FORM OF SENIOR SECURED CONVERTIBLE NOTE

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EXHIBIT 4.6

[FORM OF 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 (THE "SECURITIES ACT"),

OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,

SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION

STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, (B) AN OPINION OF

COUNSEL, REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED

UNDER SAID ACT OR (C) REASONABLE ASSURANCE HAVING BEEN PROVIDED TO THE COMPANY

THAT SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER IS BEING MADE 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

19(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.

VERILINK CORPORATION

SENIOR SECURED CONVERTIBLE NOTE

Issuance Date: ______, 200_ Principal: U.S. $_____________

FOR VALUE RECEIVED, Verilink Corporation, a Delaware corporation

(the "COMPANY"), hereby promises to pay to the order of [BUYER] or registered

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

pursuant to the terms hereof pursuant to redemption, conversion or otherwise,

the "PRINCIPAL") when due, whether upon the Maturity Date (as defined below), on

any Installment Date with respect to the Installment Amount due on such

Installment Date (each, as defined herein), acceleration, redemption or

otherwise (in each case in accordance with the terms hereof) and to pay interest

("INTEREST") on any outstanding Principal at the rate of 6.00% per annum (the

"INTEREST RATE"), 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 one of an issue of Senior Secured Convertible Notes

issued pursuant to the Securities Purchase Agreement (as defined below)

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(collectively, the "NOTES" and such other Senior Secured Convertible Notes, the

"OTHER NOTES"). Certain capitalized terms used herein are defined in Section 29.

(1) PAYMENTS OF PRINCIPAL. On each Installment Date, the Company

shall pay to the Holder an amount equal to the Installment Amount due on such

Installment Date in accordance with Section 8. The "MATURITY DATE" shall be

March 21, 2008, as the same may be extended at the option of the Holder (i)

through the date that is fifteen (15) Business Days (or, in the case of the

Event of Default specified in Section 4(a)(ix), sixty-five (65) days) after the

cure or termination of any Event of Default (as defined in Section 4(a)) that

has occurred and is continuing on the Maturity Date (as may be extended pursuant

to this Section 1) or the termination of any event that has occurred and is

continuing on the Maturity Date (as may be extended pursuant to this Section 1)

and 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) 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. Interest on this Note shall commence

accruing on the Issuance Date and shall be computed on the basis of a 365-day

year and actual days elapsed and shall be payable in arrears for each Calendar

Quarter on the tenth day of the succeeding Calendar Quarter 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 July 10, 2005.

Interest shall be payable on each Interest Date, to the record holder of this

Note on the applicable Interest Date, in cash ("CASH INTEREST") or, at the

option of the Company, in shares of Common Stock ("INTEREST SHARES") or a

combination thereof, provided that the Interest which accrued during any period

may be payable in Interest Shares if, and only if, the Company delivers written

notice (each, an "INTEREST ELECTION NOTICE") of such election to each holder of

the Notes on or prior to the twentieth (20th) Trading Day prior to the Interest

Date (each, an "INTEREST NOTICE DUE DATE"); provided, further, that from and

after November 21, 2005, the Company must pay at least 50% of all Interest due

hereunder as Cash Interest, unless at such time the Stockholder Approval (as

defined in the Securities Purchase Agreement) has been obtained. Each Interest

Election Notice must specify the amount of Interest that shall be paid as Cash

Interest, if any, and the amount of Interest that shall be paid in Interest

Shares. Interest to be paid on an Interest Date in Interest Shares shall be paid

in a number of fully paid and nonassessable shares (rounded to the nearest whole

share in accordance with Section 3(a)) of Common Stock equal to the quotient of

(a) the amount of Interest payable on such Interest Date less any Cash Interest

paid and (b) the Interest Conversion Price in effect on the applicable Interest

Date. If any Interest Shares are to be paid on an Interest Date, then the

Company shall (X) provided that the Company's transfer agent (the "TRANSFER

AGENT") is participating in the Depository Trust Company ("DTC") Fast Automated

Securities Transfer Program and such action is not prohibited by applicable law

or regulation or any applicable policy of DTC, credit such aggregate number of

Interest Shares to which the Holder shall be entitled to the Holder's or its

designee's balance account with DTC through its Deposit Withdrawal Agent

Commission system, or (Y) if the foregoing shall not apply, issue and deliver on

the applicable Interest Date, to the address set forth in the register

maintained by the Company for such purpose pursuant to the Securities Purchase

Agreement or to such address as specified by the Holder in writing to the

Company at least two Business Days prior to the applicable Interest Date, a

certificate, registered

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in the name of the Holder or its designee, for the number of Interest Shares to

