**AMERICAN WATER STAR, INC.**

**CONVERTIBLE NOTE PURCHASE AGREEMENT**

      THIS CONVERTIBLE NOTE PURCHASE AGREEMENT  (as amended, modified, supplemented or restated in accordance with its terms  from time to time, this "Agreement"), dated this _______ day of _______________,  2002, is between AMERICAN WATER STAR, INC., a Nevada corporation and its affiliates,  as hereinafter defined (the "Borrower"), and the individuals named  in Schedule 1 attached hereto, their successors and assigns (individually, a  "Purchaser" and together, the "Purchasers"). Capitalized  terms used but not otherwise defined herein shall have the respective meanings  set forth in Article VIII.

**RECITALS**

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A. The Borrower desires to induce the Purchasers to make a loan to the Borrower    through the purchase of convertible notes (the "Notes").

B. Subject to the terms and conditions set forth herein, the Purchasers desire    to purchase from the Borrower, and the Borrower desires to issue and sell    to the Purchasers, the Notes, for an aggregate purchase price up to $700,000    payable as provided herein.

**AGREEMENTS**

       In consideration of the recitals  and the mutual promises, covenants and agreements contained herein and other  good and valuable consideration, the receipt and sufficiency of which are hereby  acknowledged, the parties hereto hereby agree as follows:

**ARTICLE I**

**AUTHORIZATION AND SALE OF THE NOTE AND NOTES**

       1. 1 Authorization. The Borrower  has, prior to the date of this Agreement, (i) authorized the issuance and sale  of the Notes to the Purchasers, and (ii) authorized the issuance of, and reserved  for issuance shares of Common Stock upon the conversion of the Notes.

       1.2 Sale of the Note to the Purchasers.  Subject in all respects to the satisfaction of the terms and conditions herein  set forth and in reliance upon the respective representations and warranties  of the parties set forth herein or in any document delivered pursuant hereto,  the Borrower agrees to sell to each Purchaser (and such Purchaser agrees by  executing and delivering a signature page hereto to purchase from the Borrower)  a Note in the original principal amount set forth opposite each respective name  on Schedule 1, each free and clear of all Liens, for an aggregate purchase price  set forth opposite each respective name on Schedule 1. The unpaid principal  amount and accrued interest shall be payable in full one (1) year from the date  of issue (the "Maturity Date"). 

       1.3 Delivery of the Notes to the  Purchasers. Upon the execution and delivery by the Purchasers of a signature  page to this Agreement, the Borrower will deliver to each Purchaser, a Note,  duly executed and registered in each Purchaser's name against payment by the  Purchasers of the aggregate purchase price therefor paid for up to $700,000  to the Borrower. The Notes purchased by the Purchasers shall accrue interest  from the date of issuance and be executed by an authorized officer of the Borrower.

**ARTICLE II**

**CONDITIONS TO ISSUANCE**

       The obligation of the Purchasers  to purchase the Notes is subject to the fulfillment to each Purchaser's satisfaction  of each of the following conditions:

       2.1 Representations and Covenants.  The representations and warranties made by the Borrower in Article III shall  be true and correct, and all covenants, agreements and conditions contained  in this Agreement to be performed or complied with by the Borrower shall have  been performed or complied with.

       2.2 Corporate Authorization. At or  prior to the Closing, the Borrower shall have delivered to the Purchasers copies  of the resolutions of the Board of Directors of the Borrower approved by the  directors of the Borrower, authorizing, (i) the execution, delivery and performance  of this Agreement and the Related Agreements, and the transactions contemplated  hereby and thereby, and (ii) the reservation of shares of Common Stock issuable  upon conversion of the Notes.

       2.3 Corporate Documents. At or prior  to the Closing, the Borrower shall have delivered to the Purchasers copies of  the Articles of Incorporation for the Borrower, certified by the Nevada Secretary  of State on, or within five business days prior to, the Closing, and copies  of the By-Laws of the Borrower certified by an officer of the Borrower as of  the date of the Closing.

       2.4 Fees and Expenses. At the Closing,  the Borrower shall pay the fees and expenses of the Placement Agent specified  in this Agreement and in the Placement Agent Agreement as payable by the Borrower.

       2.5 Legal Investment. As of the Closing,  the purchase of the Notes by the Purchaser shall be legally permitted by all  laws and regulations to which the Purchasers and the Borrower are subject.

       2.6 Qualifications. As of the Closing,  all authorizations, approvals or permits of, or filings with, any governmental  authority that are required by law in connection with the lawful sale and issuance  of the Notes by the Borrower shall have been duly obtained by the Borrower and  shall be effective on and as of the Closing.

       2.7 Proceedings and Documents. All  corporate and other proceedings in connection with the transactions contemplated  hereby and by the Related Agreements, and all documents and instruments incident  to such transactions, shall be satisfactory in form and substance to the Purchasers,  and each Purchaser shall have received at or prior to the Closing all such documents  as such Purchaser shall have requested.

**ARTICLE III**

**REPRESENTATIONS AND  WARRANTIES OF THE BORROWER**

       The Borrower hereby represents and  warrants to the Purchasers as set forth below, and the Borrower acknowledges  that the Purchasers are entering into this Agreement in reliance on the truth  and accuracy of such representations and warranties.

       3.1 Organization and Standing. The  Borrower is a corporation duly organized, validly existing and in good standing  under the laws of the State of Nevada. The Borrower has the requisite legal  and corporate power to own all the properties owned by it, and to conduct its  business as presently being and as proposed to be conducted by it.

       3.2 Corporate Power. The Borrower  has all requisite legal and corporate power to enter into this Agreement and  the Related Agreements to which it is a party and to carry out and perform its  obligations under the terms of this Agreement and the Related Agreements to  which it is a party. The Borrower has the legal and corporate power to issue  the Notes and the shares of Common Stock issuable upon conversion of the Notes.

       3.3 Authorization: Enforceability.  All corporate action on the part of the Borrower, and its directors and shareholders,  necessary for the authorization, execution, delivery and performance by the  Borrower of this Agreement and the Related Agreements to which it is a party,  and the consummation of the transactions contemplated hereby and thereby, for  the authorization, issuance and delivery of the Notes, and the shares of Common  Stock issuable upon conversion of the Notes has been taken. This Agreement and  the Related Agreements are legal, valid and binding obligations of the Borrower  enforceable against the Borrower in accordance with their respective terms,  except as such enforceability may be limited by applicable bankruptcy, insolvency  or other laws affecting creditors' rights generally or by the availability of  equitable remedies.

       3.4 Capitalization. As of the Closing,  the Borrower's authorized capital stock will consist of 150,000,000 shares of  Common Stock and 5,000,000 shares of Preferred Stock. Except as disclosed in  the Borrower's Financial Statements and public SEC filings, there are no outstanding  securities of the Borrower which are convertible into or exchangeable for any  shares of the Borrower's capital stock or containing any capital appreciation  or profit participation features, there is no existing contract, option, warrant,  call or other commitment or right of any character granted or issued by the  Borrower calling for or relating to the issuance or transfer of shares of capital  stock or any other securities of the Borrower. The Borrower is not subject to  any obligation (contingent or otherwise) to repurchase or otherwise acquire  or retire any shares of its capital stock or any Notes, options or other rights  to acquire its capital stock. There are no statutory or contractual preemptive  rights or rights of refusal with respect to (i) the issuance of the Notes hereunder  or (ii) the issuance of shares of Common Stock upon conversion of the Notes,  and there are no statutory or contractual preemptive rights or rights or rights  of first refusal with respect to the issuance of any other shares of capital  stock or other securities or rights of the Borrower.

