EXECUTION COPY


NEITHER  THE  ISSUANCE  AND  PLACECITYSALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE  NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE
BEEN  REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE  SECURITIES  LAWS.  THE  SECURITIES  MAY  NOT  BE  OFFERED FOR SALE, SOLD,
TRANSFERRED  OR  ASSIGNED  (I)  IN  THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT  FOR  THE  SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B)  AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT  REQUIRED  UNDER  SAID  ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A  UNDER  SAID  ACT.  NOTWITHSTANDING  THE  FOREGOING,  THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT  SECURED  BY  THE  SECURITIES.  ANY  TRANSFEREE  OF THIS NOTE SHOULD
CAREFULLY  REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(C)(III) AND 19(A)
HEREOF.  THE  PRINCIPAL  AMOUNT  REPRESENTED  BY THIS NOTE AND, ACCORDINGLY, THE
SECURITIES  ISSUABLE  UPON  CONVERSION  HEREOF  MAY BE LESS THAN THE AMOUNTS SET
FORTH  ON  THE  FACE  HEREOF  PURSUANT  TO  SECTION  3(C)(III)  OF  THIS  NOTE.

                          CHARYS HOLDING COMPANY, INC.

                     SUBORDINATED UNSECURED CONVERTIBLE NOTE

Issuance Date: April 30, 2007                      Principal: U.S. $1,670,809.00


     FOR  VALUE  RECEIVED,  Charys Holding Company, Inc., a Delaware corporation
(the  "COMPANY"), hereby promises to pay to the order of UBS O'CONNOR LLC F/B/O/
O'CONNOR PIPES CORPORATE STRATEGIES MASTER LTD. or registered assigns ("HOLDER")
the  amount  set  out  above  as the Principal (as reduced pursuant to the terms
hereof  pursuant  to  redemption, conversion or otherwise, the "PRINCIPAL") when
due,  whether upon the Maturity Date (as defined below), on any Installment Date
with  respect  to  the Installment Amount due on such Installment Date (each, as
defined  herein),  acceleration,  redemption  or  otherwise  (in  each  case  in
accordance  with  the  terms  hereof)  and  to  pay interest ("INTEREST") on any
outstanding  Principal at a rate equal to 8.75% per annum (the "INTEREST RATE"),
from the date set out above as the Issuance Date (the "ISSUANCE DATE") until the
same becomes due and payable, whether upon any Installment Date or, the Maturity
Date,  acceleration,  conversion,  redemption  or  otherwise  (in  each  case in
accordance with the terms hereof).  This Subordinated Unsecured Convertible Note
(including  all  Subordinated  Unsecured  Convertible  Notes issued in exchange,
transfer  or replacement hereof, this "NOTE") is one of an issue of Subordinated
Unsecured Convertible Notes issued pursuant to the Securities Exchange Agreement
(as defined below) on the Closing Date (collectively, the "NOTES" and such other
Subordinated  Unsecured  Convertible  Notes,  the  "OTHER  NOTES").  Certain
capitalized  terms  used  herein  are  defined  in  Section 27.  Notwithstanding
anything  herein  contained  to  the  contrary  or  in  the  Securities Exchange
Agreement  defined below, the Holder specifically acknowledges that all of those
certain  8.75%  Senior  Convertible  Notes issued by the Company on February 16,
2007 in the principal amount of $175 million, and issued on March 6, 2007 in the
principal amount of $26.25 million in connection with the issuance of securities
of  the  Company by McMahan Securities Co. L.P. are senior to this Note in right
of  payment,  whether in respect of payment of redemptions, interest, damages or
upon  liquidation  or  dissolution  or  otherwise.

     (1)     PAYMENTS OF PRINCIPAL.  On each Installment Date, the Company shall
             ---------------------
pay  to  the  Holder  an  amount  equal  to  the  Installment Amount due on such
Installment  Date.  The "MATURITY DATE" shall be May 1, 2008, as may be extended
at  the option of the Holder (i) in the event that, and for so long as, an Event
of Default (as defined in Section 4(a)) shall have occurred and be continuing or
any  event  shall have occurred and be continuing which with the passage of time
and the failure to cure would result in an Event of Default and (ii) through the
date  that is ten (10) days after the consummation of a Change of Control in the
event  that  a  Change  of  Control is publicly announced or a Change of Control
Notice  (as defined in Section 5(b)) is delivered prior to the Maturity Date and
(iii) in connection with a deferral in accordance with the provisions of Section
8(b).

     (2)     INTEREST;  INTEREST  RATE.  Interest  on  this  Note shall commence
             -------------------------
accruing  on  the  Issuance Date and shall be computed on the basis of a 365-day
year  and  actual  days elapsed and shall be payable in arrears for each Payment
Month  on  the Installment Date during the period beginning on the Issuance Date
and  ending  on,


                                     -1-
<PAGE>
and including, the Maturity Date.  Interest shall be payable on each Installment
Date,  to the record holder of this Note on the applicable Installment Date, and
to  the extent that any Principal amount of this Note is converted prior to such
Installment  Date,  accrued  and  unpaid Interest with respect to such converted
Principal  amount  and  accrued  and  unpaid  Late  Charges with respect to such
Principal  and  Interest  shall  be paid through the Conversion Date (as defined
below) on the next succeeding Installment Date to the record holder of this Note
on  the  applicable  Conversion  Date,  in cash ("CASH INTEREST").  Prior to the
payment  of  Interest on an Installment Date, Interest on this Note shall accrue
at  the  Interest  Rate.  Upon  the  occurrence and during the continuance of an
Event of Default, the Interest Rate shall be increased to fifteen percent (15%).
In  the  event  that such Event of Default is subsequently cured, the adjustment
referred to in the preceding sentence shall cease to be effective as of the date
of  such  cure;  provided  that  the  Interest  as calculated and unpaid at such
increased rate during the continuance of such Event of Default shall continue to
apply  to  the extent relating to the days after the occurrence of such Event of
Default  through  and  including the date of cure of such Event of Default.  The
Company  shall  pay  any  and  all taxes that may be payable with respect to the
issuance and delivery of Interest Shares; provided that the Company shall not be
                                          --------
required  to  pay  any  tax  that  may  be payable in respect of any issuance of
Interest  Shares  to  any  Person  other  than the Holder or with respect to any
income  tax  due  by  the  Holder  with  respect  to  such  Interest  Shares.

