THIS NOTE AND THE  SECURITIES  ISSUABLE  UPON  CONVERSION  HEREOF  HAVE NOT BEEN
REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933,  AS  AMENDED  (THE  "ACT"),  OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH  REGISTRATION  OR RECEIPT BY THE COMPANY OF A
WRITTEN  OPINION  OF  COUNSEL  IN  THE  FORM,  SUBSTANCE  AND  SCOPE  REASONABLY
SATISFACTORY  TO THE COMPANY  THAT THIS NOTE AND THE  SECURITIES  ISSUABLE  UPON
CONVERSION HEREOF MAY BE SOLD,  TRANSFERRED,  OR OTHERWISE DISPOSED OF, UNDER AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.


                            TOTAL LUXURY GROUP, INC.

                  Senior Secured 9% Convertible Promissory Note

Date: March 7, 2008                                                  $19,000,000

     For value received,  TOTAL LUXURY GROUP, INC., an Indiana  corporation (the
"Maker" or the  "Company")  hereby  promises  to pay to the order of  ACCELERANT
PARTNERS LLC  (together  with its  successors,  representatives,  and  permitted
assigns, the "Holder"),  in accordance with the terms hereinafter provided,  the
principal  amount of  nineteen  million  ($19,000,000)  dollars,  together  with
interest  thereon.  The Maker is issuing  this  senior  secured  9%  convertible
promissory  note to the Holder  pursuant  to the Stock  Purchase  Agreement  (as
defined  in  Section  1.1  hereof).  Any other  senior  secured  9%  convertible
promissory notes issued pursuant to the Purchase  Agreement shall hereinafter be
referred  to as the  "Other  Notes" and such  Holders  as the  "Other  Holders;"
collectively, this note and the Other Notes are referred to as the "Notes."

     All payments  under or pursuant to this Note shall be made in United States
Dollars  in  immediately  available  funds to the  Holder at the  address of the
Holder as set forth in the  Purchase  Agreement  or at such  other  place as the
Holder  may  designate  from  time to time in  writing  to the  Maker or by wire
transfer of funds to the Holder's  account,  instructions for which are attached
hereto as Exhibit A. The outstanding principal balance of this Note shall be due
and payable on the thirty-month  anniversary of the Issuance Date (the "Maturity
Date") or at such earlier time as provided herein.

     This Note is secured by a Security  Agreement  dated the date  hereof  (the
"Security  Agreement")  of the  Maker in favor of the  Holder  covering  certain
collateral (the "Collateral"),  all as more particularly  described and provided
therein,  and is entitled to the benefits thereof.  The Security Agreement,  the
Uniform  Commercial  Code financing  statements in connection  with the Security
Agreement and any and all other documents executed and delivered by the Maker to
the Holder  under  which the Holder is granted  liens on assets of the Maker are
collectively referred to as the "Security Documents."



                                       1
<PAGE>

                                   ARTICLE I

     Section 1.1 Purchase  Agreement.  This Note has been executed and delivered
pursuant  to the  Stock  Purchase  Agreement  dated  as of March  7,  2008  (the
"Purchase  Agreement")  by and among the Maker and the sellers  listed  therein.
Capitalized  terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement.

     Section 1.2  Interest.  Beginning  on the  issuance  date of this Note (the
"Issuance  Date"),  the  outstanding  principal  balance of this Note shall bear
interest  ("Interest"),  in arrears,  at a rate per annum equal to nine  percent
(9%),  payable  quarterly  commencing on March 31, 2008 and on the last business
day of each  June,  September,  December,  and March  thereafter  so long as any
principal amount evidenced by this Note remains  outstanding.  Interest shall be
computed on the basis of a 360-day  year of twelve (12) 30-day  months and shall
accrue commencing on the Issuance Date.  Furthermore,  upon the occurrence of an
Event of  Default  (as  defined  in  Section  2.1  hereof),  then to the  extent
permitted by law, the Maker will pay interest in cash to the Holder,  payable on
demand,  on the outstanding  principal balance of this Note from the date of the
Event of Default through the Maturity Date at a new rate of the lesser of twelve
percent (12%) and the maximum applicable legal rate per annum.

     Section 1.3 Cash or Stock. At the option of the Maker, Interest may be paid
in cash or registered  shares of Common Stock of the Maker.  Upon the payment of
Interest in registered  shares of Common  Stock,  the number of shares of Common
Stock to be issued to the Holder shall be an amount equal to the quotient of (x)
the  Interest  payment  due  (y)  multiplied  by  1.2  and  (z)  divided  by (z)
one-hundred  percent (100%) of the average of the VWAP (as defined below) of the
closing  trading price for the ten (10) trading days  immediately  preceding the
date the Interest  payment is due. For purposes  hereof,  "VWAP" shall mean, for
any date,  (i) the daily volume  weighted  average price of the Common Stock for
such date on the OTC  Bulletin  Board as reported by  Bloomberg  Financial  L.P.
("Bloomberg")  (based on a trading day from 9:30 a.m.  Eastern Time to 4:02 p.m.
Eastern Time);  (ii) if the Common Stock is not then listed or quoted on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the "Pink
Sheets" published by the Pink Sheets,  LLC (or a similar  organization or agency
succeeding to its functions of reporting prices),  the most recent bid price per
share of the Common  Stock so reported;  or (iii) in all other  cases,  the fair
market  value  of a share  of  Common  Stock  as  determined  by an  independent
appraiser selected in good faith by the Holder and reasonably  acceptable to the
Maker.

     Section 1.4 Ranking and Covenants.
                 ----------------------

     (a) Except as set forth in Schedule  1.4(a),  no indebtedness of any of the
Maker is  senior to this  Note in right of  payment,  whether  with  respect  to
interest,  damages or upon liquidation or dissolution or otherwise and the Maker
will not, and will not permit any Subsidiary to,  directly or indirectly,  incur
any Lien on or with  respect  to any of its  property  or  assets  now  owned or
hereafter  acquired or any interest  therein or any income or profits  therefrom
without the prior written consent of the Holder.



                                       2
<PAGE>

     (b) So  long as any  Notes  are  outstanding,  none  of the  Maker  nor any
Subsidiary  shall,  directly or indirectly  without the prior written consent of
the Holder,  (i)  redeem,  purchase or  otherwise  acquire any of the  Company's
capital stock or set aside any monies for such a  redemption,  purchase or other
acquisition;  (ii) issue any options or convertible  securities with an exercise
price or a  conversion  price or a number of  underlying  shares  that floats or
resets or  otherwise  varies or is  subject to  adjustment  based  (directly  or
indirectly) on market prices of the Common Stock;  or (iii) issue any securities
having any rights,  privileges, or preferences superior to or in pari passu with
the rights, privileges, and preferences of the Holder.

     (c) The  Maker  shall  perform  any and all  acts and  execute  any and all
documents   (including,   without  limitation,   the  execution,   amendment  or
supplementation  of any financing  statement  and  continuation  statement)  for
filing under the provisions of the Uniform  Commercial Code (the "UCC"), and the
rules and regulations  thereunder,  or any other statute,  rule or regulation of
any applicable  jurisdiction which are necessary and/or advisable at the request
of the Holder or its  counsel in order to maintain in favor of the Holder of the
Notes,  a valid and perfected lien on the Collateral (as defined in the Security
Agreement).

     Section 1.5 Payment on Non-Business  Days.  Whenever any payment to be made
shall be due on a  Saturday,  Sunday or a public  holiday  under the laws of the
State of New York, such payment may be due on the next  succeeding  business day
and such next  succeeding day shall be included in the calculation of the amount
of accrued interest payable on such date.

     Section 1.6 Transfer.  This Note may be transferred or sold, subject to the
provisions  of Section 4.8 of this Note, or pledged,  hypothecated  or otherwise
granted as security by the Holder.

     Section 1.7  Replacement.  Upon receipt of a duly  executed,  notarized and
unsecured  written  statement from the Holder with respect to the loss, theft or
destruction of this Note (or any  replacement  hereof) and a standard  indemnity
reasonably  satisfactory  to the Maker,  or, in the case of a mutilation of this
Note, upon surrender and  cancellation of such Note, the Maker shall issue a new
Note,  of like tenor and  amount,  in lieu of such lost,  stolen,  destroyed  or
mutilated Note.

                                   ARTICLE II

                           EVENTS OF DEFAULT; REMEDIES
                           ---------------------------

     Section  2.1 Events of  Default.  The  occurrence  of any of the  following
events shall be an "Event of Default" under this Note:

          (a) the Maker shall fail to make any  principal  or interest  payments
     due under this Note on the date such  payments  are due and such default is
     not  fully  cured  within  three (3)  business  days  after the  occurrence
     thereof; or

          (b)  the  failure  of  a  registration  statement  (the  "Registration
     Statement")  providing  for the  resale of shares of the  Company's  common
     stock,  $0.001  par value per share  (the  "Common  Stock")  issuable  upon
     conversion  of this Note to be declared  effective  by the  Securities  and



                                       3
<PAGE>

     Exchange  Commission on or prior to the  Effectiveness  Date  applicable to
     such  registration   statement  (as  defined  in  the  Registration  Rights
     Agreement); or

          (c) At any time  subsequent to the  suspension  from listing,  without
     subsequent  listing on any one of, or the failure of the Common Stock to be
     listed  or  quoted on at least one of the Pink  Sheets  LLC,  OTC  Bulletin
     Board,  the American Stock Exchange,  the NASDAQ Global Market,  the NASDAQ
     Capital  Market or The New York Stock  Exchange,  Inc.  for a period of ten
     (10) consecutive Trading Days; or

          (d) the  Company's  notice to the Holder,  including  by way of public
     announcement, at any time, of its inability to comply (including for any of
     the reasons  described in Section  3.8(a)  hereof) or its  intention not to
     comply  with proper  requests  for  conversion  of this Note into shares of
     Common Stock; or

          (e) either (i) the Maker  shall fail to timely  deliver  the shares of
     Common Stock upon  conversion  of the Note, or (ii) the Maker shall fail to
     make the payment of any fees and/or  liquidated  damages under this Note or
     the  Purchase  Agreement,  which  failure is not  remedied  within ten (10)
     business days after the incurrence thereof; or

