EXHIBIT 10.3

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”). THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID
ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN
COMPARABLE TRANSACTIONS THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO
RULE 144 OR REGULATION S UNDER SAID ACT.

FORM OF CALLABLE SECURED CONVERTIBLE NOTE

Atlanta, Georgia      May 30, 2007    [$______] 

                      FOR VALUE RECEIVED, ADMIRALTY HOLDING COMPANY a Colorado
corporation (hereinafter called the “Borrower”), hereby promises to pay to the
order of [__________________] or registered assigns (the “Holder”) the sum of
[$______], on May 30, 2010 (the “Maturity Date”), and to pay interest on the
unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest
Rate”) per annum from May 30, 2007 (the “Issue Date”) until the same becomes due
and payable, whether at maturity or upon acceleration or by prepayment or
otherwise. Any amount of principal or interest on this Note which is not paid
when due shall bear interest at the rate of fifteen percent (15%) per annum from
the due date thereof until the same is paid (“Default Interest”). Interest shall
commence accruing on the Issue Date, shall be computed on the basis of a 365-day
year and the actual number of days elapsed and shall be payable quarterly
provided that no interest shall be due and payable for any month in which the
Trading Price (as such term is defined below) is greater than $.05 for each
Trading Day (as such term is defined below) of the month. All payments due
hereunder (to the extent not converted into common stock, $.001 par value per
share (the “Common Stock”) in accordance with the terms hereof) shall be made in
lawful money of the United States of America. All payments shall be made at such
address as the Holder shall hereafter give to the Borrower by written notice
made in accordance with the provisions of this Note.

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Whenever any amount expressed to be due by the terms of this Note is due on any
day which is not a business day, the same shall instead be due on the next
succeeding day which is a business day and, in the case of any interest payment
date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term
“business day” shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in the city of New York, New York are authorized or
required by Jaw or executive order to remain closed. Each capitalized term used
herein, and not otherwise defined, shall have the meaning ascribed thereto in
that certain Securities Purchase Agreement, dated May 30, 2007, pursuant to
which this Note was originally issued (the “Purchase Agreement”).

           This Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Borrower and will not impose
personal liability upon the holder thereof. The obligations of the Borrower
under this Note shall be secured by that certain Security Agreement and
Intellectual Property Security Agreement, each dated May 30, 2007 by and between
the Borrower and the Holder.

  The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

                      1.1            Conversion Right. The Holder shall have the
right from time to time, and at any time on or prior to the earlier of (i) the
Maturity Date and (ii) the date of payment of the Default Amount (as defined in
Article III) pursuant to Section 1.6(a) or Article III, the Optional Prepayment
Amount (as defined in Section 5.1 or any payments pursuant to Section 1.7, each
in respect of the remaining outstanding principal amount of this Note to convert
all or any part of the outstanding and unpaid principal amount of this Note into
fully paid and non-assessable shares of Common Stock, as such Common Stock
exists on the Issue Date, or any shares of capital stock or other securities of
the Borrower into which such Common Stock shall hereafter be changed or
reclassified at the conversion price (the “Conversion Price”) determined as
provided herein (a “Conversion”); provided, however that in no event shall the
Holder be entitled to convert any portion of this Note in excess of that portion
of this Note upon conversion of which the sum of (1) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Notes or the unexercised or
unconverted portion of any other security of the Borrower (including, without
limitation, the warrants issued by the Borrower pursuant to the Purchase
Agreement) subject to a limitation on conversion or exercise analogous to the
limitations contained herein) and (2) the number of shares of Common Stock
issuable upon the conversion of the portion of this Note with respect to which
the determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock and provided further that the Holder shall not be
entitled to convert any portion of this Note during any month immediately
succeeding a Determination Date on which the Borrower exercises its prepayment
option pursuant to Section 5.2 of this Note. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and

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Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such
proviso. The number of shares of Common Stock to be issued upon each conversion
of this Note shall be determined by dividing the Conversion Amount (as defined
below) by the applicable Conversion Price then in effect on the date specified
in the notice of conversion, in the form attached hereto as Exhibit A (the
“Notice of Conversion”), delivered to the Borrower by the Holder in accordance
with Section 1.4 below; provided that the Notice of Conversion is submitted by
facsimile (or by other means resulting in, or reasonably expected to result in,
notice) to the Borrower before 6:00 p.m., New York, New York time on such
conversion date (the “Conversion Date”). The term “Conversion Amount” means,
with respect to any conversion of this Note, the sum of (1) the principal amount
of this Note to be converted in such conversion plus (2) accrued and unpaid
interest, if any, on such principal amount at the interest rates provided in
this Note to the Conversion Date plus (3) Default Interest, if any, on the
amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4)
at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3
and 1.4(g) hereof or pursuant to Section 2(c) of that certain Registration
Rights Agreement, dated as of May 30, 2007, executed in connection with the
initial issuance of this Note and the other Notes issued on the Issue Date (the
“Registration Rights Agreement”). The term “Determination Date” means the last
business day of each month after the Issue Date.

                      1.2            Conversion Price.                     

                                       (a) Calculation of Conversion Price. The
Conversion Price shall be the lesser of (i) the Variable Conversion Price (as
defined herein) and (ii) the Fixed Conversion Price (as defined herein)
(subject, in each case, to equitable adjustments for stock splits, stock
dividends or rights offerings by the Borrower relating to the Borrower’s
securities or the securities of any subsidiary of the Borrower, combinations,
recapitalization, reclassifications, extraordinary distributions and similar
events). The “Variable Conversion Price” shall mean the Applicable Percentage
(as defined herein) multiplied by the Market Price (as defined herein). “Market
Price” means the average of the lowest three (3) Trading Prices (as defined
below) for the Common Stock during the twenty (20) Trading Day period ending one
Trading Day prior to the date the Conversion Notice is sent by the Holder to the
Borrower via facsimile (the “Conversion Date”). “Trading Price” means, for any
security as of any date, the intraday trading price on the Over-the-Counter
Bulletin Board (the “OTCBB”) as reported by a reliable reporting service
mutually acceptable to and hereafter designated by Holders of a majority in
interest of the Notes and the Borrower or, if the OTCBB is not the principal
trading market for such security, the intraday trading price of such security on
the principal securities exchange or trading market where such security is
listed or traded or, if no intraday trading price of such security is available
in any of the foregoing manners, the average of the intraday trading prices of
any market makers for such security that are listed in the “pink sheets” by the
National Quotation Bureau, Inc. If the Trading Price cannot be calculated for
such security on such date in the manner provided above, the Trading Price shall
be the fair market value as mutually determined by the Borrower and the holders
of a majority in interest of the Notes being converted for which the calculation
of the Trading Price is required in order to determine the Conversion Price of
such Notes. “Trading Day” shall mean any day on which the Common Stock is traded
for any period on the OTCBB, or on the principal securities exchange or other
securities market on which the Common Stock is then being traded.

