would become an Event of Default has
      occurred and is continuing, 

    

    (2) on
      the
      date the Company gives the Optional Prepayment Notice and at all times to and
      including the Optional Prepayment Date, no Repurchase Event has occurred with
      respect to which the Holder has the right to exercise repurchase rights pursuant
      to Sections 5.1 and 5.2 or with respect to which the Holder has exercised such
      repurchase rights and the Repurchase Price has not been paid to the Holder
      and
      no event which, with notice or passage of time, or both, would become a
      Repurchase Event has occurred and is continuing, and

    

    (3) on
      the
      date the Company gives the Optional Prepayment Notice, the Company (x) has
      funds
      available to pay the Optional Prepayment Price of this Note and the prepayment
      prices of the Other Notes, or (y) has funds which, together with the proceeds
      to
      be paid to the Company at the closing of a transaction in which the Company
      proposes to issue Permitted Refinancing Indebtedness, will be sufficient to
      pay
      the Optional Prepayment Price of this Note and the prepayment prices of the
      Other Notes.

    

    In
      order
      to exercise its right of prepayment under this Section 2.1, the Company
      shall give the Optional Prepayment Notice to the Holder not less than twenty
      (20) Trading Days or more than thirty (30) Trading Days prior to the Optional
      Prepayment Date stating: (1) that the Company is exercising its right to prepay
      this Note in accordance with this Section 2.1, (2) the principal amount of
      this Note to be prepaid, (3) the Optional Prepayment Price, (4) the Optional
      Prepayment Date and (5) that all of the conditions of this Section 2.1 entitling
      the Company to call this Note for prepayment have been met. On the Optional
      Prepayment Date (or such later date as the Holder surrenders this Note to the
      Company) the Company shall pay to or upon the order of the Holder, by wire
      transfer of immediately available funds to such account as shall be specified
      for such purpose by the Holder at least one Business Day prior to the Optional
      Prepayment Date, an amount equal to the Optional Prepayment Price of the portion
      (which may be all) of this Note to be prepaid. 

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    (b) In
      order
      that the Company shall not discriminate among the Holder and the holders of
      the
      Other Notes, the Company agrees that it shall not prepay any of the Other Notes
      pursuant to the provisions thereof similar to this Section 2.1 or
      repurchase or otherwise acquire any of the Other Notes (other than a mandatory
      prepayment pursuant to provisions of the Other Notes comparable to Article
      V)
      unless the Company offers simultaneously to prepay, repurchase or otherwise
      acquire this Note for cash at the same unit price as the Other Note or Other
      Notes.

    

    (c) The
      Company shall not be entitled to give an Optional Prepayment Notice or to prepay
      any portion of this Note with respect to which the Holder has given a Conversion
      Notice on or prior to the date the Company gives such Optional Prepayment
      Notice. Notwithstanding the giving of the Optional Prepayment Notice, the Holder
      shall be entitled to convert all or any portion of this Note, in accordance
      with
      the terms of this Note, by giving a Conversion Notice at any time on or prior
      to
      the later of (1) the date which is one Trading Day prior to the Optional
      Prepayment Date and (2) if the Company fails to pay and deliver to the Holder,
      or deposit in accordance with Section 7.10, the Optional Prepayment Price
      payable on the Optional Prepayment Date on or before the Optional Prepayment
      Date, the date on which the Company pays and delivers to the Holder, or deposits
      in accordance with Section 7.10, such Optional Prepayment Price. If after giving
      effect to any such conversion of this Note that occurs after the date the
      Company gives the Optional Prepayment Notice to the Holder, the principal amount
      of this Note remaining outstanding is less than the amount thereof to be prepaid
      as stated in the Optional Prepayment Notice, then the Optional Prepayment Price
      set forth in the Optional Prepayment Notice shall be adjusted to reflect the
      reduced outstanding principal amount of this Note and related accrued interest
      (and Default Interest, if any, thereon at the Default Rate) on the Optional
      Prepayment Date resulting from any such conversions of this Note after the
      Company gives the Optional Prepayment Notice to the Holder.

    

    (d) 
      Notwithstanding any other provision of this Note to the contrary, in case the
      Company shall give the Optional Prepayment Notice to the Holder, and on the
      date
      the Company gives the Optional Prepayment Notice or at any time thereafter
      to
      and including the Optional Prepayment Date, the Holder shall be restricted
      from
      converting any portion of this Note by reason of the Restricted Ownership
      Percentage (such portion, the “Unconverted Portion”), then the Optional
      Prepayment Date for such Unconverted Portion may, at the election of the Holder
      evidenced by notice to the Company given on or before the Optional Prepayment
      Date, be extended to be the Extended Optional Prepayment Date. On the
      applicable Extended Optional Prepayment Date, the Company shall pay the Optional
      Prepayment Price for any portion of this Note that it prepays on such Extended
      Optional Prepayment Date. Any portion of this Note for which there is an
      Extended Optional Prepayment Date shall remain convertible by the Holder in
      accordance with Section 6 at any time to and including the close of business
      on
      the Business Day prior to the applicable Extended Optional Prepayment
      Date.

    

    2.2 No
      Other Prepayment.
      Except
      as specifically provided in Section 2.1, this Note may not be prepaid, redeemed
      or repurchased at the option of the Company prior to the applicable Maturity
      Date, as the case may be. 

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    ARTICLE
      III

    

    CERTAIN
      COVENANTS

    

    So
      long
      as the Company shall have any obligation under this Note, unless otherwise
      consented to in advance by the Majority Holders:

    

    3.1 Limitations
      on Certain Indebtedness.
      The
      Company will not itself, and will not permit any Subsidiary to, create, assume,
      incur or in any manner become liable in respect of, including, without
      limitation, by reason of any business combination transaction (all of which
      are
      referred to herein as “incurring”), any Indebtedness other than Permitted
      Indebtedness.

    

    3.2 Payment
      of Obligations.
      The
      Company will pay and discharge, and will cause each Subsidiary to pay and
      discharge, all their respective material obligations and liabilities, including,
      without limitation, tax liabilities, except where the same may be contested
      in
      good faith by appropriate proceedings and the Company shall have established
      adequate reserves therefor on its books.

    

    3.3 Maintenance
      of Property.
      The
      Company will keep, and will cause each Subsidiary to keep, all property useful
      and necessary in its business in good working order and condition, ordinary
      wear
      and tear excepted.

    

    3.4 Conduct
      of Business and Maintenance of Existence.
      The
      Company will continue, and will cause each Subsidiary to continue, to engage
      in
      business of the same general type as now conducted by the Company and each
      Subsidiary, and will preserve, renew and keep in full force and effect, and
      will
      cause each Subsidiary to preserve, renew and keep in full force and effect
      their
      respective corporate existence and their respective rights, privileges and
      franchises necessary or desirable in the normal conduct of business except
      where
      (other than the Company’s corporate existence) the failure to do so would not
      have a material adverse effect on (i) the business, properties, operations,
      condition (financial or other), results of operation or prospects of the Company
      and the Subsidiaries, taken as a whole, (ii) the ability of the Company to
      perform and comply with its obligations under the Transaction Documents or
      (iii)
      the rights and remedies of the Holder or the Collateral Agent under or in
      connection with the Transaction Documents.

    

     3.5 Compliance
      with Laws.
      The
      Company will comply, and will cause each Subsidiary to comply, in all material
      respects with all material applicable laws, ordinances, rules, regulations,
      decisions, orders and requirements of governmental authorities and courts
      (including, without limitation, environmental laws) except (i) where compliance
      therewith is contested in good faith by appropriate proceedings or (ii) where
      non-compliance therewith could not reasonably be expected to have a material
      adverse effect on the business, condition (financial or otherwise), operations,
      performance, properties or prospects of the Company and the Subsidiaries, taken
      as a whole.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    3.6 Investment
      Company Act.
      The
      Company will not be or become an open-end investment trust, unit investment
      trust or face-amount certificate company that is or is required to be registered
      under Section 8 of the Investment Company Act of 1940, as
      amended.

    

    3.7 Limitations
      on Asset Sales, Liquidations, Etc.; Certain Matters.
      The
      Company shall not

    

    (a) sell,
      convey or otherwise dispose of all or substantially all of the assets of the
      Company as an entirety or substantially as an entirety in a single transaction
      or in a series of related transactions; or

    

    (b) sell
      one
      or more Subsidiaries, or permit any one or more Subsidiaries to sell their
      respective assets, if such sale individually or in the aggregate is material
      to
      the Company and the Subsidiaries taken as a whole, other than any such sale
      or
      sales which individually or in the aggregate could not reasonably be expected
      to
      have a material adverse effect on (i) the business, properties, operations,
      condition (financial or other), results of operation or financial prospects
      of
      the Company and the Subsidiaries, taken as a whole, (ii) the validity or
      enforceability of, or the ability of the Company to perform its obligations
      under, the Transaction Documents, or (iii) the rights and remedies of the Holder
      under the terms of the Transaction Documents; or

    

    (c) liquidate,
      dissolve or otherwise wind up the affairs of the Company.

    

    3.8 Limitations
      on Liens. The
      Company will not itself, and will not permit any Subsidiary to, create, assume
      or suffer to exist any Lien upon all or any part of its property of any
      character, whether owned at the date hereof or thereafter acquired, except
      Permitted Liens.

    

    3.9 Transactions
      with Affiliates. The
      Company will not, and will not permit any Subsidiary, directly or indirectly,
      to
      pay any funds to or for the account of, make any investment (whether by
      acquisition of stock or Indebtedness, by loan, advance, transfer of property,
      guarantee or other agreement to pay, purchase or service, directly or
      indirectly, any Indebtedness, or otherwise) in, lease, sell, transfer or
      otherwise dispose of any assets, tangible or intangible, to, or participate
      in,
      or effect any transaction in connection with, any joint enterprise or other
      joint arrangement with, any Affiliate of the Company, except, on terms to the
      Company or such Subsidiary no less favorable than terms that could be obtained
      by the Company or such Subsidiary from a Person that is not an Affiliate of
      the
      Company, as determined in good faith by the Board of Directors.

     

    3.10 Certain
      Obligations.
      The
      Company shall not enter into any agreement which would adversely affect the
      Collateral Agent's Lien on and Security Interest in the Collateral. The Company
      shall perform, and comply in all material respects with each agreement it enters
      into relating to the Collateral, the failure to comply with which could affect
      the Collateral Agent's lien on and security interest in the
      Collateral.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    3.11 Notice
      of Defaults.
      The
      Company shall notify the Holder promptly, but in any event not later than ten
      business days after the Company becomes aware of the fact, of any failure by
      the
      Company to comply with this Article III.

     

    3.12 Listing
      Eligibility Reporting.
      The
      Company shall notify the Holder from time to time within five Business Days
      after the Company first learns that it does not meet any of the applicable
      requirements for the continued listing of the Common Stock on the Principal
      Market and shall make appropriate public announcement thereof so that the
      content of such notice shall not constitute material non-public information
      for
      purposes of the 1934 Act.

    

    ARTICLE
      IV

    

    EVENTS
      OF DEFAULT

    

    4.1 If
      any of
      the following events of default (each, an “Event of Default”) shall
      occur:

    

    (a) Failure
      to Pay Principal, Interest, Etc.
      The
      Company fails to pay the principal, the Optional Prepayment Price or the
      Repurchase Price hereof when due, whether at maturity, upon acceleration or
      otherwise, as applicable; or

    

    (b) Conversion
      and the Shares.
      The
      Company fails to issue or cause to be issued shares of Common Stock to the
      Holder or the holder of any Other Note upon exercise of the conversion rights
      of
      the Holder or such holder, in any such case within ten Trading Days after the
      due date therefor in accordance with the terms of this Note, any Other Note
      or
      fails to transfer any certificate for any such shares of Common Stock or any
      shares of Common Stock issued in payment of interest on this Note or any Other
      Note as and when required by this Note and the Note Purchase Agreement, as
      the
      case may be; or

    

    (c) Breach
      of Covenant. The
      Company (1) fails to comply in any material respect with any material provision
      of Article III of this Note or breaches any other material covenant or other
      material term or condition of this Note or any of the other Transaction
      Documents (other than as specifically provided in clauses (a), (b) or (c)(1)
      of
      this Section 4.1), and in the case of this clause (2) of this Section 4.1(c)
      only, such breach continues for a period of ten Trading Days after written
      notice thereof to the Company from the Holder; or

    

    (d) Breach
      of Representations and Warranties.
      Any
      representation or warranty of the Company made herein or in any agreement,
      statement or certificate given in writing pursuant hereto or in connection
      herewith (including, without limitation, the Transaction Documents) shall be
      false or misleading in any material respect when made; or

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    (e) Certain
      Voluntary Proceedings.
      The
      Company or any Subsidiary shall commence a voluntary case or other proceeding
      seeking liquidation, reorganization or other relief with respect to itself
      or
      its debts under any bankruptcy, insolvency or other similar law now or hereafter
      in effect or seeking the appointment of a trustee, receiver, liquidator,
      custodian or other similar official of it or any substantial part of its
      property, or shall consent to any such relief or to the appointment of or taking
      possession by any such official in an involuntary case or other proceeding
      commenced against it, or shall make a general assignment for the benefit of
      creditors, or shall fail generally to pay its debts as they become due or shall
      admit in writing its inability generally to pay its debts as they become due;
      or

    

    (f) Certain
      Involuntary Proceedings. An
      involuntary case or other proceeding shall be commenced against the Company
      or
      any Subsidiary seeking liquidation, reorganization or other relief with respect
      to it or its debts under any bankruptcy, insolvency or other similar law now
      or
      hereafter in effect or seeking the appointment of a trustee, receiver,
      liquidator, custodian or other similar official of it or any substantial part
      of
      its property, and such involuntary case or other proceeding shall remain
      undismissed and unstayed for a period of 60 consecutive days; or

    

    (g) Judgments. Any
      court
      of competent jurisdiction shall enter one or more final judgments against the
      Company or any Subsidiary or any of their respective properties or other assets
      in an aggregate amount in excess of $1,000,000, which is not vacated, bonded,
      stayed, discharged, satisfied or waived for a period of 30 consecutive days;
      or

    

