Document:

NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
      IN A
      FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
      UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
      SAID
      ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
      BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE
      TERMS
      OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 20(a) HEREOF. THE PRINCIPAL
      AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
      CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
      PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

    

    MDWERKS,
      INC.

    FIRST
      AMENDED AND RESTATED

    SENIOR
      SECURED CONVERTIBLE NOTE

    

    
      	
              Issuance
                Date: 

            	October
              19,
              2006,	
              Original
                Principal Amount: U.S.
                $2,500,000

            
	 	
              as
                amended and restated 

            	 
	 	
              as
                of September 28, 2007

            	 

    

    

    FOR
      VALUE
      RECEIVED, MDwerks, Inc., a Delaware corporation (the “Company”),
      hereby
      promises to pay to GOTTBETTER CAPITAL MASTER, LTD. or its registered assigns
      (“Holder”)
      the
      amount set out above as the Original Principal Amount (as may be reduced
      pursuant to the terms hereof pursuant to redemption, conversion or otherwise,
      the “Principal”)
      when
      due, whether upon the Maturity Date (as defined below), on any Installment
      Date
      with respect to the Installment Amount due on such Installment Date,
      acceleration, redemption or otherwise (in each case in accordance with the
      terms
      hereof) and to pay interest (“Interest”)
      on any
      outstanding Principal at a rate per annum equal to the Interest Rate (as defined
      below), from the date set out above as the Issuance Date (the “Issuance
      Date”)
      until
      the same becomes due and payable, whether upon an Interest Date (as defined
      below), any Installment Date, or the Maturity Date, acceleration, conversion,
      redemption or otherwise (in each case in accordance with the terms hereof).
      This
      Senior Secured Convertible Note (including all Senior Secured Convertible Notes
      issued in exchange, transfer or replacement hereof, this “Note”)
      issued
      pursuant to the Securities Purchase Agreement (as defined below). Certain
      capitalized terms used herein are defined in Section 28.

    

    The
      Company previously executed and delivered to Holder that certain Senior Secured
      Convertible Note, dated October 19, 2006, in the principal amount of $2,500,000
      payable to the order of Holder (the “Original
      Note”).
      This
      Note amends, restates and supersedes in its entirety the Original Note. Any
      amounts outstanding under the Original Note are transferred to this
      Note,
      which
      does not evidence or cause a repayment or novation with respect to the
      obligations evidenced by the Original Note.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    1. PAYMENTS
      OF PRINCIPAL; MATURITY.
      On each
      Installment Date commencing February 1, 2008, the Company shall pay to the
      Holder an amount equal to the Installment Amount due on such Installment Date
      in
      cash by wire transfer of immediately available funds. Installment Dates and
      Installment Amounts are as set forth on the Installment Schedule. The
“Maturity
      Date”
      shall be
      October 18, 2009, as may be extended at the option of the Holder (i) in the
      event that, and for so long as, an Event of Default (as defined in Section
      4(a))
      shall have occurred and be continuing and (ii) through the date that is ten
      (10)
      days after the consummation of a Change of Control in the event that a Change
      of
      Control is publicly announced or a Change of Control Notice (as defined in
      Section 5(b)) is delivered prior to the Maturity Date.

    

    2. INTEREST;
      INTEREST RATE.

    

    (a) Interest
      on this Note shall commence accruing on the Issuance Date and shall be computed
      on the basis of a 360-day year and actual days elapsed and shall be payable
      in
      arrears for each Calendar Month during the period beginning on the Issuance
      Date
      and ending on, and including, the Maturity Date (each, an “Interest
      Date”)
      with
      the first Interest Date being December 1, 2006. Interest shall be payable on
      each Interest Date, to the record holder of this Note on the applicable Interest
      Date, in cash (“Cash
      Interest”).

    

    (b) From
      and
      after the occurrence of an Event of Default, the Interest Rate shall be
      increased to fifteen percent (15%) per annum. In the event that such Event
      of
      Default is subsequently cured, the adjustment referred to in the preceding
      sentence shall cease to be effective as of the date of such cure; provided
      that
      the Interest as calculated at such increased rate during the continuance of
      such
      Event of Default shall continue to apply to the extent relating to the days
      after the occurrence of such Event of Default through and including the date
      of
      cure of such Event of Default.  

    

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

    

    (a) Conversion
      Right.
      Subject
      to the provisions of Section 3(d), at any time or times on or after the Issuance
      Date, the Holder shall be entitled to convert any portion of the outstanding
      and
      unpaid Conversion Amount (as defined below) into fully paid and nonassessable
      shares of Common Stock in accordance with Section 3(c), at the Conversion Rate
      (as defined below). The Company shall not issue any fraction of a share of
      Common Stock upon any conversion. If the issuance would result in the issuance
      of a fraction of a share of Common Stock, the Company shall round such fraction
      of a share of Common Stock up to the nearest whole share. The Company shall
      pay
      any and all stamp and similar taxes that may be payable with respect to the
      issuance and delivery of Common Stock upon conversion of any Conversion Amount.
      The Company shall not be required, however, to pay any transfer tax or similar
      charge imposed in connection with the issuance of Common Stock in any name
      other
      than that of the Holder.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (b) Conversion
      Rate.
      The
      number of shares of Common Stock issuable upon conversion of any Conversion
      Amount pursuant to Section 3(a) shall be determined by dividing (x) such
      Conversion Amount by (y) the Conversion Price then in effect (the “Conversion
      Rate”).

    

    (i) “Conversion
      Amount”
      means
      the portion of the Principal to be converted, redeemed or otherwise with respect
      to which this determination is being made.

    

    (ii) “Conversion
      Price”
      means,
      as of the Issuance Date $2.25, which Conversion Price shall be subject to
      adjustment from time to time in accordance with the terms set forth herein
      (including Section 7 hereof). The Conversion Price shall be appropriately
      adjusted for any stock split, stock dividend, stock combination or other similar
      transaction that proportionately decreases or increases the Common
      Stock.

    

    (c) Mechanics
      of Conversion.

    

    (i) Optional
      Conversion.
      To
      convert any Conversion Amount into shares of Common Stock on any date (a
“Conversion
      Date”),
      the
      Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
      on or
      prior to 5:00 p.m., New York Time, on such date, a copy of an executed notice
      of
      conversion in the form attached hereto as Exhibit
      I
      (the
“Conversion
      Notice”)
      to the
      Company and (B) if required by Section 3(c)(iv), surrender this Note to a
      nationally recognized overnight delivery service for delivery to the Company
      (or
      an indemnification undertaking with respect to this Note in the case of its
      loss, theft or destruction). On or before the next Trading Day following the
      date of receipt of a Conversion Notice, the Company shall transmit by facsimile
      a confirmation of receipt of such Conversion Notice to the Holder and the
      Transfer Agent. On or before the second (2nd)
      Trading
      Day following the date of receipt of a Conversion Notice (the “Share
      Delivery Date”),
      the
      Company shall (1) (X) provided that the Transfer Agent is participating in
      the
      Fast Automated Securities Transfer Program of DTC credit such aggregate number
      of shares of Common Stock to which the Holder shall be entitled to the Holder’s
      or its designee’s balance account with DTC through its Deposit Withdrawal Agent
      Commission system or (Y) if the Transfer Agent is not participating in the
      DTC
      Fast Automated Securities Transfer Program, issue and deliver to the address
      as
      specified in the Conversion Notice, a certificate, registered in the name of
      the
      Holder or its designee, for the number of shares of Common Stock to which the
      Holder shall be entitled and (2) pay to the Holder in cash an amount equal
      to
      the accrued and unpaid Interest on the Conversion Amount up to and including
      the
      Conversion Date. If this Note is physically surrendered for conversion as
      required by Section 3(c)(iv) and the outstanding Principal of this Note is
      greater than the Principal portion of the Conversion Amount being converted,
      then the Company shall as soon as practicable and in no event later than three
      Business Days after receipt of this Note and at its own expense, issue and
      deliver to the holder a new Note (in accordance with Section 18(d)) representing
      the outstanding Principal not converted. The Person or Persons entitled to
      receive the shares of Common
      Stock
      issuable upon a conversion of this Note shall be treated for all purposes as
      the
      record holder or holders of such shares of Common Stock on the Conversion Date.
       In the event of a partial conversion of this Note pursuant hereto, the
      principal amount converted shall be deducted from the Installment Amounts
      relating to the Installment Dates in reverse chronological order.

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (ii) Company’s
      Failure to Timely Convert.
      If
      within three (3) Trading Days after the Company’s receipt of the facsimile copy
      of a Conversion Notice the Company shall fail to issue and deliver a certificate
      to the Holder or credit the Holder’s balance account with DTC for the number of
      shares of Common Stock to which the Holder is entitled upon such Holder’s
      conversion of any Conversion Amount (a “Conversion
      Failure”),
      and if
      on or after such Trading Day the Holder purchases (in an open market transaction
      or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder
      of
      Common Stock issuable upon such conversion that the Holder anticipated receiving
      from the Company (a “Buy-In”),
      then
      the Company shall, within three (3) Business Days after the Holder’s request and
      provision of trade confirmations and in the Holder’s sole discretion, either (i)
      pay cash to the Holder in an amount equal to the Holder’s total purchase price
      (including brokerage commissions and other out-of-pocket expenses, if any)
      for
      the shares of Common Stock so purchased (the “Buy-In
      Price”),
      at
      which point the Company’s obligation to deliver such certificate (and to issue
      such Common Stock) shall terminate, or (ii) promptly honor its obligation to
      deliver to the Holder a certificate or certificates representing such Common
      Stock and pay cash to the Holder in an amount equal to the excess (if any)
      of
      the Buy-In Price over the product of (A) such number of shares of Common Stock,
      times (B) the Closing Bid Price on the Conversion Date.

    

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

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (iv) Disputes.
      In
      the
      event of a dispute as to the number of shares of Common Stock issuable to the
      Holder in connection with a conversion of this Note, the Company shall issue
      to
      the Holder the number of shares of Common Stock not in dispute and resolve
      such
      dispute in accordance with Section 23.

    

    (d) Limitations
      on Conversions. 

    

    (i) Beneficial
      Ownership.
      The
      Company shall not effect any conversion of this Note, and the Holder of this
      Note (including any successor, transferee or assignee) shall not have the right
      to convert any portion of this Note pursuant to Section 3(a), to the extent
      that
      after giving effect to such conversion, the Holder (together with the Holder’s
      affiliates) would beneficially own in excess of 4.99% (the “Maximum
      Percentage”)
      of the
      number of shares of Common Stock outstanding immediately after giving effect
      to
      such conversion. For purposes of the foregoing sentence, the number of shares
      of
      Common Stock beneficially owned by the Holder and its affiliates shall include
      the number of shares of Common Stock issuable upon conversion of this Note
      with
      respect to which the determination of such sentence is being made, but shall
      exclude the number of shares of Common Stock which would be issuable upon (A)
      conversion of the remaining, nonconverted portion of this Note beneficially
      owned by the Holder or any of its affiliates and (B) exercise or conversion
      of
      the unexercised or nonconverted portion of any other securities of the Company
      (including, without limitation, any warrants) subject to a limitation on
      conversion or exercise analogous to the limitation contained herein beneficially
      owned by the Holder or any of its affiliates. Except as set forth in the
      preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership
      shall be calculated in accordance with Section 13(d) of the Securities Exchange
      Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining
      the number of outstanding shares of Common Stock, the Holder may rely on the
      number of outstanding shares of Common Stock as reflected in (x) the Company’s
      most recent Form 10-KSB, Form 10-K, Form 10-QSB, Form 10-Q or Form 8-K, as
      the
      case may be (y) a more recent public announcement by the Company or (z) any
      other notice by the Company or the Transfer Agent setting forth the number
      of
      shares of Common Stock outstanding. For any reason at any time, during regular
      business hours of the Company and upon the written request of the Holder, the
      Company shall within two (2) Business Days confirm in writing to the Holder
      the
      number of shares of Common Stock then outstanding. In any case, the number
      of
      outstanding shares of Common Stock shall be determined after giving effect
      to
      the conversion or exercise of securities of the Company, including this Note,
      by
      the Holder or its affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported. By written notice to the
      Company, the Holder may increase or decrease the Maximum Percentage to any
      other
      percentage specified in such notice; provided that (i) any such increase will
      not be effective until the sixty-first (61st
      ) day
      after such notice is delivered to the Company, and (ii) any such increase or
      decrease will apply only to the Holder and not to any other holder of
      Notes.

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (ii) Principal
      Market Regulation.
      The
      Company shall not be obligated to issue any shares of Common Stock upon
      conversion of this Note, and the Holder of this Note shall not have the right
      to
      receive upon conversion of this Note any shares of Common Stock, if the issuance
      of such shares of Common Stock would exceed the aggregate number of shares
      of
      Common Stock which the Company may issue upon conversion or exercise, as
      applicable, of the Notes and Warrants without breaching the Company’s
      obligations under the rules or regulations of the Principal Market (the
“Exchange
      Cap”),
      except
      that such limitation shall not apply in the event that the Company (A) obtains
      the approval of its stockholders as required by the applicable rules of the
      Principal Market for issuances of Common Stock in excess of such amount or
      (B)
      obtains a written opinion from outside counsel to the Company that such approval
      is not required, which opinion shall be reasonably satisfactory to the Required
      Holders. Until such approval or written opinion is obtained, no purchaser of
      the
      Notes pursuant to the Securities Purchase Agreement (the “Purchasers”)
      shall
      be issued in the aggregate, upon conversion or exercise, as applicable, of
      Notes
      or Warrants, shares of Common Stock in an amount greater than the product of
      the
      Exchange Cap multiplied by a fraction, the numerator of which is the principal
      amount of Notes issued to the Purchasers pursuant to the Securities Purchase
      Agreement on the Closing Date and the denominator of which is the aggregate
      principal amount of all Notes issued to the Purchasers pursuant to the
      Securities Purchase Agreement on the Closing Date (with respect to each
      Purchaser, the “Exchange
      Cap Allocation”).
      In the
      event that any Purchaser shall sell or otherwise transfer any of such
      Purchaser’s Notes, the transferee shall be allocated a pro rata portion of such
      Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence
      shall apply to such transferee with respect to the portion of the Exchange
      Cap
      Allocation allocated to such transferee. In the event that any holder of Notes
      shall convert all of such holder’s Notes into a number of shares of Common Stock
      which, in the aggregate, is less than such holder’s Exchange Cap Allocation,
      then the difference between such holder’s Exchange Cap Allocation and the number
      of shares of Common Stock actually issued to such holder shall be allocated
      to
      the respective Exchange Cap Allocations of the remaining holders of Notes on
      a
      pro rata basis in proportion to the aggregate principal amount of the Notes
      then
      held by each such holder.

    

    4. RIGHTS
      UPON EVENT OF DEFAULT.

    

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

    

    (i) the
      failure of the applicable Registration Statement required to be filed pursuant
      to the Registration Rights Agreement to be filed on or prior to the Filing
      Deadline (as defined in the Registration Rights Agreement) or declared effective
      by the SEC on or prior to the date that is thirty (30) days after the applicable
      Effectiveness Deadline (as defined in the Registration Rights Agreement), the
      Company fails to file the final prospectus in accordance with Rule 424 under
      the
      1933 Act or, while the applicable Registration Statement is required to be
      maintained effective pursuant to the terms of the Registration
      Rights Agreement, the effectiveness of the applicable Registration Statement
      lapses for any reason (including, without limitation, the issuance of a stop
      order) or is unavailable to any holder of the Notes for sale of all of such
      holder’s Registrable Securities (as defined in the Registration Rights
      Agreement) in accordance with the terms of the Registration Rights Agreement,
      and such lapse or unavailability continues for a period of ten (10) consecutive
      days or for more than an aggregate of thirty (30) days in any 365-day period
      (other than days during an Allowable Grace Period (as defined in the
      Registration Rights Agreement));

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

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

    

    (iii) the
      Company’s (A) failure to cure a Conversion Failure by delivery of the required
      number of shares of Common Stock within ten (10) Business Days after the
      applicable Conversion Date or (B) written notice to any holder of the Notes,
      including by way of public announcement or through any of its authorized agents,
      at any time, of its intention not to comply with a request for conversion of
      any
      Notes into shares of Common Stock that is tendered in accordance with the
      provisions of the Notes;

    

    (iv) at
      any
      time following the tenth (10th)
      consecutive Business Day that the authorized number of shares is less than
      the
      number of shares of Common Stock that the Holder would be entitled to receive
      upon a conversion of one hundred seventy-five percent (175%) of the full
      Conversion Amount of this Note (without regard to any limitations on conversion
      set forth in Section 3(d) or otherwise);

    

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

    

    (vi) any
      default under, redemption of or acceleration prior to maturity of any
      Indebtedness in excess of $250,000, in the aggregate, of the Company or any
      of
      its Subsidiaries (as defined in Section 3(a) of the Securities Purchase
      Agreement);

    

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

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

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

    

    (ix) a
      final
      judgment or judgments for the payment of money aggregating in excess of $250,000
      are rendered against the Company or any of its Subsidiaries and which judgments
      are not, within sixty (60) days after the entry thereof, bonded, discharged
      or
      stayed pending appeal, or are not discharged within sixty (60) days after the
      expiration of such stay; provided,
      however,
      that
      any judgment which is covered by insurance or an indemnity from a credit worthy
      party shall not be included in calculating the $250,000 amount set forth above
      so long as the Company provides the Holder a written statement from such insurer
      or indemnity provider (which written statement shall be reasonably satisfactory
      to the Holder) to the effect that such judgment is covered by insurance or
      an
      indemnity and the Company will receive the proceeds of such insurance or
      indemnity within thirty (30) days of the issuance of such judgment;

    

    (x) the
      Company breaches any material representation, warranty, covenant or other term
      or condition of any Transaction Document, except, in the case of a breach of
      a
      covenant which is curable, only if such breach continues for a period of at
      least thirty (30) consecutive days after written notice thereof;

    

    (xi) any
      breach or failure in any respect to comply with (x) Section 15 of this Note or
      (y) any of the Potential Partner Conditions;

    

    (xii) the
      inability of the Common Stock to be transferred with DTC through the Deposit
      Withdrawal at Custodian system, only if such inability continues for a period
      of
      at least thirty (30) consecutive days; or

    

    (xiii) The
      Security Agreement (as defined in the Securities Purchase Agreement) shall
      for
      any reason fail or cease to create a valid and perfected and, except to the
      extent permitted by the terms thereof, first priority lien in favor of the
      Holder for the benefit of the holders of the Notes on any Collateral (as defined
      in the Security Agreement) purported to be covered thereby and such failure
      or
      cessation cannot be cured within ten (10) business days of written notice
      thereof. 