       3.5 Validity of Shares. The shares  of Common Stock issuable upon conversion of the Notes have been duly and validly  reserved by the Borrower and, upon issuance in accordance with the conversion  provisions of the Notes will be duly and validly issued, fully paid, nonassessable  and free and clear of all Liens.

       3.6 Financial Statements. The Borrower  has made available to the Purchaser its unaudited consolidated balance sheet  as of June 30, 2002 ("Balance Sheet"), and its unaudited consolidated  statements of operations and cash flow for the period then ended (collectively,  including the "Financial Statements'). The Financial Statements have been  prepared in accordance with GAAP (subject to the absence of footnote disclosures  and changes resulting from employee stock options and other normal adjustments),  and present fairly the financial position of the Borrower as of June 30, 2002  and the results of its operations and cash flow for the period then ended.

       3.7 Absence of Material Undisclosed  Liabilities. The Borrower does not have any material liabilities (fixed or contingent,  except for payroll tax liabilities due or to become due) which are, or indebtedness  which is, not fully reflected or provided for in the Balance Sheet, other than  trade payables and accruals incurred in the ordinary course of business since  the date of the Balance Sheet and executory contracts entered into in the ordinary  course of business. 

       3.8 Litigation. There are no material  actions, suits, proceedings or investigations pending or, to the Borrower's  knowledge, threatened against or affecting the Borrower at law or in equity,  or before or by any federal, state, municipal or other governmental department,  commission, board, agency or instrumentality, domestic or foreign. The Borrower  is not operating under or subject to, nor in default with respect to, any order,  writ, injunction or decree of any court or federal, state, municipal or other  governmental department, commission, board, agency or instrumentality, foreign  or domestic, and the Borrower has not been charged or, to the Borrower's knowledge,  threatened with a charge of violation, or under investigation with respect to  possible violation, of any provision of any federal, state or local law or administrative  ruling or regulation relating to the Borrower or its business, affairs, assets,  prospects, operations, employee relations, rights or condition, financial or  otherwise.

       3.9 Consents. All material consents,  approvals, qualifications, orders or authorizations of, or filings with, any  governmental authority, including state securities commissions, required in  connection with the Borrower's valid execution, delivery or performance of this  Agreement and the Related Agreements to which it is a party, the offer, sale  and issuance of the Notes and the consummation of any other transaction contemplated  on the part of the Borrower hereby or thereby have been obtained or made.

       3.10 Compliance with Law and Other  Instruments. The Borrower is not in violation of any term of its Articles of  Incorporation or By-Laws. The Borrower is not in violation of the provisions  of any material note, bond, mortgage, indenture, loan, factoring arrangement,  license, agreement, lease or other instrument or obligation to which the Borrower  is a party or by which it or any of its assets may be bound. To the knowledge  of the Borrower, the Borrower has all material franchises, permits, licenses  and approvals necessary to conduct its respective business as presently conducted.  To the knowledge of the Borrower, the Borrower is not in violation of any term  or provision of any such material franchise, permit, license or approval, or  any-material law, judgment, order, writ, injunction, decree, statute, rule or  regulation of any court, administrative agency, bureau, board, commission, office,  authority, department or other governmental entity applicable to the Borrower,  or any of its assets.

       3.11 No Violation. None of the execution  and delivery of this Agreement and the Related Agreements, the consummation  of the transactions provided for herein and therein or contemplated hereby and  thereby, the fulfillment by the Borrower of the terms hereof or thereof, will  (a) conflict with or result in a breach of any provision of the Articles of  Incorporation or By-Laws of the Borrower, (b) result in a default or breach,  give rise to any right of termination, cancellation or acceleration, or require  any consent or approval, under any of the terms, conditions or provisions of  any material note, bond, mortgage, indenture, loan, factoring arrangement, license,  agreement, lease or other instrument or obligation to which the Borrower is  a party or by which it or any of its respective assets may be bound or (c) to  the knowledge of the Borrower, violate any material law (including, but not  limited to, any Environmental Law), judgment, order, writ, injunction, decree,  statute, rule or regulation of any court, administrative agency, bureau, board,  commission, office, authority, department or other governmental entity applicable  to the Borrower or any of its assets.

**ARTICLE IV**

**REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS**

       Each Purchaser represents and warrants  to the Borrower with respect to itself as follows:

       4.1 Enforceability. This Agreement  and the Related Agreements are legal, valid and binding obligations of the Purchaser,  enforceable against such Purchaser in accordance with their terms.

       4.2 Purchase for Investment. The  Purchaser will acquire the Notes, and the Common Stock issuable upon conversion  of the Notes for investment, and not with a view to distributing all or any  part thereof in any transaction, which would constitute a "distribution"  within the meaning of the Securities Act. The Purchaser acknowledges that the  Notes and the Common Stock issuable upon conversion of the Notes have not been  registered under the Securities Act and, except as provided in the Registration  Agreement, Exhibit B hereto, the Borrower is under no obligation to file a registration  statement with the Securities and Exchange Commission with respect to the Notes  or the Common Stock issuable upon conversion of the Notes.

       4.3 Borrower Qualifications. The  Purchaser (a) has such knowledge and experience in financial and business matters  that it is capable of evaluating the merits and risks of its investment in the  Notes and Common Stock issuable upon conversion of the Notes; (b) is able to  bear the complete loss of its investment in the Notes or Common Stock issuable  upon conversions of the Notes; and (c) has had the opportunity to ask questions  of, and receive answers from, the Borrower and its management concerning the  terms and conditions of the offering of the Notes and Common Stock issuable  upon conversion of the Notes and to obtain additional information. The Purchaser  is not relying upon any statements or instruments made or issued by any other  person other than the Borrower and its officers in making its decision to invest  in the Notes and the Common Stock issuable upon conversion of the Notes. The  Purchaser is an "accredited Borrower" as such term is defined in Rule  501 of the Securities Act.

**ARTICLE V**

**REPORTING AND INSPECTION**

       5.1 Accounting. The Borrower will  maintain and will cause each of its Affiliates to maintain a system of accounting  established and administered in accordance with GAAP and all financial statements  or information delivered under Section 5.2 will be prepared in accordance with  GAAP.