     (3)     CONVERSION OF NOTES.  This Note shall be convertible into shares of
             -------------------
the  Company's common stock, par value $0.001 per share (the "COMMON STOCK"), on
the  terms  and  conditions  set  forth  in  this  Section 3 (the "CONVERSION").

          (a)     Conversion  Right.  Subject to the provisions of Section 3(d),
                  -----------------
at any time or times on or after the Issuance Date, the Holder shall be entitled
to  convert  any  portion  of  the  outstanding and unpaid Conversion Amount (as
defined  below)  into  fully  paid  and  nonassessable shares of Common Stock in
accordance  with  Section  3(c), at the Conversion Rate (as defined below).  The
Company  shall  not  issue  any  fraction  of  a  share of Common Stock upon any
Conversion.  If  the  issuance  would  result in the issuance of a fraction of a
share  of  Common  Stock,  the  Company  shall round such fraction of a share of
Common  Stock  up to the nearest whole share.  The Company shall pay any and all
taxes  that  may  be payable with respect to the issuance and delivery of Common
Stock  upon  Conversion  of  any  Conversion  Amount.

          (b)     Conversion  Rate.  The  number  of  shares  of  Common  Stock
                  ----------------
issuable upon Conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(the  "CONVERSION  RATE").

               (i)     "CONVERSION AMOUNT" means the portion of the Principal to
be  converted, redeemed or otherwise with respect to which this determination is
being  made.

               (ii)     "CONVERSION  PRICE" means, as of any Conversion Date (as
defined  below)  or other date of determination, $2.25, subject to adjustment as
provided  herein.

          (c)     Mechanics  of  Conversion.
                  -------------------------

               (i)     Optional  Conversion.  To  convert  any Conversion Amount
                       --------------------
into  shares of Common Stock on any date (a "CONVERSION DATE"), the Holder shall
(A)  transmit  by  facsimile  (or otherwise deliver), for receipt on or prior to
11:59  p.m.,  New  York  Time,  on  such  date,  a copy of an executed notice of
Conversion in the form attached hereto as Exhibit I (the "CONVERSION NOTICE") to
                                          ---------
the  Company  and (B) if required by Section 3(c)(iii), surrender this Note to a
common  carrier  for  delivery  to  the  Company  as  soon  as practicable on or
following such date (or an indemnification undertaking with respect to this Note
in  the  case  of its loss, theft or destruction).  On or before the first (1st)
Business  Day  following the date of receipt of a Conversion Notice, the Company
shall  transmit by facsimile a confirmation of receipt of such Conversion Notice
to  the  Holder  and  the  Transfer Agent.  On or before the second Business Day
following  the  date  of  receipt  of  a  Conversion Notice (the "SHARE DELIVERY
DATE"),  the Company shall (X) provided that the Transfer Agent is participating
in  the  DTC  Fast  Automated Securities Transfer Program, credit such aggregate
number  of  shares  of Common Stock to which the Holder shall be entitled to the
Holder's  or  its  designee's  balance  account  with  DTC  through  its Deposit
Withdrawal  Agent  Commission  system  or  (Y)  if  the  Transfer  Agent  is not
participating  in  the DTC Fast Automated Securities Transfer Program, issue and
deliver  to  the  address  as specified in the Conversion Notice, a certificate,
registered  in  the name of the Holder or its designee, for the number of shares
of  Common  Stock  to  which  the  Holder  shall  be


                                     -2-
<PAGE>
entitled.  If  this Note is physically surrendered for Conversion as required by
Section 3(c)(iii) and the outstanding Principal of this Note is greater than the
Principal  portion  of  the  Conversion Amount being converted, then the Company
shall  as soon as practicable and in no event later than three (3) Business Days
after  receipt  of  this  Note  and at its own expense, issue and deliver to the
holder  a  new  Note  (in  accordance  with  Section  17(d))  representing  the
outstanding  Principal not converted.  The Person or Persons entitled to receive
the  shares  of  Common  Stock  issuable upon a Conversion of this Note shall be
treated  for  all  purposes  as  the  record holder or holders of such shares of
Common  Stock  on  the Conversion Date.  In the event of a partial Conversion of
this Note pursuant hereto, the principal amount converted shall be deducted from
the  Installment  Amounts  relating to the Installment Dates as set forth in the
Conversion  Notice.