    (h) Default
      Under Other Agreements and Instruments.
      (1) The
      Company or any Subsidiary shall (i) default in any payment with respect to
      any
      Indebtedness for borrowed money (other than this Note) which Indebtedness has
      an
      outstanding principal amount in excess of $1,000,000, individually or $2,000,000
      in the aggregate, for the Company and its Subsidiaries, beyond the period of
      grace, if any, provided in the instrument or agreement under which such
      Indebtedness was created or (ii) default in the observance or performance of
      any
      agreement, covenant or condition relating to any such Indebtedness or contained
      in any instrument or agreement evidencing, securing or relating thereto, or
      any
      other event shall occur or condition exist, the effect of which default or
      other
      event or condition is to cause, or to permit the holder or holders of such
      Indebtedness (or a trustee or agent on behalf of such holder or holders) to
      cause, any such Indebtedness to become due prior to its stated maturity and
      such
      default or event shall continue beyond the period of grace, if any, provided
      in
      the instrument or agreement under which such Indebtedness was created (after
      giving effect to any consent or waiver obtained and then in effect thereunder);
      or (2) any Indebtedness of the Company or any Subsidiary which has an
      outstanding principal amount in excess of $1,000,000, individually or $2,000,000
      in the aggregate, shall, in accordance with its terms, be declared to be due
      and
      payable, or required to be prepaid other than by a regularly scheduled or
      required payment prior to the stated maturity thereof; or

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    (i) Security
      Agreement.
      The
      occurrence of any “Event of Default” as defined in the Security Agreement;
      or

    

    (j) Delisting
      of Common Stock.
      The
      Common Stock shall cease to be listed on the Principal Market; 

    

    then,
      (W)
      upon the occurrence and during the continuation of any Event of Default
      specified in clause (a), (b), (c), (d), (g), (h), (i) or (j) of this
      Section 4.1, at the option of the Holder the Company shall, and upon the
      occurrence of any Event of Default specified in clause (e) or (f) of this
      Section 4.1, the Company shall, in any such case, pay to the Holder an
      amount equal to the sum of (1) 150% of the outstanding principal amount of
      this
      Note plus
      (2)
      accrued and unpaid interest on such principal amount to the date of payment
      plus
      (3)
      accrued and unpaid Default Interest, if any, thereon at the rate provided in
      this Note to the date of payment, (X) all other amounts payable hereunder or
      under any of the other Transaction Documents shall immediately become due and
      payable, all without demand, presentment or notice, all of which hereby are
      expressly waived, together with all costs, including, without limitation,
      reasonable legal fees and expenses of collection, (Y) the Collateral Agent
      shall
      be entitled to exercise all rights and remedies under the Pledge and Security
      Agreement, and (Z) the Holder shall be entitled to exercise all other rights
      and
      remedies available at law or in equity.

     

    ARTICLE
      V

    

    REPURCHASE
      UPON A REPURCHASE EVENT

    

    5.1 Repurchase
      Right Upon Repurchase Event.
      If a
      Repurchase Event occurs, in addition to any other right of the Holder, the
      Holder shall have the right, at the Holder’s option, to require the Company to
      repurchase all of this Note, or any portion hereof, on the repurchase date
      that
      is five Business Days after the date of the Holder Notice delivered with respect
      to such Repurchase Event. The Holder shall have the right to require the Company
      to repurchase all or any such portion of this Note if a Repurchase Event occurs
      at any time while any portion of the principal amount of this Note is
      outstanding at a price equal to the Repurchase Price. If the Holder exercises
      its right to require the repurchase of less than all of the outstanding
      principal amount of this Note, the Holder may specify the manner in which the
      principal amount repurchased shall be allocated between the outstanding
      installments of principal.

    

    5.2 Notices;
      Method of Exercising Repurchase Rights, Etc.
      (a) On
      or before the fifth Business Day after the occurrence of a Repurchase Event,
      the
      Company shall give to the Holder a Company Notice of the occurrence of the
      Repurchase Event and of the repurchase right set forth herein arising as a
      result thereof. Such Company Notice shall set forth:

    

    (i) the
      date
      by which the repurchase right must be exercised, and

     

    
      
         

      

      
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    (ii) a
      description of the procedure (set forth in this Section 5.2) which the
      Holder must follow to exercise the repurchase right.

    

    No
      failure of the Company to give a Company Notice or defect therein shall limit
      the Holder’s right to exercise the repurchase right or affect the validity of
      the proceedings for the repurchase of this Note or portion hereof.

    

    (b) To
      exercise the repurchase right, the Holder shall deliver to the Company on or
      before the 30th day after a Company Notice (or if no such Company Notice has
      been given, within 40 days after the Holder first learns of the Repurchase
      Event) (i) a Holder Notice setting forth the name of the Holder and the
      principal amount of this Note to be repurchased, and (ii) this Note, duly
      endorsed for transfer to the Company of the portion of the outstanding principal
      amount of this Note to be repurchased. A Holder Notice may be revoked by the
      Holder at any time prior to the time the Company pays the applicable Repurchase
      Price to the Holder.

    

    (c) If
      the
      Holder shall have given a Holder Notice, then on the date which is five Business
      Days after the date such Holder Notice is given (or such later date as the
      Holder surrenders this Note) the Company shall make payment in immediately
      available funds of the applicable Repurchase Price to such account as specified
      by the Holder in writing to the Company at least one Business Day prior to
      the
      applicable repurchase date.

    

    5.3 Other. (a)
      If
      the Company fails to repurchase on the applicable repurchase date this Note
      (or
      portion hereof) as to which the repurchase right has been properly exercised
      pursuant to this Article V, then the Repurchase Price for the portion (which,
      if
      applicable, may be all) of this Note which is required to have been so
      repurchased shall bear interest to the extent not prohibited by applicable
      law
      from the applicable repurchase date until paid at the Default Rate.

     

    (b) If
      a
      portion of this Note is to be repurchased, upon surrender of this Note to the
      Company in accordance with the terms of this Article V, the Company shall
      execute and deliver to the Holder without service charge, a new Note or Notes,
      having the same date hereof and containing identical terms and conditions,
      in
      such denomination or denominations as requested by the Holder in aggregate
      principal amount equal to, and in exchange for, the unrepurchased portion of
      the
      principal amount of the Note so surrendered.

     

    (c) A
      Holder
      Notice given by the Holder shall be deemed for all purposes to be in proper
      form
      unless the Company notifies the Holder within three Business Days after such
      Holder Notice has been given (which notice shall specify all defects in such
      Holder Notice), and any Holder Notice containing any such defect shall
      nonetheless be effective on the date given if the Holder promptly undertakes
      to
      correct all such defects. No such claim of defect shall limit or delay
      performance of the Company's obligation to repurchase any portion of this Note,
      the repurchase of which is not in dispute.

     

    
      
         

      

      
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    ARTICLE
      VI

    

    CONVERSION

    

    6.1 Right
      to Convert.  (a)
      Subject to and upon compliance with the provisions of this Note, the Holder
      shall have the right, at the Holder's option, at any time prior to the close
      of
      business on the Maturity Date (except that, if the Holder shall have exercised
      repurchase rights under Sections 5.1 and 5.2 or the Company shall have exercised
      its prepayment rights under Section 2.1, such conversion right shall terminate
      with respect to the portion of this Note to be repurchased or prepaid, as the
      case may be, at the close of business on the last Trading Day prior to the
      later
      of (x) the date the Company is required to make such repurchase or the Optional
      Prepayment Date, as the case may be, and (y) the date the Company pays or
      deposits in accordance with Section 7.10 the applicable Repurchase Price or
      the
      Optional Prepayment Price unless in any such case the Company shall default
      in
      payment due upon repurchase or prepayment hereof) to convert the principal
      amount of this Note, or any portion of such principal amount which is at least
      $1,000 (or such lesser principal amount of this Note as shall be outstanding
      at
      such time), plus accrued and unpaid interest, into that number of fully paid
      and
      non-assessable shares of Common Stock (as such shares shall then be constituted)
      obtained by dividing (1) the sum of (x) the principal amount of this Note or
      portion thereof being converted plus
      (y)
      accrued and unpaid interest on the portion of the principal amount of this
      Note
      being converted to the applicable Conversion Date plus
      (z)
      accrued and unpaid Default Interest, if any, on the amount referred to in the
      immediately preceding clause (y) to the applicable Conversion Date by
      (2)
      the
      Conversion Price in effect on the applicable Conversion Date, by giving a
      Conversion Notice in the manner provided in Section 6.2; provided,
      however, that,
      if
      at any time this Note is converted in whole or in part pursuant to this Section
      6.1, the Company does not have available for issuance upon such conversion
      as
      authorized and unissued shares or in its treasury at least the number of shares
      of Common Stock required to be issued pursuant hereto, then, at the election
      of
      the Holder made by notice from the Holder to the Company, this Note (or portion
      hereof as to which conversion has been requested), to the extent that sufficient
      shares of Common Stock are not then available for issuance upon conversion,
      shall be converted into the right to receive from the Company, in lieu of the
      shares of Common Stock into which this Note or such portion hereof would
      otherwise be converted and which the Company is unable to issue, payment in
      an
      amount equal to the product obtained by multiplying (x) the number of shares
      of
      Common Stock which the Company is unable to issue times
      (y)
      the
      arithmetic average of the Market Price for the Common Stock during the five
      consecutive Trading Days immediately prior to the applicable Conversion Date.
      Any such payment shall, for all purposes of this Note, be deemed to be a payment
      of principal plus a premium equal to the total amount payable less the principal
      portion of this Note converted as to which such payment is required to be made
      because shares of Common Stock are not then available for issuance upon such
      conversion. The Holder is not entitled to any rights of a holder of Common
      Stock
      until the Holder has converted this Note to Common Stock, and only to the extent
      this Note is deemed to have been converted to Common Stock under this Article
      VI. For purposes of Sections 6.5 and 6.6, whenever a provision references the
      shares of Common Stock into which this Note (or a portion hereof) is convertible
      or the shares of Common Stock issuable upon conversion of this Note (or a
      portion hereof) or words of similar import, any determination required by such
      provision shall be made as if a sufficient number of shares of Common Stock
      were
      then available for issuance upon conversion in full of this Note.

     

    
      
         

      

      
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    (b) In
      case
      the Company shall on or after the Issuance Date sell or issue any Common Stock
      or any securities convertible into or exchangeable for Common Stock for gross
      proceeds in excess of seven million dollars ($7,000,000) in aggregate, the
      Note
      shall automatically convert into such newly issued security in the most recent
      issuance for gross proceeds in excess of three million dollars ($3,000,000)
      at a
      conversion price which is lesser of (x) $1.30 per share or (y) a product
      obtained by multiplying average price per share or conversion price of such
      newly issued securities by 0.85.

    

    6.2 Exercise
      of Conversion Privilege; Issuance of Common Stock on Conversion; No Adjustment
      for Interest or Dividends. (a)
      In
      order to exercise the conversion privilege with respect to this Note, the Holder
      shall give a Conversion Notice (or such other notice which is acceptable to
      the
      Company) to the Company and the Transfer Agent or to the office or agency
      designated by the Company for such purpose by notice to the Holder. A Conversion
      Notice may be given by telephone line facsimile transmission to the numbers
      set
      forth on the form of Conversion Notice. 

    

    (b) As
      promptly as practicable, but in no event later than five Trading Days, after
      a
      Conversion Notice is given, the Company shall issue and shall deliver to the
      Holder or the Holder's designee the number of full shares of Common Stock
      issuable upon such conversion of this Note or portion hereof in accordance
      with
      the provisions of this Article and deliver a check or cash in respect of any
      fractional interest in respect of a share of Common Stock arising upon such
      conversion, as provided in Section 6.2(f) and, if applicable, any cash payment
      required pursuant to the proviso to the first sentence of Section 6.1 (which
      payment, if any, shall be paid no later than three Trading Days after the
      applicable Conversion Date). In lieu of delivering physical certificates for
      the
      shares of Common Stock issuable upon any conversion of this Note, provided
      the
      Company's transfer agent is participating in the Depository Trust Company
      (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the
      Holder, the Company shall use commercially reasonable efforts to cause its
      transfer agent electronically to transmit such shares of Common Stock issuable
      upon conversion to the Holder (or its designee), by crediting the account of
      the
      Holder’s (or such designee’s) broker with DTC through its Deposit Withdrawal
      Agent Commission system (provided that the same time periods herein as for
      stock
      certificates shall apply).

     

    
      
         

      

      
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    (c) Each
      conversion of this Note (or portion hereof) shall be deemed to have been
      effected on the applicable Conversion Date, and the person in whose name any
      certificate or certificates for shares of Common Stock shall be issuable upon
      such conversion shall be deemed to have become on such Conversion Date the
      holder of record of the shares represented thereby; provided,
      however, that
      if a
      Conversion Date is a date on which the stock transfer books of the Company
      shall
      be closed such conversion shall constitute the person in whose name the
      certificates are to be issued as the record holder thereof for all purposes
      on
      the next succeeding day on which such stock transfer books are open, but such
      conversion shall be at the Conversion Price in effect on the applicable
      Conversion Date.  Upon
      conversion of this Note or any portion hereof, the accrued and unpaid interest
      on this Note (or portion hereof) to (but excluding) the applicable Conversion
      Date shall be deemed to be paid to the Holder of this Note through receipt
      of
      such number of shares of Common Stock issued upon conversion of this Note or
      portion hereof as shall have an aggregate Current Fair Market Value on the
      Trading Day immediately preceding such Conversion Date equal to the amount
      of
      such accrued and unpaid interest.

     

    (d) No
      fractional shares of Common Stock shall be issued upon conversion of this Note
      but, in lieu of any fraction of a share of Common Stock which would otherwise
      be
      issuable in respect of such conversion, the Company may round the number of
      shares of Common Stock issued on such conversion up to the next highest whole
      share or may pay lawful money of the United States of America for such
      fractional share, based on a value of one share of Common Stock being equal
      to
      the Market Price of the Common Stock on the applicable Conversion
      Date.

    

    6.3 Adjustment
      of Conversion Price. The
      Conversion Price shall be adjusted from time to time by the Company as
      follows:

    

    (a) Adjustments
      for Certain Dividends and Distributions in Common Stock.
      In case
      the Company shall on or after the Issuance Date pay a dividend or make a
      distribution to all holders of the outstanding Common Stock in shares of Common
      Stock, the Conversion Price in effect at the opening of business on the date
      following the date fixed for the determination of stockholders entitled to
      receive such dividend or other distribution shall be reduced by multiplying
      such
      Conversion Price by a fraction of which the numerator shall be the number of
      shares of Common Stock outstanding at the close of business on the Record Date
      fixed for such determination and the denominator shall be the sum of such number
      of shares and the total number of shares constituting such dividend or other
      distribution, such reduction to become effective immediately after the opening
      of business on the day following the Record Date. If any dividend or
      distribution of the type described in this Section 6.3(a) is declared but not
      so
      paid or made, the Conversion Price shall again be adjusted to the Conversion
      Price which would then be in effect if such dividend or distribution had not
      been declared.

