I- MANY , I NC. SENIOR CONVERTIBLE NOTE

Exhibit 10.3

[FORM OF SENIOR CONVERTIBLE NOTE]

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

I- MANY , I NC .

S ENIOR C ONVERTIBLE N OTE

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

(1) MATURITY . On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal and accrued and unpaid Interest, if any. The “ Maturity Date ” is December 31, 2012.

(2) INTEREST; INTEREST RATE . (a) Interest on this Note shall commence accruing on the outstanding Principal on the Issuance Date and shall be computed on the basis of a 360-day year and twelve 30-day months and shall be payable in arrears on March 31, June 30, September 30 and December 31 of each year (each, an “ Interest Date ”) with the first Interest Date being March 31, 2008. Interest shall be payable on each Interest Date, to the record holder of this Note on the applicable Interest Date in cash.

(b) Prior to the payment of Interest on an Interest Date, Interest on this Note shall accrue at the Interest Rate and be payable in cash. From and after the occurrence and during the continuance of an Event of Default, the Interest Rate shall be increased to ten percent (10.0%). In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default.

(3) CONVERSION OF NOTES . This Note shall be convertible into shares of Common Stock, on the terms and conditions set forth in this Section 3.

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

(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 with respect to which this determination is being made.

(ii) “ Conversion Price ” means, as of any Conversion Date (as defined below) or other date of determination, $3.8192, subject to adjustment as provided herein.

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(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 and appropriate bond with respect to this Note in the case of its loss, theft or destruction). On or before the first (1 ^st ) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Company’s transfer agent (the “ Transfer Agent ”). On or before the second (2 ^nd ) Trading Day following the date of receipt of a Conversion Notice (the “ Share Delivery Date ”), the Company shall (1) (x) provided that the Transfer Agent is participating in the Depository Trust Company’s (“ DTC ”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled and (2) pay to the Holder in cash, by wire transfer of immediately available funds, an amount equal to the Additional Interest Amount, if any on the Conversion Amount subject to such conversion. 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) Trading Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 17(d)) representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

(ii) Company’s Failure to Timely Convert . If the Company is required to effect a conversion pursuant to a Conversion Notice and the Company shall fail to issue a certificate to the Holder or credit the Holder’s balance account with DTC, as applicable, for the number of shares of Common Stock to which the Holder is entitled upon conversion of any Conversion Amount on or prior to the date which is three (3) Trading Days after the Conversion Date (a “ Conversion Failure ”), then the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned, as the case may be, any portion of this Note that has not been converted pursuant to such Conversion Notice; provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In the alternative to the voiding of the Conversion Notice, 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 the Holder’s conversion of any Conversion Amount and if on

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or after such Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale to a third party by the Holder of Common Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a “ Buy-In ”), then the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s discretion, either (x) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out of pocket expenses, if any) for the shares of Common Stock so purchased (the “ Buy-In Price ”), at which point the Company’s obligation to deliver shares of Common Stock with respect to the applicable Conversion Amount shall terminate, or (y) promptly honor its obligation to deliver to the Holder the shares of Common Stock to which the Holder is entitled to have received upon the conversion of the applicable Conversion Amount and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (I) such number of shares of Common Stock, times (II) the Closing Bid Price on the Conversion Date.

(iii) Registration; Book-Entry . The Company shall maintain a register (the “ Register ”) for the recordation of the names and addresses of the holders of each Note and the principal amount of the Notes held by such holders (the “ Registered Notes ”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of Principal and Interest hereunder, notwithstanding notice to the contrary. A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a request to assign or sell all or part of any Registered Note by a Holder, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 17. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Principal amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal 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, and the Company is required to effect conversions pursuant to such Conversion Notices, 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(e), 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 22.

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(d) Mandatory Conversion .