which the Holder shall be entitled. Notwithstanding the foregoing, the Company

shall not be entitled to pay Interest in Interest Shares and shall be required

to pay such Interest in cash as Cash Interest on the applicable Interest Date

if, unless consented to in writing by the Holder, during the period commencing

on the applicable Interest Notice Due Date through the applicable Interest Date

the Equity Conditions have not been satisfied. Prior to the payment of Interest

on an Interest Date, Interest on this Note shall accrue at the Interest Rate and

be payable by way of inclusion of the Interest in the Conversion Amount in

accordance with Section 3(b)(i). Upon the occurrence and during the continuance

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

(12%). In the event that such Event of Default is subsequently cured, the

adjustment referred to in the preceding sentence shall cease to be effective as

of the date of such cure; provided that the Interest as calculated and unpaid at

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

continue to apply to the extent relating to the days after the occurrence of

such Event of Default through and including the date of cure of such Event of

Default. The Company shall pay any and all taxes that may be payable with

respect to the issuance and delivery of Interest Shares; provided that the

Company shall not be required to pay any tax that may be payable in respect of

any issuance of Interest Shares to any Person other than the Holder or with

respect to any income tax due by the Holder with respect to such Interest

Shares.

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

of the Company's common stock, par value $.01 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 conversion would result in the issuance of a fraction of a

share of Common Stock, unless the entire balance of the Note is being converted,

the portion of the Conversion Amount that corresponds to such fraction of a

share of Common Stock shall resume the status of unpaid Principal on the Note.

If the entire balance of the Note is being converted, 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 taxes that may be payable with respect to the

issuance and delivery of Common Stock upon conversion of any Conversion Amount;

provided that the Company shall not be required to pay any tax that may be

payable in respect of any issuance of Common Stock to any Person other than the

converting Holder or with respect to any income tax due by the Holder with

respect to such Common Stock.

(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 sum of (A) the portion

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

this determination

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is being made, (B) accrued and unpaid Interest with respect to such Principal

and (C) accrued and unpaid Late Charges with respect to such Principal and

Interest.

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

(as defined below) or other date of determination, $3.01, subject to adjustment

as provided 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 with respect to this Note

in the case of its loss, theft or destruction). On or before the first (1st)

Business 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 Business Day

following the date of receipt of a Conversion Notice (the "SHARE DELIVERY

DATE"), the Company shall (X) provided that the Transfer Agent is participating

in the DTC Fast Automated Securities Transfer Program and such action is not

prohibited by applicable law or regulation or any applicable policy of DTC,

credit such aggregate number of 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 foregoing shall not

apply, issue and deliver to the address as specified in the Conversion Notice, a

certificate, registered in the name of the Holder or its designee, for the

number of shares of Common Stock to which the Holder shall be entitled. If this

Note is physically surrendered for conversion as required by Section 3(c)(iii)

and 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 (3) 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 19(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 as set forth in the Conversion Notice.

