THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NEITHER THIS NOTE
NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAS BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER
ANY APPLICABLE STATE SECURITIES LAWS. NEITHER THIS NOTE NOR THE SECURITIES
ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE SOLD OR OTHERWISE TRANSFERRED OR
PLEDGED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE
REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS.

No. ____
$__________

IntelliHome, Inc.

8.0% Convertible Note Due June 30, 2009

Section 1. General.

FOR VALUE RECEIVED, IntelliHome, Inc., a Texas corporation (the “Company”),
hereby promises to pay to the order of _____________________, or its registered
assigns (the “Investor”), the principal sum of ____________________________
DOLLARS AND ZERO CENTS ($_________), or such lesser amount as shall then equal
the outstanding principal amount hereof, together with interest thereon at a
rate equal to 8% (the “Interest Rate”) per annum, simple interest computed on
the basis of the actual number of days elapsed and a year of 360 days comprised
of twelve 30 day months. Unless earlier redeemed in accordance with Section 2 or
converted in accordance with Section 5, all unpaid principal, together with any
then unpaid and accrued interest and other amounts payable hereunder, shall be
due and payable on the earlier of (i) June 30, 2009 (the “Maturity Date”); or
(ii) when such amounts become due and payable as a result of, and following, an
Event of Default in accordance with Section 3. All payments required to be made
hereunder, if any, shall be made in such coin or currency of the United States
of America as at the time of payment shall be legal tender therein for the
payment of public and private debts. Interest shall accrue on the unpaid balance
of the principal amount of this Note (without any compounding) from and
including the date hereof to, but excluding, the date on which the principal
amount of this Note is paid in full (or converted in accordance with Section 5
hereof) and shall be payable on the Maturity or, at the written election of the
Investor, quarterly, commencing ninety (90) days after the date hereof and
continuing until the outstanding principal amount hereof shall be paid in full.

This is one of a duly authorized issue of notes (this note being referred to as
the “Note” and, collectively, all similar notes issued by the Company pursuant
to a Note Purchase Agreement (the “Purchase Agreement”), dated June 5, 2008,
between the Company and the various investors named therein, being referred to
as the “Notes”) of the Company in an anticipated aggregate principal amount of
up to US$575,000. All capitalized terms not otherwise defined herein shall have
the meaning set forth in the Purchase Agreement.
 
 
 

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Section 2. Defaults.

The occurrence of any of the following shall constitute an “Event of Default”
under this Note:

(a)  The Company shall fail to pay (i) when due any principal or interest
payment hereof on the due date hereunder or (ii) any other payment required
under the terms of this Note on the date due and such payment shall not have
been made within five (5) days of Company’s receipt of Investor’s written notice
to Company of such failure to pay; or

(b) The Company shall fail to observe or perform any other covenant, obligation,
condition or agreement contained in this Note (other than those specified in
Section 2(a)) and such failure shall continue for ten (10) days after written
notice thereof is delivered to the Company; or
 
(c) Any representation, warranty, certificate, or other statement (financial or
otherwise) made or furnished by or on behalf of the Company to the Investor in
writing in connection with this Note, or as an inducement to the Investor to
purchase this Note, shall be false, incorrect, incomplete or misleading in any
material respect when made or furnished; or
 
(d) The Company shall (i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian of itself or of all or a substantial part of
its property, (ii) make a general assignment for the benefit of its or any of
its creditors, (iii) be dissolved or liquidated in full or in part,
(iv) commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
consent to any such relief or to the appointment of or taking possession of its
property by any official in an involuntary case or other proceeding commenced
against it, or (v) take any action for the purpose of effecting any of the
foregoing; or
 
(e) Proceedings for the appointment of a receiver, trustee, liquidator or
custodian of the Company or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking liquidation,
reorganization or other relief with respect to the Company or the debts thereof
under any bankruptcy, insolvency or other similar law now or hereafter in effect
shall be commenced and an order for relief entered or such proceeding shall not
be dismissed or discharged within thirty (30) days of commencement.
 
Section 3. Rights Of Investor Upon Default.