(i) General . If at any time from and after December 31, 2009 (the “ Mandatory Conversion Eligibility Date ”), (1) the Closing Sale Price of the Common Stock exceeds 200% of the Conversion Price on the Issuance Date (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the Subscription Date) for each of any twenty (20) Trading Days occurring following the Mandatory Conversion Eligibility Date in any thirty (30) consecutive Trading Day period (such period, the “ Mandatory Conversion Measuring Period ”) and (2) there is not then an Equity Conditions Failure, the Company shall have the right to require the Holder to convert all or any portion of the Conversion Amount then remaining under this Note, in each case as designated in the Mandatory Conversion Notice (as defined below) into fully paid, validly issued and nonassessable shares of Common Stock in accordance with Section 3(c) hereof at the Conversion Rate as of the Mandatory Conversion Date (as defined below) (a “ Mandatory Conversion ”). The Company may exercise its right to require conversion under this Section 3(d) by delivering a written notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of Notes and the Transfer Agent (the “Mandatory Conversion Notice” and the date all of the holders received such notice by facsimile is referred to as the “ Mandatory Conversion Notice Date ”) within two (2) Business Days following the end of the applicable Mandatory Conversion Measuring Period. The Mandatory Conversion Notice shall be irrevocable. The Mandatory Conversion Notice shall (y) state (I) the Trading Day selected for the Mandatory Conversion, which Trading Day shall be no sooner than twenty (20) Trading Days nor later than sixty (60) Trading Days following the Mandatory Conversion Notice Date (the “ Mandatory Conversion Date ”), (II) the aggregate Conversion Amount of the Notes subject to Mandatory Conversion from the Holder and all of the holders of the Notes pursuant to this Section 3(d) (and analogous provisions under the Other Notes), (III) the number of shares of Common Stock to be issued to the Holder on the Mandatory Conversion Date and (IV) the amount of accrued and unpaid Interest to be paid to the Holder in cash on the Mandatory Conversion Date and (z) certify that there has been no Equity Conditions Failure.

(ii) Pro Rata Conversion Requirement . If the Company elects to cause a conversion of any Conversion Amount of this Note pursuant to Section 3(d)(i), then it must simultaneously take the same action in the same proportion with respect to the Other Notes. If the Company elects a Mandatory Conversion of this Note pursuant to Section 3(d)(i) (or similar provisions under the Other Notes) with respect to less than all of the Conversion Amounts of the Notes then outstanding, then the Company shall require conversion of a Conversion Amount from each of the holders of the Notes equal to the product of (1) the aggregate Conversion Amount of Notes which the Company has elected to cause to be converted pursuant to Section 3(d)(i), multiplied by (2) the fraction, the numerator of which is the sum of the aggregate Original Principal Amount of the Notes purchased by such holder (or the ultimate holder of a Note transferred as set forth below with an allocation among such Notes as set forth below) of outstanding Notes and the denominator of which is the sum of the aggregate Original Principal Amount of the Notes purchased by all (or the ultimate holder of a Note transferred as set forth below with an allocation among such Notes as set forth below)

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holders holding outstanding Notes (such fraction with respect to each holder is referred to as its “ Conversion Allocation Percentage ,” and such amount with respect to each holder is referred to as its “ Pro Rata Conversion Amount ”); provided, however, that in the event that any holder’s Pro Rata Conversion Amount exceeds the outstanding Principal amount of such holder’s Note, then such excess Pro Rata Conversion Amount shall be allocated amongst the remaining holders of Notes in accordance with the foregoing formula. In the event that the initial holder or any subsequent holder of any Notes shall sell or otherwise transfer any of such holder’s Notes, the transferee shall be allocated a pro rata portion of such transferring holder’s Conversion Allocation Percentage and the Pro Rata Conversion Amount. For purposes of illustration of the foregoing, the Conversion Allocation Percentage and Pro Rata Conversion Amount of any Note shall be calculated by reference to its Original Principal Amount and, in transferring any portion of the Note, or any subsequent Note evidencing some or all of the Principal payable on this Note, the allocated Original Principal Amount shall be indicated thereon, and shall not be reduced by any payment or conversion thereof.

(e) Limitations on Conversions .

(i) Beneficial Ownership . Other than in connection with a Mandatory Conversion, [INSERT ONLY IN RAMIUS NOTES: at such time as the Holder (including any of the Holder’s affiliates) does not have a representative on the Company’s board of directors and the beneficial ownership of the Holder (together with its affiliates), without giving effect to Conversion Shares issuable hereunder, is not in excess of 9.99%, ] ¹ 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% ] ² [ 9.99% ] ³ (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) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”). For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-K, Form 10-Q, Form 8-K or other public filing with the SEC, as the case may be, (2) a more recent

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public announcement by the Company or (3) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3(e)(i) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. By written notice to the Company, the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (x) any such increase or decrease will not be effective until the sixty-first (61 ^st ) day after such notice is delivered to the Company, and (y) any such increase or decrease will apply only to the Holder and not to any other holder of Notes.