       5.2 Financial Statements and Other  Information. The Borrower will deliver to each Purchaser of a Note by making  available on the internet at www.sec.gov under American Water Star, Inc. (AMWS)

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(a) promptly after the completion of the audit for each fiscal year of      the Borrower, consolidated balance sheets of the Borrower and its Affiliates,      as at the end of such year, and consolidated statements of operations and      cash flow of the Borrower and its Affiliates, for such fiscal year, prepared      in accordance with GAAP and setting forth in each case in comparative form      the figures for the previous fiscal year, all in reasonable detail and certified,      by regionally recognized independent public accounting firm selected by      the Borrower;

(b) within fifty (50) days after the end of each calendar quarter, unaudited      consolidated balance sheets of the Borrower as of the end of such quarter,      and unaudited consolidated statements of operations and cash flow of the      Borrower and its Affiliates for such quarter and for the current fiscal      year to date, prepared in accordance with GAAP and setting forth in comparative      form the figures for the corresponding periods of the previous fiscal year,      subject to changes resulting from normal year-end audit adjustments, and      other key operating and financial statistics and data material to the Borrower's      business and operations, all in reasonable detail and certified by the principal      financial officer of the Borrower;

(c) promptly upon the Borrower's learning thereof, notice of (i) any material      litigation adversely affecting the Borrower whether or not the claim is      considered by the Borrower to be covered by insurance, and (ii) the institution      of any material suit or administrative proceeding involving the Borrower's      business, affairs, assets, prospects, operations, employee relations, rights      or conditions (financial or otherwise); and

(d) promptly upon the Borrower's learning thereof, notice of any material      default under, or breach or violation of, this Agreement or any of the Related      Agreements.

       5.3 Inspection Rights. With respect  to any party entitled to receive the financial statements and other information  provided for in Section 5.2 hereunder, the Borrower will permit an authorized  representative designated by such party, at the Purchaser's expense, to visit  and inspect the properties of the Borrower, including its and their books and  records (and to make extracts therefrom or copies thereof) and to discuss its  and their affairs, finances and accounts with its and their officers and personnel,  all at such reasonable times during normal business hours and as often as such  party may reasonably request, but in no event more than once during any fiscal  quarter.

**ARTICLE VI**

**COVENANTS**

       6.1 Insurance. The Borrower will  maintain or cause to be maintained with financially sound and reputable insurers,  insurance with respect to its assets and business against loss or damage covering  risks of such types and in such amounts which are customary for similarly situated  corporations of established reputation engaged in the same or similar businesses,  in adequate amounts, and at the request of any Purchaser shall furnish such  Purchaser with evidence of the same.

       6.2 Payment of Taxes and Other Obligations.  The Borrower will pay or cause to be paid all material taxes, assessments and  other governmental charges levied upon any of its assets or in respect of its  franchises, businesses, income or profits, all trade accounts payable in accordance  with usual and customary business terms, and all claims for work, labor or materials,  which if unpaid might become a Lien upon any asset of the Borrower before the  same become delinquent, except that (unless and until foreclosure, restraint,  sale or other similar proceedings shall have been commenced) no such charge  need be paid if being contested in good faith and by appropriate measures promptly  initiated and diligently conducted if (a) such reserve or other appropriate  provision, if any, as shall be required by sound accounting practice consistent  with GAAP shall have been made therefor, and (b) such contest does not have  a material adverse effect on the financial condition of the Borrower or the  ability of the Borrower to pay any Indebtedness and no assets are in imminent  danger of forfeiture.

       6.3 Compliance With Laws. The Borrower  will comply, and will cause each of its Affiliates to comply, with all material  laws (including, but not limited to, Environmental Laws), rules, regulations,  judgments, orders and decrees of any governmental or regulatory authority applicable  to its and their respective assets.

       6.4 Corporate Existence. Property  and Shares. The Borrower will preserve, protect, and maintain, (a) its corporate  existence, and (b) all rights, franchises, accreditations, privileges, and properties,  the failure of which to preserve, protect, and maintain might have a material  adverse effect on the business, affairs, assets, prospects, operations, employee  relations, rights or condition, financial or otherwise, of the Borrower taken  as a whole.

       6.5 Maintenance. The Borrower will,  and will cause each of its Affiliates to, maintain and keep its properties in  good repair, working order and condition, subject to normal wear and tear, and  from time to time make all necessary repairs, renewals and replacements so that  its businesses may be properly and advantageously conducted at all times.

       6.6 Other Obligations. The Borrower  will comply with, and cause each of its Affiliates to comply with, all obligations  which it incurs pursuant to any contract or agreement, whether oral or written,  express or implied, as such obligations become due to the extent to which the  failure to so comply could be expected to have a material adverse effect upon  the business, affairs, assets, prospects, operations, employee relations, rights  or condition, financial or otherwise, of the Borrower and its Affiliates taken  as a whole, unless and to the extent that the same are being contested in good  faith and by appropriate proceedings and adequate reserves (as determined in  accordance with GAAP) have been established on its books with respect thereto.

       6.7 No Restrictions. The Borrower  will not enter into or become subject to any agreement or instrument, which  by its terms would (under any circumstances) restrict the Borrower's right to  perform the provisions of this Agreement or the Related Agreements.

       6.8 Dividends and Stock Redemptions.  Other than in connection with any future financing involving preferred stock  or the retirement/surrender of founder's shares presently contemplated, the  Borrower will not (i) purchase or otherwise retire any of its shares of capital  stock or (ii) declare or pay dividends on, or make any other distribution on  or in respect of, any shares of its capital stock.

       6.9 Public Disclosures. The Borrower  will not disclose the Purchaser's name or identity as a lender to the Borrower  in any press release or other public announcement or in any document or material  filed with any governmental entity, without the prior written consent of the  Purchaser, unless such disclosure is required by applicable law or governmental  regulations or by order of a court of competent jurisdiction, in which case  prior to making such disclosure the Borrower will give written notice to the  Purchaser describing in reasonable detail the proposed content of such disclosure  and will permit such Purchaser two business days to review and comment upon  the form and substance of such disclosure.

       6.10 Use of Proceeds. The Borrower  will use the proceeds from the sale of the Note for (i) liquidity, (ii) the  payment of the fees and expenses identified in Section 6.11, (iii) to self finance  receivables, (iv) for inventory purchases as the Borrower expands its bottler  network nationwide, (iv) the working capital, and capital expenditure requirements  of the Borrower and other uses in the ordinary course of business, including  costs associated with Borrower relations.

       6.11 Fees and Expenses. The Borrower  will bear all of its own expenses in connection with the preparation, execution  and negotiation of this Agreement and the Related Agreements, and the transactions  contemplated hereby and thereby, and the Borrower will also reimburse the Purchasers  for or pay any expenses it incurs including, but not limited to, the reasonable  legal fees and disbursements up to $5,000 of counsel to the Placement Agent  in connection with the preparation, execution, negotiation and performance of  this Agreement, the Related Agreements, and the transactions contemplated hereby  and thereby and any investigation or analysis, by or on behalf of the Purchasers.

       The Borrower is offering the Notes  through Camden Securities, Inc., Placement Agent, a member of the National Association  of Securities Dealers, Inc. (NASD). The Placement Agent will receive a cash  commission of 10% and a non-accountable expense allowance of 3% of the gross  proceeds. In addition, the Placement Agent will receive 10% on all shares to  be converted of common stock (pro-rata based on an aggregate amount of Notes  sold in this offering of $700,000) and 2% due diligence fees of the gross proceeds  raised by Camden.

