MDWERKS, INC. 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 FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS

NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE

144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE

PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING

ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD

CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 20(a)

HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE

SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET

FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

                                  MDWERKS, INC.

                         SENIOR SECURED CONVERTIBLE NOTE

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

FOR VALUE RECEIVED, MDwerks, Inc., a Delaware corporation (the "COMPANY"),

hereby promises to pay to GOTTBETTER CAPITAL MASTER, LTD. or its registered

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

may be reduced pursuant to the terms hereof pursuant to redemption, conversion

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

defined below), on any Installment Date with respect to the Installment Amount

due on such Installment Date, acceleration, redemption or otherwise (in each

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

any outstanding Principal at a rate per annum equal to the Interest Rate (as

defined below), from the date set out above as the Issuance Date (the "ISSUANCE

DATE") until the same becomes due and payable, whether upon an Interest Date (as

defined below), any Installment Date, or the Maturity Date, acceleration,

conversion, redemption or otherwise (in each case in accordance with the terms

hereof). This Senior Secured Convertible Note (including all Senior Secured

Convertible Notes issued in exchange, transfer or replacement hereof, this

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

Certain capitalized terms used herein are defined in Section 28.

1. PAYMENTS OF PRINCIPAL; MATURITY. On each Installment Date commencing October

1, 2007, the Company shall pay to the Holder an amount equal to the Installment

Amount due on such Installment Date in cash by wire transfer of immediately

available funds. The "MATURITY DATE" shall be October 18, 2009, as may be

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

an Event of Default (as defined in Section 4(a)) shall have

occurred and be continuing and (ii) through the date that is ten (10) days after

the consummation of a Change of Control in the event that a Change of Control is

publicly announced or a Change of Control Notice (as defined in Section 5(b)) is

delivered prior to the Maturity Date.

2. INTEREST; INTEREST RATE.

     (a) Interest on this Note shall commence accruing on the Issuance Date and

shall be computed on the basis of a 360-day year and actual days elapsed and

shall be payable in arrears for each Calendar Month during the period beginning

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

"INTEREST DATE") with the first Interest Date being December 1, 2006. Interest

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

applicable Interest Date, in cash ("CASH INTEREST").

     (b) From and after the occurrence of an Event of Default, the Interest Rate

shall be increased to fifteen percent (15%) per annum. In the event that such

Event of Default is subsequently cured, the adjustment referred to in the

preceding sentence shall cease to be effective as of the date of such cure;

provided that the Interest as calculated at such increased rate during the

continuance of such Event of Default shall continue to apply to the extent

relating to the days after the occurrence of such Event of Default through and

including the date of cure of such Event of Default.

3. CONVERSION OF NOTES. This Note shall be convertible into shares of common

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

terms and conditions set forth in this Section 3.

     (a) Conversion Right. Subject to the provisions of Section 3(d), at any

time or times on or after the Issuance Date, the Holder shall be entitled to

convert any portion of the outstanding and unpaid Conversion Amount (as defined

below) into fully paid and nonassessable shares of Common Stock in accordance

with Section 3(c), at the Conversion Rate (as defined below). The Company shall

not issue any fraction of a share of Common Stock upon any conversion. If the

issuance would result in the issuance of a fraction of a share of Common Stock,

the Company shall round such fraction of a share of Common Stock up to the

nearest whole share. The Company shall pay any and all stamp and similar taxes

that may be payable with respect to the issuance and delivery of Common Stock

upon conversion of any Conversion Amount. The Company shall not be required,

however, to pay any transfer tax or similar charge imposed in connection with

the issuance of Common Stock in any name other than that of the Holder.

     (b) Conversion Rate. The number of shares of Common Stock issuable upon

conversion of any Conversion Amount pursuant to Section 3(a) shall be determined

by dividing (x) such Conversion Amount by (y) the Conversion Price then in

effect (the "CONVERSION RATE").