               (ii)     Company's  Failure  to  Timely Convert.  If within three
                        --------------------------------------
(3)  Trading  Days  after  the  Company's  receipt  of  the  facsimile copy of a
Conversion  Notice  the Company shall fail to issue and deliver a certificate to
the  Holder  or  credit  the Holder's balance account with DTC for the number of
shares  of  Common  Stock  to  which  the  Holder is entitled upon such holder's
Conversion of any Conversion Amount (a "CONVERSION FAILURE"), and if on or after
such  Trading  Day  the  Holder  purchases  (in  an  open  market transaction or
otherwise)  Common  Stock  to deliver in satisfaction of a sale by the Holder of
Common Stock issuable upon such Conversion that the Holder anticipated receiving
from the Company (a "BUY-IN"), then the Company shall, within three (3) Business
Days  after  the Holder's request and in the Holder's discretion, either (i) pay
cash  to  the  Holder  in  an  amount equal to the Holder's total purchase price
(including  brokerage  commissions,  if  any)  for the shares of Common Stock so
purchased  (the  "BUY-IN  PRICE"),  at  which  point the Company's obligation to
deliver  such  certificate  (and to issue such Common Stock) shall terminate, or
(ii)  promptly  honor  its  obligation to deliver to the Holder a certificate or
certificates  representing  such  Common  Stock and pay cash to the Holder in an
amount  equal to the excess (if any) of the Buy-In Price over the product of (A)
such  number  of  shares of Common Stock, times (B) the Closing Bid Price on the
Conversion  Date.

               (iii)     Book-Entry.  Notwithstanding  anything  to the contrary
                         ----------
set forth herein, upon Conversion of any portion of this Note in accordance with
the  terms hereof, the Holder shall not be required to physically surrender this
Note  to  the  Company unless (A) the full Conversion Amount represented by this
Note  is  being  converted or (B) the Holder has provided the Company with prior
written  notice (which notice may be included in a Conversion Notice) requesting
reissuance  of  this  Note upon physical surrender of this Note.  The Holder and
the  Company  shall  maintain  records  showing the Principal, Interest and Late
Charges  converted  and  the  dates  of such Conversions or shall use such other
method,  reasonably  satisfactory  to  the  Holder and the Company, so as not to
require  physical  surrender  of  this  Note  upon  Conversion.

               (iv)     Pro  Rata  Conversion;  Disputes.  In the event that the
                        --------------------------------
Company  receives a Conversion Notice from more than one holder of Notes for the
same  Conversion  Date  and  the  Company can convert some, but not all, of such
portions  of the Notes submitted for Conversion, the Company, subject to Section
3(d),  shall  convert from each holder of Notes electing to have Notes converted
on  such  date a pro rata amount of such holder's portion of its Notes submitted
for  Conversion  based on the principal amount of Notes submitted for Conversion
on  such  date  by such holder relative to the aggregate principal amount of all
Notes  submitted  for  Conversion on such date.  In the event of a dispute as to
the number of shares of Common Stock issuable to the Holder in connection with a
Conversion  of  this  Note,  the Company shall issue to the Holder the number of
shares  of  Common  Stock  not in dispute and resolve such dispute in accordance
with  Section  24.

          (d)     Limitations  on  Conversions.
                  ----------------------------

               (i)     Beneficial  Ownership.  The  Company shall not effect any
                       ---------------------
Conversion of this Note, and the Holder of this Note shall not have the right to
convert  any  portion  of this Note pursuant to Section 3(a), to the extent that
after  giving  effect to such Conversion, the Holder (together with the Holder's
affiliates) would beneficially own in excess of 4.99% (the "MAXIMUM PERCENTAGE")
of  the  number  of  shares of Common Stock outstanding immediately after giving
effect  to  such Conversion.  For purposes of the foregoing sentence, the number
of  shares  of  Common Stock beneficially owned by the Holder and its affiliates
shall  include  the number of shares of Common Stock issuable upon Conversion of
this  Note  with  respect  to  which the determination of such sentence is being
made,  but  shall  exclude  the  number of shares of Common Stock which would be
issuable upon (A) Conversion of the remaining, nonconverted portion of this Note
beneficially  owned  by  the Holder or any of its affiliates and (B) exercise or
Conversion of the unexercised or nonconverted portion of any other securities of
the


                                     -3-
<PAGE>
Company  (including, without limitation, any Other Notes or warrants) subject to
a  limitation  on  Conversion  or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its affiliates.  Except as set
forth  in  the  preceding  sentence,  for  purposes  of  this  Section  3(d)(i),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities  Exchange  Act of 1934, as amended (the "1934 ACT").  For purposes of
this  Section 3(d)(i), in determining the number of outstanding shares of Common
Stock,  the  Holder may rely on the number of outstanding shares of Common Stock
as reflected in (x) the Company's most recent Form 10-Q or Form 8-K, as the case
may  be  (y)  a  more recent public announcement by the Company or (z) any other
notice  by  the Company or the Transfer Agent setting forth the number of shares
of  Common  Stock  outstanding.  For any reason at any time, upon the written or
oral  request  of  the Holder, the Company shall within one Business Day confirm
orally  and  in  writing to the Holder the number of shares of Common Stock then
outstanding.  In  any  case,  the  number  of outstanding shares of Common Stock
shall  be  determined  after  giving  effect  to  the  Conversion or exercise of
securities  of the Company, including this Note, by the Holder or its affiliates
since the date as of which such number of outstanding shares of Common Stock was
reported.  By written notice to the Company, the Holder may increase or decrease
the  Maximum Percentage to any other percentage not in excess of 9.99% specified
in  such notice; provided that (i) any such increase will not be effective until
the  sixty-first  (61st)  day after such notice is delivered to the Company, and
(ii)  any such increase or decrease will apply only to the Holder and not to any
other  holder  of  Notes.

