No.   2                                                           $1,744,518 USD
     ---

                                 INTERIORS, INC.

                 Secured Convertible Note due September 29, 2004

      THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THERE IS AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

            This Secured Convertible Note is duly authorized issue of Secured
Convertible Notes of Interiors Inc., a Delaware corporation (the "Issuer"),
issued on December 31, 1999 (the "Issuance Date"), and designated as its Secured
Convertible Note due September 29, 2004 (the "Note").

            This Note has been issued under the terms and provisions of the
Exchange Agreement dated as of December 31, 1999 between the Issuer and Holder
(the "Exchange Agreement") and shall be subject to all of the terms and
conditions and entitled to all of the benefits thereof. This Note has been
secured by the Collateral (as defined in the Security Agreement) pursuant to the
terms of the Exchange Agreement and a security agreement (the "Security
Agreement") entered into between the Issuer and the Holder.

                FOR VALUE RECEIVED, the Issuer promises to pay to

                            Endeavour Capital Fund SA

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

       One Million Seven Hundred Forty Four Thousand Five Hundred Eighteen

                             United States Dollars,
<PAGE>

on or prior to September 29, 2004 (the "Maturity Date") or such earlier date
this Note is required to be repaid by the Issuer pursuant to the terms herein,
and to pay interest, as outlined below, at the rate of seventeen percent (17%)
per annum on the principal sum outstanding for the term of this Note. Accrual of
interest shall commence as of September 30, 1999, and shall accrue from day to
day. Interest shall be payable in cash by the Issuer upon the earlier to occur
of (a) a Conversion Date, (b) redemption as set forth below, or (c) upon an
Event of Default as defined below. Unless otherwise agreed in writing by both
parties hereto, the interest so payable will be paid to the person in whose name
this Note (or one or more predecessor Notes) is registered on the records of the
Issuer regarding registration and transfers of the Note (the "Note Register"),
provided, however, that the Issuer's obligation to a transferee of this Note
arises only if such transfer, sale or other disposition is made in accordance
with the terms and conditions contained in the Exchange Agreement and this Note.

      In the event this Note is outstanding on the Maturity Date it shall
automatically be converted into shares of the Issuer's Class A Common Stock,
$0.001 par value per share (the "Common Stock") (as set forth below) as if the
Holder voluntarily elected such conversion in accordance with the procedures,
terms and conditions set forth in this Note, provided, that such shares of
Common Stock are either (a) registered at such time for resale under the
Securities Act, or (b) otherwise resalable under the Securities Act without
restriction to limitation under Rule 144, and (i) the Common Stock is listed on
the Nasdaq Small Cap Market or other principal market of the Common Stock at
such time and has been listed on such market for at least the preceding sixty
trading days, (ii) there has not been any suspension in the trading of the
Common Stock on the Nasdaq Small Cap Market or other Principal Market, and the
(iii) the Issuer has been in compliance in all material respects with the terms
and conditions of this Note, the Exchange Agreement, and the Security Agreement
 . In the event that (i), (ii), and (iii) of the preceding sentence are not
satisfied then the Issuer shall be obligated to pay the Holder the cash value of
the principal amount of this Note outstanding on such date as if such Note had
been converted and sold on such date (at the Bid Price as defined below) in
accordance with the conversion provisions set forth below, plus all unpaid
interest. Principal and interest are payable at the address last appearing on
the Note Register as designated in writing by the Holder hereof from time to
time.

      The Note is subject to the following additional provisions:

      1. The Note is exchangeable for like Notes in equal aggregate principal
amount of authorized denominations, as requested by the Holder surrendering the
same, but shall not be issuable in denominations of less than $50,000 (unless
such amount represents the remaining principal balance outstanding). No service
charge will be made for such registration or transfer or exchange.

      2. The Issuer shall be entitled to withhold from all payments of principal
and/or interest of this Note 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.


                                       23
<PAGE>

      3. This Note has been issued subject to investment representations of the
original Holder hereof and may be transferred or exchanged only in compliance
with the Securities Act and applicable state securities laws. Prior to the due
presentment for such transfer of this Note, the Issuer and any agent of the
Issuer may treat the person in whose name this Note is duly registered on the
Note Register as the owner hereof for the purpose of receiving payment as herein
provided and all other purposes, whether or not this Note 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 Exchange Agreement.

