<PAGE>

                                                                      EXHIBIT


NO.1                                                              $500,000 USD


                                INTERIORS INC.


                   7% Convertible Debenture due July 26, 2001


THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY OTHER APPLICABLE STATE SECURITIES LAWS
AND HAS BEEN ISSUED IN RELIANCE UPON REGULATION D PROMULGATED UNDER THE
SECURITIES ACT. THIS DEBENTURE SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A
SOLICITATION OF AN OFFER TO BUY THE DEBENTURE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL.


THIS DEBENTURE MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
UNDER APPLICABLE STATE SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT
FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND UNDER
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS; AND IN THE CASE OF AN
EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION FROM THEIR COUNSEL THAT
SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE SECURITIES.


     THIS DEBENTURE is one of a duly authorized issue of Debentures of
INTERIORS INC., a corporation duly organized and existing under the laws of
the State of Delaware (the "ISSUER"), issued on July 27, 1998 (the "Issuance
Date"), and designated as its 7% Convertible Debentures due July 26, 2001, in
an aggregate face amount not exceeding Two Million Two Hundred Fifty Thousand
(USD$2,250,000) Dollars.


THIS DEBENTURE HAS BEEN ISSUED UNDER THE TERMS AND PROVISIONS OF THE 7%
CONVERTIBLE DEBENTURES SUBSCRIPTION AGREEMENT DATED AS OF JULY 27, 1998 BETWEEN
THE ISSUER AND HOLDER (THE "AGREEMENT") AND SHALL BE SUBJECT TO ALL OF THE
TERMS AND CONDITIONS AND ENTITLED TO ALL OF THE BENEFITS THEREOF.


               FOR VALUE RECEIVED, the ISSUER promises to pay to


                          DOMINION CAPITAL FUND, LTD.


the registered holder hereof or its registered assigns, if any (the "HOLDER"),
the principal sum of:


                             FIVE HUNDRED THOUSAND


                             United States Dollars,
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on July 26, 2001 (the "Maturity Date"), and to pay interest, as outlined below,
at the rate of seven (7%) percent per annum on the principal sum outstanding
for the term of this Debenture. Accrual of interest shall commence on the date
hereof. Interest shall be payable by the ISSUER in cash, quarterly, commencing
on the first business day of the Company's next fiscal quarter immediately
following the Issuance Date, on that portion of the principal amount of this
Debenture which is then outstanding. The interest so payable will be paid to
the person in whose name this Debenture (or one or more predecessor Debentures)
is registered on the records of the ISSUER regarding registration and transfers
of the Debenture (the "Debenture Register"), provided, however, that the
ISSUER'S obligation to a transferee of this Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions contained in the Agreement. The principal of this Debenture is
payable as provided below in shares of Common Stock at any time prior to the
Maturity Date upon the HOLDER exercising its conversion rights set forth below.
In the event this Debenture is outstanding on the Maturity Date it shall
automatically be converted into freely tradable shares of Common Stock as if
the HOLDER voluntarily elected such conversion in accordance with the
procedures, terms and conditions set forth in this Debenture provided, that (i)
the Common Stock is listed on the OTC Bulletin Board or Nasdaq Small Cap Stock
Market, (ii) the Bid Price is greater the One ($1.00) Dollar for the ten (10)
Trading Days immediately preceding the Maturity Date, (iii) there has not been
any suspension in the trading of the Common Stock on the OTC Bulletin Board or
Nasdaq Small Cap Stock Market during the thirty (30) Trading Days immediately
preceding the Maturity Date, and the (iv) the ISSUER has been in full
compliance with the terms and conditions of this Debenture and the Agreement.
In the event all of the aforementioned conditions are not satisfied, or the
ISSUER is not able to issue freely tradable shares of Common Stock as described
above, the ISSUER agrees to pay to the HOLDER, in cash, within three (3)
Trading Days of the Maturity Date, the dollar value of the number of shares of
Common Stock issuable to the HOLDER as if the HOLDER had exercised its
conversion rights on the Maturity Date, multiplied by the closing bid price of
the Common Stock on the Maturity Date. Principal and interest are payable at
the address last appearing on the Debenture Register as designated in writing
by the HOLDER hereof from time to time.