     

    
      
         

      

      
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    (b) Weighted
      Adjustments for Certain Issuances of Rights or Warrants. In
      case
      the Company shall on or after the Issuance Date issue rights or warrants (other
      than any rights or warrants referred to in Section 6.3(d)) to all holders of
      its
      outstanding shares of Common Stock entitling them (for a period expiring within
      45 days after the date fixed for the determination of stockholders entitled
      to
      receive such rights or warrants) to subscribe for or purchase shares of Common
      Stock at a price per share less than the Current Market Price on the Record
      Date
      fixed for the determination of stockholders entitled to receive such rights
      or
      warrants, the Conversion Price shall be adjusted so that the same shall equal
      the price determined by multiplying the Conversion Price in effect at the
      opening of business on the date after such Record Date by a fraction of which
      the numerator shall be the number of shares of Common Stock outstanding at
      the
      close of business on the Record Date plus the number of shares which the
      aggregate offering price of the total number of shares so offered would purchase
      at such Current Market Price, and the denominator shall be the number of shares
      of Common Stock outstanding on the close of business on the Record Date plus
      the
      total number of additional shares of Common Stock so offered for subscription
      or
      purchase. Such adjustment shall become effective immediately after the opening
      of business on the day following the Record Date fixed for determination of
      stockholders entitled to receive such rights or warrants. To the extent that
      shares of Common Stock are not delivered pursuant to such rights or warrants,
      upon the expiration or termination of such rights or warrants, the Conversion
      Price shall be readjusted to the Conversion Price which would then be in effect
      had the adjustments made upon the issuance of such rights or warrants been
      made
      on the basis of delivery of only the number of shares of Common Stock actually
      delivered. In the event that such rights or warrants are not so issued, the
      Conversion Price shall again be adjusted to be the Conversion Price which would
      then be in effect if such date fixed for the determination of stockholders
      entitled to receive such rights or warrants had not been fixed. In determining
      whether any rights or warrants entitle the holder to subscribe for or purchase
      shares of Common Stock at less than such Current Market Price, and in
      determining the aggregate offering price of such shares of Common Stock, there
      shall be taken into account any consideration received for such rights or
      warrants, the value of such consideration, if other than cash, to be determined
      by the Board of Directors. Notwithstanding the foregoing, if any of the
      adjustments as set forth in this Section 6.3(b) will require the Company to
      seek
      stockholder approval and such stockholder approval has not yet been obtained,
      then the adjustment shall not take effect until such stockholder approval is
      obtained. The Company shall use its commercially reasonable best efforts to
      obtain, as promptly as practicable, but in no event later than 90 days
      thereafter, the necessary stockholder approval.

    

    (c) Adjustments
      for Certain Subdivisions of the Common Stock. In
      case
      the outstanding shares of Common Stock shall on or after the Issuance Date
      be
      subdivided into a greater number of shares of Common Stock, the Conversion
      Price
      in effect at the opening of business on the earlier of the day following the
      day
      upon which such subdivision becomes effective and the day on which “ex-” trading
      of the Common Stock begins with respect to such subdivision shall be
      proportionately reduced, and conversely, in case outstanding shares of Common
      Stock shall be combined into a smaller number of shares of Common Stock, the
      Conversion Price in effect at the opening of business on the earlier of the
      day
      following the day upon which such combination becomes effective and the day
      on
      which “ex-” trading of the Common Stock with respect to such combination begins
      shall be proportionately increased, such reduction or increase, as the case
      may
      be, to become effective immediately after the opening of business on the earlier
      of the day following the day upon which such subdivision or combination becomes
      effective and the day on which “ex-” trading of the Common Stock begins with
      respect to such subdivision or combination.

     

    
      
         

      

      
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    (d) Adjustments
      for Certain Dividends and Distributions.
      In case
      the Company shall on or after the Issuance Date, by dividend or otherwise,
      distribute to all holders of its Common Stock shares of any class of capital
      stock of the Company (other than any dividends or distributions to which Section
      6.3(a) applies) or evidences of its indebtedness, cash or other assets
      (including securities, but excluding any rights or warrants referred to in
      Section 6.3(b) and dividends and distributions paid exclusively in cash and
      excluding any capital stock, evidences of indebtedness, cash or assets
      distributed upon a merger or consolidation to which Section 6.6 applies) (the
      foregoing hereinafter in this Section 6.3(d) called the “Securities”)), then, in
      each such case, subject to the second paragraph of this Section 6.3(d), the
      Conversion Price shall be reduced so that the same shall be equal to the price
      determined by multiplying the Conversion Price in effect immediately prior
      to
      the close of business on the Record Date with respect to such distribution
      by a
      fraction of which the numerator shall be the Current Market Price on such date
      less the fair market value (as determined by the Board of Directors, whose
      determination shall be conclusive and described in a Board Resolution) on such
      date of the portion of the Securities so distributed applicable to one share
      of
      Common Stock and the denominator shall be such Current Market Price, such
      reduction to become effective immediately prior to the opening of business
      on
      the day following the Record Date; provided,
      however, that
      in
      the event the then fair market value (as so determined) of the portion of the
      Securities so distributed applicable to one share of Common Stock is equal
      to or
      greater than the Current Market Price on the Record Date, in lieu of the
      foregoing adjustment, adequate provision shall be made so that the Holder shall
      have the right to receive upon conversion of this Note (or any portion hereof)
      the amount of Securities such holder would have received had such holder
      converted this Note (or portion hereof) immediately prior to such Record Date.
      In the event that such dividend or distribution is not so paid or made, the
      Conversion Price shall again be adjusted to be the Conversion Price which would
      then be in effect if such dividend or distribution had not been declared. If
      the
      Board of Directors determines the fair market value of any distribution for
      purposes of this Section 6.3(d) by reference to the actual or when issued
      trading market for any Securities comprising all or part of such distribution,
      it must in doing so consider the prices in such market over the same period
      used
      in computing the Current Market Price, to the extent possible.

    

    Rights
      or
      warrants distributed by the Company to all holders of Common Stock entitling
      the
      holders thereof to subscribe for or purchase shares of the Company's capital
      stock (either initially or under certain circumstances), which rights or
      warrants, until the occurrence of a specified event or events (a “Trigger
      Event”): (i) are deemed to be transferred with such shares of Common Stock; (ii)
      are not exercisable; and (iii) are also issued in respect of future issuances
      of
      Common Stock, shall not be deemed to have been distributed for purposes of
      this
      Section 6.3 (and no adjustment to the Conversion Price under this Section 6.3
      will be required) until the occurrence of the earliest Trigger Event. If any
      such rights or warrants, including any such existing rights or warrants
      distributed prior to the Issuance Date, are subject to Trigger Events, upon
      the
      satisfaction of each of which such rights or warrants shall become exercisable
      to purchase different securities, evidences of indebtedness or other assets,
      then the occurrence of each such Trigger Event shall be deemed to be such date
      of issuance and record date with respect to new rights or warrants (and a
      termination or expiration of the existing rights or warrants without exercise
      by
      the holder thereof) (so that, by way of illustration and not limitation, the
      dates of issuance of any such rights shall be deemed to be the dates on which
      such rights become exercisable to purchase capital stock of the Company, and
      not
      the date on which such rights may be issued, or may become evidenced by separate
      certificates, if such rights are not then so exercisable). In addition, in
      the
      event of any distribution of rights or warrants, or any Trigger Event with
      respect thereto, that was counted for purposes of calculating a distribution
      amount for which an adjustment to the Conversion Price under this Section 6.3
      was made (1) in the case of any such rights or warrants which shall all have
      been redeemed or repurchased without exercise by any holders thereof, the
      Conversion Price shall be readjusted upon such final prepayment or repurchase
      to
      give effect to such distribution or Trigger Event, as the case may be, as though
      it were a cash distribution, equal to the per share prepayment or repurchase
      price received by a holder or holders of Common Stock with respect to such
      rights or warrants (assuming such holder had retained such rights or warrants),
      made to all holders of Common Stock as of the date of such prepayment or
      repurchase, and (2) in the case of such rights or warrants which shall have
      expired or been terminated without exercise by any holders thereof, the
      Conversion Price shall be readjusted as if such rights and warrants had not
      been
      issued.

     

    
      
         

      

      
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    For
      purposes of this Section 6.3(d) and Sections 6.3(a) and (b), any dividend or
      distribution to which this Section 6.3(d) is applicable that also includes
      shares of Common Stock, or rights or warrants to subscribe for or purchase
      shares of Common Stock to which Section 6.3(b) applies (or both), shall be
      deemed instead to be (1) a dividend or distribution of the evidences of
      indebtedness, assets, shares of capital stock, rights or warrants other than
      such shares of Common Stock or rights or warrants to which Section 6.3(b)
      applies (and any Conversion Price reduction required by this Section 6.3(d)
      with
      respect to such dividend or distribution shall then be made) immediately
      followed by (2) a dividend or distribution of such shares of Common Stock or
      such rights or warrants (and any further Conversion Price reduction required
      by
      Sections 6.3(a) and (b) with respect to such dividend or distribution shall
      then
      be made), except (A) the Record Date of such dividend or distribution shall
      be
      substituted as “the date fixed for the determination of stockholders entitled to
      receive such dividend or other distribution”, “Record Date fixed for such
      determination” and “Record Date” within the meaning of Section 6.3(a) and as
“the date fixed for the determination of stockholders entitled to receive such
      rights or warrants”, “the Record Date fixed for the determination of the
      stockholders entitled to receive such rights or warrants” and “such Record Date”
within the meaning of Section 6.3(b) and (B) any shares of Common Stock included
      in such dividend or distribution shall not be deemed “outstanding at the close
      of business on the Record Date fixed for such determination” within the meaning
      of Section 6.3(a).

     

    
      
         

      

      
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    (e) Adjustments
      for Certain Cash Dividends.
      In case
      the Company shall on or after the Issuance Date, by dividend or otherwise,
      distribute to all holders of its Common Stock cash (excluding any cash that
      is
      distributed upon a merger or consolidation to which Section 6.5 applies or
      as
      part of a distribution referred to in Section 6.3(d)) in an aggregate amount
      that, combined with (1) the aggregate amount of any other such distributions
      to
      all holders of its Common Stock made exclusively in cash within the 12 months
      preceding the date of payment of such distribution, and in respect of which
      no
      adjustment pursuant to this Section 6.3(e) has been made, and (2) the aggregate
      of any cash plus the fair market value (as determined by the Board of Directors,
      whose determination shall be conclusive and set forth in a Board Resolution)
      of
      consideration payable in respect of any Tender Offer by the Company or any
      Subsidiary for all or any portion of the Common Stock concluded within the
      12
      months preceding the date of payment of such distribution, exceeds 1% of the
      product of (x) the Current Market Price on the Record Date with respect to
      such
      distribution times
      (y)
      the
      number of shares of Common Stock outstanding on such date, then, and in each
      such case, immediately after the close of business on such date, unless the
      Company elects to reserve such cash for distribution to the Holder upon the
      conversion of this Note (and shall have made adequate provision) so that the
      Holder will receive upon such conversion, in addition to the shares of Common
      Stock to which the Holder is entitled, the amount of cash which the Holder
      would
      have received if the Holder had, immediately prior to the Record Date for such
      distribution of cash, converted this Note into Common Stock, the Conversion
      Price shall be reduced so that the same shall equal the price determined by
      multiplying the Conversion Price in effect immediately prior to the close of
      business on such Record Date by a fraction (i) the numerator of which shall
      be
      equal to the Current Market Price on the Record Date less an amount equal to
      the
      quotient of (x) the excess of such combined amount over such 1% and (y) the
      number of shares of Common Stock outstanding on the Record Date and (ii) the
      denominator of which shall be equal to the Current Market Price on the Record
      Date; provided,
      however, that
      in
      the event the portion of the cash so distributed applicable to one share of
      Common Stock is equal to or greater than the Current Market Price of the Common
      Stock on the Record Date, in lieu of the foregoing adjustment, adequate
      provision shall be made so that the Holder shall have the right to receive
      upon
      conversion of this Note (or any portion hereof) the amount of cash the Holder
      would have received had the Holder converted this Note (or portion hereof)
      immediately prior to such Record Date. In the event that such dividend or
      distribution is not so paid or made, the Conversion Price shall again be
      adjusted to be the Conversion Price which would then be in effect if such
      dividend or distribution had not been declared.

    

    (f) Additional
      Reductions in Conversion Price.
      The
      Company may make such reductions in the Conversion Price, in addition to those
      required by Sections 6.3(a), (b), (c), (d), and (e), as the Board of Directors
      considers to be advisable to avoid or diminish any income tax to holders of
      Common Stock or rights to purchase Common Stock resulting from any dividend
      or
      distribution of stock (or rights to acquire stock) or from any event treated
      as
      such for income tax purposes.

    

    (g) De
      Minimus Adjustments.
      No
      adjustment in the Conversion Price shall be required unless such adjustment
      would require an increase or decrease of at least 1% in such price; provided,
      however, that
      any
      adjustments which by reason of this Section 6.3(h) are not required to be made
      shall be carried forward and taken into account in any subsequent adjustment.
      All calculations under this Article VI shall be made by the Company and shall
      be
      made to the nearest cent or to the nearest one hundredth of a share, as the
      case
      may be.

     

    
      
         

      

      
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    No
      adjustment need be made for a change in the par value of the Common Stock or
      from par value to no par value or from no par value to par value.

    

    (h)  Company
      Notice of Adjustments.
      Whenever
      the Conversion Price is adjusted as herein provided, the Company shall promptly,
      but in no event later than five days thereafter, give a notice to the Holder
      setting forth the Conversion Price after such adjustment and setting forth
      a
      brief statement of the facts requiring such adjustment, but which statement
      shall not include any information which would be material non-public information
      for purposes of the 1934 Act. Failure to deliver such notice shall not affect
      the legality or validity of any such adjustment.