      4. The Holder is entitled, at its option, at any time after September 29,
2000 to convert this Note, in whole or in part, in accordance with the following
terms and conditions:

            (a) The Holder may exercise its right to convert the Note by
telecopying an executed and completed notice of conversion (the "Notice of
Conversion") to the Issuer and delivering the original Note to the Issuer by
express courier. Each Business Day 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 Note
(together with the certificates representing the Note not so converted) to the
Holder via express courier, by electronic transfer (if applicable) or otherwise
within five Business Days after the Conversion Date, provided, the Issuer has
received the original Note being so converted. If the Company has not received
the original Note being converted within three Business Days after Conversion
Date, then the Issuer shall transmit the certificates representing the shares of
Common Stock issuable upon conversion of the Note (together with the
certificates representing the Note not so converted) to the Holder via express
courier, by electronic transfer (if applicable) or otherwise within three
Business Days after receipt of the original Note being converted. 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 (i) five
Business Days after receipt of a Notice of Conversion (provided the Issuer has
received the original Note within three Business Days after the Conversion
Date), or (ii) three Business Days after receipt of the original Note being
converted if the Issuer has not received the original Note being converted
within three Business Days after the Conversion Date, 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 Note representing the portion of the
Note converted shall be delivered as follows:

            To the Issuer:

                        Interiors, Inc.
                        320 Washington Street
                        Mount Vernon, New York 10553
                        Telephone:  (914) 665-5400
                        Facsimile: (914) 665-5469
                        Attention: President


                                       3
<PAGE>

                  or to such other address as may be communicated by the Issuer
            to the Holder in writing.

            In the event that the Common Stock issuable upon conversion of the
Note is not delivered to the Holder within (i) seven Business Days after the
Conversion Date (provided the Issuer has received the original Notice of
Conversion and Note within three Business Days after the Conversion Date), or
(ii) three Business Days after receipt of the original Notice of Conversion and
original Note being converted if the Issuer has not received the original Notice
of Conversion and original Note being converted within three Business Days after
the Conversion Date (and assuming the Holder has not revoked such Notice of
Conversion as permitted above), the Issuer shall pay to the Holder, in
immediately available funds, upon demand, as liquidated damages for such failure
and not as a penalty, for each $100,000 principal amount of Note sought to be
converted, $250 for each calendar day that the shares of Common Stock are not
delivered, which liquidated damages shall run from the eighth Business Day after
the Conversion Date up until the time that either the Notice of Conversion 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. The Holder's right to liquidated damages
pursuant to the terms of this Section shall in no way affect the Holder's right
pursuant to Section 7 below to consider this Note immediately due and payable
upon the occurrence of an Event of Default (as defined in Section 7 below).

            (b) The Holder may, at its sole option convert this Note into that
number of shares of fully paid and nonassessable shares of Common Stock (the
"Conversion Shares") which is to be derived from dividing the Conversion Amount
by the Conversion Price. For purposes of this Note, the term "Conversion Amount"
shall mean the principal dollar amount of the Note being converted. The
"Conversion Price" shall be equal to one hundred (100%) percent of the average
of Bid Price during the five consecutive trading days immediately preceding a
Conversion Date, as such Conversion Price shall be adjusted pursuant to the
terms hereof. The "Bid Price" shall be deemed to be the reported last bid price
regular way of the Common Stock 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. The principal amount of this Note
shall be reduced as per that principal amount indicated on the Notice of
Conversion upon the proper receipt by the Holder of such shares of Common Stock
due upon such Notice of Conversion.

            (c) Upon each adjustment of the Conversion Price, the Holder shall
thereafter be entitled to (but not obligated to) receive upon conversion of this
Note, at the Conversion Price resulting from such adjustment, the number of
shares of Common Stock obtained by (i) multiplying the Conversion Price in
effect immediately prior to such adjustment by the number of shares of Common
Stock receivable hereunder immediately prior to such adjustment and (ii)
dividing the product thereof by the Conversion Price resulting from such
adjustment.