     The Debenture is subject to the following additional provisions:


     1. Subject to the restrictions on transferability set forth herein and in
the Agreement, the Debenture is exchangeable for like Debentures in equal
aggregate principal amount of authorized denominations, as requested by the
HOLDER surrendering the same. No service charge will be made for such
registration or transfer or exchange, although the HOLDER shall be responsible
for their own expenses associated with complying with the restrictions on
transfer of the Debenture in the Agreement.


     2. The ISSUER shall be entitled to withhold from all payments of principal
of this Debenture any amounts required to be withheld under the applicable
provisions of the U.S. Internal Revenue Code of 1986, as amended, or other
applicable laws at the time of such payments.


                                       2
<PAGE>

     3. This Debenture has been issued subject to investment representations of
the original HOLDER hereof and may be transferred or exchanged in the United
States only in compliance with the 1933 Act and applicable state securities
laws and in compliance with the restrictions on transfer provided in the
Agreement. Prior to the due presentment for such transfer of this Debenture,
the ISSUER and any agent of the ISSUER may treat the person in whose name this
Debenture is duly registered on the Debenture Register as the owner hereof for
the purpose of receiving payment as herein provided and all other purposes,
whether or not this Debenture is overdue, and neither the ISSUER nor any such
agent shall be affected by notice to the contrary. The transferee shall be
bound, as the original HOLDER by the same representations and terms described
herein and under the Agreement.


     4. At any time after the two hundred fortieth (240th) day from the
Issuance Date, the HOLDER is entitled, at its option, to convert this
Debenture, in whole or in part, in accordance with the following terms and
conditions:


          (a) The HOLDER may exercise its right to convert the Debenture by
     telecopying an executed and completed notice of conversion (the "Notice of
     Conversion") to the ISSUER and delivering the original Notice of
     Conversion and the original Debenture to the ISSUER by express courier.
     Each business date on which a Notice of Conversion is telecopied to and
     received by the ISSUER in accordance with the provisions hereof shall be
     deemed a "Conversion Date". The ISSUER will transmit the certificates
     representing shares of Common Stock issuable upon conversion of the
     Debenture (together with the certificates representing the Debenture not
     so converted) to the HOLDER via express courier, by electronic transfer or
     otherwise within six business days after the Conversion Date if the ISSUER
     has received the original Notice of Conversion and Debenture being so
     converted by such date. In addition to any other remedies which may be
     available to the HOLDER, in the event that the ISSUER fails to effect
     delivery of such shares of Common Stock within such six business day
     period, the HOLDER will be entitled to revoke the Notice of Conversion by
     delivering a notice to such effect to the ISSUER whereupon the ISSUER and
     the HOLDER shall each be restored to their respective positions
     immediately prior to delivery of the Notice of Conversion. The Notice of
     Conversion and Debenture representing the portion of the Debenture
     converted shall be delivered as follows:


     To the ISSUER:


            INTERIORS INC.
            320 Washington Street
            Mount Vernon, New York 10553
            Attn: Max Munn, President
            Facsimile: (914) 665-5469
            Telephone: (914) 665-5400


     In the event that the Common Stock issuable upon conversion of the
Debenture is not delivered, within six (6) business days of receipt by the
ISSUER of a valid Notice of Conversion and the Debenture to be converted, the
ISSUER shall pay to the HOLDER, in


                                       3
<PAGE>

immediately available funds, upon demand, as liquidated damages for such
failure and not as a penalty, for each $100,000 principal amount of Debenture
sought to be converted, $500 for each of the first ten (10) days and $1,000 per
day thereafter that the shares of Common Stock are not delivered, which
liquidated damages shall run from the seventh business day after the Conversion
Date up until the time that either the Conversion Notice is revoked or the
Common Stock is delivered, at which time such liquidated damages shall cease.
Any and all payments required pursuant to this paragraph shall be payable only
in cash immediately and shall not be in addition to the liquidated damages set
forth in Section 4(ii) of the Agreement.


