FORM OF AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE NOTE

EX-4.16

FORM OF AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE NOTE

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE

NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN

REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, 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 GENERALLY ACCEPTABLE FORM, 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, SUBJECT TO COMPLIANCE WITH APPLICABLE

SECURITIES LAWS, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE

MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,

INCLUDING SECTIONS 3(C)(III) AND 18(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. THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A

INTERCREDITOR AGREEMENT BY AND BETWEEN FORTRESS CREDIT CORP., AS AGENT (OR ANY

SUCCESSOR OR REPLACEMENT AGENT) FOR CERTAIN OTHER FINANCIAL INSTITUTIONS UNDER

THE SENIOR LOAN AGREEMENT (HEREINAFTER DEFINED), AND LAW DEBENTURE TRUST COMPANY

OF NEW YORK (OR ANY SUCCESSOR OR REPLACEMENT COLLATERAL AGENT), IN ITS CAPACITY

AS COLLATERAL AGENT, FOR THE HOLDER OF THIS NOTE AND THE HOLDERS OF THE OTHER

NOTES, DATED AS OF NOVEMBER 8, 2006 AS AMENDED PURSUANT TO AMENDMENT NO. 1 TO

INTERCREDITOR AND SUBORDINATION AGREEMENT DATED MAY __, 2007 (AS THE SAME MAY BE

AMENDED SUPPLEMENTED, RESTATED, NOVATED OR REPLACED (INCLUDING IN CONNECTION

WITH REPLACEMENT SENIOR FINANCING) FROM TIME TO TIME, THE "INTERCREDITOR

AGREEMENT"). THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SECURITIES PURCHASE

AGREEMENT (NOTES AND WARRANTS), DATED AS OF NOVEMBER 8, 2006, BY AND AMONG

MARITIME LOGISTICS US HOLDINGS INC., THE BUYERS LISTED THEREIN, LAW DEBENTURE

TRUST COMPANY OF NEW YORK, AS COLLATERAL AGENT FOR SUCH BUYERS AND SUMMIT GLOBAL

LOGISTICS, INC. PURSUANT TO THAT CERTAIN JOINDER AGREEMENT, DATED AS OF NOVEMBER

8, 2006, AS SUCH SECURITIES PURCHASE AGREEMENT HAS BEEN AMENDED, RESTATED,

SUPPLEMENTED AND/OR MODIFIED TO DATE AND/OR FROM TIME TO TIME.

SUMMIT GLOBAL LOGISTICS, INC.

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AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE NOTE

Original Issuance Date: Original Principal Amount: U.S. $_____________

November 8, 2006

Reissue Date: Reissue Principal Amount: U.S. $_____________

May __, 2007

FOR VALUE RECEIVED, Summit Global Logistics, Inc., a Delaware

corporation (formerly known as Aerobic Creations, Inc., the "COMPANY"), hereby

promises to pay to the order of [_________]or registered permitted assigns

("HOLDER") the amount set out above as the Reissue Principal Amount (as reduced

pursuant to the terms hereof pursuant to redemption (or prepayment), conversion

or otherwise, the "PRINCIPAL") when due, whether upon the Maturity Date (as

defined below), acceleration, redemption (or prepayment) or otherwise (in each

case in accordance with the terms hereof) and to pay interest ("INTEREST") on

any outstanding Principal at the applicable Interest Rate, from November 6, 2006

(the "INTEREST COMMENCEMENT DATE") until the same becomes due and payable,

whether upon an Interest Date (as defined below), the Maturity Date,

acceleration, conversion, redemption (or prepayment) or otherwise (in each case

in accordance with the terms hereof). This Amended and Restated Senior Secured

Convertible Note (including all Senior Secured Convertible Notes issued in

exchange, transfer or replacement hereof, as amended, restated, supplemented

and/or modified from time to time in accordance with the provisions hereof, this

"NOTE") is one of an issue of Senior Secured Convertible Notes and Amended and

Restated Senior Secured Convertible Notes issued pursuant to the Securities

Purchase Agreement (as defined below) on the Reissue Date (such other Senior

Secured Convertible Notes and Amended and Restated Senior Secured Convertible

Notes, as amended, restated, supplemented and/or modified to date and from time

to time, the "OTHER NOTES"). This Note amends, restates and replaces that

certain Senior Secured Convertible Note issued by Company to Holder on the

Original Issuance Date ("ORIGINAL NOTE"). This Note evidences and the Reissue

Principal Amount includes (i) the Original Principal Amount of the Original

Note, (ii) $________ of additional loans made by Holder to Company on the

Reissue Date, (iii) $________ of Default Interest (as defined in the Second

Amendment to Securities Purchase Agreement (Notes and Warrants) and First

Amendment to Joinder Agreement dated as of May __, 2007) and (iv) a fee in the

amount of $_______ as consideration for the Holder agreeing to waive certain

rights under the Registration Rights Agreement. Certain capitalized terms used

herein are defined in Section 28. Capitalized terms used but not defined herein

shall have the meanings ascribed to them in the Securities Purchase Agreement.

(1) MATURITY. On the Maturity Date, the Company shall pay to the

Holder an amount in cash representing all outstanding Principal, accrued and

unpaid Interest and accrued and unpaid Late Charges on such Principal and

Interest. The "MATURITY DATE" shall be November 8, 2011, as may be extended at

the option of the Holder (i) in the event that, and for so long as, an Event of

Default (as defined in Section 4(a)) shall have occurred and be continuing on

the Maturity Date (as may be extended pursuant to this Section 1) or any event

that shall have occurred and be continuing that with the passage of time and the

failure to cure would result in an Event of Default and (ii) through the date

that is ten (10) Business Days after the consummation of a Change of Control in

the event that a Change of Control is publicly announced or a Change of Control

Notice (as defined in Section 5(b)) is delivered prior to the

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Maturity Date. Except as specifically set forth in Section 8 hereof, this Note

is not voluntarily prepayable.

(2) INTEREST; INTEREST RATE. (a) Interest on the Principal

then-outstanding under this Note (i) shall accrue interest at the Interest Rate,

commencing on the Interest COMMENCEMENT Date, (ii) shall be computed on the

basis of a 360-day year comprised of twelve (12) thirty (30) day months and

(iii) shall be payable in arrears for each Calendar Quarter on the first day of

the succeeding Calendar Quarter during the period beginning on the Interest

Commencement Date and ending on, and including, the Maturity Date (each, an

"INTEREST DATE") with the first Interest Date being January 1, 2007 provided

that, all Interest accruing for the five (5) consecutive Calendar Quarters

ending after the Reissue Date, commencing with the Calendar Quarter ending on

June 30, 2007, shall, at the option of the Company, after giving written notice

to the Holder on or prior to the first day of each such Calendar Quarter other

than with respect to Calendar Quarter ending on June 30, 2007 (in which case, no

such notice is required), accrue in arrears on the first day of the succeeding

Calendar Quarter and shall not be payable until the Maturity Date (or earlier,

in the event that all Principal hereunder is being converted to Common Stock

(prior to the Maturity Date) in accordance with this Section 2, on the

Conversion Date with respect thereto). Interest on this Note shall accrue from

the Interest Commencement Date until the earlier to occur of the date (i) the

Principal Amount is paid or, if a paying agent is engaged by the Company,

transferred to such paying agent with instructions to pay the same and (ii) all

amounts outstanding under this Note are converted to Common Stock in accordance

with the provisions hereof. Interest shall be payable or accrue, as applicable

in accordance with this Section 2(a), on each Interest Date to the record holder

of this Note on the applicable Interest Date, and to the extent that any

principal amount of this Note is converted prior to such Interest Date, accrued

and unpaid Interest in respect of such converted principal amount and accrued

and unpaid Late Charges in respect of such converted principal amount and

Interest shall be paid on the Conversion Date (as defined below) to the record

holder of this Note on the applicable Conversion Date, in cash.