                                       4
<PAGE>

            (d)   The Conversion Price shall be adjusted as follows:

                  (i) In the case of any amendment to the Issuer's Certificate
of Incorporation to change the designation of the Common Stock or the rights,
privileges, restrictions or conditions in respect to the Common Stock or
division of the Common Stock, this Note shall be adjusted so as to provide that
upon exercise thereof, the Holder shall receive, in lieu of each share of Common
Stock theretofore issuable upon such conversion, the kind and amount of shares,
other securities, money and property receivable upon such designation, change or
division by the Holder issuable upon such conversion had the conversion occurred
immediately prior to such designation, change or division. This Note shall be
deemed thereafter to provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section. The provisions of this Subsection (i) shall apply in the same manner to
successive reclassifications, changes, consolidations and mergers.

                  (ii) If the Issuer shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares of Common Stock, or
declare a dividend or make any other distribution upon the Common Stock payable
in shares of Common Stock, the Conversion Price in effect immediately prior to
such subdivision or dividend or other distribution shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Conversion Price
in effect immediately prior to such combination shall be proportionately
increased.

                  (iii) If any capital reorganization or reclassification of the
capital stock of the Issuer, or any consolidation or merger of the Issuer with
or into another corporation or other entity, or the sale of all or substantially
all of the Issuer's assets to another corporation or other entity shall be
effected in such a way that holders of shares of Common Stock shall be entitled
to receive stock, securities, other evidence of equity ownership or assets with
respect to or in exchange for shares of Common Stock, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale (except as
otherwise provided below in this Section) lawful and adequate provisions shall
be made whereby the Holder shall thereafter have the right to receive upon the
conversion hereof upon the basis and upon the terms and conditions specified
herein, such shares of stock, securities, other evidence of equity ownership or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of
Common Stock immediately theretofore receivable upon the conversion of this Note
under this Section had such reorganization, reclassification, consolidation,
merger or sale not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the holder to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Conversion Price and of the number of shares of Common Stock
receivable upon the conversion of this Note) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities, other evidence
of equity ownership or assets thereafter deliverable upon the exercise hereof
including an immediate adjustment, by reason of such consolidation or merger, of
the Conversion Price to the value for the Common Stock reflected, by the terms
of such consolidation or merger if the value so reflected is less than the
Conversion Price in effect immediately prior to such consolidation or merger.
Subject to the terms of this Note, in the event


                                       5
<PAGE>

of a merger or consolidation of the Issuer with or into another corporation or
other entity as a result of which the number of shares of common stock of the
surviving corporation or other entity issuable to investors of Common Stock, is
greater or lesser than the number of shares of Common Stock of the Issuer
outstanding immediately prior to such merger or consolidation, then the
Conversion Price in effect immediately prior to such merger or consolidation
shall be adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock. The Issuer shall not
effect any such consolidation, merger or sale, unless, prior to the consummation
thereof, the successor corporation (if other than the Issuer) resulting from
such consolidation or merger or the corporation purchasing such assets shall
assume by written instrument the obligation to deliver to the Holder such shares
of stock, securities, other evidence of equity ownership or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to receive
or otherwise acquire. If a purchase, tender or exchange offer is made to and
accepted by the holders of more than fifty (50%) percent of the outstanding
shares of Common Stock, the Issuer shall not effect any consolidation, merger or
sale with the person having made such offer or with any affiliate of such
person, unless prior to the consummation of such consolidation, merger or sale
the Holder shall have been given a reasonable opportunity to then elect to
receive upon the conversion of this Note the amount of stock, securities, other
evidence of equity ownership or assets then issuable with respect to the number
of shares of Common Stock in accordance with such offer.