    

    (b) Redemption
      Right.
      Upon
      the occurrence of an Event of Default with respect to this Note, the Company
      shall within two (2) Business Days after the day on which the Company is aware
      of the Event of Default deliver written notice thereof via facsimile and
      overnight courier (an “Event
      of Default Notice”)
      to the
      Holder. At any time after the earlier of the Holder’s receipt of an Event of
      Default Notice and the Holder becoming aware of an Event of Default, the Holder
      may require the Company to redeem all or any portion of the outstanding balance
      of this Note by delivering written notice thereof (the “Event of Default
      Redemption Notice”) to the Company, which Event of Default Redemption Notice
      shall indicate the portion of this Note the Holder is electing to have redeemed.
      Each portion of this Note subject to redemption by the Company pursuant to
      this
      Section 4(b) shall be redeemed by the Company at a price equal to the greater
      of
      (i) the product of (x) the Conversion Amount to be redeemed and (y) the
      Redemption Premium and (ii) the product of (A) the Conversion Rate with respect
      to such Conversion Amount in effect at such time as the Holder delivers an
      Event
      of Default Redemption Notice and (B) the Closing Sale Price of the Common Stock
      on the date immediately preceding such Event of Default (the “Event
      of Default Redemption Price”).
      Redemptions required by this Section 4(b) shall be made in accordance with
      the
      provisions of
      Section
      12. To the extent redemptions required by this Section 4(b) are deemed or
      determined by a court of competent jurisdiction to be prepayments of the Note
      by
      the Company, such redemptions shall be deemed to be voluntary prepayments.
      The
      parties hereto agree that in the event of the Company’s redemption of any
      portion of this Note under this Section 4(b), the Holder’s damages would be
      uncertain and difficult to estimate because of the parties’ inability to predict
      future interest rates and the uncertainty of the availability of a suitable
      substitute investment opportunity for the Holder.  Accordingly, any
      Redemption Premium due under this Section 4(b) is intended by the parties to
      be,
      and shall be deemed, a reasonable estimate of the Holder’s actual loss of its
      investment opportunity and not as a penalty.  

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    5. RIGHTS
      UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

    

    (a) Assumption.
      For so
      long as this Note shall remain outstanding, the Company shall not enter into
      or
      be party to a Fundamental Transaction unless (i) the Successor Entity assumes
      in
      writing all of the obligations of the Company under this Note and the other
      Transaction Documents in accordance with the provisions of this Section 5(a)
      pursuant to written agreements in form and substance satisfactory to the
      Required Holders and approved by the Required Holders prior to such Fundamental
      Transaction, including agreements to deliver to each holder of Notes in exchange
      for such Notes a security of the Successor Entity evidenced by a written
      instrument substantially similar in form and substance to the Notes, including,
      without limitation, having a principal amount and interest rate equal to the
      principal amounts and the interest rates of the Notes held by such holder,
      having similar conversion rights as the Notes and having similar ranking to
      the
      Notes, and satisfactory to the Required Holders and (ii) the Successor
      Entity (including its Parent Entity) is a publicly traded corporation whose
      common stock is quoted on or listed for trading on an Eligible Market. Upon
      the
      occurrence of any Fundamental Transaction, the Successor Entity shall succeed
      to, and be substituted for (so that from and after the date of such Fundamental
      Transaction, the provisions of this Note referring to the “Company” shall refer
      instead to the Successor Entity), and may exercise every right and power of
      the
      Company and shall assume all of the obligations of the Company under this Note
      with the same effect as if such Successor Entity had been named as the Company
      herein. Upon consummation of the Fundamental Transaction, the Successor Entity
      shall deliver to the Holder confirmation that there shall be issued upon
      conversion or redemption of this Note at any time after the consummation of
      the
      Fundamental Transaction, in lieu of the shares of Common Stock (or other
      securities, cash, assets or other property) issuable upon the conversion of
      the
      Notes prior to such Fundamental Transaction, such shares of publicly traded
      common stock (or their equivalent) of the Successor Entity, as adjusted in
      accordance with the provisions of this Note. The provisions of this Section
      shall apply similarly and equally to successive Fundamental Transactions and
      shall be applied without regard to any limitations on the conversion of this
      Note.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (b) Redemption
      Right.
      No
      sooner than fifteen (15) days nor later than ten (10) days prior to the
      consummation of a Change of Control, but not prior to the public announcement
      of
      such Change of Control, the Company shall deliver written notice thereof via
      facsimile and overnight courier to the Holder (a “Change
      of Control Notice”).
      At any
      time during the period beginning after the Holder’s receipt of a Change of
      Control Notice and ending ten (10) Trading Days after the consummation of such
      Change of Control, the Holder may require the Company to redeem all or any
      portion of this Note by delivering written notice thereof
      (“Change
      of Control Redemption Notice”)
      to the
      Company, which Change of Control Redemption Notice shall indicate the Conversion
      Amount the Holder is electing to be redeemed. The portion of this Note subject
      to redemption pursuant to this Section 5 shall be redeemed by the Company in
      cash at a price equal to the greater of (i) the product of the Change of Control
      Premium and the product of (x) the sum of the Conversion Amount being redeemed
      and any accrued and unpaid Interest with respect to such Conversion Amount
      and
      accrued and unpaid Late Charges with respect to such Conversion Amount and
      Interest and (y) the quotient determined by dividing (A) the Closing Sale Price
      of the Common Stock immediately following the public announcement of such
      proposed Change of Control by (B) the Conversion Price and (ii) 150% of the
      sum
      of the Conversion Amount being redeemed and any accrued and unpaid Interest
      with
      respect to such Conversion Amount subject to such Change of Control Redemption
      and accrued and unpaid Late Charges with respect to such Conversion Amount
      and
      Interest (the “Change
      of Control Redemption Price”).
      Redemptions required by this Section 5 shall be made in accordance with the
      provisions of Section 15 and shall have priority to payments to shareholders
      in
      connection with a Change of Control. To the extent redemptions required by
      this
      Section 5(b) are deemed or determined by a court of competent jurisdiction
      to be
      prepayments of this Note by the Company, such redemptions shall be deemed to
      be
      voluntary prepayments. Notwithstanding anything to the contrary in this Section
      5, until the Company Redemption Price (together with any interest thereon)
      is
      paid in full, the Conversion Amount submitted for redemption under this Section
      5(c) may be converted, in whole or in part, by the Holder into shares of Common
      Stock, or in the event the Conversion Date is after the consummation of the
      Change of Control, shares of publicly traded common stock (or their equivalent)
      of the Successor Entity pursuant to Section 3. The parties hereto agree that
      in
      the event of the Company’s redemption of any portion of this Note under this
      Section 5(b), the Holder’s damages would be uncertain and difficult to estimate
      because of the parties’ inability to predict future interest rates and the
      uncertainty of the availability of a suitable substitute investment opportunity
      for the Holder.  Accordingly, any redemption premium due under this Section
      5(b) is intended by the parties to be, and shall be deemed, a reasonable
      estimate of the Holder’s actual loss of its investment opportunity and not as a
      penalty.

    

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

    

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

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

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

    

    7. RIGHTS
      UPON ISSUANCE OF OTHER SECURITIES.

    

    (a) Adjustment
      of Conversion Price upon Issuance of Common Stock.
      If at
      any time after the Subscription Date, the Company issues or sells, or in
      accordance with this Section 7(a) is deemed to have issued or sold, any shares
      of Common Stock (including the issuance or sale of shares of Common Stock owned
      or held by or for the account of the Company, but excluding shares of Common
      Stock which are an Excluded Security or are deemed to have been issued or sold
      by the Company in connection with any Excluded Security) for a consideration
      per
      share (the “New
      Issuance Price”)
      less
      than a price (the “Applicable
      Price”)
      equal
      to the Conversion Price in effect immediately prior to such issue or sale (the
      foregoing a “Dilutive
      Issuance”),
      then
      (i) if such issuance or sale occurs prior to the one year anniversary date
      of
      the Subscription Date, immediately after such Dilutive Issuance, the Conversion
      Price then in effect shall be reduced to the New Issuance Price or (ii) if
      such
      issuance or sale occurs on or after the one year anniversary of the Subscription
      Date, then immediately after such Dilutive Issuance the Conversion Price then
      in
      effect shall be reduced to the price determined by dividing (i) an amount equal
      to the sum of (x) the number of shares of Common Stock outstanding immediately
      prior to such issue or sale (including for the purpose, shares of Common Stock
      issuable upon conversion or exercise of any outstanding securities or Options
      which are at such time exercisable, convertible or vested) multiplied by the
      Applicable Price and (y) the consideration, if any, to be received by the
      Company for such additional shares of Common Stock by (ii) an amount equal
      to
      the sum of (x) the total number of shares of Common Stock outstanding
      immediately prior to such issue of sale (including, for this purpose, shares
      of
      Common Stock issuable upon conversion or exercise of any outstanding securities
      or Options, which are at such time exercisable, convertible or vested) any
      (y)
      the total number of additional shares of Common Stock issuable as part of such
      Dilutive Issuance (including shares subject to conversion of convertible
      securities or Options). For purposes of determining the adjusted Conversion
      Price under this Section 7(a), the following shall be applicable:

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

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

    

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

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

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

    

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

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

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

    

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

    

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

    

    8. COMPANY
      RIGHT OF REDEMPTION.
       

    

    (a) General.
      The
      Company at its option shall have the right to redeem, with three (3) Business
      Days advance written notice (the “Company
      Redemption Notice”),
      a
      portion or all of the outstanding principal of the Note; provided,
      however,
      the
      Closing Bid Price of the Common Stock is less than the Conversion Price then
      in
      effect for five (5) Trading Days immediately prior to the delivery of the
      Company Redemption Notice. The Holder may convert after the Company Redemption
      Notice is received and until the Company Redemption Price is received by the
      Holder. The redemption price shall be One Hundred and Ten percent (110%) of
      the
      face amount redeemed plus accrued interest (the “Company Redemption
      Price”).
      The
      Company shall pay the Company Redemption Price on all payments made pursuant
      to
      this Note (except to the extent a higher redemption price is due in connection
      with an Event of Default or Change of Control, in which case such higher
      redemption price shall be paid by the Company), including payments made before,
      on, or after the Maturity Date. It shall be an Event of Default if the Company
      does not timely redeem the portion of this Note elected to be redeemed pursuant
      to a Company Redemption Notice and, thereafter, the Holder shall be able to
      exercise all of its rights and remedies hereunder upon an Event of Default,
      including the right to accelerate this Note and cause this Note to be redeemed
      in full pursuant to Section 4(b) hereof. For all payments under this Note,
      the
      payment of the Company Redemption Price by the Company shall be in addition
      to
      any accrued interest due.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    (b) Mechanics
      of Company Redemption.
      If the
      Company elects to redeem the Note in accordance with Section 8(a), then the
      Company Redemption Price, if any, which is to be paid to the Holder, shall
      be
      paid, by wire transfer of immediately available funds, an amount in cash equal
      to 100% of the Company Redemption Price. If the Company fails to redeem the
      amount of outstanding principal set forth in the Company Redemption Notice
      on
      such date, then at the option of the Holder designated in writing to the Company
      (any such designation, “Conversion Notice” for purposes of this Note), the
      Holder may require the Company to convert all or any part of such outstanding
      principal plus accrued interest at the Conversion Price. Conversions required
      by
      this Section 8(b) shall be made in accordance with the provisions of Section
      3(c). Notwithstanding anything to the contrary in this Section 8(b), but subject
      to Section 3(d), until the Company Redemption Price (together with any interest
      thereon) is paid in full, the amount of outstanding principal set forth in
      the
      Company Redemption Notice (together with any interest thereon) may be converted,
      in whole or in part, by the Holder into Common Stock pursuant to Section 3.
      

    

    9. SECURITY.
      This
      Note is secured to the extent and in the manner set forth in the Security
      Documents (as defined in the Securities Purchase Agreement).

    

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

    

    11. RESERVATION
      OF AUTHORIZED SHARES.

    

    (a) Reservation.
      The
      Company initially shall reserve out of its authorized and unissued Common Stock
      a number of shares of Common Stock for each of the Notes equal to 175% of the
      Conversion Rate with respect to the Conversion Amount of each such Note as
      of
      the Issuance Date. So long as any of the Notes are outstanding, the Company
      shall take all action necessary to reserve and keep available out of its
      authorized and unissued Common Stock, solely for the purpose of effecting the
      conversion of the Notes, 175% of the number of shares of Common Stock as shall
      from time to time be necessary to effect the conversion of all of the Notes
      then
      outstanding; provided that at no time shall the number of shares of Common
      Stock
      so reserved be less than the number of shares required to be reserved pursuant
      to the previous sentence (without regard to any limitations on conversions)
      (the
“Required
      Reserve Amount”).
      

    

    (b) Insufficient
      Authorized Shares.
      If at
      any time while any of the Notes remain outstanding the Company does not have
      a
      sufficient number of authorized and unreserved shares of Common Stock to satisfy
      its obligation to reserve for issuance upon conversion of the Notes at least
      a
      number of shares of Common Stock equal to the Required Reserve Amount (an
“Authorized
      Share Failure”),
      then
      the Company shall immediately take all action necessary to increase the
      Company’s authorized shares of Common Stock to an amount sufficient to allow the
      Company to reserve the Required Reserve Amount for the Notes then outstanding.
      Without limiting the generality of the foregoing sentence, as soon as
      practicable after the date of the occurrence of an Authorized Share Failure,
      but
      in no event later than forty-five (45) days after the occurrence of such
      Authorized Share Failure, the Company shall hold a meeting of its shareholders
      for the approval of an increase in the number of authorized shares of Common
      Stock. In connection with such meeting, the Company shall provide each
      shareholder with a proxy or information statement and shall use its best efforts
      to solicit its shareholders’ approval of such increase in authorized shares of
      Common Stock and to cause its board of directors to recommend to the
      shareholders that they approve such proposal.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    12. HOLDER’S
      REDEMPTIONS.
      The
      Company shall deliver the applicable Event of Default Redemption Price to the
      Holder within five (5) Business Days after the Company’s receipt of the Holder’s
      Event of Default Redemption Notice. If the Holder has submitted a Change of
      Control Redemption Notice in accordance with Section 5(b), the Company shall
      deliver the applicable Change of Control Redemption Price to the Holder
      concurrently with the consummation of such Change of Control if such notice
      is
      received prior to the consummation of such Change of Control and within five
      (5)
      Business Days after the Company’s receipt of such notice otherwise. In the event
      of a redemption of less than all of the Conversion Amount of this Note, the
      Company shall promptly cause to be issued and delivered to the Holder a new
      Note
      (in accordance with Section 18(d)) representing the outstanding Principal which
      has not been redeemed. In the event that the Company does not pay the applicable
      Redemption Price to the Holder within the time period required, at any time
      thereafter and until the Company pays such unpaid Redemption Price in full,
      the
      Holder shall have the option, in lieu of redemption, to require the Company
      to
      promptly return to the Holder all or any portion of this Note representing
      the
      Conversion Amount that was submitted for redemption and for which the applicable
      Redemption Price (together with any Late Charges thereon) has not been paid.
      Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice
      shall be null and void with respect to such Conversion Amount, (y) the Company
      shall immediately return this Note, or issue a new Note (in accordance with
      Section 18(d)) to the Holder representing the sum of such Conversion Amount
      to
      be redeemed together with accrued and unpaid Interest with respect to such
      Conversion Amount and accrued and unpaid Late Charges with respect to such
      Conversion Amount and Interest and (z) the Conversion Price of this Note or
      such
      new Notes shall be adjusted to the lesser of (A) the Conversion Price as in
      effect on the date on which the applicable Redemption Notice is voided and
      (B)
      the lowest Closing Bid Price during the period beginning on and including the
      date on which the applicable Redemption Notice is delivered to the Company
      and
      ending on and including the date on which the applicable Redemption Notice
      is
      voided. The Holder’s delivery of a notice voiding a Redemption Notice and
      exercise of its rights following such notice shall not affect the Company’s
      obligations to make any payments of Late Charges which have accrued prior to
      the
      date of such notice with respect to the Conversion Amount subject to such
      notice.

    

    13. RESTRICTION
      ON REDEMPTION AND CASH DIVIDENDS.
      Until
      all of the Notes have been converted, redeemed or otherwise satisfied in
      accordance with their terms, the Company shall not, directly or indirectly,
      redeem, repurchase or declare or pay any cash dividend or distribution on its
      capital stock without the prior express written consent of the Required
      Holders.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    14. VOTING
      RIGHTS.
      The
      Holder shall have no voting rights as the holder of this Note, except as
      required by law, including but not limited to Section 212 of the Delaware
      General Corporation Law, and as expressly provided in this Note.

    

    15. COVENANTS.
       

    

    (a) Rank.
      All
      payments due under this Note shall be senior to all other Indebtedness of the
      Company and its Subsidiaries and shall be subordinate to the Permitted Senior
      Indebtedness solely with respect to accounts receivables of the Company securing
      the Permitted Senior Indebtedness.

    

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

    

    (c) Existence
      of Liens.
      So long
      as this Note is outstanding, the Company shall not, and the Company shall not
      permit any of its Subsidiaries to, directly or indirectly, allow or suffer
      to
      exist any mortgage, lien, pledge, charge, security interest or other encumbrance
      upon or in any property or assets (including accounts and contract rights)
      owned
      by the Company or any of its Subsidiaries (collectively, “Liens”)
      other
      than Permitted Liens.