(b) Interest on this Note that is payable, and is punctually

paid or duly provided for, on any Interest Date shall be paid to the Person in

whose name this Note is registered at the close of business on the Record Date

for such interest at the office or agency of the Company maintained for such

purpose or at the office of a payment agent located in the state of New York

engaged by the Company for the purpose of making payments under this Note and

the Other Notes. Each payment of interest on this Note shall be made by check

mailed to the address of the Holder specified in the register of Notes;

PROVIDED, HOWEVER, that, at the request of the Holder in writing to the Company,

interest on the Holder's Note(s) shall be paid by wire transfer in immediately

available funds in accordance with the written wire transfer instruction

supplied by the Holder from time to time to the Company at least ten (10)

Business Days prior to the applicable Interest Date or Conversion Date.

(c) From and after the occurrence and during the continuance

of an Event of Default, the Interest Rate shall be increased to two percent

(2.0%) in excess of the Interest Rate otherwise payable at such time. In the

event that such Event of Default is subsequently cured or waived, the adjustment

referred to in the preceding sentence shall cease to be effective as of the date

of such cure or waiver; PROVIDED that, the Interest as calculated and unpaid at

such increased rate during the continuance of such Event of Default shall

continue to apply to the

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extent relating to the days after the occurrence of such Event of Default to but

excluding the date of cure or waiver of such Event of Default. For purposes of

this Section 2(c), the period of the Event of Default in respect of Section

4(a)(i) only, shall commence the first day after the grace periods specified

therein expire and shall end on the day upon which the applicable Registration

Statement becomes effective or again becomes available, as applicable.

(3) CONVERSION OF NOTES. This Note shall be convertible into shares

of the Company's common stock, par value $0.001 per share (the "COMMON STOCK"),

on the terms and conditions set forth in this Section 3.

(a) CONVERSION RIGHT. Subject to the provisions of Section

3(d), at any time or times on or after the Original Issuance Date, the Holder

shall be entitled to convert all or any portion of the Principal

then-outstanding 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 or down, as applicable, to the nearest whole share. The Company

shall pay any and all taxes that may be payable in respect of the issuance and

delivery of shares of Common Stock upon conversion of any Principal.

(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

(the "CONVERSION RATE").

(i) "CONVERSION AMOUNT" means the portion of the

Principal to be converted, redeemed or otherwise in respect of which the

applicable determination is being made.

(ii) "CONVERSION PRICE" means, as of any Conversion

Date (as defined below) or other date of determination, $5.50 per share of

Common Stock subject to adjustment as provided for herein.

(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 11:59 p.m., New York Time, on such date, a copy of an executed notice of

conversion in the form attached hereto as EXHIBIT I (the "CONVERSION NOTICE") to

the Company and (B) if required by Section 3(c)(iii), surrender this Note to a

common carrier for delivery to the Company as soon as practicable on or

following such date (or an indemnification undertaking in respect of this Note

in the case of its loss, theft or destruction). On or before the second (2nd)

Trading Day following the date of receipt of a Conversion Notice, the Company

shall transmit by facsimile a confirmation of receipt of such Conversion Notice

to the Holder and the Company's transfer agent (the "TRANSFER AGENT"), which

confirmation shall constitute an instruction to the Transfer Agent to process

such Conversion Notice in accordance with the terms herein (the "SHARE DELIVERY

DATE"), and (X) provided that the Transfer Agent is participating in the

Depository Trust Company ("DTC") Fast

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Automated Securities Transfer Program, the applicable registration statement is

effective under the 1933 Act and provided that the Holder is eligible to receive

shares of Common Stock through 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 or the Holder is not eligible to

receive shares of Common Stock through DTC, 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, pay to the Holder in cash an amount equal to the

accrued and unpaid Interest and Late Charges (as defined in Section 24(b)), if

any, on the Conversion Amount up to and including the Conversion Date. The

Holder undertakes that whenever the Company credits securities as set forth in

clause (1)(X) of the preceding sentence, (A) upon receipt of notice from the

Company that the applicable registration statement is not, or no longer is,

effective in respect of the resale of such securities, the Holder will not

transfer such securities (other than (I) in connection with a transfer, wherein

the Holder provides the Company with an opinion of counsel reasonably

satisfactory to the Company, in a generally acceptable form, to the effect that

such transfer may be made without registration under the applicable requirements

of the 1933 Act, or (II) the Holder provides the Company with assurances

reasonably acceptable to the Company that the transfer may be effected pursuant

to Rule 144 or Rule 144) until the Company notifies the Holder that the

applicable registration statement becomes effective (again), and (B) the Holder

shall indemnify and hold the Company harmless against any claim of securities

laws violations in respect of the transfer (after the receipt of the first

notice from the Company provided for in clause (A) of this sentence but prior to

the receipt of the second notice from the Company provided for in clause (A) of

this sentence) by the Holder of any security as to which such credit at DTC has

been effected. If this Note is physically surrendered for conversion as required

by Section 3(c)(iii) and the outstanding Principal of this Note is greater than

the Principal being converted, then the Company shall, as soon as practicable

and in no event later than three (3) Business Days after receipt of this Note

(the "NOTE DELIVERY DATE") 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.

(ii) COMPANY'S FAILURE TO TIMELY CONVERT.

(A) CONVERSION FAILURE. Subject to the terms and

conditions of this Note, if the Company shall fail to issue 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 conversion of any Conversion Amount on or prior to the

date which is three (3) Trading Days after the Conversion Date (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, in addition to all other remedies available

to the Holder, the Company shall, within three (3) Business Days after

the Holder's request and in the Holder's discretion, either (i) pay cash

to the Holder in an amount equal to the Holder's

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total purchase price (including reasonable out of pocket brokerage

commissions, and other reasonable 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.

(B) NOTICE OF VOID CONVERSION; ADJUSTMENT TO

CONVERSION PRICE. If for any reason the Holder has not received all of

the shares of Common Stock prior to the tenth (10th) Business Day after

the Share Delivery Date in respect of a conversion of this Note, other

than due to the pendency of a dispute being resolved in accordance with

Section 23 (a "CONVERSION FAILURE"), then the Holder, upon written

notice to the Company, may void its Conversion Notice in respect of, and

retain or have returned, as the case may be, any portion of this Note

that has not been converted pursuant to the Holder's Conversion Notice.