    

    (i) Effectiveness
      of Certain Adjustments.
      In any
      case in which this Section 6.3 provides that an adjustment shall become
      effective immediately after a Record Date for an event, the Company may defer
      until the occurrence of such event (i) issuing to the Holder in connection
      with
      any conversion of this Note after such Record Date and before the occurrence
      of
      such event the additional shares of Common Stock issuable upon such conversion
      by reason of the adjustment required by such event over and above the Common
      Stock issuable upon such conversion before giving effect to such adjustment
      and
      (ii) paying to such holder any amount in cash in lieu of any fraction pursuant
      to Section 6.2(f).

    

    (j) Outstanding
      Shares.
      For
      purposes of this Section 6.3, the number of shares of Common Stock at any time
      outstanding shall not include shares held in the treasury of the Company but
      shall include shares issuable in respect of scrip certificates issued in lieu
      of
      fractions of shares of Common Stock. The Company will not pay any dividend
      or
      make any distribution on shares of Common Stock held in the treasury of the
      Company other than dividends or distributions payable only in shares of Common
      Stock.

    

    6.4 Effect
      of Reclassification, Consolidation, Merger or Sale.  (a)
      If
      any of the following events occur, namely:

    

    (i) any
      reclassification or change of the outstanding shares of Common Stock (other
      than
      a change in par value, or from par value to no par value, or from no par value
      to par value, or as a result of a subdivision or combination),

    

    (ii) any
      consolidation, merger or combination of the Company with another corporation
      as
      a result of which holders of Common Stock shall be entitled to receive stock,
      securities or other property or assets (including cash) with respect to or
      in
      exchange for such Common Stock, or

    

    (iii) any
      sale
      or conveyance of the properties and assets of the Company as, or substantially
      as, an entirety to any other corporation as a result of which holders of Common
      Stock shall be entitled to receive stock, securities or other property or assets
      (including cash) with respect to or in exchange for such Common
      Stock,

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

    then
      the
      Company or the successor or purchasing Person, as the case may be, shall execute
      with the Holder a written agreement providing that:

    

    (x) this
      Note
      shall be convertible into the kind and amount of shares of stock and other
      securities or property or assets (including cash) receivable upon such
      reclassification, change, consolidation, merger, statutory exchange,
      combination, sale or conveyance by the holder of the number of shares of Common
      Stock issuable upon conversion of this Note in full (assuming, for such
      purposes, a sufficient number of authorized shares of Common Stock available
      to
      convert this Note) immediately prior to such reclassification, change,
      consolidation, merger, statutory exchange, combination, sale or conveyance
      assuming such holder of Common Stock did not exercise such holder's rights
      of
      election, if any, as to the kind or amount of securities, cash or other property
      receivable upon such consolidation, merger, statutory exchange, combination,
      sale or conveyance (provided
      that, if
      the kind or amount of securities, cash or other property receivable upon such
      consolidation, merger, statutory exchange, sale or conveyance is not the same
      for each share of Common Stock in respect of which such rights of election
      shall
      not have been exercised (“non-electing share”), then for the purposes of this
      Section 6.4 the kind and amount of securities, cash or other property receivable
      upon such consolidation, merger, statutory exchange, combination, sale or
      conveyance for each non-electing share shall be deemed to be the kind and amount
      so receivable per share by a plurality of the non-electing shares),

    

    (y) in
      the
      case of any such successor or purchasing Person, upon such consolidation,
      merger, statutory exchange, combination, sale or conveyance such successor
      or
      purchasing Person shall be jointly and severally liable with the Company for
      the
      performance of all of the Company's obligations under this Note and the Note
      Purchase Agreement and

    

    (z) if
      registration or qualification is required under the 1933 Act or applicable
      state
      law for the public resale by the Holder of such shares of stock and other
      securities so issuable upon conversion of this Note, such registration or
      qualification shall be completed prior to such reclassification, change,
      consolidation, merger, statutory exchange, combination, sale or
      conveyance.

    

    Such
      written agreement shall provide for adjustments which shall be as nearly
      equivalent as may be practicable to the adjustments provided for in this
      Article. If, in the case of any such reclassification, change, consolidation,
      merger, statutory exchange, combination, sale or conveyance, the stock or other
      securities and assets receivable thereupon by a holder of shares of Common
      Stock
      includes shares of stock or other securities and assets of a corporation other
      than the successor or purchasing corporation, as the case may be, in such
      reclassification, change, consolidation, merger, statutory exchange,
      combination, sale or conveyance, then such written agreement shall also be
      executed by such other corporation and shall contain such additional provisions
      to protect the interests of the Holder as the Board of Directors shall
      reasonably consider necessary by reason of the foregoing, including, to the
      extent practicable, the provisions providing for the repurchase rights set
      forth
      in Article V herein.

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

     

    (b) The
      above
      provisions of this Section shall similarly apply to successive
      reclassifications, changes, consolidations, mergers, statutory exchanges,
      combinations, sales and conveyances.

    

    (c) If
      this
      Section 6.4 applies to any event or occurrence, Section 6.3 shall not
      apply.

    

    6.5 Reservation
      of Shares; Shares to Be Fully Paid; Listing of Common Stock.

    

    (a) The
      Company shall reserve and keep available, free from preemptive rights, out
      of
      its authorized but unissued shares of Common Stock or shares of Common Stock
      held in treasury, solely for issuance upon conversion of this Note, and in
      addition to the shares of Common Stock required to be reserved by the terms
      of
      the Other Notes, Warrants and the Other Warrants, sufficient shares to provide
      for the conversion of this Note from time to time as this Note is
      converted.

    

    (b) Before
      taking any action which would cause an adjustment reducing the Conversion Price
      below the then par value, if any, of the shares of Common Stock issuable upon
      conversion of this Note, the Company will take all corporate action which may,
      in the opinion of its counsel, be necessary in order that the Company may
      validly and legally issue shares of such Common Stock at such adjusted
      Conversion Price.

    

    (c) The
      Company covenants that all shares of Common Stock issued upon conversion of
      this
      Note will be fully paid and non-assessable by the Company and free from all
      taxes, liens and charges with respect to the issue thereof.

    

    (d) The
      Company covenants that if any shares of Common Stock to be provided for the
      purpose of conversion of, or payment of interest on, this Note hereunder require
      registration with or approval of any governmental authority under any federal
      or
      state law before such shares may be validly issued upon conversion or in payment
      of interest, the Company will in good faith and as expeditiously as possible
      endeavor to secure such registration or approval, as the case may
      be.

    

    (e) The
      Company covenants that, in the event the Common Stock shall be listed on the
      Nasdaq, the Nasdaq Capital Market, the NYSE, the AMEX or any other national
      securities exchange, the Company shall obtain and, so long as the Common Stock
      shall be so listed on such market or exchange, maintain approval for listing
      thereon of all Common Stock issuable upon conversion of or in payment of
      interest on this Note.

    

    6.6 Notice
      to Holder Prior to Certain Actions. In
      case
      on or after the Issuance Date:

    

    (a) the
      Company shall declare a dividend (or any other distribution) on its Common
      Stock
      (other than in cash out of retained earnings); or

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

     

    (b) the
      Company shall authorize the granting to the holders of its Common Stock of
      rights or warrants to subscribe for or purchase any share of any class or any
      other rights or warrants; or

    

    (c) the
      Board
      of Directors shall authorize any reclassification of the Common Stock of the
      Company (other than a subdivision or combination of its outstanding Common
      Stock, or a change in par value, or from par value to no par value, or from
      no
      par value to par value), or any consolidation or merger or other business
      combination transaction to which the Company is a party and for which approval
      of any stockholders of the Company is required, or the sale or transfer of
      all
      or substantially all of the assets of the Company; or

    

    (d) there
      shall be pending the voluntary or involuntary dissolution, liquidation or
      winding-up of the Company;

    

    the
      Company shall give the Holder, as promptly as possible but in any event at
      least
      ten Trading Days prior to the applicable date hereinafter specified, a notice
      stating (x) the date on which a record is to be taken for the purpose of such
      dividend, distribution or rights or warrants, or, if a record is not to be
      taken, the date as of which the holders of Common Stock of record to be entitled
      to such dividend, distribution or rights are to be determined, or (y) the date
      on which such reclassification, consolidation, merger, other business
      combination transaction, sale, transfer, dissolution, liquidation or winding-up
      is expected to become effective or occur, and the date as of which it is
      expected that holders of Common Stock of record who shall be entitled to
      exchange their Common Stock for securities or other property deliverable upon
      such reclassification, consolidation, merger, other business combination
      transaction, sale, transfer, dissolution, liquidation or winding-up shall be
      determined. Such notice shall not include any information which would be
      material non-public information for purposes of the 1934 Act. Failure to give
      such notice, or any defect therein, shall not affect the legality or validity
      of
      such dividend, distribution, reclassification, consolidation, merger, sale,
      transfer, dissolution, liquidation or winding-up. In the case of any such action
      of which the Company gives such notice to the Holder or is required to give
      such
      notice to the Holder, the Holder shall be entitled to give a Conversion Notice
      which is contingent on the completion of such action.

    

    6.7 Restricted
      Ownership Percentage Limitation.
      (a)
      Notwithstanding anything to the contrary contained herein, the number of shares
      of Common Stock that may be acquired at any time by the Holder upon conversion
      of the Note shall not exceed a number that, when added to the total number
      of
      shares of Common Stock deemed beneficially owned by such Holder that have
      limitations on the holder's right to convert, exercise or purchase similar
      to
      the limitation set forth herein (the “Excluded Shares”), together with all
      shares of Common Stock beneficially owned at such time (other than by virtue
      of
      the ownership of Excluded Shares) by Persons whose beneficial ownership of
      Common Stock would be aggregated with the beneficial ownership by the Holder
      for
      purposes of determining whether a group exists or for purposes of determining
      the Holder’s beneficial ownership (the “Aggregation Parties”), in either such
      case for purposes of Section 13(d) of the 1934 Act and Regulation 13D-G
      thereunder (including, without limitation, as the same is made applicable to
      Section 16 of the 1934 Act and the rules promulgated thereunder), would result
      in beneficial ownership by the Holder or such group of more than 9.9% of the
      shares of Common Stock for purposes of Section 13(d) or Section 16 of the 1934
      Act and the rules promulgated thereunder (as the same may be modified by a
      particular Holder as provided herein, the “Restricted Ownership Percentage”).
      The Holder shall have the right at any time and from time to time to reduce
      its
      Restricted Ownership Percentage immediately upon notice to the Company in the
      event and only to the extent that Section 16 of the 1934 Act or the rules
      promulgated thereunder (or any successor statute or rules) is changed to reduce
      the beneficial ownership percentage threshold thereunder to a percentage less
      than 10%. If at any time the limits in this Section 6.7 make the Note
      inconvertible in whole or in part, the Company shall not by reason thereof
      be
      relieved of its obligation to issue shares of Common Stock at any time or from
      time to time thereafter upon conversion of the Note as and when shares of Common
      Stock may be issued in compliance with such restrictions.

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

     

    (b) For
      purposes of this Section 6.7, in determining the number of outstanding shares
      of
      Common Stock at any time the Holder may rely on the number of outstanding shares
      of Common Stock as reflected in (1) the Company's then most recent Form 10-Q,
      Form 10-K or other public filing with the SEC, as the case may be, (2) a public
      announcement by the Company that is later than any such filing referred to
      in
      the preceding clause (1) or (3) any other notice by the Company or its transfer
      agent setting forth the number shares of Common Stock outstanding and knowledge
      the Holder may have about the number of shares of Common Stock issued upon
      conversions or exercises of this Note, the Other Notes, the Warrants, the Other
      Warrants or other Common Stock Equivalents by any Person, including the Holder,
      which are not reflected in the information referred to in the preceding clauses
      (1) through (3). Upon the written request of any Holder, the Company shall
      within three Business Days confirm in writing to such Holder the number of
      shares of Common Stock then outstanding. In any case, the number of outstanding
      shares of Common Stock shall be determined after giving effect to the conversion
      or exercise of Common Stock Equivalents, including the Notes and the Warrants,
      by the Holder or its Affiliates, in each such case subsequent to, the date
      as of
      which such number of outstanding shares of Common Stock was reported.

     

    ARTICLE
      VII

    

    MISCELLANEOUS

    

    7.1 Failure
      or Indulgency 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 privileges. All rights
      and remedies existing hereunder are cumulative to, and not exclusive of, any
      rights or remedies otherwise available. The Company stipulates that the remedies
      at law of the Holder in the event of any default or threatened default by the
      Company in the performance of or compliance with any of the terms of this Note
      are not and will not be adequate, and that such terms may be specifically
      enforced (x) by a decree for the specific performance of any agreement contained
      herein, including, without limitation, a decree for issuance of the shares
      of
      Common Stock (or other securities) issuable upon conversion of this Note or
      (y)
      by an injunction against a violation of any of the terms hereof or (z)
      otherwise.

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

     

    7.2 Notices.
      Except
      as otherwise specifically provided herein, any notice herein required or
      permitted to be given shall be in writing and may be personally served, sent
      by
      telephone line facsimile transmission or delivered by courier or sent by United
      States mail and shall be deemed to have been given upon receipt if personally
      served, sent by telephone line facsimile transmission or sent by courier or
      three days after being deposited in the facilities of the United States Postal
      Service, certified, with postage pre-paid and properly addressed, if sent by
      mail. For the purposes hereof, the address and facsimile line transmission
      number of the Holder shall be as furnished by the Holder for such purpose and
      shown on the records of the Company; and the address of the Company shall be
      SJ
      Electronics, Inc., 5F, No. 166, Sinhu 2nd
      Road,
      Neihu District, Taipei City, Taiwan, Attention: Agatha Shen (telephone line
      facsimile number 886-2-8791-1368). The Holder or the Company may change its
      address for notice by service of written notice to the other as herein
      provided.

    

    7.3 Amendment,
      Waiver.
      (a)
      Neither this Note or any Other Note nor any terms hereof or thereof may be
      changed, amended, discharged or terminated unless such change, amendment,
      discharge or termination is in writing signed by the Company and the Majority
      Holders, provided that no such change, amendment, discharge or termination
      shall, without the consent of the Holder and the holders of the Other Notes
      affected thereby (i) extend the scheduled Maturity Date of this Note or any
      Other Note, or reduce the rate or extend the time of payment of interest (other
      than as a result of waiving the applicability of any post-default increase
      in
      interest rates) hereon or thereon or reduce the principal amount hereof or
      thereof or the Repurchase Price or the Optional Prepayment Price hereof or
      thereof, (ii) increase or decrease the Conversion Price except as set forth
      in
      this Note, (iii) release the Collateral or reduce the amount of Collateral
      required to be deposited or maintained by the Company pursuant to the Security
      Agreement, except as expressly provided in the Security Agreement, (iv) amend,
      modify or waive any provision of this Section 7.3 or (v) reduce any
      percentage specified in, or otherwise modify, the definition of Majority
      Holders.  Notwithstanding
      anything to the contrary contained herein, no amendment or waiver shall increase
      or eliminate the Restricted Ownership Percentage, whether permanently or
      temporarily, unless, in addition to complying with the other requirements of
      this Note, such amendment or waiver shall have been approved in accordance
      with
      the General Corporation Law of the State of Nevada and the Company's By-laws
      by
      holders of the outstanding shares of Common Stock entitled to vote at a meeting
      or by written consent in lieu of such meeting.