               (ii)     Principal  Market  Regulation.  The Company shall not be
                        -----------------------------
obligated  to  issue  any shares of Common Stock upon Conversion of this Note if
the issuance of such shares of Common Stock would exceed the aggregate number of
shares  of Common Stock which the Company may issue upon Conversion or exercise,
as  applicable,  of  the  Notes  and  Warrants  without  breaching the Company's
obligations  under  the  rules  or  regulations  of  the  Principal  Market (the
"EXCHANGE  CAP"),  except that such limitation shall not apply in the event that
the  Company  (A)  obtains  the  approval of its stockholders as required by the
applicable rules of the Principal Market for issuances of Common Stock in excess
of  such  amount  or  (B)  obtains a written opinion from outside counsel to the
Company  that  such  approval is not required, which opinion shall be reasonably
satisfactory to the Required Holders.  Until such approval or written opinion is
obtained,  no  holder of the Notes pursuant to the Securities Exchange Agreement
(the  "HOLDERS")  shall be issued in the aggregate, upon Conversion or exercise,
as applicable, of Notes or Warrants, shares of Common Stock in an amount greater
than  the product of the Exchange Cap multiplied by a fraction, the numerator of
which  is  the  principal  amount of Notes issued to the Holders pursuant to the
Securities  Exchange  Agreement on the Closing Date and the denominator of which
is the aggregate principal amount of all Notes issued to the Holders pursuant to
the  Securities  Exchange  Agreement  on  the Closing Date (with respect to each
Purchaser,  the  "EXCHANGE  CAP  ALLOCATION").  In  the event that any Purchaser
shall  sell  or otherwise transfer any of such Purchaser's Notes, the transferee
shall  be  allocated  a  pro  rata  portion  of  such  Purchaser's  Exchange Cap
Allocation,  and  the  restrictions  of  the  prior sentence shall apply to such
transferee  with respect to the portion of the Exchange Cap Allocation allocated
to  such transferee.  In the event that any holder of Notes shall convert all of
such  holder's  Notes  into  a  number  of  shares of Common Stock which, in the
aggregate,  is  less  than  such  holder's  Exchange  Cap  Allocation,  then the
difference  between  such  holder's  Exchange  Cap  Allocation and the number of
shares  of Common Stock actually issued to such holder shall be allocated to the
respective  Exchange  Cap Allocations of the remaining holders of Notes on a pro
rata  basis  in  proportion  to the aggregate principal amount of the Notes then
held  by  each  such  holder.

     (4)     RIGHTS  UPON  EVENT  OF  DEFAULT.
             --------------------------------

          (a)     Event  of  Default.  Each  of  the  following  events  shall
                  ------------------
constitute  an  "EVENT  OF  DEFAULT":

               (i)     The  failure  of  the  applicable  Registration Statement
required  to  be  filed  pursuant  to  the  Registration  Rights Agreement to be
declared  effective  by the SEC, or, while the applicable Registration Statement
is required to be maintained effective pursuant to the terms of the Registration
Rights  Agreement,  the  effectiveness  of the applicable Registration Statement
lapses  for  any  reason  (including, without limitation, the issuance of a stop
order)  or  is  unavailable  to  any holder of the Notes for sale of all of such
holder's  Registrable  Securities  (as  defined  in  the  Registration  Rights
Agreement)  in  accordance  with the terms of the Registration Rights Agreement,
and  such lapse or unavailability continues for a period of five (5) consecutive
Trading  Days  or  for  more  than  an aggregate of ten (10) days in any 365-day
period  (other  than  days  during  an Allowable Grace Period (as defined in the
Registration  Rights  Agreement));


                                     -4-
<PAGE>
               (ii)     If  after  Conversion,  the  suspension  from trading or
failure  of  the Common Stock to be listed on an Eligible Market for a period of
five  (5)  consecutive  Trading  Days  or for more than an aggregate of ten (10)
Trading  Days  in  any  365-day  period;

               (iii)     The  Company's (A) failure to cure a Conversion Failure
by  delivery  of  the  required number of shares of Common Stock within ten (10)
Business  Days  after  the  applicable Conversion Date or (B) notice, written or
oral,  to  any  holder  of the Notes, including by way of public announcement or
through  any  of  its agents, at any time, of its intention not to comply with a
request for Conversion of any Notes into shares of Common Stock that is tendered
in  accordance  with the provisions of the Notes, other than pursuant to Section
3(d);

               (iv)     At  any time following the 10th consecutive Business Day
that  the Holder's Authorized Share Allocation is less than the number of shares
of  Common  Stock that the Holder would be entitled to receive upon a Conversion
of the full Conversion Amount of this Note (without regard to any limitations on
Conversion  set  forth  in  Section  3(d)  or  otherwise);

               (v)     The  Company's failure to pay to the Holder any amount of
Principal,  Interest,  Late  Charges or other amounts when and as due under this
Note (including, without limitation, the Company's failure to pay any redemption
payments  or amounts hereunder) or any other Transaction Document (as defined in
the Securities Exchange Agreement) or any other agreement, document, certificate
or  other  instrument delivered in connection with the transactions contemplated
hereby  and  thereby  to  which  the Holder is a party, except, in the case of a
failure  to pay Interest and Late Charges when and as due, in which case only if
such  failure  continues  for  a  period  of  at  least  five (5) Business Days;

               (vi)     The entry by a court having jurisdiction in the premises
of  (i) a decree or order for relief in respect of the Company or any Subsidiary
of  a  voluntary  case  or  proceeding  under  any  applicable  Federal or State
bankruptcy,  insolvency, reorganization or other similar law or (ii) a decree or
order  adjudging  the  Company  or  any  Subsidiary as bankrupt or insolvent, or
approving  as  properly  filed  a  petition seeking reorganization, arrangement,
adjustment  or  composition  of  or  in respect of the Company or any Subsidiary
under  any  applicable  Federal  or  State  law or (iii) appointing a custodian,
receiver,  liquidator, assignee, trustee, sequestrator or other similar official
of  the Company or any Subsidiary or of any substantial part of its property, or
ordering  the  winding  up or liquidation of its affairs, and the continuance of
any  such  decree or order for relief or any such other decree or order unstayed
and  in  effect  for  a  period  of  60  consecutive  days;