(iii) BOOK-ENTRY. 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) all of the Principal is being

converted or (B) the Holder has provided the Company with prior written notice

(which notice may be included in a Conversion Notice) requesting reissuance of

this Note upon physical surrender of this Note. The Holder and the Company shall

maintain records showing the Principal converted (and the Interest and Late

Charges paid in respect thereof) 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. Notwithstanding

the foregoing, if this Note is converted or redeemed as aforesaid, the Holder

may not transfer this Note unless the Holder first physically surrenders this

Note to the Company, whereupon the Company will forthwith issue and deliver upon

the order of the Holder a new Note of like tenor, registered as the Holder may

request, representing in the aggregate the remaining Principal represented by

this Note. The Holder and any assignee, by acceptance of this Note, acknowledge

and agree that, by reason of the provisions of this paragraph, following

conversion or redemption of any portion of this Note, the Principal of this Note

may be less than the principal amount stated on the face hereof.

(iv) PRO RATA CONVERSION; DISPUTES. In the event that

the Company receives a Conversion Notice from more than one holder of Notes for

the same Conversion Date and the Company can convert some, but not all, of such

portions of the Notes submitted for conversion, the Company, subject to Section

3(d), shall convert from each holder of Notes electing to have Notes converted

on such date a pro rata amount of such holder's portion of its Notes submitted

for conversion based on the principal amount of Notes submitted for conversion

on such date by such holder relative to the aggregate principal amount of all

Notes submitted for conversion on such date. 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.

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(d) LIMITATIONS ON CONVERSIONS.

(i) BENEFICIAL OWNERSHIP. The Company shall not

effect any conversion of this Note, and the Holder of this Note shall not have

the right to convert any portion of this Note pursuant to Section 3(a), to the

extent that after giving effect to such conversion, the Holder (together with

the Holder's affiliates) would beneficially own in excess of 9.99% (the "MAXIMUM

PERCENTAGE") of the number of shares of Common Stock outstanding immediately

after giving effect to such conversion; PROVIDED, HOWEVER, that following the

Optional Redemption Notice Date (as defined in Section 8(a)) the Maximum

Percentage shall be of no further force and effect on the Optional Redemption

Date, solely for purposes of effecting a Optional Redemption pursuant to Section

8. For purposes of the foregoing sentence, the aggregate 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 in

respect of 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 Other Notes or 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 (the "EXCHANGE ACT"). For purposes

of this Section 3(d)(i), in determining the number of outstanding shares of

Common Stock, the Holder may rely on the number of outstanding shares of Common

Stock as reflected in (x) the Company's most recent Form 10-K, Form 10-KSB, Form

10-Q, Form 10-QSB 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, upon the written or oral request of the Holder, the

Company shall promptly, but in no event no later than two (2) Business Days,

confirm orally and in writing to the Holder the number of shares of Common Stock

then outstanding. In any case, the number of outstanding shares of Common Stock

shall be determined after giving effect to the conversion or exercise of

securities of the Company, including this Note, by the Holder or its affiliates

since the date as of which such number of outstanding shares of Common Stock was

reported. By written notice to the Company, the Holder may increase or decrease

the Maximum Percentage to any other percentage not in excess of 9.99% specified

in such notice; provided that (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.

(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, the PIPE Notes and Warrants without breaching the Company's

obligations under the rules or regulations of the applicable Eligible Market

(the number of shares which may be issued without violating such rules and

regulations, the "EXCHANGE CAP"), except

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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 such

Eligible Market for issuances of shares of Common Stock in excess of such amount

(the "STOCKHOLDER APPROVAL") 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. Unless and until such

Stockholder Approval or written opinion is obtained, no purchaser of the Notes

pursuant to the Securities Purchase Agreement (each, a "PURCHASER") shall be

issued in the aggregate, upon conversion or exercise or otherwise, 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 such Purchaser pursuant to the

Securities Purchase Agreement on the Reissue 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 Reissue Date and the aggregate

principal amount of the PIPE Notes issued on the Reissue Date (in respect of

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 in respect of 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 declared effective by the SEC on or prior to the date that is sixty (60) days

after the applicable Effectiveness Deadline (as defined in the Registration

Rights Agreement), 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 three times in any 365-day period that does not exceed thirty (30)

days in the aggregate (other, in each case, than days during an Allowable Grace

Period or a Maintenance Grace Period (as defined in the Registration Rights

Agreement));

(ii) the suspension from trading or failure of the

Common Stock to be quoted or listed on an Eligible Market for a period of five

(5) consecutive Trading Days or for more than an aggregate of ten (10) Trading

Days in any 365-day period;

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(iii) the Company's (A) failure to cure a Conversion

Failure by delivery, subject to the Conversion Limitations set forth in Section

3(d), of the required number of shares of Common Stock within fifteen (15)

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 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, other than pursuant to Section

3(d);

(iv) at any time following the twentieth (20th)

consecutive Business Day that the Holder's Authorized Share Allocation is less

than the number of shares of Common Stock that the Holder would be entitled to

receive upon a conversion of the full 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 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) 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, (A) in the case of a failure to pay Interest or Late

Charges when and as due, in which case only if such failure continues for a

period of at least five (5) Business Days and (B) if such payment is prohibited

by the Intercreditor Agreement due solely to the existence of an Event of

Default occurring under any of the Senior Loan Documents triggered pursuant to

the Intercreditor Agreement or the Senior Loan Agreement by the Holder's breach

of this Note or any Transaction Document to which such Holder is a party;

(vi) the Company's or any Subsidiary's failure to pay

any principal of or interest or premium on any of its Indebtedness (excluding

Indebtedness under the Senior Loan and Indebtedness evidenced by any of the

Notes), to the extent that the aggregate principal amount of all such

Indebtedness exceeds $2,000,000, when due (whether by scheduled maturity,

required prepayment, acceleration, demand or otherwise) and such failure shall

continue after the applicable grace period, if any, specified in the agreement

or instrument relating to such Indebtedness, or any other default under any

agreement or instrument relating to any such Indebtedness, or any other event,

shall occur and shall continue after the applicable grace period, if any,

specified in such agreement or instrument, if the effect of such default or

event is to accelerate, or to permit the acceleration of, the maturity of such

Indebtedness; or any such Indebtedness shall be declared to be due and payable,

or required to be prepaid (other than by a regularly scheduled required

prepayment), redeemed, purchased or defeased or an offer to prepay, redeem,

purchase or defease such Indebtedness shall be required to be made, in each

case, prior to the stated maturity thereof, except, if such failure is caused by

the Holder's breach of this Note or any of the Transaction Documents to which

such Holder is a party;

(vii) the Company or any of its Subsidiaries (A) shall

institute any proceeding or voluntary case seeking to adjudicate it bankrupt or

insolvent, or seeking dissolution, liquidation, winding up, reorganization,

arrangement, adjustment, protection, relief or composition of it or its debts

under any law relating to bankruptcy, insolvency, reorganization or relief of

debtors, or seeking the entry of an order for relief or the appointment of a

receiver,

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administrative receiver, administrator, trustee, custodian, liquidator or other

similar official for any such Person or for any substantial part of its

property, or any other Insolvency Proceeding, (B) shall be generally not paying

its debts as such debts become due or shall admit in writing its inability to

pay its debts generally or shall be unable to pay its debts, (C) shall make a

general assignment for the benefit of creditors, or (D) shall take any action to

authorize or effect any of the actions set forth above in this subsection (vii);