    

    (d) Restricted
      Payments.
      The
      Company shall not, and the Company shall not permit any of its Subsidiaries
      to,
      directly or indirectly, redeem, defease, repurchase, repay or make any payments
      in respect of, by the payment of cash or cash equivalents (in whole or in part,
      whether by way of open market purchases, tender offers, private transactions
      or
      otherwise), all or any portion of any Permitted Indebtedness, whether by way
      of
      payment in respect of principal of (or premium, if any) or interest on, such
      Indebtedness if at the time such payment is due or is otherwise made or, after
      giving effect to such payment, an event constituting, an Event of Default has
      occurred and is continuing.

    

    (e) Sales
      of Equity Securities.
       Except for Excluded Securities, the Company shall not, without the prior
      written consent of the Holder, (i) issue or sell shares of Common Stock or
      preferred stock without consideration or for a consideration per share less
      than
      the greater of the Closing Bid Price of the Common Stock determined immediately
      prior to its issuance or $.01, if the Common Stock is not traded or quoted
      on
      the Principal Market or any national exchange, (ii) issue any warrant, option,
      right, contract, call, or other security instrument granting the holder thereof,
      the right to acquire Common Stock without consideration or for a consideration
      less than the greater of such Common Stock’s Closing Bid Price value determined
      immediately prior to its issuance or $.01, if the Common Stock is not traded
      on
      the Principal Market or any national exchange, or (iii) file any registration
      statement on Form S-8, unless (x) such shares covered by such Form S-8 are
      not
      issued without consideration or for a consideration less than the greater of
      the
      Common Stock’s Closing Bid Price on the date of issuance or $.01, if the Common
      Stock is not traded or quoted on the Principal Market or any national exchange,
      and (y) such Form S-8 registration statement is not filed prior to ninety (90)
      days following the effectiveness of the registration statement. 

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    (f) Subsidiary
      Internal Accounting Controls.
      So long
      as this Note is outstanding, the Company and each of its Subsidiaries shall
      maintain, in all material respects, a system
      of
      internal accounting controls consistent with the Internal Accounting Controls
      (as defined in the Securities Purchase Agreement).

    

    (g) Dispositions.
      So long
      as any Obligations are outstanding, the Company shall not, and the Company
      shall
      not permit any of its Subsidiaries to, convey, sell, lease or sublease, transfer
      or otherwise dispose of, whether in one transaction or a series of related
      transactions, all or any material part of its business, property or assets,
      whether now owned or hereafter acquired (or agree to do any of the foregoing);
      provided,
      however,
      that
      the Company and its Subsidiaries may (i) sell inventory in the ordinary course
      of business, (ii) dispose of obsolete or worn-out equipment in the ordinary
      course of business and (iii) dispose of the non-core assets set forth
      on
      Schedule 15(g)
      hereto.

    

    (h) Additional
      Collateral Security.
      The
      Company shall cause each Subsidiary of the Company or any such Subsidiary not
      in
      existence on the Issuance Date, to execute and deliver to the Collateral Agent
      promptly and in any event within five (5) Business Days after the formation,
      acquisition or change in status thereof (i) a Security Agreement and (ii) such
      other agreements, instruments, approvals, legal opinions or other documents
      reasonably requested by the Collateral Agent in order to create, perfect,
      establish the first priority of (subject to Permitted Liens) or otherwise
      protect any Lien purported to be covered by any such Security Agreement or
      otherwise to effect the intent that such Subsidiary shall become bound by all
      of
      the terms, covenants and agreements contained in the this Note and that all
      property and assets of such Subsidiary shall become Collateral for the
      Obligations.

     

    16. VOTE
      TO ISSUE, OR CHANGE THE TERMS OF, NOTES.
      The
      affirmative vote at a meeting duly called for such purpose or the written
      consent without a meeting of the Required Holders shall be required for any
      change or amendment to this Note. In no event shall any amendment, modification
      nor waiver be made to this Note which would adversely affect the Holder without
      the written consent of the Holder.

    

    17. TRANSFER.
      The
      Holder acknowledges and agrees that this Note may only be offered, sold,
      assigned or transferred by the Holder without the consent of the Company,
      provided that the provisions of Section 2(f) of the Securities Purchase
      Agreement are complied with in all respects.

    

    18. REISSUANCE
      OF THIS NOTE.

    

    (a) Transfer.
      If this
      Note is to be transferred, the Holder shall surrender this Note to the Company,
      whereupon the Company will issue, promptly following the satisfaction of the
      provisions of Section 2(f) of the Securities Purchase Agreement, and deliver
      upon the order of the Holder a new Note (in accordance with Section 18(d)),
      in
      the name of the validly registered assigns or transferee, representing the
      outstanding Principal being transferred by the Holder and, if less then the
      entire outstanding Principal is being transferred, a new Note (in accordance
      with Section 18(d)) to the Holder representing the outstanding Principal not
      being transferred. The Holder and any assignee, by acceptance of this Note,
      acknowledge and agree that, by reason of the provisions of Section 3(c)(iii)
      and
      this Section 18(a), following conversion or redemption of any portion of this
      Note, the outstanding Principal represented by this Note may be less than the
      Principal stated on the face of this Note.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    (b) Lost,
      Stolen or Mutilated Note.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Note, and, in the case of loss,
      theft or destruction, of any indemnification undertaking and posting of a bond
      by the Holder to the Company in customary form and, in the case of mutilation,
      upon surrender and cancellation of this Note, the Company shall execute and
      deliver to the Holder a new Note (in accordance with Section 18(d)) representing
      the outstanding Principal.

    

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

    

    (d) Issuance
      of New Notes.
      Whenever the Company is required to issue a new Note pursuant to the terms
      of
      this Note, such new Note (i) shall be of like tenor with this Note,
      (ii) shall represent, as indicated on the face of such new Note, the
      Principal remaining outstanding (or in the case of a new Note being issued
      pursuant to Section 18(a) or Section 18(c), the Principal designated by the
      Holder which, when added to the principal represented by the other new Notes
      issued in connection with such issuance, does not exceed the Principal remaining
      outstanding under this Note immediately prior to such issuance of new Notes),
      (iii) shall have an issuance date, as indicated on the face of such new Note,
      which is the same as the Issuance Date of this Note, (iv) shall have the same
      rights and conditions as this Note, and (v) shall represent accrued Interest
      and
      Late Charges on the Principal and Interest of this Note, from the Issuance
      Date.

    

    19. REMEDIES,
      CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
      RELIEF.
      The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under this Note and any of the other Transaction Documents
      at
      law or in equity (including a decree of specific performance and/or other
      injunctive relief). Amounts set forth or provided for herein with respect to
      payments, conversion and the like (and the computation thereof) shall be the
      amounts to be received by the Holder and shall not, except as expressly provided
      herein, be subject to any other obligation of the Company (or the performance
      thereof). The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate.  The Company therefore agrees that,
      in the event of any such breach or threatened breach, the Holder shall be
      entitled, in addition to all other available remedies, to an injunction
      restraining any breach, without the necessity of showing economic loss and
      without any bond or other security being required.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    20. PAYMENT
      OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
      If (a)
      this Note is placed in the hands of an attorney for collection or enforcement
      or
      is collected or enforced through any legal proceeding or the Holder otherwise
      takes action to collect amounts due under this Note or to enforce the provisions
      of this Note or (b) there occurs any bankruptcy, reorganization, receivership
      of
      the Company or other proceedings affecting Company creditors’ rights and
      involving a claim under this Note, then the Company shall pay the reasonable
      costs incurred by the Holder for such collection, enforcement or action or
      in
      connection with such bankruptcy, reorganization, receivership or other
      proceeding, including, but not limited to, attorneys’ fees and
      disbursements.

    

    21. CONSTRUCTION;
      HEADINGS.
      The
      headings of this Note are for convenience of reference and shall not form part
      of, or affect the interpretation of, this Note.

    

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

    

    23. DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Closing Bid Price, the Closing
      Sale Price, the Average Market Price or the Weighted Average Price or the
      arithmetic calculation of the Conversion Rate or any Redemption Price, the
      Company shall submit the disputed determinations or arithmetic calculations
      via
      facsimile within two (2) Business Days of receipt of the Conversion Notice
      or
      Redemption Notice or other event giving rise to such dispute, as the case may
      be, to the Holder. If the Holder and the Company are unable to agree upon such
      determination or calculation within one (1) Business Day of such disputed
      determination or arithmetic calculation being submitted to the Holder, then
      the
      Company shall, within one (1) Business Day submit via facsimile (a) the disputed
      determination of the Closing Bid Price, the Closing Sale Price, the Average
      Market Price or the Weighted Average Price to an independent, reputable
      investment bank selected by the Company and approved by the Holder  (such
      approval not to be unreasonably withheld or delayed) or (b) the disputed
      arithmetic calculation of the Conversion Rate or any Redemption Price to the
      Company’s independent, outside accountant. The Company, at the Company’s
      expense, shall cause the investment bank or the accountant, as the case may
      be,
      to perform the determinations or calculations and notify the Company and the
      Holder of the results no later than five (5) Business Days from the time it
      receives the disputed determinations or calculations. Such investment bank’s or
      accountant’s determination or calculation, as the case may be, shall be binding
      upon all parties absent demonstrable error. If such investment bank or
      accountant’s determination confirms the Company’s calculation, Holder shall
      reimburse Company for the Company’s expenses of such investment bank or
      accountants.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    24. NOTICES;
      PAYMENTS.

    

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

    

    (b) Payments.
       Whenever any payment of cash is to be made by the Company to any Person
      pursuant to this Note, such payment shall be made in lawful money of the United
      States of America by a check drawn on the account of the Company and sent via
      overnight courier service to such Person at such address as previously provided
      to the Company in writing (which address, in the case of each of the Purchasers,
      shall initially be as set forth on the Schedule of Buyers attached to the
      Securities Purchase Agreement); provided that the Holder may elect to receive
      a
      payment of cash via wire transfer of immediately available funds by providing
      the Company with prior written notice setting out such request and the Holder’s
      wire transfer instructions. Whenever any amount expressed to be due by the
      terms
      of this Note is due on any day which is not a Business Day, the same shall
      instead be due on the next succeeding day which is a Business Day and, in the
      case of any Interest Date which is not the date on which
      this
      Note is paid in full, the extension of the due date thereof shall not be taken
      into account for purposes of determining the amount of Interest due on such
      date. Any amount of Principal or other amounts due under the Transaction
      Documents, other than Interest, which is not paid when due shall result in
      a
      late charge being incurred and payable by the Company in an amount equal to
      interest on such amount at the rate of fifteen percent (15%) per annum from
      the
      date such amount was due until the same is paid in full (“Late
      Charge”).

    

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

    

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

    

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

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

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

    

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

    

    (b) “Average
      Market Price”
means,
      for any given date, the lesser of (i) the arithmetic average of the Weighted
      Average Price of the Common Stock during the twenty (20) consecutive Trading
      Day
      period ending on the third (3rd)
      Trading
      Day immediately prior to such given date, and (ii) the arithmetic average of
      the
      Weighted Average Price of the Common Stock during the five (5) consecutive
      Trading Day period ending on the third (3rd)
      Trading
      Day immediately prior to such given date and that all such determinations shall
      be appropriately adjusted for any stock split, stock dividend, stock combination
      or other similar transaction that proportionately decreases or increases the
      Common Stock during such periods.

    

    (c) “Bloomberg”
means
      Bloomberg Financial Markets.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

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

    

    (e) “Calendar
      Month”
means
      the period beginning on and including the first of each calendar month and
      ending on and including the last day of such calendar month.

    

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

    

    (g) “Change
      of Control Premium”
means
      (i) 125% or (ii) 115% in the event of a Change of Control involving
      consideration paid to holders of the Company’s Common Stock where the
      consideration per share of the Company’s Common Stock to be received by the
      holders thereof is greater (as to amounts other than cash, as determined
      reasonably and in good faith by the Board of Directors of the Company) than
      200%
      of the Conversion
      Price as of the Initial Issuance Date (as adjusted for stock splits, stock
      dividends, reverse stock splits, recapitalizations, reclassifications and
      similar events). 

    

    (h) “Closing
      Bid Price”
and
      “Closing
      Sale Price”
means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, for such security on the Principal Market, as
      reported by Bloomberg, or, if the Principal Market begins to operate on an
      extended hours basis and does not designate the closing bid price or the closing
      trade price, as the case may be, then the last bid price or last trade price,
      respectively, of such security prior to 4:00 p.m., New York Time, as reported
      by
      Bloomberg, or, if the Principal Market is not the principal securities exchange
      or trading market for such security, the last closing bid price or last trade
      price, respectively, of such security on the principal securities exchange
      or
      trading market where such security is listed or traded as reported by Bloomberg,
      or if the foregoing do not apply, the last closing bid price or last trade
      price, respectively, of such security in the over-the-counter market on the
      electronic bulletin board for such security as reported by Bloomberg, or, if
      no
      closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, of any market makers for such security as reported in the “pink
      sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
      the Closing Bid Price or the Closing Sale Price cannot be calculated for a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price or the Closing Sale Price, as the case may be, of such security on such
      date shall be the fair market value as mutually determined by the Company and
      the Holder. If the Company and the Holder are unable to agree upon the fair
      market value of such security, then such dispute shall be resolved pursuant
      to
      Section 23.  All such determinations to be appropriately adjusted for any
      stock dividend, stock split, stock combination or other similar transaction
      during the applicable calculation period.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

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

    

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

    

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

    

    (l) “Eligible
      Market”
means,
      the Principal Market, The New York Stock Exchange, Inc., the Nasdaq Capital
      Market, the Nasdaq Global Market or the American Stock Exchange.

    

    (m) “Equity
      Conditions”
means
      that each of the following conditions is satisfied: (i) on each day during
      the period beginning six (6) months prior to the applicable date of
      determination and ending on and including the applicable date of determination
      (the “Equity Conditions Measuring Period”), either (x) the Registration
      Statement filed pursuant to the Registration Rights Agreement shall be effective
      and available for the resale of all remaining Registrable Securities in
      accordance with the terms of the Registration Rights Agreement and there shall
      not have been any Grace Periods (as defined in the Registration Rights
      Agreement) or (y) all shares of Common Stock issuable upon conversion of the
      Notes and exercise of the Warrants shall be eligible for sale without
      restriction and without the need for registration under any applicable federal
      or state securities laws; (ii) on each day during the Equity Conditions
      Measuring Period, the Common Stock is designated for quotation on the Principal
      Market and shall not have been suspended from trading on such exchange or market
      (other than suspensions of not more than two (2) Trading Days and occurring
      prior to the applicable date of determination due to business announcements
      by
      the Company) nor shall delisting or suspension by such exchange or market been
      threatened or pending either (A) in writing by such exchange or market or (B)
      by
      falling below the minimum listing maintenance requirements of such exchange
      or
      market; (iii) during the one (1) year period ending on and including the date
      immediately preceding the applicable date of determination, the Company shall
      have delivered Conversion Shares upon conversion of the Notes and Warrant Shares
      upon exercise of the Warrants to the holders on a timely basis as set forth
      in
      Section 3(c)(i) hereof and Section 1(a) of the Warrants; (iv) any applicable
      shares of Common Stock to be issued in connection with the event requiring
      determination may be issued in full without violating Section 3(d) hereof and
      the rules or regulations of the Principal Market; (v) during the Equity
      Conditions Measuring Period, the Company shall not have failed to timely make
      any payments within five (5) Business Days of when such payment is due pursuant
      to any Transaction Document; (vi) during the Equity Conditions Measuring Period,
      there shall not have occurred either (A) the public announcement of a pending,
      proposed or intended Fundamental Transaction which has not been abandoned,
      terminated or consummated or (B) an Event of Default or an event that with
      the
      passage of time or giving of notice would constitute an Event of Default; (vii)
      the Company shall have no knowledge of any fact that would cause (x) the
      Registration Statements required pursuant to the Registration Rights Agreement
      not to be effective and available for the resale of all remaining Registrable
      Securities in accordance with the terms of the Registration Rights Agreement
      or
      (y) any shares of Common Stock issuable upon conversion of the Notes and
      shares of Common Stock issuable upon exercise of the Warrants not to be eligible
      for sale without restriction pursuant to Rule 144(k) and any applicable state
      securities laws; (viii) the Company otherwise shall have been in material
      compliance with and shall not have materially breached any provision, covenant,
      representation or warranty of any Transaction Document; and (ix) the Stockholder
      Approval (as defined in the Securities Purchase Agreement) shall have been
      obtained.

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

    (n) “Equity
      Conditions Failure”
means
      that on any day during (i) the period commencing twenty-one (21) Trading Days
      prior to the applicable Interest Notice Date through the applicable Interest
      Notice Date or (ii) the period commencing with the applicable Interest Notice
      Due Date through the applicable Interest Date, the Equity Conditions have not
      been satisfied (or waived in writing by the Holder).

    

    (o) “Excluded
      Securities”
means
      any Common Stock and/or Options, Warrants or other Common Stock Purchase Rights
      (and the Common Stock issuable pursuant to such Options) issued or issuable:
      (i) in connection with any Approved Stock Plan up to a maximum of ten
      percent (10%) of the outstanding Common Stock (provided that securities issued
      in connection with an Approved Stock Plan that are outstanding as of September
      28, 2007, and shares of Common Stock issuable pursuant to exercise or conversion
      of such outstanding securities shall not be included for purposes of calculating
      the maximum of ten percent (10%)); (ii) upon conversion or exercise of any
      Options or Convertible Securities which are outstanding on the day immediately
      preceding September 28, 2007, provided that the terms of such Options or
      Convertible Securities are not amended, modified or changed on or after
      September 28, 2007, to lower the conversion or exercise price thereof and so
      long as the number of shares of Common Stock underlying such securities is
      not
      otherwise increased; (iii) shares of Common Stock issued in an underwritten
      public offering in which the gross cash proceeds to the Company (before
      underwriting discounts, commissions and fees) are at least $10,000,000;
      (iv) Options issued to medical practices that are customers of the Company
      in good standing to acquire up to a maximum of 250,000 shares of Common Stock
      per practice with an exercise or conversion price at or above the Closing Sale
      Price on the day of issuance; (v) up to 250,000 shares of Common Stock (or
      securities convertible into 250,000 shares of Common Stock with an exercise
      or
      conversion price at or above the Closing Sale price on the day of issuance)
      as
      consideration for strategic acquisitions up to a maximum of 250,000 shares
      of
      Common Stock per acquisition; (vi) up to 250,000 shares of Common Stock (or
      securities convertible into 250,000 shares of Common Stock with an exercise
      or
      conversion price at or above the Closing Sale Price on the day of issuance)
      per
      year to third parties in connection with investor relations and public relations
      efforts of the Company; and (vii) shares of Common Stock, Options, or Warrants
      to be issued to Rodman & Renshaw (or their designees) as consideration for
      securing a line of credit or similar financing for the Company or its
      subsidiaries.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    

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

    

    (q) “GAAP”
means
      United States generally accepted accounting principles, consistently
      applied.