(ii) 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 of the Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market whether or not the Common Stock is listed on 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 such 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 satisfactory to the Majority 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 of Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of Notes issued to a Purchaser pursuant to the Securities Purchase Agreement on the Closing Date and the denominator of which is the aggregate principal amount of all Notes issued to the Purchasers pursuant to the Securities Purchase Agreement on the Closing Date (with respect to each Purchaser, the “ Exchange Cap Allocation ”). 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 and such allocation and restriction shall apply to all successive transferees, ratably in accordance with their respective interest in the Original Principal Amount evidenced by their Notes. 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.

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(f) Conversion Upon Fundamental Change . The conversion by the Holder following its receipt of a Change of Control Notice during the Change of Control Conversion/Redemption Period shall be a “ Change of Control Conversion ”. In connection with a Change of Control Conversion, the Holder shall be entitled to receive the Make-Whole Premium with respect to any Conversion Amount converted in accordance with Section 3(c).

(4) RIGHTS UPON EVENT OF DEFAULT .

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

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

(ii) the Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock or Make-Whole Premium within ten (10) Business Days after the applicable Conversion Date or Change of Control Settlement Date (as defined in Section 9(a)), as the case may be, or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a 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(e);

(iii) at any time following an Authorized Share Failure Deadline if there has been an Authorized Share Failure;

(iv) the Company’s failure to pay to the Holder any amount of Principal, Interest or other amounts when and as due under this Note (including, without limitation, the Company’s failure to pay any redemption amounts hereunder) or any other Transaction Document (as defined in the Securities Purchase Agreement) or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party, except, in the case of a failure to pay Interest when and as due, in which case only if such failure continues for a period of at least seven (7) Business Days;

(v) any redemption of or acceleration prior to maturity of any Indebtedness exceeding $1,000,000 individually or in the aggregate of the Company or any of its Subsidiaries other than with respect to any Other Notes;

(vi) the Company or any of its Significant 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;

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

(viii) 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 such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within thirty (30) days of the issuance of such judgment;

(ix) other than as specifically set forth in another clause of this Section 4(a), the Company breaches, in any material respect, any material representation, warranty, covenant or agreement in any Transaction Document, except, in the case of a breach of a covenant or agreement in any Transaction Document which is curable, only if such breach continues for a period of at least thirty (30) consecutive days;

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

(xi) any Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes, unless such Event of Default is waived or cured.

(b) Acceleration and Redemption . Upon the occurrence of an Event of Default with respect to this Note or any Other Note, the Company shall within one (1) Business Day deliver written notice thereof via facsimile and overnight courier (an “ Event of Default Notice ”) to the Holder and the Other Holders. If an Event of Default other than an Event of Default specified in Section 4(a)(vi) or (vii) occurs, the Required Holders, at any time after the earlier of the Holder’s or any Other Holder’s receipt of an Event of Default Notice and the Holder or any Other Holder’s becoming aware of an Event of Default, by one or more written notices to the Company, may declare the entire Conversion Amount of all of the Notes plus accrued and unpaid Interest thereon due and payable immediately and upon any such declaration such Conversion Amount of all the Notes plus accrued and unpaid Interest thereon shall become immediately due and payable. Notwithstanding the foregoing, in the case of an Event of Default specified in Section 4(a)(vi) or (vii), the Conversion Amount of all of the Notes plus accrued and unpaid Interest thereon will ipso facto become due and payable without any declaration or other act on the part of the Holder or any of the Other Holders. Upon an acceleration in accordance with the preceding sentence or upon an Event of Default specified

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in Section 4(a)(vi) or (vii) occurs, 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 Conversion Amount of this Note the Holder is electing to require the Company to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price (the “ Event of Default Redemption Price ”) equal to the sum of (i) the Conversion Amount to be redeemed and (ii) any accrued and unpaid Interest thereon. Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 9. To the extent redemptions required by this Section 4(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments.

(c) Waiver of Past Defaults . The Majority Holders may on behalf of the Holders of all the Notes waive any past Event of Default hereunder and its consequences, except an Event of Default (i) specified in Section 4(a)(vi) or (vii); or (ii) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Note affected. Upon any such waiver, such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of the Notes; but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon.