(viii) any proceeding shall be instituted against the

Company or any of its Subsidiaries seeking to adjudicate it bankrupt or

insolvent, or seeking dissolution, liquidation, winding up, reorganization,

arrangement, adjustment, protection, relief of debtors, or seeking the entry of

an order for relief or the appointment of a receiver, administrative receiver,

administrator, trustee, custodian, liquidator or other similar official for any

such Person or for any substantial part of its property, or any other Insolvency

Proceeding shall be instituted against the Company or any Subsidiary, and any

such proceeding shall remain undismissed or unstayed for a period of thirty (30)

days or any of the actions sought in such proceeding (including, without

limitation, the entry of an order for relief against any such Person or the

appointment of a receiver, administrative receiver, administrator, trustee,

custodian, liquidator or other similar official for it or for any substantial

part of its property) shall occur;

(ix) any provision of any Note, Security Document or

the Intercreditor Agreement or any other security document entered into for the

benefit of the Collateral Agent (as defined in the Securities Purchase

Agreement) or any Holder, after delivery thereof pursuant the Securities

Purchase Agreement or any Note shall at any time for any reason (other than

pursuant to the express terms thereof) cease to be valid and binding on or

enforceable against the Company or any Guarantor under the Guaranties (as

defined in the Securities Purchase Agreement) (each, a "GUARANTOR" and

collectively, the "GUARANTORS") intended to be a party thereto, or the validity

or enforceability thereof shall be contested by any party thereto, or a

proceeding shall be commenced by the Company or any Guarantor or any

Governmental Authority having jurisdiction over any of them, seeking to

establish the invalidity or unenforceability thereof, or any the Company or any

Guarantor shall deny in writing that it has any liability or obligation

purported to be created under any Note or Security Document;

(x) the Security Agreement, the Intercreditor

Agreement, any Pledge Agreement, Guaranty (as each such term is defined in the

Securities Purchase Agreement) or any other security document entered into for

the benefit of the Collateral Agent (as defined in the Securities Purchase

Agreement) or any Holder, after delivery thereof pursuant the Securities

Purchase Agreement or any Note, shall for any reason fail or cease to create a

valid and perfected and, except to the extent permitted by the terms hereof or

thereof, second priority Lien (subject to Permitted Liens) in favor of the

Collateral Agent for the benefit of Holders on any Collateral purported to be

covered thereby;

(xi) the loss, suspension or revocation of, or

failure to renew, any license or permit now held or hereafter acquired by the

Company or any Guarantor, if such license or permit is not replaced with a

similar license or permit and, after giving effect to such replacement license

or permit, such loss, suspension, revocation or failure to renew has or could

reasonably be expected to have a Material Adverse Effect;

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(xii) the indictment of the Company or any Guarantor

under any criminal statute, or commencement of criminal or civil proceedings

against the Company or any Guarantor, pursuant to which statute or proceedings

the penalties or remedies sought or available include forfeiture to any

Governmental Authority of any material portion of the property of such Person;

(xiii) a Change of Control shall have occurred;

(xiv) a breach, default, event of default or

termination shall occur under any Acquisition Document (as defined in the Senior

Loan Agreement) or other Material Contract after giving effect to applicable

grace periods, if any, contained in any such Acquisition Document or other

Material Contract that gives any third party the right to terminate any such

Acquisition Document or other Material Contract or that otherwise could

reasonably be expected to have a Material Adverse Effect;

(xv) one or more final judgments or orders for the

payment of money is rendered against any the Company or any Subsidiary in excess

of $2,000,000 in the aggregate (provided that, any judgment covered by insurance

where the insurer has assumed responsibility in writing for such judgment and

acknowledged that the Company or Subsidiary, as applicable, will receive the

proceeds of such insurance within thirty (30) days of the issuance of a final,

non-appealable judgment and execution thereon is effectively stayed shall not be

included in calculating such amount) and shall remain undischarged or unvacated

for a period in excess of sixty (60) days or execution shall at any time not be

effectively stayed, or any final judgment other than for the payment of money,

or injunction, attachment, garnishment or execution is rendered against the

Company or any Subsidiary or any of the Collateral having a value in excess of

$2,000,000 and shall remain undischarged or unvacated for a period in excess of

sixty (60) days or execution shall at any time not be effectively stayed;

(xvi) (A) Any representation or warranty made by the

Company or any Subsidiary herein (a) containing a materiality threshold, is

incorrect or misleading when made or (b) in respect of any such representation

or warranty which does not contain a materiality threshold, the same is

materially misleading or materially incorrect when made or (B) the Company

breaches any covenant (other than the covenants set forth in Section 14 of this

Note) or other term or condition of any Transaction Document, except, in the

case of a breach of a covenant, term or condition which is curable, only if such

breach continues for a period of at least twenty (20) consecutive Business Days

after notice thereof;

(xvii) any breach or failure in any respect to comply

with Section 14 of this Note, Sections 6(e), (g), or (h) of the Pledge

Agreement, or Sections 5(e)(i), (g), or the first sentence of Section 5 (i) of

the Security Agreement;

(xviii) any Event of Default (as defined in the Other

Notes) occurs in respect of any Other Note;

(xix) the occurrence of any acceleration under the

Senior Loan Documents in respect of Indebtedness outstanding thereunder;

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(xx) the Company and/or any Guarantor(s) is/are

enjoined, restrained or in any way prevented by the order of any court or any

Governmental Authority from conducting all or any material part of its or their

business for more than ten (10) days provided that such curtailment could

reasonably be expected to have a Material Adverse Effect;

(xxi) any material damage to, or loss, theft or

destruction of, any Collateral, whether or not insured, or any strike, lockout,

labor dispute, embargo, condemnation, act of God or public enemy, or other

casualty which causes, for more than ten (10) days, the cessation or substantial

curtailment of revenue producing activities at any facility of any Obligor, if

any such event or circumstance has or could reasonably be expected to have a

Material Adverse Effect;

(xxii) at any time after the initial employment by

ShellCo of the Consultant, (i) ShellCo terminates the employment of the

Consultant, or limits or attempts to limit the scope of the engagement of the

Consultant, without the consent of Required Holders provided that ShellCo may

terminate the Consultant (without being required to replace the same) at any

time after December 31, 2007 if no Event of Default is then continuing or (ii)

ShellCo, or any member of senior management of ShellCo, shall fail to cooperate

with the Consultant in connection with the Consultant providing the services for

which it was engaged; or

(xxiii) any cessation of a substantial part of the

business of the Company and/or any Guarantor(s) for a period which could

reasonably be expected to have a Material Adverse Effect.