     (b) Each Debenture shall be convertible, at the sole option of the HOLDER,
into that number of shares of fully paid and nonassessable shares of Common
Stock which is to be derived from dividing the Conversion Amount by the
Conversion Price. For purposes of this Debenture, the Conversion Amount shall
mean the principal dollar amount of the Debenture being converted plus all
accrued and unpaid interest attributable to the Debenture being converted as of
the Conversion Date. The Conversion Price shall be equal to the lesser of: (i)
eighty (80%) percent of the average closing bid price of the Common Stock
during the three day trading period immediately preceding the Conversion Date,
or (ii) US$2.10. The closing bid price shall be deemed to be the reported last
bid price regular way as reported by Bloomberg LP or if unavailable, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or if the Common Stock is not listed or admitted to
trading on any national securities exchange, the closing bid price as reported
by NASDAQ or such other system then in use, or, if the Common Stock is not
quoted by any such organization, the closing bid price in the over-the-counter
market as furnished by the principal national securities exchange on which the
Common Stock is traded. Notwithstanding anything in this Debenture to the
contrary, the ability of Holder to convert this Debenture shall be restricted
as set forth in Sections 9.1 and 9.2 of the Agreement provided the Company
complies with these sections and pays the Economic Benefit.


     (c) The number of shares of Common Stock issuable upon the conversion of
the Debenture and the Conversion Price shall be subject to adjustment as
follows:


          (i) In case the ISSUER shall (A) pay a dividend on Common Stock in
     Common Stock or securities convertible into, exchangeable for or otherwise
     entitling a holder thereof to receive Common Stock, (B) declare a dividend
     payable in cash on its Common Stock and at substantially the same time
     offer its shareholder a right to purchase new Common Stock (or securities
     convertible into, exchangeable for or otherwise entitling a holder thereof
     to receive Common Stock) from proceeds of such dividend (all Common Stock
     so issued shall be deemed to have been issued as a stock dividend), (C)
     subdivide its outstanding shares of Common Stock into a greater number of
     shares of Common Stock, (D) combined its outstanding shares of Common
     Stock into a smaller number of shares of Common Stock, or (E) issue by
     reclassification of its Common Stock any shares of Common Stock of the
     ISSUER, the number of shares of Common Stock issuable upon conversion of
     the Debenture immediately prior thereto shall be adjusted so that the
     holders of the Debenture shall be entitled to receive after the happening
     of any of the events described above that number and kind of shares as the
     holders would have received had such Debenture been converted immediately
     prior to the happening of


                                       4
<PAGE>
     such event or any record date with respect thereto. Any adjustment made
     pursuant to this subdivision shall become effective immediately after the
     close of business on the record date in the case of a stock dividend and
     shall become effective immediately after the close of business on the
     record date in the case of a stock split, subdivision, combination or
     reclassification.


          (ii) Any adjustment in the numbers of shares of Common Stock issuable
     hereunder otherwise required to be made by this paragraph 4(c) will not
     have to be made if such adjustment would not require an increase or
     decrease in one (1%) percent or more in the number of shares of Common
     Stock issuable upon conversion of the Debenture.


          (iii) Whenever the number of shares of Common Stock issuable upon the
     conversion of the Debenture is adjusted, as herein provided, the
     Conversion Price shall be adjusted (to the nearest cent) by multiplying
     such Conversion Price immediately prior to such adjustment by a fraction
     of which the numerator shall be the number of shares of Common Stock
     issuable upon the exercise of each share of Debenture immediately prior to
     such adjustment, and of which the denominator shall be the number of
     shares of Common Stock issuable immediately thereafter.


     (d) In the case of any (i) consolidation or merger of the ISSUER into any
entity (other than a consolidation or merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the ISSUER), (ii) sale, transfer, lease or conveyance of all or
substantially all of the assets of the ISSUER as an entirety or substantially
as an entirety, or (iii) reclassification, capital reorganization or change of
the Common Stock (other than solely a change in par value, or from par value to
no par value), in each case as a result of which shares of Common Stock shall
be converted into the right to receive stock, securities or other property
(including cash or any combination thereof), each holder of a Debenture then
outstanding shall have the right thereafter to convert such Debenture only into
the kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale, transfer, capital reorganization or
reclassification by a holder of the number of shares of Common Stock of the
ISSUER into which such Debenture would have been converted immediately prior to
such consolidation, merger, sale, transfer, capital reorganization or
reclassification, assuming such holder of Common Stock of the ISSUER (A) is not
an entity with which the ISSUER consolidated or into which such sale or
transfer was made, as the case may be ("constituent entity"), or an affiliate
of the constituent entity, and (B) failed to exercise his or her rights of
election, if any, as to the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer (provided
that if the kind or amount of securities, cash or other property receivable
upon such consolidation, merger, sale or transfer is not the same for each
share of Common stock of the ISSUER held immediately prior to such
consolidation, merger, sale or transfer by other than a constituent entity or
an affiliate thereof and in respect of which the ISSUER merged into the ISSUER
or to which such rights or election shall not have been exercised
("non-electing share"), then for the purpose of this Section (4)(d) the kind
and amount of securities, cash or other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a majority of the
non-electing shares). If necessary, appropriate adjustment shall be made in the
application of the provision set forth herein with respect to the