    

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

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

     

    (s) “Initial
      Issuance Date”
means
      October 19, 2006.

    

    (t) “Installment
      Amount”
means
      with respect to any Installment Date, the lesser of (A) the dollar amount set
      forth in the column entitled “Installment Amount” in the Installment Schedule
      and that corresponds to such Installment Date and (B) the remaining principal
      due hereunder.   In the event the Holder shall sell or otherwise transfer
      any portion of this Note, the transferee shall be allocated a pro rata portion
      of the each unpaid Installment Amount hereunder.

    

    (u) “Installment
      Date”
means
      the first day of each calendar month.

    

    (v) “Installment
      Schedule”
means
      the Installment Schedule attached hereto as Schedule
      I.

    

    (w) “Interest
      Rate”
means
      eight percent (8%) per annum, subject to periodic adjustment pursuant to Section
      2.

    

    (x) “Options”
means
      any rights, warrants or options to subscribe for or purchase Common Stock or
      Convertible Securities.

    

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

    

    (z) “Permitted
      Indebtedness”
means
      (A) Indebtedness incurred by the Company that is made expressly subordinate
      in
      right of payment and priority to the Indebtedness evidenced by this Note, as
      reflected in a written agreement acceptable to the Holder and approved by the
      Holder in writing (which approval shall not be unreasonably withheld or
      delayed), and which Indebtedness does not provide at any time for (1) the
      payment, prepayment, repayment, repurchase or defeasance, directly or
      indirectly, of any principal or premium, if any, thereon until ninety-one (91)
      days after the Maturity Date or later and (2) total interest and fees at a
      rate
      in excess of the Interest Rate hereunder, (B) Permitted Senior Indebtedness,
      (C)
      Indebtedness secured by Permitted Liens, (D) Indebtedness to trade creditors
      incurred in the ordinary course of
      business, and (E) extensions, refinancings and renewals of any items of
      Permitted Indebtedness, provided that the principal amount is not increased
      or
      the terms modified to impose more burdensome terms upon the Company or its
      Subsidiary, as the case may be, (F) indebtedness to David Goldner pursuant
      to
      that certain promissory note, dated August 24, 2006, issued by the Company
      to
      David Goldner.

    

    (aa) “Permitted
      Liens”
means
      (i) any Lien for taxes not yet due or delinquent or being contested in good
      faith by appropriate proceedings for which adequate reserves have been
      established in accordance with GAAP, (ii) any statutory Lien arising in the
      ordinary course of business by operation of law with respect to a liability
      that
      is not yet due or delinquent, (iii) any Lien created by operation of law, such
      as materialmen’s liens, mechanics’ liens and other similar liens, arising in the
      ordinary course of business with respect to a liability that is not yet due
      or
      delinquent or that are being contested in good faith by appropriate proceedings,
      (iv) Liens securing the Company’s obligations under the Notes, (v) Liens (A)
      upon or in any equipment (as defined in the Security Agreement) acquired or
      held
      by the Company or any of its Subsidiaries to secure the purchase price of such
      equipment or indebtedness incurred solely for the purpose of financing the
      acquisition or lease of such equipment, or (B) existing on such equipment at
      the
      time of its acquisition, provided that the Lien is confined solely to the
      property so acquired and improvements thereon, and the proceeds of such
      equipment, (vi) Liens incurred in connection with the extension, renewal or
      refinancing of the indebtedness secured by Liens of the type described in clause
      (v) above, provided that any extension, renewal or replacement Lien shall be
      limited to the property encumbered by the existing Lien and the principal amount
      of the Indebtedness being extended, renewed or refinanced does not increase,
      (vii) Liens on accounts receivables, security interests, loan documents and
      reserve accounts and the proceeds thereof of the Company and its Subsidiaries
      securing the Company’s obligations under the Permitted Senior Indebtedness;
      (viii) leases or subleases and licenses and sublicenses hereafter granted to
      others in the ordinary course of the Company’s business, not interfering in any
      material respect with the business of the Company and its Subsidiaries taken
      as
      a whole, (ix) Liens in favor of customs and revenue authorities arising as
      a
      matter of law to secure payments of custom duties in connection with the
      importation of goods; (x) Liens arising from judgments, decrees or attachments
      in circumstances not constituting an Event of Default under Section 4(a)(ix);
      (xi) Liens with respect to Indebtedness not individually in excess of $50,000
      or
      in the aggregate in excess of $250,000, which individually and in aggregate
      are
      not material to the Company; (xii) the Permitted Liens as defined in the
      Securities Purchase Agreement and (xii) the Lien granted to David Goldner with
      respect to the collateral described in that certain Security Agreement, dated
      August 24, 2006, between the Company and David Goldner.

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    (bb) “Permitted
      Senior Indebtedness”
means
      any financing facility to be obtained by the Company after the Initial Issuance
      Date, and secured by liens in any or all of the following: accounts receivables,
      security interests in client assets; loan documents; reserve account; and the
      proceeds thereof.

    

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

    

    (dd) “Potential
      Partner Conditions”
means
      at any time during the period commencing on the date of the consummation of
      any
      material transaction between the Company and a Person and ending on the first
      anniversary of the Effective Date, there shall be no disclosure that any
      executive officer of such Person has (i) exhibited dishonesty in the performance
      of his or her duties, which is materially and demonstrably injurious to the
      Company;
      or (ii) been convicted of (x) a felony under the laws of the United States
      or
      any state thereof or (y) a misdemeanor involving moral turpitude, in each case,
      which is materially and demonstrably injurious to the Company.

    

    (ee) “Principal
      Market”
means
      Over-the-Counter Bulletin Board.

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

     

    (ff) “Redemption
      Notices”
means,
      collectively, the Event of Default Redemption Notices, Change of Control
      Redemption Notices, the Company Redemption Notice, and, each of the foregoing,
      individually, a Redemption Notice.

    

    (gg) “Redemption
      Premium”
means
      (i) in the case of the Events of Default described in Section 4(a)(i) - (vi)
      and
      (ix) - (xii), 125% or (ii) in the case of the Events of Default described in
      Section 4(a)(vii) - (viii), 120%.

    

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

    

    (ii) “Registration
      Rights Agreement”
means
      that certain registration rights agreement between the Company and the initial
      holders of the Notes relating to, among other things, the registration of the
      resale of the Common Stock issuable upon conversion of the Notes and exercise
      of
      the Warrants.

    

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

     

    (kk) “SEC”
means
      the United States Securities and Exchange Commission.

    

    (ll) “Securities
      Purchase Agreement”
means
      that certain securities purchase agreement dated the Subscription Date by and
      among the Company and the initial holders of the Notes pursuant to which the
      Company issued the Notes.

    

    (mm) “Subscription
      Date”
means
      October 19, 2006.

    

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

    

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

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

    (pp) “Volume
      Installment Limitation”
means,
      for any date of determination, fifteen percent (15%) of the aggregate dollar
      trading volume (as reported on Bloomberg) of the Common Stock over the forty
      (40) consecutive Trading Day period ending on the third (3rd)
      Trading
      Day immediately preceding the applicable Installment Date.

    

    (qq) “Volume
      Interest Limitation”
means,
      for any date of determination, fifteen percent (15%) of the aggregate dollar
      trading volume (as reported on Bloomberg) of the Common Stock over the twenty
      (20) consecutive Trading Day period ending on the third (3rd)
      Trading
      Day immediately preceding the applicable Interest Date.

    

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

    

    (ss) “Warrants”
has
      the
      meaning ascribed to such term in the Securities Purchase Agreement, and shall
      include all warrants issued in exchange therefor or replacement
      thereof.

    

    (tt) “Weighted
      Average Price”
means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market during the period beginning at 9:30 a.m.,
      New York Time (or such other time as the Principal Market publicly announces
      is
      the official open of trading), and ending at 4:00 p.m., New York Time (or such
      other time as the Principal Market publicly announces is the official close
      of
      trading) as reported by Bloomberg through its “Volume at Price” functions, or,
      if the foregoing does not apply, the dollar volume-weighted average price of
      such security in the over-the-counter market on the electronic bulletin board
      for such security during the period beginning at 9:30 a.m., New York Time (or
      such other time as such market publicly announces is the official open of
      trading), and ending at 4:00 p.m., New York Time (or such other time as such
      market publicly announces is the official close of trading) as reported by
      Bloomberg, or, if no dollar volume-weighted average price is reported for such
      security by Bloomberg for such hours, the average of the highest closing bid
      price and the lowest closing ask price of any of the market makers for such
      security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
      National Quotation Bureau, Inc.).  If the Weighted Average Price cannot be
      calculated for a security on a particular date on any of the foregoing bases,
      the Weighted Average Price of such security on such date shall be the fair
      market value as mutually determined by the Company and the Holder.  If the
      Company and the Holder are unable to agree upon the fair market value of such
      security, then such dispute shall be resolved pursuant to Section 23.  All
      such determinations to be appropriately adjusted for any stock dividend, stock
      split, stock combination or other similar transaction during the applicable
      calculation period.

    

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

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    

    29. SUBORDINATION.
      The
      obligations of the Company under this Note and the Security Documents are
      expressly subordinated to the obligations of the Company and its Subsidiaries
      in
      connection with Permitted Senior Indebtedness. By acceptance of this note,
      Holder agrees that it shall promptly execute and deliver (i) such agreements,
      documents and instruments as may be reasonably requested by holders of Permitted
      Senior Indebtedness, expressly confirming the subordination of the Company’s
      obligations under this Note and the Security Documents to those of the holders
      of Permitted Senior Indebtedness and (ii) such intercreditor agreements as
      may
      be reasonably requested by holders of Permitted Senior Indebtedness relating
      to
      customary intercreditor arrangements including, but not limited to, standstill
      agreements and the right to cure defaults under this Note.

    

    [Signature
      Page Follows]

    

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

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

    
      	 	 	 
	 	
              MDWERKS,
                INC.

            
	 
 	 
 	 
 
	 	By:  	
              /s/
                Howard B. Katz

            
	 	
              

              Name: Howard
                Katz

              Title: Chief
                Executive Officer

            

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    SCHEDULE
      I

    

    INSTALLMENT
      SCHEDULE

    

    
      	
              Issue
                Date

            	 	 	 	 	
              10/19/2006

            	 	 	 	 	 	 	 	 	 	 
	
              Face
                Amount

            	 	 	 	
              $

            	
              2,500,000

            	 	 	 	 	 	 	 	 	 	 
	
              Interest
                Rate

            	 	 	 	 	
              8.0

            	
              %

            	 	 	 	 	 	 	 	 	 
	
              Term
                (months)

            	 	 	 	 	
              36

            	 	 	 	 	 	 	 	 	 	 
	
              Principal
                (months)

            	 	

            	 	 	
              25

            	 	 	 	 	 	 	 	 	 	 

    

     

    
      	
               

              Period

            	
               

            	
               

            	
              Installment

              Date
                

            	
               

            	
               

            	
              Beginning
                Principal

            	
               

            	
               

            	
              Accrued
                Interest

            	
               

            	
               

            	
              Interest
                Due
                

            	
               

            	
               

            	
              Installment
                Payment

            	
               

            	
               

            	
              Ending
                Principal

            	 
	
              0

            	 	 	
              11/1/2006

            	 	
              $

            	
              2,500,000.00

            	 	
              $

            	
              6,666.67

            	 	
              $

            	
              0.00

            	 	
              $

            	
              0.00

            	 	
              $

            	
              2,500,000.00

            	 
	
              1

            	 	 	
              12/1/2006

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              23,333.33

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              2

            	 	 	
              1/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              3

            	 	 	
              2/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              4

            	 	 	
              3/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              5

            	 	 	
              4/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              6

            	 	 	
              5/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              7

            	 	 	
              6/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              8

            	 	 	
              7/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              9

            	 	 	
              8/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              10

            	 	 	
              9/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              11

            	 	 	
              10/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              12

            	 	 	
              11/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              13

            	 	 	
              12/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              14

            	 	 	
              1/1/2008

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              15

            	 	 	
              2/1/2008

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              113,636.36

            	 	 	
              2,386,363.64

            	 
	
              16

            	 	 	
              3/1/2008

            	 	 	
              2,386,363.64

            	 	 	
              15,909.09

            	 	 	
              15,909.09

            	 	 	
              113,636.36

            	 	 	
              2,272,727.27

            	 
	
              17

            	 	 	
              4/1/2008

            	 	 	
              2,272,727.27

            	 	 	
              15,151.52

            	 	 	
              15,151.52

            	 	 	
              113,636.36

            	 	 	
              2,159,090.91

            	 
	
              18

            	 	 	
              5/1/2008

            	 	 	
              2,159,090.91

            	 	 	
              14,393.94

            	 	 	
              14,393.94

            	 	 	
              113,636.36

            	 	 	
              2,045,454.55

            	 
	
              19

            	 	 	
              6/1/2008

            	 	 	
              2,045,454.55

            	 	 	
              13,636.36

            	 	 	
              13,636.36

            	 	 	
              113,636.36

            	 	 	
              1,931,818.18

            	 
	
              20

            	 	 	
              7/1/2008

            	 	 	
              1,931,818.18

            	 	 	
              12,878.79

            	 	 	
              12,878.79

            	 	 	
              113,636.36

            	 	 	
              1,818,181.82

            	 
	
              21

            	 	 	
              8/1/2008

            	 	 	
              1,818,181.82

            	 	 	
              12,121.21

            	 	 	
              12,121.21

            	 	 	
              113,636.36

            	 	 	
              1,704,545.45

            	 
	
              22

            	 	 	
              9/1/2008

            	 	 	
              1,704,545.45

            	 	 	
              11,363.64

            	 	 	
              11,363.64

            	 	 	
              113,636.36

            	 	 	
              1,590,909.09

            	 
	
              23

            	 	 	
              10/1/2008

            	 	 	
              1,590,909.09

            	 	 	
              10,606.06

            	 	 	
              10,606.06

            	 	 	
              113,636.36

            	 	 	
              1,477,272.73

            	 
	
              24

            	 	 	
              11/1/2008

            	 	 	
              1,477,272.73

            	 	 	
              9,848.48

            	 	 	
              9,848.48

            	 	 	
              113,636.36

            	 	 	
              1,363,636.36

            	 
	
              25

            	 	 	
              12/1/2008

            	 	 	
              1,363,636.36

            	 	 	
              9,090.91

            	 	 	
              9,090.91

            	 	 	
              113,636.36

            	 	 	
              1,250,000.00

            	 
	
              26

            	 	 	
              1/1/2009

            	 	 	
              1,250,000.00

            	 	 	
              8,333.33

            	 	 	
              8,333.33

            	 	 	
              113,636.36

            	 	 	
              1,136,363.64

            	 
	
              27

            	 	 	
              2/1/2009

            	 	 	
              1,136,363.64

            	 	 	
              7,575.76

            	 	 	
              7,575.76

            	 	 	
              113,636.36

            	 	 	
              1,022,727.27

            	 
	
              28

            	 	 	
              3/1/2009

            	 	 	
              1,022,727.27

            	 	 	
              6,818.18

            	 	 	
              6,818.18

            	 	 	
              113,636.36

            	 	 	
              909,090.91

            	 
	
              29

            	 	 	
              4/1/2009

            	 	 	
              909,090.91

            	 	 	
              6,060.61

            	 	 	
              6,060.61

            	 	 	
              113,636.36

            	 	 	
              795,454.55

            	 

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
               

              Period

            	
               

            	
               

            	
              Installment

              Date
                

            	
               

            	
               

            	
              Beginning
                Principal

            	
               

            	
               

            	
              Accrued
                Interest

            	
               

            	
               

            	
              Interest
                Due
                

            	
               

            	
               

            	
              Installment
                Payment

            	
               

            	
               

            	
              Ending
                Principal

            	
               

            
	
              30

            	 	 	
              5/1/2009

            	 	 	
              795,454.55

            	 	 	
              5,303.03

            	 	 	
              5,303.03

            	 	 	
              113,636.36

            	 	 	
              681,818.18

            	 
	
              31

            	 	 	
              6/1/2009

            	 	 	
              681,818.18

            	 	 	
              4,545.45

            	 	 	
              4,545.45

            	 	 	
              113,636.36

            	 	 	
              568,181.82

            	 
	
              32

            	 	 	
              7/1/2009

            	 	 	
              568,181.82

            	 	 	
              3,787.88

            	 	 	
              3,787.88

            	 	 	
              113,636.36

            	 	 	
              454,545.45

            	 
	
              33

            	 	 	
              8/1/2009

            	 	 	
              454,545.45

            	 	 	
              3,030.30

            	 	 	
              3,030.30

            	 	 	
              113,636.36

            	 	 	
              340,909.09

            	 
	
              34

            	 	 	
              9/1/2009

            	 	 	
              340,909.09

            	 	 	
              2,272.73

            	 	 	
              2,272.73

            	 	 	
              113,636.36

            	 	 	
              227,272.73

            	 
	
              35

            	 	 	
              10/1/2009

            	 	 	
              227,272.73

            	 	 	
              1,515.15

            	 	 	
              1,515.15

            	 	 	
              113,636.36

            	 	 	
              113,636.36

            	 
	
              36

            	 	 	
              10/18/2009

            	 	 	
              113,636.36

            	 	 	
              454.55

            	 	 	
              454.55

            	 	 	
              113,636.36

            	 	 	
              0.00NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
      IN A
      FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
      UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
      SAID
      ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
      BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE
      TERMS
      OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 20(a) HEREOF. THE PRINCIPAL
      AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
      CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
      PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

    

    MDWERKS,
      INC.