Upon the occurrence or existence of any Event of Default (other than an Event of
Default referred to in Sections 2(d) or 2(e) hereof) and at any time thereafter
during the continuance of such Event of Default, the Investor may, by written
notice to the Company, declare all outstanding amounts payable by the Company
hereunder to be immediately due and payable without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived,
anything contained herein to the contrary notwithstanding. Upon the occurrence
or existence of any Event of Default described in Sections 2(d) or 2(e) hereof,
immediately and without notice, all outstanding amounts payable by the Company
hereunder shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein to the contrary
notwithstanding. In addition to the foregoing remedies, upon the occurrence or
existence of any Event of Default, the Investor may exercise any other right,
power or remedy permitted to it by law, either by suit in equity or by action at
law, or both.
 
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Section 4. Conversion.

(a) Investor Conversion. At any time on or after the Full Funding Date, and from
time to time prior to the Maturity Date, the Investor may, at its sole and
exclusive option, convert all or any part of the principal and interest
outstanding under this Note into fully paid and nonassessable shares of Common
Stock of the Company at a conversion price per share of Common Stock equal to
$0.005, subject to adjustment as provided in Section 5 hereof (the “Conversion
Price”).

(b) Mechanics and Effect Of Conversion. No fractional shares of Common Stock
shall be issued upon conversion of this Note. Upon the conversion of the entire
principal outstanding under this Note, in lieu of issuing any fractional shares
to the Investors, the Company shall pay to the Investor the amount of
outstanding principal that is not so converted. On partial conversion of this
Note, the Company shall issue to the Investor (i) the shares of Common Stock
into which a portion of this Note is converted and (ii) a new convertible
promissory note having identical terms to this Note, except that the principal
amount thereof shall equal to the difference between (A) the principal amount of
this Note immediately prior to such conversion minus (B) the portion of such
principal amount converted into Common Stock. Upon conversion of this Note
pursuant to this Section 4, the Investor shall surrender this Note, duly
endorsed, at the principal office of the Company. At its expense, the Company
shall, as soon as practicable thereafter, issue and deliver to the Investor at
such principal office a certificate or certificates for the number of shares of
Common Stock, to which the Investor shall be entitled upon such conversion
(bearing such legends as are required by applicable state and federal securities
laws in the opinion of counsel to the Company), together with any other
securities and property to which the Investor is entitled upon such conversion
under the terms of this Note.

(c) Reservation of Stock Issuable Upon Conversion. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
capital stock of the Company, solely for the purpose of effecting the conversion
of this Note, such number of its shares of capital stock of the Company as shall
from time to time be sufficient to effect the conversion of this Note; and if at
any time the number of authorized but unissued shares of capital stock of the
Company shall not be sufficient to effect the conversion of this Note, the
Company hereby covenants and agrees to take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of capital stock to such number of shares as shall be sufficient for such
purpose.

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(d) Payment of Expenses and Taxes on Conversion. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
execution, issuance and delivery of stock certificates and new promissory notes
pursuant to this Section 4 hereof, except that, in the event such stock
certificates or new promissory notes shall be registered in a name or names
other than the name of the holder of this Note, funds sufficient to pay all
stock transfer fees, which shall be payable upon the execution and delivery of
such stock certificate or certificates or new promissory notes, shall be paid by
the holder hereof to the Company at the time of delivering this Note to the
Company upon conversion.

Section 5. Conversion Price Adjustments.

(a) Adjustments For Stock Splits and Combinations. If the Company shall at any
time or from time to time after the date of original issuance of this Note (the
“Date of Original Issue”) effect a stock split or subdivision of the outstanding
Common Stock, the Conversion Price in effect immediately before that subdivision
shall be proportionately decreased, and, conversely, if the Company shall at any
time or from time to time after the Date of Original Issue combine the
outstanding shares of Common Stock (including by way of reverse stock split)
into a smaller number of shares, the Conversion Price in effect immediately
before the combination shall be proportionately increased. Any adjustment under
this Section 5(a) shall become effective at the close of business on the date
the stock split, subdivision or combination becomes effective.