                  (iv) In case the Issuer shall, at any time prior to conversion
of this Note, consolidate or merge with any other corporation or other entity
(where the Issuer is not the surviving entity) or transfer all or substantially
all of its assets to any other corporation or other entity, then the Issuer
shall, as a condition precedent to such transaction, cause effective provision
to be made so that the Holder upon the conversion of this Note after the
effective date of such transaction shall be entitled to receive the kind and,
amount of shares, evidences of indebtedness and/or other securities or property
receivable on such transaction by the Holder of the number of shares of Common
Stock as to which this Note was convertible immediately prior to such
transaction (without giving effect to any restriction upon such exercise); and,
in any such case, appropriate provision shall be made with respect to the rights
and interests of the Holder to the end that the provisions of this Note shall
thereafter be applicable (as nearly as may be practicable) with respect to any
shares, evidences of indebtedness or other securities or assets thereafter
deliverable upon conversion of this Note. Upon the occurrence of any event
described in this Subsection (iv), the Holder shall have the right to (i)
convert this Note immediately prior to such event at a Conversion Price equal to
the lesser of (a) the then Conversion Price or (b) the price per share of Common
Stock paid in such event, (ii) retain ownership of this Note, in which event,
appropriate provisions shall be made so that this Note shall be convertible at
the Holder's option into shares of stock, securities or other equity ownership
of the surviving or acquiring entity, or (iii) force redemption of the then
outstanding principal amount of this Note in accordance with the provisions of
Section 18 below.

                  (v) Whenever the Conversion Price shall be adjusted pursuant
to this Section the Issuer shall promptly mail by registered or certified mail,
return receipt requested, to the Holder a certificate signed by its President or
Vice President and by its Treasurer, or Secretary, setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of


                                       6
<PAGE>

the basis on which the Board of Directors of the Issuer made any determination
hereunder), and the Conversion Price after giving effect to such adjustment, and
shall cause copies of such certificates to be mailed (by first-class mail,
postage prepaid) to the Holder. The Issuer shall make such certificate and mail
it to the Holder immediately after each adjustment.

            (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 Note and in taking of all such action as may be necessary or appropriate in
order to protect the conversion rights of the Holder against impairment.

            (f) In the event of any liquidation, dissolution or winding up of
the Issuer, whether voluntary or involuntary, before any distribution may be
made with respect to the Issuer's Common Stock or any other class of common
stock or preferred stock of the Issuer, the Holder shall be entitled to receive
out of the assets available for distribution to shareholders an amount in cash
equal to the Redemption Price of such principal amount of Note then outstanding
(the "Liquidation Amount"). If any portion of the principal amount of this Note
shall have been prepaid or converted into Common Stock prior to such
liquidation, dissolution or winding up, the interest component of the
Liquidation Amount pursuant to clause (ii) above shall be calculated annually
based on the average principal amount of this Note which shall be outstanding
during each consecutive twelve month period from the date of issuance of this
Note to the date immediately prior to such liquidation, dissolution or winding
up of the Company. If the assets of the Company available for distribution to
shareholders shall be insufficient to pay the Holder the full Liquidation Amount
to which they shall be entitled, then any such distribution of assets of the
Issuer shall be distributed ratably to all of the holders of the Notes. After
the payment of the Liquidation Amount shall have been made in full to the Holder
or funds necessary for such payment shall have been set aside by the Issuer in
trust for the account of holders of the Notes so as to be available for such
payments, the holders of the Notes shall be entitled to no further participation
in the distribution of the assets of the Issuer, and the remaining assets of the
Issuer legally available for distribution to shareholders shall be distributed
among the holders of Common Stock and any other classes or series of Common
Stock or preferred stock of the Issuer in accordance with their respective
terms.

      5. No provision of this Note 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 Note at the place,
time, and rate, and in the coin or currency herein prescribed.

      6. 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.


                                       7
<PAGE>

      7. If one or more of the following described events (each of which being
an "Event of Default" hereunder) shall occur and shall be continuing (as set
forth below) for a period of seven Business Days after notice from the Holder:

            (a) any of the representations, covenants, or warranties made by the
      Issuer herein, or in the Exchange Agreement and/or Security Agreement
      shall have been incorrect when made; or

            (b) any of the representations, covenants, or warranties made by
      Petals, Inc. in the Security Agreement shall have been incorrect when made
      in any material respect; or

            (c) the Issuer shall breach, fail to perform, or fail to observe in
      any material respect any material covenant, term, provision, condition,
      agreement or obligation of the Issuer under this Note (or any security of
      the Issuer held by the Holder), the Security Agreement, the Registration
      Rights Agreement entered into between the Issuer and the Holder of even
      date herewith (the "Registration Rights Agreement"), and the Exchange
      Agreement, between the parties of even date herewith; or