          (i) "CONVERSION AMOUNT" means the portion of the Principal to be

     converted, redeemed or otherwise with respect to which this determination

     is being made.

                                        2

          (ii) "CONVERSION PRICE" means, as of the Issuance Date $2.25, which

     Conversion Price shall be subject to adjustment from time to time in

     accordance with the terms set forth herein (including Section 7 hereof).

     The Conversion Price shall be appropriately adjusted for any stock split,

     stock dividend, stock combination or other similar transaction that

     proportionately decreases or increases the Common Stock.

     (c) Mechanics of Conversion.

          (i) Optional Conversion. To convert any Conversion Amount into shares

     of Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A)

     transmit by facsimile (or otherwise deliver), for receipt on or prior to

     5:00 p.m., New York Time, on such date, a copy of an executed notice of

     conversion in the form attached hereto as Exhibit I (the "CONVERSION

     NOTICE") to the Company and (B) if required by Section 3(c)(iv), surrender

     this Note to a nationally recognized overnight delivery service for

     delivery to the Company (or an indemnification undertaking with respect to

     this Note in the case of its loss, theft or destruction). On or before the

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

     Company shall transmit by facsimile a confirmation of receipt of such

     Conversion Notice to the Holder and the Transfer Agent. On or before the

     second (2nd) Trading Day following the date of receipt of a Conversion

     Notice (the "SHARE DELIVERY DATE"), the Company shall (1) (X) provided that

     the Transfer Agent is participating in the Fast Automated Securities

     Transfer Program of DTC credit such aggregate number of shares of Common

     Stock to which the Holder shall be entitled to the Holder's or its

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

     Commission system or (Y) if the Transfer Agent is not participating in the

     DTC Fast Automated Securities Transfer Program, issue and deliver to the

     address as specified in the Conversion Notice, a certificate, registered in

     the name of the Holder or its designee, for the number of shares of Common

     Stock to which the Holder shall be entitled and (2) pay to the Holder in

     cash an amount equal to the accrued and unpaid Interest on the Conversion

     Amount up to and including the Conversion Date. If this Note is physically

     surrendered for conversion as required by Section 3(c)(iv) and the

     outstanding Principal of this Note is greater than the Principal portion of

     the Conversion Amount being converted, then the Company shall as soon as

     practicable and in no event later than three Business Days after receipt of

     this Note and at its own expense, issue and deliver to the holder a new

     Note (in accordance with Section 18(d)) representing the outstanding

     Principal not converted. The Person or Persons entitled to receive the

     shares of Common Stock issuable upon a conversion of this Note shall be

     treated for all purposes as the record holder or holders of such shares of

     Common Stock on the Conversion Date. In the event of a partial conversion

     of this Note pursuant hereto, the principal amount converted shall be

     deducted from the Installment Amounts relating to the Installment Dates in

     reverse chronological order.

          (ii) Company's Failure to Timely Convert. If within three (3) Trading

     Days after the Company's receipt of the facsimile copy of a Conversion

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

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

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

     conversion of any Conversion Amount (a "CONVERSION

                                        3

     FAILURE"), and if on or after such Trading Day the Holder purchases (in an

     open market transaction or otherwise) Common Stock to deliver in

     satisfaction of a sale by the Holder of Common Stock issuable upon such

     conversion that the Holder anticipated receiving from the Company (a

     "BUY-IN"), then the Company shall, within three (3) Business Days after the

     Holder's request and provision of trade confirmations and in the Holder's

     sole discretion, either (i) pay cash to the Holder in an amount equal to

     the Holder's total purchase price (including brokerage commissions and

     other out-of-pocket expenses, if any) for the shares of Common Stock so

     purchased (the "BUY-IN PRICE"), at which point the Company's obligation to

     deliver such certificate (and to issue such Common Stock) shall terminate,

     or (ii) promptly honor its obligation to deliver to the Holder a

     certificate or certificates representing such Common Stock and pay cash to

     the Holder in an amount equal to the excess (if any) of the Buy-In Price

     over the product of (A) such number of shares of Common Stock, times (B)

     the Closing Bid Price on the Conversion Date.