(b) REDEMPTION RIGHT. Upon the Company's obtaining knowledge

of the occurrence of an Event of Default in respect of this Note or any Other

Note, the Company shall, as soon as possible, but in any event, within four (4)

Business Days, deliver written notice thereof via facsimile and overnight

courier (an "EVENT OF DEFAULT NOTICE") to the Holder. Subject to the provisions

of the Intercreditor Agreement, at any time after the earlier of the Holder's

receipt of such Event of Default Notice and the Holder's becoming aware of such

an Event of Default in respect of this Note or any Other Note, the Holder may

require the Company to redeem all or any portion of this Note by delivering

written notice thereof (the "EVENT OF DEFAULT REDEMPTION NOTICE") to the

Company, which Event of Default Redemption Notice shall indicate the portion of

this Note the Holder is electing to redeem. Each portion of this Note subject to

redemption by the Company pursuant to this Section 4(b) shall be redeemed as

provided in Section 12(a), (provided that the Event of Default giving rise to

such redemption right has not been cured or waived on or before the second (2nd)

Business Day after the expiration of the payments standstill period set forth in

the Intercreditor Agreement (notwithstanding any shorter cure period set forth

in Section 4(a) or any other provision hereof)) by the Company at a price equal

to the greater of (x) the product of (i) the Conversion Amount to be redeemed

together with accrued and unpaid Interest and Late Charges, if any incurred up

to and including the Conversion Date, in respect of such Conversion Amount and

(ii) the Redemption Premium or (y) the product of (A) the Closing Sale Price of

the Common Stock on the date immediately preceding such Event of Default

multiplied by (B) the number of shares of Common Stock into which the amount set

forth in clause (x) would have converted into in accordance with Section 3(a)

(the "EVENT OF DEFAULT REDEMPTION PRICE"). For purposes of this Section 4(b) and

Section 12(a), an Event of Default occurring under Section 4(a)(i) hereof shall

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be deemed to be cured on the day upon which the applicable Registration

Statement becomes effective or again becomes available, as applicable. 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 the 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.

(5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

(a) ASSUMPTION. The Company shall not enter into or be party

to a Fundamental Transaction unless, in the case of a Fundamental Transaction of

the type described in clause (ii), (iii), (iv), or (v) of the definition thereof

if the Successor Entity in such Fundamental Transaction is a person other than

the Company, (i) such Successor Entity assumes in writing all of the obligations

of the Company under this Note and the other Transaction Documents in accordance

with the provisions of this Section 5(a) pursuant to written agreements in form

and substance reasonably satisfactory to the Required Holders 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 then

outstanding 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 reasonably satisfactory to the Required Holders and (ii) such Successor

Entity (or its Parent Entity) is a publicly traded corporation whose common

stock is quoted on or listed for trading on an Eligible Market (other than the

Initial Principal Market). Upon the occurrence of any Fundamental Transaction,

such 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 such 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, such Successor Entity shall deliver to the Holder

confirmation that there shall be issued upon conversion or redemption of this

Note at any time after the consummation of the Fundamental Transaction, in lieu

of the shares of the Company's Common Stock (or other securities, cash, assets

or other property) issuable upon the conversion or redemption of the Notes prior

to such Fundamental Transaction, such shares of the publicly traded common stock

(or their equivalent) of the Successor Entity (including its Parent Entity), as

adjusted in accordance with the provisions of this Note. The provisions of this

Section shall apply similarly and equally to successive Fundamental Transactions

and shall be applied without regard to any limitations on the conversion or

redemption of this Note.

(b) REDEMPTION RIGHT. No sooner than fifteen (15) days nor

later than ten (10) days prior to the consummation of a Change of Control, but

not prior to the public

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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 twenty (20) 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

redeem. 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 the product of (i)

the sum of the Conversion Amount being redeemed plus accrued and unpaid Interest

and Late Charges, if any, in respect of such Conversion Amount up to and

including the date of redemption and (ii) the greater of (x) the quotient

determined by dividing (A) the greatest of the Closing Sale Price of the Common

Stock immediately prior to the consummation of the Change of Control, the

Closing Sale Price of the Common Stock immediately following the public

announcement of such proposed Change of Control and the Closing Sale Price of

the Common Stock immediately prior to the public announcement of such proposed

Change of Control by (B) the Conversion Price, and (y) the Change of Control

Premium (such product, the "CHANGE OF CONTROL REDEMPTION PRICE"). Redemptions

required by this Section 5 shall be made in accordance with the provisions of

Section 12 and shall have priority over payments to stockholders 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 the Note by the Company, such redemptions shall be deemed to be

voluntary prepayments. Notwithstanding anything to the contrary in this Section

5, but subject to Section 3(d), until the Change of Control Redemption Price 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 Common Stock

pursuant to Section 3. The parties hereto agree that in the event of the

Company's redemption of any portion of the Note under this Section 5(b), the

Holder's damages would be uncertain and difficult to estimate because of the

parties' inability to predict future interest rates and the uncertainty of the

availability of a suitable substitute investment opportunity for the Holder.

Accordingly, any 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, and the receipt

by the Holder of the Change of Control Redemption Price shall constitute full

satisfaction of the amount requested to be redeemed pursuant to this Section 5.

(6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE

EVENTS.

(a) PURCHASE RIGHTS. If at any time after the Reissue Date,

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 (collectively, 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

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<PAGE>

which the record holders of Common Stock are to be determined for the grant,

issue or sale of such Purchase Rights.

(b) OTHER CORPORATE EVENTS. In addition to and not in

substitution for any other rights hereunder, but without duplication of the

consideration issuable pursuant to Section 5(a), 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 in respect of or in exchange

for shares of Common Stock (a "CORPORATE EVENT"), the Company shall make

appropriate provision to insure that the Holder will thereafter have the right

to receive upon a conversion of this Note, (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 in respect of 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 and whenever on or after the Reissue Date, the Company (i) 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 Excluded Securities and Common Stock deemed to have been issued or sold by

the Company in connection with any Excluded Security), Convertible Securities or

Options entitling the recipient thereof to subscribe for or purchase shares of

Common Stock for a consideration per share of Common Stock or (ii) amend or

otherwise modify the terms of any Convertible Securities or Options to a price

per share of Common Stock (such issuance, subscription or purchase price or

amended or modified price being referred to as 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 or deemed issuance or sale (the

foregoing a "DILUTIVE ISSUANCE"), then immediately after such Dilutive Issuance,

the Conversion Price then in effect shall be:

(i) if such issuance occurs prior to the first

anniversary of the Reissue Date, adjusted to equal the New Issuance Price, and

(ii) if such issuance occurs on or after the first

anniversary of the Reissue Date, reduced to an amount equal to the product of

(x) the Conversion Price in effect immediately prior to such Dilutive Issuance

and (y) the quotient determined by dividing (1) the

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sum of (I) the product derived by multiplying the Conversion Price in effect

immediately prior to such Dilutive Issuance and the number of shares of Common

Stock Deemed Outstanding immediately prior to such Dilutive Issuance plus (II)

the consideration, if any, received by the Company upon such Dilutive Issuance,

by (2) the product derived by multiplying (I) the Conversion Price in effect

immediately prior to such Dilutive Issuance by (II) the number of shares of

Common Stock Deemed Outstanding immediately after such Dilutive Issuance.