               (vii)     The  commencement by the Company or any Subsidiary of a
voluntary  case  or proceeding under any applicable Federal or State bankruptcy,
insolvency,  reorganization  or  other  similar  law  or  of  any  other case or
proceeding  to  be  adjudicated a bankrupt or insolvent, or the consent by it to
the  entry  of  a  decree  or  order for relief in respect of the Company or any
Subsidiary  in an involuntary case or proceeding under any applicable Federal or
State  bankruptcy,  insolvency,  reorganization  or  other similar law or to the
commencement  of  any bankruptcy or insolvency case or proceeding against it, or
the  filing  by  it of a petition or answer or consent seeking reorganization or
relief  under  any  applicable Federal or State law, or the consent by it to the
filing  of  such  petition  or  to  the appointment of or taking possession by a
custodian,  receiver,  liquidator,  assignee,  trustee,  sequestrator  or  other
similar  official of the Company or any Subsidiary or of any substantial part of
its property, or the making by it of an assignment for the benefit of creditors,
or the admission by it in writing of its inability to pay its debts generally as
they  become  due,  or  the  taking  of  corporate  action by the Company or any
Subsidiary  in  furtherance  of  any  such  action;

               (viii)     The  Company  breaches  any  material  representation,
warranty,  covenant  or  other  term  or  condition of any Transaction Document,
except,  in the case of a breach of a covenant or other term or condition of any
Transaction  Document  which  is  curable,  only  if  the  Holder gives five (5)
Business Days prior notice of such breach and it remains uncured for a period of
at  least  five  (5)  Business  Days;

               (ix)     (A)  the  indictment  or  conviction of any of the named
executive  officers  (as  defined in Item 402(a)(3) of Regulation S-K) or any of
the  directors of the Company of a violation of federal or state securities laws
or  (B)  the  settlement  in  an  amount  over $1,000,000 by any such officer or
director  of  an action relating to such officer's violation of federal or state
securities  laws,  breach  of  fiduciary  duties  or  self-dealing;


                                     -5-
<PAGE>
               (x)     Any  breach  or  failure  in  any  respect to comply with
Section  9  of  this  Note;  or

               (xi)     Any  Event  of  Default  (as defined in the Other Notes)
occurs  with  respect  to  any  Other  Notes.

          (b)     Redemption  Right.  Promptly  after the occurrence of an Event
                  -----------------
of  Default  with  respect  to  this  Note  or any Other Note, the Company shall
deliver written notice thereof via facsimile and overnight courier (an "EVENT OF
DEFAULT  NOTICE")  to the Holder.  At any time after the earlier of the Holder's
receipt  of an Event of Default Notice and the Holder becoming aware of an Event
of  Default,  the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION
NOTICE") to the Company, which Event of Default Redemption Notice shall indicate
the portion of this Note the Holder is electing to redeem.  Each portion of this
Note subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed  by  the  Company at a price equal to the greater of (i) the product of
(x)  the  sum  of the Conversion Amount to be redeemed together with accrued and
unpaid  Interest  with  respect to such Conversion Amount and accrued and unpaid
Late  Charges  with  respect  to such Conversion Amount and Interest and (y) the
Redemption  Premium and (ii) the product of (A) the Conversion Rate with respect
to  such  sum of the Conversion Amount together with accrued and unpaid Interest
with  respect to such Conversion Amount and accrued and unpaid Late Charges with
respect  to  such  Conversion  Amount and Interest in effect at such time as the
Holder  delivers  an Event of Default Redemption Notice and (B) the Closing Sale
Price  of  the  Common  Stock  on  the  date immediately preceding such Event of
Default (the "EVENT OF DEFAULT REDEMPTION PRICE").  Redemptions required by this
Section  4(b) shall be made in accordance with the provisions of Section 12.  In
the  event  of  a partial redemption of this Note pursuant hereto, the principal
amount  redeemed  shall be deducted from the Installment Amounts relating to the
applicable  Installment  Dates  as  set forth in the Event of Default Redemption
Notice.

          (c)     In  addition,  and  without limitation of any other rights and
remedies hereunder, upon the first occurrence of a default under Section 4(a)(v)
                                                                 ---------------
of  this  Note,  without  regard  to  any  cure  period thereunder, and upon the
expiration  of  each  additional  30  day  thereafter  during which the Event of
Default  continues,  in  whole  or  in  part (such late payment, the "DELINQUENT
PAYMENT  AMOUNT"),  the  Company shall issue a Warrant to the Holder in the form
attached  to the Securities Exchange Agreement (including any warrants issued in
exchange  therefore  or  replacement  thereof,  a  "WARRANT") for such number of
shares  of Common Stock of the Company equal to the Delinquent Payment Amount at
such  time  divided  by  the Conversion Price.  Upon the second occurrence of an
Event  of Default under Section 4(a)(v) of this Note, without regard to any cure
                        ---------------
period  thereunder,  the  Company  shall  issue a Warrant to the Holder for such
number  of  shares  of  Common  Stock  of  the  Company equal to the outstanding
principal balance of the Note at such time divided by the Conversion Price.  The
issuance  of  any  Warrant hereunder is not a cure of any Event of Default.  The
Company  and  the  Holder  agree  that  it  would  be  extremely  difficult  and
impracticable  under the presently known and anticipated facts and circumstances
to  ascertain  and  fix with precision the actual damages the Holder would incur
should  the Company delay in making timely payments hereunder, and, accordingly,
the  Company  and  the  Holder  agree that a Warrant shall be issued as provided
herein  as liquidated damages for such delay, and not as a penalty.  The Company
and  the  Holder  agree  that the liquidated damages identified herein are not a
penalty, but instead are a good faith and reasonable estimate of the damages and
loss  the  Holder  would suffer in the event the Company delays in making timely
payments  under  this  Note.