          (iii) Registration; Book-Entry. The Company shall maintain a register

     (the "REGISTER") for the recordation of the names and addresses of the

     holders of the Notes and the principal amount of the Notes held by such

     holders (the "REGISTERED NOTES"). The entries in the Register shall be

     conclusive and binding for all purposes absent manifest error. The Company

     and the holders of the Notes shall treat each Person whose name is recorded

     in the Register as the owner of a Note for all purposes, including, without

     limitation, the right to receive payments of principal and interest

     hereunder, notwithstanding notice to the contrary. A Registered Note may be

     assigned or sold in whole or in part only by registration of such

     assignment or sale on the Register. Upon its receipt of a request to assign

     or sell all or part of any Registered Note by a Holder, the Company shall

     record the information contained therein in the Register and issue one or

     more new Registered Notes in the same aggregate principal amount as the

     principal amount of the surrendered Registered Note to the designated

     assignee or transferee pursuant to Section 17. Notwithstanding anything to

     the contrary set forth herein, upon conversion of any portion of this Note

     in accordance with the terms hereof, the Holder shall not be required to

     physically surrender this Note to the Company unless (A) the full

     Conversion Amount represented by this Note is being converted or (B) the

     Holder has provided the Company with prior written notice (which notice may

     be included in a Conversion Notice) requesting physical surrender and

     reissue of this Note. The Holder and the Company shall maintain records

     showing the Principal, Interest and Late Charges converted and the dates of

     such conversions or shall use such other method, reasonably satisfactory to

     the Holder and the Company, so as not to require physical surrender of this

     Note upon conversion.

          (iv) Disputes. In the event of a dispute as to the number of shares of

     Common Stock issuable to the Holder in connection with a conversion of this

     Note, the Company shall issue to the Holder the number of shares of Common

     Stock not in dispute and resolve such dispute in accordance with Section

     23.

     (d) Limitations on Conversions.

                                        4

          (i) Beneficial Ownership. The Company shall not effect any conversion

     of this Note, and the Holder of this Note (including any successor,

     transferee or assignee) shall not have the right to convert any portion of

     this Note pursuant to Section 3(a), to the extent that after giving effect

     to such conversion, the Holder (together with the Holder's affiliates)

     would beneficially own in excess of 4.99% (the "MAXIMUM PERCENTAGE") of the

     number of shares of Common Stock outstanding immediately after giving

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

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

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

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

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

     Stock which would be issuable upon (A) conversion of the remaining,

     nonconverted portion of this Note beneficially owned by the Holder or any

     of its affiliates and (B) exercise or conversion of the unexercised or

     nonconverted portion of any other securities of the Company (including,

     without limitation, any warrants) subject to a limitation on conversion or

     exercise analogous to the limitation contained herein beneficially owned by

     the Holder or any of its affiliates. Except as set forth in the preceding

     sentence, for purposes of this Section 3(d)(i), beneficial ownership shall

     be calculated in accordance with Section 13(d) of the Securities Exchange

     Act of 1934, as amended. For purposes of this Section 3(d)(i), in

     determining the number of outstanding shares of Common Stock, the Holder

     may rely on the number of outstanding shares of Common Stock as reflected

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

     10-Q or Form 8-K, as the case may be (y) a more recent public announcement

     by the Company or (z) any other notice by the Company or the Transfer Agent

     setting forth the number of shares of Common Stock outstanding. For any

     reason at any time, during regular business hours of the Company and upon

     the written request of the Holder, the Company shall within two (2)

     Business Days confirm in writing to the Holder the number of shares of

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

     shares of Common Stock shall be determined after giving effect to the

     conversion or exercise of securities of the Company, including this Note,

     by the Holder or its affiliates since the date as of which such number of

     outstanding shares of Common Stock was reported. By written notice to the

     Company, the Holder may increase or decrease the Maximum Percentage to any

     other percentage specified in such notice; provided that (i) any such

     increase will not be effective until the sixty-first (61st ) day after such

     notice is delivered to the Company, and (ii) any such increase or decrease

     will apply only to the Holder and not to any other holder of Notes.