          (f) while the  Registration  Statement  is required  to be  maintained
     effective pursuant to the terms of the Registration  Rights Agreement,  the
     effectiveness  of  the   Registration   Statement  lapses  for  any  reason
     (including,  without  limitation,  the  issuance  of a  stop  order)  or is
     unavailable  to the  Holder  for  sale of the  Registrable  Securities  (as
     defined in the Registration  Rights Agreement) in accordance with the terms
     of the  Registration  Rights  Agreement,  and such lapse or  unavailability
     continues for a period of ten (10) consecutive  Trading Days, provided that
     the Company has not  exercised  its rights  pursuant to Section 3(n) of the
     Registration Rights Agreement; or

          (g) default shall be made in the  performance or observance of (i) any
     covenant, condition or agreement contained in this Note and such default is
     not fully cured  within ten (10)  business  days after the Holder  delivers
     written notice to the Maker of the occurrence thereof or (ii) any covenant,
     condition or  agreement  contained  in the  Purchase  Agreement,  the Other
     Notes,  the  Warrant,  the  Security  Documents,  the  Registration  Rights
     Agreement,  or any other  Transaction  Document which is not covered by any
     other  provisions  of this  Section 2.1 and such default is not fully cured
     within ten (10) business days after the Holder  delivers  written notice to
     the Maker of the occurrence thereof; or

          (h) any  material  representation  or  warranty  made by either of the
     Maker herein or in the Purchase  Agreement,  the Other Notes,  the Warrant,
     the Security  Documents,  the Registration  Rights Agreement,  or any other
     Transaction  Document  shall  prove  to have  been  false or  incorrect  or
     breached in a material  respect on the date as of which made and the Holder
     delivers written notice to the Maker of the occurrence thereof; or

          (i) the Maker shall after the Issuance Date (A) default in any payment
     of any amount or amounts of  principal  of or interest on any  indebtedness
     (other than the indebtedness  hereunder) the aggregate  principal amount of
     which  indebtedness  is in  excess  of  $100,000  or  (B)  default  in  the
     observance or performance of any other  agreement or condition  relating to



                                       4
<PAGE>

     any  indebtedness  or contained in any instrument or agreement  evidencing,
     securing or relating  thereto,  or any other event shall occur or condition
     exist, the effect of which default or other event or condition is to cause,
     or to permit the holder or holders or beneficiary or  beneficiaries of such
     indebtedness  to  cause  with  the  giving  of  notice  if  required,  such
     indebtedness to become due prior to its stated maturity; or

          (j) the Maker shall (i) apply for or consent to the appointment of, or
     the taking of possession by, a receiver,  custodian,  trustee or liquidator
     of itself or of all or a substantial  part of its property or assets,  (ii)
     make a general assignment for the benefit of its creditors,  (iii) commence
     a  voluntary  case  under  the  United  States  Bankruptcy  Code (as now or
     hereafter  in  effect)  or under the  comparable  laws of any  jurisdiction
     (foreign or domestic),  (iv) file a petition  seeking to take  advantage of
     any bankruptcy, insolvency, moratorium, reorganization or other similar law
     affecting the enforcement of creditors' rights generally,  (v) acquiesce in
     writing  to any  petition  filed  against it in an  involuntary  case under
     United States  Bankruptcy Code (as now or hereafter in effect) or under the
     comparable laws of any jurisdiction (foreign or domestic),  or (vi) issue a
     notice of  bankruptcy  or winding down of its  operations  or issue a press
     release regarding same; or

          (k) a  proceeding  or case shall be commenced in respect of the Maker,
     without its application or consent, in any court of competent jurisdiction,
     seeking  (i)  the  liquidation,  reorganization,  moratorium,  dissolution,
     winding  up,  or  composition  or  readjustment  of  its  debts,  (ii)  the
     appointment of a trustee, receiver, custodian, liquidator or the like of it
     or of all or any  substantial  part of its  assets in  connection  with its
     liquidation  or  dissolution or (iii) similar relief in respect of it under
     any law  providing for the relief of debtors,  and such  proceeding or case
     described  in clause (i),  (ii) or (iii)  shall  continue  undismissed,  or
     unstayed  and in effect,  for a period of thirty (30) days or any order for
     relief  shall  be  entered  in an  involuntary  case  under  United  States
     Bankruptcy  Code (as now or  hereafter  in effect) or under the  comparable
     laws of any jurisdiction  (foreign or domestic) against either of the Maker
     or  action  under  the  laws  of any  jurisdiction  (foreign  or  domestic)
     analogous to any of the foregoing  shall be taken with respect to either of
     the Maker and shall continue  undismissed,  or unstayed and in effect for a
     period of thirty (30) days; or

          (l) the  failure of the  Company to  instruct  its  transfer  agent to
     remove any legends  from shares of Common  Stock  eligible to be sold under
     Rule 144 of the Securities Act and issue such  unlegended  certificates  to
     the Holder within five (5) business days of the Holder's request so long as
     the Holder has provided  reasonable  assurances  to the Company,  and based
     thereon the Company has determined, that such shares of Common Stock can be
     sold pursuant to Rule 144; or

          (m) the  failure  of the Maker to pay any  amounts  due to the  Holder
     herein or any other  Transaction  Document within five (5) business days of
     the date such  payments  are due and such default is not fully cured within
     five (5)business days after the Holder delivers written notice to the Maker
     of the occurrence thereof; or

          (n) the occurrence of an event of default under any other  Transaction
     Document.



                                       5
<PAGE>

     Section 2.2 Remedies Upon An Event of Default. If an Event of Default shall
have occurred and shall be  continuing,  the Holder of this Note may at any time
at its option,  (a) declare the entire  unpaid  principal  balance of this Note,
together with all interest accrued hereon, due and payable,  and thereupon,  the
same shall be accelerated and so due and payable,  without presentment,  demand,
protest,  or  notice,  all of which are  hereby  expressly  unconditionally  and
irrevocably waived by the Maker; provided,  however, that upon the occurrence of
an Event of Default  described  in (i) Sections  2.1(j) or (k), the  outstanding
principal balance and accrued interest  hereunder shall be automatically due and
payable  and (ii)  Sections  2.1(b)-(i),  (l),  (m),  (n),  or (o),  demand  the
prepayment  of this Note  pursuant to Section  3.7  hereof,  (b) demand that the
principal amount of this Note then outstanding shall be converted into shares of
Common Stock at a Conversion Price per share calculated  pursuant to Section 3.1
hereof assuming that the date that the Event of Default occurs is the Conversion
Date (as defined in Section 3.1  hereof),  (c) appoint a majority of the members
of the entire  board of  directors  of the Maker,  or (d)  exercise or otherwise
enforce any one or more of the Holder's rights, powers, privileges, remedies and
interests under this Note, the Purchase Agreement,  the Security  Agreement,  or
applicable  law. No course of delay on the part of the Holder shall operate as a
waiver  thereof  or  otherwise  prejudice  the  right of the  Holder.  No remedy
conferred  hereby shall be  exclusive of any other remedy  referred to herein or
now or  hereafter  available  at law,  in equity,  by statute or  otherwise.  In
connection  with the  Holder's  exercise of any of its remedies  hereunder,  the
Maker shall use its best  efforts to  cooperate  with the Holder to the end that
the Holder's rights hereunder will be effectuated.

                                  ARTICLE III

                 CONVERSION; ANTIDILUTION; PREPAYMENT; COVENANTS

     Section 3.1  Conversion.  At any time on or after the Issuance  Date,  this
Note  shall be  convertible  (in whole or in part),  at the option of the Holder
(the "Optional  Conversion"),  into such number of fully paid and non-assessable
shares of Common Stock (the "Conversion  Rate") as is determined by dividing (x)
that portion of the  outstanding  principal  balance  under this Note as of such
date that the Holder elects to convert by (y) the  Conversion  Price (as defined
in Section 3.2(a) hereof) or the Conversion Price Reset Option Price (as defined
in Section 3.5 hereof),  as applicable,  then in effect on the date on which the
Holder faxes a notice of conversion  (the "Optional  Conversion  Notice"),  duly
executed, to the Company (facsimile number _________,  Attn.:  ___________) (the
"Optional Conversion Date"); provided,  however, that the Conversion Price shall
be subject to  adjustment  as described in Section 3.6 of this Note.  The Holder
shall deliver this Note to the Company at the address designated in the Purchase
Agreement  as soon as  practicable  after  such  time  that  this  Note is fully
converted.  With respect to partial  conversions of this Note, the Company shall
keep and attach hereto  written  records of the amount of this Note converted as
of each Conversion Date.

     Section 3.2 Conversion Price.
                 -----------------

          (a)  The  term  "Conversion  Price"  shall  mean  $0.04,   subject  to
     adjustment under Section 3.5 and Section 3.6 hereof.



                                       6
<PAGE>

          (b) The term  "Conversion  Shares"  shall  mean such  shares of Common
     Stock issuable upon Conversion of this Note.

          (c)  Notwithstanding  any of the foregoing to the contrary,  if during
     any period (a "Black-out Period"), the Holder is unable to trade any Common
     Stock issued or issuable upon conversion of this Note immediately due, such
     Holder shall have the option but not the obligation on any Conversion  Date
     within ten (10) Trading Days  following  the  expiration  of the  Black-out
     Period of using the Conversion Price applicable on such Optional Conversion
     Date or any  Conversion  Price  selected by the Holder that would have been
     applicable  had such  Optional  Conversion  Date been at any  earlier  time
     during the Black-out Period or within the ten (10) Trading Days thereafter.
     In no event shall the Black-out Period have any effect on the Maturity Date
     of this Note.