                                       5
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rights and interest thereafter of the HOLDER, to the end that the provisions
set forth herein shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the conversion of the Debenture. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers, capital reorganizations and reclassifications. The ISSUER shall not
effect any such consolidation, merger, sale or transfer unless prior to or
simultaneously with the consummation thereof the successor ISSUER or entity (if
other than the ISSUER) resulting from such consolidation, merger, sale or
transfer shall assume, by written instrument, the obligation to deliver to the
HOLDER such shares of Common Stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to receive under this
paragraph.


     (e) The ISSUER will not, by amendment of its Certificate of Incorporation
or through any reorganization, recapitalization, 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 ISSUER, but will at
all times in good faith assist in the carrying out of all the provisions of
this paragraph and in taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the HOLDERS against
impairment.


     5. First Redemption Prior to 240 Days Following Issuance Date. At any time
prior to the two hundred fortieth (240th) day following the Issuance Date the
Issuer shall be entitled to Redeem all or any portion of the outstanding
Debenture in cash pursuant to the following procedures and at the First
Redemption Price hereinafter provided by providing seven (7) business days
prior written notice (the "First Redemption Notice") to the HOLDER:


     (a) The First Redemption Notice shall set forth (i) the First Redemption
Date which shall be ten (10) trading days after the First Redemption Notice
Date, (ii) the First Redemption Price which shall equal the Purchase Price of
that portion of the Debenture being redeemed plus all accrued interest
attributable to that portion of the Debenture being redeemed, (iii) a statement
that interest on that portion of the Debenture being redeemed will cease to
accrue on such First Redemption Date, and (iv) a statement of or reference to
the conversion right set forth in this Debenture (including that the right to
give a notice of conversion in respect of any shares to be redeemed shall
terminate on the First Redemption Date). The First Redemption Notice shall be
irrevocable, and it shall be mailed, postage prepaid, at least ten (10)
business days prior to the First Redemption Date to the HOLDER at their address
as the same shall appear on the books of the Company. If fewer than all of the
principal amount of the Debentures owned by the HOLDER are then to be redeemed,
the notice shall specify the amount thereof that is to be redeemed and, if
practicable, the numbers of the certificates representing such Debenture.


     (b) Immediately following the First Redemption Date, the HOLDER shall
surrender their original Debenture at the office of the ISSUER, and the ISSUER
shall issue to the HOLDER a new Debenture Certificate for the principal amount
that remains outstanding, if any.


     (c) The ISSUER shall not be entitled to send any First Redemption Notice
and begin the First redemption procedure hereunder unless it has:


                                       6
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     (i) the full amount of the First Redemption Price in cash, available in a
   demand or other immediately available account in a bank or similar
   financial institution;


     (ii) immediately available credit facilities, in the full amount of the
   First Redemption Price with a bank or similar financial institution; or


     (iii) a combination of the items set forth in (i) and (ii) above,
   aggregating the full amount of the First Redemption Price.


     (d) In the event the ISSUER fails to make payment pursuant to the First
Redemption Notice on the First Redemption Date or otherwise fails to comply
with the Redemption provisions set forth herein, the First Redemption and First
Redemption Notice shall be deemed null and void and the ISSUER shall lose any
and all further redemption privileges and rights.


     6. Second Redemption Subsequent to 240 Days Following Issuance Date. At
any time after the two hundred fortieth (240th) day following the Issuance Date
the Issuer shall be entitled to redeem all or any portion of the outstanding
Debenture in cash pursuant to the following procedures and at the Second
Redemption Price hereinafter provided by providing and the Holder receiving,
twenty (20) calendar days prior written notice (the "Second Redemption
Notice").