          (ii) Principal Market Regulation. The Company shall not be obligated

     to issue any shares of Common Stock upon conversion of this Note, and the

     Holder of this Note shall not have the right to receive upon conversion of

     this Note any shares of Common Stock, if the issuance of such shares of

     Common Stock would exceed the aggregate number of shares of Common Stock

     which the Company may issue upon conversion or exercise, as applicable, of

     the Notes and Warrants without breaching the Company's obligations under

     the rules or regulations of the Principal Market (the "EXCHANGE CAP"),

     except that such limitation shall not apply in the event that the Company

     (A) obtains the approval of its stockholders as required by the applicable

     rules of the Principal Market for issuances of Common Stock in excess of

     such amount or (B) obtains a written opinion

                                        5

     from outside counsel to the Company that such approval is not required,

     which opinion shall be reasonably satisfactory to the Required Holders.

     Until such approval or written opinion is obtained, no purchaser of the

     Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS")

     shall be issued in the aggregate, upon conversion or exercise, as

     applicable, of Notes or Warrants, shares of Common Stock in an amount

     greater than the product of the Exchange Cap multiplied by a fraction, the

     numerator of which is the principal amount of Notes issued to the

     Purchasers pursuant to the Securities Purchase Agreement on the Closing

     Date and the denominator of which is the aggregate principal amount of all

     Notes issued to the Purchasers pursuant to the Securities Purchase

     Agreement on the Closing Date (with respect to each Purchaser, the

     "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or

     otherwise transfer any of such Purchaser's Notes, the transferee shall be

     allocated a pro rata portion of such Purchaser's Exchange Cap Allocation,

     and the restrictions of the prior sentence shall apply to such transferee

     with respect to the portion of the Exchange Cap Allocation allocated to

     such transferee. In the event that any holder of Notes shall convert all of

     such holder's Notes into a number of shares of Common Stock which, in the

     aggregate, is less than such holder's Exchange Cap Allocation, then the

     difference between such holder's Exchange Cap Allocation and the number of

     shares of Common Stock actually issued to such holder shall be allocated to

     the respective Exchange Cap Allocations of the remaining holders of Notes

     on a pro rata basis in proportion to the aggregate principal amount of the

     Notes then held by each such holder.

4. RIGHTS UPON EVENT OF DEFAULT.

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

"Event of Default":

          (i) the failure of the applicable Registration Statement required to

     be filed pursuant to the Registration Rights Agreement to be filed on or

     prior to the Filing Deadline (as defined in the Registration Rights

     Agreement) or declared effective by the SEC on or prior to the date that is

     thirty (30) days after the applicable Effectiveness Deadline (as defined in

     the Registration Rights Agreement), the Company fails to file the final

     prospectus in accordance with Rule 424 under the 1933 Act or, while the

     applicable Registration Statement is required to be maintained effective

     pursuant to the terms of the Registration Rights Agreement, the

     effectiveness of the applicable Registration Statement lapses for any

     reason (including, without limitation, the issuance of a stop order) or is

     unavailable to any holder of the Notes for sale of all of such holder's

     Registrable Securities (as defined in the Registration Rights Agreement) in

     accordance with the terms of the Registration Rights Agreement, and such

     lapse or unavailability continues for a period of ten (10) consecutive days

     or for more than an aggregate of thirty (30) days in any 365-day period

     (other than days during an Allowable Grace Period (as defined in the

     Registration Rights Agreement));

          (ii) the suspension from trading or failure of the Common Stock to be

     listed on the Principal Market or on an Eligible Market for a period of

     five (5) consecutive

                                        6

     Trading Days or for more than an aggregate of ten (10) Trading Days in any

     365-day period

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

     delivery of the required number of shares of Common Stock within ten (10)