 

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“Applicable Percentage” shall mean 50.0% . The “Fixed Conversion Price” shall
mean $.15.

                                                (b)             Conversion Price
During Major Announcements.

Notwithstanding anything contained in Section 1.2(a) to the contrary, in the
event the Borrower (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a merger in which
the Borrower is the surviving or continuing corporation and its capital stock is
unchanged) or sell or transfer all or substantially all of the assets of the
Borrower or (ii) any person, group or entity (including the Borrower) publicly
announces a tender offer to purchase 50% or more of the Borrower’s Common Stock
(or any other takeover scheme) (the date of the announcement referred to in
clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then
the Conversion Price shall, effective upon the Announcement Date and continuing
through the Adjusted Conversion Price Termination Date (as defined below), be
equal to the lower of (x) the Conversion Price which would have been applicable
for a Conversion occurring on the Announcement Date and (y) the Conversion Price
that would otherwise be in effect. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be determined as set forth in this
Section 1.2(a) . For purposes hereof, “Adjusted Conversion Price Termination
Date” shall mean, with respect to any proposed transaction or tender offer (or
takeover scheme) for which a public announcement as contemplated by this Section
1.2(b) has been made, the date upon which the Borrower (in the case of clause
(i) above) or the person, group or entity (in the case of clause (ii) above)
consummates or publicly announces the termination or abandonment of the proposed
transaction or tender offer (or takeover scheme) which caused this Section I
.2(b) to become operative.

                                    1.3             Authorized Shares. The
Borrower covenants that during the period the conversion right exists, the
Borrower will reserve from its authorized and unissued Common Stock a sufficient
number of shares, free from preemptive rights, to provide for the issuance of
Common Stock upon the full conversion of this Note and the other Notes issued
pursuant to the Purchase Agreement. The Borrower is required at all times to
have authorized and reserved two times the number of shares that is actually
issuable upon full conversion of the Notes (based on the Conversion Price of the
Notes or the Exercise Price of the Warrants in effect from time to time) (the
“Reserved Amount”). The Reserved Amount shall be increased from time to time in
accordance with the Borrower’s obligations pursuant to Section 4(h) of the
Purchase Agreement. The Borrower represents that upon issuance, such shares will
be duly and validly issued, fully paid and non-assessable. In addition, if the
Borrower shall issue any securities or make any change to its capital structure
which would change the number of shares of Common Stock into which the Notes
shall be convertible at the then current Conversion Price, the Borrower shall at
the same time make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Notes. The Borrower (i)
acknowledges that it has irrevocably instructed its transfer agent to issue
certificates for the Common Stock issuable upon conversion of this Note, and
(ii) agrees that its issuance of this Note shall constitute full authority to
its officers and agents who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock in accordance with the terms and conditions of this Note.

 

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                        If, at any time a Holder of this Note submits a Notice
of Conversion, and the Borrower does not have sufficient authorized but unissued
shares of Common Stock available to effect such conversion in accordance with
the provisions of this Article I (a “Conversion Default”), subject to Section
4.8, the Borrower shall issue to the Holder all of the shares of Common Stock
which are then available to effect such conversion. The portion of this Note
which the Holder included in its Conversion Notice and which exceeds the amount
which is then convertible into available shares of Common Stock (the “Excess
Amount”) shall, notwithstanding anything to the contrary contained herein, not
be convertible into Common Stock in accordance with the terms hereof until (and
at the Holder’s option at any time after) the date additional shares of Common
Stock are authorized by the Borrower to permit such conversion, at which time
the Conversion Price in respect thereof shall be the lesser of (i) the
Conversion Price on the Conversion Default Date (as defined below) and (ii) the
Conversion Price on the Conversion Date thereafter elected by the Holder in
respect thereof. In addition, the Borrower shall pay to the Holder payments
(“Conversion Default Payments”) for a Conversion Default in the amount of (x)
the sum of (1) the then outstanding principal amount of this Note plus (2)
accrued and unpaid interest on the unpaid principal amount of this Note through
the Authorization Date (as defined below) plus (3) Default Interest, if any, on
the amounts referred to in clauses (1) and/or (2), multiplied by (y) .24,
multiplied by (z) (N/365), where N = the number of days from the day the holder
submits a Notice of Conversion giving rise to a Conversion Default (the
“Conversion Default Date”) to the date (the “Authorization Date”) that the
Borrower authorizes a sufficient number of shares of Common Stock to effect
conversion of the full outstanding principal balance of this Note. The Borrower
shall use its best efforts to authorize a sufficient number of shares of Common
Stock as soon as practicable following the earlier of (i) such time that the
Holder notifies the Borrower or that the Borrower otherwise becomes aware that
there are or likely will be insufficient authorized and unissued shares to allow
full conversion thereof and (ii) a Conversion Default. The Borrower shall send
notice to the Holder of the authorization of additional shares of Common Stock,
the Authorization Date and the amount of Holder’s accrued Conversion Default
Payments. The accrued Conversion Default Payments for each calendar month shall
be paid in cash or shall be convertible into Common Stock (at such time as there
are sufficient authorized shares of Common Stock) at the applicable Conversion
Price, at the Borrower’s option, as follows:

                                                (a)             In the event
Holder elects to take such payment in cash, cash payment shall be made to Holder
by the fifth ) day of the month following the month in which it has accrued; and

                                                (b)             In the event
Holder elects to take such payment in Common Stock, the Holder may convert such
payment amount into Common Stock at the Conversion Price (as in effect at the
time of conversion) at any time after the fifth day of the month following the
month in which it has accrued in accordance with the terms of this Article I (so
long as there is then a sufficient number of authorized shares of Common Stock).