     

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

     

    (b) Any
      term
      or condition of this Note may be waived by the Holder or the Company at any
      time
      if the waiving party is entitled to the benefit thereof, but no such waiver
      shall be effective unless set forth in a written instrument duly executed by
      or
      on behalf of the party waiving such term or condition. No waiver by any party
      of
      any term or condition of this Note, in any one or more instances, will be deemed
      to be or construed as a waiver of the same or any other term or condition of
      this Note on any future occasion.

    

    7.4 Assignability.
      This
      Note shall be binding upon the Company and its successors, and shall inure
      to
      the benefit of and be binding upon the Holder and its successors and permitted
      assigns. The Company may not assign its rights or obligations under this
      Note.

    

    7.5 Certain
      Expenses.  The
      Company shall pay on demand all expenses incurred by the Holder, including
      reasonable attorneys' fees and expenses, as a consequence of, or in connection
      with (x) any amendment or waiver of this Note or any other Transaction Document,
      (y) any default or breach of any of the Company’s obligations set forth in the
      Transaction Documents and (z) the enforcement or restructuring of any right
      of,
      including the collection of any payments due, the Holder under the Transaction
      Documents, including any action or proceeding relating to such enforcement
      or
      any order, injunction or other process seeking to restrain the Company from
      paying any amount due the Holder.

    

    7.6 Governing
      Law.
      This
      Note shall be governed by the internal laws of the State of New York, without
      regard to the principles of conflict of laws.

     

    7.7 Transfer
      of Note.
      This
      Note has not been and is not being registered under the provisions of the 1933
      Act or any state securities laws and this Note may not be transferred prior
      to
      the end of the holding period applicable to sales without volume restrictions
      under Rule 144 unless (1) the transferee is an “accredited investor” (as defined
      in Regulation D under the 1933 Act) and (2) the Holder shall have delivered
      to
      the Company an opinion of counsel, reasonably satisfactory in form, scope and
      substance to the Company, to the effect that this Note may be sold or
      transferred without registration under the 1933 Act. Prior to any such transfer,
      such transferee shall have represented in writing to the Company that such
      transferee has requested and received from the Company all information relating
      to the business, properties, operations, condition (financial or other), results
      of operations or prospects of the Company and the Subsidiaries deemed relevant
      by such transferee; that such transferee has been afforded the opportunity
      to
      ask questions of the Company concerning the foregoing and has had the
      opportunity to obtain and review the reports and other information concerning
      the Company which at the time of such transfer have been filed by the Company
      with the SEC pursuant to the 1934 Act. If such transfer is intended to assign
      the rights and obligations under Section 5, 8, 9 and 10 of the Note Purchase
      Agreement, such transfer shall otherwise be made in compliance with Section
      10(j) of the Note Purchase Agreement.

    

    7.8 Enforceable
      Obligation. The
      Company represents and warrants that at the time of the original issuance of
      this Note it received the full purchase price payable pursuant to the Note
      Purchase Agreement in an amount at least equal to the original principal amount
      of this Note, and that this Note is an enforceable obligation of the Company
      which is not subject to any offset, reduction, counterclaim or disallowance
      of
      any sort.

     

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

     

    7.9 Note
      Register; Replacement of Notes.
      The
      Company shall maintain a register showing the names, addresses and telephone
      line facsimile numbers of the Holder and the registered holders of the Other
      Notes. The Company shall also maintain a facility for the registration of
      transfers of this Note and the Other Notes and at which this Note and the Other
      Notes may be surrendered for split up into instruments of smaller denominations
      or for combination into instruments of larger denominations. Upon receipt by
      the
      Company of evidence reasonably satisfactory to it of the ownership of and the
      loss, theft, destruction or mutilation of this Note and (a) in the case of
      loss,
      theft or destruction, of indemnity from the Holder reasonably satisfactory
      in
      form to the Company (and without the requirement to post any bond or other
      security) or (b) in the case of mutilation, upon surrender and cancellation
      of
      this Note, the Company will execute and deliver to the Holder a new Note of
      like
      tenor without charge to the Holder.

    

    7.10 Payment
      of Note on Prepayment or Repurchase; Deposit of Optional Prepayment Price or
      Repurchase Price, Etc.
      (a)
      If
      this Note or any portion of this Note is to be prepaid as provided in Section
      2.1 or repurchased as provided in Sections 5.1 and 5.2 and any notice required
      in connection therewith shall have been given as provided therein and the
      Company shall have otherwise complied with the requirements of this Note with
      respect thereto, then this Note or the portion of this Note to be so prepaid
      or
      repurchased and with respect to which any such notice has been given shall
      become due and payable on the date stated in such notice at the Optional
      Prepayment Price or Repurchase Price. On and after the Optional Prepayment
      Date
      or repurchase date so stated in such notice, provided that the Company shall
      have deposited with an Eligible Bank on or prior to such Optional Prepayment
      Date or repurchase date, an amount in cash sufficient to pay the Optional
      Prepayment Price or Repurchase Price, interest on this Note or the portion
      of
      this Note to be so prepaid or repurchased shall cease to accrue, and this Note
      or such portion hereof shall be deemed not to be outstanding and shall not
      be
      entitled to any benefit  with respect to principal of or interest on the
      portion to be so prepaid or repurchased except to receive payment of the
      Optional Prepayment Price or Repurchase Price. On presentation and surrender
      of
      this Note or such portion hereof, this Note or the specified portion hereof
      shall be paid and repurchased at the Optional Prepayment Price or Repurchase
      Price. If a portion of this Note is to be prepaid or repurchased, upon surrender
      of this Note to the Company in accordance with the terms hereof, the Company
      shall execute and deliver to the Holder without service charge, a new Note
      or
      Notes, having the same date hereof and containing identical terms and
      conditions, in such denomination or denominations as requested by the Holder
      in
      aggregate principal amount equal to, and in exchange for, the unprepaid or
      unrepurchased portion of the principal amount of this Note so
      surrendered.

    

    (b) Upon
      the
      payment in full of all amounts payable by the Company under this Note or the
      deposit thereof as provided in Section 7.10(a), thereafter the obligations
      of
      the Company under this Note shall be as set forth in this Article VII, and,
      in
      the case of such deposit, to pay the Repurchase Price, from the funds so
      deposited. Upon such payment or deposit, any Event of Default which occurred
      prior to such payment or deposit by reason of one or more provisions of this
      Note with which the Company thereafter is no longer obligated to comply, then
      shall no longer exist.

     

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

     

    7.11 Construction.
      The
      language used in this Note will be deemed to be the language chosen by the
      Company and the original Holder of this Note (or its predecessor instrument)
      to
      express their mutual intent, and no rules of strict construction will be applied
      against the Company or the Holder.

     

    [Remainder
      of Page Intentionally Left Blank]

     

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Note to be signed in its name by its duly authorized
      officer on of the day and in the year first above written.

    

    Date:
      May
      __, 2008

    

      
        	
                SJ
                  ELECTRONICS, INC.

              
	 
	
                By:

              	 
	 	
                Name:

              
	 	
                Title:

              

      

    

     

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

     

    ASSIGNMENT

    

    FOR
      VALUE RECEIVED,
      _________________________ hereby sell(s), assign(s) and transfer(s) unto
      _________________________ (Please insert social security or other Taxpayer
      Identification Number of assignee: ______________________________) the within
      Note, and hereby irrevocably constitutes and appoints _________________________
      attorney to transfer the said Note on the books of SJ Electronics, Inc., a
      Nevada corporation (the “Company”), with full power of substitution in the
      premises.

    

    In
      connection with any transfer of the Note within the period prior to the
      expiration of the holding period applicable to sales thereof under Rule 144
      under the 1933 Act (or any successor provision) (other than any transfer
      pursuant to a registration statement that has been declared effective under
      the
      1933 Act), the undersigned confirms that such Note is being
      transferred:

     

    
      
        	
              	
                o

              	
                To
                  the Company or a subsidiary thereof;
                  or

              

      

      

      
        	
              	
                o

              	
                To
                  a “qualified institutional buyer” pursuant to and in compliance with Rule
                  144A; or

              

      

      

      
        	
              	
                o

              	
                To
                  a non-US Person and in compliance with Regulation S under the 1933
                  Act;
                  or

              

      

      

      
        	
              	
                o

              	
                Pursuant
                  to and in compliance with Rule 144 under the 1933
                  Act;

              

      

    

     

    and
      unless the box below is checked, the undersigned confirms that, to the knowledge
      of the undersigned, such Note is not being transferred to an Affiliate of the
      Company.

    

      
        
          
            	
                  	
                    o

                  	
                    The
                      transferee is an Affiliate of the
                      Company.

                  

          

        

      

    

     

    Capitalized
      terms used in this Assignment and not defined in this Assignment shall have
      the
      respective meanings provided in the Note.

    

     Dated:_____________________

     

      NAME:_____________________

    

    

     ___________________________

      Signature(s)

     

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

     

    Exhibit
      A

    

    COMPANY
      NOTICE

    (Section 5.2(a)
      of 15% Senior Secured Convertible Note due 2009)

    

    TO:  ______________________________

    (Name
      of
      Holder)

    

    

    (1) A
      Repurchase Event described in the 15% Senior Secured Convertible Note due 2009
      (the “Note”) of SJ Electronics, Inc., a Nevada corporation (the “Company”),
      occurred on                     ,
            .
      As a
      result of such Repurchase Event, the Holder is entitled to exercise its
      repurchase rights pursuant to Section 5.2 of the Note.

    

    (2) The
      Holder’s repurchase right must be exercised on or before               ,
             .

    

    (3) At
      or
      before the date set forth in the preceding paragraph (2), the Holder
      must:

    

    (a) deliver
      to the Company a Holder Notice, in the form attached as Exhibit
      B
      to the
      Note; and

    

    (b) the
      Note,
      duly endorsed for transfer to the Company of the portion of the principal amount
      to be repurchased.

    

    (4) Capitalized
      terms used herein and not otherwise defined herein have the respective meanings
      provided in the Note.

     

    Date:__________________

    

      
        	
                SJ
                  ELECTRONICS, INC.

              
	 
	
                By:

              	 
	 	
                Name:

              
	 	
                Title:

              

      

    

     

    
      
         

      

      
        40

        
          

        

      

      
         

      

    

     

    Exhibit
      B

    

    HOLDER
      NOTICE

    (Section 5.2(b)
      of 15% Senior Secured Convertible Note due 2009)

    

    TO:      
      SJ
      ELECTRONICS, INC.

    

    (1) Pursuant
      to the terms of the 15% Senior Secured Convertible Note due 2009 (the “Note”),
      the undersigned Holder hereby elects to exercise its right to require repurchase
      by the Company pursuant to Sections 5.2(a) and 5.2(b) of $                         
      of the
      Note, equal to the sum of $                    
      principal amount of the Note, $                    
      of
      accrued and unpaid interest on such principal amount and $                    
      of
      Default Interest on the Note at the Repurchase Price provided in the
      Note.

    

    (2) Capitalized
      terms used herein and not otherwise defined herein have the respective meanings
      provided in the Note.

     

    Date:________________

    

      
        	
                NAME
                  OF HOLDER:

              
	 
	 
	 
	
                By:

              	 
	 	
                Signature
                  of Registered Holder

              
	 	
                (Must
                  be signed exactly as name

              
	 	
                appears
                  in the Note)

              

      

    

     

    
      
         

      

      
        41

        
          

        

      

      
         

      

    

     

    Exhibit
      C

    

    NOTICE
      OF CONVERSION

    OF
      15% SENIOR SECURED CONVERTIBLE NOTE DUE 2009

    OF
      SJ ELECTRONICS, INC.

    

      
        	
                To:

              	
                SJ
                  Electronics, Inc.

              
	 	
                5F,
                  No. 166, Sinhu 2nd Road,

              
	 	
                Neihu
                  District, Taipei City, Taiwan

              
	 	 
	
                Attention:
                  Chief Financial Officer

              
	
                Facsimile
                  No.: (886) 8791-1368

              

      

    

    
 

    1. Pursuant
      to the terms of the 15% Senior Secured Convertible Note Due 2009 (the “Note”),
      the undersigned hereby elects to convert $_______________ of the Note, equal
      to
      the sum of $_______________ principal amount of the Note, $_______________
      of
      accrued and unpaid interest on such principal amount and $_______________ of
      Default Interest on such interest into shares of Common Stock of SJ Electronics,
      Inc., a Nevada corporation (the “Company”), at a Conversion Price per share
      equal to $_______________. Capitalized terms used herein and not otherwise
      defined herein have the respective meanings provided in the Note.

    

    2. The
      number of shares of Common Stock issuable upon the conversion of the Note to
      which this Notice relates is _______________ (the “Conversion Shares”).

    

    3. Please
      issue a certificate or certificates for _______________ shares of Common Stock
      in the name(s) specified immediately below or, if additional space is necessary,
      on an attachment hereto:

     

    _______________________________

    Name

    _______________________________

    Address

    _______________________________

    SS
      or Tax
      ID Number

     

    ________________________________________________________________________

    Delivery
      Instructions for Common Stock 

    

      
        	
                Date:________________

              	
                NAME
                  OF HOLDER:

              
	 	 
	 	 
	 	 
	 	
                By:

              	 
	 	 	
                Signature
                  of Registered Holder

              
	 	 	
                (Must
                  be signed exactly as name

              
	 	 	
                appears
                  in the Note.)