     Section 3.3 Mechanics of Conversion.
                 -----------------------

          (a)  Not  later  than  three  (3)  Trading  Days  after  any  Optional
     Conversion  Date (the  "Delivery  Date"),  the  Company  or its  designated
     transfer  agent,  as applicable,  shall issue and deliver to the Depository
     Trust  Company  ("DTC")  account on the  Holder's  behalf  via the  Deposit
     Withdrawal  Agent  Commission  System ("DWAC") as specified in the Optional
     Conversion  Notice,  registered  in the name of the Holder or its designee,
     for the  number  of shares of  Common  Stock to which the  Holder  shall be
     entitled. Notwithstanding the foregoing, in the alternative, not later than
     the Delivery Date,  the Company shall deliver to the  applicable  Holder by
     express  courier  a  certificate  or  certificates  which  shall be free of
     restrictive legends and trading  restrictions (other than those required by
     Section 5.1 of the Purchase Agreement) representing the number of shares of
     Common Stock being  acquired upon the  conversion of this Note.  If, in the
     case of any  Optional  Conversion  such DWAC  transfer  or  certificate  or
     certificates  are not delivered to or as directed by the applicable  Holder
     by the Delivery Date, the Holder shall be entitled by written notice to the
     Company  at any  time on or  before  its  receipt  of such  certificate  or
     certificates  thereafter,  to rescind such  conversion,  in which event the
     Company  shall  immediately  return  this  Note  tendered  for  conversion,
     whereupon  the  Company  and the  Holder  shall each be  restored  to their
     respective  positions  immediately  prior to the delivery of such notice of
     revocation,  except that any amounts  described in Sections  3.3(b) and (c)
     shall be payable  through  the date  notice of  rescission  is given to the
     Maker.

          (b) The Company understands that a delay in the delivery of the shares
     of Common Stock upon conversion of this Note beyond the Delivery Date could
     result in economic  loss to the Holder.  If the Company fails to deliver to
     the Holder such shares via DWAC or a certificate or  certificates  pursuant
     to this Section hereunder by the Delivery Date, the Maker shall pay to such
     Holder,  in cash, an amount per Trading Day for each Trading Day until such
     shares are delivered via DWAC or certificates are delivered,  together with
     interest  on such  amount at a rate of 10% per annum,  accruing  until such
     amount  and any  accrued  interest  thereon  is paid in full,  equal to the
     greater  of (A)  (i) 1% of the  aggregate  principal  amount  of the  Notes
     requested  to be  converted  for the first five (5) Trading  Days after the
     Delivery  Date and (ii) 2% of the aggregate  principal  amount of the Notes
     requested to be converted  for each Trading Day  thereafter  and (B) $5,000
     per day (which  amount  shall be paid as  liquidated  damages  and not as a
     penalty).  Nothing  herein  shall limit a Holder's  right to pursue  actual
     damages  for the  Company's  failure to deliver  certificates  representing
     shares of  Common  Stock (as the case may be) upon  conversion  within  the



                                       7
<PAGE>

     period  specified herein and such Holder shall have the right to pursue all
     remedies  available  to  it  at  law  or  in  equity  (including,   without
     limitation,  a decree of specific  performance  and/or injunctive  relief).
     Notwithstanding anything to the contrary contained herein, the Holder shall
     be  entitled  to withdraw  an  Optional  Conversion  Notice,  and upon such
     withdrawal the Maker shall only be obligated to pay the liquidated  damages
     accrued  in  accordance  with  this  Section  3.3(b)  through  the date the
     Optional Conversion Notice is withdrawn.

          (c) In addition to any other rights  available  to the Holder,  if the
     Company  fails to cause its  transfer  agent to  transmit  to the  Holder a
     certificate  or  certificates  representing  the  shares  of  Common  Stock
     issuable upon  conversion of this Note on or before the Delivery  Date, and
     if after such date the Holder is required by its broker to purchase  (in an
     open market  transaction or otherwise) shares of Common Stock to deliver in
     satisfaction of a sale by the Holder of the shares of Common Stock issuable
     upon  conversion of this Note which the Holder  anticipated  receiving upon
     such  exercise  (a  "Buy-In"),  then the Maker shall (1) pay in cash to the
     Holder the amount by which (x) the Holder's total purchase price (including
     brokerage commissions,  if any) for the shares of Common Stock so purchased
     exceeds (y) the amount  obtained by multiplying (A) the number of shares of
     Common Stock  issuable  upon  conversion  of this Note that the Company was
     required  to deliver to the Holder in  connection  with the  conversion  at
     issue  multiplied  by (B) the price at which the sell order  giving rise to
     such purchase obligation was executed, and (2) at the option of the Holder,
     either reinstate the portion of the Note and equivalent number of shares of
     Common  Stock for which such  conversion  was not honored or deliver to the
     Holder the number of shares of Common Stock that would have been issued had
     the Company timely  complied with its  conversion and delivery  obligations
     hereunder. For example, if the Holder purchases Common Stock having a total
     purchase  price of $11,000 to cover a Buy-In with  respect to an  attempted
     conversion  of shares of Common Stock with an  aggregate  sale price giving
     rise to such  purchase  obligation  of  $10,000,  under  clause  (1) of the
     immediately  preceding  sentence  the Maker  shall be  required  to pay the
     Holder $1,000. The Holder shall provide the Maker written notice indicating
     the amounts  payable to the Holder in respect of the Buy-In,  together with
     applicable  confirmations  and other evidence  reasonably  requested by the
     Maker.  Nothing  herein  shall  limit a Holder's  right to pursue any other
     remedies available to it hereunder, at law or in equity including,  without
     limitation,  a decree of specific performance and/or injunctive relief with
     respect  to  the   Company's   failure  to  timely   deliver   certificates
     representing  shares  of  Common  Stock  upon  conversion  of this  Note as
     required pursuant to the terms hereof.






                                       8
<PAGE>

     Section   3.4   Ownership   Cap  and   Certain   Conversion   Restrictions.
Notwithstanding anything to the contrary set forth in Section 3 of this Note, at
no time may the  Holder  convert  all or a portion of this Note if the number of
shares of Common Stock to be issued  pursuant to such  conversion  would exceed,
when  aggregated  with all other  shares of Common  Stock owned by the Holder at
such time, the number of shares of Common Stock which would result in the Holder
beneficially  owning (as  determined  in  accordance  with Section  13(d) of the
Exchange  Act and the rules  thereunder)  more than  9.99% of all of the  Common
Stock outstanding at such time;  provided,  however,  that upon a Holder of this
Note providing the Company with sixty-one (61) days notice  (pursuant to Section
4.1 hereof)  (the  "Waiver  Notice")  that such Holder  would like to waive this
Section  3.4 with  regard to any or all  shares of Common  Stock  issuable  upon
conversion  of this Note,  this  Section  3.4 will be of no force or effect with
regard  to all or a  portion  of  the  Note  referenced  in the  Waiver  Notice;
provided,  further,  that  during the  sixty-one  (61) day  period  prior to the
Maturity Date of this Note the Holder may waive this Section 3.4 upon  providing
the  Waiver  Notice at any time  during  such  sixty-one  (61) day  period;  and
provided,  further,  that any Waiver Notice during the sixty-one (61) day period
prior to the Maturity Date will not be effective until the Maturity Date.

     Section 3.5  Conversion  Price Reset.  The Holder has been  informed by the
Maker that the Maker does not have sufficient  shares of Common Stock authorized
for which to enable the Holder to exercise  its  conversion  rights  provided in
this Note.  The Maker  undertakes  to use its best  efforts to become  reporting
under the federal  securities laws and seek to be re-listed for quotation on the
OTC Bulletin  Board as soon as practical,  seek to maintain such listing so long
as the Holder owns any shares of Common Stock,  and shall,  as soon as practical
as thereafter possible,  will take all required steps under applicable state and
federal  law to  increase  the number of  authorized  shares of Common  Stock to
enable the Holder to exercise its  conversion  rights  provided in this Note. In
all events,  the relisting process and the amendment of the Maker's  Certificate
of  Incorporation  shall be  accomplished by no later than June 1, 2008. In this
regard,  the terms and  conditions  of such increase in the number of authorized
Common Stock shall be subject to the Holder's prior consent.

     In  consideration  of the risks  that the  Holder is  assuming,  including,
without limitation, the risks inherent in owning an illiquid investment, because
the Maker does not have sufficient  authorized shares of Common Stock to fulfill
its  obligations  hereunder,  the Maker hereby provides to the Holder a one-time
Conversion Price Reset Option that is exercisable at any time within twelve (12)
months after the Holder has been provided with notice that the Maker has secured
all  stockholder  and  regulatory  approval  of the  requisite  increase  of its
authorized  shares of Common  Stock and the  Maker has  completed  all  required
filings.  The  Conversion  Price Reset Option shall be  exercisable  on five (5)
Business Days' notice and shall set forth,  among other matters,  the Conversion
Price Reset  Option  Price,  which shall be  one-hundred  percent  (100%) of the
average of the VWAP for the ten (10) trading days immediately preceding the date
of the Holder's  notice of its exercise of the  Conversion  Price Reset  Option.
Upon the Holder's exercise of its Conversion Price Reset Option,  the Conversion
Price Reset Option Price will  thereafter be deemed to be the Conversion  Price,
which is  subject in all cases to  adjustment  in  accordance  with the terms of
Section 3.6.

     Section 3.6 Adjustment of Conversion Price.
                 -------------------------------



                                       9
<PAGE>


          (a) The Conversion  Price shall be subject to adjustment  from time to
     time as follows:

               (i) Adjustments for Stock Splits and Combinations. If the Company
          shall at any time or from time to time after the Issuance Date, effect
          a  stock  split  of  the  outstanding  Common  Stock,  the  applicable
          Conversion Price in effect  immediately prior to the stock split shall
          be proportionately decreased. If the Company shall at any time or from
          time to time after the Issuance Date,  combine the outstanding  shares
          of Common Stock, the applicable Conversion Price in effect immediately
          prior to the  combination  shall  be  proportionately  increased.  Any
          adjustments  under this  Section  3.6(a)(i)  shall be effective at the
          close of business on the date the stock split or combination occurs.