                        The Holder’s election shall be made in writing to the
Borrower at any time prior to 6:00 p.m., New York, New York time, on the third
day of the month following the month in which Conversion Default payments have
accrued. If no election is made, the Holder shall be deemed to have elected to
receive cash. Nothing herein shall limit the Holder’s right to pursue 

                                                                                                                       
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actual damages (to the extent in excess of the Conversion Default Payments) for
the Borrower's failure to maintain a sufficient number of authorized shares of
Common Stock, and each holder shall have the right to pursue all remedies
available at law or in equity (including degree of specific performance and/or
injunctive relief).

                                       1.4          Method of Conversion.

                                                    (a)              Mechanics
of Conversion. Subject to Section 1,1, this Note may be converted by the Holder
in whole or in part at any time from time to time after the Issue Date, by (A)
submitting to the Borrower a Notice of Conversion (by facsimile or other
reasonable means of communication dispatched on the Conversion Date prior to
6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b),
surrendering this Note at the principal office of the Borrower.

                                                    (b)              Surrender
of Note Upon Conversion. Notwithstanding anything to the contrary set forth
herein, upon conversion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to the Borrower
unless the entire unpaid principal amount of this Note is so converted. The
Holder and the Borrower shall maintain records showing the principal amount so
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Borrower, so as not to require
physical surrender of this Note upon each such conversion. In the event of any
dispute or discrepancy, such records of the Borrower shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of this Note is converted as aforesaid, the Holder may not
transfer this Note unless the Holder first physically surrenders this Note to
the Borrower, whereupon the Borrower will forthwith issue and deliver upon the
order of the Holder a new Note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of this
Note. The Holder and any assignee, by acceptance of this Note, acknowledge and
agree that, by reason of the provisions of this paragraph, following conversion
of a portion of this Note, the unpaid and unconverted principal amount of this
Note represented by this Note may be less than the amount stated on the face
hereof.

                                                    (c)              Payment of
Taxes. The Borrower shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of shares of Common
Stock or other securities or property on conversion of this Note in a name other
than that of the Holder (or in street name), and the Borrower shall not be
required to issue or deliver any such shares or other securities or property
unless and until the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the Holder’s account)
requesting the issuance thereof shall have paid to the Borrower the amount of
any such tax or shall have established to the satisfaction of the Borrower that
such tax has been paid.

                                                    (d)              Delivery of
Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a
facsimile transmission (or other reasonable means of communication) of a Notice
of Conversion meeting the requirements for conversion as provided in this
Section 1.4, the Borrower shall issue and deliver or cause to be issued and
delivered to or upon the order of the Holder certificates for the Common Stock
issuable upon such conversion within three (3) business days after such receipt
(and, solely in the case of conversion of the

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entire unpaid principal amount hereof, surrender of this Note) (such second
business day being hereinafter referred to as the “Deadline”) in accordance with
the terms hereof and the Purchase Agreement (including, without limitation, in
accordance with the requirements of Section 2(g of the Purchase Agreement that
certificates for shares of Common Stock issued on or after the effective date of
the Registration Statement upon conversion of this Note shall not bear any
restrictive legend).

                                                    (e)              Obligation
of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of
Conversion, the Holder shall be deemed to be the holder of record of the Common
Stock issuable upon such conversion, the outstanding principal amount and the
amount of accrued and unpaid interest on this Note shall be reduced to reflect
such conversion, and, unless the Borrower defaults on its obligations under this
Article 1, all rights with respect to the portion of this Note being so
converted shall forthwith terminate except the right to receive the Common Stock
or other securities, cash or other assets, as herein provided, on such
conversion. If the Holder shall have given a Notice of Conversion as provided
herein, the Borrower’s obligation to issue and deliver the certificates for
Common Stock shall be absolute and unconditional, irrespective of the absence of
any action by the Holder to enforce the same, any waiver or consent with respect
to any provision thereof; the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other
obligation of the Borrower to the holder of record, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any other
circumstance which might otherwise limit such obligation of the Borrower to the
Holder in connection with such conversion. The Conversion Date specified in the
Notice of Conversion shall be the Conversion Date so long as the Notice of
Conversion is received by the Borrower before 6:00 p.m., New York, New York
time, on such date.

                                                    (f)              Delivery of
Common Stock by Electronic Transfer. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided the Borrower’s
transfer agent is participating in the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer (“FAST”) program, upon request of the Holder and
its compliance with the provisions contained in Section 1.1 and in this Section
1.4, the Borrower shall use its best efforts to cause its transfer agent to
electronically transmit the Common Stock issuable upon conversion to the Holder
by crediting the account of Holder’s Prime Broker with DTC through its Deposit
Withdrawal Agent Commission (“DWAC”) system.

                                                     (g)              Failure to
Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s
right to pursue other remedies, including actual damages and/or equitable
relief; the parties agree that if delivery of the Common Stock issuable upon
conversion of this Note is more than three (3) business days after the Deadline
(other than a failure due to the circumstances described in Section 1.3 above,
which failure shall be governed by such Section) the Borrower shall pay to the
Holder $2,000 per day in cash, for each day beyond the Deadline that the
Borrower fails to deliver such Common Stock. Such cash amount shall be paid to
Holder by the fifth day of the month following the month in which it has accrued
or, at the option of the Holder (by written notice to the Borrower by the first
day of

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the month following the month in which it has accrued), shall be added to the
principal amount of this, in which event interest shall accrue thereon in
accordance with the terms of this Note and such additional principal amount
shall be convertible into Common Stock in accordance with the terms of this
Note.

                                       1.5              Concerning the Shares.
The shares of Common Stock issuable upon conversion of this Note may not be sold
or transferred unless (i) such shares are sold pursuant to an effective
registration statement under the Act or (ii) the Borrower or its transfer agent
shall have been furnished with an opinion of counsel (which opinion shall be in
form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the shares to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration or (iii)
such shares are sold or transferred pursuant to Rule 144 under the Act (or a
successor rule) (“Rule 144”) or (iv) such shares are transferred to an
“affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or
otherwise transfer the shares only in accordance with this Section 1.5 and who
is an Accredited Investor (as defined in the Purchase Agreement). Except as
otherwise provided in the Purchase Agreement (and subject to the removal
provisions set forth below), until such time as the shares of Common Stock
issuable upon conversion of this Note have been registered under the Act as
contemplated by the Registration Rights Agreement or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold, each certificate for
shares of Common Stock issuable upon conversion of this Note that has not been
so included in an effective registration statement or that has not been sold
pursuant to an effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantially in the following form,
as appropriate:

  “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION
OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD
PURSUANT TO RULE 144 OR REGULATION S UNDER SAID ACT.”