     Business Days after the applicable Conversion Date or (B) written notice to

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

     any of its authorized agents, at any time, of its intention not to comply

     with a request for conversion of any Notes into shares of Common Stock that

     is tendered in accordance with the provisions of the Notes;

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

     that the authorized number of shares is less than the number of shares of

     Common Stock that the Holder would be entitled to receive upon a conversion

     of one hundred seventy-five percent (175%) of the full Conversion Amount of

     this Note (without regard to any limitations on conversion set forth in

     Section 3(d) or otherwise);

          (v) the Company's failure to pay to the Holder any amount of Principal

     (including, without limitation, any redemption or make-whole payments),

     Interest, Late Charges or other amounts when and as due under this Note or

     any other Transaction Document (as defined in the Securities Purchase

     Agreement), including any Company Redemption Price or Redemption Premium in

     connection with any redemption of this Note, or any other agreement,

     document, certificate or other instrument delivered in connection with the

     transactions contemplated hereby and thereby to which the Holder is a

     party, except, in the case of a failure to pay Interest and Late Charges

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

     of at least five (5) Business Days;

          (vi) any default under, redemption of or acceleration prior to

     maturity of any Indebtedness in excess of $250,000, in the aggregate, of

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

     Securities Purchase Agreement);

          (vii) the Company or any of its Subsidiaries, pursuant to or within

     the meaning of Title 11, U.S. Code, or any similar Federal, foreign or

     state law for the relief of debtors (collectively, "BANKRUPTCY LAW"), (A)

     commences a voluntary case, (B) consents to the entry of an order for

     relief against it in an involuntary case, (C) consents to the appointment

     of a receiver, trustee, assignee, liquidator or similar official (a

     "CUSTODIAN"), (D) makes a general assignment for the benefit of its

     creditors or (E) admits in writing that it is generally unable to pay its

     debts as they become due;

          (viii) a court of competent jurisdiction enters an order or decree

     under any Bankruptcy Law that (A) is for relief against the Company or any

     of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the

     Company or any of its Subsidiaries or (C) orders the liquidation of the

     Company or any of its Subsidiaries;

          (ix) a final judgment or judgments for the payment of money

     aggregating in excess of $250,000 are rendered against the Company or any

     of its Subsidiaries and

                                        7

     which judgments are not, within sixty (60) days after the entry thereof,

     bonded, discharged or stayed pending appeal, or are not discharged within

     sixty (60) days after the expiration of such stay; provided, however, that

     any judgment which is covered by insurance or an indemnity from a credit

     worthy party shall not be included in calculating the $250,000 amount set

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

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

     reasonably satisfactory to the Holder) to the effect that such judgment is

     covered by insurance or an indemnity and the Company will receive the

     proceeds of such insurance or indemnity within thirty (30) days of the

     issuance of such judgment;

          (x) the Company breaches any material representation, warranty,

     covenant or other term or condition of any Transaction Document, except, in

     the case of a breach of a covenant which is curable, only if such breach

     continues for a period of at least thirty (30) consecutive days after

     written notice thereof;

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

     15 of this Note or (y) any of the Potential Partner Conditions;

          (xii) the inability of the Common Stock to be transferred with DTC

     through the Deposit Withdrawal at Custodian system, only if such inability

     continues for a period of at least thirty (30) consecutive days; or

          (xiii) The Security Agreement (as defined in the Securities Purchase

     Agreement) shall for any reason fail or cease to create a valid and

     perfected and, except to the extent permitted by the terms thereof, first

     priority lien in favor of the Holder for the benefit of the holders of the

     Notes on any Collateral (as defined in the Security Agreement) purported to

     be covered thereby and such failure or cessation cannot be cured within ten

     (10) business days of written notice thereof.