            (d) Petals, Inc. shall breach, fail to perform, or fail to observe
      in any material respect any material covenant, term, provision, condition,
      agreement or obligation of Petals, Inc. under the Security Agreement
      between the parties of even date herewith; or

            (e) a trustee, liquidator or receiver shall be appointed for the
      Issuer (and/or Petals, Inc.) or for a substantial part of its property or
      business without its consent and shall not be discharged within thirty
      (30) calendar days after such appointment; or

            (f) 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/or Petals, Inc.) and shall not be dismissed within thirty (30)
      calendar days thereafter; or

            (g) 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/or
      Petals, Inc.) and, if instituted against the Issuer (and/or Petals, Inc.),
      Issuer (and/or Petals, Inc.) 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)
      calendar days thereafter; or

            (h) the Common Stock is suspended and/or delisted from trading on
      the Nasdaq Small Cap Market, or the Issuer has received notice of final
      action concerning delisting from the Nasdaq Small Cap Market, unless in
      each such instance, the Issuer's Common Stock shall be listed on the
      Nasdaq National Market, the American Stock Exchange or the New York Stock
      Exchange within seven business days from such suspension and/or delisting
      on the Nasdaq Small Cap Market; or


                                       8
<PAGE>

            (i) the Registration Statement including the shares of Common Stock
      underlying this Note has not been filed with the Securities and Exchange
      Commission and/or declared effective in a timely manner as per Sections
      3(a) and 3(f) of the Registration Rights Agreement, or the effectiveness
      of such Registration Statement shall be suspended for more than seven
      consecutive business days; or

            (j) the Issuer shall have failed to pay interest within five
      Business Days of when due hereunder and/or principal within three Business
      Days of when due hereunder and/or comply with the redemption provisions
      contained herein within three Business Days of when due hereunder; in each
      case, upon receipt of written notice of such payment default; or

            (k) the Issuer shall have failed to timely deliver shares of Common
      Stock issuable upon conversion of the Notes and/or exercise of the
      Warrants issued by the Issuer pursuant to the terms of this Note and the
      Warrants; or

            (l) the Issuer, or any other party, shall, at any time after the
      Issuance Date, (i) in any way materially and adversely alter Holder's
      security interest that it has been granted in the Collateral pursuant to
      the Security Agreement, or (ii) sell, transfer or convey the Collateral;
      or

            (m) the Company and/or Petals, Inc. shall cease operations, cease to
      operate as a going concern, terminate its corporate existence, or sell,
      transfer and/or convey all or substantially all of its assets, or either
      shall combine with another entity whereby the Issuer is not the surviving
      entity; or

            (n) a judgment in excess of $100,000 shall be entered against Debtor
      and/or Subsidiary or a warrant of execution or similar process shall be
      issued or levied against its property and within thirty (30) days after
      such judgment, warrant or process shall not have been paid in full or
      proper appeal of the same made; or

            (o) the occurrence of any "Event of Default" as that term is defined
      in the Security Agreement.

      then, or at any time thereafter, and in each and every such case, unless
such Event of Default shall have been cured or waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) or
cured as provided herein, at the option of the Holder, and in the Holder's sole
discretion, the Holder may consider the entire principal amount of this Note
(and all interest through such date) immediately due and payable in cash, at the
cash equivalent of the Redemption Price for such then outstanding principal
amount of Note, (or the Holder shall be entitled to recover from the Collateral
as per the terms of the Security Agreement, but shall be entitled to enforce its
rights hereunder in the event the Collateral is insufficient to the amounts due
and owing as aforesaid) 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


                                       9
<PAGE>

provided herein or any other rights or remedies afforded by law (including but
not limited to consequential damages if any). 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. Nothing contained herein shall limit the rights of the
Holder to collect liquidated damages as provided herein or in any other
agreement entered into between the Holder and the Issuer, or any other damages
that the Holder may otherwise be entitled to under the terms of this Note, the
Exchange Agreement, or the Security Agreement.

      8. In case any provision of this Note 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 possible, and the validity and enforceability
of the remaining provisions of this Note will not in any way be affected or
impaired thereby.