    FIRST
      AMENDED AND RESTATED

    SENIOR
      SECURED CONVERTIBLE NOTE

    

      
        	
                Issuance
                  Date:

              	
                November
                  9, 2006,

              	 	
                Original
                  Principal Amount:

              	 	
                U.S.
                  $2,500,000

              
	 	
                as
                  amended and restated

              	 	 	 	 
	 	
                as
                  of September 28, 2007

              	 	 	 	 

      

    

     

    FOR
      VALUE
      RECEIVED, MDwerks, Inc., a Delaware corporation (the “Company”),
      hereby
      promises to pay to GOTTBETTER CAPITAL MASTER, LTD. or its registered assigns
      (“Holder”)
      the
      amount set out above as the Original Principal Amount (as may be reduced
      pursuant to the terms hereof pursuant to redemption, conversion or otherwise,
      the “Principal”)
      when
      due, whether upon the Maturity Date (as defined below), on any Installment
      Date
      with respect to the Installment Amount due on such Installment Date,
      acceleration, redemption or otherwise (in each case in accordance with the
      terms
      hereof) and to pay interest (“Interest”)
      on any
      outstanding Principal at a rate per annum equal to the Interest Rate (as defined
      below), from the date set out above as the Issuance Date (the “Issuance
      Date”)
      until
      the same becomes due and payable, whether upon an Interest Date (as defined
      below), any Installment Date, or the Maturity Date, acceleration, conversion,
      redemption or otherwise (in each case in accordance with the terms hereof).
      This
      Senior Secured Convertible Note (including all Senior Secured Convertible Notes
      issued in exchange, transfer or replacement hereof, this “Note”)
      is
      issued pursuant to the Securities Purchase Agreement (as defined below). Certain
      capitalized terms used herein are defined in Section 28.

    

    The
      Company previously executed and delivered to Holder that certain Senior Secured
      Convertible Note, dated November 9, 2006, in the principal amount of $2,500,000
      payable to the order of Holder (the “Original
      Note”).
      This
      Note amends, restates and supersedes in its entirety the Original Note. Any
      amounts outstanding under the Original Note are transferred to this
      Note,
      which
      does not evidence or cause a repayment or novation with respect to the
      obligations evidenced by the Original Note.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    1. PAYMENTS
      OF PRINCIPAL; MATURITY.
      On each
      Installment Date commencing February 1, 2008, the Company shall pay to the
      Holder an amount equal to the Installment Amount due on such Installment Date
      in
      cash by wire transfer of immediately available funds. Installment Dates and
      Installment Amounts are as set forth on the Installment Schedule. The
“Maturity
      Date”
      shall be
      November 8, 2009, as may be extended at the option of the Holder (i) in the
      event that, and for so long as, an Event of Default (as defined in Section
      4(a))
      shall have occurred and be continuing and (ii) through the date that is ten
      (10)
      days after the consummation of a Change of Control in the event that a Change
      of
      Control is publicly announced or a Change of Control Notice (as defined in
      Section 5(b)) is delivered prior to the Maturity Date.

    

    2. INTEREST;
      INTEREST RATE.

    

    (a) Interest
      on this Note shall commence accruing on the Issuance Date and shall be computed
      on the basis of a 360-day year and actual days elapsed and shall be payable
      in
      arrears for each Calendar Month during the period beginning on the Issuance
      Date
      and ending on, and including, the Maturity Date (each, an “Interest
      Date”)
      with
      the first Interest Date being December 1, 2006. Interest shall be payable on
      each Interest Date, to the record holder of this Note on the applicable Interest
      Date, in cash (“Cash
      Interest”).

    

    (b) From
      and
      after the occurrence of an Event of Default, the Interest Rate shall be
      increased to fifteen percent (15%) per annum. In the event that such Event
      of
      Default is subsequently cured, the adjustment referred to in the preceding
      sentence shall cease to be effective as of the date of such cure; provided
      that
      the Interest as calculated at such increased rate during the continuance of
      such
      Event of Default shall continue to apply to the extent relating to the days
      after the occurrence of such Event of Default through and including the date
      of
      cure of such Event of Default.  

    

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

    

    (a) Conversion
      Right.
      Subject
      to the provisions of Section 3(d), at any time or times on or after the Issuance
      Date, the Holder shall be entitled to convert any portion of the outstanding
      and
      unpaid Conversion Amount (as defined below) into fully paid and nonassessable
      shares of Common Stock in accordance with Section 3(c), at the Conversion Rate
      (as defined below). The Company shall not issue any fraction of a share of
      Common Stock upon any conversion. If the issuance would result in the issuance
      of a fraction of a share of Common Stock, the Company shall round such fraction
      of a share of Common Stock up to the nearest whole share. The Company shall
      pay
      any and all stamp and similar taxes that may be payable with respect to the
      issuance and delivery of Common Stock upon conversion of any Conversion Amount.
      The Company shall not be required, however, to pay any transfer tax or similar
      charge imposed in connection with the issuance of Common Stock in any name
      other
      than that of the Holder.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (b) Conversion
      Rate.
      The
      number of shares of Common Stock issuable upon conversion of any Conversion
      Amount pursuant to Section 3(a) shall be determined by dividing (x) such
      Conversion Amount by (y) the Conversion Price then in effect (the “Conversion
      Rate”).

    

    (i) “Conversion
      Amount”
      means
      the portion of the Principal to be converted, redeemed or otherwise with respect
      to which this determination is being made.

    

    (ii) “Conversion
      Price”
      means,
      as of the Issuance Date $2.25, which Conversion Price shall be subject to
      adjustment from time to time in accordance with the terms set forth herein
      (including Section 7 hereof). The Conversion Price shall be appropriately
      adjusted for any stock split, stock dividend, stock combination or other similar
      transaction that proportionately decreases or increases the Common
      Stock.

    

    (c) Mechanics
      of Conversion.

    

    (i) Optional
      Conversion.
      To
      convert any Conversion Amount into shares of Common Stock on any date (a
“Conversion
      Date”),
      the
      Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
      on or
      prior to 5:00 p.m., New York Time, on such date, a copy of an executed notice
      of
      conversion in the form attached hereto as Exhibit
      I
      (the
“Conversion
      Notice”)
      to the
      Company and (B) if required by Section 3(c)(iv), surrender this Note to a
      nationally recognized overnight delivery service for delivery to the Company
      (or
      an indemnification undertaking with respect to this Note in the case of its
      loss, theft or destruction). On or before the next Trading Day following the
      date of receipt of a Conversion Notice, the Company shall transmit by facsimile
      a confirmation of receipt of such Conversion Notice to the Holder and the
      Transfer Agent. On or before the second (2nd)
      Trading
      Day following the date of receipt of a Conversion Notice (the “Share
      Delivery Date”),
      the
      Company shall (1) (X) provided that the Transfer Agent is participating in
      the
      Fast Automated Securities Transfer Program of DTC credit such aggregate number
      of shares of Common Stock to which the Holder shall be entitled to the Holder’s
      or its designee’s balance account with DTC through its Deposit Withdrawal Agent
      Commission system or (Y) if the Transfer Agent is not participating in the
      DTC
      Fast Automated Securities Transfer Program, issue and deliver to the address
      as
      specified in the Conversion Notice, a certificate, registered in the name of
      the
      Holder or its designee, for the number of shares of Common Stock to which the
      Holder shall be entitled and (2) pay to the Holder in cash an amount equal
      to
      the accrued and unpaid Interest on the Conversion Amount up to and including
      the
      Conversion Date. If this Note is physically surrendered for conversion as
      required by Section 3(c)(iv) and the outstanding Principal of this Note is
      greater than the Principal portion of the Conversion Amount being converted,
      then the Company shall as soon as practicable and in no event later than three
      Business Days after receipt of this Note and at its own expense, issue and
      deliver to the holder a new Note (in accordance with Section 18(d)) representing
      the outstanding Principal not converted. The Person or Persons entitled to
      receive the shares of Common
      Stock
      issuable upon a conversion of this Note shall be treated for all purposes as
      the
      record holder or holders of such shares of Common Stock on the Conversion Date.
       In the event of a partial conversion of this Note pursuant hereto, the
      principal amount converted shall be deducted from the Installment Amounts
      relating to the Installment Dates in reverse chronological order.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (ii) Company’s
      Failure to Timely Convert.
      If
      within three (3) Trading Days after the Company’s receipt of the facsimile copy
      of a Conversion Notice the Company shall fail to issue and deliver a certificate
      to the Holder or credit the Holder’s balance account with DTC for the number of
      shares of Common Stock to which the Holder is entitled upon such Holder’s
      conversion of any Conversion Amount (a “Conversion
      Failure”),
      and if
      on or after such Trading Day the Holder purchases (in an open market transaction
      or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of
      Common Stock issuable upon such conversion that the Holder anticipated receiving
      from the Company (a “Buy-In”),
      then
      the Company shall, within three (3) Business Days after the Holder’s request and
      provision of trade confirmations and in the Holder’s sole discretion, either (i)
      pay cash to the Holder in an amount equal to the Holder’s total purchase price
      (including brokerage commissions and other out-of-pocket expenses, if any)
      for
      the shares of Common Stock so purchased (the “Buy-In
      Price”),
      at
      which point the Company’s obligation to deliver such certificate (and to issue
      such Common Stock) shall terminate, or (ii) promptly honor its obligation to
      deliver to the Holder a certificate or certificates representing such Common
      Stock and pay cash to the Holder in an amount equal to the excess (if any)
      of
      the Buy-In Price over the product of (A) such number of shares of Common Stock,
      times (B) the Closing Bid Price on the Conversion Date.

    

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

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (iv) Disputes.
      In
      the
      event of a dispute as to the number of shares of Common Stock issuable to the
      Holder in connection with a conversion of this Note, the Company shall issue
      to
      the Holder the number of shares of Common Stock not in dispute and resolve
      such
      dispute in accordance with Section 23.

    

    (d) Limitations
      on Conversions. 

    

    (i) Beneficial
      Ownership.
      The
      Company shall not effect any conversion of this Note, and the Holder of this
      Note (including any successor, transferee or assignee) shall not have the right
      to convert any portion of this Note pursuant to Section 3(a), to the extent
      that
      after giving effect to such conversion, the Holder (together with the Holder’s
      affiliates) would beneficially own in excess of 4.99% (the “Maximum
      Percentage”)
      of the
      number of shares of Common Stock outstanding immediately after giving effect
      to
      such conversion. For purposes of the foregoing sentence, the number of shares
      of
      Common Stock beneficially owned by the Holder and its affiliates shall include
      the number of shares of Common Stock issuable upon conversion of this Note
      with
      respect to which the determination of such sentence is being made, but shall
      exclude the number of shares of Common Stock which would be issuable upon (A)
      conversion of the remaining, nonconverted portion of this Note beneficially
      owned by the Holder or any of its affiliates and (B) exercise or conversion
      of
      the unexercised or nonconverted portion of any other securities of the Company
      (including, without limitation, any warrants) subject to a limitation on
      conversion or exercise analogous to the limitation contained herein beneficially
      owned by the Holder or any of its affiliates. Except as set forth in the
      preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership
      shall be calculated in accordance with Section 13(d) of the Securities Exchange
      Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining
      the number of outstanding shares of Common Stock, the Holder may rely on the
      number of outstanding shares of Common Stock as reflected in (x) the Company’s
      most recent Form 10-KSB, Form 10-K, Form 10-QSB, Form 10-Q or Form 8-K, as
      the
      case may be (y) a more recent public announcement by the Company or (z) any
      other notice by the Company or the Transfer Agent setting forth the number
      of
      shares of Common Stock outstanding. For any reason at any time, during regular
      business hours of the Company and upon the written request of the Holder, the
      Company shall within two (2) Business Days confirm in writing to the Holder
      the
      number of shares of Common Stock then outstanding. In any case, the number
      of
      outstanding shares of Common Stock shall be determined after giving effect
      to
      the conversion or exercise of securities of the Company, including this Note,
      by
      the Holder or its affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported. By written notice to the
      Company, the Holder may increase or decrease the Maximum Percentage to any
      other
      percentage specified in such notice; provided that (i) any such increase will
      not be effective until the sixty-first (61st
      ) day
      after such notice is delivered to the Company, and (ii) any such increase or
      decrease will apply only to the Holder and not to any other holder of
      Notes.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (ii) Principal
      Market Regulation.
      The
      Company shall not be obligated to issue any shares of Common Stock upon
      conversion of this Note, and the Holder of this Note shall not have the right
      to
      receive upon conversion of this Note any shares of Common Stock, if the issuance
      of such shares of Common Stock would exceed the aggregate number of shares
      of
      Common Stock which the Company may issue upon conversion or exercise, as
      applicable, of the Notes and Warrants without breaching the Company’s
      obligations under the rules or regulations of the Principal Market (the
“Exchange
      Cap”),
      except
      that such limitation shall not apply in the event that the Company (A) obtains
      the approval of its stockholders as required by the applicable rules of the
      Principal Market for issuances of Common Stock in excess of such amount or
      (B)
      obtains a written opinion from outside counsel to the Company that such approval
      is not required, which opinion shall be reasonably satisfactory to the Required
      Holders. Until such approval or written opinion is obtained, no purchaser of
      the
      Notes pursuant to the Securities Purchase Agreement (the “Purchasers”)
      shall
      be issued in the aggregate, upon conversion or exercise, as applicable, of
      Notes
      or Warrants, shares of Common Stock in an amount greater than the product of
      the
      Exchange Cap multiplied by a fraction, the numerator of which is the principal
      amount of Notes issued to the Purchasers pursuant to the Securities Purchase
      Agreement on the Closing Date and the denominator of which is the aggregate
      principal amount of all Notes issued to the Purchasers pursuant to the
      Securities Purchase Agreement on the Closing Date (with respect to each
      Purchaser, the “Exchange
      Cap Allocation”).
      In the
      event that any Purchaser shall sell or otherwise transfer any of such
      Purchaser’s Notes, the transferee shall be allocated a pro rata portion of such
      Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence
      shall apply to such transferee with respect to the portion of the Exchange
      Cap
      Allocation allocated to such transferee. In the event that any holder of Notes
      shall convert all of such holder’s Notes into a number of shares of Common Stock
      which, in the aggregate, is less than such holder’s Exchange Cap Allocation,
      then the difference between such holder’s Exchange Cap Allocation and the number
      of shares of Common Stock actually issued to such holder shall be allocated
      to
      the respective Exchange Cap Allocations of the remaining holders of Notes on
      a
      pro rata basis in proportion to the aggregate principal amount of the Notes
      then
      held by each such holder.

    

    4. RIGHTS
      UPON EVENT OF DEFAULT.

    

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

    

    (i) the
      failure of the applicable Registration Statement required to be filed pursuant
      to the Registration Rights Agreement to be filed on or prior to the Filing
      Deadline (as defined in the Registration Rights Agreement) or declared effective
      by the SEC on or prior to the date that is thirty (30) days after the applicable
      Effectiveness Deadline (as defined in the Registration Rights Agreement), the
      Company fails to file the final prospectus in accordance with Rule 424 under
      the
      1933 Act or, while the applicable Registration Statement is required to be
      maintained effective pursuant to the terms of the Registration
      Rights Agreement, the effectiveness of the applicable Registration Statement
      lapses for any reason (including, without limitation, the issuance of a stop
      order) or is unavailable to any holder of the Notes for sale of all of such
      holder’s Registrable Securities (as defined in the Registration Rights
      Agreement) in accordance with the terms of the Registration Rights Agreement,
      and such lapse or unavailability continues for a period of ten (10) consecutive
      days or for more than an aggregate of thirty (30) days in any 365-day period
      (other than days during an Allowable Grace Period (as defined in the
      Registration Rights Agreement));

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

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

    

    (iii) the
      Company’s (A) failure to cure a Conversion Failure by delivery of the required
      number of shares of Common Stock within ten (10) Business Days after the
      applicable Conversion Date or (B) written notice to any holder of the Notes,
      including by way of public announcement or through any of its authorized agents,
      at any time, of its intention not to comply with a request for conversion of
      any
      Notes into shares of Common Stock that is tendered in accordance with the
      provisions of the Notes;

    

    (iv) at
      any
      time following the tenth (10th)
      consecutive Business Day that the authorized number of shares is less than
      the
      number of shares of Common Stock that the Holder would be entitled to receive
      upon a conversion of one hundred seventy-five percent (175%) of the full
      Conversion Amount of this Note (without regard to any limitations on conversion
      set forth in Section 3(d) or otherwise);

    

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

    

    (vi) any
      default under, redemption of or acceleration prior to maturity of any
      Indebtedness in excess of $250,000, in the aggregate, of the Company or any
      of
      its Subsidiaries (as defined in Section 3(a) of the Securities Purchase
      Agreement);

    

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

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

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

    

    (ix) a
      final
      judgment or judgments for the payment of money aggregating in excess of $250,000
      are rendered against the Company or any of its Subsidiaries and which judgments
      are not, within sixty (60) days after the entry thereof, bonded, discharged
      or
      stayed pending appeal, or are not discharged within sixty (60) days after the
      expiration of such stay; provided,
      however,
      that
      any judgment which is covered by insurance or an indemnity from a credit worthy
      party shall not be included in calculating the $250,000 amount set forth above
      so long as the Company provides the Holder a written statement from such insurer
      or indemnity provider (which written statement shall be reasonably satisfactory
      to the Holder) to the effect that such judgment is covered by insurance or
      an
      indemnity and the Company will receive the proceeds of such insurance or
      indemnity within thirty (30) days of the issuance of such judgment;

    

    (x) the
      Company breaches any material representation, warranty, covenant or other term
      or condition of any Transaction Document, except, in the case of a breach of
      a
      covenant which is curable, only if such breach continues for a period of at
      least thirty (30) consecutive days after written notice thereof;

    

    (xi) any
      breach or failure in any respect to comply with (x) Section 15 of this Note
      or
      (y) any of the Potential Partner Conditions;

    

    (xii) the
      inability of the Common Stock to be transferred with DTC through the Deposit
      Withdrawal at Custodian system, only if such inability continues for a period
      of
      at least thirty (30) consecutive days; or

    

    (xiii) The
      Security Agreement (as defined in the Securities Purchase Agreement) shall
      for
      any reason fail or cease to create a valid and perfected and, except to the
      extent permitted by the terms thereof, first priority lien in favor of the
      Holder for the benefit of the holders of the Notes on any Collateral (as defined
      in the Security Agreement) purported to be covered thereby and such failure
      or
      cessation cannot be cured within ten (10) business days of written notice
      thereof. 