     (b) Redemption Right. Upon the occurrence of an Event of Default with

respect to this Note, the Company shall within two (2) Business Days after the

day on which the Company is aware of the Event of Default deliver written notice

thereof via facsimile and overnight courier (an "EVENT OF DEFAULT NOTICE") to

the Holder. At any time after the earlier of the Holder's receipt of an Event of

Default Notice and the Holder becoming aware of an Event of Default, the Holder

may require the Company to redeem all or any portion of the outstanding balance

of this Note by delivering written notice thereof (the "Event of Default

Redemption Notice") to the Company, which Event of Default Redemption Notice

shall indicate the portion of this Note the Holder is electing to have redeemed.

Each portion of this Note subject to redemption by the Company pursuant to this

Section 4(b) shall be redeemed by the Company at a price equal to the greater of

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

Redemption Premium and (ii) the product of (A) the Conversion Rate with respect

to such Conversion Amount in effect at such time as the Holder delivers an Event

of Default Redemption Notice and (B) the Closing Sale Price of the Common Stock

on the date immediately preceding such Event of Default (the "EVENT OF DEFAULT

REDEMPTION PRICE"). Redemptions required by this Section 4(b) shall be made in

accordance with the provisions of Section 12. To the extent redemptions required

by this Section 4(b) are deemed or determined by a court of competent

jurisdiction to be

                                        8

prepayments of the Note by the Company, such redemptions shall be deemed to be

voluntary prepayments. The parties hereto agree that in the event of the

Company's redemption of any portion of this Note under this Section 4(b), the

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

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

availability of a suitable substitute investment opportunity for the Holder.

Accordingly, any Redemption Premium due under this Section 4(b) is intended by

the parties to be, and shall be deemed, a reasonable estimate of the Holder's

actual loss of its investment opportunity and not as a penalty.

5. RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

     (a) Assumption. For so long as this Note shall remain outstanding, the

Company shall not enter into or be party to a Fundamental Transaction unless (i)

the Successor Entity assumes in writing all of the obligations of the Company

under this Note and the other Transaction Documents in accordance with the

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

substance satisfactory to the Required Holders and approved by the Required

Holders prior to such Fundamental Transaction, including agreements to deliver

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

Entity evidenced by a written instrument substantially similar in form and

substance to the Notes, including, without limitation, having a principal amount

and interest rate equal to the principal amounts and the interest rates of the

Notes held by such holder, having similar conversion rights as the Notes and

having similar ranking to the Notes, and satisfactory to the Required Holders

and (ii) the Successor Entity (including its Parent Entity) is a publicly traded

corporation whose common stock is quoted on or listed for trading on an Eligible

Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity

shall succeed to, and be substituted for (so that from and after the date of

such Fundamental Transaction, the provisions of this Note referring to the

"Company" shall refer instead to the Successor Entity), and may exercise every

right and power of the Company and shall assume all of the obligations of the

Company under this Note with the same effect as if such Successor Entity had

been named as the Company herein. Upon consummation of the Fundamental

Transaction, the Successor Entity shall deliver to the Holder confirmation that

there shall be issued upon conversion or redemption of this Note at any time

after the consummation of the Fundamental Transaction, in lieu of the shares of

Common Stock (or other securities, cash, assets or other property) issuable upon

the conversion of the Notes prior to such Fundamental Transaction, such shares

of publicly traded common stock (or their equivalent) of the Successor Entity,

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

this Section shall apply similarly and equally to successive Fundamental

Transactions and shall be applied without regard to any limitations on the

conversion of this Note.