                                     -6-
<PAGE>
     (5)     RIGHTS  UPON  FUNDAMENTAL  TRANSACTION  AND  CHANGE  OF  CONTROL.
             -----------------------------------------------------------------

          (a)     Assumption.  The Company shall not enter into or be party to a
                  ----------
Fundamental  Transaction unless (i)  the Successor Entity assumes in writing all
of  the  obligations  of  the  Company under this Note and the other Transaction
Documents  in  accordance  with  the provisions of this Section 5(a) pursuant to
written agreements in form and substance reasonably satisfactory to the Required
Holders  and  approved  by  the  Required  Holders  prior  to  such  Fundamental
Transaction, including agreements to deliver to each holder of Notes in exchange
for  such  Notes  a  security  of  the  Successor  Entity evidenced by a written
instrument  substantially similar in form and substance to the Notes, including,
without  limitation,  having  a  principal amount and interest rate equal to the
principal  amounts  and  the interest rates of the Notes held by such holder and
having  similar  ranking  to the Notes, and satisfactory to the Required Holders
and  (ii)  the  Successor  Entity  (including  its  Parent Entity) is a publicly
traded  corporation  whose common stock is quoted on or listed for trading on an
Eligible  Market  (a  "PUBLIC  SUCCESSOR  ENTITY").  Upon  the occurrence of any
Fundamental  Transaction,  the  Successor  Entity  shall  succeed  to,  and  be
substituted  for  (so  that  from  and  after  the  date  of  such  Fundamental
Transaction,  the provisions of this Note referring to the "Company" shall refer
instead  to the Successor Entity), and may exercise every right and power of the
Company  and  shall assume all of the obligations of the Company under this Note
with  the  same effect as if such Successor Entity had been named as the Company
herein.  Upon  consummation of the Fundamental Transaction, the Successor Entity
shall  deliver  to  the  Holder  confirmation  that  there  shall be issued upon
Conversion  or redemption of this Note at any time after the consummation of the
Fundamental Transaction, in lieu of the shares of the Company's Common Stock (or
other  securities,  cash,  assets  or  other  property)  purchasable  upon  the
Conversion  or  redemption  of  the Notes prior to such Fundamental Transaction,
such  shares  of  the  publicly  traded  common stock (or its equivalent) of the
Successor  Entity  (including its Parent Entity), as adjusted in accordance with
the  provisions  of  this  Note.  The  provisions  of  this  Section shall apply
similarly  and  equally  to  successive  Fundamental  Transactions  and shall be
applied  without  regard  to  any limitations on the Conversion or redemption of
this  Note.

          (b)     Redemption  Right.  No sooner than fifteen (15) days nor later
                  -----------------
than  ten  (10)  days  prior to the consummation of a Change of Control, but not
prior  to  the  public announcement of such Change of Control, the Company shall
deliver written notice thereof via facsimile and overnight courier to the Holder
(a  "CHANGE  OF CONTROL NOTICE").  At any time during the period beginning after
the Holder's receipt of a Change of Control Notice and ending on the date of the
consummation  of  such  Change  of Control (or, in the event a Change of Control
Notice  is not delivered at least ten (10) days prior to a Change of Control, at
any  time  on  or  after  the  date  which is ten (10) days prior to a Change of
Control  and  ending  ten  (10)  days  after  the consummation of such Change of
Control),  the  Holder  may  require the Company to redeem all or any portion of
this  Note  by  delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION
NOTICE")  to  the  Company,  which  Change  of  Control  Redemption Notice shall
indicate the Conversion Amount the Holder is electing to redeem.  The portion of
this  Note subject to redemption pursuant to this Section 5 shall be redeemed by
the  Company  at  a price equal to the greater of (i) the product of (x) 125% of
the sum of the Conversion Amount being redeemed together with accrued and unpaid
Interest  with  respect  to  such  Conversion Amount and accrued and unpaid Late
Charges with respect to such Conversion Amount and Interest and (y) the quotient
determined  by  dividing  (A)  the  Closing  Sale  Price  of  the  Common  Stock
immediately following the public announcement of such proposed Change of Control
by  (B)  the  Conversion Price and (ii) 125% of the sum of the Conversion Amount
being  redeemed  together  with accrued and unpaid Interest with respect to such
Conversion  Amount  and  accrued  and  unpaid  Late Charges with respect to such
Conversion  Amount  and  Interest  (the  "CHANGE  OF CONTROL REDEMPTION PRICE").
Redemptions  required  by  this  Section  5 shall be made in accordance with the
provisions  of Section 12 and shall have priority to payments to stockholders in
connection  with  a Change of Control.  Notwithstanding anything to the contrary
in  this  Section  5,  but  subject to Section 3(d), until the Change of Control
Redemption  Price  (together  with  any  interest  thereon) is paid in full, the
Conversion  Amount  submitted  for  redemption under this Section 5(c) (together
with  any interest thereon) may be converted, in whole or in part, by the Holder
into  Common  Stock pursuant to Section 3.  In the event of a partial redemption
of  this  Note  pursuant hereto, the principal amount redeemed shall be deducted
from the Installment Amounts relating to the applicable Installment Dates as set
forth  in  the  Change  of  Control  Redemption  Notice.