    

    (b) Redemption
      Right.
      Upon
      the occurrence of an Event of Default with respect to this Note, the Company
      shall within two (2) Business Days after the day on which the Company is aware
      of the Event of Default deliver written notice thereof via facsimile and
      overnight courier (an “Event
      of Default Notice”)
      to the
      Holder. At any time after the earlier of the Holder’s receipt of an Event of
      Default Notice and the Holder becoming aware of an Event of Default, the Holder
      may require the Company to redeem all or any portion of the outstanding balance
      of this Note by delivering written notice thereof (the “Event of Default
      Redemption Notice”) to the Company, which Event of Default Redemption Notice
      shall indicate the portion of this Note the Holder is electing to have redeemed.
      Each portion of this Note subject to redemption by the Company pursuant to
      this
      Section 4(b) shall be redeemed by the Company at a price equal to the greater
      of
      (i) the product of (x) the Conversion Amount to be redeemed and (y) the
      Redemption Premium and (ii) the product of (A) the Conversion Rate with respect
      to such Conversion Amount in effect at such time as the Holder delivers an
      Event
      of Default Redemption Notice and (B) the Closing Sale Price of the Common Stock
      on the date immediately preceding such Event of Default (the “Event
      of Default Redemption Price”).
      Redemptions required by this Section 4(b) shall be made in accordance with
      the
      provisions of
      Section
      12. To the extent redemptions required by this Section 4(b) are deemed or
      determined by a court of competent jurisdiction to be prepayments of the Note
      by
      the Company, such redemptions shall be deemed to be voluntary prepayments.
      The
      parties hereto agree that in the event of the Company’s redemption of any
      portion of this Note under this Section 4(b), the Holder’s damages would be
      uncertain and difficult to estimate because of the parties’ inability to predict
      future interest rates and the uncertainty of the availability of a suitable
      substitute investment opportunity for the Holder.  Accordingly, any
      Redemption Premium due under this Section 4(b) is intended by the parties to
      be,
      and shall be deemed, a reasonable estimate of the Holder’s actual loss of its
      investment opportunity and not as a penalty.  

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    5. RIGHTS
      UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

    

    (a) Assumption.
      For so
      long as this Note shall remain outstanding, the Company shall not enter into
      or
      be party to a Fundamental Transaction unless (i) the Successor Entity assumes
      in
      writing all of the obligations of the Company under this Note and the other
      Transaction Documents in accordance with the provisions of this Section 5(a)
      pursuant to written agreements in form and substance satisfactory to the
      Required Holders and approved by the Required Holders prior to such Fundamental
      Transaction, including agreements to deliver to each holder of Notes in exchange
      for such Notes a security of the Successor Entity evidenced by a written
      instrument substantially similar in form and substance to the Notes, including,
      without limitation, having a principal amount and interest rate equal to the
      principal amounts and the interest rates of the Notes held by such holder,
      having similar conversion rights as the Notes and having similar ranking to
      the
      Notes, and satisfactory to the Required Holders and (ii) the Successor
      Entity (including its Parent Entity) is a publicly traded corporation whose
      common stock is quoted on or listed for trading on an Eligible Market. Upon
      the
      occurrence of any Fundamental Transaction, the Successor Entity shall succeed
      to, and be substituted for (so that from and after the date of such Fundamental
      Transaction, the provisions of this Note referring to the “Company” shall refer
      instead to the Successor Entity), and may exercise every right and power of
      the
      Company and shall assume all of the obligations of the Company under this Note
      with the same effect as if such Successor Entity had been named as the Company
      herein. Upon consummation of the Fundamental Transaction, the Successor Entity
      shall deliver to the Holder confirmation that there shall be issued upon
      conversion or redemption of this Note at any time after the consummation of
      the
      Fundamental Transaction, in lieu of the shares of Common Stock (or other
      securities, cash, assets or other property) issuable upon the conversion of
      the
      Notes prior to such Fundamental Transaction, such shares of publicly traded
      common stock (or their equivalent) of the Successor Entity, as adjusted in
      accordance with the provisions of this Note. The provisions of this Section
      shall apply similarly and equally to successive Fundamental Transactions and
      shall be applied without regard to any limitations on the conversion of this
      Note.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (b) Redemption
      Right.
      No
      sooner than fifteen (15) days nor later than ten (10) days prior to the
      consummation of a Change of Control, but not prior to the public announcement
      of
      such Change of Control, the Company shall deliver written notice thereof via
      facsimile and overnight courier to the Holder (a “Change
      of Control Notice”).
      At any
      time during the period beginning after the Holder’s receipt of a Change of
      Control Notice and ending ten (10) Trading Days after the consummation of such
      Change of Control, the Holder may require the Company to redeem all or any
      portion of this Note by delivering written notice thereof
      (“Change
      of Control Redemption Notice”)
      to the
      Company, which Change of Control Redemption Notice shall indicate the Conversion
      Amount the Holder is electing to be redeemed. The portion of this Note subject
      to redemption pursuant to this Section 5 shall be redeemed by the Company in
      cash at a price equal to the greater of (i) the product of the Change of Control
      Premium and the product of (x) the sum of the Conversion Amount being redeemed
      and any accrued and unpaid Interest with respect to such Conversion Amount
      and
      accrued and unpaid Late Charges with respect to such Conversion Amount and
      Interest and (y) the quotient determined by dividing (A) the Closing Sale Price
      of the Common Stock immediately following the public announcement of such
      proposed Change of Control by (B) the Conversion Price and (ii) 150% of the
      sum
      of the Conversion Amount being redeemed and any accrued and unpaid Interest
      with
      respect to such Conversion Amount subject to such Change of Control Redemption
      and accrued and unpaid Late Charges with respect to such Conversion Amount
      and
      Interest (the “Change
      of Control Redemption Price”).
      Redemptions required by this Section 5 shall be made in accordance with the
      provisions of Section 15 and shall have priority to payments to shareholders
      in
      connection with a Change of Control. To the extent redemptions required by
      this
      Section 5(b) are deemed or determined by a court of competent jurisdiction
      to be
      prepayments of this Note by the Company, such redemptions shall be deemed to
      be
      voluntary prepayments. Notwithstanding anything to the contrary in this Section
      5, until the Company Redemption Price (together with any interest thereon)
      is
      paid in full, the Conversion Amount submitted for redemption under this Section
      5(c) may be converted, in whole or in part, by the Holder into shares of Common
      Stock, or in the event the Conversion Date is after the consummation of the
      Change of Control, shares of publicly traded common stock (or their equivalent)
      of the Successor Entity pursuant to Section 3. The parties hereto agree that
      in
      the event of the Company’s redemption of any portion of this Note under this
      Section 5(b), the Holder’s damages would be uncertain and difficult to estimate
      because of the parties’ inability to predict future interest rates and the
      uncertainty of the availability of a suitable substitute investment opportunity
      for the Holder.  Accordingly, any redemption premium due under this Section
      5(b) is intended by the parties to be, and shall be deemed, a reasonable
      estimate of the Holder’s actual loss of its investment opportunity and not as a
      penalty.

    

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

    

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

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

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

    

    7. RIGHTS
      UPON ISSUANCE OF OTHER SECURITIES.

    

    (a) Adjustment
      of Conversion Price upon Issuance of Common Stock.
      If at
      any time after the Subscription Date, the Company issues or sells, or in
      accordance with this Section 7(a) is deemed to have issued or sold, any shares
      of Common Stock (including the issuance or sale of shares of Common Stock owned
      or held by or for the account of the Company, but excluding shares of Common
      Stock which are an Excluded Security or are deemed to have been issued or sold
      by the Company in connection with any Excluded Security) for a consideration
      per
      share (the “New
      Issuance Price”)
      less
      than a price (the “Applicable
      Price”)
      equal
      to the Conversion Price in effect immediately prior to such issue or sale (the
      foregoing a “Dilutive
      Issuance”),
      then
      (i) if such issuance or sale occurs prior to the one year anniversary date
      of
      the Subscription Date, immediately after such Dilutive Issuance, the Conversion
      Price then in effect shall be reduced to the New Issuance Price or (ii) if
      such
      issuance or sale occurs on or after the one year anniversary of the Subscription
      Date, then immediately after such Dilutive Issuance the Conversion Price then
      in
      effect shall be reduced to the price determined by dividing (i) an amount equal
      to the sum of (x) the number of shares of Common Stock outstanding immediately
      prior to such issue or sale (including for the purpose, shares of Common Stock
      issuable upon conversion or exercise of any outstanding securities or Options
      which are at such time exercisable, convertible or vested) multiplied by the
      Applicable Price and (y) the consideration, if any, to be received by the
      Company for such additional shares of Common Stock by (ii) an amount equal
      to
      the sum of (x) the total number of shares of Common Stock outstanding
      immediately prior to such issue of sale (including, for this purpose, shares
      of
      Common Stock issuable upon conversion or exercise of any outstanding securities
      or Options, which are at such time exercisable, convertible or vested) any
      (y)
      the total number of additional shares of Common Stock issuable as part of such
      Dilutive Issuance (including shares subject to conversion of convertible
      securities or Options). For purposes of determining the adjusted Conversion
      Price under this Section 7(a), the following shall be applicable:

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

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

    

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

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

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

    

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

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

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

    

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

    

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

    

    8. COMPANY
      RIGHT OF REDEMPTION.
       

    

    (a) General.
      The
      Company at its option shall have the right to redeem, with three (3) Business
      Days advance written notice (the “Company
      Redemption Notice”),
      a
      portion or all of the outstanding principal of the Note; provided,
      however,
      the
      Closing Bid Price of the Common Stock is less than the Conversion Price then
      in
      effect for five (5) Trading Days immediately prior to the delivery of the
      Company Redemption Notice. The Holder may convert after the Company Redemption
      Notice is received and until the Company Redemption Price is received by the
      Holder. The redemption price shall be One Hundred and Ten percent (110%) of
      the
      face amount redeemed plus accrued interest (the “Company Redemption
      Price”).
      The
      Company shall pay the Company Redemption Price on all payments made pursuant
      to
      this Note (except to the extent a higher redemption price is due in connection
      with an Event of Default or Change of Control, in which case such higher
      redemption price shall be paid by the Company), including payments made before,
      on, or after the Maturity Date. It shall be an Event of Default if the Company
      does not timely redeem the portion of this Note elected to be redeemed pursuant
      to a Company Redemption Notice and, thereafter, the Holder shall be able to
      exercise all of its rights and remedies hereunder upon an Event of Default,
      including the right to accelerate this Note and cause this Note to be redeemed
      in full pursuant to Section 4(b) hereof. For all payments under this Note,
      the
      payment of the Company Redemption Price by the Company shall be in addition
      to
      any accrued interest due.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    (b) Mechanics
      of Company Redemption.
      If the
      Company elects to redeem the Note in accordance with Section 8(a), then the
      Company Redemption Price, if any, which is to be paid to the Holder, shall
      be
      paid, by wire transfer of immediately available funds, an amount in cash equal
      to 100% of the Company Redemption Price. If the Company fails to redeem the
      amount of outstanding principal set forth in the Company Redemption Notice
      on
      such date, then at the option of the Holder designated in writing to the Company
      (any such designation, “Conversion Notice” for purposes of this Note), the
      Holder may require the Company to convert all or any part of such outstanding
      principal plus accrued interest at the Conversion Price. Conversions required
      by
      this Section 8(b) shall be made in accordance with the provisions of Section
      3(c). Notwithstanding anything to the contrary in this Section 8(b), but subject
      to Section 3(d), until the Company Redemption Price (together with any interest
      thereon) is paid in full, the amount of outstanding principal set forth in
      the
      Company Redemption Notice (together with any interest thereon) may be converted,
      in whole or in part, by the Holder into Common Stock pursuant to Section 3.
      

    

    9. SECURITY.
      This
      Note is secured to the extent and in the manner set forth in the Security
      Documents (as defined in the Securities Purchase Agreement).

    

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

    

    11. RESERVATION
      OF AUTHORIZED SHARES.

    

    (a) Reservation.
      The
      Company initially shall reserve out of its authorized and unissued Common Stock
      a number of shares of Common Stock for each of the Notes equal to 175% of the
      Conversion Rate with respect to the Conversion Amount of each such Note as
      of
      the Issuance Date. So long as any of the Notes are outstanding, the Company
      shall take all action necessary to reserve and keep available out of its
      authorized and unissued Common Stock, solely for the purpose of effecting the
      conversion of the Notes, 175% of the number of shares of Common Stock as shall
      from time to time be necessary to effect the conversion of all of the Notes
      then
      outstanding; provided that at no time shall the number of shares of Common
      Stock
      so reserved be less than the number of shares required to be reserved pursuant
      to the previous sentence (without regard to any limitations on conversions)
      (the
“Required
      Reserve Amount”).
      

    

    (b) Insufficient
      Authorized Shares.
      If at
      any time while any of the Notes remain outstanding the Company does not have
      a
      sufficient number of authorized and unreserved shares of Common Stock to satisfy
      its obligation to reserve for issuance upon conversion of the Notes at least
      a
      number of shares of Common Stock equal to the Required Reserve Amount (an
“Authorized
      Share Failure”),
      then
      the Company shall immediately take all action necessary to increase the
      Company’s authorized shares of Common Stock to an amount sufficient to allow the
      Company to reserve the Required Reserve Amount for the Notes then outstanding.
      Without limiting the generality of the foregoing sentence, as soon as
      practicable after the date of the occurrence of an Authorized Share Failure,
      but
      in no event later than forty-five (45) days after the occurrence of such
      Authorized Share Failure, the Company shall hold a meeting of its shareholders
      for the approval of an increase in the number of authorized shares of Common
      Stock. In connection with such meeting, the Company shall provide each
      shareholder with a proxy or information statement and shall use its best efforts
      to solicit its shareholders’ approval of such increase in authorized shares of
      Common Stock and to cause its board of directors to recommend to the
      shareholders that they approve such proposal.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    12. HOLDER’S
      REDEMPTIONS.
      The
      Company shall deliver the applicable Event of Default Redemption Price to the
      Holder within five (5) Business Days after the Company’s receipt of the Holder’s
      Event of Default Redemption Notice. If the Holder has submitted a Change of
      Control Redemption Notice in accordance with Section 5(b), the Company shall
      deliver the applicable Change of Control Redemption Price to the Holder
      concurrently with the consummation of such Change of Control if such notice
      is
      received prior to the consummation of such Change of Control and within five
      (5)
      Business Days after the Company’s receipt of such notice otherwise. In the event
      of a redemption of less than all of the Conversion Amount of this Note, the
      Company shall promptly cause to be issued and delivered to the Holder a new
      Note
      (in accordance with Section 18(d)) representing the outstanding Principal which
      has not been redeemed. In the event that the Company does not pay the applicable
      Redemption Price to the Holder within the time period required, at any time
      thereafter and until the Company pays such unpaid Redemption Price in full,
      the
      Holder shall have the option, in lieu of redemption, to require the Company
      to
      promptly return to the Holder all or any portion of this Note representing
      the
      Conversion Amount that was submitted for redemption and for which the applicable
      Redemption Price (together with any Late Charges thereon) has not been paid.
      Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice
      shall be null and void with respect to such Conversion Amount, (y) the Company
      shall immediately return this Note, or issue a new Note (in accordance with
      Section 18(d)) to the Holder representing the sum of such Conversion Amount
      to
      be redeemed together with accrued and unpaid Interest with respect to such
      Conversion Amount and accrued and unpaid Late Charges with respect to such
      Conversion Amount and Interest and (z) the Conversion Price of this Note or
      such
      new Notes shall be adjusted to the lesser of (A) the Conversion Price as in
      effect on the date on which the applicable Redemption Notice is voided and
      (B)
      the lowest Closing Bid Price during the period beginning on and including the
      date on which the applicable Redemption Notice is delivered to the Company
      and
      ending on and including the date on which the applicable Redemption Notice
      is
      voided. The Holder’s delivery of a notice voiding a Redemption Notice and
      exercise of its rights following such notice shall not affect the Company’s
      obligations to make any payments of Late Charges which have accrued prior to
      the
      date of such notice with respect to the Conversion Amount subject to such
      notice.

    

    13. RESTRICTION
      ON REDEMPTION AND CASH DIVIDENDS.
      Until
      all of the Notes have been converted, redeemed or otherwise satisfied in
      accordance with their terms, the Company shall not, directly or indirectly,
      redeem, repurchase or declare or pay any cash dividend or distribution on its
      capital stock without the prior express written consent of the Required
      Holders.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    14. VOTING
      RIGHTS.
      The
      Holder shall have no voting rights as the holder of this Note, except as
      required by law, including but not limited to Section 212 of the Delaware
      General Corporation Law, and as expressly provided in this Note.

    

    15. COVENANTS.
       

    

    (a) Rank.
      All
      payments due under this Note shall be senior to all other Indebtedness of the
      Company and its Subsidiaries and shall be subordinate to the Permitted Senior
      Indebtedness solely with respect to accounts receivables of the Company securing
      the Permitted Senior Indebtedness.

    

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

    

    (c) Existence
      of Liens.
      So long
      as this Note is outstanding, the Company shall not, and the Company shall not
      permit any of its Subsidiaries to, directly or indirectly, allow or suffer
      to
      exist any mortgage, lien, pledge, charge, security interest or other encumbrance
      upon or in any property or assets (including accounts and contract rights)
      owned
      by the Company or any of its Subsidiaries (collectively, “Liens”)
      other
      than Permitted Liens.