               (ii) Adjustments for Certain Dividends and Distributions.  If the
          Company  shall at any time or from  time to time  after  the  Issuance
          Date,  make or  issue or set a record  date for the  determination  of
          holders  of Common  Stock  entitled  to  receive a  dividend  or other
          distribution  payable  in shares of Common  Stock,  then,  and in each
          event, the applicable  Conversion Price in effect immediately prior to
          such event shall be decreased  as of the time of such  issuance or, in
          the event such record  date shall have been fixed,  as of the close of
          business on such record date, by multiplying the applicable Conversion
          Price then in effect by a fraction:

                    (1) the  numerator  of which  shall be 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

                    (2) the  denominator  of which shall be 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.

               (iii)  Adjustment for Other Dividends and  Distributions.  If the
          Company  shall at any time or from  time to time  after  the  Issuance
          Date,  make or  issue or set a record  date for the  determination  of
          holders  of Common  Stock  entitled  to  receive a  dividend  or other
          distribution  payable in other than shares of Common Stock,  then, and
          in each event,  an appropriate  revision to the applicable  Conversion
          Price shall be made and provision shall be made (by adjustments of the
          Conversion  Price or otherwise) so that the holders of this Note shall
          receive upon conversions  thereof, in addition to the number of shares
          of Common Stock  receivable  thereon,  the number of securities of the
          Company  which they would have  received had this Note been  converted
          into Common Stock on the date of such event and had thereafter, during
          the period from the date of such event to and including the Conversion
          Date,  retained  such  securities  (together  with  any  distributions
          payable  thereon  during  such  period),  giving  application  to  all
          adjustments   called  for  during  such  period   under  this  Section
          3.6(a)(iii) with respect to the rights of the holders of this Note and
          the Other  Notes;  provided,  however,  that if such record date shall
          have  been  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 adjusted to the Conversion  Price in effect
          immediately  prior to such adjustment until the time of actual payment
          of such dividends or distributions.



                                       10
<PAGE>


               (iv) Adjustments for Reclassification,  Exchange or Substitution.
          If the Common Stock issuable upon  conversion of this Note at any time
          or from time to time after the  Issuance  Date shall be changed to the
          same or  different  number of shares of any class or classes of stock,
          whether  by  reclassification,  exchange,  substitution  or  otherwise
          (other than by way of a stock split or  combination of shares or stock
          dividends  provided for in Sections  3.6(a)(i),  (ii) and (iii),  or a
          reorganization,  merger, consolidation, or sale of assets provided for
          in  Section  3.6(a)(v)),  then,  and in  each  event,  an  appropriate
          revision to the Conversion Price shall be made and provisions shall be
          made (by adjustments of the Conversion Price or otherwise) so that the
          Holder shall have the right  thereafter  to convert this Note into the
          kind and  amount of shares  of stock and other  securities  receivable
          upon  reclassification,  exchange,  substitution  or other change,  by
          holders of the  number of shares of Common  Stock into which such Note
          might have been converted immediately prior to such  reclassification,
          exchange,  substitution  or  other  change,  all  subject  to  further
          adjustment as provided herein.

               (v)  Adjustments for  Reorganization,  Merger,  Consolidation  or
          Sales  of  Assets.  If at any  time or from  time  to time  after  the
          Issuance Date there shall be a capital  reorganization  of the Company
          (other than by way of a stock split or  combination of shares or stock
          dividends or distributions provided for in Section 3.6(a)(i), (ii) and
          (iii),  or a  reclassification,  exchange  or  substitution  of shares
          provided for in Section  3.6(a)(iv)),  or a merger or consolidation of
          the  Company  with or into  another  corporation  where the holders of
          outstanding  voting  securities of the Company prior to such merger or
          consolidation  do not own over fifty percent (50%) of the  outstanding
          voting  securities of the merged or consolidated  entity,  immediately
          after  such   merger  or   consolidation,   or  the  sale  of  all  or
          substantially  all of the Company's  properties or assets to any other
          person (an "Organic  Change"),  then as a part of such Organic Change,
          (A) if the  surviving  entity in any such  Organic  Change is a public
          company that is registered  pursuant to the Securities Exchange Act of
          1934,  as  amended,  and its  common  stock is  listed  or quoted on a
          national  exchange or the OTC Bulletin Board, an appropriate  revision
          to the Conversion  Price shall be made and provision shall be made (by
          adjustments of the Conversion Price) so that the Holder shall have the
          right  thereafter  to  convert  such Note into the kind and  amount of
          shares of stock and other securities or property of the Company or any
          successor  corporation  as it would have  received as a result of such
          Organic  Change  if it had  converted  this  Note  into  Common  Stock
          immediately  prior to such Organic  Change,  and (B) if the  surviving
          entity  in any such  Organic  Change is not a public  company  that is
          registered  pursuant  to  the  Securities  Exchange  Act of  1934,  as
          amended,  or its  common  stock is not  listed or quoted on a national
          exchange or the OTC Bulletin Board, the Holder shall have the right to
          demand prepayment pursuant to Section 3.7(b) hereof. In any such case,
          appropriate  adjustment  shall  be  made  in  the  application  of the
          provisions of this Section 3.6(a)(v) with respect to the rights of the
          Holder after the Organic Change to the end that the provisions of this
          Section   3.6(a)(v)   (including  any  adjustment  in  the  applicable
          Conversion  Price  then in effect and the number of shares of stock or
          other  securities  deliverable  upon conversion of this Note) shall be
          applied after that event in as nearly an  equivalent  manner as may be
          practicable.

               (vi)  Adjustments  for  Issuance of  Additional  Shares of Common
          Stock.

                    (1) In the event the Company  shall,  at any time within two
               (2)  years   following  the  Issuance  Date  (the  "Full  Ratchet
               Period"),  the Company shall issue or sell any additional  shares
               of common  stock  (otherwise  than as provided  in the  foregoing



                                       11
<PAGE>

               subsections (i) through (v) of this Section 3.6(a) or pursuant to
               Common Stock  Equivalents  (hereafter  defined) granted or issued
               prior  to  the  Issuance  Date)  ("Additional  Shares  of  Common
               Stock"), at a price per share less than the Conversion Price then
               in effect or without  consideration (the "New Conversion Price"),
               then the  Conversion  Price  upon  each  such  issuance  shall be
               reduced to an amount equal to such New Conversion Price.

                    (2)  The   provisions  of  paragraph  (1)  of  this  Section
               3.6(a)(vi)  shall not apply to any issuance of Additional  Shares
               of Common Stock for which an adjustment is provided under Section
               3.6(a)(vii).  No  adjustment  of the  number  of shares of Common
               Stock for  which  this Note  shall be  convertible  shall be made
               under paragraph (1) of this Section  3.6(a)(vi) upon the issuance
               of any  Additional  Shares  of  Common  Stock  which  are  issued
               pursuant to the exercise of any Common Stock Equivalents,  if any
               such adjustment shall previously have been made upon the issuance
               of such Common Stock Equivalents pursuant to Section 3.6(a)(vii).

               (vii)  Issuance  of Common  Stock  Equivalents.  In the event the
          Company  shall at any time within the Full  Ratchet  Period  issue any
          securities   convertible  into  or  exchangeable   for,   directly  or
          indirectly,  Common Stock ("Convertible  Securities"),  other than the
          Notes,  or any rights or  warrants  or options  to  purchase  any such
          Common  Stock  or  Convertible  Securities,  shall be  issued  or sold
          (collectively, the "Common Stock Equivalents") and the aggregate price
          per share for which Additional  Shares of Common Stock may be issuable
          thereafter  pursuant  to  such  Common  Stock  Equivalent,   plus  the
          consideration  received  by the  Company  for  issuance of such Common
          Stock  Equivalent  divided  by the  number of  shares of Common  Stock
          issuable  pursuant to such Common Stock Equivalent (the "Aggregate Per
          Common  Share  Price")  shall be less than the  applicable  Conversion
          Price then in effect,  or if, after any such  issuance of Common Stock
          Equivalents, the price per share for which Additional Shares of Common
          Stock may be  issuable  thereafter  is amended or  adjusted,  and such
          price as so amended shall make the Aggregate Per Common Share Price be
          less  than the  applicable  Conversion  Price in effect at the time of
          such amendment or adjustment,  then the  applicable  Conversion  Price
          upon each such issuance or amendment  shall be adjusted as provided in
          the first  sentence of subsection  (vi) of this Section  3.6(a) on the
          basis that (1) the maximum number of Additional Shares of Common Stock
          issuable pursuant to all such Common Stock Equivalents shall be deemed
          to have been issued (whether or not such Common Stock  Equivalents are
          actually then exercisable,  convertible or exchangeable in whole or in
          part) as of the  earlier  of (A) the date on which the  Company  shall
          enter into a firm  contract  for the  issuance  of such  Common  Stock
          Equivalent,  or (B) the date of actual  issuance of such Common  Stock
          Equivalent.  No adjustment of the applicable Conversion Price shall be
          made under this subsection  (vii) upon the issuance of any Convertible
          Security  which is issued  pursuant to the exercise of any warrants or
          other  subscription  or purchase  rights  therefor,  if any adjustment
          shall previously have been made to the exercise price of such warrants
          or other subscription or purchase rights therefor, then in effect upon
          the issuance of such warrants or other subscription or purchase rights
          therefor  pursuant to this subsection  (vii).  No adjustment  shall be
          made to the  Conversion  Price  upon  the  issuance  of  Common  Stock
          pursuant to the exercise,  conversion  or exchange of any  Convertible
          Security  or  Common  Stock  Equivalent  where  an  adjustment  to the
          Conversion  Price was made as a result of the  issuance or purchase of
          any Convertible Security or Common Stock Equivalent.