                          The legend set forth above shall be removed and the
Borrower shall issue to the Holder a new certificate therefor free of any
transfer legend if (i) the Borrower or its transfer agent shall have received an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Common Stock may be made without registration under the Act and the
shares are so sold or transferred, (ii) such Holder provides the Borrower or its
transfer agent with reasonable assurances that the Common Stock issuable upon
conversion of this Note (to the extent such securities are deemed to have been
acquired on the same date) can be sold pursuant to Rule 144 or (iii) in the case
of the Common Stock issuable upon conversion of this Note, such security is
registered for sale by the Holder under an effective registration statement
filed under the Act or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date that can then
be immediately sold. Nothing in this Note shall (i) limit

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the Borrower’s obligation under the Registration Rights Agreement or (ii) affect
in any way the Holder’s obligations to comply with applicable prospectus
delivery requirements upon the resale of the securities referred to herein.

                              1.6      Effect of Certain Events.

                                        (a)           Effect of Merger,
Consolidation, Etc. At the option of the Holder, the sale, conveyance or
disposition of all or substantially all of the assets of the Borrower, the
effectuation by the Borrower of a transaction or series of related transactions
in which more than 50% of the voting power of the Borrower is disposed of, or
the consolidation, merger or other business combination of the Borrower with or
into any other Person (as defined below) or Persons when the Borrower is not the
survivor shall either: (i) be deemed to be an Event of Default (as defined in
Article III) pursuant to which the Borrower shall be required to pay to the
Holder upon the consummation of and as a condition to such transaction an amount
equal to the Default Amount (as defined in Article III) or (ii) be treated
pursuant to Section 1.6(b) hereof. “Person” shall mean any individual,
corporation, limited liability company, partnership, association, trust or other
entity or organization.

                                        (b)           Adjustment Due to Merger,
Consolidation, Etc. If, at any time when this Note is issued and outstanding and
prior to conversion of all of the Notes, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Borrower shall
be changed into the same or a different number of shares of another class or
classes of stock or securities of the Borrower or another entity, or in case of
any sale or conveyance of all or substantially all of the assets of the Borrower
other than in connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to receive upon
conversion of this Note, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities or assets which the
Holder would have been entitled to receive in such transaction had this Note
been converted in full immediately prior to such transaction (without regard to
any limitations on conversion set forth herein), and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holder of this Note to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the Conversion Price and of the
number of shares issuable upon conversion of the Note) shall thereafter be
applicable, as nearly as may be practicable in relation to any securities or
assets thereafter deliverable upon the conversion hereof. The Borrower shall not
effect any transaction described in this Section 1.6(b) unless (a) it first
gives, to the extent practicable, thirty (30) days prior written notice (but in
any event at least fifteen (15) days prior written notice) of the record date of
the special meeting of shareholders to approve, or if there is no such record
date, the consummation of, such merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event or sale of assets
(during which time the Holder shall be entitled to convert this Note) and (b)
the resulting successor or acquiring entity (if not the Borrower) assumes by
written instrument the obligations of this Section 1.6(b) . The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers or
share exchanges.

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                                                (c)            Adjustment Due to
Distribution.  If the Borrower shall declare or make any distribution of its
assets (or rights to acquire its assets) to holders of Common Stock as a
dividend, stock repurchase, by way of return of capital or otherwise (including
any dividend or distribution to the Borrower’s shareholders in cash or shares
(or rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled,
upon any conversion of this Note after the date of record for determining
shareholders entitled to such Distribution, to receive the amount of such assets
which would have been payable to the Holder with respect to the shares of Common
Stock issuable upon such conversion had such Holder been the holder of such
shares of Common Stock on the record date for the determination of shareholders
entitled to such Distribution.

                                                (d)             Adjustment Due
to Dilutive Issuance. If, at any time when any Notes are issued and outstanding,
the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof
is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of reasonable
expenses or commissions or underwriting discounts or allowances in connection
therewith) less than the Fixed Conversion Price in effect on the date of such
issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the Fixed Conversion
Price will be reduced to the amount of the consideration per share received by
the Borrower in such Dilutive Issuance; provided that only one adjustment will
be made for each Dilutive Issuance.

                                                The Borrower shall be deemed to
have issued or sold shares of Common Stock if the Borrower in any manner issues
or grants any warrants, rights or options (not including employee stock option
plans), whether or not immediately exercisable, to subscribe for or to purchase
Common Stock or other securities convertible into or exchangeable for Common
Stock (“Convertible Securities”) (such warrants, rights and options to purchase
Common Stock or Convertible Securities are hereinafter referred to as “Options”)
and the price per share for which Common Stock is issuable upon the exercise of
such Options is less than the Fixed Conversion Price then in effect, then the
Fixed Conversion Price shall be equal to such price per share. For purposes of
the preceding sentence, the “price per share for which Common Stock is issuable
upon the exercise of such Options” is determined by dividing (i) the total
amount, if any, received or receivable by the Borrower as consideration for the
issuance or granting of all such Options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Borrower upon the exercise of
all such Options, plus, in the case of Convertible Securities issuable upon the
exercise of such Options, the minimum aggregate amount of additional
consideration payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options (assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Conversion Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Options or upon
the conversion or exchange of Convertible Securities issuable upon exercise of
such Options.

                                    Additionally, the Borrower shall be deemed
to have issued or sold shares of Common Stock if the Borrower in any manner
issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options), and the price per share for which Common Stock is issuable upon

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such conversion or exchange is less than the Fixed Conversion Price then in
effect, then the Fixed Conversion Price shall be equal to such price per share.
For the purposes of the preceding sentence, the “price per share for which
Common Stock is issuable upon such conversion or exchange” is determined by
dividing (i) the total amount, if any, received or receivable by the Borrower as
consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Borrower upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment to the Fixed Conversion Price
will be made upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.

                                        (e)           Purchase Rights. If, at
any time when any Notes are issued and outstanding, the Borrower issues any
convertible securities or rights to purchase stock, warrants, securities or
other property (the “Purchase Rights”) pro rata to the record holders of any
class of Common Stock, then the Holder of this Note will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such Holder could have acquired if such Holder had held the number of
shares of Common Stock acquirable upon complete conversion of this Note (without
regard to any limitations on conversion contained herein) 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.