     (a) The Second Redemption Notice shall set forth (i) the Second Redemption
Date which shall be twenty (20) calendar days after the Second Redemption
Notice Date, (ii) the Second Redemption Price which shall equal that portion of
the Purchase Price of the Debenture being redeemed, plus all accrued interest
attributable to that portion of the Debenture being Redeemed, plus a premium
calculated on a daily pro rata basis equal to ten percent (10%) of the
principal amount of that portion of the Debenture being redeemed for the first
thirty (30) day period following the two hundred fortieth (240th) day after the
Issuance Date plus an additional two percent (2%) of the principal amount of
the Debenture being redeemed for each thirty (30) day period following the two
hundred seventieth (270th) day after the Issuance Date and ending on the Second
Redemption Notice Date, (iii) a statement that interest on that portion of the
Debenture being redeemed will cease to accrue on such Second Redemption Date.
The Second Redemption Notice shall be irrevocable, and it shall be mailed,
postage prepaid, at least twenty (20) calendar days prior to the Second
Redemption Date to the HOLDER at their address as the same shall appear on the
books of the Company (the date of such mailing being the "Second Redemption
Notice Date"). If fewer than all of the principal amount of the Debentures
owned by the HOLDER are then to be Redeemed, the notice shall specify the
amount thereof that is to be redeemed and, if practicable, the numbers of the
certificates representing such Debenture.


     (b) Immediately following the Second Redemption Date, the HOLDER shall
surrender their original Debenture at the office of the ISSUER, and the ISSUER
shall issue to the HOLDER a new Debenture Certificate for the principal amount
that remains outstanding, if any.


                                       7
<PAGE>

     (c)  The ISSUER shall not be entitled to send any Second Redemption Notice
and begin the redemption procedure hereunder unless it has:


     (i) the full amount of the Second Redemption Price in cash, available in
   a demand or other immediately available account in a bank or similar
   financial institution;


     (ii) immediately available credit facilities, in the full amount of the
   Second Redemption Price with a bank or similar financial institution; or


     (iii) a combination of the items set forth in (i) and (ii) above,
   aggregating the full amount of the Second Redemption Price.


     (d) In the event the ISSUER fails to make payment pursuant to the Second
Redemption Notice on the Second Redemption Date or otherwise fails to comply
with the Redemption provisions set forth herein, the Second Redemption and
Second Redemption notice shall be deemed null and void and the ISSUER shall
lose any and all further redemption privileges and rights.


     (e) Notwithstanding the above, at any time prior to the Second Redemption
Date the HOLDER is entitled, at its option, to convert the Debentures being
noticed for redemption, in whole or in part in accordance with the terms and
conditions set forth above in Section 4.


     7. No provisions of this Debenture shall alter or impair the obligation of
the ISSUER, which is absolute and unconditional, upon an Event of Default (as
defined below), to pay the principal of, and interest on this Debenture at the
place, time, and rate, and in the coin or currency herein prescribed.


     8. The ISSUER hereby expressly waives demand and presentment for payment,
notice on nonpayment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, and diligence in taking any action to
collect amounts called for hereunder and shall be directly and primarily liable
for the payment of all sums owing and to be owing hereon, regardless of and
without any notice, diligence, act or omission as or with respect to the
collection of any amount called for hereunder.


     9. If one or more of the following described "Events of Default" shall
occur,


     (a) Any of the representations or warranties made by the ISSUER herein, or
in the Agreement shall have been incorrect when made in any material respect;
or


     (b) The ISSUER shall fail to perform or observe in any material respect 
any covenant, term, provision, condition, agreement or obligation of the ISSUER
under this

                                   (8)

<PAGE>

Debenture, the Registration Rights Agreement and the Agreement, between the
parties of even date herewith, which shall remain uncured for five business
days after notice hereof; or


     (c) A trustee, liquidator or receiver shall be appointed for the ISSUER or
for a substantial part of its property or business without its consent and
shall not be discharged within thirty (30) days after such appointment; or


     (d) Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the ISSUER and
shall not be dismissed within thirty (30) calendar days thereafter; or


     (e) Bankruptcy reorganization, Insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the ISSUER and, if instituted
against the ISSUER, ISSUER shall by any action or answer approve of, consent to
or acquiesce in any such proceedings or admit the material allegations of, or
default in answering a petition filed in any such proceeding or such
proceedings shall not be dismissed within thirty (30) days thereafter; or


     (f) The Common Stock is delisted from trading on the NASDAQ Small Cap
Stock Market (except pursuant to section 9.2 of the Agreement), or the Company
has received notice concerning delisting from the NASDAQ Small Cap Stock
Market; or


     (g) The effectiveness of the Registration Statement has been suspended for
a period of ten (10) Trading Days.