               (viii)  Subsequent  Common  Stock and  Common  Stock  Equivalents
          Issues.  In the event the Company,  shall,  at any time after the Full



                                       12
<PAGE>

          Ratchet Period, issue or sell any Additional Shares of Common Stock or
          Common Stock Equivalents  (otherwise than as provided in the foregoing
          subsections  of this  Section  4), at a price per share  less than the
          Conversion Price, or without consideration,  the Conversion Price then
          in effect  upon each such  issuance  shall be  adjusted  to that price
          (rounded to the nearest cent) determined by multiplying the Conversion
          Price by a fraction:  (1) the numerator of which shall be equal to the
          sum  of  (A)  the  number  of  shares  of  Common  Stock   outstanding
          immediately  prior to the issuance of such Additional Shares of Common
          Stock plus (B) the number of shares of Common  Stock  (rounded  to the
          nearest whole share) which the aggregate  consideration  for the total
          number  of such  Additional  Shares of  Common  Stock so issued  would
          purchase at a price per share equal to the then Conversion  Price; and
          (2) the denominator of which shall be equal to the number of shares of
          Common  Stock  outstanding  immediately  after  the  issuance  of such
          Additional  Shares of Common  Stock.  No  adjustment  of the number of
          shares  of  Common  Stock  shall  be made  upon  the  issuance  of any
          Additional  Shares of Common  Stock  which are issued  pursuant to the
          exercise of any warrants or other  subscription  or purchase rights or
          pursuant to the exercise of any  conversion or exchange  rights in any
          Common Stock  Equivalents if any such adjustment shall previously have
          been made upon the  issuance of such  warrants or other rights or upon
          the issuance of such Common Stock Equivalents (or upon the issuance of
          any warrant or other rights therefore).

                           (ix) Consideration for Stock. In case any shares of
Common Stock or any Common Stock Equivalents shall
be issued or sold:

                    (1) in connection with any merger or  consolidation in which
               the  Company  is  the  surviving   corporation  (other  than  any
               consolidation  or  merger  in which  the  previously  outstanding
               shares of Common  Stock of the  Company  shall be  changed  to or
               exchanged   for  the  stock  or  other   securities   of  another
               corporation),  the  amount of  consideration  therefor  shall be,
               deemed to be the fair market value, as determined  reasonably and
               in good  faith by the  board of  directors  of the  Company  (the
               "Board"),  of such  portion  of the assets  and  business  of the
               nonsurviving  corporation  as  the  Board  may  determine  to  be
               attributable   to  such  shares  of  Common  Stock,   Convertible
               Securities, rights or warrants or options, as the case may be; or

                    (2) in the  event  of any  consolidation  or  merger  of the
               Company in which the Company is not the surviving  corporation or
               in which the previously outstanding shares of Common Stock of the
               Company shall be changed into or exchanged for the stock or other
               securities of another corporation, or in the event of any sale of
               all or  substantially  all of the assets of the Company for stock
               or other  securities  of any  corporation,  the Company  shall be
               deemed to have issued a number of shares of its Common  Stock for
               stock or  securities or other  property of the other  corporation
               computed on the basis of the actual  exchange  ratio on which the
               transaction was predicated,  and for a consideration equal to the
               fair  market  value on the date of such  transaction  of all such
               stock or securities or other  property of the other  corporation.
               If any such  calculation  results in adjustment of the applicable
               Conversion  Price,  or the  number  of  shares  of  Common  Stock
               issuable upon conversion of the Notes,  the  determination of the
               applicable  Conversion  Price or the  number  of shares of Common
               Stock issuable upon conversion of the Notes  immediately prior to
               such merger,  consolidation  or sale,  shall be made after giving
               effect to such adjustment of the number of shares of Common Stock



                                       13
<PAGE>

               issuable upon  conversion of the Notes. In the event Common Stock
               is issued with other shares or  securities or other assets of the
               Company for  consideration  which covers both, the  consideration
               computed as provided in this Section 3.6(viii) shall be allocated
               among such  securities  and assets as determined in good faith by
               the Board.

          (b) Record Date.  In case the Company shall take record of the holders
     of its Common Stock for the purpose of entitling  them to subscribe  for or
     purchase Common Stock or Convertible Securities, then the date of the issue
     or sale of the  shares of Common  Stock  shall be deemed to be such  record
     date.

          (c)  Certain  Issues   Excepted.   Anything  herein  to  the  contrary
     notwithstanding,  the Company shall not be required to make any  adjustment
     to the Conversion  Price in connection with (i) securities  issued pursuant
     to the  conversion or exercise of  convertible  or  exercisable  securities
     issued or outstanding on or prior to the date of the Purchase  Agreement or
     issued  pursuant to the Purchase  Agreement  (so long as the  conversion or
     exercise  price in such  securities  are not  amended  to lower  such price
     and/or  adversely  affect the Holder),  (ii) the Conversion  Shares,  (iii)
     Common Stock issued or the issuance or grants of options to purchase Common
     Stock  pursuant to the  Company's  stock option  plans and  employee  stock
     purchase plans that either (x) exist on the date of the Purchase Agreement,
     or (y) do not exceed ten percent (10%) of the  outstanding  Common Stock of
     the Company as of the date of the Purchase Agreement,  (iv) any note issued
     to the placement agent and its designees for the transactions  contemplated
     by the Purchase  Agreement and the shares of Common Stock issuable upon the
     conversion of said note; and (v) any shares of Common Stock issued upon the
     exercise  of the  warrant  issued  to  Donald  Jones  for the  transactions
     contemplated by the Purchase Agreement.

          (d) No  Impairment.  Except for the  amendment of its  Certificate  of
     Incorporation  as  contemplated  by Section 3.5, the Company  shall not, by
     amendment   of  its   Certificate   of   Incorporation   or   through   any
     reorganization,  transfer of assets,  consolidation,  merger,  dissolution,
     issue or sale of securities or any other voluntary action, avoid or seek to
     avoid the  observance or  performance of any of the terms to be observed or
     performed  hereunder by the  Company,  but will at all times in good faith,
     assist in the carrying out of all the provisions of this Section 3.6 and in
     the taking of all such action as may be necessary or  appropriate  in order
     to protect the conversion rights of the Holder against  impairment.  In the
     event a Holder  shall elect to convert any Notes as  provided  herein,  the
     Company cannot refuse conversion based on any claim that such Holder or any
     one  associated  or  affiliated  with such  Holder has been  engaged in any
     violation of law, violation of an agreement to which such Holder is a party
     or for any  reason  whatsoever,  unless,  an  injunction  from a court,  or
     notice,  restraining  and or adjoining  conversion  of all or of said Notes
     shall have  issued and the  Company  posts a surety bond for the benefit of
     such Holder in an amount equal to one hundred  percent (100%) of the amount
     of the Notes the Holder has elected to convert,  which bond shall remain in
     effect until the  completion of  arbitration/litigation  of the dispute and
     the  proceeds  of which  shall be  payable to such  Holder  (as  liquidated
     damages) in the event it obtains judgment.

          (e) Certificates as to Adjustments. Upon occurrence of each adjustment
     or readjustment of the Conversion Price or number of shares of Common Stock
     issuable  upon  conversion  of this Note  pursuant to this Section 3.6, the
     Company  at  its  expense  shall  promptly   compute  such   adjustment  or
     readjustment  in accordance with the terms hereof and furnish to the Holder



                                       14
<PAGE>

     a certificate  setting forth such adjustment and  readjustment,  showing in
     detail the facts upon which such adjustment or  readjustment is based.  The
     Company shall, upon written request of the Holder, at any time,  furnish or
     cause to be furnished to the Holder a like  certificate  setting forth such
     adjustments and readjustments, the applicable Conversion Price in effect at
     the time, and 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
     the conversion of this Note.  Notwithstanding  the  foregoing,  the Company
     shall not be obligated  to deliver a  certificate  unless such  certificate
     would  reflect an increase or decrease of at least one percent (1%) of such
     adjusted amount.

          (f)  Issue  Taxes.  The  Maker  shall  pay any and all issue and other
     taxes,  excluding federal, state or local income taxes, that may be payable
     in respect of any issue or delivery of shares of Common Stock on conversion
     of this Note pursuant thereto; provided,  however, that the Maker shall not
     be  obligated  to pay  any  transfer  taxes  resulting  from  any  transfer
     requested by the Holder in connection with any such conversion.

          (g) Fractional  Shares.  No fractional shares of Common Stock shall be
     issued upon  conversion of this Note. In lieu of any  fractional  shares to
     which the Holder  would  otherwise  be  entitled,  the Maker shall pay cash
     equal to the product of the fraction that would  evidence  such  fractional
     shares multiplied by one-hundred  percent (100%) of the average of the VWAP
     for the  ten  (10)  consecutive  Trading  Days  immediately  preceding  the
     Conversion Date.

          (h)  Reservation of Common Stock.  The Company shall at all times when
     this Note  shall be  outstanding,  reserve  and keep  available  out of its
     authorized but unissued Common Stock,  one hundred twenty percent (120%) of
     such  number  of  shares  of  Common  Stock as shall  from  time to time be
     sufficient to effect the conversion of this Note.  The Company shall,  from
     time to time in accordance with Indiana law, increase the authorized number
     of shares of Common Stock if at any time the unissued  number of authorized
     shares shall not be sufficient to satisfy the Company's  obligations  under
     this Section 3.6(h).

          (i)  Regulatory  Compliance.  If any  shares  of  Common  Stock  to be
     reserved for the purpose of conversion of this Note require registration or
     listing with or approval of any governmental  authority,  stock exchange or
     other  regulatory  body  under any  federal or state law or  regulation  or
     otherwise  before  such  shares may be  validly  issued or  delivered  upon
     conversion,  the Company shall, at its sole cost and expense, in good faith
     and as  expeditiously  as possible,  endeavor to secure such  registration,
     listing or approval, as the case may be.

               Section 3.7 Prepayment.
                           -----------

          (a) Prepayment Upon an Event of Default.  Notwithstanding  anything to
     the contrary contained herein,  upon the occurrence of an Event of Default,
     the Holder shall have the right,  at such Holder's  option,  to require the
     Maker to prepay in cash all or a portion  of this Note at a price  equal to
     one hundred percent (100%) of the aggregate  principal  amount of this Note
     plus  all  accrued  and  unpaid  interest  applicable  at the  time of such
     request.  Nothing in this Section  3.7(a)  shall limit the Holder's  rights
     under Section 2.2 hereof.