                                        (f)           Notice of Adjustments.
Upon the occurrence of each adjustment or readjustment of the Conversion Price
as a result of the events described in this Section 1.6, the Borrower, at its
expense, shall promptly compute such adjustment or readjustment and prepare and
furnish to the Holder of a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Borrower shall, upon the written request at any time
of the Holder, furnish to such Holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time in effect and
(iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of
the Note.

                              1.7           Trading Market Limitations. Unless
permitted by the applicable rules and regulations of the principal securities
market on which the Common Stock is then listed or traded, in no event shall the
Borrower issue upon conversion of or otherwise pursuant to this Note and the
other Notes issued pursuant to the Purchase Agreement more than the maximum
number of shares of Common Stock that the Borrower can issue pursuant to any
rule of the principal United States securities market on which the Common Stock
is then traded (the “Maximum Share Amount”), which shall be 19.99% of the total
shares outstanding on the Closing Date (as defined in the Purchase Agreement),
subject to equitable adjustment from time to time for stock splits, stock
dividends, combinations, capital reorganizations and similar events relating to
the Common Stock occurring after the date hereof. Once the Maximum Share Amount
has been issued (the date of which is hereinafter referred to as the “Maximum
Conversion Date”), if the Borrower fails to eliminate any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Borrower or any of its securities on the Borrower’s ability to issue shares
of Common Stock in excess of the Maximum Share Amount (a “Trading Market
Prepayment Event”), in lieu of any further right to convert this Note, and in

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full satisfaction of the Borrower’s obligations under this Note, the Borrower
shall pay to the Holder, within fifteen (15) business days of the Maximum
Conversion Date (the “Trading Market Prepayment Date”), an amount equal to 130%
times the sum of (a) the then outstanding principal amount of this Note
immediately following the Maximum Conversion Date, plus (b) accrued and unpaid
interest on the unpaid principal amount of this Note to the Trading Market
Prepayment Date, plus (c) Default Interest, if any, on the amounts referred to
in clause (a) and/or (b) above, plus (d) any optional amounts that may be added
thereto at the Maximum Conversion Date by the Holder in accordance with the
terms hereof (the then outstanding principal amount of this Note immediately
following the Maximum Conversion Date, plus the amounts referred to in clauses
(b), (c) and (d) above shall collectively be referred to as the “Remaining
Convertible Amount”). With respect to each Holder of Notes, the Maximum Share
Amount shall refer to such Holder’s pro rata share thereof determined in
accordance with Section 4.8 below. In the event that the sum of (x) the
aggregate number of shares of Common Stock issued upon conversion of this Note
and the other Notes issued pursuant to the Purchase Agreement plus (y) the
aggregate number of shares of Common Stock that remain issuable upon conversion
of this Note and the other Notes issued pursuant to the Purchase Agreement,
represents at least one hundred percent (100%) of the Maximum Share Amount (the
“Triggering Event”), the Borrower will use its best efforts to seek and obtain
Shareholder Approval (or obtain such other relief as will allow conversions
hereunder in excess of the Maximum Share Amount) as soon as practicable
following the Triggering Event and before the Maximum Conversion Date. As used
herein, “Shareholder Approval” means approval by the shareholders of the
Borrower to authorize the issuance of the full number of shares of Common Stock
which would be issuable upon full conversion of the then outstanding Notes but
for the Maximum Share Amount.

                              1.8           Status as Shareholder. Upon
submission of a Notice of Conversion by a Holder, (i) the shares covered thereby
(other than the shares, if any, which cannot be issued because their issuance
would exceed such Holder’s allocated portion of the Reserved Amount or Maximum
Share Amount) shall be deemed converted into shares of Common Stock and (ii) the
Holder’s rights as a Holder of such converted portion of this Note shall cease
and terminate, excepting only the right to receive certificates for such shares
of Common Stock and to any remedies provided herein or otherwise available at
law or in equity to such Holder because of a failure by the Borrower to comply
with the terms of this Note. Notwithstanding the foregoing, if a Holder has not
received certificates for all shares of Common Stock prior to the tenth (10th)
business day after the expiration of the Deadline with respect to a conversion
of any portion of this Note for any reason, then (unless the Holder otherwise
elects to retain its status as a holder of Common Stock by so notifying the
Borrower) the Holder shall regain the rights of a Holder of this Note with
respect to such unconverted portions of this Note and the Borrower shall, as
soon as practicable, return such unconverted Note to the Holder or, if the Note
has not been surrendered, adjust its records to reflect that such portion of
this Note has not been converted. In all cases, the Holder shall retain all of
its rights and remedies (including, without limitation, (i) the right to receive
Conversion Default Payments pursuant to Section 1.3 to the extent required
thereby for such Conversion Default and any subsequent Conversion Default and
(ii) the right to have the Conversion Price with respect to subsequent
conversions determined in accordance with Section 1.3) for the Borrower’s
failure to convert this Note.

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ARTICLE II. CERTAIN COVENANTS

                              2.1           Distributions on Capital Stock. So
long as the Borrower shall have any obligation under this Note, the Borrower
shall not without the Holder’s written consent (a) pay, declare or set apart for
such payment, any dividend or other distribution (whether in cash, property or
other securities) on shares of capital stock other than dividends on shares of
Common Stock solely in the form of additional shares of Common Stock or (b)
directly or indirectly or through any subsidiary make any other payment or
distribution in respect of its capital stock except for distributions pursuant
to any shareholders’ rights plan which is approved by a majority of the
Borrower’s disinterested directors.

                              2.2           Restriction on Stock Repurchases. So
long as the Borrower shall have any obligation under this Note, the Borrower
shall not without the Holder’s written consent redeem, repurchase or otherwise
acquire (whether for cash or in exchange for property or other securities or
otherwise) in any one transaction or series of related transactions any shares
of capital stock of the Borrower or any warrants, rights or options to purchase
or acquire any such shares.

                              2.3           Borrowings. So long as the Borrower
shall have any obligation under this Note, the Borrower shall not, without the
Holder’s written consent, create, incur, assume or suffer to exist any liability
for borrowed money, except (a) borrowings in existence or committed on the date
hereof and of which the Borrower has informed Holder in writing prior to the
date hereof, (b) indebtedness to trade creditors or financial institutions
incurred in the ordinary course of business or (c) borrowings, the proceeds of
which shall be used to repay this Note.

                              2.4           Sale of Assets. So long as the
Borrower shall have any obligation under this Note, the Borrower shall not,
without the Holder’s written consent, sell, lease or otherwise dispose of any
significant portion of its assets outside the ordinary course of business. Any
consent to the disposition of any assets may be conditioned on a specified use
of the proceeds of disposition.