                                     -7-
<PAGE>
     (6)     RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.
             ------------------------------------------------------------------

          (a)     Purchase  Rights.  Except  with respect to the purchase of any
                  ----------------
current  Subsidiaries or any proposed acquisition of a new Subsidiary and except
as  disclosed  in  the SEC Documents filed at least three Business Days prior to
the  date  of this Agreement), or the issuance of any shares of the Common Stock
to  employees  or  consultants  for  services  rendered  to  the  Company or any
Subsidiary,  or  the issuance of any shares of the Common Stock in settlement of
debts  or  disputes  of  the  Company  or any Subsidiary, or the issuance of any
shares  of  the  Common Stock to any lender in connection with financings of the
Company  or  any  Subsidiary,  or the issuance of any shares of the Common Stock
pursuant  to  any Stock Option Plan adopted by the Company or any Subsidiary, or
shares  of  the  Common  Stock issued pursuant to any S-8 Registration Statement
filed  by the Company with the SEC, or as otherwise consented to by the Required
Holders  (an  "EXCLUDED SECURITY"), if at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities  or  other  property  pro  rata to the record holders of any class of
Common  Stock  (the  "PURCHASE  RIGHTS"),  then  the  Holder will be entitled to
acquire,  upon  the  terms  applicable  to  such  Purchase Rights, the aggregate
Purchase  Rights which the Holder could have acquired if the Holder had held the
number  of  shares  of  Common Stock acquirable upon complete Conversion of this
Note  (without  taking  into  account  any  limitations  or  restrictions on the
convertibility  of  this  Note) immediately before the date on which a record is
taken  for  the  grant, issuance or sale of such Purchase Rights, or, if no such
record  is taken, the date as of which the record holders of Common Stock are to
be  determined  for  the  grant, issue or sale of such Purchase Rights.  As used
herein,  "SEC  Documents"  means  all  reports,  schedules,  exhibits,  forms,
statements  and other documents required to be filed by the Company with the SEC
pursuant  to  the  reporting  requirements  of the 1934 Act (including documents
incorporated  by  reference therein), including the registration statement filed
by  the  Company  on  Form  SB-2  on  April  30, 2007 and any other registration
statements  filed  by  the  Company  pursuant  to the Securities Act of 1933, as
amended  (the  "1933  ACT").

          (b)     Other  Corporate  Events.  In  addition  to  and  not  in
                  ------------------------
substitution  for  any  other rights hereunder, prior to the consummation of any
Fundamental  Transaction pursuant to which holders of shares of Common Stock are
entitled  to  receive  securities or other assets with respect to or in exchange
for  shares  of  Common  Stock  (a  "CORPORATE  EVENT"),  the Company shall make
appropriate  provision  to ensure that the Holder will thereafter have the right
to  receive  upon  a  Conversion  of this Note, (i) in addition to the shares of
Common Stock receivable upon such Conversion, such securities or other assets to
which  the Holder would have been entitled with respect to such shares of Common
Stock  had  such  shares  of  Common  Stock  been  held  by  the Holder upon the
consummation  of  such  Corporate  Event  (without  taking  into  account  any
limitations  or restrictions on the convertibility of this Note) or (ii) in lieu
of  the  shares  of Common Stock otherwise receivable upon such Conversion, such
securities  or other assets received by the holders of shares of Common Stock in
connection  with the consummation of such Corporate Event in such amounts as the
Holder  would  have been entitled to receive had this Note initially been issued
with  Conversion rights for the form of such consideration (as opposed to shares
of  Common  Stock) at a Conversion rate for such consideration commensurate with
the Conversion Rate.  Provision made pursuant to the preceding sentence shall be
in a form and substance satisfactory to the Required Holders.  The provisions of
this  Section  shall  apply similarly and equally to successive Corporate Events
and  shall  be  applied  without  regard to any limitations on the Conversion or
redemption  of  this  Note.

     (7)     RIGHTS  UPON  ISSUANCE  OF  OTHER  SECURITIES.
             ---------------------------------------------

          (a)     Adjustment  of Conversion Price upon Issuance of Common Stock.
                  -------------------------------------------------------------
Subject  to  the  Exchange  Agreement,  if and whenever on or after the Issuance
Date,  the  Company  issues or sells, or in accordance with this Section 7(a) is
deemed  to  have  issued  or  sold,  any  shares  of Common Stock (including the
issuance  or  sale of shares of Common Stock owned or held by or for the account
of  the Company, but excluding shares of Common Stock deemed to have been issued
or  sold  by  the  Company  in  connection  with  any  Excluded  Security) for a
consideration  per  share  (the  "NEW  ISSUANCE  PRICE")  less than a price (the
"APPLICABLE PRICE") equal to the Conversion Price in effect immediately prior to
such issue or sale (the foregoing a "DILUTIVE ISSUANCE"), then immediately after
such  Dilutive  Issuance the Conversion Price then in effect shall be reduced to
an  amount  equal  to  the  New Issuance Price.  For purposes of determining the
adjusted  Conversion  Price  under  this  Section  7(a),  the following shall be
applicable:

               (i)     Issuance of Options.  If the Company in any manner grants
                       -------------------
or  sells  any  Options  and  the  lowest price per share for which one share of
Common  Stock  is  issuable  upon  the  exercise  of  any  such


                                     -8-
<PAGE>
Option  or upon Conversion or exchange or exercise of any Convertible Securities
issuable  upon  exercise  of such Option is less than the Applicable Price, then
such  share  of  Common Stock shall be deemed to be outstanding and to have been
issued  and  sold  by  the  Company  at the time of the granting or sale of such
Option  for  such  price  per  share.  For purposes of this Section 7(a)(i), the
"lowest price per share for which one share of Common Stock is issuable upon the
exercise  of  any  such Option or upon Conversion or exchange or exercise of any
Convertible  Securities issuable upon exercise of such Option" shall be equal to
the  sum  of the lowest amounts of consideration (if any) received or receivable
by  the  Company  with respect to any one share of Common Stock upon granting or
sale  of the Option, upon exercise of the Option and upon Conversion or exchange
or  exercise  of any Convertible Security issuable upon exercise of such Option.
No  further  adjustment  of  the  Conversion Price shall be made upon the actual
issuance  of  such  Common  Stock  or  of  such  Convertible Securities upon the
exercise  of  such Options or upon the actual issuance of such Common Stock upon
Conversion  or  exchange  or  exercise  of  such  Convertible  Securities.