          (b) Prepayment Option Upon Major Transaction. In addition to all other
     rights of the Holder contained herein,  simultaneous with the occurrence of
     a Major Transaction (as defined below), the Holder shall have the right, at



                                       15
<PAGE>

     the  Holder's  option,  to  require  the  Maker to  prepay in cash all or a
     portion  of the  Holder's  Notes  at a price  equal to one  hundred  twenty
     percent  (120%)  of the  aggregate  principal  amount of this Note plus all
     accrued and unpaid interest (the "Major Transaction Prepayment Price").

          (c) Prepayment  Option Upon Triggering Event. In addition to all other
     rights of the Holder contained herein, after a Triggering Event (as defined
     below), the Holder shall have the right, at the Holder's option, to require
     the Maker to prepay all or a portion of this Note in cash at a price  equal
     to one hundred twenty percent (120%) of the aggregate  principal  amount of
     this Note plus all  accrued  and unpaid  interest  (the  "Triggering  Event
     Prepayment Price," and, collectively with the Major Transaction  Prepayment
     Price, the "Prepayment Price").

          (d) "Major Transaction." A "Major Transaction" shall be deemed to have
     occurred at such time as any of the following events:

               (i) the  consolidation,  merger or other business  combination of
          the Company  with or into  another  Person (as defined in Section 4.13
          hereof) (other than (A) pursuant to a migratory merger effected solely
          for the purpose of changing the  jurisdiction of  incorporation of the
          Company or (B) a consolidation,  merger or other business  combination
          in which holders of the Company's  voting power  immediately  prior to
          the transaction  continue after the  transaction to hold,  directly or
          indirectly,  the  voting  power of the  surviving  entity or  entities
          necessary to elect a majority of the members of the board of directors
          (or their  equivalent if other than a  corporation)  of such entity or
          entities); or

               (ii) the sale or transfer of more than fifty percent (50%) of the
          Company's assets (based on the fair market value as determined in good
          faith by the Board) other than  inventory  in the  ordinary  course of
          business in one or a related series of transactions; or

               (iii) closing of a purchase, tender or exchange offer made to the
          holders of more than fifty percent (50%) of the outstanding  shares of
          Common Stock in which more than fifty percent (50%) of the outstanding
          shares of Common Stock were tendered and accepted; or

               (iv) a change in more than  fifty  percent  (50%) of the  current
          members of the Company's Board of Directors as of the Issuance Date.

               (v) the occurrence of a "Qualified Financing" which shall mean an
          underwritten public offering of the Company's common stock pursuant to
          which the gross proceeds of at least $5 million is raised.

          (e) "Triggering  Event." A "Triggering  Event" shall be deemed to have
     occurred at such time as any of the following events:

               (i) so long as any Notes are  outstanding,  the  effectiveness of
          the Registration Statement, after it becomes effective, (i) lapses for
          any reason  (including,  without  limitation,  the  issuance of a stop
          order) or (ii) is  unavailable to the Holder for sale of the shares of
          Common Stock, and such lapse or unavailability  continues for a period
          of twenty  (20)  consecutive  Trading  Days,  and the shares of Common
          Stock into which the Holder's Notes can be converted cannot be sold in



                                       16
<PAGE>

          the public securities market pursuant to Rule 144 under the Securities
          Act,  provided that the cause of such lapse or  unavailability  is not
          due to  factors  primarily  within  the  control  of the Holder of the
          Notes;  and provided  further  that a Triggering  Event shall not have
          occurred  if and to the extent the  Company  exercised  its rights set
          forth in Section 3(n) of the Registration Rights Agreement;

               (ii) the suspension from listing,  without  subsequent listing on
          any one of,  or the  failure  of the  Common  Stock to be listed on at
          least one of the Pink  Sheets,  the OTC Bulletin  Board,  the American
          Stock Exchange, the Nasdaq Global Market, the Nasdaq Capital Market or
          The  New  York  Stock  Exchange,  Inc.,  for  a  period  of  ten  (10)
          consecutive Trading Days;

               (iii) the  Company's  notice to the Holder or any Other  Holders,
          including by way of public announcement, at any time, of its inability
          to comply  (including  for any of the  reasons  described  in  Section
          3.8(a) hereof) or its intention not to comply with proper requests for
          conversion of any Notes into shares of Common Stock; or

               (iv) the  Company's  failure to comply with a  Conversion  Notice
          tendered in  accordance  with the  provisions of this Note within five
          (5) Trading  Days after the  receipt by the Company of the  Conversion
          Notice; or

               (v) the Company  deregisters  its shares of Common Stock and as a
          result such shares of Common Stock are no longer publicly traded; or

               (vi) the Company consummates a "going private" transaction and as
          a result the Common Stock is no longer registered under Sections 12(b)
          or 12(g) of the Exchange Act; or

               (vii) the Maker breaches any representation,  warranty,  covenant
          or other term or condition of the Purchase  Agreement,  this Note, the
          Security  Agreement or any other agreement,  document,  certificate or
          other  instrument   delivered  in  connection  with  the  transactions
          contemplated thereby or hereby,  except to the extent that such breach
          would not have a Material  Adverse  Effect (as defined in the Purchase
          Agreement) and except,  in the case of a breach of a covenant which is
          curable,  only if such breach continues for a period of a least twenty
          (20) business days.

          (f)   Mechanics  of   Prepayment   at  Option  of  Holder  Upon  Major
     Transaction.  No sooner than fifteen (15) days nor later than ten (10) days
     prior to the consummation of a Major Transaction,  but in no event prior to
     the public announcement of such Major Transaction,  the Maker shall deliver
     written  notice  thereof via facsimile and  overnight  courier  ("Notice of
     Major  Transaction")  to the Holder of this Note and the Other Holders.  At
     any time after receipt of a Notice of Major Transaction (or, in the event a
     Notice of Major  Transaction  is not delivered at least ten (10) days prior
     to a Major Transaction, at any time during the ten (10) day period prior to
     a Major Transaction),  the Holder of this Note and the Other Holders of the
     Other Notes then  outstanding  may  require the Maker to prepay,  effective
     immediately prior to the consummation of such Major Transaction, all or any
     portion of this Note then outstanding by delivering  written notice thereof
     via  facsimile and  overnight  courier  ("Notice of Prepayment at Option of
     Holder Upon Major Transaction") to the Maker, which Notice of Prepayment at



                                       17
<PAGE>

     Option of Holder Upon Major  Transaction  shall  indicate (i) the principal
     amount of this Note that the Holder is  electing  to have  prepaid and (ii)
     the applicable Major Transaction  Prepayment Price, as calculated  pursuant
     to Section 3.7(b) above.

          (g) Mechanics of Prepayment at Option of Holder Upon Triggering Event.
     Within three (3) business days after the occurrence of a Triggering  Event,
     the Maker shall deliver  written notice thereof via facsimile and overnight
     courier ("Notice of Triggering Event") to the Holder and the Other Holders.
     At any time  after  the  earlier  of the  Holder's  receipt  of a Notice of
     Triggering  Event and the Holder becoming aware of a Triggering  Event, the
     Holder  of  this  Note  and the  Other  Holders  of the  Other  Notes  then
     outstanding may require the Maker to prepay all or any portion of this Note
     then  outstanding  by delivering  written  notice thereof via facsimile and
     overnight   courier  ("Notice  of  Prepayment  at  Option  of  Holder  Upon
     Triggering  Event") to the Maker,  which Notice of  Prepayment at Option of
     Holder Upon Triggering Event shall indicate (i) the amount of the Note that
     the Holder is electing to have prepaid and (ii) the  applicable  Triggering
     Event Prepayment Price, as calculated pursuant to Section 3.7(c) above. The
     Holder  shall only be  permitted  to require  the Maker to prepay this Note
     pursuant to Section 3.7 hereof for the greater of a period of ten (10) days
     after receipt by the Holder of a Notice of Triggering  Event or for so long
     as such Triggering Event is continuing.

          (j)  Payment  of  Prepayment  Price.  Upon  the  Maker'  receipt  of a
     Notice(s)  of  Prepayment  at Option of Holder Upon  Triggering  Event or a
     Notice(s) of Prepayment at Option of Holder Upon Major Transaction from the
     Holder or the Other  Holders,  the Maker  shall  notify  the Holder or such
     Other  Holder,  as the case may be, by facsimile of the Maker's  receipt of
     such Notice(s) of Prepayment at Option of Holder Upon  Triggering  Event or
     Notice(s) of Prepayment at Option of Holder Upon Major  Transaction  within
     two (2) business days of the Maker'  receipt of the same and the Holder and
     each Other Holder which has sent such a notice  shall  promptly  thereafter
     submit to the Maker this Note (or  certificates  representing  a portion of
     this Note if the Holder elects not to have all of the outstanding principal
     and accrued interest hereunder prepaid) or the Other Notes (or certificates
     representing a portion of the Other Notes if the Other Holders elect not to
     have  all of the  outstanding  principal  and  accrued  interest  hereunder
     prepaid)  which  the  Holder  or Other  Holders,  as the case may be,  have
     elected to have prepaid. The Maker shall deliver the applicable  Triggering
     Event Prepayment  Price to the Holder,  within five (5) business days after
     the Maker' receipt of this Note or the certificates related thereto, as the
     case may be, and, in the case of a prepayment  pursuant to Section  3.7(f),
     the Maker shall deliver the applicable Major  Transaction  Prepayment Price
     immediately  prior to the consummation of the Major  Transaction;  provided
     that the Holder's  original Note or the Other Holders' original Other Note,
     or the certificates  related  thereto,  shall have been so delivered to the
     Maker;  provided  further  that if the Maker is unable to prepay all of the
     Notes to be  prepaid,  the Maker  shall  prepay an amount to the Holder and
     each Other Holder of this Note and the Other Notes being  prepaid  equal to
     such  holder's  pro-rata  amount of all Notes being  prepaid.  If the Maker
     shall fail to prepay all of the Notes submitted for prepayment  (other than
     pursuant to a dispute as to the  arithmetic  calculation  of the Prepayment
     Price),  in  addition to any remedy such holder of the Notes may have under
     this Note and the  Purchase  Agreement,  the  applicable  Prepayment  Price
     payable in respect of such Notes not  prepaid  shall bear  interest  at the
     rate of two percent (2%) per month (prorated for partial months) until paid
     in full.  Until the Maker pay such unpaid  applicable  Prepayment  Price in
     full to a holder of the Notes submitted for  prepayment,  such holder shall
     have the option  (the "Void  Optional  Prepayment  Option")  to, in lieu of