(ii) Company's Failure to Timely Convert. If the Company

shall fail, other than pursuant to Section 3(d), 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 five Business Days after the

Conversion Date (a "CONVERSION FAILURE"), then (A) the Company shall pay damages

in cash to the Holder for each date of such Conversion Failure in an amount

equal to 2.0% of the product of (I) the sum of the number of shares of Common

Stock not issued to the Holder on or prior to the Share Delivery Date and to

which the Holder is entitled, and (II) the Closing Sale Price of the Common

Stock on the Share Delivery Date and (B) the Holder,

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upon written notice to the Company, may void its Conversion Notice with respect

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

that has not been converted pursuant to such Conversion Notice; provided that

the voiding of a Conversion Notice shall not affect the Company's obligations to

make any payments which have accrued prior to the date of such notice pursuant

to this Section 3(c)(ii) or otherwise. In addition to the foregoing, if within

three (3) Trading Days after the Company's receipt of the facsimile copy of a

Conversion Notice the Company shall fail to issue and deliver a certificate to

the Holder or credit the Holder's balance account with DTC for the number of

shares of Common Stock to which the Holder is entitled upon such holder's

conversion of any Conversion Amount, 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 in the Holder's discretion, either (i) pay cash to the

Holder in an amount equal to the Holder's total purchase price (including

brokerage commissions, 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) 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) 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 reissuance of this Note upon physical surrender of this Note.

The Holder and the Company shall maintain records showing the Principal,

Interest and Late Charges converted and the dates of such conversions or shall

use such other method, reasonably satisfactory to the Holder and the Company, so

as not to require physical surrender of this Note upon conversion.

(iv) Pro Rata Conversion; Disputes. In the event that

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

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

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

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

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

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

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

Notes submitted for conversion on such date. 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 24. The failure to issue to the Holder the number of shares of

Common Stock in dispute shall not be a Conversion Failure.

(d) Limitations on Conversions.

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(i) Beneficial Ownership. The Company shall not effect

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

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

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

the Holder's affiliates) would beneficially own in excess of 4.99% (the "MAXIMUM

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

after giving effect to such conversion. For purposes of the foregoing sentence,

the number of shares of Common Stock beneficially owned by the Holder and its

affiliates shall include the number of shares of Common Stock issuable upon

conversion of this Note with respect to which the determination of such sentence

is being made, but shall exclude the number of shares of Common Stock which

would be issuable upon (A) conversion of the remaining, 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. 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-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, upon the written

or oral request of the Holder, the Company shall within one Business Day confirm

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

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

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

the Company, including this Note, by the Holder or its affiliates 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 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 and the payment of Interest in Interest

Shares 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 or the payment of Interest in Interest Shares, shares of Common Stock

(as adjusted for stock splits,

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stock dividends, stock combinations and other similar transactions) 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

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 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));

(ii) the suspension from trading or failure of the

Common Stock to be listed on an Eligible Market for a period of five (5)

consecutive days or for more than an aggregate of ten (10) 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) notice, written

or oral, to any holder of the Notes, including by way of public announcement or

through any of its agents, at any time, of its intention not to comply with a

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);

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(iv) at any time following the tenth (10th) consecutive

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

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

upon a conversion of the full Conversion Amount of this Note (without regard to

any limitations on conversion set forth in Section 3(d) or otherwise);

(v) (A) the Company's failure to pay to the Holder any

amount of Principal, when and as due under this Note (including, without

limitation, the Company's failure to pay any redemption payments) or (B) the

Company's failure to pay to the Holder any other amounts when due and as due

under any 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, if such failure continues for a period of at least five (5)

Business Days;

(vi) (A) any payment default or other default occurs

under any Indebtedness (as defined in Section 3(s) of the Securities Purchase

Agreement) of the Company or any of its Subsidiaries (as defined in Section 3(a)

of the Securities Purchase Agreement) (other than the Alabama Mortgage) that

results in a redemption of or acceleration prior to maturity of $250,000 or more

of such Indebtedness in the aggregate, (B) any material default occurs under any

Indebtedness of the Company (other than the Alabama Mortgage) or any of its

Subsidiaries having an aggregate outstanding balance in excess of $250,000 and

such default continues uncured for more than ten (10) Business Days, other than,

in each case (A) and (B) above, a default with respect to any Other Notes, or

(C) any "event of default" occurs under the Alabama Mortgage;

(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;