(d) Recission and Annulment . At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Holder or any of the Other Holders, the Majority Holders, by written notice to the Company, may rescind and annul such declaration and its consequences if such rescission and annulment will not conflict with any judgment or decree of a court of competent jurisdiction and (i) the Company has paid to the Holder and each Other Holder a sum sufficient to pay (A) all overdue Interest on the Notes, and (B) the Principal Amount plus accrued and unpaid Interest, if any, any Redemption Price on any Notes which have become due otherwise than by such declaration of acceleration; and (ii) all Events of Default, other than the non-payment of Principal plus accrued and unpaid interest on Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 4(c) above . No such rescission shall affect any subsequent default or impair any right consequent thereon.

(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 the Successor Entity expressly assumes in writing, executed and delivered to the Holder concurrently with the consummation of the Fundamental Transaction, 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) prior to such Fundamental Transaction, including agreements to deliver to each holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Notes then outstanding held by such holder, having similar conversion rights, with the Conversion Rate adjusted to reflect the consideration received by the Company’s stockholders in such Fundamental Transaction, and having similar ranking to the Notes. In furtherance of and not in limitation of the foregoing, prior to the consummation of any Fundamental Transaction pursuant to

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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, the shares of Common Stock receivable upon such conversion or 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). Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note with the same effect as if such Successor Entity had been named as the Company herein. If 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 (a “ Public Successor Entity ”) and the consideration paid to holders of Common Stock in such Fundamental Transaction consists of stock in such Public Successor Entity (a “ Public Fundamental Transaction ”), then upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion or redemption of this Note at any time after the consummation of the Fundamental Transaction, in lieu of the shares of the Company’s Common Stock 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 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 ”) which shall state:

(i) the events causing a Change of Control and the anticipated Effective Date;

(ii) the last date of the Change of Control Conversion/Redemption Period (as defined below) by which the Holder must deliver a Change of Control Redemption Notice to elect the redemption option pursuant to this Section 5(b) or deliver a Conversion Notice requesting conversion upon a Change of Control in accordance with Section 3(c);

(iii) the Change of Control Settlement Date;

(iv) the Change of Control Redemption Price;

(v) the Conversion Price applicable on the date of the Change of Control Notice;

(vi) that Notes may be converted in connection with the Change of Control;

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(vii) that the Change of Control Redemption Price for any Convertible Note as to which a Change of Control Redemption Notice has been duly given will be paid promptly on the Change of Control Settlement Date; and

(viii) if the Holder is entitled to receive a Make-Whole Premium upon any conversion occurring within the Change of Control Conversion/Redemption Period.

At any time during the period beginning after the Holder’s receipt of a Change of Control Notice and ending twenty (20) Business Days after the Effective Date (such period, the “ Change of Control Conversion/Redemption Period ”), 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 require the Company to redeem. The portion of this Note subject to redemption pursuant to this Section 5(b) shall be redeemed by the Company in cash at a price (the “ Change of Control Redemption Price ”) equal to the sum of (i) the Conversion Amount and (ii) any accrued and unpaid Interest thereon. Redemptions required by this Section 5 shall be made in accordance with the provisions of Section 9 and shall have priority to payments to stockholders in connection with a Change of Control. 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(e), 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 (and any such conversions shall be deemed to be a withdrawal of the Change of Control Redemption Notice to the extent of such conversion) and shall be entitled to receive the Make-Whole Premium upon any such conversion.

(c) Make-Whole Premium . (i) If a Change of Control occurs, the Company shall pay the Make-Whole Premium to the holders of the Notes who effect a Change of Control Conversion at any time during the Change of Control Conversion/Redemption Period.

(A) The Make-Whole Premium shall be equal to an additional number of shares of Common Stock calculated in accordance with this Section 5(c). The Make-Whole Premium will be in addition to, and not in substitution for, any cash, securities or other assets otherwise due to the Holder upon conversion as described in this Note.

(B) The “ Make-Whole Premium ” shall be equal to the Conversion Amount of the Notes to be converted divided by $1,000 and multiplied by the applicable number of shares of Common Stock determined by reference to the table below (the “ Make-Whole Premium Table ”) and is based on the Effective Date and the Stock Price.

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Additional Shares Required to be Issued

(per $1,000 Conversion Amount of Notes)

Effective Date