**ARTICLE VII**

**EVENTS OF DEFAULT**

       7.1 Events of Default Defined: Acceleration  of Maturity. If any one or more of the following events ("Events of Default")  shall have occurred:

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 (a) the Borrower shall (i) default, and such default shall continue for    five or more days, in the payment when due of any principal or interest on    the Note or (ii) fail to pay any other amounts owing hereunder for five days    after receiving notice thereof; or

 (b) default shall occur in the observance or performance of any of the other    covenants or agreements of the Borrower contained in this Agreement or the    Related Agreements which is not remedied within 30 days after notice thereof    to the Borrower; or

 (c) any default shall occur in the terms governing Indebtedness of the Borrower    and such default remains uncured beyond any applicable cure or grace period    or the holder or holders of such Indebtedness has declared the unpaid balance    thereof to be due and payable; or

 (d) the Borrower shall commence a voluntary case concerning itself under    Title 11 of the United States Code entitled "Bankruptcy," as now    or hereafter in effect, or any successor thereto (the "Bankruptcy Code");    or an involuntary case is commenced against the Borrower and the petition    is not stayed within 30 days, or is not dismissed within 60 days, after commencement    of the case; or a custodian (as defined in the Bankruptcy Code) is appointed    for, or takes charge of, all or substantially all of the property of the Borrower;    or the Borrower commences any other proceeding under any reorganization, arrangement,    adjustment of debt, relief of debtors, dissolution, insolvency or liquidation    or similar law of any jurisdiction whether now or hereafter in effect relating    to Borrower; or there is commenced against the Borrower any such proceeding    which remains undismissed for a period of 60 days; or the Borrower is adjudicated    insolvent or bankrupt; or any order of relief or other order approving any    such case or proceeding is entered; or the Borrower suffers any appointment    of any custodian or the like for it or any substantial part of its property    to continue undischarged or unstayed for a period of 60 days; or the Borrower    makes a general assignment for the benefit of creditors; or any corporate    action is taken by the Borrower for the purpose of effecting any of the foregoing;    or

 (e) any representation, warranty or certification made by the Borrower or    any of its officers in this Agreement, in any Related Agreement or in any    certificate, report, financial statement, or other instrument delivered under    or pursuant to any provision hereof or thereof shall prove to have been false    or incorrect in any material respect on the date or dates as of which they    were made and shall remain false or incorrect for 30 days after notice thereof    to the Borrower;

then, when any Event of Default described in clauses (a), (b), (c), or (e)    above has occurred and shall be continuing, the principal of the Note and    the interest accrued thereon and all other amounts due hereunder (the "other    payments") shall forthwith become and be due and payable, if not already    due and payable, without presentment, further demand or notice of any kind.    When any Event of Default described in clause (d) above has occurred, then    the principal of the Note, the interest accrued thereon and the other payments    shall immediately become due and payable, upon the occurrence thereof, without    presentment, demand, or notice of any kind. If any principal, installment    of interest or other payment is not paid in full on the due date thereof (whether    by maturity, prepayment, or acceleration) or any Event of Default has occurred    and is continuing, then the outstanding principal balance of the Note, any    overdue installment of interest (to the extent permitted by applicable law),    including interest accruing after the commencement of any proceeding under    any bankruptcy or insolvency law, and all other payments will bear interest    from the due date of such payment, or from and after an Event of Default,    at a rate equal to the interest rate applicable to the Note plus 5% ("Default    Rate"). If payment of the Note is accelerated, then the outstanding principal    balance thereof shall bear interest at the Default Rate from and after the    Event of Default.

       7.2 Suits for Enforcement. If any  Event of Default specified in Section 7.1 above has occurred and is continuing,  the Purchaser of any of the Notes may proceed to protect and enforce such holder's  rights either by suit in equity or by action at law, or both, whether for the  specific performance of any covenant or agreement contained in this Agreement  or any Related Agreement, or in aid of the conversion of any power granted in  this Agreement or any Related Agreement, or to enforce any other legal or equitable  right or remedy of such holder.

       7.3 Delays or Omissions. No failure  to convert or delay in the conversion of, any right, power or remedy accruing  to any holder of any Note upon any breach or default of the Borrower under this  Agreement shall impair any such right, power or remedy of such holder nor shall  it be construed to be a waiver of any such breach or default, or an acquiescence  therein, or of or in any similar breach or default thereafter occurring; nor  shall any waiver of any single breach or default be deemed a waiver of any other  breach or default theretofore or thereafter occurring.

       7.4 Remedies Cumulative. All remedies,  under either this Agreement or the Note, by law or otherwise afforded to any  holder of the Note, shall be cumulative and not alternative.

**ARTICLE VIII**

**DEFINITIONS**

       8.1 Definitions. In addition to the  capitalized terms defined elsewhere in this Agreement, the following capitalized  terms shall have the following meanings when used in this Agreement:

       "Closing" means the closing  of the sale and issuance of the Notes to the Purchasers pursuant to this Agreement.

       "Common Stock" means the  shares of Common Stock, $.0001 par value per share, of the Borrower.

        "Environmental Laws" means  all federal, state and local laws, ordinances and rules of common law relating  to environmental, safety, or health matters, including those relating to fines,  orders, injunctions, penalties, damages, contribution, cost recovery compensation,  losses, or injuries resulting from the release or threatened release of Hazardous  Substances and the generation, use, storage, transportation, or disposal of  Hazardous Substances in any manner applicable to the Parent or its assets, including  the Comprehensive Environmental Response, Compensation and Liability Act of  1980 (42 U.S.C. §§ 9601 et seq.), the Hazardous Materials Transportation  Act (49 U.S.C. §§ 1801 et seq the Resource Conservation and Recovery  Act of 1976 (42 U.S.C. §§6901 et seq.), the Federal Water Pollution  Control Act (33 U.S.C. §§ 1251 et seq.), the Clean Air Act (42 U.S.C.  §§ 7401 et seq.), the Toxic Substances Control Act of 1976 (15 U.S.C.  §§ 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. §§  300f- §§ 300j-11 et seq, the Occupational Safety and Health Act of  1970 (29 U.S.C. §§ 651 et seq.), and the Emergency Planning and Community  Right-to-Know Act (42 U.S.C. §§ 11001 et seq.), each as heretofore  and hereafter amended or supplemented, and any analogous present or future federal,  state, or local statutes, rules, and regulations promulgated thereunder or pursuant  thereto, and any other present or future law, ordinance, rule, regulation, permit,  order, or directive addressing environmental, safety or health issues, of or  by the federal government, any state or political subdivision thereof, or any  agency, court, or body of the federal government or any state or political subdivision  thereof.

       "GAAP" means United States  generally accepted accounting principles, consistently applied.

       "Indebtedness" of any Person  means the principal of, premium, if any, and unpaid interest on (a) indebtedness  for borrowed money, (b) indebtedness guaranteed, directly or indirectly, in  any manner by such Person, or in effect guaranteed, directly or indirectly,  in any manner by such Person through an agreement, contingent or otherwise,  to supply funds to, or in any other manner invest in, the debtor, or to purchase  indebtedness, or to purchase and pay for property if not delivered or pay for  services if not performed, primarily for the purpose of enabling the debtor  to make payment of the indebtedness or to assure the owners of the indebtedness  against loss, (c) all indebtedness secured by any mortgage, lien, pledge, charge  or other encumbrance upon property owned by such Person, even though such Person  has not in any manner become liable for the payment of such indebtedness, (d)  all indebtedness of such Person created or arising under any conditional sale,  lease (intended primarily as a financing device) or other title retention or  security agreement with respect to property acquired by such Person even though  the rights and remedies of the seller, lessor or lender under such agreement  or lease in the event of default may be limited to repossession or sale of such  property, and (e) renewals, extensions and refunding of any such indebtedness.