     Then, or at any time thereafter, and in each and every such case, unless
such Event of Default shall have been waived in writing by the HOLDER (which
waiver shall not be deemed to be a waiver of any subsequent default) at the
option of the HOLDER and in the HOLDER'S sole discretion, the HOLDER may
consider this Debenture immediately due and payable in cash, (at the equivalent
dollar value of the number of shares of Common Stock issuable upon conversion
(assuming a Conversion Date as of the date of such notice from the HOLDER)
times the Bid Price on the Trading Day immediately preceding such notice from
the HOLDER, without presentment, demand protest or notice of any kind, all of
which are hereby expressly waived, anything herein or in any note or other
instruments contained to the contrary notwithstanding, and HOLDER may
immediately, and without expiration of any period of grace, enforce any and all
of the HOLDER'S rights and remedies provided herein or any other rights or
remedies afforded by law. It is agreed that in the event of such action, such
HOLDER shall be entitled to receive all reasonable fees, costs and expenses
incurred, including without limitation such reasonable fees and expenses of
attorneys (if litigation is commenced).


     10. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent


                                       9
<PAGE>

possible, and the validity and enforceability of the remaining provisions of
this Debenture will not in any way be affected or impaired thereby.


     11. In addition to the terms of the Registration Rights Agreement of even
date herewith, the HOLDER shall have the right to include all of the shares of
Common Stock underlying this Debenture (the "Registrable Securities") as part
of any registration of securities filed by the ISSUER (other than in connection
with a transaction contemplated by Rule 145(a) promulgated under the Act or
pursuant to Form S-8, or the financing arrangement presently under review with
Cruttenden Roth Incorporated or any substitute entity for a transaction
therefor and having substantially the same terms) and must be notified in
writing of such filing; provided, however, that the HOLDER agrees it shall not
have any piggy-back registration rights pursuant to this Debenture if the
shares of Common Stock underlying this Debenture may be sold in the United
States pursuant to the provisions of Rule 144. HOLDER shall have five (5)
business days to notify the ISSUER in writing as to whether the ISSUER is to
include HOLDER or not include HOLDER as part of the registration; provided,
however, that if any registration pursuant to this Section shall be
underwritten, in whole or in part, the Company may require that the Registrable
Securities requested for inclusion pursuant to this Section be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the underwriter
evidenced in writing of such offering only a limited number of Registrable
Securities should be included in such offering, or no such shares should be
included, the HOLDER, and all other selling stockholders, shall be limited to
registering such proportion of their respective shares as shall equal the
proportion that the number of shares of selling stockholders permitted to be
registered by the underwriter in such offering bears to the total number of all
shares then held by all selling stockholders desiring to participate in such
offering. Those Registrable Securities which are excluded from an underwritten
offering pursuant to the foregoing provisions of this Section (and all other
Registrable Securities held by the selling stockholders) shall be withheld from
the market by the HOLDERS thereof for a period, not to exceed one hundred
eighty (180) days, which the underwriter may reasonably determine is necessary
in order to effect such underwritten offering. The ISSUER shall have the right
to terminate or withdraw any registration initiated by it under this Agreement
prior to the effectiveness of such registration whether or not any Debenture
holder elected to include securities in such registration. All registration
expenses incurred by the ISSUER in complying with this Agreement shall be paid
by the ISSUER, exclusive of underwriting discounts, commissions and legal fees
and expenses for counsel to the HOLDERS of this Debenture.


     12. This Debenture and the Agreement (along with all exhibits attached
thereto) constitute the full and entire understanding and agreement between the
ISSUER and HOLDER with respect hereto. Neither this Debenture nor any terms
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the ISSUER and the HOLDER. Any capitalized terms shall
have the same meaning as given in the Agreement. In the event of any
inconsistencies between this Debenture and the Agreement, the Agreement shall
control.


                                       10
<PAGE>

     13. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York.


     14. This Debenture, together with all documents referenced herein, embody
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in this Debenture or the Agreement shall affect, or be used
to interpret, change or restrict, the express terms and provisions of this
Debenture.


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<PAGE>

     IN WITNESS WHEREOF, the ISSUER has caused this Debenture to be duly
executed by an officer thereunto duly authorized.


                                           INTERIORS INC.







                                            By: /s/ Max Munn        
                                            ---------------------
                                            Name: Max Munn
                                            Title: President
                                            Date: July 27, 1998

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