              

    

     

    
      
         

      

      
        42

        
          

        

      

      
         

      

    

       

    Exhibit
      D

    

    OPTIONAL
      PREPAYMENT NOTICE

    (Section 2.1
      of 15% Senior Secured

    Convertible
      Note due 2009)

    

    TO:_________________________________     

    (Name
      of
      Holder)

    

    (1) Pursuant
      to the terms of the 15% Senior Secured Convertible Note due 2009 (the “Note”),
      SJ Electronics, Inc., a Nevada corporation (the “Company”), hereby notifies the
      above-named Holder that the Company is exercising its right to prepay the Note
      in accordance with Section 2.1 of the Note as set forth below:

    

    (i) The
      principal amount of the Note to be prepaid is $             .

    

    (ii) The
      Optional Prepayment Price is $               .

    

    (iii) The
      Optional Prepayment Date is               .

    

    (2) All
      of
      the conditions specified in Section 2.1 of the Note entitling the Company to
      call the Note for prepayment have been satisfied.

    

    (3) Capitalized
      terms used herein and not otherwise defined herein have the respective meanings
      provided in the Note.

     

     Date:__________________

    

      
        	
                SJ
                  ELECTRONICS, INC.

              
	 
	
                By:

              	 
	 	
                Name:

              
	 	
                Title:

              

      

       

      
        
           

        

        
          43PLEDGE
      AND SECURITY AGREEMENT

     

    PLEDGE
      AND SECURITY AGREEMENT dated May __, 2008, made by SJ Electronics, Inc. (f/k/a
      Acheron, Inc.), a Nevada corporation (the “Pledgor”)
      and
      Agatha Shen, in favor of Tri-State Title & Escrow, LLC, in its capacity as
      collateral agent (the “Collateral
      Agent”)
      for
      and on behalf of the Noteholders (as defined below) (in such capacity, the
      “Pledgee”).

     

    W I T N E S S E T H:

     

    WHEREAS,
      Pledgor and each party listed as a "Investor" on the Schedule of Investors
      attached thereto (collectively, the “Investors”,
      and
      together with their respective successors and permitted assigns, collectively,
      the "Noteholders")
      are
      parties to the Note Purchase Agreement, dated as of the date hereof (as amended,
      restated, supplemented or otherwise modified from time to time in accordance
      with the terms thereof, the “Note
      Purchase Agreement”),
      pursuant to which the Pledgor will authorize and issue a new series of its
      senior secured convertible notes (as such Notes may be amended, restated,
      replaced or otherwise modified from time to time in accordance with the terms
      thereof, collectively, the "Notes"),
      which
      Notes shall be convertible into the Pledgor’s Shares, par value $.001, in
      accordance with the terms thereof;

     

    WHEREAS,
      Agatha Shen has executed and delivered a Guaranty dated the date hereof (as
      amended, restated, supplemented or otherwise modified from time to time in
      accordance with the terms thereof, the “Guaranty”)
      for
      the benefit of herself and the Noteholders, with respect to the Pledgor’s
      obligations under the Note Purchase Agreement, the Notes and the other
      Transaction Documents (as defined below); and

     

    WHEREAS,
      it is a condition precedent to the Noteholders purchasing the Notes pursuant
      to
      the Note Purchase Agreement that the Pledgor and Agatha Shen shall have agreed
      to pledge as collateral security to Pledgee, for themselves and the benefit
      of
      Noteholders and to the grant to Pledgee, for themselves and the benefit of
      Noteholders, of a security interest in and Lien on the
      Accounts Receivable of the Pledgor as defined in Section 2 (the “Accounts
      Receivable”)
      and
ten
      million (10,000,000) shares of Common Stock, owned by Agatha Shen, the Chairman
      of the Pledgor
      (the
“Pledged
      Shares”)
      subject to the terms and conditions hereof;
      

     

    WHEREAS,
      Pledgor has determined that the execution, delivery and performance of this
      Agreement directly benefits, and is in the best interest of,
      Pledgor;

     

    NOW,
      THEREFORE, in consideration of the premises and the agreements herein and in
      order to induce the Investors purchase the Notes pursuant to the Note Purchase
      Agreement, Pledgor hereby agrees with the Pledgee, for itself and the benefit
      of
      the Noteholders, as follows:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SECTION
      1. Definitions.
      

     

    Reference
      is hereby made to the Notes for a statement of the terms thereof. All terms
      used
      in this Agreement which are defined in the Notes, Note Purchase Agreement or
      in
      Article 8 or Article 9 of the Uniform Commercial Code currently in effect in
      the
      State of Nevada (the
      “Code”)
      and
      which are not otherwise defined herein shall have the same meanings herein
      as
      set forth therein. If a term used, but not defined, in this Agreement shall
      have
      been defined in both the Notes and the Note Purchase Agreement, such term as
      used in this Agreement shall have the meaning ascribed to such term in the
      Notes.

     

    SECTION
      2. Pledge
      and Grant of Security Interest.
      

     

    As
      collateral security for the prompt performance, observance and indefeasible
      payment in full of all of the Obligations (as defined in Section 3 hereof),
      Pledgor hereby pledges and collaterally assigns to the Pledgee, for itself
      and
      the benefit of the Noteholders, and grants to the Pledgee for the benefit of
      itself and the Noteholders a continuing security interest in and Lien on, (A)
      Agatha Shen’s right, title and interest in and to the Pledged Shares, and, (B)
      Pledgor’s right, title and interest in and to the Accounts Receivable (together
      with Pledged Shares, the “Pledged
      Collateral”).
      “Accounts Receivable” means all
      rights to payment for goods sold or leased or for services rendered, whether
      or
      not such rights have been earned by performance, except that all such rights
      to
      payment from Lite-On, Inc. are expressly excluded from Accounts
      Receivable.

     

    SECTION
      3. Security
      for Obligations.
      The
      security interest created hereby in the Pledged Collateral constitutes
      continuing collateral security for all of the following obligations, whether
      now
      existing or hereafter incurred (the “Obligations”):

     

    (a) all
      present and future indebtedness, obligations, and liabilities of Pledgor to
      Pledgee and the Noteholders under the Notes and the Guaranty, as applicable.
      Without limiting the generality of the foregoing, the Obligations include the
      obligation of Pledgor and Subsidary to pay principal, interest, charges,
      expenses, and disbursements, indemnities and other amounts each payable by
      Pledgor under the Notes and the Guaranty, as applicable, whether now existing
      or
      hereafter arising, whether arising before, during or after the initial or any
      renewal term of the Notes or after the commencement of any case with respect
      to
      Pledgor under the Bankruptcy Code (as defined in the Notes) or any similar
      statute (including the payment of interest and other amounts which would accrue
      and become due but for the commencement of such case, whether or not such
      amounts are allowed or allowable in whole or in part in such case);
      and

     

    (b) the
      obligation of Pledgor to reimburse any amount in respect of any of the foregoing
      that Pledgee or any Noteholder (in its sole discretion) may elect to pay or
      advance on behalf of Pledgor; provided, that such obligation or the amount
      related thereto is not being contested by Pledgor in good faith. Pledgor waives
      any rights it may have under the Code to demand any filing of termination
      statements (or similar filing) by Pledgee with respect to the Collateral, and
      Pledgee shall not be required to deliver such termination statements to Pledgor,
      or to file them with any filing office, in each case, unless and until all
      of
      the Obligations are paid in full and the Notes and Guaranty are terminated.
      

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    SECTION
      4. Delivery
      and Registration of Pledged Collateral.

     

    (a) Agatha
      Shen shall promptly cause the Pledged Shares to be registered or entered, as
      the
      case may be, in the name of the Pledgee, for the benefit of the Noteholders,
      or,
      upon the reasonable request of the Pledgee, otherwise cause the security
      interest held by the Pledgee, for the benefit of the Noteholders, to be
      perfected in accordance with the Code.

     

    (b) The
      Pledgor shall give, execute, deliver, file and/or record any financing
      statement, notice, instrument, document, agreement or other papers that may
      be
      necessary or desirable (in the judgment of Pledgee) to create, preserve, perfect
      or validate the security interest granted pursuant hereto or to enable Pledgee
      to exercise and enforce its rights hereunder with respect to such pledge and
      security interest.

     

    (c) If
      Pledgor shall receive, by virtue of the Pledgor’s being or having been an owner
      of any Pledged Collateral, any (i) stock certificate (including, without
      limitation, any certificate representing a stock dividend or distribution in
      connection with any increase or reduction of capital, reclassification, merger,
      consolidation, sale of assets, combination of shares, stock split, spin-off
      or
      split-off), or other instrument, (ii) option or right, whether as an addition
      to, substitution for, or in exchange for, any Pledged Collateral, or otherwise,
      (iii) dividends payable in cash (except such dividends permitted to be retained
      by the Pledgor pursuant to Section 7 hereof) or in securities or other property
      or (iv) dividends or other distributions in connection with a partial or total
      liquidation or dissolution or in connection with a reduction of capital, capital
      surplus or paid-in surplus, the Pledgor shall receive such stock certificate,
      instrument, option, right, payment or distribution in trust for the benefit
      of
      the Pledgee, shall segregate it from Pledgor’s other property and shall deliver
      it forthwith to the Pledgee, for the benefit of itself and the Noteholders,
      in
      the exact form received, with any necessary endorsement and/or appropriate
      stock
      powers duly executed in blank, to be held by the Pledgee as Pledged Collateral
      and as further collateral security for the Obligations.

     

    SECTION
      5. Representations
      and Warranties.
      The
      Pledgor represents and warrants that as of the date hereof that:

     

    (a) The
      Pledgor (i) is a corporation duly organized, validly existing and in good
      standing under the laws of the State of Nevada, and (ii) has all requisite
      power
      and authority to execute, deliver and perform this Agreement.

     

    (b) The
      execution, delivery and performance by the Pledgor of this Agreement and the
      Guaranty (i) have been duly authorized by all necessary action, (ii) do not
      and
      will not contravene its charter or by-laws, or any applicable law compliance
      with which is material to the business of the Pledgor or any Material Contract
      or any other contractual restriction binding on or otherwise affecting it or
      any
      of its properties where the contravention of such other contractual restriction
      has or could reasonably be expected to have a Material Adverse Effect, (iii)
      do
      not and will not result in or require the creation of any Lien upon or with
      respect to any of its properties other than pursuant to any Transaction Document
      and (iv) do not and will not result in any default, noncompliance,
      suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
      license, authorization or approval applicable to it or its operations or any
      of
      its properties
      where
      such default, noncompliance, suspension, revocation, impairment, forfeiture
      or
      nonrenewal has or could reasonably be expected to have a Material Adverse Effect
      (as defined in the Note Purchase Agreement).

     

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

     

    (c) The
      Pledged Shares to the extent applicable have been duly authorized and validly
      issued and are fully paid and nonassessable and the holders thereof are not
      entitled to any preemptive, first refusal or other similar rights. 

     

    (d) The
      Pledgor is and will be at all times the legal and beneficial owner of its
      Pledged Collateral free and clear of any Lien except for the Lien created by
      this Agreement and other Transaction Documents and the Permitted
      Liens.

     

    (e) The
      exercise by the Pledgee of any of its rights and remedies in accordance with
      the
      terms of this Agreement will not contravene any applicable law compliance with
      which is material to the business of the Pledgor or any Material Contract or
      any
      other contractual restriction binding on or otherwise affecting the Pledgor
      or
      any of the properties of the Pledgor where the contravention of such other
      contractual restriction has or would reasonably be expected to have a Material
      Adverse Effect, and will not result in or require the creation of any Lien
      (other than Permitted Liens, or pursuant to this Agreement or the other
      Transaction Documents) upon or with respect to any of the properties of the
      Pledgor.

     

    (f) No
      authorization or approval or other action by, and no notice to or filing with,
      any Governmental Authority is required to be obtained or made by the Pledgor
      for
      (i) the due execution, delivery and performance by the Pledgor of this
      Agreement, (ii) the grant by the Pledgor, or the perfection, of the Lien created
      hereby in the Pledged Collateral or (iii) the exercise by the Pledgee, for
      the
      benefit of itself and the Noteholders, of any of its rights and remedies
      hereunder, except as may be required in connection with any sale of any Pledged
      Collateral by laws affecting the offering and sale of securities
      generally.

     

    (g) This
      Agreement has been duly executed and delivered by and on behalf of the Pledgor
      and constitutes the legal, valid and binding obligation of the Pledgor,
      enforceable against the Pledgor in accordance with its terms.

     

    SECTION
      6. Covenants
      as to the Pledged Collateral.
      Unless
      and until the Obligations have been paid in full, the Pledgor shall, unless
      the
      Pledgee shall otherwise consent in writing:

     

    (a) keep
      adequate records concerning the Pledged Collateral and permit the Pledgee or
      any
      agents, designees or representatives thereof at any time or from time to time,
      subject to the terms of the Notes, to examine and make copies of and abstracts
      from such records during
      normal business hours of the Pledgor provided that the Pledgor shall not bear
      the cost and expense of more than two such examinations or other visits in
      any
      calendar year unless an Event of Default has occurred and is
      continuing;

     

    (b) at
      the
      Pledgor’s expense, promptly, and in any event within five (5) days after
      receipt, deliver to the Pledgee a copy of each material notice or other material
      communication received by it in respect of the Pledged Collateral;

     

    
      
        
        

      

      
        A-3

        
          

        

      

      
        
        

      

    

     

    (c) at
      the
      Pledgor’s expense, defend the Pledgee’s right, title and security interest in
      and to the Pledged Collateral against the claims of any Person;

     

    (d) at
      the
      Pledgor’s expense, at any time and from time to time, promptly execute and
      deliver all further instruments and documents and take all further action that
      may be necessary or appropriate or that the Pledgee may reasonably request
      in
      order to (i) perfect and protect, or maintain the perfection of, the security
      interest and Lien purported to be created hereby, (ii) enable the Pledgee to
      exercise and enforce its rights and remedies hereunder in respect of the Pledged
      Collateral in accordance with the provisions hereof or (iii) otherwise effect
      the purposes of this Agreement, including, without limitation, delivering to
      the
      Pledgee, after the occurrence and during the continuation of an Event of
      Default, irrevocable proxies in respect of the Pledged Shares;

     

    (e) not
      sell,
      assign (by operation of law or otherwise), exchange or otherwise dispose of
      any
      Pledged Collateral or any of its interest therein other than as permitted under
      the Notes and other Transaction Documents;

     

    (f) not
      create or suffer to exist any Lien upon or with respect to any Pledged
      Collateral owned by it except for the Lien created hereby or the other
      Transaction Documents or for any Permitted Lien;

     

    (g) not
      make
      or consent to any amendment or other modification or waiver with respect to
      any
      Pledged Collateral except that any Pledgor may make or consent to any amendment
      or other modification or waiver solely to the extent necessary to reflect any
      merger or consolidation permitted by the Notes or enter into any agreement
      or
      permit to exist any restriction with respect to any Pledged Collateral other
      than under the Transaction Documents;

     

    (h) not
      take
      or fail to take any action which would in any manner impair the value or
      enforceability of the Pledgee’s security interest in and Lien on any Pledged
      Collateral;

     

    (i) in
      the
      event the Pledgor achieves the 2008 Projected Income, as defined in Section
      6(i)
      of the Note Purchase Agreement, the security interest and Lien on the Pledged
      Shares created hereby shall terminate, all rights to the Pledged Shares shall
      revert to Agatha Shen and the Pledged Shares shall be returned to Agatha
      Shen.