                                       18
<PAGE>

     prepayment,  require the Maker to promptly  return to such holder(s) all of
     the Notes that were submitted for  prepayment by such holder(s)  under this
     Section  3.7 and for which  the  applicable  Prepayment  Price has not been
     paid, by sending  written  notice  thereof to the Maker via facsimile  (the
     "Void Optional  Prepayment  Notice").  Upon the Maker' receipt of such Void
     Optional  Prepayment  Notice(s) and prior to payment of the full applicable
     Prepayment Price to such holder,  (i) the Notice(s) of Prepayment at Option
     of Holder Upon Triggering Event or the Notice(s) of Prepayment at Option of
     Holder Upon Major  Transaction,  as the case may be, shall be null and void
     ab initio with  respect to those Notes  submitted  for  prepayment  and for
     which the  applicable  Prepayment  Price has not been paid,  (ii) the Maker
     shall  immediately  return  any such Notes  submitted  to the Maker by each
     holder for  prepayment  under  this  Section  and for which the  applicable
     Prepayment  Price has not been paid and (iii) the Conversion  Price of such
     returned Notes shall be adjusted to the lesser of (A) the Conversion  Price
     as in effect on the date on which the applicable  Void Optional  Prepayment
     Notice(s) is  delivered  to the Maker and (B) the lowest  closing bid price
     during  the  period  beginning  on the  date  on  which  the  Notice(s)  of
     Prepayment of Option of Holder Upon Major  Transaction  or the Notice(s) of
     Prepayment at Option of Holder Upon  Triggering  Event, as the case may be,
     is delivered to the Maker and ending on the date on which the Void Optional
     Prepayment Notice(s) is delivered to the Maker; provided that no adjustment
     shall  be  made if such  adjustment  would  result  in an  increase  of the
     Conversion  Price then in effect.  A holder's  delivery of a Void  Optional
     Prepayment  Notice and exercise of its rights  following  such notice shall
     not effect the Maker'  obligations  to make any payments which have accrued
     prior to the date of such notice. Payments provided for in this Section 3.7
     shall have priority to payments to other  stockholders in connection with a
     Major Transaction.

               Section 3.8 Inability to Fully Convert.
                           ---------------------------

          (a)  Holder's  Option if Maker  Cannot  Fully  Convert.  If,  upon the
     Company's receipt of a Conversion  Notice,  the Company cannot issue shares
     of Common Stock registered for resale under the Registration Statement, for
     any reason, including, without limitation, because the Company (x) does not
     have  a  sufficient  number  of  shares  of  Common  Stock  authorized  and
     available, (y) is otherwise prohibited by applicable law or by the rules or
     regulations of any stock exchange,  interdealer  quotation  system or other
     self-regulatory  organization  with jurisdiction over the Company or any of
     its  securities  from issuing all of the Common Stock which is to be issued
     to the  Holder  pursuant  to a  Conversion  Notice  or (z)  fails to have a
     sufficient number of shares of Common Stock registered for resale under the
     Registration  Statement,  then the  Company  shall  issue as many shares of
     Common  Stock,  as it is able to issue  in  accordance  with  the  Holder's
     Conversion  Notice and,  with  respect to the  unconverted  portion of this
     Note, the Holder, solely at Holder's option, can elect to:

               (i)  require  the Maker to prepay  that  portion of this Note for
          which the Company is unable to issue Common Stock in  accordance  with
          the Holder's Conversion Notice (the "Mandatory Prepayment") at a price
          per share equal to the Triggering  Event  Prepayment  Price as of such
          Conversion Date (the "Mandatory Prepayment Price");

               (ii) with respect to the Common Stock, if the Company's inability
          to fully convert is pursuant to Section  3.8(a)(y) above,  require the



                                       19
<PAGE>

          Company  to  issue  restricted  shares  of  Common  Stock,  if  it  is
          permissible  for the Company to do so, in accordance with the Holder's
          Conversion Notice;

               (iii) void its Conversion Notice and retain or have returned,  as
          the case may be,  this Note (or the  portion  thereof)  that was to be
          converted  pursuant  to  the  Conversion  Notice  (provided  that  the
          Holder's  voiding its  Conversion  Notice shall not affect the Maker's
          obligations  to make any payments which have accrued prior to the date
          of such notice); or

               (iv)  exercise its Buy-In  rights  pursuant to and in  accordance
          with  the  terms  and  provisions  of  Section  3.3(c)  of this  Note.


          (b)  Mechanics  of  Fulfilling  Holder's  Election.  Upon receipt of a
     facsimile copy of a Conversion Notice from the Holder which cannot be fully
     satisfied as described in Section  3.8(a)  above,  the Company shall within
     two (2)  Trading  Days  send via  facsimile  to the  Holder a notice of the
     Company's  inability to fully satisfy the Conversion Notice (the "Inability
     to Fully Convert  Notice").  Such  Inability to Fully Convert  Notice shall
     indicate  (i) the reason why the  Company  is unable to fully  satisfy  the
     Holder's  Conversion  Notice,  (ii) the amount of this Note which cannot be
     converted and (iii) the applicable  Mandatory  Prepayment Price. The Holder
     shall notify the Maker of its election  pursuant to Section 3.8(a) above by
     delivering  written  notice via facsimile to the Maker ("Notice in Response
     to Inability to Convert").

          (c) Payment of Prepayment Price. If the Holder shall elect to have its
     Notes prepaid pursuant to Section  3.8(a)(i) above, the Maker shall pay the
     Mandatory  Prepayment  Price to the Holder  within  thirty (30) days of the
     Maker's receipt of the Holder's Notice in Response to Inability to Convert,
     provided  that,  prior to the  Maker's  receipt of the  Holder's  Notice in
     Response to Inability to Convert the Company has not  delivered a notice to
     the Holder stating,  to the  satisfaction of the Holder,  that the event or
     condition  resulting  in the  Mandatory  Prepayment  has been cured and all
     Conversion  Shares  issuable to the Holder can and will be delivered to the
     Holder in  accordance  with the terms of this Note. If the Maker shall fail
     to pay the applicable  Mandatory Prepayment Price to the Holder on the date
     that is three (3)  business  days  following  the  Maker's  receipt  of the
     Holder's Notice in Response to Inability to Convert (other than pursuant to
     a dispute as to the  determination  of the  arithmetic  calculation  of the
     Prepayment Price), in addition to any remedy the Holder may have under this
     Note and the Purchase Agreement,  such unpaid amount shall bear interest at
     the rate of two percent (2%) per month  (prorated for partial months) until
     paid in full. Until the full Mandatory  Prepayment Price is paid in full to
     the Holder,  the Holder may (i) void the Mandatory  Prepayment with respect
     to that portion of the Note for which the full Mandatory  Prepayment  Price
     has not been paid,  (ii) receive back such Note, and (iii) require that the
     Conversion Price of such returned Note be adjusted to the lesser of (A) the
     Conversion  Price as in effect on the date on which the  Holder  voided the
     Mandatory Prepayment and (B) the lowest VWAP during the period beginning on
     the Conversion  Date and ending on the date the Holder voided the Mandatory
     Prepayment.

          (d)  Pro-rata  Conversion  and  Prepayment.  In the event the  Company
     receives a Conversion  Notice from the Holder and the Other  Holders on the
     same day and the Company can convert and prepay some,  but not all, of this
     Note  pursuant to this Section 3.8,  the Company  shall  convert and prepay
     from the Holder  and each Other  Holder  electing  to have its Other  Notes



                                       20
<PAGE>

     converted  and  prepaid at such time an amount  equal to the Holder or such
     Other Holder's  pro-rata  amount of all the Notes and the Other Notes being
     converted and prepaid at such time.

     Section 3.9 No Rights as Stockholder.  Nothing contained in this Note shall
be construed as  conferring  upon the Holder,  prior to the  conversion  of this
Note,  the right to vote or to  receive  dividends  or to  consent or to receive
notice as a  stockholder  in respect  of any  meeting  of  stockholders  for the
election of directors of the Company or of any other matter, or any other rights
as a stockholder of the Company.

                                   ARTICLE IV

                                  MISCELLANEOUS

     Section  4.1  Notices.  Any  notice,  demand,   request,  waiver  or  other
communication  required or permitted to be given  hereunder  shall be in writing
and shall be  effective  (a) upon hand  delivery,  telecopy or  facsimile at the
address or number  designated  in the  Purchase  Agreement  (if  delivered  on a
business day during normal  business hours where such notice is to be received),
or the first business day following such delivery (if delivered  other than on a
business day during normal  business  hours where such notice is to be received)
or (b) on the  second  business  day  following  the date of  mailing by express
courier  service,  fully  prepaid,  addressed  to such  address,  or upon actual
receipt  of such  mailing,  whichever  shall  first  occur.  The Maker will give
written  notice to the  Holder at least ten (10) days prior to the date on which
the Company takes a record (x) with respect to any dividend or distribution upon
the Common Stock, (y) with respect to any pro rata subscription offer to holders
of  Common  Stock or (z) for  determining  rights to vote  with  respect  to any
Organic  Change,  dissolution,  liquidation  or winding-up but in no event shall
such notice be provided to the Holder prior to such information being made known
to the public.  The Maker also will give  written  notice to the Holder at least
ten  (10)  days  prior to the date on which  any  Organic  Change,  dissolution,
liquidation  or winding-up  will take place but in no event shall such notice be
provided to the Holder prior to such information being made known to the public.
The Maker shall promptly  notify the Holder of any notices sent or received,  or
any actions taken with respect to the Other Notes.