     (b) Redemption Right. No sooner than fifteen (15) days nor later than ten

(10) days prior to the consummation of a Change of Control, but not prior to the

public announcement of such Change of Control, the Company shall deliver written

notice thereof via facsimile and overnight courier to the Holder (a "CHANGE OF

CONTROL NOTICE"). At any time during the period beginning after the Holder's

receipt of a Change of Control Notice and ending ten (10) Trading Days after the

consummation of such Change of Control, the Holder may require the Company to

redeem all or any portion of this Note by delivering written notice thereof

("CHANGE OF

                                        9

CONTROL REDEMPTION NOTICE") to the Company, which Change of Control Redemption

Notice shall indicate the Conversion Amount the Holder is electing to be

redeemed. The portion of this Note subject to redemption pursuant to this

Section 5 shall be redeemed by the Company in cash at a price equal to the

greater of (i) the product of the Change of Control Premium and the product of

(x) the sum of the Conversion Amount being redeemed and any accrued and unpaid

Interest with respect to such Conversion Amount and accrued and unpaid Late

Charges with respect to such Conversion Amount and Interest and (y) the quotient

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

immediately following the public announcement of such proposed Change of Control

by (B) the Conversion Price and (ii) 150% of the sum of the Conversion Amount

being redeemed and any accrued and unpaid Interest with respect to such

Conversion Amount subject to such Change of Control Redemption and accrued and

unpaid Late Charges with respect to such Conversion Amount and Interest (the

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

shall be made in accordance with the provisions of Section 15 and shall have

priority to payments to shareholders in connection with a Change of Control. To

the extent redemptions required by this Section 5(b) are deemed or determined by

a court of competent jurisdiction to be prepayments of this Note by the Company,

such redemptions shall be deemed to be voluntary prepayments. Notwithstanding

anything to the contrary in this Section 5, until the Company Redemption Price

(together with any interest thereon) is paid in full, the Conversion Amount

submitted for redemption under this Section 5(c) may be converted, in whole or

in part, by the Holder into shares of Common Stock, or in the event the

Conversion Date is after the consummation of the Change of Control, shares of

publicly traded common stock (or their equivalent) of the Successor Entity

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

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

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

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

availability of a suitable substitute investment opportunity for the Holder.

Accordingly, any redemption premium due under this Section 5(b) is intended by

the parties to be, and shall be deemed, a reasonable estimate of the Holder's

actual loss of its investment opportunity and not as a penalty.

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

     (a) Purchase Rights. If at any time the Company grants, issues or sells any

Options, Convertible Securities or rights to purchase stock, warrants,

securities or other property pro rata to the record holders of any class of

Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to

acquire, upon the terms applicable to such Purchase Rights, the aggregate

Purchase Rights which the Holder could have acquired if the Holder had held the

number of shares of Common Stock acquirable upon complete conversion of this

Note (without taking into account any limitations or restrictions on the

convertibility of this Note) immediately before the date on which a record is

taken for the grant, issuance or sale of such Purchase Rights, or, if no such

record is taken, the date as of which the record holders of Common Stock are to

be determined for the grant, issue or sale of such Purchase Rights.

     (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

                                       10

of shares of Common Stock are entitled to receive securities or other assets

with respect to or in exchange for shares of Common Stock (a "CORPORATE EVENT"),

the Company shall make appropriate provision to insure that if the Holder is a

Holder at the time of consummation of such Fundamental Transaction, the Holder

will thereafter have the right to receive upon conversion of this Note, at the

Holder's option, (i) in addition to the shares of Common Stock receivable upon

such conversion, such securities or other assets to which the Holder would have

been entitled with respect to such shares of Common Stock had such shares of

Common Stock been held by the Holder upon the consummation of such Corporate

Event (without taking into account any limitations or restrictions on the

convertibility of this Note) or (ii) in lieu of the shares of Common Stock

otherwise receivable upon such conversion, such securities or other assets

received by the holders of shares of Common Stock in connection with the

consummation of such Corporate Event in such amounts as the Holder would have

been entitled to receive had this Note initially been issued with conversion

rights for the form of such consideration (as opposed to shares of Common Stock)

at a conversion rate for such consideration commensurate with the Conversion

Rate. Provision made pursuant to the preceding sentence shall be in a form and

substance satisfactory to the Required Holders. The provisions of this Section

shall apply similarly and equally to successive Corporate Events and shall be

applied without regard to any limitations on the conversion or redemption of

this Note.