      9. [this section intentionally left blank]

      10. This Note, together with all documents referenced herein, embodies the
full and entire understanding and agreement between the Issuer and Holder with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. Neither
this Note nor any terms hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Issuer and the Holder. All
capitalized terms not otherwise defined herein shall have the same meaning as
given in the Exchange Agreement. In the event of any inconsistencies between
this Note and the Exchange Agreement, the Note shall control. No statement,
representation, warranty, covenant or agreement of any kind not expressly set
forth in this Note shall affect, or be used to interpret, change or restrict,
the express terms and provisions of this Note.

      11. This Note will be exclusively construed and enforced in accordance
with and governed exclusively by the laws of the State of New York, except for
matters arising under the Securities Act, without reference to principles of
conflicts of law. Each of the parties consents to the exclusive jurisdiction of
the U.S. District Court sitting in the Southern District of the State of New
York sitting in Manhattan in connection with any dispute arising under this Note
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions. Each party hereby agrees that if the
other party to this Note obtains a judgment against it in such a proceeding, the
party which obtained such judgment may enforce same by summary judgment in the
courts of any country having jurisdiction over the party against whom such
judgment was obtained, and each party hereby waives any defenses available to it
under local law and agrees to the enforcement of such a judgment. Each party to
this Note irrevocably consents to the service of process in any such proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law. Each party waives its right to a trial by jury.


                                       10
<PAGE>

      12. The convertibility of this Note shall be restricted such that that
portion of the Note which, if otherwise converted, would result in Holder owning
4.99% or more of the then issued and outstanding Common Stock, shall not be
convertible until the Holder is not an owner of 4.99% or more of the then issued
and outstanding Common Stock.

      13. In the event the Issuer, at any time while this Note is outstanding,
shall issue any shares of Common Stock (or any instrument convertible into
Common Stock), otherwise than: (i) pursuant to options, warrants, instruments
and agreements under which convertible notes and/or shares of convertible
preferred stock of the Issuer were issued, or other obligations to issue shares
of Common Stock as of the Issuance Date, all as described in the SEC filings
made by the Issuer within twelve months prior to the Issuance Date, or (ii) all
shares reserved for issuance pursuant to the Issuer's stock option, incentive,
or other similar plan, which plan and which grant was in effect as of the
Issuance Date and approved by the Board of Directors of the Issuer ((i) and (ii)
collectively referred to as the "Existing Obligations"), for a consideration
less than the Conversion Price that would be in effect at the time of such
issue, then, and thereafter successively upon each such issue, the Conversion
Price shall be amended from then on to be equal to the lesser of (i) one hundred
(100%) percent of the average of the Bid Prices during the five consecutive
trading days immediately preceding a Conversion Date, or (ii) the resulting
quotient from the following formula: (y) the number of shares of Common Stock
outstanding immediately prior to such issue shall be multiplied by the
Conversion Price in effect at the time of such issue and the product shall be
added to the aggregate consideration, if any received by the Issuer upon such
issue of additional shares of Common Stock; and (z) the sum so obtained shall be
divided by the number of shares of Common Stock outstanding immediately after
such issue. Except for the Existing Obligations, and options that may be issued
under any employee incentive stock option and/or any qualified stock option plan
adopted by the Issuer, for the purposes of this adjustment, the issuance of any
security of the Issuer carrying the right to convert such security into shares
of Common Stock or of any warrant, right, or option to purchase Common Stock
shall result in an adjustment to the Conversion Price upon issuance of shares of
Common Stock upon the Holder's exercise of its conversion rights.

      14. In the event the Holder shall elect to convert any portion of this
Note as provided herein, the Issuer cannot refuse conversion based on any claim
that the Holder or anyone associated or affiliated with the Holder has been
engaged in any violation of law, unless an injunction from a court, restraining
and/or enjoining conversion of all or part of said portion of this Note shall
have been issued and the Issuer posts a surety bond for the benefit of the
Holder in the amount of 130% of the principal amount of the Note sought to be
converted plus outstanding interest through such date, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to the Holder in the event it obtains a favorable judgment (but shall not in any
way limit any additional damages the Holder may be entitled to).