     

    (j) upon
      the
      direction of the Collateral Agent as described in Section 2(a) of that certain
      Lockbox Agreement (the “Lockbox Agreement”) dated as of the date hereof by and
      among the Pledgor, the Collateral Agent and the Lockbox Agent, as defined
      therein, the
      Pledgor shall promptly, but in no event later than thirty Business Days, after
      such direction is given, notify all the account debtors on the Accounts
      Receivable that payments in respect thereof shall be made directly to the
      Collateral Account. Funds may be withdrawn from the Collateral Account only
      in
      accordance with Section 4 of the Lockbox Agreement.

     

    SECTION
      7. Distributions
      and Voting Rights, Etc. in Respect of the Pledged Shares.

     

    (a) So
      long
      as no Event of Default shall have occurred and be continuing:

     

    
      
        
        

      

      
        A-4

        
          

        

      

      
        
        

      

    

     

    (i) Agatha
      Shen may exercise any and all voting and other consensual rights pertaining
      to
      the Pledged Shares for any purpose not inconsistent with the terms of this
      Agreement, the Notes or the other Transaction Documents; provided,
      however,
      that
      (A) Agatha Shen will not exercise or refrain from exercising any such right,
      as
      the case may be, if the Pledgee has provided prior written notice to Agatha
      Shen
      that, in the Pledgee’s judgment, such action (or inaction) could reasonably be
      expected to affect adversely in any material respect the value of the Pledged
      Shares or otherwise could reasonably be expected to have a Material Adverse
      Effect and (B) Agatha Shen will give the Pledgee at least five (5) Business
      Days’ notice of the manner in which it intends to exercise, or the reasons for
      refraining from exercising, any such right that could reasonably be expected
      to
      affect adversely in any material respect the value of any Pledged Collateral
      or
      otherwise could reasonably be expected to have a Material Adverse
      Effect;

     

    (ii) Agatha
      Shen may receive and retain any and all dividends, interest or other
      distributions paid in respect of the Pledged Shares to the extent permitted
      by
      the Notes or the other Transaction Documents; provided,
      that,
      any and
      all (A) dividends and interest paid or payable other than in cash in respect
      of,
      and instruments and other property received, receivable or otherwise distributed
      in respect of or in exchange for, the Pledged Shares,
      (B)
      dividends and other distributions paid or payable in cash in respect of the
      Pledged Shares in connection with a partial or total liquidation or dissolution
      or in connection with a reduction of capital, capital surplus or paid-in
      surplus, and
      (C)
      cash paid, payable or otherwise distributed in redemption of, or in exchange
      for, the Pledged Shares, together with any dividend, interest or other
      distribution or payment which, in the case of each of (A), (B) and (C) hereof,
      at the time of such payment or other distribution was not permitted by the
      Notes, shall be, and shall forthwith be delivered to the Pledgee to hold as,
      Pledged Collateral and shall, if received by Agatha Shen, be received in trust
      for the benefit of the Pledgee, shall be segregated from the other property
      or
      funds of Agatha Shen, and shall be forthwith delivered to the Pledgee in the
      exact form received with any necessary endorsement and/or appropriate stock
      powers duly executed in blank, to be held by the Pledgee as Pledged Collateral
      and as further collateral security for the Obligations; provided,
      that,
      the
      Pledgee shall return such amounts to Agatha Shen within ten (10) Business Days
      of a request from the Pledgor for such return unless such amounts are applied
      to
      the Obligations in accordance with the Notes during such ten (10) Business
      Day
      period; and

     

    (iii) the
      Pledgee will execute and deliver (or cause to be executed and delivered) to
      Agatha Shen all such proxies and other instruments as Agatha Shen may reasonably
      request for the purpose of enabling Agatha Shen to exercise the voting and
      other
      rights which it is entitled to exercise pursuant to Section 7(a)(i) hereof
      and
      to receive the dividends, interest and/or other distributions which it is
      authorized to receive and retain pursuant to Section 7(a)(ii)
      hereof.

     

    (b) Upon
      the
      occurrence and during the continuance of an Event of Default:

     

    (i) all
      rights of Agatha Shen to exercise the voting and other consensual rights which
      it would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof,
      and to receive the dividends and interest payments which it would otherwise
      be
      authorized to receive and retain pursuant to Section 7(a)(ii) hereof, shall
      cease, and all such rights shall thereupon become vested in the Pledgee which
      shall thereupon have the sole right to exercise such voting and other consensual
      rights and to receive and hold as Pledged Collateral such dividends and interest
      payments;

     

    
      
        
        

      

      
        A-5

        
          

        

      

      
        
        

      

    

     

    (ii) without
      limiting the generality of the foregoing, the Pledgee may at its option exercise
      any and all rights of conversion, exchange, subscription or any other rights,
      privileges or options pertaining to the Pledged Shares as if it were the
      absolute owner thereof, including, without limitation, the right to exchange,
      in
      its discretion, any and all of the Pledged Shares upon the merger,
      consolidation, reorganization, recapitalization or other adjustment of the
      Pledgor, and, in connection therewith, to deposit and deliver any and all of
      the
      Pledged Shares with any committee, depository, transfer agent, registrar or
      other designated agent upon such terms and conditions as it may determine;
      and

     

    (iii) all
      dividends, distributions, interest and other payments which are received by
      Agatha Shen contrary to the provisions of Section 7(b)(i) hereof shall be
      received in trust for the benefit of the Pledgee and shall be segregated from
      other funds of Agatha Shen, and shall be forthwith paid over to the Pledgee
      as
      Pledged Collateral in the exact form received with any necessary endorsement
      and/or appropriate stock powers duly executed in blank, to be held by the
      Pledgee as Pledged Collateral and as further collateral security for the
      Obligations.

     

    SECTION
      8. Additional
      Provisions Concerning the Pledged Collateral.

     

    (a) The
      Pledgor hereby authorizes the Pledgee to file any financing statements required
      hereunder or under any other Transaction Document, and any continuation
      statements or amendment with respect thereto for the perfection of the security
      interest created hereby in any appropriate filing office without the signature
      of the Pledgor. A photocopy or other reproduction of this Agreement or any
      financing statement covering the Pledge Collateral or any part thereof shall
      be
      sufficient as a financing statement where permitted by law.

     

    (b) The
      Pledgor hereby irrevocably appoints the Pledgee the Pledgor’s attorney-in-fact
      and proxy, with full authority in the place and stead of the Pledgor and in
      the
      name of the Pledgor or otherwise, from time to time in the Pledgee’s discretion,
      to take any action and to execute any agreements, instruments or other documents
      in the Pledgor’s name and to file such agreements, instruments or other
      documents in the Pledgor’s name and to file such agreements, instruments, or
      other documents in any appropriate filing office, which the Pledgee may deem
      necessary or advisable to accomplish the purposes of this Agreement (subject
      to
      the rights of the Pledgor under Section 7(a) hereof), including, without
      limitation, to receive, endorse and collect all instruments made payable to
      the
      Pledgor representing any dividend, interest payment or other distribution in
      respect of any Pledged Collateral and to give full discharge for the same.
      This
      power is coupled with an interest and is irrevocable until all of the
      Obligations are paid in full. 

     

    (c) If
      the
      Pledgor fails to perform any agreement or obligation contained herein, the
      Pledgee itself may, after the occurrence and during the continuance of an Event
      of Default, perform, or cause performance of, such agreement or obligation,
      and
      the expenses of the Pledgee incurred in connection therewith shall be payable
      by
      the Pledgor pursuant to Section 11 hereof and shall be secured by the Pledged
      Collateral.

     

    
      
        
        

      

      
        A-6

        
          

        

      

      
        
        

      

    

     

    (d) Other
      than the exercise of reasonable care to assure the safe custody of the Pledged
      Collateral while held hereunder, the Pledgee shall have no duty or liability
      to
      preserve rights pertaining thereto and shall be relieved of all responsibility
      for the Pledged Collateral upon surrendering it or tendering surrender of it
      to
      the Pledgor. The Pledgee shall be deemed to have exercised reasonable care
      in
      the custody and preservation of the Pledged Collateral in its possession if
      the
      Pledged Collateral is accorded treatment substantially equal to that which
      the
      Pledgee accords its own property, it being understood that the Pledgee shall
      not
      have responsibility for (i) ascertaining or taking action with respect to calls,
      conversions, exchanges, maturities, tenders or other matters relating to any
      Pledged Collateral, whether or not the Pledgee has or is deemed to have
      knowledge of such matters, or (ii) taking any necessary steps to preserve rights
      against any parties with respect to any Pledged Collateral.

     

    (e) The
      powers conferred on the Pledgee hereunder are solely to protect its interest
      in
      the Pledged Collateral and shall not impose any duty upon it to exercise any
      such powers. Except for the safe custody of any Pledged Collateral in its
      possession and the accounting for monies actually received by it hereunder,
      the
      Pledgee shall have no duty as to any Pledged Collateral or as to the taking
      of
      any necessary steps to preserve rights against prior parties or any other rights
      pertaining to any Pledged Collateral.

     

    (f) Upon
      the
      occurrence and during the continuation of any Event of Default, the Pledgee
      may
      at any time in its discretion (i) without notice to any Pledgor, transfer or
      register in the name of the Pledgee or any of its nominees any or all of the
      Pledged Collateral, subject only to the revocable rights of the Pledgor under
      Section 7(a) hereof, and (ii) exchange certificates or instruments constituting
      Pledged Collateral for certificates or instruments of smaller or larger
      denominations. 

     

    SECTION
      9. No
      Assumption of Liabilities.
      

     

    (a) Nothing
      herein shall be construed to make the Pledgee liable as a member or owner of
      the
      Subsidary and the Pledgee by virtue of this Agreement or otherwise shall not
      have any of the duties, obligations or liabilities of a member or owner of
      the
      Subsidiary. The parties hereto expressly agree that this Agreement shall not
      be
      construed as creating a partnership or joint venture between the Pledgee and
      the
      Pledgor.

     

    (b) By
      accepting this Agreement, the Pledgee does not intend to be deemed to be a
      co-venturer with respect to the Pledgor either before or after an Event of
      Default shall have occurred. The Pledgee shall have only those powers set forth
      herein and shall assume none of the duties, obligations or liabilities of the
      Pledgor. The Pledgee shall not be obligated to perform or discharge any
      obligation of the Pledgor as a result of the pledge hereby effected.

     

    (c) The
      acceptance by the Pledgee of this Agreement, with all of the rights, powers,
      privileges and authority so created, shall not at any time or in any event
      obligate the Pledgee to appear in or defend any action or proceeding relating
      to
      the Pledged Collateral to which it is not a party, or to take any action
      hereunder or thereunder, or to expend any money or incur any expense or perform
      or discharge any obligation, duty or liability hereunder or otherwise with
      respect to the Pledged Collateral.

     

    
      
        
        

      

      
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    SECTION
      10. Remedies
      Upon Default.
      If any
      Event of Default shall have occurred and be continuing:

     

    (a) The
      Pledgee may exercise in respect of the Pledged Shares, in addition to other
      rights and remedies provided for herein or otherwise available to it, all of
      the
      rights and remedies of a secured party on default under the Code then in effect
      in the State of Delaware; and without limiting the generality of the foregoing
      and without notice except as specified below, sell the Pledged Collateral or
      any
      part thereof in one or more parcels at public or private sale, at any exchange
      or broker’s board or elsewhere, at such price or prices and on such other terms
      as the Pledgee may deem commercially reasonable. The Pledgor agrees that, to
      the
      extent notice of sale shall be required by law, at least ten (10) days’ notice
      to the Pledgor of the time and place of any public sale of Pledged Collateral
      or
      the time after which any private sale is to be made shall constitute reasonable
      notification. The Pledgee shall not be obligated to make any sale of Pledged
      Collateral regardless of whether or not notice of sale has been given. The
      Pledgee may adjourn any public or private sale from time to time by announcement
      at the time and place fixed therefor, and such sale may, without further notice,
      be made at the time and place to which it was so adjourned.

     

    (b) In
      the
      event that the Pledgee determines to exercise its right to sell all or any
      part
      of the Pledged Collateral pursuant to Section 10(a) hereof, the Pledgor will,
      at
      the Pledgor’s expense and upon request by the Pledgee: execute and deliver, and
      cause the Pledgor and the directors and officers thereof to execute and deliver,
      all such instruments and documents, and do or cause to be done all such other
      acts and things, as may be necessary or, in the opinion of the Pledgee,
      advisable to sell such Pledged Collateral in accordance with the provisions
      of
      the Securities Act of 1933, as amended (the “Securities Act”), as well as
      applicable “Blue Sky” or other state securities laws. The Pledgor acknowledges
      the difficulty of ascertaining the amount of damages which would be suffered
      by
      the Pledgee by reason of the failure by the Pledgor to perform any of the
      covenants contained in this Section 10(b) and, consequently, agrees that,
      without limiting any other rights or remedies of Pledgee, if the Pledgor fails
      to perform any of such covenants, the Pledgee shall be entitled to specific
      performance against the Pledgor compelling performance of such
      covenants.

     

    (c) Notwithstanding
      the provisions of Section 10(b) hereof, the Pledgor recognizes
      that the
      Pledgee may deem it impracticable to effect a public sale of all or any part
      of
      the Pledged Shares and that the Pledgee may, therefore, determine to make one
      or
      more private sales of the Pledged Shares to a restricted group of purchasers
      who
      will be obligated to agree, among other things, to acquire such securities
      for
      their own account, for investment and not with a view to the distribution or
      resale thereof. The Pledgor acknowledges that any such private sale may be
      at
      prices and on terms less favorable to the seller than the prices and other
      terms
      which might have been obtained at a public sale and, notwithstanding the
      foregoing, agrees that such private sales shall be deemed to have been made
      in a
      commercially reasonable manner and that the Pledgee shall have no obligation
      to
      delay sale of any such securities for the period of time necessary to permit
      the
      issuer of such securities to register such securities for public sale under
      the
      Securities Act. 