       "Lien" means any mortgage,  deed of trust, lien, security interest, pledge, lease, conditional sale contract,  claim, charge, easement, right of way, assessment, restriction and other encumbrance  of every kind.

       "Note" means each of the  Convertible Notes of the Borrower in favor of a Purchaser in the aggregate principal  amount of up to $700,000 and substantially in the form of Exhibit A hereto,  as amended and in effect from time to time, and any notes issued in exchange  for, or replacement of, all or any part of such note, and any extension, renewal,  restatement or supplement to or of any such note.

       "Person" means an individual,  a partnership, a corporation, a limited liability company, an association, a  joint stock company, a trust, a joint venture, an unincorporated organization  or a governmental entity or any department, agency or political subdivision  thereof.

       "Placement Agent" means  Camden Securities, Inc, a registered NASD Broker-Dealer.

       "Placement Agent Agreement"  means that certain Agreement dated October 2002 by and between the Borrower  and the Placement Agent.

       "Registration Agreement"  means that certain Registration Agreement, of even date herewith, between the  Borrower and the Purchasers substantially in the form of Exhibit B hereto.

       "Related Agreements" means  the Notes and the Registration Agreement.

       "Securities Act" means  the Securities Act of 1933, as amended.

       8.2 Rules of Construction. The following  provisions shall be applied wherever appropriate herein:

> 
(a) "herein," "hereby," "hereunder," "hereof"    and other equivalent words shall refer to this Agreement as an entirety and    not solely to the particular portion of this Agreement in which any such word    is used;

(b) all definitions set forth herein shall be deemed applicable whether the    words defined are used herein in the singular or the plural;

(c) wherever used herein, any pronoun or pronouns shall be deemed to include    both the singular and plural and to cover all genders;

(d) all accounting terms not specifically defined herein shall be construed    in accordance with GAAP;

(e) neither this Agreement nor any other agreement, document or instrument    referred to herein or executed and delivered in connection herewith shall    be construed against either party as the principal draftsperson hereof or    thereof;

(f) all references or citations in this Agreement to statutes or regulations    or statutory or regulatory provisions shall generally be considered citations    to such statutes, regulations or provisions as in effect on the date hereof,    except that when the context otherwise requires, such references shall be    considered citations to such statutes, regulations or provisions as in effect    from time to time, including any successor statutes, regulations or provisions    directly or indirectly superseding such statutes, regulations or provisions;

(g) any references herein to a particular Section, Article, Exhibit or Schedule    means a Section or Article of, or an Exhibit or Schedule to, this Agreement    unless another agreement is specified; and

(h) the Exhibits and Schedules attached hereto are incorporated herein by    reference and shall be considered part of this Agreement.

**ARTICLE IX**

**CONVERSION RIGHTS**

       The holders of the Notes shall have  conversion rights as follows:

       9.1 Voluntary Conversion. At any  time, commencing one (1) month after completion of the offering, the Holder  may convert the then outstanding principal amount thereof, together with all  accrued and unpaid interest hereunder, at a conversion price of thirty percent  (30%) discount to the closing bid price per share (the "Conversion Price")  on the day of conversion into shares of Common Stock with a floor price of twenty  cents($0.20) and a maximum conversion price of forty cents ($0.40) per share.  The maximum of forty cents ($0.40) is only valid if the Company's trading price  is not more than one dollar ($1.00). Once the trading price for AMWS is trading  at or above one dollar ($1.00), the maximum conversion clause is of no effect  and the only conversion formula is the thirty percent (30%) reduction from the  bid price at time of conversion.

       9.2 Automatic Conversion. The outstanding  principal amount and all accrued interest on this Note shall automatically be  converted into shares of Common Stock at the then effective Conversion Price  (defined above) in the event the Holder fails to deliver to the Company written  notice of his/her/its intent to receive cash payment for the total indebtedness  due under this Note no later than 30 days prior to the Maturity Date (defined  above).

       9.3 Mechanics of Conversion. Before  any holder of a Note shall be entitled to convert the same into shares of Common  Stock, he, she or it shall surrender the Note duly endorsed "Cancelled"  at the office of the Corporation or of any transfer agent for such stock, and  shall give written notice to the Corporation at such office that he, she or  it elects to convert the same and shall state therein the name or names in which  he, she or it wishes the certificate or certificates for shares of Common Stock  to be issued; provided, however, that in the event of an automatic conversion  pursuant to Section 9.2, the Note shall be converted automatically without any  further action by the holder and whether or not the Note is surrendered to the  Corporation or its transfer agent. The Corporation shall not be obligated to  issue certificates evidencing the shares of Common Stock issuable upon such  conversion unless the Note is either delivered to the Corporation or its transfer  agent as provided above, or the holder notifies the Corporation or its transfer  agent that such Note has been lost, stolen or destroyed and executes an agreement  satisfactory to the Corporation to indemnify the Corporation from any loss incurred  by it in connection with such certificates. The Corporation shall, as soon as  practicable after delivery of such Note or such agreement of indemnification,  in the case of a lost Note, issue and deliver at such office to such holder  of a certificate or certificates for the number of shares of Common Stock to  which such holder shall be entitled as aforesaid. Such conversion shall be deemed  to have been made on the date of closing of the automatic conversion event referred  to in Section 9.2, and the person or persons entitled to receive the shares  of Common Stock issuable upon such conversion shall be treated for all purposes  as the record holder or holders of such shares of Common Stock on such date.

       9.4 Adjustments to Conversion Price.  In the event that this Corporation at any time or from time to time after the  date hereof, shall declare or pay, without consideration, any dividend on its  Common Stock payable in Common Stock or in any right to acquire Common Stock  for no consideration, or shall effect a subdivision of the outstanding shares  of Common Stock into a greater number of shares of Common Stock (by stock split,  reclassification or otherwise than by payment of a dividend in Common Stock  or in any right to acquire Common Stock), or in the event the outstanding shares  of Common Stock shall be combined or consolidated, by reclassification or otherwise,  into a lesser number of shares of Common Stock, then the Conversion Price in  effect immediately prior to such event shall, concurrently with the effectiveness  of such event, be proportionately decreased or increased, as appropriate. In  the event that the Corporation shall declare or pay, without consideration,  any dividend on the Common Stock payable in any right to acquire Common Stock  for no consideration, then the Corporation shall be deemed to have made a dividend  payable in Common Stock in an amount of shares equal to the maximum number of  shares issuable upon exercise of such rights to acquire Common Stock. 

       9.5 Adjustments for Reclassification  and Reorganization. If the Common Stock issuable upon conversion of a Note shall  be changed into the same or a different number of shares of any other class  or classes of stock, whether by capital reorganization, reclassification or  otherwise (other than a subdivision or combination of shares provided for in  Section 9.4, then the Conversion Price, as then in effect shall, concurrently  with the effectiveness of such reorganization or reclassification, be proportionately  adjusted so that the Note shall be convertible into, or in lieu of the number  of shares of Common Stock that the holders would have otherwise been entitled  to receive, a number of shares of such other class or classes of stock equivalent  to the number of shares of Common Stock that would have been subject to receipt  by the holders upon conversion of the Notes immediately before that change.