                              2.5           Advances and Loans. So long as the
Borrower shall have any obligation under this Note, the Borrower shall not,
without the Holder’s written consent, lend money, give credit or make advances
to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and affiliates of the
Borrower, except loans, credits or advances (a) in existence or committed on the
date hereof and which the Borrower has informed Holder in writing prior to the
date hereof, (b) made in the ordinary course of business or (c) not in excess of
$50,000.

                              2.6           Contingent Liabilities. So long as
the Borrower shall have any obligation under this Note, the Borrower shall not,
without the Holder’s written consent, which shall not be unreasonably withheld,
assume, guarantee, endorse, contingently agree to purchase or otherwise become
liable upon the obligation of any person, firm, partnership, joint venture or
corporation, except by the endorsement of negotiable instruments for deposit or
collection and except assumptions, guarantees, endorsements and contingencies
(a) in existence or committed on the date hereof and which the Borrower has
informed Holder in writing prior to the date hereof, and (b) similar
transactions in the ordinary course of business.

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ARTICLE III. EVENTS OF DEFAULT

                              If any of the following events of default (each,
an “Event of Default”) shall occur:

                              3.1           Failure to Pay Principal or
Interest. The Borrower fails to pay the principal hereof or interest thereon
when due on this Note, whether at maturity, upon a Trading Market Prepayment
Event pursuant to Section 1.7, upon acceleration or otherwise;

                              3.2           Conversion and the Shares. The
Borrower fails to issue shares of Common Stock to the Holder (or announces or
threatens that it will not honor its obligation to do so) upon exercise by the
Holder of the conversion rights of the Holder in accordance with the terms of
this Note (for a period of at least sixty (60) days, if such failure is solely
as a result of the circumstances governed by Section 1.3 and the Borrower is
using its best efforts to authorize a sufficient number of shares of Common
Stock as soon as practicable), fails to transfer or cause its transfer agent to
transfer (electronically or in certificated form) any certificate for shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Note as and when required by this Note or the Registration Rights
Agreement, or fails to remove any restrictive legend (or to withdraw any stop
transfer instructions in respect thereof) on any certificate for any shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Note as and when required by this Note or the Registration Rights Agreement
(or makes any announcement, statement or threat that it does not intend to honor
the obligations described in this paragraph) and any such failure shall continue
uncured (or any announcement, statement or threat not to honor its obligations
shall not be rescinded in writing) for ten (10) days after the Borrower shall
have been notified thereof in writing by the Holder;

                              3.3           Failure to Timely File Registration
or Effect Registration. The Borrower fails to file the Registration Statement
within seventy-five (75) days following the Closing Date (as defined in the
Purchase Agreement) or obtain effectiveness with the Securities and Exchange
Commission of the Registration Statement within one hundred thirty-five (135)
days following the Closing Date (as defined in the Purchase Agreement) or such
Registration Statement lapses in effect (or sales cannot otherwise be made
thereunder effective, whether by reason of the Borrower’s failure to amend or
supplement the prospectus included therein in accordance with the Registration
Rights Agreement or otherwise) for more than ten (10) consecutive days or twenty
(20) days in any twelve month period after the Registration Statement becomes
effective;

                              3.4           Breach of Covenants. The Borrower
breaches any material covenant or other material term or condition contained in
Sections 1.3, 1.6 or 1.7 of this Note, or Sections 4(c), 4(e), 4(h), 4(i), 4(j)
or 5 of the Purchase Agreement and such breach continues for a period of ten
(10) days after written notice thereof to the Borrower from the Holder;

                              3.5           Breach of Representations and
Warranties. Any representation or warranty of the Borrower made herein or in any
agreement, statement or certificate given in writing pursuant hereto or in
connection herewith (including, without limitation, the Purchase Agreement and
the Registration Rights Agreement), shall be false or misleading in any material

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respect when made and the breach of which has (or with the passage of time will
have) a material adverse effect on the rights of the Holder with respect to this
Note, the Purchase Agreement or the Registration Rights Agreement;

                              3.6           Receiver or Trustee. The Borrower or
any subsidiary of the Borrower shall make an assignment for the benefit of
creditors, or apply for or consent to the appointment of a receiver or trustee
for it or for a substantial part of its property or business, or such a receiver
or trustee shall otherwise be appointed;

                              3.7           Judgments. Any money judgment, writ
or similar process shall be entered or filed against the Borrower or any
subsidiary of the Borrower or any of its property or other assets for more than
$50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty
(20) days unless otherwise consented to by the Holder, which consent will not be
unreasonably withheld;

                              3.8           Bankruptcy. Bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by
or against the Borrower or any subsidiary of the Borrower;

                              3.9           Delisting of Common Stock. The
Borrower shall fail to maintain the listing of the Common Stock on at least one
of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market,
the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock
Exchange; or

                              3.10           Default Under Other Notes. An Event
of Default has occurred and is continuing under any of the other Notes issued
pursuant to the Purchase Agreement, then, upon the occurrence and during the
continuation of any Event of Default specified in Section 3.1, 3.2, 3.3, 3.4,
3.5, 3.7, 3.9, or 3.10, at the option of the Holders of a majority of the
aggregate principal amount of the outstanding Notes issued pursuant to the
Purchase Agreement exercisable through the delivery of written notice to the
Borrower by such Holders (the “Default Notice”), and upon the occurrence of an
Event of Default specified in Section 3.6 or 3.8, the Notes shall become
immediately due and payable and the Borrower shall pay to the Holder, in full
satisfaction of its obligations hereunder, an amount equal to the greater of (i)
130% times the sum of (w) the then outstanding principal amount of this Note
plus (x) accrued and unpaid interest on the unpaid principal amount of this Note
to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z)
any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or
pursuant to Section 2(c) of the Registration Rights Agreement (the then
outstanding principal amount of this Note to the date of payment plus the
amounts referred to in clauses (x), (y) and (z) shall collectively be known as
the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid,
where parity value means (a) the highest number of shares of Common Stock
issuable upon conversion of or otherwise pursuant to such Default Sum in
accordance with Article I, treating the Trading Day immediately preceding the
Mandatory Prepayment Date as the “Conversion Date” for purposes of determining
the lowest applicable Conversion Price, unless the Default Event arises as a
result of a breach in respect of a specific Conversion Date in which case such
Conversion Date shall be the Conversion Date), multiplied by (b) the highest
Closing Price for the Common Stock during the period beginning on the date of
first occurrence of the Event of

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Default and ending one day prior to the Mandatory Prepayment Date (the “Default
Amount”) and all other amounts payable hereunder shall immediately become due
and payable, all without demand, presentment or notice, all of which hereby are
expressly waived, together with all costs, including, without limitation, legal
fees and expenses, of collection, and the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity. If the Borrower
fails to pay the Default Amount within five (5) business days of written notice
that such amount is due and payable, then the Holder shall have the right at any
time, so long as the Borrower remains in default (and so long and to the extent
that there are sufficient authorized shares), to require the Borrower, upon
written notice, to immediately issue, in lieu of the Default Amount, the number
of shares of Common Stock of the Borrower equal to the Default Amount divided by
the Conversion Price then in effect.