     

    
      
        
        

      

      
        A-8

        
          

        

      

      
        
        

      

    

     

    (d) Any
      cash
      held by the Pledgee as Pledged Collateral and all cash proceeds received by
      the
      Pledgee in respect of any sale of, collection from, or other realization upon,
      all or any part of the Pledged Collateral may, in the discretion of the Pledgee,
      be held by the Pledgee as collateral for, and/or then or at any time thereafter
      applied (after payment of any amounts payable to the Pledgee pursuant to Section
      11 hereof) in whole or in part by the Pledgee against, all or any part of the
      Obligations in such order as the Pledgee shall elect consistent with the
      provisions of the Notes. Any surplus of such cash or cash proceeds held by
      the
      Pledgee and remaining after the date all of the Obligations have been paid
      in
      full shall be paid over to the Pledgor or to such Person as may be lawfully
      entitled to receive such surplus.

     

    (e) In
      the
      event that the proceeds of any such sale, collection or realization are
      insufficient to pay all amounts to which the Pledgee or any Noteholder is
      legally entitled, the Pledgor shall be liable for the deficiency, together
      with
      interest thereon at the highest rate specified in the Notes for interest on
      overdue principal thereof or such other rate as shall be fixed by applicable
      law, together with the costs of collection and the reasonable fees, costs and
      expenses of any attorneys employed by the Pledgee or any Noteholder to collect
      such deficiency.

     

    SECTION
      11. Application
      of Proceeds.
      The
      proceeds of any collection, sale or other realization of all or any part of
      the
      Pledged Collateral pursuant hereto shall be applied by the Collateral Agent
      pursuant to the rights and powers granted to the Collateral Agent by the
      Collateral Agency Agreement:

     

    (a) First,
      to
      the payment of the costs and expenses of such collection, sale or other
      realization, including reasonable out-of-pocket costs and expenses of the
      Collateral Agent, and the Pledgee and the fees and expenses of its agents and
      counsel;

     

    (b) Next,
      to
      the payment in full of the Secured Obligations; and

     

    (c) Finally,
      to the payment to the Pledgor, or its successors or assigns, or as a court
      of
      competent jurisdiction may direct, of any surplus then remaining.

     

    As
      used
      in this Section 11, "proceeds" of Pledged Collateral shall mean cash, securities
      and other property realized in respect of, and distributions in kind of, Pledged
      Collateral, including any thereof received under any reorganization, liquidation
      or adjustment of debt of the Pledgor.

     

    SECTION
      12. Indemnity
      and Expenses.

     

    (a) The
      Pledgor agrees to indemnify, defend, protect and hold harmless the Pledgee
      (and
      all of its respective officers, directors, employees, attorneys, consultants
      and
      agents) from and against any and all claims, damages, losses, liabilities
      obligations, penalties, fees, costs and expenses (including, without limitation,
      reasonable legal fees, costs, expenses and disbursements of counsel) to the
      extent that they arise out of or otherwise result from this Agreement
      (including, without limitation, enforcement of this Agreement), except, as
      to
      any such indemnified Person, claims, damages, losses, liabilities, obligations,
      penalties, fees, costs and expenses resulting solely and directly from such
      Person’s gross negligence or willful misconduct as determined by a final
      judgment of a court of competent jurisdiction.

     

    
      
        
        

      

      
        A-9

        
          

        

      

      
        
        

      

    

     

    (b) The
      Pledgor agrees to pay to the Pledgee upon demand the amount of any and all
      reasonable costs and expenses, including the reasonable fees, costs, expenses
      and disbursements of the Pledgee’s counsel and of any experts and agents, which
      the Pledgee may incur in connection with (i) the preparation, negotiation,
      execution, delivery, recordation, administration, amendment, waiver or other
      modification or termination of this Agreement, (ii) the custody, preservation,
      use or operation of, or the sale of, collection from, or other realization
      upon,
      any Pledged Collateral, (iii) the exercise or enforcement of any of the rights
      of the Pledgee hereunder, or (iv) the failure by any Pledgor to perform or
      observe any of the provisions hereof.

     

    (c) The
      Pledgor agrees to pay to the Collateral Agent certain fees set forth in the
      Schedule of Collateral Agent Fees attached as Exhibit A.

     

    SECTION
      13. Notices,
      Etc.
      All
      notices and other communications provided for hereunder shall be in writing
      and
      shall be mailed (by certified mail, postage prepaid and return receipt
      requested), telecopied or delivered, if to the Pledgor, to it at the address
      of
      the Company specified in the Notes or as otherwise specified next to the
      Pledgor’s signature below; if to the Pledgee, to it at the address specified in
      the Notes; or as to either such Person at such other address as shall be
      designated by such Person in a written notice to such other Person complying
      as
      to delivery with the terms of this Section 12. All such notices and other
      communications shall be effective (a) if mailed (by certified mail, postage
      prepaid and return receipt requested), when received or three (3) days after
      deposit in the mails, whichever occurs first, (b) if telecopied, when
      transmitted and confirmation is received, or (c) if delivered by overnight
      courier or by hand delivery upon delivery.

     

    SECTION
      14. Governing
      Law; Process Agents; Consent to Jurisdiction, Venue, Etc. 

     

    (a) THIS
      AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
      THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS
      OF
      LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION
      AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED
      HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
      GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW
      YORK.

     

    (b) The
      Pledgor (the “Process
      Agent Entity”)
      hereby
      irrevocably and unconditionally appoints the Secretary of State of State of
      New
      York (the “Process
      Agent”)
      as its
      agent to receive on behalf of the Process Agent Entity and its property service
      of copies of the summons and complaint and any other process which may be served
      in any such action, suit or proceeding, agrees that such service may be made
      by
      mailing (by certified or registered mail, postage prepaid and return receipt
      requested) or delivering a copy of such process to the Process Agent Entity
      in
      care of the Process Agent at the Process Agent’s above address, irrevocably
      authorizes and directs the Process Agent to accept such service on its behalf
      and as an alternative method of service, irrevocably consents to the service
      of
      any and all process in any such action, suit or proceeding by the mailing of
      copies of such process to the Process Agent Entity at its address specified
      above, such service to become effective ten (10) days after such mailing. The
      Pledgee hereby irrevocably appoints the Secretary of State of the State of
      New
      York as its agent for service of process in respect of any such action or
      proceeding and further irrevocably consents to the service of process out of
      any
      of the aforementioned courts and in any such action or proceeding by the mailing
      of copies thereof by registered or certified mail, postage prepaid, to the
      Secretary of State of the State of New York, such service to become effective
      ten (10) days after such mailing. Nothing herein shall affect the right of
      the
      Pledgee to service of process in any other manner permitted by law or to
      commence legal proceedings or otherwise proceed against any Pledgor in any
      other
      jurisdiction.

     

    
      
        
        

      

      
        A-10

        
          

        

      

      
        
        

      

    

     

    (c) ANY
      LEGAL
      ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS
      OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES
      DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
      DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY IRREVOCABLY ACCEPTS IN RESPECT
      OF
      ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
      COURTS.
      THE
      PLEDGOR HEREBY IRREVOCABLY APPOINTS PROCESS AGENT AS ITS AGENT FOR SERVICE
      OF
      PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND FURTHER IRREVOCABLY
      CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS
      AND
      IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED
      OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS FOR NOTICES
      HEREIN AND TO THE PROCESS AGENT, SUCH SERVICE TO BECOME EFFECTIVE TEN (10)
      DAYS
      AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF PLEDGEE AND THE
      NOTEHOLDERS TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
      COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PLEDGOR IN ANY
      OTHER
      JURISDICTION. THE PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
      FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
      HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT
      IN
      ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS
      BEEN
      BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PLEDGOR HAS OR
      HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
      LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
      ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
      PROPERTY, THE PLEDGOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF
      ITS
      OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER TRANSACTION
      DOCUMENTS.

     

    (d) The
      Pledgor irrevocably and unconditionally waives any right it may have to claim
      or
      recover in any legal action, suit or proceeding referred to in this Section
      any
      special, exemplary, punitive or consequential damages.

     

    
      
        
        

      

      
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    SECTION
      15. WAIVER
      OF JURY TRIAL, ETC THE
      PLEDGOR (AND BY ITS ACCEPTANCE OF THIS AGREEMENT, THE PLEDGEE) HEREBY WAIVES
      ANY
      RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING
      ANY RIGHTS UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, OR UNDER
      ANY
      AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED
      OR
      WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM
      ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND
      AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE
      A
      COURT AND NOT BEFORE A JURY. THE PLEDGOR CERTIFIES THAT NO OFFICER,
      REPRESENTATIVE, AGENT OR ATTORNEY OF PLEDGEE OR ANY NOTEHOLDER HAS REPRESENTED,
      EXPRESSLY OR OTHERWISE, THAT PLEDGEE OR ANY NOTEHOLDER WOULD NOT, IN THE EVENT
      OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING
      WAIVERS. THE PLEDGOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL
      INDUCEMENT FOR THE AGENTS
      AND THE
      NOTEHOLDERS ENTERING INTO THIS AGREEMENT.

     

    SECTION
      16. Security
      Interest Absolute.
      All
      rights of the Pledgee and the Noteholders, all Liens and all obligations of
      the
      Pledgor hereunder shall be absolute and unconditional irrespective of: (i)
      any
      lack of validity or enforceability of the Notes or any other Transaction
      Document, (ii) any change in the time, manner or place of payment of, or in
      any
      other term in respect of, all or any of the Obligations, or any other amendment
      or waiver of or consent to any departure from the Notes or any other Transaction
      Document, (iii) any exchange or release of (except to the extent of any such
      release), or non-perfection of any Lien on, any Collateral, or any release
      or
      amendment or waiver of or consent to departure from any guaranty, for all or
      any
      of the Obligations, or (iv) any other circumstance which might otherwise
      constitute a defense available to, or a discharge of, the Pledgor in respect
      of
      the Obligations other than such Obligations having been paid in full. All
      authorizations and agencies contained herein with respect to any of the Pledged
      Collateral are irrevocable and powers coupled with an interest.

     

    SECTION
      17. Miscellaneous.

     

    (a) No
      amendment of any provision of this Agreement shall be effective unless it is
      in
      writing and signed by the Pledgee and the Pledgor, and no waiver of any
      provision of this Agreement, and no consent to any departure by the Pledgor
      therefrom, shall be effective unless it is in writing and signed by the Pledgee
      and the Pledgor, and then such waiver or consent shall be effective only in
      the
      specific instance and for the specific purpose for which given.

     

    (b) No
      failure on the part of the Pledgee or the Noteholders to exercise, and no delay
      in exercising, any right hereunder or under any Transaction Document shall
      operate as a waiver thereof; nor shall any single or partial exercise of any
      such right preclude any other or further exercise thereof or the exercise of
      any
      other right. The rights and remedies of the Pledgee and the Noteholders provided
      herein and in the Transaction Documents are cumulative and are in addition
      to,
      and not exclusive of, any rights or remedies provided by law. The rights of
      the
      Pledgee and the Noteholders under the applicable Transaction Document against
      any party thereto are not conditional or contingent on any attempt by the
      Pledgee or the Noteholders to exercise any of their rights under any other
      document against such party or against any other Person.

     

    (c) Any
      provision of this Agreement which is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining portions
      hereof or thereof or affecting the validity or enforceability of such provision
      in any other jurisdiction. 

     

    
      
        
        

      

      
        A-12

        
          

        

      

      
        
        

      

    

     

    (d) Subject
      to the provisions of Section 6(i), this Agreement shall create a continuing
      security interest in and Lien on the Pledged Collateral and shall (i) remain
      in
      full force and effect until the date the Obligations are paid in full, and
      (ii)
      be binding on each Pledgor and, by its acceptance hereof, the Pledgee, and
      its
      permitted successors and assigns, and shall inure, together with all rights
      and
      remedies of the Pledgee and the Noteholders hereunder, to the benefit of Pledgee
      and the Noteholders and their respective permitted successors, transferees
      and
      assigns. Without limiting the generality of clause (ii) of the immediately
      preceding sentence, the Pledgee and the Noteholders may assign or otherwise
      transfer their respective rights and obligations under this Agreement and any
      other Transaction Document to any other Person (to the extent permitted by
      the
      Notes), and such other Person shall thereupon become vested with all of the
      benefits in respect thereof granted to the Pledgee and the Noteholders herein
      or
      otherwise. Upon any such assignment or transfer, all references in this
      Agreement to Pledgee or any Noteholder shall mean the assignee of Pledgee or
      any
      such Noteholder. None of the rights or obligations of the Pledgor hereunder
      may
      be assigned or otherwise transferred without the prior written consent of the
      Pledgee, and any such assignment or transfer without such consent shall be
      null
      and void.

     

    (e) Subject
      to the provisions of Section 6(i), on the date the Obligations have been paid
      in
      full and the Notes and the other Transaction Documents have been terminated
      (i)
      this Agreement and the security interest and Lien created hereby shall terminate
      and all rights to the Pledged Collateral shall revert to the Pledgor, and (ii)
      the Pledgee will, at the Pledgor’s expense, except as otherwise required by
      applicable law, (A) return to any of the Pledgor such of the Pledged Collateral
      as shall not have been sold or otherwise disposed of or applied pursuant to
      the
      terms hereof and (B) execute and deliver to the Pledgor, without recourse,
      representation or warranty, such documents as the Pledgor shall reasonably
      request to evidence such termination and reversion of rights.

     

    (f) This
      Agreement may be executed in any number of counterparts and by the different
      parties hereto on separate counterparts, each of which shall be deemed an
      original, but all such counterparts shall constitute one and the same
      agreement.

     

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        A-13

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Pledgor has caused this Agreement to be executed and
      delivered by their officer thereunto duly authorized, as of the date first
      above
      written.

     

    
      	 	
              PLEDGOR:

            

    

    

    
      	 	 	
              SJ
                ELECTRONICS, INC.

            
	 	 	 	 
	 	 	
              By:

            	 
	 	 	 	
              Name:
                

            	 
	 	 	 	
              Title:

            	 

    

    

    
      	 	  
	 	
              Agatha
                Shen

            

    

     

    
      
        
        

      

      
        A-14

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