       9.6 No Impairment. The Corporation  will not, 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 Corporation but will at all times in good faith  assist in the carrying out of all the provisions of the Notes and in the taking  if all such action as may be necessary or appropriate in order to protect the  conversion rights of the holders of the Notes against impairment.

       9.7 Certificates as to Adjustments.  Upon the occurrence of each adjustment or readjustment of the applicable Conversion  Price pursuant to this Agreement, the Corporation at its expense shall promptly  compute such adjustment or readjustment in accordance with the terms hereof  and prepare and furnish to each holder of a Note a certificate setting forth  such adjustment or readjustment and showing in detail the facts upon which such  adjustment or readjustment is based. The Corporation shall, upon the written  request at any time of any holder of a Note, furnish or cause to be furnished  to such holder a like certificate prepared by the Corporation setting forth  (i) such adjustments and readjustments, (ii) the applicable Conversion Price  at the time in effect, and (iii) the number of shares of Common Stock and the  amount, if any, of other property which at the time would be received upon the  conversion of the Note.

       9.8 Notices. In the event of any  taking by the Corporation of a record of the holder of the holders of any class  of securities for the purposes of determining the holders thereof who are entitled  to receive any dividend (other than a cash dividend) or other distribution,  the Corporation shall mail to the holders of Notes at least thirty (30) days  prior to the date specified therein, a notice specifying the date on which any  such record is to be taken for the purpose of such dividend or distribution.  In the event of any proposal by the Corporation to take any action that would  result in any liquidation or deemed liquidation of the Corporation, the Corporation  shall mail to the holder of as Note at least twenty (20) days prior to the date  of such proposed transaction a notice specifying the proposed date of such transaction.  Any notice required by the provisions of this Agreement to be given to the holders  of Notes shall be deemed given if deposited in the United States mail, postage  prepaid and addressed to the holders of Notes appearing in the books of the  Corporation. If the mailing address of any holder of a Note is outside the United  States, a copy of any notice to be sent pursuant to this Section shall be sent  to such holder by telecopy (with confirmation of receipt) and shall be deemed  given upon transmission. Any notices deposited in the mail shall be sent by  registered mail.

       9.9 Issue Taxes. The Corporation  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  on conversion of the Notes pursuant hereto; provided, however, that the Corporation  shall not be obligated to pay any transfer taxes resulting from any transfer  requested by any holder in connection with any such conversion.

       9.10 Reservation of Stock Issuable  Upon Conversion. The Corporation shall at all times reserve and keep available  out of its authorized but unissued shares of Common Stock, solely for the purpose  of effecting the conversion of the Notes, such number of shares of its Common  Stock as shall from time to time be sufficient to effect the conversion of all  outstanding Notes; and if at any time the number of authorized by unissued shares  of Common Stock shall not be sufficient to effect the conversion of all then  outstanding Notes, the Corporation will take such corporate action as may, in  the opinion of its counsel, be necessary to increase its authorized but unissued  shares of Common Stock to such number of shares as shall be sufficient for such  purpose, including, without limitation, engaging its best efforts to obtain  the requisite stockholder approval if any necessary amendment to this Agreement.

       9.11 Fractional Shares. No fractional  shares shall be issued upon the conversion of the Notes. All shares of Common  Stock (including fractions thereof) issuable upon conversion of a Note by a  holder shall be aggregated for purposes of determining whether the conversion  would result in the issuance of any fractional share. If, after the aforementioned  aggregation, the conversion would result in the issuance of a fraction of a  share, such fraction will be rounded up to the next whole share, and the Corporation  shall pay the holder otherwise entitled to such share a sum in cash equal to  the fair market value of such share on the date of conversion (as determined  in good faith by the Board of Directors of the Corporation).

**ARTICLE X**

**MISCELLANEOUS**

       10.1 Consent to Amendments; Waivers.  The provisions of this Agreement may be amended, and the Borrower may take any  action herein prohibited, or omit to perform any act herein required to be performed  by it, only if the Borrower has obtained the written consent of the holder or  holders of a majority of the outstanding principal amount of the Note. No other  course of dealing between the Borrower and any holder of all or any part of  the Note or any delay in exercising any rights hereunder or under any of the  Related Agreements shall operate as a waiver of any rights of any such holders.  If the Borrower pays any consideration to any Person for such consent to any  amendment, modification or waiver hereunder or under any of the Related Agreements,  the Borrower shall also pay each holder of any part of the Note granting its  consent equivalent consideration computed on a pro rata basis. Any waiver, permit,  consent or approval of any kind or character on the part of any party of any  provisions or conditions of this Agreement or any of the Related Agreements  must be made in writing and shall be effective only to the extent specifically  set forth in such writing.

       10.2 Representations and Warranties:  Indemnification. 

> 
(a) All representations and warranties contained herein or in any of the    Related Agreements or made in writing by any party in connection herewith    or therewith will survive the execution and delivery of this Agreement and    any investigation made at any time by or on behalf of the Purchasers or any    other holder of all or any part of the Note.

(b) The Borrower will defend, indemnify and hold the Purchasers or any other    holder of all or any part of the Note harmless from and against any and all    actions, suits, losses, damages, liabilities, claims, obligations and expenses    (including, but not limited to, legal fees and court costs) ("Losses"),    whether or not resulting from judgments or arbitration awards, that shall    be suffered or incurred by such Purchasers or holder, as the case may be,    resulting from or arising out of any breach of any of the representations,    warranties or covenants of the Borrowers contained in this Agreement or in    any Related Agreement or in any schedule, certificate, exhibit or other instrument    furnished or to be furnished by the Borrower hereunder or thereunder.

(c) Each Purchaser will, jointly and severally, defend, indemnify and hold    the Borrower harmless from and against any and all Losses, whether or not    resulting from judgment or arbitration awards, that shall be suffered or incurred    by the Borrower resulting from or arising out of any breach of any of the    representations, warranties or covenants of the Purchasers contained in this    Agreement or in any Related Agreement or in any schedule, certificate, exhibit    or other instrument furnished or to be furnished by the Purchasers hereunder    or thereunder.

       10.3 Successors and Assigns. Except  as otherwise expressly provided herein, all covenants and agreements contained  in this Agreement by or on behalf of any of the parties hereto will bind and  inure to the benefit of the respective successors and assigns of the parties  hereto, whether so expressed or not, provided, however, that neither party shall  assign (by operation of law or otherwise) this Agreement or any part hereof  or any obligation hereunder without the prior written consent of the Borrower  or the holder or holders of a majority of the outstanding principal amount of  the Notes, as the case may be. In addition, and whether or not any express assignment  has been made, the provisions of this Agreement which are for the benefit of  the Purchasers or any holder of all or any part of the Note are also for the  benefit of, and enforceable by, any subsequent holders of all or any part of  the Note. Neither the Note nor the Notes may be transferred unless such transfer  is registered under the Securities Act or unless an exemption from such registration  is available, which exemption shall be established either by an opinion of counsel  delivered by the holder or holders of a Note or Notes being transferred or by  other customary means.

       10.4 Descriptive Headings. The descriptive  headings of this Agreement are inserted for convenience of reference only and  do not constitute a part of and shall not be utilized in interpreting this Agreement.