      15. Upon receipt by the Issuer of evidence of the loss, theft, destruction
or mutilation of any Note certificate(s), and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Issuer, and
upon the cancellation of the Note certificate(s), if mutilated, the Issuer shall
execute and deliver new certificates for Note(s) of like tenure and date.


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<PAGE>

      16. This Note does not entitle the Holder to any voting rights or other
rights as a shareholder of the Issuer prior to the conversion into Common Stock
thereof, except as provided by applicable law. If, however, at the time of the
surrender of this Note and conversion the Holder hereof shall be entitled to
convert this Note, the shares of Common Stock so issued shall be and be deemed
to be issued to the Holder as the record owner of such shares as of the close of
business on the Conversion Date.

      17. Except as expressly provided herein or as required by law, so long as
this Note remains outstanding, the Issuer shall not, without the approval by
vote or written consent by the Holder, take any action that would adversely
affect the rights, preferences or privileges of this Note.

      18. The Issuer shall have the right to redeem this Note, in whole or in
part (except that portion of the principal amount of this Note that is the
subject of a Notice of Conversion which has previously been sent to the Issuer),
in cash at the Redemption Price (as defined below) at any time by thereafter
providing written notice (the "Redemption Notice") to the Holder. The Issuer
shall wire transfer the appropriate amount of funds to the Holder to complete
the redemption, which shall be (if the Redemption Notice is received via
facsimile by the Holder prior to the first anniversary of the Issuance Date) no
later than the tenth Business Day after the Holder has received the Redemption
Notice via facsimile (the "Redemption Date") and if the Redemption Notice is
received via facsimile by the Holder after the first anniversary of the Issuance
Date no later than the third Business Day after the Holder has received the
Redemption Notice via facsimile (also referred to as a Redemption Date. Upon
facsimile receipt of the Redemption Notice, the Holder's right to convert this
Note shall terminate and be canceled immediately; provided, however, that the
right to convert this Note shall immediately be reinstated if the Issuer fails
to comply with the redemption provisions hereof. In the event the Issuer fails
to wire the appropriate amount of funds to the Holders as set forth in the
Redemption Notice on or before the Redemption Date, or shall otherwise fail to
comply with the redemption provisions set forth herein on three separate
occasions, then the Issuer shall have waived its right to redeem any portion of
this Note at any time thereafter (the foregoing shall have not be deemed as a
waiver by the Holder of any rights it may have under Section 7 herein).

            The Redemption Notice shall set forth (i) the Redemption Date, (ii)
the Redemption Price, as defined below, and (iii) the principal amount of the
Note being redeemed. The Redemption Notice shall be irrevocable, and it shall be
delivered by facsimile to the Holder at its address as the same shall appear on
the books of the Issuer.

            The Redemption Price shall be equal to the sum of (a) the entire
outstanding principal amount of this Note being redeemed, (b) any and all
payment due to the Holder from the Issuer pursuant to the terms of the Exchange
Agreement, and (c) all accrued and unpaid interest on this Note.

            At the close of business on the Redemption Date, subject to the
Holder's receipt of the applicable Redemption Price, the portion of this Note
being redeemed shall be automatically canceled and converted into a right to
receive the Redemption Price, and all rights of this Note, including the right
to conversion shall cease without further action. Immediately following the
Redemption Date (assuming full compliance by the Issuer with the redemption
provisions set forth herein), the Holder shall surrender its original Note at
the office of the Issuer,


                                       12
<PAGE>

and the Issuer shall issue to the Holder a new Note certificate for the
principal amount that remains outstanding, if any.

      The Redemption Price shall be adjusted proportionally upon any adjustment
of the Conversion Price as set forth above.

      The Issuer shall not be entitled to send any Redemption Notice and begin
the redemption procedure hereunder unless it has:

            (i) the full amount of the 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 Redemption Price with a bank or similar financial institution; or

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

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                                       13
<PAGE>

            IN WITNESS WHEREOF, the Issuer has caused this Convertible Note to
be duly executed by an officer thereunto duly authorized.

                                        INTERIORS, INC.


                                        By /s/ Max Munn
                                          --------------------------------------
                                          Name: Max Munn
                                          Title: President

Date: December 31, 1999


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