    

    (d) Restricted
      Payments.
      The
      Company shall not, and the Company shall not permit any of its Subsidiaries
      to,
      directly or indirectly, redeem, defease, repurchase, repay or make any payments
      in respect of, by the payment of cash or cash equivalents (in whole or in part,
      whether by way of open market purchases, tender offers, private transactions
      or
      otherwise), all or any portion of any Permitted Indebtedness, whether by way
      of
      payment in respect of principal of (or premium, if any) or interest on, such
      Indebtedness if at the time such payment is due or is otherwise made or, after
      giving effect to such payment, an event constituting, an Event of Default has
      occurred and is continuing.

    

    (e) Sales
      of Equity Securities.
       Except for Excluded Securities, the Company shall not, without the prior
      written consent of the Holder, (i) issue or sell shares of Common Stock or
      preferred stock without consideration or for a consideration per share less
      than
      the greater of the Closing Bid Price of the Common Stock determined immediately
      prior to its issuance or $.01, if the Common Stock is not traded or quoted
      on
      the Principal Market or any national exchange, (ii) issue any warrant, option,
      right, contract, call, or other security instrument granting the holder thereof,
      the right to acquire Common Stock without consideration or for a consideration
      less than the greater of such Common Stock’s Closing Bid Price value determined
      immediately prior to its issuance or $.01, if the Common Stock is not traded
      on
      the Principal Market or any national exchange, or (iii) file any registration
      statement on Form S-8, unless (x) such shares covered by such Form S-8 are
      not
      issued without consideration or for a consideration less than the greater of
      the
      Common Stock’s Closing Bid Price on the date of issuance or $.01, if the Common
      Stock is not traded or quoted on the Principal Market or any national exchange,
      and (y) such Form S-8 registration statement is not filed prior to ninety (90)
      days following the effectiveness of the registration statement. 

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    (f) Subsidiary
      Internal Accounting Controls.
      So long
      as this Note is outstanding, the Company and each of its Subsidiaries shall
      maintain, in all material respects, a system
      of
      internal accounting controls consistent with the Internal Accounting Controls
      (as defined in the Securities Purchase Agreement).

    

    (g) Dispositions.
      So long
      as any Obligations are outstanding, the Company shall not, and the Company
      shall
      not permit any of its Subsidiaries to, convey, sell, lease or sublease, transfer
      or otherwise dispose of, whether in one transaction or a series of related
      transactions, all or any material part of its business, property or assets,
      whether now owned or hereafter acquired (or agree to do any of the foregoing);
      provided,
      however,
      that
      the Company and its Subsidiaries may (i) sell inventory in the ordinary course
      of business, (ii) dispose of obsolete or worn-out equipment in the ordinary
      course of business and (iii) dispose of the non-core assets set forth
      on
      Schedule 15(g)
      hereto.

    

    (h) Additional
      Collateral Security.
      The
      Company shall cause each Subsidiary of the Company or any such Subsidiary not
      in
      existence on the Issuance Date, to execute and deliver to the Collateral Agent
      promptly and in any event within five (5) Business Days after the formation,
      acquisition or change in status thereof (i) a Security Agreement and (ii) such
      other agreements, instruments, approvals, legal opinions or other documents
      reasonably requested by the Collateral Agent in order to create, perfect,
      establish the first priority of (subject to Permitted Liens) or otherwise
      protect any Lien purported to be covered by any such Security Agreement or
      otherwise to effect the intent that such Subsidiary shall become bound by all
      of
      the terms, covenants and agreements contained in the this Note and that all
      property and assets of such Subsidiary shall become Collateral for the
      Obligations.

    

    

    16. VOTE
      TO ISSUE, OR CHANGE THE TERMS OF, NOTES.
      The
      affirmative vote at a meeting duly called for such purpose or the written
      consent without a meeting of the Required Holders shall be required for any
      change or amendment to this Note. In no event shall any amendment, modification
      nor waiver be made to this Note which would adversely affect the Holder without
      the written consent of the Holder.

    

    17. TRANSFER.
      The
      Holder acknowledges and agrees that this Note may only be offered, sold,
      assigned or transferred by the Holder without the consent of the Company,
      provided that the provisions of Section 2(f) of the Securities Purchase
      Agreement are complied with in all respects.

    

    18. REISSUANCE
      OF THIS NOTE.

    

    (a) Transfer.
      If this
      Note is to be transferred, the Holder shall surrender this Note to the Company,
      whereupon the Company will issue, promptly following the satisfaction of the
      provisions of Section 2(f) of the Securities Purchase Agreement, and deliver
      upon the order of the Holder a new Note (in accordance with Section 18(d)),
      in
      the name of the validly registered assigns or transferee, representing the
      outstanding Principal being transferred by the Holder and, if less then the
      entire outstanding Principal is being transferred, a new Note (in accordance
      with Section 18(d)) to the Holder representing the outstanding Principal not
      being transferred. The Holder and any assignee, by acceptance of this Note,
      acknowledge and agree that, by reason of the provisions of Section 3(c)(iii)
      and
      this Section 18(a), following conversion or redemption of any portion of this
      Note, the outstanding Principal represented by this Note may be less than the
      Principal stated on the face of this Note.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    (b) Lost,
      Stolen or Mutilated Note.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Note, and, in the case of loss,
      theft or destruction, of any indemnification undertaking and posting of a bond
      by the Holder to the Company in customary form and, in the case of mutilation,
      upon surrender and cancellation of this Note, the Company shall execute and
      deliver to the Holder a new Note (in accordance with Section 18(d)) representing
      the outstanding Principal.

    

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

    

    (d) Issuance
      of New Notes.
      Whenever the Company is required to issue a new Note pursuant to the terms
      of
      this Note, such new Note (i) shall be of like tenor with this Note,
      (ii) shall represent, as indicated on the face of such new Note, the
      Principal remaining outstanding (or in the case of a new Note being issued
      pursuant to Section 18(a) or Section 18(c), the Principal designated by the
      Holder which, when added to the principal represented by the other new Notes
      issued in connection with such issuance, does not exceed the Principal remaining
      outstanding under this Note immediately prior to such issuance of new Notes),
      (iii) shall have an issuance date, as indicated on the face of such new Note,
      which is the same as the Issuance Date of this Note, (iv) shall have the same
      rights and conditions as this Note, and (v) shall represent accrued Interest
      and
      Late Charges on the Principal and Interest of this Note, from the Issuance
      Date.

    

    19. REMEDIES,
      CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
      RELIEF.
      The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under this Note and any of the other Transaction Documents
      at
      law or in equity (including a decree of specific performance and/or other
      injunctive relief). Amounts set forth or provided for herein with respect to
      payments, conversion and the like (and the computation thereof) shall be the
      amounts to be received by the Holder and shall not, except as expressly provided
      herein, be subject to any other obligation of the Company (or the performance
      thereof). The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate.  The Company therefore agrees that,
      in the event of any such breach or threatened breach, the Holder shall be
      entitled, in addition to all other available remedies, to an injunction
      restraining any breach, without the necessity of showing economic loss and
      without any bond or other security being required.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    20. PAYMENT
      OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
      If (a)
      this Note is placed in the hands of an attorney for collection or enforcement
      or
      is collected or enforced through any legal proceeding or the Holder otherwise
      takes action to collect amounts due under this Note or to enforce the provisions
      of this Note or (b) there occurs any bankruptcy, reorganization, receivership
      of
      the Company or other proceedings affecting Company creditors’ rights and
      involving a claim under this Note, then the Company shall pay the reasonable
      costs incurred by the Holder for such collection, enforcement or action or
      in
      connection with such bankruptcy, reorganization, receivership or other
      proceeding, including, but not limited to, attorneys’ fees and
      disbursements.

    

    21. CONSTRUCTION;
      HEADINGS.
      The
      headings of this Note are for convenience of reference and shall not form part
      of, or affect the interpretation of, this Note.

    

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

    

    23. DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Closing Bid Price, the Closing
      Sale Price, the Average Market Price or the Weighted Average Price or the
      arithmetic calculation of the Conversion Rate or any Redemption Price, the
      Company shall submit the disputed determinations or arithmetic calculations
      via
      facsimile within two (2) Business Days of receipt of the Conversion Notice
      or
      Redemption Notice or other event giving rise to such dispute, as the case may
      be, to the Holder. If the Holder and the Company are unable to agree upon such
      determination or calculation within one (1) Business Day of such disputed
      determination or arithmetic calculation being submitted to the Holder, then
      the
      Company shall, within one (1) Business Day submit via facsimile (a) the disputed
      determination of the Closing Bid Price, the Closing Sale Price, the Average
      Market Price or the Weighted Average Price to an independent, reputable
      investment bank selected by the Company and approved by the Holder  (such
      approval not to be unreasonably withheld or delayed) or (b) the disputed
      arithmetic calculation of the Conversion Rate or any Redemption Price to the
      Company’s independent, outside accountant. The Company, at the Company’s
      expense, shall cause the investment bank or the accountant, as the case may
      be,
      to perform the determinations or calculations and notify the Company and the
      Holder of the results no later than five (5) Business Days from the time it
      receives the disputed determinations or calculations. Such investment bank’s or
      accountant’s determination or calculation, as the case may be, shall be binding
      upon all parties absent demonstrable error. If such investment bank or
      accountant’s determination confirms the Company’s calculation, Holder shall
      reimburse Company for the Company’s expenses of such investment bank or
      accountants.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    24. NOTICES;
      PAYMENTS.

    

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

    

    (b) Payments.
       Whenever any payment of cash is to be made by the Company to any Person
      pursuant to this Note, such payment shall be made in lawful money of the United
      States of America by a check drawn on the account of the Company and sent via
      overnight courier service to such Person at such address as previously provided
      to the Company in writing (which address, in the case of each of the Purchasers,
      shall initially be as set forth on the Schedule of Buyers attached to the
      Securities Purchase Agreement); provided that the Holder may elect to receive
      a
      payment of cash via wire transfer of immediately available funds by providing
      the Company with prior written notice setting out such request and the Holder’s
      wire transfer instructions. Whenever any amount expressed to be due by the
      terms
      of this Note is due on any day which is not a Business Day, the same shall
      instead be due on the next succeeding day which is a Business Day and, in the
      case of any Interest Date which is not the date on which
      this
      Note is paid in full, the extension of the due date thereof shall not be taken
      into account for purposes of determining the amount of Interest due on such
      date. Any amount of Principal or other amounts due under the Transaction
      Documents, other than Interest, which is not paid when due shall result in
      a
      late charge being incurred and payable by the Company in an amount equal to
      interest on such amount at the rate of fifteen percent (15%) per annum from
      the
      date such amount was due until the same is paid in full (“Late
      Charge”).

    

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

    

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

    

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

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

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

    

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

    

    (b) “Average
      Market Price”
means,
      for any given date, the lesser of (i) the arithmetic average of the Weighted
      Average Price of the Common Stock during the twenty (20) consecutive Trading
      Day
      period ending on the third (3rd)
      Trading
      Day immediately prior to such given date, and (ii) the arithmetic average of
      the
      Weighted Average Price of the Common Stock during the five (5) consecutive
      Trading Day period ending on the third (3rd)
      Trading
      Day immediately prior to such given date and that all such determinations shall
      be appropriately adjusted for any stock split, stock dividend, stock combination
      or other similar transaction that proportionately decreases or increases the
      Common Stock during such periods.

    

    (c) “Bloomberg”
means
      Bloomberg Financial Markets.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

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

    

    (e) “Calendar
      Month”
means
      the period beginning on and including the first of each calendar month and
      ending on and including the last day of such calendar month.

    

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

    

    (g) “Change
      of Control Premium”
means
      (i) 125% or (ii) 115% in the event of a Change of Control involving
      consideration paid to holders of the Company’s Common Stock where the
      consideration per share of the Company’s Common Stock to be received by the
      holders thereof is greater (as to amounts other than cash, as determined
      reasonably and in good faith by the Board of Directors of the Company) than
      200%
      of the Conversion
      Price as of the Initial Issuance Date (as adjusted for stock splits, stock
      dividends, reverse stock splits, recapitalizations, reclassifications and
      similar events). 

    

    (h) “Closing
      Bid Price”
and
      “Closing
      Sale Price”
means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, for such security on the Principal Market, as
      reported by Bloomberg, or, if the Principal Market begins to operate on an
      extended hours basis and does not designate the closing bid price or the closing
      trade price, as the case may be, then the last bid price or last trade price,
      respectively, of such security prior to 4:00 p.m., New York Time, as reported
      by
      Bloomberg, or, if the Principal Market is not the principal securities exchange
      or trading market for such security, the last closing bid price or last trade
      price, respectively, of such security on the principal securities exchange
      or
      trading market where such security is listed or traded as reported by Bloomberg,
      or if the foregoing do not apply, the last closing bid price or last trade
      price, respectively, of such security in the over-the-counter market on the
      electronic bulletin board for such security as reported by Bloomberg, or, if
      no
      closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, of any market makers for such security as reported in the “pink
      sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
      the Closing Bid Price or the Closing Sale Price cannot be calculated for a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price or the Closing Sale Price, as the case may be, of such security on such
      date shall be the fair market value as mutually determined by the Company and
      the Holder. If the Company and the Holder are unable to agree upon the fair
      market value of such security, then such dispute shall be resolved pursuant
      to
      Section 23.  All such determinations to be appropriately adjusted for any
      stock dividend, stock split, stock combination or other similar transaction
      during the applicable calculation period.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

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

    

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

    

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

    

    (l) “Eligible
      Market”
means,
      the Principal Market, The New York Stock Exchange, Inc., the Nasdaq Capital
      Market, the Nasdaq Global Market or the American Stock Exchange.

    

    (m) “Equity
      Conditions”
means
      that each of the following conditions is satisfied: (i) on each day during
      the period beginning six (6) months prior to the applicable date of
      determination and ending on and including the applicable date of determination
      (the “Equity Conditions Measuring Period”), either (x) the Registration
      Statement filed pursuant to the Registration Rights Agreement shall be effective
      and available for the resale of all remaining Registrable Securities in
      accordance with the terms of the Registration Rights Agreement and there shall
      not have been any Grace Periods (as defined in the Registration Rights
      Agreement) or (y) all shares of Common Stock issuable upon conversion of the
      Notes and exercise of the Warrants shall be eligible for sale without
      restriction and without the need for registration under any applicable federal
      or state securities laws; (ii) on each day during the Equity Conditions
      Measuring Period, the Common Stock is designated for quotation on the Principal
      Market and shall not have been suspended from trading on such exchange or market
      (other than suspensions of not more than two (2) Trading Days and occurring
      prior to the applicable date of determination due to business announcements
      by
      the Company) nor shall delisting or suspension by such exchange or market been
      threatened or pending either (A) in writing by such exchange or market or (B)
      by
      falling below the minimum listing maintenance requirements of such exchange
      or
      market; (iii) during the one (1) year period ending on and including the date
      immediately preceding the applicable date of determination, the Company shall
      have delivered Conversion Shares upon conversion of the Notes and Warrant Shares
      upon exercise of the Warrants to the holders on a timely basis as set forth
      in
      Section 3(c)(i) hereof and Section 1(a) of the Warrants; (iv) any applicable
      shares of Common Stock to be issued in connection with the event requiring
      determination may be issued in full without violating Section 3(d) hereof and
      the rules or regulations of the Principal Market; (v) during the Equity
      Conditions Measuring Period, the Company shall not have failed to timely make
      any payments within five (5) Business Days of when such payment is due pursuant
      to any Transaction Document; (vi) during the Equity Conditions Measuring Period,
      there shall not have occurred either (A) the public announcement of a pending,
      proposed or intended Fundamental Transaction which has not been abandoned,
      terminated or consummated or (B) an Event of Default or an event that with
      the
      passage of time or giving of notice would constitute an Event of Default; (vii)
      the Company shall have no knowledge of any fact that would cause (x) the
      Registration Statements required pursuant to the Registration Rights Agreement
      not to be effective and available for the resale of all remaining Registrable
      Securities in accordance with the terms of the Registration Rights Agreement
      or
      (y) any shares of Common Stock issuable upon conversion of the Notes and
      shares of Common Stock issuable upon exercise of the Warrants not to be eligible
      for sale without restriction pursuant to Rule 144(k) and any applicable state
      securities laws; (viii) the Company otherwise shall have been in material
      compliance with and shall not have materially breached any provision, covenant,
      representation or warranty of any Transaction Document; and (ix) the Stockholder
      Approval (as defined in the Securities Purchase Agreement) shall have been
      obtained.

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

    (n) “Equity
      Conditions Failure”
means
      that on any day during (i) the period commencing twenty-one (21) Trading Days
      prior to the applicable Interest Notice Date through the applicable Interest
      Notice Date or (ii) the period commencing with the applicable Interest Notice
      Due Date through the applicable Interest Date, the Equity Conditions have not
      been satisfied (or waived in writing by the Holder).

    

    (o) “Excluded
      Securities”
means
      any Common Stock and/or Options, Warrants or other Common Stock Purchase Rights
      (and the Common Stock issuable pursuant to such Options) issued or issuable:
      (i) in connection with any Approved Stock Plan up to a maximum of ten
      percent (10%) of the outstanding Common Stock (provided that securities issued
      in connection with an Approved Stock Plan that are outstanding as of September
      28, 2007, and shares of Common Stock issuable pursuant to exercise or conversion
      of such outstanding securities shall not be included for purposes of calculating
      the maximum of ten percent (10%)); (ii) upon conversion or exercise of any
      Options or Convertible Securities which are outstanding on the day immediately
      preceding September 28, 2007, provided that the terms of such Options or
      Convertible Securities are not amended, modified or changed on or after
      September 28, 2007, to lower the conversion or exercise price thereof and so
      long as the number of shares of Common Stock underlying such securities is
      not
      otherwise increased; (iii) shares of Common Stock issued in an underwritten
      public offering in which the gross cash proceeds to the Company (before
      underwriting discounts, commissions and fees) are at least $10,000,000;
      (iv) Options issued to medical practices that are customers of the Company
      in good standing to acquire up to a maximum of 250,000 shares of Common Stock
      per practice with an exercise or conversion price at or above the Closing Sale
      Price on the day of issuance; (v) up to 250,000 shares of Common Stock (or
      securities convertible into 250,000 shares of Common Stock with an exercise
      or
      conversion price at or above the Closing Sale price on the day of issuance)
      as
      consideration for strategic acquisitions up to a maximum of 250,000 shares
      of
      Common Stock per acquisition; (vi) up to 250,000 shares of Common Stock (or
      securities convertible into 250,000 shares of Common Stock with an exercise
      or
      conversion price at or above the Closing Sale Price on the day of issuance)
      per
      year to third parties in connection with investor relations and public relations
      efforts of the Company; and (vii) shares of Common Stock, Options, or Warrants
      to be issued to Rodman & Renshaw (or their designees) as consideration for
      securing a line of credit or similar financing for the Company or its
      subsidiaries.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

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

    

    (q) “GAAP”
means
      United States generally accepted accounting principles, consistently
      applied.