(b) Adjustments For Common Stock Dividends and Distributions. If the Company at
any time or from time to time after the Date of Original Issue issues, or fixes
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable solely in additional shares of
Common Stock, the Conversion Price that is then in effect shall be decreased as
of the time of such issuance or, in the event such record date is fixed, as of
the close of business on such record date, by multiplying the Conversion Price
by a fraction (i) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (ii) the denominator of which is
the sum of the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution; provided, however, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Conversion Price shall be adjusted pursuant to this Section 5(b) to reflect the
actual payment of such dividend or distribution.

(c) Adjustments For Other Dividends and Distributions. If the Company at any
time or from time to time after the Date of Original Issue issues, or fixes a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of Common Stock or in other property, in each such event
provision shall be made so that the Investor shall receive upon conversion
hereof, in addition to the number of shares of Common Stock receivable hereupon,
the amount of securities of the Company or other property which such Investor
would have received had this Note been converted into Common Stock on the date
of such event and had it thereafter, during the period from the date of such
event to and including the conversion date, retained such securities or other
property receivable by it as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 5 with respect to
the rights of the Investor or with respect to such other securities or other
property by their terms. As used herein, the term “other property” does not
include cash.
 
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(d) Adjustments For Reclassification, Exchange and Substitution. If at any time
or from time to time after the Date of Original Issue, the Common Stock issuable
upon the conversion of this Note is changed into the same or a different number
of shares of any class or series of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend or a reorganization, merger, consolidation or sale of assets
provided for elsewhere in this Section 5), then in any such event the Investor
shall have the right thereafter to convert this Note into the kind and amount of
stock and other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the number of shares of Common
Stock into which this Note could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.

(e) Certificate of Adjustment. In each case of an adjustment or readjustment of
the Conversion Price for the number of shares of Common Stock or other
securities issuable upon conversion of this Note, the Company, at its own
expense, shall cause its Treasurer to compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to the Investor at the Investor's address as shown in the
Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based.

(f) Notice of Record Date. Upon (i) the establishment by the Company of a record
of the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution,
or (ii) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other Company, or any transfer of
all or substantially all the assets of the Company to any other person or any
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the Company shall mail to the Investor at least 20 days prior to the record date
specified therein a notice specifying (A) the date on which any such record is
to be taken for the purpose of such dividend or distribution and a description
of such dividend or distribution, (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and (C) the date, if any, that is to
be fixed as to when the holders of record of Common Stock (or other securities),
shall be entitled to exchange their shares of Common Stock (or other
securities), for securities or other property deliverable upon such
reorganization, reclassification transfer, consolidation, merger, dissolution,
liquidation or winding up.

(g) No Impairment. The Company shall not amend its Articles of Incorporation or
participate in any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action for the
purpose of avoiding or seeking to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but shall at all
times in good faith assist in carrying out all such action as may be reasonably
necessary or appropriate in order to protect the conversion rights of the
Investor against dilution or other impairment as provided herein.
 
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Section 6. Defenses.

The obligations of the Company under this Note shall not be subject to
reduction, limitation, impairment, termination, defense, set-off, counterclaim
or recoupment for any reason.

Section 7. Exchange or Replacement of Notes.

(a) The Investor may, at its option, in person or by duly authorized attorney,
surrender this Note for exchange, at the principal business office of the
Company, and receive in exchange therefore, a new Note in the same principal
amount as the unpaid principal amount of this Note and bearing interest at the
same annual rate as this Note, each such new Note to be dated as of the date of
this Note and to be in such principal amount as remains unpaid and payable to
such person or persons, or order, as the Investor may designate in writing.

(b) Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction, or mutilation of this Note and (in the case of loss, theft
or destruction) of an indemnity reasonably satisfactory to it, and upon
surrender and cancellation of this Note, if mutilated, the Company will deliver
a new Note of like tenor in lieu of this Note. Any Note delivered in accordance
with the provisions of this Section 7 shall be dated as of the date of this
Note.

Section 8. Attorneys’ and Collection Fees.