(b) CERTAIN DISTRIBUTIONS TO HOLDERS OF COMMON STOCK. In

case the Company shall at any time or from time to time, on or after the Reissue

Date and prior to conversion of this Note, distribute to all holders of shares

of Common Stock (including any such distribution made in connection with a

merger or consolidation in which the Company is the resulting or surviving

Person and the Common Stock is not changed or exchanged) cash, evidences of

indebtedness of the Company, any Subsidiary or another issuer, securities of the

Company (including Convertible Securities), any Subsidiary or another issuer or

other assets (excluding dividends payable in shares of Common Stock for which

adjustment is made under another paragraph of this Section 7 and any

distribution in connection with the issuance of any Excluded Securities) or

Options to subscribe for or purchase of any of the foregoing, then, and in each

such case, the Conversion Price then in effect shall be adjusted (and any other

appropriate actions shall be taken by the Company) by multiplying the Conversion

Price in effect immediately prior to the date of such distribution by a fraction

(x) the numerator of which shall be the Weighted Average Price of the Common

Stock for the five (5) consecutive Trading Days immediately prior to the date of

distribution less the then fair market value (as determined by the Company's

Board of Directors in the exercise of their fiduciary duties with the

concurrence of the Required Holders) of the portion of the cash, evidences of

indebtedness, securities or other assets so distributed or of such Options to

subscribe applicable to one share of Common Stock and (y) the denominator of

which shall be the Weighted Average Price of the Common Stock for the five (5)

consecutive Trading Days immediately prior to the date of distribution (but such

fraction shall not be greater than one). Such adjustment shall be made whenever

any such distribution is made and shall become effective retroactively to a date

immediately following the close of business on the record date for the

determination of stockholders entitled to receive such distribution.

(c) DIVIDENDS AND CERTAIN OTHER EVENTS IN RESPECT OF THE

COMMON STOCK. In the event that the Company shall at any time or from time to

time, on or after the Reissue Date and prior to the conversion of this Note, (A)

pay a dividend or make a distribution payable in shares of Common Stock on any

class of shares of capital stock of the Company, (B) subdivide its outstanding

shares of Common Stock into a greater number of shares, (C) combine its

outstanding shares of Common Stock into a smaller number of shares or (D) issue

any shares of capital stock by reclassification of its shares of Common Stock,

the Conversion Price in effect at the opening of business on the day following

the date fixed for the determination of stockholders entitled to receive such

dividend or distribution or at the opening of business on the day following the

day on which such subdivision,

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combination or reclassification becomes effective, as the case may be, shall be

adjusted so that the holder of any Notes thereafter surrendered for conversion

shall be entitled to receive the number of shares of Common Stock that such

holder would have owned or have been entitled to receive after the happening of

any of the events described above had such Notes been converted immediately

prior to the record date in the case of a dividend or distribution or the

effective date in the case of a subdivision, combination or reclassification. An

adjustment made pursuant to this Section 7(c) shall become effective immediately

upon the opening of business on the day next following the record date (subject

to Section 7(e) below) in the case of a dividend or distribution and shall

become effective immediately upon the opening of business on the day next

following the effective date in the case of a subdivision, combination or

reclassification.

(d) TENDER OFFERS. In the event that the Company shall at

any time or from time to time, on or after the Reissue Date and prior to the

conversion of this Note, make a payment of cash or other consideration to the

holders of shares of Common Stock in respect of a tender offer or exchange

offer, other than an odd-lot offer, and the value of the sum of (i) the

aggregate cash and other consideration paid for such shares of Common Stock, and

(ii) any other consent or other fees paid to holders of shares of Common Stock

in respect of such tender offer or exchange offer expressed as an amount per

share of Common Stock validly tendered or exchanged pursuant to such tender

offer or exchange offer, exceeds the Weighted Average Price of the Common Stock

on the Trading Day immediately prior to the date any such tender offer or

exchange offer is first publicly announced (the "ANNOUNCEMENT DATE"), then the

Conversion Price shall be adjusted in accordance with the formula:

R' = R x O' x P

F + (P x O)

For purposes of the foregoing formula:

R = the Conversion Price in effect at the expiration time of the tender

offer or exchange offer that is the subject of this Section 7(d) (the

"EXPIRATION TIME");

R' = the Conversion Price in effect immediately after the Expiration

Time;

F = the fair market value (as determined by the Company's Board of

Directors in the exercise of their fiduciary duties with the concurrence of the

Required Holders) of the aggregate value of all cash and any other consideration

paid or payable for shares of Common Stock validly tendered or exchanged

(including any consent or other fees) and not withdrawn prior to the Expiration

Time (the "PURCHASED SHARES OF COMMON STOCK");

O = the number of shares of Common Stock outstanding immediately after

the Expiration Time less any Purchased Shares of Common Stock;

O' = the number of shares of Common Stock outstanding immediately after

the Expiration Time, plus any Purchased Shares of Common Stock; and

P = the Weighted Average Price of the Common Stock on the five (5)

consecutive Trading Days beginning two (2) Trading Days after the Announcement

Date.

Such decrease, if any, shall become effective immediately upon the opening of

business on the day next following the Expiration Time. In the event that the

Company is obligated to purchase shares pursuant to any tender offer, but the

Company is prevented by applicable law from effecting any such purchases or all

such purchases are rescinded, the Conversion Price shall

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again be adjusted to the Conversion Price that would then be in effect if such

tender or exchange offer had not been made. If the application of this Section

7(d) to any tender or exchange offer would result in an increase in the

Conversion Price, no adjustment shall be made for such tender or exchange offer

under this Section 7(d).

(e) 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'S RIGHT OF OPTIONAL REDEMPTION.

(a) OPTIONAL REDEMPTION. If on any Trading Day on or after

the third anniversary of the Reissue Date and prior to the Maturity Date, the

Weighted Average Price of the shares of Common Stock has equaled or exceeded

180% of the Conversion Price then in effect for each of 20 consecutive Trading

Days ending on the Redemption Period End Day and provided that the applicable

Eligible Market is not the Initial Principal Market and no Equity Conditions

Failure then exists, the Company shall have the right to redeem all or any

portion of the Conversion Amount then remaining under this Note (an "OPTIONAL

REDEMPTION"). The portion of this Note subject to redemption pursuant to this

Section 8 shall be redeemed by the Company in cash at a price equal to the sum

of (i) the Principal being redeemed and (ii) the amount of any accrued and

unpaid Late Charges on such Principal and any accrued and unpaid Interest

through the date of redemption (the "OPTIONAL REDEMPTION PRICE"). The Company

may exercise its redemption right under this Section 8 by delivering a written

notice thereof by confirmed facsimile and overnight courier to all, but not less

than all, of the holders of Notes and the Transfer Agent (the "OPTIONAL

REDEMPTION NOTICE" and the date such notice is delivered to all the holders is

referred to as the "OPTIONAL REDEMPTION NOTICE DATE"). The Optional Redemption

Notice shall be irrevocable. The Optional Redemption Notice shall state (A) the

date on which the Optional Redemption shall occur (the "OPTIONAL REDEMPTION

DATE") which date shall be not less than 30 days nor more than 60 days after the

Optional Redemption Notice Date, and (B) the aggregate principal amount (the

"OPTIONAL REDEMPTION AMOUNT") of the Notes which the Company has elected to be

subject to Optional Redemption from all of the holders of the Notes pursuant to

this Section 8 (and analogous provisions under the Other Notes) on the Optional

Redemption Date. The Company will make a public announcement containing the

information set forth in the Optional Redemption Notice on or before the

Optional Redemption Notice Date. The Company may not effect more than one

Optional Redemption. Notwithstanding anything to the contrary in this Section 8,

until the Optional Redemption Price is paid, in full, the Optional Redemption

Amount may be converted, in whole or in part, by the Holders into shares of

Common Stock pursuant to Section 3. All Conversion Amounts converted by the

Holder after the Optional Redemption Notice Date shall reduce the Conversion

Amount of this Note required to be redeemed on the Optional Redemption Date.