    

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

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

     

    (s) “Initial
      Issuance Date”
means
      October 19, 2006.

    

    (t) “Installment
      Amount”
means
      with respect to any Installment Date, the lesser of (A) the dollar amount set
      forth in the column entitled “Installment Amount” in the Installment Schedule
      and that corresponds to such Installment Date and (B) the remaining principal
      due hereunder.   In the event the Holder shall sell or otherwise transfer
      any portion of this Note, the transferee shall be allocated a pro rata portion
      of the each unpaid Installment Amount hereunder.

    

    (u) “Installment
      Date”
means
      the first day of each calendar month.

    

    (v) “Installment
      Schedule”
means
      the Installment Schedule attached hereto as Schedule
      I.

    

    (w) “Interest
      Rate”
means
      eight percent (8%) per annum, subject to periodic adjustment pursuant to Section
      2.

    

    (x) “Options”
means
      any rights, warrants or options to subscribe for or purchase Common Stock or
      Convertible Securities.

    

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

    

    (z) “Permitted
      Indebtedness”
means
      (A) Indebtedness incurred by the Company that is made expressly subordinate
      in
      right of payment and priority to the Indebtedness evidenced by this Note, as
      reflected in a written agreement acceptable to the Holder and approved by the
      Holder in writing (which approval shall not be unreasonably withheld or
      delayed), and which Indebtedness does not provide at any time for (1) the
      payment, prepayment, repayment, repurchase or defeasance, directly or
      indirectly, of any principal or premium, if any, thereon until ninety-one (91)
      days after the Maturity Date or later and (2) total interest and fees at a
      rate
      in excess of the Interest Rate hereunder, (B) Permitted Senior Indebtedness,
      (C)
      Indebtedness secured by Permitted Liens, (D) Indebtedness to trade creditors
      incurred in the ordinary course of
      business, and (E) extensions, refinancings and renewals of any items of
      Permitted Indebtedness, provided that the principal amount is not increased
      or
      the terms modified to impose more burdensome terms upon the Company or its
      Subsidiary, as the case may be, (F) indebtedness to David Goldner pursuant
      to
      that certain promissory note, dated August 24, 2006, issued by the Company
      to
      David Goldner.

    

    (aa) “Permitted
      Liens”
means
      (i) any Lien for taxes not yet due or delinquent or being contested in good
      faith by appropriate proceedings for which adequate reserves have been
      established in accordance with GAAP, (ii) any statutory Lien arising in the
      ordinary course of business by operation of law with respect to a liability
      that
      is not yet due or delinquent, (iii) any Lien created by operation of law, such
      as materialmen’s liens, mechanics’ liens and other similar liens, arising in the
      ordinary course of business with respect to a liability that is not yet due
      or
      delinquent or that are being contested in good faith by appropriate proceedings,
      (iv) Liens securing the Company’s obligations under the Notes, (v) Liens (A)
      upon or in any equipment (as defined in the Security Agreement) acquired or
      held
      by the Company or any of its Subsidiaries to secure the purchase price of such
      equipment or indebtedness incurred solely for the purpose of financing the
      acquisition or lease of such equipment, or (B) existing on such equipment at
      the
      time of its acquisition, provided that the Lien is confined solely to the
      property so acquired and improvements thereon, and the proceeds of such
      equipment, (vi) Liens incurred in connection with the extension, renewal or
      refinancing of the indebtedness secured by Liens of the type described in clause
      (v) above, provided that any extension, renewal or replacement Lien shall be
      limited to the property encumbered by the existing Lien and the principal amount
      of the Indebtedness being extended, renewed or refinanced does not increase,
      (vii) Liens on accounts receivables, security interests, loan documents and
      reserve accounts and the proceeds thereof of the Company and its Subsidiaries
      securing the Company’s obligations under the Permitted Senior Indebtedness;
      (viii) leases or subleases and licenses and sublicenses hereafter granted to
      others in the ordinary course of the Company’s business, not interfering in any
      material respect with the business of the Company and its Subsidiaries taken
      as
      a whole, (ix) Liens in favor of customs and revenue authorities arising as
      a
      matter of law to secure payments of custom duties in connection with the
      importation of goods; (x) Liens arising from judgments, decrees or attachments
      in circumstances not constituting an Event of Default under Section 4(a)(ix);
      (xi) Liens with respect to Indebtedness not individually in excess of $50,000
      or
      in the aggregate in excess of $250,000, which individually and in aggregate
      are
      not material to the Company; (xii) the Permitted Liens as defined in the
      Securities Purchase Agreement and (xii) the Lien granted to David Goldner with
      respect to the collateral described in that certain Security Agreement, dated
      August 24, 2006, between the Company and David Goldner.

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    (bb) “Permitted
      Senior Indebtedness”
means
      any financing facility to be obtained by the Company after the Initial Issuance
      Date, and secured by liens in any or all of the following: accounts receivables,
      security interests in client assets; loan documents; reserve account; and the
      proceeds thereof.

    

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

    

    (dd) “Potential
      Partner Conditions”
means
      at any time during the period commencing on the date of the consummation of
      any
      material transaction between the Company and a Person and ending on the first
      anniversary of the Effective Date, there shall be no disclosure that any
      executive officer of such Person has (i) exhibited dishonesty in the performance
      of his or her duties, which is materially and demonstrably injurious to the
      Company;
      or (ii) been convicted of (x) a felony under the laws of the United States
      or
      any state thereof or (y) a misdemeanor involving moral turpitude, in each case,
      which is materially and demonstrably injurious to the Company.

    

    (ee) “Principal
      Market”
means
      Over-the-Counter Bulletin Board.

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

     

    (ff) “Redemption
      Notices”
means,
      collectively, the Event of Default Redemption Notices, Change of Control
      Redemption Notices, the Company Redemption Notice, and, each of the foregoing,
      individually, a Redemption Notice.

    

    (gg) “Redemption
      Premium”
means
      (i) in the case of the Events of Default described in Section 4(a)(i) - (vi)
      and
      (ix) - (xii), 125% or (ii) in the case of the Events of Default described in
      Section 4(a)(vii) - (viii), 120%.

    

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

    

    (ii) “Registration
      Rights Agreement”
means
      that certain registration rights agreement between the Company and the initial
      holders of the Notes relating to, among other things, the registration of the
      resale of the Common Stock issuable upon conversion of the Notes and exercise
      of
      the Warrants.

    

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

     

    (kk) “SEC”
means
      the United States Securities and Exchange Commission.

    

    (ll) “Securities
      Purchase Agreement”
means
      that certain securities purchase agreement dated the Subscription Date by and
      among the Company and the initial holders of the Notes pursuant to which the
      Company issued the Notes.

    

    (mm) “Subscription
      Date”
means
      October 19, 2006.

    

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

    

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

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

    (pp) “Volume
      Installment Limitation”
means,
      for any date of determination, fifteen percent (15%) of the aggregate dollar
      trading volume (as reported on Bloomberg) of the Common Stock over the forty
      (40) consecutive Trading Day period ending on the third (3rd)
      Trading
      Day immediately preceding the applicable Installment Date.

    

    (qq) “Volume
      Interest Limitation”
means,
      for any date of determination, fifteen percent (15%) of the aggregate dollar
      trading volume (as reported on Bloomberg) of the Common Stock over the twenty
      (20) consecutive Trading Day period ending on the third (3rd)
      Trading
      Day immediately preceding the applicable Interest Date.

    

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

    

    (ss) “Warrants”
has
      the
      meaning ascribed to such term in the Securities Purchase Agreement, and shall
      include all warrants issued in exchange therefor or replacement
      thereof.

    

    (tt) “Weighted
      Average Price”
means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market during the period beginning at 9:30 a.m.,
      New York Time (or such other time as the Principal Market publicly announces
      is
      the official open of trading), and ending at 4:00 p.m., New York Time (or such
      other time as the Principal Market publicly announces is the official close
      of
      trading) as reported by Bloomberg through its “Volume at Price” functions, or,
      if the foregoing does not apply, the dollar volume-weighted average price of
      such security in the over-the-counter market on the electronic bulletin board
      for such security during the period beginning at 9:30 a.m., New York Time (or
      such other time as such market publicly announces is the official open of
      trading), and ending at 4:00 p.m., New York Time (or such other time as such
      market publicly announces is the official close of trading) as reported by
      Bloomberg, or, if no dollar volume-weighted average price is reported for such
      security by Bloomberg for such hours, the average of the highest closing bid
      price and the lowest closing ask price of any of the market makers for such
      security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
      National Quotation Bureau, Inc.).  If the Weighted Average Price cannot be
      calculated for a security on a particular date on any of the foregoing bases,
      the Weighted Average Price of such security on such date shall be the fair
      market value as mutually determined by the Company and the Holder.  If the
      Company and the Holder are unable to agree upon the fair market value of such
      security, then such dispute shall be resolved pursuant to Section 23.  All
      such determinations to be appropriately adjusted for any stock dividend, stock
      split, stock combination or other similar transaction during the applicable
      calculation period.

    

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

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

     

    29. SUBORDINATION.
      The
      obligations of the Company under this Note and the Security Documents are
      expressly subordinated to the obligations of the Company and its Subsidiaries
      in
      connection with Permitted Senior Indebtedness. By acceptance of this note,
      Holder agrees that it shall promptly execute and deliver (i) such agreements,
      documents and instruments as may be reasonably requested by holders of Permitted
      Senior Indebtedness, expressly confirming the subordination of the Company’s
      obligations under this Note and the Security Documents to those of the holders
      of Permitted Senior Indebtedness and (ii) such intercreditor agreements as
      may
      be reasonably requested by holders of Permitted Senior Indebtedness relating
      to
      customary intercreditor arrangements including, but not limited to, standstill
      agreements and the right to cure defaults under this Note.

    

    [Signature
      Page Follows]

    

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

     

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

    

    
      	 	 	 
	 	
              MDWERKS,
                INC.

            
	 
 	 
 	 
 
	
            	By:  	/s/ Howard
              B.
              Katz
	 	
              
Name: Howard
              Katz
	 	Title: Chief
              Executive Officer

    

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

       

    

    SCHEDULE
      I

    

    INSTALLMENT
      SCHEDULE

    

    

    
      	
              Issue
                Date

            	 	 	
              11/9/2006

            	 
	
              Face
                Amount

            	 	
              $

            	
              2,500,000

            	 
	
              Interest
                Rate

            	 	 	
              8.0

            	
              %

            
	
              Term
                (months)

            	 	 	
              36

            	 
	
              Principal
                (months)

            	 	 	
              25

            	 

    

     

    
      	 	 
	
              Period

            	 	
              Installment

              Date

            	
               

            	
              Beginning
                Principal

            	
               

            	
              Accrued

              Interest

            	
               

            	
              Interest
                

              Due

            	
               

            	
              Installment

              Payment

            	
               

            	
              Ending
                

              Principal

            	 
	
              0

            	 	 	
              12/1/2006

            	 	
              $

            	
              2,500,000.00

            	 	
              $

            	
              11,666.67

            	 	
              $

            	
              11,666.67

            	 	
              $

            	
              0.00

            	 	
              $

            	
              2,500,000.00

            	 
	
              1

            	 	 	
              1/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              2

            	 	 	
              2/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              3

            	 	 	
              3/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              4

            	 	 	
              4/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              5

            	 	 	
              5/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              6

            	 	 	
              6/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              7

            	 	 	
              7/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              8

            	 	 	
              8/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              9

            	 	 	
              9/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              10

            	 	 	
              10/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              11

            	 	 	
              11/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              12

            	 	 	
              12/1/2007

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              13

            	 	 	
              1/1/2008

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              0.00

            	 	 	
              2,500,000.00

            	 
	
              14

            	 	 	
              2/1/2008

            	 	 	
              2,500,000.00

            	 	 	
              16,666.67

            	 	 	
              16,666.67

            	 	 	
              108,695.65

            	 	 	
              2,391,304.35

            	 
	
              15

            	 	 	
              3/1/2008

            	 	 	
              2,391,304.35

            	 	 	
              15,942.03

            	 	 	
              15,942.03

            	 	 	
              108,695.65

            	 	 	
              2,282,608.70

            	 
	
              16

            	 	 	
              4/1/2008

            	 	 	
              2,282,608.70

            	 	 	
              15,217.39

            	 	 	
              15,217.39

            	 	 	
              108,695.65

            	 	 	
              2,173,913.04

            	 
	
              17

            	 	 	
              5/1/2008

            	 	 	
              2,173,913.04

            	 	 	
              14,492.75

            	 	 	
              14,492.75

            	 	 	
              108,695.65

            	 	 	
              2,065,217.39

            	 
	
              18

            	 	 	
              6/1/2008

            	 	 	
              2,065,217.39

            	 	 	
              13,768.12

            	 	 	
              13,768.12

            	 	 	
              108,695.65

            	 	 	
              1,956,521.74

            	 
	
              19

            	 	 	
              7/1/2008

            	 	 	
              1,956,521.74

            	 	 	
              13,043.48

            	 	 	
              13,043.48

            	 	 	
              108,695.65

            	 	 	
              1,847,826.09

            	 
	
              20

            	 	 	
              8/1/2008

            	 	 	
              1,847,826.09

            	 	 	
              12,318.84

            	 	 	
              12,318.84

            	 	 	
              108,695.65

            	 	 	
              1,739,130.43

            	 
	
              21

            	 	 	
              9/1/2008

            	 	 	
              1,739,130.43

            	 	 	
              11,594.20

            	 	 	
              11,594.20

            	 	 	
              108,695.65

            	 	 	
              1,630,434.78

            	 
	
              22

            	 	 	
              10/1/2008

            	 	 	
              1,630,434.78

            	 	 	
              10,869.57

            	 	 	
              10,869.57

            	 	 	
              108,695.65

            	 	 	
              1,521,739.13

            	 
	
              23

            	 	 	
              11/1/2008

            	 	 	
              1,521,739.13

            	 	 	
              10,144.93

            	 	 	
              10,144.93

            	 	 	
              108,695.65

            	 	 	
              1,413,043.48

            	 
	
              24

            	 	 	
              12/1/2008

            	 	 	
              1,413,043.48

            	 	 	
              9,420.29

            	 	 	
              9,420.29

            	 	 	
              108,695.65

            	 	 	
              1,304,347.83

            	 
	
              25

            	 	 	
              1/1/2009

            	 	 	
              1,304,347.83

            	 	 	
              8,695.65

            	 	 	
              8,695.65

            	 	 	
              108,695.65

            	 	 	
              1,195,652.17

            	 
	
              26

            	 	 	
              2/1/2009

            	 	 	
              1,195,652.17

            	 	 	
              7,971.01

            	 	 	
              7,971.01

            	 	 	
              108,695.65

            	 	 	
              1,086,956.52

            	 
	
              27

            	 	 	
              3/1/2009

            	 	 	
              1,086,956.52

            	 	 	
              7,246.38

            	 	 	
              7,246.38

            	 	 	
              108,695.65

            	 	 	
              978,260.87

            	 
	
              28

            	 	 	
              4/1/2009

            	 	 	
              978,260.87

            	 	 	
              6,521.74

            	 	 	
              6,521.74

            	 	 	
              108,695.65

            	 	 	
              869,565.22

            	 

    

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    

    
      	
              Period

            	 	
              Installment

              Date

            	
               

            	
              Beginning
                Principal

            	
               

            	
              Accrued
                

              Interest

            	
               

            	
              Interest
                

              Due

            	
               

            	
              Installment

              Payment

            	
               

            	
              Ending
                

              Principal

            	 
	
              29

            	 	 	
              5/1/2009

            	 	 	
              869,565.22

            	 	 	
              5,797.10

            	 	 	
              5,797.10

            	 	 	
              108,695.65

            	 	 	
              760,869.57

            	 
	
              30

            	 	 	
              6/1/2009

            	 	 	
              760,869.57

            	 	 	
              5,072.46

            	 	 	
              5,072.46

            	 	 	
              108,695.65

            	 	 	
              652,173.91

            	 
	
              31

            	 	 	
              7/1/2009

            	 	 	
              652,173.91

            	 	 	
              4,347.83

            	 	 	
              4,347.83

            	 	 	
              108,695.65

            	 	 	
              543,478.26

            	 
	
              32

            	 	 	
              8/1/2009

            	 	 	
              543,478.26

            	 	 	
              3,623.19

            	 	 	
              3,623.19

            	 	 	
              108,695.65

            	 	 	
              434,782.61

            	 
	
              33

            	 	 	
              9/1/2009

            	 	 	
              434,782.61

            	 	 	
              2,898.55

            	 	 	
              2,898.55

            	 	 	
              108,695.65

            	 	 	
              326,086.96

            	 
	
              34

            	 	 	
              10/1/2009

            	 	 	
              326,086.96

            	 	 	
              2,173.91

            	 	 	
              2,173.91

            	 	 	
              108,695.65

            	 	 	
              217,391.30

            	 
	
              35

            	 	 	
              11/1/2009

            	 	 	
              217,391.30

            	 	 	
              1,449.28

            	 	 	
              1,449.28

            	 	 	
              108,695.65

            	 	 	
              108,695.65

            	 
	
              36

            	 	 	
              11/9/2009

            	 	 	
              108,695.65

            	 	 	
              217.39

            	 	 	
              217.39

            	 	 	
              108,695.65

            	 	 	
              0.00

            	 

    

    

    
      
         

      

      
        34

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00130-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00130-of-00352.parquet"}]]