Should the indebtedness evidenced by this Note or any part hereof be collected
at law or in equity or in bankruptcy, receivership or other court proceedings,
the Company agrees to pay, in addition to the principal and interest due and
payable hereon, all costs of collection, including reasonable attorneys’ fees
and expenses, incurred by the Investor in collecting or enforcing this Note.

Section 9. Waivers.

The Company hereby waives presentment, demand for payment, notice of dishonor,
notice of protest and all other notices or demands in connection with the
delivery, acceptance, performance or default of this Note. No delay by the
Investor in exercising any power or right hereunder shall operate as a waiver of
any power or right, nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof, or the exercise thereof, or
the exercise of any other power or right hereunder or otherwise; and no waiver
whatsoever or modification of the terms hereof shall be valid unless set forth
in writing by the Investor and then only to the extent set forth therein.

Section 10. Amendments.

This Note may not be amended without the express written consent of both the
Company and the Investor.
 
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Section 11. Governing Law.

This Note is made and delivered in, and shall be governed by and construed in
accordance with the laws of the State of Texas (without giving effect to
principles of conflicts of laws of the State of Texas or any other state). Any
action to enforce the terms of this Note shall be exclusively brought in the
state and/or federal courts in Harris County, Texas.

Section 12. Successors and Assigns.

The rights and obligations of the Company and the Investor under this Note shall
be binding upon and benefit the successors, assigns, heirs, administrators and
transferees of the parties. Notwithstanding the foregoing, neither this Note nor
any of the rights, interests or obligations hereunder may be assigned, by
operation of law or otherwise, in whole or in part, by the Company, without the
prior written consent of the Investor

Section 13. Notices.

All notices, requests, demands and other communications to any party hereunder
shall be in writing (including facsimile or similar writing) and shall be given
to such party at its address or facsimile number set forth below or such other
address or facsimile number as such party may hereafter specify by notice to the
other parties listed below:
 
(a)
If to the Company:
IntelliHome, Inc.
   
5150 Franz Rd., Suite 100
   
Katy, Texas 77493
   
Telephone:
281-391-4199
   
Facsimile:
281-391-0624
        (b) If to the Investor: At the address shown on the signature page 

 
Each such notice, request or other communication shall be effective (i) upon
receipt (provided, however, that notices received on a Saturday, Sunday or legal
holiday or after 5:00 p.m. on any other day will be deemed to have been received
on the next business day), if given by legible facsimile transmission with proof
from sender of confirmation of receipt, or (ii) if given by any other means,
when delivered at the address specified in this Section 13.

Section 14. No Rights of Stockholders.

Except as otherwise provided herein, this Note shall not entitle the Investor to
any of the rights of a stockholder of the Company, including without limitation,
the right to vote, to receive dividends and other distributions, or to receive
any notice of, or to attend, meetings of stockholders or any other proceedings
of the Company, unless and to the extent converted into shares of Common Stock
in accordance with the terms hereof.

Section 15. Entire Agreement.

This Note and the Purchase Agreement constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereto and thereof.
 
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Section 16. Headings.

The headings used in this Note are used for convenience only and are not to be
considered in construing or interpreting this Note.

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by its
duly authorized officer as of the date indicated below.

 
IntelliHome, Inc.
Date: June __, 2008
           
By:
 
 
Name:
Mark Trimble
 
Title:
President

Note No.  _____________________
Amount:  $____________________
Investor Name:   _____________________
Address:  _____________________
          _____________________

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ANNEX A
 
CONVERSION NOTICE

(To be Executed by the Registered Holder
in order to Convert the Note)

The undersigned hereby irrevocably elects to convert the above Note No. _____
into shares of Common Stock, $0.001 par value per share, of IntelliHome, Inc.
according to the provisions hereof, as of the date written below.

Conversion calculations:
 
   
Date of Conversion Notice
         
 
   
Principal Amount of Note to be Converted
         
 
   
Conversion Price
         
 
   
Number of Shares to be Issued Upon Conversion
         
 
   
Signature
         
 
   
Name
         
  
   
Address
 

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