Redemptions made pursuant to this Section 8 shall be made in accordance with

Section 12 to the extent applicable.

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(b) PRO RATA REDEMPTION REQUIREMENT. If the Company elects

to cause an Optional Redemption pursuant to Section 8(a), then it must

simultaneously take the same action in respect of the Other Notes. If the

Company elects to cause an Optional Redemption pursuant to Section 8(a) (or

similar provisions under the Other Notes) in respect of less than all of the

principal amount of the Notes then outstanding, then the Company shall require

redemption of a principal amount from the Holder and each holder of the Other

Notes equal to the product of (i) the aggregate principal amount of Notes which

the Company has elected to cause to be redeemed pursuant to Section 8(a),

multiplied by (ii) the fraction, the numerator of which is the sum of the

initial principal amount of Notes purchased by such holder and the denominator

of which is the initial principal amounts of Notes purchased by all holders

holding outstanding Notes (such fraction in respect of each holder is referred

to as its "REDEMPTION ALLOCATION PERCENTAGE", and such amount in respect of each

holder is referred to as its "PRO RATA REDEMPTION AMOUNT"); provided that in the

event that the initial holder of any Notes has sold or otherwise transferred any

of such holder's Notes, the transferee shall be allocated a pro rata portion of

such holder's Redemption Allocation Percentage and Pro Rata Redemption Amount.

(9) SECURITY. This Note and the Other Notes are 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 Certificate of Incorporation, Bylaws

or through any reorganization, transfer of assets, consolidation, merger, scheme

of arrangement, dissolution, issue or sale of securities, or any other voluntary

action, avoid or seek to avoid the observance or performance of any of the terms

of this Note, and will at all times in good faith carry out all of the

provisions of this Note and take all action as may be required to protect the

rights of the Holder of this Note subject to the Intercreditor Agreement.

(11) RESERVATION OF AUTHORIZED SHARES.

(a) RESERVATION. The Company shall initially reserve out of

its authorized and unissued Common Stock a number of shares of Common Stock for

each of the Notes equal to 130% of the Conversion Rate in respect of the

Conversion Amount of each such Note as of the Reissue Date. For 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, 130% of the

number of shares of Common Stock as shall from time to time be necessary to

effect the conversion of all of the Notes then outstanding; provided that at no

time shall the number of shares of Common Stock so reserved be less than the

number of shares required to be reserved by the previous sentence (without

regard to any limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The

initial number of shares of Common Stock reserved for conversions of the Notes

and each increase in the number of shares so reserved shall be allocated pro

rata among the holders of the Notes based on the principal amount of the Notes

held by each holder on the Reissue Date or increase in the number of reserved

shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event

that a holder shall sell or otherwise transfer any of such holder's Notes, each

transferee shall be allocated a pro rata portion of such holder's

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Authorized Share Allocation. Any shares of Common Stock reserved and allocated

to any Person which ceases to hold any Notes shall be allocated to the remaining

holders of Notes, pro rata based on the principal amount of the Notes then held

by such holders.

(b) INSUFFICIENT AUTHORIZED SHARES. If at any time while any

of the Notes remain outstanding, the Company does not have a sufficient number

of authorized and unreserved shares of Common Stock to satisfy its obligation to

reserve for issuance upon conversion of the Notes at least a number of shares of

Common Stock equal to the Required Reserve Amount (an "AUTHORIZED SHARE

FAILURE"), then the Company shall immediately take all action necessary to

increase the Company's authorized shares of Common Stock to an amount sufficient

to allow the Company to reserve the Required Reserve Amount for the Notes then

outstanding. Without limiting the generality of the foregoing sentence, as soon

as practicable after the date of the occurrence of an Authorized Share Failure,

but in no event later than sixty (60) days after the occurrence of such

Authorized Share Failure, the Company shall hold a meeting of its stockholders

for the approval of an increase in the number of authorized shares of Common

Stock. In connection with such meeting, the Company shall provide each

stockholder with a proxy statement and shall use its best efforts to solicit its

stockholders' approval of such increase in authorized shares of Common Stock and

to cause its board of directors to recommend to the stockholders that they

approve such proposal.

(12) HOLDER'S REDEMPTIONS.

(a) MECHANICS. The Company shall deliver the applicable

Event of Default Redemption Price to the Holder within five (5) Business Days

after the Company's receipt of the Holder's Event of Default Redemption Notice,

if the Intercreditor Agreement does not prohibit the payment by the Company of

the Default Redemption Price at such time, and if such payment is then so

prohibited, on the third (3rd) Business Day after such prohibition lapses;

provided that if the Event(s) of Default giving rise to the redemption right

shall have been cured or waived on or before the second (2nd) Business Day after

such prohibition's lapsing, such redemption right shall terminate. 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 Redemption Notice shall be null and void in respect of 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 such Conversion

Amount 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

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the date on which the Redemption Notice is voided and (B) the lowest Closing Bid

Price of the Common Stock during the period beginning on and including the date

on which the Redemption Notice is delivered to the Company and ending on and

including the date on which the 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 in

respect of the Conversion Amount subject to such notice.

(b) REDEMPTION BY OTHER HOLDERS. Upon the Company's receipt

of notice from any of the holders of the Other Notes for redemption or repayment

as a result of an event or occurrence substantially similar to the events or

occurrences described in Section 4(b) (each, an "OTHER REDEMPTION NOTICE"), the

Company shall immediately, but no later than one (1) Business Day after its

receipt thereof, forward to the Holder by facsimile a copy of such notice. If

the Company receives a Redemption Notice and one or more Other Redemption

Notices, during the seven (7) Business Day period beginning on and including the

date which is three (3) Business Days prior to the Company's receipt of the

Holder's Redemption Notice and ending on and including the date which is three

(3) Business Days after the Company's receipt of the Holder's Redemption Notice

and the Company is unable to redeem all principal, interest and other amounts

designated in such Redemption Notice and such Other Redemption Notices received

during such seven (7) Business Day period, then the Company shall redeem a pro

rata amount from each holder of the Notes (including the Holder) based on the

principal amount of the Notes submitted for redemption pursuant to such

Redemption Notice and such Other Redemption Notices received by the Company

during such seven Business Day period.

(13) VOTING RIGHTS. The Holder shall have no voting rights as the

holder of this Note, except as required by law, including, but not limited to,

the General Corporation Law of the State of Delaware and as expressly provided

in this Note.

(14) COVENANTS.

(a) RANK. All payments due under this Note (i) shall rank

(A) PARI PASSU with all Other Notes, (B) junior to the Permitted Senior

Indebtedness, (C) senior to the Subordinated Indebtedness, all Indebtedness not

constituting Permitted Indebtedness and all Permitted Indebtedness expressly

designated as ranking junior to the Notes, and (D) PARI PASSU with all other

Permitted Indebtedness and (ii) shall be secured by a security interest in

substantially all of the assets of the Company and the Subsidiaries, other than

the Foreign Subsidiaries (as defined in the Securities Purchase Agreement), the

escrowed funds referenced in SCHEDULE 14(A) and as otherwise provided in the

Security Agreement (junior only to the security interests securing the Permitted

Senior Indebtedness) and such security interests shall rank PARI PASSU with the

security interests securing the Indebtedness under the Other Notes.