ARTICLE IV. MISCELLANEOUS

                                 4.1            Failure or Indulgence Not
Waiver. No failure or delay on the part of the Holder in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privileges.
All rights and remedies existing hereunder are cumulative to, and not exclusive
of, any rights or remedies otherwise available.

                                 4.2            Notices. Any notice herein
required or permitted to be given shall be in writing and may be personally
served or delivered by courier or sent by United States mail and shall be deemed
to have been given upon receipt if personally served (which shall include
telephone line facsimile transmission) or sent by courier or three (3) days
after being deposited in the United States mail, certified, with postage
pre-paid and properly addressed, if sent by mail. For the purposes hereof, the
address of the Holder shall be as shown on the records of the Borrower; and the
address of the Borrower shall be 3490 Piedmont Road, Suite 304, Atlanta, GA
30305, facsimile number: (404) 231-9400. Both the Holder and the Borrower may
change the address for service by service of written notice to the other as
herein provided.

                                 4.3            Amendments. This Note and any
provision hereof may only be amended by an instrument in writing signed by the
Borrower and the Holder. The term “Note” and all reference thereto, as used
throughout this instrument, shall mean this instrument (and the other Notes
issued pursuant to the Purchase Agreement) as originally executed, or if later
amended or supplemented, then as so amended or supplemented.

                                 4.4            Assignability. This Note shall
be binding upon the Borrower and its successors and assigns, and shall inure to
be the benefit of the Holder and its successors and assigns. Each transferee of
this Note must be an “accredited investor” (as defined in Rule 501(a) of the
1933 Act). Notwithstanding anything in this Note to the contrary, this Note may
be pledged as collateral in connection with a bona fide margin account or other
lending arrangement.

                                 4.5            Cost of Collection. If default
is made in the payment of this Note, the Borrower shall pay the Holder hereof
costs of collection, including reasonable attorneys’ fees.

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                                 4.6            Governing Law. THIS NOTE SHALL
BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER
HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS
LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS
NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES
FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN
ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A
FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY
OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING
UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

                                 4.7            Certain Amounts. Whenever
pursuant to this Note the Borrower is required to pay an amount in excess of the
outstanding principal amount (or the portion thereof required to be paid at that
time) plus accrued and unpaid interest plus Default Interest on such interest,
the Borrower and the Holder agree that the actual damages to the Holder from the
receipt of cash payment on this Note may be difficult to determine and the
amount to be so paid by the Borrower represents stipulated damages and not a
penalty and is intended to compensate the Holder in part for loss of the
opportunity to convert this Note and to earn a return from the sale of shares of
Common Stock acquired upon conversion of this Note at a price in excess of the
price paid for such shares pursuant to this Note. The Borrower and the Holder
hereby agree that such amount of stipulated damages is not plainly
disproportionate to the possible loss to the Holder from the receipt of a cash
payment without the opportunity to convert this Note into shares of Common
Stock.

                                 4.8            Allocations of Maximum Share
Amount and Reserved Amount. The Maximum Share Amount and Reserved Amount shall
be allocated pro rata among the Holders of Notes based on the principal amount
of such Notes issued to each Holder. Each increase to the Maximum Share Amount
and Reserved Amount shall be allocated pro rata among the Holders of Notes based
on the principal amount of such Notes held by each Holder at the time of the
increase in the Maximum Share Amount or Reserved Amount. In the event a Holder
shall sell or otherwise transfer any of such Holder’s Notes, each transferee
shall be allocated a pro rata portion of such transferor’s Maximum Share Amount
and Reserved Amount. Any portion of the Maximum Share Amount or Reserved Amount
which remains allocated to any person or entity which does not hold any Notes
shall be allocated to the remaining Holders of Notes, pro rata based on the
principal amount of such Notes then held by such Holders.

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                                 4.9            Damages Shares. The shares of
Common Stock that may be issuable to the Holder pursuant to Sections 1.3 and
1.4(g) hereof and pursuant to Section 2(c) of the Registration Rights Agreement
(“Damages Shares”) shall be treated as Common Stock issuable upon conversion of
this Note for all purposes hereof and shall be subject to all of the limitations
and afforded all of the rights of the other shares of Common Stock issuable
hereunder, including without limitation, the right to be included in the
Registration Statement filed pursuant to the Registration Rights Agreement. For
purposes of calculating interest payable on the outstanding principal amount
hereof, except as otherwise provided herein, amounts convertible into Damages
Shares (“Damages Amounts”) shall not bear interest but must be converted prior
to the conversion of any outstanding principal amount hereof, until the
outstanding Damages Amounts is zero.

                                 4.10            Denominations. At the request
of the Holder, upon surrender of this Note, the Borrower shall promptly issue
new Notes in the aggregate outstanding principal amount hereof, in the form
hereof, in such denominations of at least $50,000 as the Holder shall request.

                                 4.11            Purchase Agreement. By its
acceptance of this Note, each Holder agrees to be bound by the applicable terms
of the Purchase Agreement.

                                 4.12            Notice of Corporate Events.
Except as otherwise provided below, the Holder of this Note shall have no rights
as a Holder of Common Stock unless and only to the extent that it converts this
Note into Common Stock. The Borrower shall provide the Holder with prior
notification of any meeting of the Borrower’s shareholders (and copies of proxy
materials and other information sent to shareholders). In the event of any
taking by the Borrower of a record of its shareholders for the purpose of
determining shareholders who are entitled to receive payment of any dividend or
other distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation, reclassification or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Borrower or any proposed
liquidation, dissolution or winding up of the Borrower, the Borrower shall mail
a notice to the Holder, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
The Borrower shall make a public announcement of any event requiring
notification to the Holder hereunder substantially simultaneously with the
notification to the Holder in accordance with the terms of this Section 4.12.

