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.

                        CALLABLE SECURED CONVERTIBLE NOTE

Troy, Michigan
May 8, 2006                                                          $[________]

            FOR VALUE  RECEIVED,  MIDNIGHT  HOLDINGS  GROUP,  INC.,  a  Delaware
corporation  (hereinafter called the "BORROWER"),  hereby promises to pay to the
order of  [______________]  or  registered  assigns  (the  "HOLDER")  the sum of
$[__________],  on May 8, 2009 (the "MATURITY DATE"), and to pay interest on the
unpaid principal  balance hereof at the rate of ten percent (10%) per annum from
May 8, 2006 (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 on March 31,
June 30,  September 30 and December 31 of each year beginning on the last day of
the first full quarter  after Issue Date.  All payments  due  hereunder  (to the
extent not  converted  into common  stock,  $.00005 par value per share,  of the
Borrower (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.  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 law or executive
order to

<PAGE>

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 8, 2006, 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  by and
between the Borrower and the Holder of even date herewith.

      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 (iii) 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 4.9% of the  outstanding
shares of Common Stock. 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 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


                                       2
<PAGE>

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 January
26, 2006,  executed in connection with the initial issuance of this Note and the
other Notes issued on the Issue Date (the "REGISTRATION RIGHTS AGREEMENT").

            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.  "APPLICABLE PERCENTAGE" shall mean
25%; provided, however, that the Applicable Percentage shall be increased to (i)
30% in the event that the Registration Statement (as defined in the Registration
Rights  Agreement)  is filed on or before  the  Filing  Date (as  defined in the
Registration  Rights  Agreement) and (ii) 40% in the event that the Registration
Statement (as defined in the Registration Rights Agreement) becomes effective on
or before the  Effectiveness  Deadline  (as defined in the  Registration  Rights
Agreement).

                  (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


                                       3
<PAGE>

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
1.2(b) to become operative.

            1.3  AUTHORIZED  SHARES.  Subject to the  completion  of the Charter
Amendment Actions (as defined in the Purchase Agreement), 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.

            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


                                       4
<PAGE>

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  (5th)  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 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,


                                       5
<PAGE>

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 five (5)
business days after such receipt  (and,  solely in the case of conversion of the
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).


                                       6
<PAGE>

                  (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 I, 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 two (2) 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 the month  following the month in which it has accrued),  shall
be added to the  principal  amount of this Note, 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


                                       7
<PAGE>

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 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


                                       8
<PAGE>

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.

                  (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.


                                       9
<PAGE>

                  (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,  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 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.


                                       10
<PAGE>

                  (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 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


                                       11
<PAGE>

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.

                         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.


                                       12
<PAGE>

            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 in
excess of  $[_______],  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, 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.

                         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;


                                       13
<PAGE>

            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  sixty  (60)  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 two hundred  fifty (250) 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 twenty (20)  consecutive  days or forty (40) 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  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;


                                       14
<PAGE>

            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 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,


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<PAGE>

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 3872 Rochester
Road, Troy, MI 48083,  facsimile number:  586-783-1367.  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.

            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


                                       16
<PAGE>

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.

            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


                                       17
<PAGE>

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


                                       18
<PAGE>

                             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 $.04 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) 135% (for  prepayments  occurring within thirty (30) days of
the Issue Date), (ii) 145% for prepayments occurring between thirty-one (31) and
ninety (90) days of the Issue  Date,  or (iii) 150% (for  prepayments  occurring
after the ninetieth (90th) 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.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       19
<PAGE>

            IN WITNESS  WHEREOF,  Borrower  has caused this Note to be signed in
its name by its duly authorized officer this 8th day of May, 2006.

                                                MIDNIGHT HOLDINGS GROUP, INC.


                                                By: ____________________________
                                                    Nicholas Cocco
                                                    Chief Executive Officer


                                       20
<PAGE>

                                    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 $.00005 per share ("COMMON STOCK"),  of Midnight  Holdings Group,  Inc., a
Delaware  corporation  (the  "BORROWER")  according  to  the  conditions  of the
convertible  Notes of the Borrower dated as of May 8, 2006 (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:________________________________________


                                       21
<PAGE>

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.


                                       22