       10.5 Notices. Any notices required  or permitted to be sent hereunder shall be delivered personally or mailed, by  certified mail, return receipt requested, or delivered by overnight courier  service to the following addresses, or such other address as any party hereto  designates by written notice to the Borrower, and shall be deemed to have been  given upon delivery, if delivered personally, five days after mailing, if mailed,  or one business day after delivery to the courier, if delivered by overnight  courier service.

If to the Borrower, to:

 American Water Star, Inc.  4560 S Decatur #204  Las Vegas, NV 89103  Attn: Thomas Krucker - Chairman and Treasurer

If to the Purchasers, to the addresses specified on Schedule 1 hereto.

       10.6 Governing Law. This Agreement  and the rights and duties of the parties hereto shall be governed by the laws  of the State of Nevada (without regard to principles of conflicts of law).

       10.7 Execution in Counterparts. This  Agreement may be executed in any number of counterparts, each of which when  so executed and delivered shall be deemed an original, and such counterparts  together shall constitute one instrument.

       10.8 Consent to Jurisdiction. The  Borrower and the Purchasers hereby irrevocably agree that any suit, action,  proceeding or claim against it arising out of or in any way relating to this  agreement or any of the related agreements, or any judgment entered by any court  in respect thereof, may be brought or enforced in the state or federal courts  located in Las Vegas, Nevada and hereby irrevocably waives, to the fullest extent  permitted by law, any objection which they may now or hereafter have to the  venue of any proceeding brought in Las Vegas, Nevada and further irrevocably  waives any claims that any such proceeding has been brought in an inconvenient  forum.

       10.9 Usury Savings Clause. It is  the intent of the Purchasers and the Borrower in the execution of this Agreement  and the Note issued hereunder to contract in strict compliance with applicable  usury law. In furtherance thereof, the Purchaser and the Borrower stipulate  and agree that none of the terms and provisions contained in or pertaining to  this Agreement and the Note and Notes issued hereunder shall ever constitute  or be construed to create (a) a contract to pay for the use, forbearance or  detention of money interest at a rate or in an amount in excess of the maximum  rate of interest permitted by applicable law or (b) a charging of interest at  a rate or in an amount in excess of the maximum rate of interest permitted by  applicable law. If for any reason interest received or collected by the Purchaser  exceeds or is deemed to exceed the applicable maximum lawful rate, the Purchaser  may, at its sole option, either refund the amount of such excess or credit the  amount of such excess against the principal balance of the Note outstanding  and thereby shall render inapplicable any and all penalties of any kind provided  by applicable law as a result of such excess interest. All amounts paid or agreed  to be paid in connection with the Note which would under any law in effect and  applicable to the Purchaser be deemed "interest" shall, at the option  of the Purchaser, to the extent permitted by such applicable law, be amortized,  prorated, allocated and spread throughout the full term of such Note.

        10.10 Exchange of Note. Upon surrender  by any holder of the Note to the Borrower of the Note, the Borrower at its expense  will issue in exchange therefor, and deliver to such holder, a new Note or Notes,  in such principal amount or amounts as may be requested by such holder. Upon  receipt of evidence satisfactory to the Borrower of the loss, theft, destruction  or mutilation of any Note, and in case of any such loss, theft or destruction,  upon delivery of an indemnity agreement satisfactory to the Borrower (provided  that in the case of either Purchaser or an institutional Borrower, such holder's  own agreement shall be deemed satisfactory to the Borrower), or in case of any  such mutilation, upon surrender and cancellation of such Note, the Borrower  at its expense will issue and deliver to any such holder a new Note of like  tenor, in lieu of such lost, stolen, destroyed or mutilated Note.

The parties hereto have executed this Agreement as of the date first set forth  above.

| **BORROWER:**             | AMERICAN WATER STAR, INC. |
|---------------------------|---------------------------|
|                      | By:                       |
|                      | Its:                      |
|                      |                      |
| **PURCHASER/PURCHASERS:** |                      |
|                      | Signature                 |
|                      | Print Name                |
|                      | Soc. Sec. No              |
|                      |                      |
|                      | Signature                 |
|                      | Print Name                |
|                      | Soc. Sec. No.             |

  

**SCHEDULE 1**

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  NO TRANSFER, SALE OR OTHER DISPOSITION OF THIS NOTE MAY BE MADE UNLESS A REGISTRATION  STATEMENT WITH RESPECT TO THIS NOTE HAS BECOME EFFECTIVE UNDER SAID ACT, OR  THE CORPORATION HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY  TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.  THIS NOTE IS SUBJECT TO THE TERMS OF THE PURCHASE AGREEMENT BY AND BETWEEN THE  CORPORATION AND THE PURCHASERS NAMED THEREIN. 

**AMERICAN WATER STAR, INC.  CONVERTIBLE NOTE**

| $_______________________ | ____________, 20___      Las Vegas, Nevada |
|--------------------------|--------------------------------------------|

         SECTION 1. American Water Star, Inc.,  a Nevada corporation (the "Corporation"), for value received, hereby  promises to pay to __________________________________, or his assigns ("Payee"),  the principal amount of _____________________________________ Dollars ($______________)  and to pay interest (computed on the basis of a 360-day year) on the unpaid  principal amount hereof outstanding from time to time from and including the  date hereof until and including the date the principal amount hereof is paid  in full at the rate of 15% per annum.         SECTION 2. The principal amount hereof  and all accrued interest shall be payable in full in immediately available funds  one (1) year from the date of issue on ________________, 2003 (the "Maturity  Date").         SECTION 3. This Note is issued under  and pursuant to the terms and provisions of that Convertible Note Purchase Agreement,  dated as of the date hereof (as amended, restated or supplemented from time  to time, the "Note Agreement"), entered into by the Corporation and  the original Purchasers therein referred to, and the Payee is entitled to all  of the rights and benefits provided for thereby or referred to therein, to which  Note Agreement reference is hereby made for a statement thereof.         SECTION 4. Under certain circumstances,  as specified in Section 7.1 of the Note Agreement, the principal of, and all  accrued interest on, this Note may be declared due and payable in the manner  and with the effect provided in the Note Agreement. If any installment of principal  or interest is not paid in full in immediately available funds on the due date  thereof (whether by maturity or acceleration), then the outstanding principal  balance of this Note and any interest accrued prior to that due date (to the  extent permitted by applicable law) shall bear additional interest as set forth  in Section 7.1 of the Note Agreement. This Note may be prepaid in full or in  part at any time without premium or penalty. Payments received under this Note  shall be applied first to accrued interest and then to reduce the principal  amount hereof.         SECTION 5. All payments on or in respect  of this Note, including principal, interest and premium thereon shall be made  in such coin and currency of the United States of America as at the time of  payment is legal tender for the payment of public and private debts in immediately  available funds to such account as the holder hereof specifies, or, at the option  of the holder hereof, in such manner and at such other place in the United States  of America as the holder hereof shall have indicated to the Corporation. Whenever  a payment to be made hereunder shall be due and payable on a day which is not  a business day in Las Vegas, Nevada, such payment shall be made on the next  succeeding business day and such extension of time shall be included in the  computation of the payment of interest hereunder. All payments hereunder shall  be made without counterclaim, setoff or withholding to the holder's account  as designated in writing from time to time by the holder hereof.         SECTION 6. This Note is a registered  Note and is transferable only by surrender thereof at the principal office of  the Corporation, duly endorsed or accompanied by a written instrument of transfer  duly executed by the holder of this Note or its attorney duly authorized in  writing.         SECTION 7. The Corporation hereby  waives diligence, presentment, demand, protest and notice of every kind whatsoever.  The failure of the holder hereof to conversion any of its rights hereunder in  any particular instance is outlined in the Note Purchase Agreement         SECTION 8. This Note shall be binding  upon the Corporation, its successors and assigns, and shall inure to the benefit  of the holder hereof, its successors and assigns.         SECTION 9. This Note is made under,  and shall be governed by and construed in accordance with, the laws of the State  of Nevada (exclusive of the conflict of law principles and provisions thereof).         SECTION 10. The holders of this Note  shall have conversion rights as follows:

> 
(a) Voluntary Conversion. At any time, commencing one (1) month after completion    of the offering, the holder of this Note may convert the then outstanding    principal amount thereof, together with all accrued and unpaid interest hereunder,    at a conversion price of thirty percent (30%) discount to the closing bid    price per share on the day of conversion (the "Conversion Price")    into shares of Common Stock with a floor price of twenty cents ($0.20), and    a ceiling of forty cents ($0.40) per share if trading price is less than one    dollar ($1.00) per share.    (b) Automatic Conversion. The outstanding principal amount and all accrued    interest on this Note shall automatically be converted into shares of Common    Stock at the then effective Conversion Price (defined above) in the event    the Holder fails to deliver to the Company written notice of his/her/its intent    to receive cash payment for the total indebtedness due under this Note no    later than 30 days prior to the Maturity Date (defined above).    (c) Mechanics of Conversions. Before any holder of a Note shall be entitled    to convert the same into shares of Common Stock, he, she or it shall surrender    the Note duly endorsed "Cancelled" at the office of the Corporation    or of any transfer agent for such stock, and shall give written notice to    the Corporation at such office that he, she or it elects to convert the same    and shall state therein the name or names in which he, she or it wishes the    certificate or certificates for shares of Common Stock to be issued.

(d) Adjustments for Reclassification and Reorganization. If the Common Stock    issuable upon conversion of this Note shall be changed into the same or a    different number of shares of any other class or classes of stock, whether    by capital reorganization, reclassification or otherwise (other than a subdivision    or combination of shares provided for in Section 10(d), then the Conversion    Price, as combination of shares provided for in Section 10(d), then the Conversion    Price, as then in effect shall, concurrently with the effectiveness of such    reorganization or reclassification, be proportionately adjusted so that the    Note shall be convertible into, or in lieu of the number of shares of Common    Stock that the holders would have otherwise been entitled to receive, a number    of shares of such other class or classes of stock equivalent to the number    of shares of Common Stock that would have been subject to receipt by the holders    upon conversion of this Note immediately before that change. This clause is    effective solely for the note purchaser who has not gone through the note    conversion process. Once the conversion or election made not to convert than    this section c is not applicable.    (e) No Impairment. The Corporation will not, 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 Corporation    but will at all times in good faith assist in the carrying out all the provisions    of this Note and in the taking if all such action as may be necessary or appropriate    in order to protect the conversion rights of the holders of this Note against    impairment.    (f) Certificates as to Adjustments. Upon the occurrence of each adjustment    or readjustment or readjustment of the applicable Conversion Price pursuant    to this Note, the Corporation at its expense shall promptly compute such adjustment    or readjustment in accordance with the terms hereof and prepare and furnish    to the holder of this Note a certificate setting forth such adjustment or    readjustment and showing in detail the facts upon which such adjustment or    readjustment is based. The Corporation shall, upon the written request at    any time of the holder of this Note, furnish or cause to be furnished to such    holder a like certificate prepared by the Corporation setting forth (i) such    adjustments and readjustments, (ii) the applicable Conversion Price at the    time in effect, and (iii) the number of shares of Common Stock and the amount,    if any, of other property which at the time would be received upon the conversion    of this Note. This information shall be forthcoming from Camden Securities    and forwarded to the Company.    (g) Notices. In the event of any taking by the Corporation of a record of    the holder of the holders of any class of securities for the purposes of determining    the holders thereof who are entitled to receive any dividend (other than a    cash dividend) or other distribution, the Corporation shall mail to the holder    of this Note at least thirty (30) days prior to the date specified therein,    a notice specifying the date on which any such record is to be taken for the    purpose of such dividend or distribution. In the event of any proposal by    the Corporation to take any action that would result in any liquidation or    deemed liquidation of the Corporation, the Corporation shall mail to the holder    of this Note at least twenty (20) days prior to the date of such proposed    transaction a notice specifying the proposed date of such transaction. Any    notice required by the provisions of his Note appearing in the books of the    Corporation. If the mailing address of the holder of this Note is outside    the United States, a copy of any notice to be sent pursuant to this Section    shall be sent to such holder by telecopy (with confirmation of receipt) and    shall be deemed given upon transmission. Any notices deposited in the mail    shall be sent by registered mail.    (h) Issue Taxes. The Corporation 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 on conversion of this Note pursuant hereto;    provided, however, that the Corporation shall not be obligated to pay any    transfer taxes resulting from any transfer requested by any holder in connection    with any such conversion.    (i) Reservation of Stock Issuable Upon Conversion. The Corporation shall at    all times reserve and keep available out of its authorized but unissued shares    of Common Stock, solely for the purpose of effecting the conversion of the    Notes, such number of shares of its Common Stock as shall from time to time    be sufficient to effect the conversation of all outstanding Notes; and if    at any time the number of authorized by unissued shares of Common Stock not    be sufficient to effect the conversion of all then outstanding Notes, the    Corporation will take such corporate action as may, in the opinion of its    counsel, be necessary to increase its authorized but unissued shares of Common    Stock to such number of shares as shall be sufficient for such purpose, including,    without limitation, engaging its best efforts to obtain the requisite stockholder    approval if any necessary amendment to this Note.    (j) Fractional Shares No fractional shares shall be issued upon the conversion    of the Notes. Fractional interests shall be eliminated by rounding any fraction    up to the nearest whole number of common shares.

       SECTION 11. For purposes of this  Note, in addition to capitalized terms elsewhere defined in this Note, the following  capitalized terms have the following meanings:         "Obligations" shall mean  any principal, interest, premium, penalties, fees and other liabilities and  obligations (including obligations under letters of credit and unused availability  under revolving credit facilities) payable under the documentation relating  to any Senior Indebtedness (including, but not limited to, all interest accruing  after the commencement of any bankruptcy, insolvency, receivership or similar  proceeding at the rate provided in the governing documentation, whether or not  such interest is an allowed claim in such proceeding).         "Person" means an individual,  a partnership, a corporation, an association, a joint stock company, a trust,  a joint venture, an unincorporated organization and a governmental entity or  any department, agency or political subdivision hereof.         "Placement Agent " means  Camden Securities, Inc.  IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first  above written.

|   | AMERICAN WATER STAR, INC.        By: 

Its: |
|--------|---------------------------------------------|

 

[CORPORATE SEAL]