                                 4.13            Remedies. The Borrower
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Borrower acknowledges that the
remedy at law for a breach of its obligations under this Note will be inadequate
and agrees, in the event of a breach or threatened breach by the Borrower of the
provisions of this Note, that the Holder shall be entitled, in addition to all
other available remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining, preventing or
curing any breach of this Note and to enforce specifically the terms and
provisions thereof,

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without the necessity of showing economic loss and without any bond or other
security being required.

ARTICLE V. CALL OPTION

                                 5.1            Call Option. Notwithstanding
anything to the contrary contained in this Article V, so long as (i) no Event of
Default or Trading Market Prepayment Event shall have occurred and be
continuing, (ii) the Borrower has a sufficient number of authorized shares of
Common Stock reserved for issuance upon full conversion of the Notes, then at
any time after the Issue Date, and (iii) the Common Stock is trading at or below
$.15 per share, the Borrower shall have the right, exercisable on not less than
ten (10) Trading Days prior written notice to the Holders of the Notes (which
notice may not be sent to the Holders of the Notes until the Borrower is
permitted to prepay the Notes pursuant to this Section 5.1), to prepay all of
the outstanding Notes in accordance with this Section 5.1. Any notice of
prepayment hereunder (an “Optional Prepayment”) shall be delivered to the
Holders of the Notes at their registered addresses appearing on the books and
records of the Borrower and shall state (1) that the Borrower is exercising its
right to prepay all of the Notes issued on the Issue Date and (2) the date of
prepayment (the “Optional Prepayment Notice”). On the date fixed for prepayment
(the “Optional Prepayment Date”), the Borrower shall make payment of the
Optional Prepayment Amount (as defined below) to or upon the order of the
Holders as specified by the Holders in writing to the Borrower at least one (1)
business day prior to the Optional Prepayment Date. If the Borrower exercises
its right to prepay the Notes, the Borrower shall make payment to the holders of
an amount in cash (the “Optional Prepayment Amount”) equal to either (i) 125%
(for prepayments occurring within thirty (30) days of the Issue Date), (ii) 135%
for prepayments occurring between thirty-one (31) and sixty (60) days of the
Issue Date, or (iii) 150% (for prepayments occurring after the sixtieth (60th)
day following the Issue Date), multiplied by the sum of (w) the then outstanding
principal amount of this Note plus (x) accrued and unpaid interest on the unpaid
principal amount of this Note to the Optional Prepayment Date plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or
pursuant to Section 2(c) of the Registration Rights Agreement (the then
outstanding principal amount of this Note to the date of payment plus the
amounts referred to in clauses (x), (y) and (z) shall collectively be known as
the “Optional Prepayment Sum”). Notwithstanding notice of an Optional
Prepayment, the Holders shall at all times prior to the Optional Prepayment Date
maintain the right to convert all or any portion of the Notes in accordance with
Article I and any portion of Notes so converted after receipt of an Optional
Prepayment Notice and prior to the Optional Prepayment Date set forth in such
notice and payment of the aggregate Optional Prepayment Amount shall be deducted
from the principal amount of Notes which are otherwise subject to prepayment
pursuant to such notice. If the Borrower delivers an Optional Prepayment Notice
and fails to pay the Optional Prepayment Amount due to the Holders of the Notes
within two (2) business days following the Optional Prepayment Date, the
Borrower shall forever forfeit its right to redeem the Notes pursuant to this
Section 5.1.

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                                 5.2            Partial Call Option.
Notwithstanding anything to the contrary contained in this Article V, in the
event that the Average Daily Price of the Common Stock, as reported by the
Reporting Service, for each day of the month ending on any Determination Date is
below the Initial Market Price, the Borrower may, at its option, prepay a
portion of the outstanding principal amount of the Notes equal to 104% of the
principal amount hereof divided by thirty-six (36) plus one month’s interest.
The term “Initial Market Price” means shall mean the volume weighted average
price of the Common Stock for the five (5) Trading Days immediately preceding
the Closing which is $.15. The term “Reporting Service” means a reliable
reporting service mutually acceptable to and hereinafter designated by the
Holder.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name
by its duly authorized officer this 30th day of May, 2007.

ADMIRALTY HOLDING COMPANY 

By:     

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    Herbert C. Leeming      Chief Executive Officer 

                        21                       

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EXHIBIT A

NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Notes)

                  The undersigned hereby irrevocably elects to convert
$ ________________ principal amount of the Note (defined below) into shares of
common stock, par value $.001 per share (“Common Stock”), of Admiralty Holding
Company, a Colorado corporation (the “Borrower”) according to the conditions of
the convertible Notes of the Borrower dated as of May 30, 2007 (the “Notes”), as
of the date written below. If securities are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates. No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any. A copy of each Note is attached hereto (or evidence of loss, theft or
destruction thereof).

                  The Borrower shall electronically transmit the Common Stock
issuable pursuant to this Notice of Conversion to the account of the undersigned
or its nominee with DTC through its Deposit Withdrawal Agent Commission system
(“DWAC Transfer”).

Name of DTC Prime Broker: ___________________________________________
Account Number: ____________________________________________________

                  In lieu of receiving shares of Common Stock issuable pursuant
to this Notice of Conversion by way of a DWAC Transfer, the undersigned hereby
requests that the Borrower issue a certificate or certificates for the number of
shares of Common Stock set forth below (which numbers are based on the Holder’s
calculation attached hereto) in the name(s) specified immediately below or, if
additional space is necessary, on an attachment hereto:

Name: _____________________________________________________________
Address:  ___________________________________________________________

                  The undersigned represents and warrants that all offers and
sales by the undersigned of the securities issuable to the undersigned upon
conversion of the Notes shall be made pursuant to registration of the securities
under the Securities Act of 1933, as amended (the “Act”), or pursuant to an
exemption from registration under the Act.

Date of Conversion:
___________________________
Applicable Conversion Price:
___________________
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the
Notes:
______________                                                
Signature:
_________________      __________________
Name:    
______________________________________
Address:

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The Borrower shall issue and deliver shares of Common Stock to an overnight
courier not later than three business days following receipt of the original
Note(s) to be converted, and shall make payments pursuant to the Notes for the
number of business days such issuance and delivery is late.

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