Notwithstanding the foregoing, if Company shall have received notice of the

existence of any Lien, the existence or priority of which is in violation of the

first sentence of this Section 14(a), Company shall have ten (10) days after the

receipt of such notice to remove such Lien (or obtain the agreement of the

holder of such Lien that such Lien ranks in priority in accordance with the

first sentence of this Section 14(a)).

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(b) INCURRENCE OF INDEBTEDNESS. Until this Note has been

converted, redeemed or otherwise satisfied in accordance with its terms (other

than in respect of contingent indemnification obligations in respect of which no

claim has been asserted), 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 the Other Notes and (ii) Permitted Indebtedness.

(c) EXISTENCE OF LIENS. Until this Note has been converted,

redeemed or otherwise satisfied in accordance with its terms (other than in

respect of contingent indemnification obligations in respect of which no claim

has been asserted), the Company shall not, and the Company shall not permit any

of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon

or in respect of any of its properties, whether now owned or hereafter acquired;

file or suffer to exist under the Uniform Commercial Code or any similar law or

statute of any jurisdiction, a financing statement (or the equivalent thereof)

that names it or any of its Subsidiaries as debtor; sign or suffer to exist any

security agreement authorizing any secured party thereunder to file such

financing statement (or the equivalent thereof); sell any of its property or

assets subject to an understanding or agreement, contingent or otherwise, to

repurchase such property or assets (including sales of accounts) with recourse

to it or any of its Subsidiaries or assign or otherwise transfer, or permit any

of its Subsidiaries to assign or otherwise transfer, any account or other right

to receive income; other than, as to all of the above, Permitted Liens.

Notwithstanding the foregoing, if Company shall have received notice of the

existence of any Lien, the existence of which is in violation of the first

sentence of this Section 14(c), Company shall have ten (10) days after the

receipt of such notice to effect the removal of such Lien.

(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 Indebtedness (other than Permitted Senior Indebtedness,

Indebtedness evidenced by the Other Notes or Permitted Indebtedness (other than

the Permitted Indebtedness referenced in clauses (vi) and (xii) hereof and any

other Subordinated Indebtedness), the payment of which shall not be restricted

by the provisions of this Note, the Security Documents, the Warrant, the

Securities Purchase Agreement or the Registration Rights Agreement), 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, or that with the

passage of time and without being cured would constitute, an Event of Default

has occurred or would occur and is, or would be, continuing; provided that

notwithstanding the foregoing, no principal (or any portion thereof) of any

Subordinated Indebtedness may be paid (whether upon maturity, redemption,

acceleration or otherwise) so long as this Note is outstanding and for at least

91 days thereafter.

(e) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. Until this

Note has been converted, redeemed or otherwise satisfied in accordance with its

terms (other than in respect of contingent indemnification obligations in

respect of which no claim has been asserted), the Company shall not, nor permit

any of its Subsidiaries to, directly or indirectly,

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(i) Declare or pay any dividend or other

distribution, or permit any Subsidiary to declare or pay any dividend or other

distribution, in each case directly or indirectly, on account of any equity of

the Company or any Subsidiary, except:

(A) any Subsidiary of the Company may pay

dividends or make other distributions to the Company or any Subsidiary;

(B) the Company may pay dividends in the

form of common stock or preferred stock otherwise permitted to be issued

hereunder (but in no event in the form of redeemable preferred equity

requiring any payment prior to the Maturity Date); or

(ii) Make any repurchase, redemption (other than

redemption of the Notes in accordance with the terms hereof), retirement,

defeasance, sinking fund or similar payment, purchase or other acquisition for

value, direct or indirect, of any equity of the Company or any Guarantor or any

direct or indirect parent of the Company or any Guarantor, now or hereafter

outstanding or make any payment to retire, or to obtain the surrender of, any

outstanding warrants, options or other rights for the purchase or acquisition of

shares of any class of equity of the Company or any Guarantor, now or hereafter

outstanding, except, (x) from and after the second (2nd) anniversary of the

Reissue Date, the Company and the Guarantors may repurchase common stock held by

employees, officers, and/or directors pursuant to any Approved Stock Plan upon

the termination, retirement or death of any such employee, officer, and/or

director in accordance with the provisions of such plan or pursuant to any

special incentive bonus plans pursuant to the terms thereof, provided that, as

to any such repurchase, each of the following conditions is satisfied: (A) as of

the date of the payment for such repurchase and after giving effect thereto on a

pro forma basis, no Event of Default shall exist or have occurred and be

continuing, (B) such repurchase shall be paid with funds legally available

therefor, (C) such repurchase shall not violate any law or regulation or the

terms of any indenture, agreement or undertaking to which the Company or any

Guarantor is a party or by which the Company or such Guarantor or its or their

property are bound, and (D) the aggregate amount of all payments for such

repurchases in any calendar year shall not exceed $2,000,000 and (y) prior to

such second (2nd) anniversary of the Reissue Date, Company and the Guarantors

may repurchase common stock held by employees, officers, and/or directors

pursuant to any Approved Stock Plan upon the termination, retirement or death of

any such employee, officer, and/or director in accordance with the provisions of

such plan or pursuant to any special incentive bonus plans pursuant to the terms

thereof, provided that, as to any such repurchase, each of the following

conditions is satisfied: (A) as of the date of the payment for such repurchase

and after giving effect thereto on a pro forma basis, no Event of Default shall

exist or have occurred and be continuing, (B) such repurchase shall be paid with

funds legally available therefor, (C) such repurchase shall not violate any law

or regulation or the terms of any indenture, agreement or undertaking to which

the Company or any Guarantor is a party or by which the Company or such

Guarantor or its or their property are bound, and (D) the aggregate amount of

all payments for such repurchases in any calendar year shall not exceed $50,000;

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(iii) Return any equity to any shareholders or other

equity holders of the Company or any of its Subsidiaries, or make any

other distribution of property, assets, equity, warrants, rights,

options, obligations or securities thereto as such (other than as

permitted hereunder or, in the case of such distribution of property or

assets, to the extent not otherwise prohibited hereunder);

(iv) Pay any management fees or any other fees or

expenses (including the reimbursement thereof by the Company or any

Guarantor) pursuant to any management, consulting or other services

agreement to any of the shareholders or other equity holders of the

Company or any Guarantor or other Affiliates except any such management

fees or any other fees or expenses (x) paid to the Company or any

Guarantor (whether paid by the Company, any Guarantor or any other

Subsidiary or Affiliate of the Company), (y) paid by SeaMaster China to

Sea Master Hong Kong (each as defined in the Senior Loan Agreement);

and/or (z) paid by a Subsidiary that is not the Company or a Guarantor

to a Subsidiary that is not the Company or a Guarantor or

(v) Directly or indirectly make or commit to make

any optional prepayment of, or otherwise repurchase any Indebtedness

that is subordinated in right of payment to the Notes, including without

limitation, any Subordinated Indebtedness.

(f) MERGER AND ACQUISITION ACTIVITIES. Until this Note has

been converted, redeeme