(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 $2,000,000 are rendered against the Company or

any of its Subsidiaries and which judgments are not, within sixty (60) days

after the entry thereof, bonded, discharged or stayed pending appeal, or are not

discharged within sixty (60) days after the expiration of such stay; provided,

however, that any judgment which is covered by insurance or an indemnity from a

credit worthy party shall not be included in calculating the $2,000,000 amount

set forth above so long as the Company provides the Holder a written statement

from such insurer or indemnity provider (which written statement shall be

reasonably satisfactory to the Holder) to the effect that

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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 in any material respect any

representation, warranty, covenant or other term or condition of any Transaction

Document, except, in the case of a breach of a covenant or other term or

condition of any Transaction Document which is curable, only if such breach

continues for a period of at least ten (10) consecutive Business Days;

(xi) any breach or failure in any respect to comply with

Section 15 of this Note or Section 8(b) of the Securities Purchase Agreement; or

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

Notes) occurs with respect to any Other Notes.

(b) Redemption Right. Promptly after the occurrence of an

Event of Default with respect to this Note or any Other Note, the Company shall

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 and prior to sixty (60) days after written notice from the Company to

the Holder that such Event of Default is cured (which written notice shall

provide satisfactory evidence that such Event of Default has actually been

cured), 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 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 13. In the event of a partial redemption of this Note

pursuant hereto, the principal amount redeemed shall be deducted from the

Installment Amounts relating to the applicable Installment Dates as set forth in

the Event of Default Redemption Notice.

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

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

to a Fundamental Transaction unless (i) the Successor Entity (if other than the

Company) assumes in writing all of the obligations of the Company under this

Note and the other Transaction Documents in accordance with the provisions of

this Section 5(a) pursuant to written agreements in form and substance

reasonably satisfactory to the Required Holders and approved by the Required

Holders prior to such Fundamental Transaction, including agreements to deliver

to each holder of Notes in exchange for such Notes a security of the Successor

Entity evidenced by

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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

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 (if other than the Company) 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

(if other than the Company) 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)

purchasable upon the conversion or redemption of the Notes prior to such

Fundamental Transaction, such shares of stock, securities, cash, assets or any

other property whatsoever (including warrants or other purchase or subscription

rights) which the Holder would have been entitled to receive upon the happening

of such Fundamental Transaction had this Note been converted immediately prior

to such Fundamental Transaction, 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 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 on the date

of the consummation of such Change of Control (or, in the event a Change of

Control Notice is not delivered at least ten (10) days prior to a Change of

Control, at any time on or after the date which is ten (10) days prior to a

Change of Control and ending ten (10) 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 at a price equal to the greater of (i) the product of (x) the

Conversion Amount being redeemed 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) 105% of the Conversion Amount being redeemed from the Issuance Date until

six months from the Issuance Date, 110% of the Conversion Amount being redeemed

from the end of such six month period until the first anniversary of the

Issuance Date, and 120% of the Conversion Amount being redeemed thereafter (the

"CHANGE OF CONTROL REDEMPTION PRICE"). Redemptions required by this Section 5

shall be made in accordance with the provisions of Section 13 only if such

Change of Control is consummated and shall have priority to payments to

stockholders in connection with a Change of Control. Notwithstanding anything to

the contrary

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in this Section 5, but subject to Section 3(d), until the Change of Control

Redemption Price (together with any interest thereon) is paid in full, the

Conversion Amount submitted for redemption under this Section 5(c) (together

with any interest thereon) may be converted, in whole or in part, by the Holder

into Common Stock pursuant to Section 3. In the event of a partial redemption of

this Note pursuant hereto, the principal amount redeemed shall be deducted from

the Installment Amounts relating to the applicable Installment Dates as set

forth in the Change of Control Redemption Notice.

(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"), the Company shall make

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

to receive upon a conversion of this Note, 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 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.