     Section 4.2 Governing Law; Consent to Jurisdiction. The parties acknowledge
and agree that any claim, controversy,  dispute or action relating in any way to
this agreement or the subject matter of this agreement  shall be governed solely
by the laws of the State of  Delaware,  without  regard to any  conflict of laws
doctrines.  The parties  irrevocably  consent to being served with legal process
issued from the state and  federal  courts  located in New York and  irrevocably
consent to the exclusive  personal  jurisdiction of the federal and state courts
situated in the State of New York. The parties  irrevocably waive any objections
to the personal  jurisdiction  of these courts.  Said courts shall have sole and
exclusive  jurisdiction  over any and all claims,  controversies,  disputes  and
actions which in any way relate to this  agreement or the subject matter of this
agreement.  The parties also irrevocably  waive any objections that these courts
constitute an oppressive, unfair, or inconvenient forum and agree not to seek to
change venue on these grounds or any other grounds.  Nothing in this Section 4.2
shall affect or limit any right to serve  process in any other manner  permitted
by law.



                                       21
<PAGE>


     Section  4.3  Headings.  Article  and  section  headings  in this  Note are
included  herein for purposes of  convenience  of  reference  only and shall not
constitute a part of this Note for any other purpose.

     Section 4.4 Remedies,  Characterizations,  Other Obligations,  Breaches and
Injunctive Relief. The remedies provided in this Note shall be cumulative and in
addition to all other  remedies  available  under this Note, at law or in equity
(including,  without limitation,  a decree of specific  performance and/or other
injunctive  relief),  no  remedy  contained  herein  shall be deemed a waiver of
compliance  with the  provisions  giving rise to such remedy and nothing  herein
shall  limit a Holder's  right to pursue  actual  damages for any failure by the
Maker to comply with the terms of this Note.  Amounts set forth or provided  for
herein with respect to payments,  conversion  and the like (and the  computation
thereof) shall be the amounts to be received by the Holder hereof and shall not,
except as expressly  provided herein,  be subject to any other obligation of the
Maker (or the performance thereof). Each of the Maker acknowledges that a breach
by it of its obligations  hereunder will cause  irreparable and material harm to
the  Holder and that the  remedy at law for any such  breach may be  inadequate.
Therefore  each Maker agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled,  in addition to all other available rights
and remedies,  at law or in equity,  to seek and obtain such  equitable  relief,
including  but not  limited  to an  injunction  restraining  any such  breach or
threatened  breach,  without the necessity of showing  economic loss and without
any bond or other security being required.

     Section 4.5  Enforcement  Expenses.  The Maker  agrees to pay all costs and
expenses  of the  Holder  incurred  as a result  of  enforcement  of this  Note,
including, without limitation, reasonable attorneys' fees and expenses.

     Section 4.6 Binding Effect. The obligations of the Maker and the Holder set
forth  herein  shall be binding  upon the  successors  and  assigns of each such
party,  whether or not such  successors  or assigns are  permitted  by the terms
hereof.

     Section  4.7  Amendments.  This Note may not be  modified or amended in any
manner except in writing executed by the Maker and the Holder.

     Section  4.8  Compliance  with  Securities  Laws.  The  Holder of this Note
acknowledges  that this  Note is being  acquired  solely  for the  Holder's  own
account and not as a nominee for any other party,  and for investment,  and that
the Holder shall not offer,  sell or otherwise  dispose of this Note.  This Note
and any Note issued in substitution or replacement  therefor shall be stamped or
imprinted with a legend in substantially the following form:

           "THIS  NOTE  AND THE  SECURITIES  ISSUABLE  UPON  CONVERSION
           HEREOF HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF
           1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES
           LAWS,  AND MAY NOT BE SOLD OR  TRANSFERRED IN THE ABSENCE OF
           SUCH  REGISTRATION  OR RECEIPT  BY THE  COMPANY OF A WRITTEN
           OPINION  OF  COUNSEL  IN  THE  FORM,   SUBSTANCE  AND  SCOPE



                                       22
<PAGE>

           REASONABLY  SATISFACTORY  TO THE COMPANY  THAT THIS NOTE AND
           THE SECURITIES  ISSUABLE UPON CONVERSION HEREOF MAY BE SOLD,
           TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN
           EXEMPTION  FROM  REGISTRATION  UNDER THE ACT AND SUCH  STATE
           SECURITIES LAWS."

     Section 4.9 Accredited  Investor Status. In no event may the Holder convert
this Note in whole or in part unless the Holder is an  "accredited  investor" as
defined in Regulation D under the Act.

     Section 4.10 Parties in Interest. This Note shall be binding upon, inure to
the benefit of and be enforceable by the Maker,  the Holder and their respective
successors and permitted assigns.

     Section 4.11 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  privilege,  nor shall any waiver by the Holder of
any such  right or  rights  on any one  occasion  be deemed a waiver of the same
right or rights on any future occasion.

               Section 4.12 Maker's Waivers.
                            ---------------

          (a) Except as otherwise  specifically  provided herein,  the Maker and
     all others  that may become  liable for all or any part of the  obligations
     evidenced  by this  Note,  hereby  waive  presentment,  demand,  notice  of
     nonpayment,  protest and all other demands' and notices in connection  with
     the delivery, acceptance,  performance and enforcement of this Note, and do
     hereby  consent  to any number of  renewals  of  extensions  of the time or
     payment  hereof and agree that any such renewals or extensions  may be made
     without notice to any such persons and without  affecting  their  liability
     herein and do further  consent to the release of any person liable  hereon,
     all without  affecting the liability of the other  persons,  firms or Maker
     liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.

          (b) THE MAKER  ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS
     A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE
     LAW,  HEREBY  WAIVES ITS RIGHT TO NOTICE AND  HEARING  WITH  RESPECT TO ANY
     PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE
     TO USE.

     Section 4.13  Definitions.  For the purposes  hereof,  the following  terms
shall have the following meanings:


     "Convertible  Securities"  means  any  convertible  securities,   warrants,
options or other rights to subscribe for or to purchase or exchange for,  shares
of Common Stock or Common Stock Equivalents.



                                       23
<PAGE>


     "Options"  shall mean any rights,  warrants or options to subscribe  for or
purchase Common Stock or Convertible Securities of the Company.

     "Person"  means  an  individual  or  a  corporation,   partnership,  trust,
incorporated or  unincorporated  association,  joint venture,  limited liability
company, joint stock company,  government (or an agency or political subdivision
thereof) or other entity of any kind.

     "Trading  Day" means (a) a day on which the  Common  Stock is traded on the
Pink Sheets, OTC Bulletin Board, or (b) if the Common Stock is not traded on the
OTC  Bulletin  Board,  a day  on  which  the  Common  Stock  is  quoted  in  the
over-the-counter  market as  reported  by the Pink  Sheets  LLC (or any  similar
organization or agency succeeding its functions of reporting prices);  provided,
however,  that in the event that the Common Stock is not listed or quoted as set
forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday,
Sunday  and any day which  shall be a legal  holiday  or a day on which  banking
institutions in the State of New York are authorized or required by law or other
government action to close.

     Section  4.14 Usury.  All  agreements  between the Maker and the Holder are
hereby expressly  limited to provide that in no contingency or event whatsoever,
whether by reason of  acceleration  of  maturity of the  indebtedness  evidenced
hereby or  otherwise,  shall the amount  paid or agreed to be paid to the Holder
for the use,  forbearance  or detention  of the  indebtedness  evidenced  hereby
exceed the  maximum  amount  which the  Holder is  permitted  to  receive  under
applicable  law.  If,  from any  circumstances  whatsoever,  fulfillment  of any
provision hereof or of the Stock Purchase Agreement or any document  thereunder,
at  the  time  performance  of  such  provision  shall  be  due,  shall  involve
transcending  the limit of validity  prescribed by law,  then,  ipso facto,  the
obligation to be fulfilled shall  automatically  be reduced to the limit of such
validity, and if from any circumstance the Holder shall ever receive as interest
an amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal balance of
any of the Maker's obligations to the Holder, and not to the payment of interest
hereunder. To the extent permitted by applicable law, all sums paid or agreed to
be paid for the use,  forbearance or detention of the indebtedness  evidenced by
this Note shall be amortized, prorated, allocated and spread throughout the full
term of such  indebtedness  until  payment in full,  to the end that the rate or
amount  of  interest  on  account  of such  indebtedness  does  not  exceed  any
applicable usury ceiling.  As used herein,  the term "applicable law" shall mean
the law in effect as of the date hereof,  provided,  however,  that in the event
there is a change  in the law  which  results  in a higher  permissible  rate of
interest,  then this Note shall be governed by such new law as of its  effective
date.  This  provision  shall  control every other  provision of all  agreements
between the Maker and the Holder.



                                       24
<PAGE>



     IN WITNESS  WHEREOF,  the Maker has caused this Note to be duly executed as
of the Issuance Date set out above.


                                                TOTAL LUXURY GROUP, INC.


                                                 By:
                                                     ---------------------------
                                                      Name:
                                                      Title:









                                       25
<PAGE>



                                    EXHIBIT A

                                WIRE INSTRUCTIONS



Payee: ________________________________________________________

Bank:  ________________________________________________________

Address: _____________________________________________________

            __________________________________________________

Bank No.: _____________________________________________________

Account No.:  __________________________________________________

Account Name: _________________________________________________








                                       26
<PAGE>



                                     FORM OF

            NOTICE OF OPTIONAL CONVERSION INTO SHARES OF COMMON STOCK

          (To be Executed by the Registered Holder in order to Convert
                      the Note into Shares of Common Stock)

The undersigned hereby  irrevocably elects to convert $ ________________  of the
principal  amount of the above Note No. ___ into shares of Common Stock of TOTAL
LUXURY GROUP, INC. (the "Company") according to the conditions hereof, as of the
date written below.

Date of Conversion _________________________________________________________

Applicable Conversion Price __________________________________________________

Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion:____________________________________

Signature___________________________________________________________________

         [Name]

Address:__________________________________________________________________

         _________________________________________________________________










                                       27
<PAGE>



                                 Schedule 1.4(a)



None.



















                                       28
<PAGE>