(b) Other Corporate Events. In addition to and not in

substitution for any other rights hereunder, prior to the consummation of any

Fundamental Transaction pursuant to which holders of shares of Common Stock are

entitled to receive securities or other assets with respect to or in exchange

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

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

to receive upon a conversion of this Note, as applicable, (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 reasonably 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 Subscription Date, the Company issues or

sells, or in accordance

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with this Section 7(a) is deemed to have issued or sold, any shares of Common

Stock (including the issuance or sale of shares of Common Stock owned or held by

or for the account of the Company, but excluding shares of Common Stock deemed

to have been issued or sold by the Company in connection with any Excluded

Security) for a consideration per share less than a price (the "APPLICABLE

PRICE") equal to the Conversion Price in effect immediately prior to such issue

or sale (the foregoing a "DILUTIVE ISSUANCE"), then immediately after such

Dilutive Issuance, the Conversion Price then in effect shall be reduced to an

amount equal to the product of (A) the Conversion Price in effect immediately

prior to such Dilutive Issuance and (B) the quotient determined by dividing (1)

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

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

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

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

by (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. For

purposes of determining the adjusted Conversion Price under this Section 7(a),

the following shall be applicable:

(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

exercise of such Option and conversion or exchange or exercise of any

Convertible Securities issuable upon exercise of such Option is less than the

Applicable Price, then such share of Common Stock shall be deemed to be

outstanding and to have been issued and sold by the Company at the time of the

granting or sale of such Option for such price per share. For purposes of this

Section 7(a)(i), the "lowest price per share for which one share of Common Stock

is issuable upon the exercise of any such Option or upon conversion or exchange

or exercise of any Convertible Securities issuable upon exercise of such Option"

shall be equal to the sum of the lowest amounts of consideration (if any)

received or receivable by the Company with respect to any one share of Common

Stock upon granting or sale of the Option, upon exercise of the Option and upon

conversion or exchange or exercise of any Convertible Security issuable upon

exercise of such Option. No further adjustment of the Conversion Price shall be

made upon the actual issuance of such Common Stock or of such Convertible

Securities upon the exercise of such Options or upon the actual issuance of such

Common Stock upon conversion or exchange or exercise of such Convertible

Securities.

(ii) Issuance of Convertible Securities. If the Company

in any manner issues or sells any Convertible Securities and the lowest price

per share for which one share of Common Stock is issuable upon such conversion

or exchange or exercise thereof is less than the Applicable Price, then such

share of Common Stock shall be deemed to be outstanding and to have been issued

and sold by the Company at the time of the issuance or sale of such Convertible

Securities for such price per share. For the purposes of this Section 7(a)(ii),

the "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 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

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exercise of any Options for which adjustment of the Conversion Price had been or

are to be made pursuant to other provisions of this Section 7(a), no further

adjustment of the Conversion Price shall be made by reason of such issue or

sale.

(iii) Change in Option Price or Rate of Conversion. If

the purchase price provided for in any Options, the additional consideration, if

any, payable upon the issue, conversion, exchange or exercise of any Convertible

Securities, or the rate at which any Convertible Securities are convertible into

or exchangeable or exercisable for Common Stock changes at any time, the

Conversion Price in effect at the time of such change shall be adjusted to the

Conversion Price which would have been in effect at such time had such Options

or Convertible Securities provided for such changed purchase price, additional

consideration or changed conversion rate, as the case may be, at the time

initially granted, issued or sold. For purposes of this Section 7(a)(iii), if

the terms of any Option or Convertible Security that was outstanding as of the

Subscription Date are changed in the manner described in the immediately

preceding sentence, then such Option or Convertible Security and the Common

Stock deemed issuable upon exercise, conversion or exchange thereof shall be

deemed to have been issued as of the date of such change. No adjustment shall be

made pursuant to this Section 7(a)(iii) 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 a consideration of $.01. 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, except where such

consideration consists of marketable securities, in which case the amount of

consideration received by the Company will be the Closing Sale Price of such

securities on the date of receipt. If any Common Stock, Options or Convertible

Securities are issued to the shareholders 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 net

assets and business of the non-surviving entity, calculated on a going concern

basis, as is attributable to such Common Stock, Options or Convertible

Securities, as the case may be. The fair value of any consideration other than

cash or securities will be determined jointly by the Company and the Required

Holders. If such parties are unable to reach agreement within ten (10) days

af