               (ii)     Issuance  of  Convertible Securities.  If the Company in
                        ------------------------------------
any  manner  issues or sells any Convertible Securities and the lowest price per
share  for  which  one share of Common Stock is issuable upon such Conversion or
exchange  or exercise thereof is less than the Applicable Price, then such share
of  Common  Stock  shall be deemed to be outstanding and to have been issued and
sold  by  the  Company  at  the time of the issuance of sale of such Convertible
Securities for such price per share.  For the purposes of this Section 7(a)(ii),
the  "price  per share for which one share of Common Stock is issuable upon such
Conversion  or  exchange  or  exercise"  shall be equal to the sum of the lowest
amounts  of  consideration  (if  any) received or receivable by the Company with
respect  to  any  one  share  of  Common  Stock upon the issuance or sale of the
Convertible  Security  and  upon  the Conversion or exchange or exercise of such
Convertible  Security.  No  further  adjustment of the Conversion Price shall be
made  upon  the actual issuance of such Common Stock upon Conversion or exchange
or  exercise  of  such  Convertible Securities, and if any such issue or sale of
such  Convertible  Securities  is  made  upon  exercise of any Options for which
adjustment  of the Conversion Price had been or are to be made pursuant to other
provisions  of  this Section 7(a), no further adjustment of the Conversion Price
shall  be  made  by  reason  of  such  issue  or  sale.

               (iii)     Change  in  Option Price or Rate of Conversion.  If the
                         ----------------------------------------------
purchase  price  provided  for  in any Options, the additional consideration, if
any, payable upon the issue, Conversion, exchange or exercise of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or  exchangeable  or  exercisable  for  Common  Stock  changes  at any time, the
Conversion  Price  in effect at the time of such change shall be adjusted to the
Conversion  Price  which would have been in effect at such time had such Options
or  Convertible  Securities provided for such changed purchase price, additional
consideration  or  changed  Conversion  rate,  as  the  case may be, at the time
initially  granted,  issued or sold.  For purposes of this Section 7(a)(iii), if
the  terms  of any Option or Convertible Security that was outstanding as of the
Issuance  Date  are changed in the manner described in the immediately preceding
sentence,  then  such Option or Convertible Security and the Common Stock deemed
issuable  upon  exercise, Conversion or exchange thereof shall be deemed to have
been  issued as of the date of such change.  No adjustment shall be made if such
adjustment  would  result in an increase of the Conversion Price then in effect.

               (iv)     Calculation  of  Consideration  Received.  In  case  any
                        ----------------------------------------
Option is issued in connection with the issue or sale of other securities of the
Company,  together  comprising  one  integrated transaction in which no specific
consideration  is  allocated to such Options by the parties thereto, the Options
will  be  deemed  to  have  been  issued for a consideration of $.0.001.  If any
Common  Stock, Options or Convertible Securities are issued or sold or deemed to
have  been  issued or sold for cash, the consideration received therefor will be
deemed  to  be  the  net amount received by the Company therefor.  If any Common
Stock,  Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Company  will  be  the  fair  value  of  such  consideration,  except where such
consideration  consists of securities, in which case the amount of consideration
received by the Company will be the Closing Sale Price of such securities on the
date  of  receipt.  If  any  Common Stock, Options or Convertible Securities are
issued  to  the owners of the non-surviving entity in connection with any merger
in  which  the  Company  is  the  surviving  entity, the amount of consideration
therefor  will  be deemed to be the fair value of such portion of the net assets
and  business  of  the  non-surviving  entity  as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be.  The fair value of
any  consideration  other  than cash or securities will be determined jointly by
the  Company  and  the  Required  Holders.  If  such parties are unable to reach
agreement  within  ten  (10)  days  after  the  occurrence of an event requiring
valuation  (the "VALUATION EVENT"), the fair value of such consideration will be
determined  within  five  (5)  Business


                                     -9-
<PAGE>
Days after the tenth (10th) day following the Valuation Event by an independent,
reputable  appraiser  jointly  selected by the Company and the Required Holders.
The  determination  of  such  appraiser shall be deemed binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne
by  the  Company.

               (v)     Record  Date.  If  the  Company  takes  a  record  of the
                       ------------
holders  of  Common  Stock  for  the  purpose of entitling them (A) to receive a
dividend  or  other  distribution  payable  in  Common  Stock,  Options  or  in
Convertible Securities or (B) to subscribe for or purchase Common Stock, Options
or  Convertible  Securities, then such record date will be deemed to be the date
of the issue or sale of the Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other distribution or the
date  of the granting of such right of subscription or purchase, as the case may
be.

          (b)     Adjustment of Conversion Price upon Subdivision or Combination
                  --------------------------------------------------------------
of  Common  Stock.  If  the  Company  at  any time on or after the Issuance Date
-----------------
subdivides  (by  any stock split, stock dividend, recapitalization or otherwise)
one  or  more  classes  of its outstanding shares of Common Stock into a greater
number  of  shares,  the  Conversion  Price  in effect immediately prior to such
subdivision  will  be proportionately reduced.  If the Company at any time on or
after  the  Issuance  Date  combines  (by  combination,  reverse  stock split or
otherwise)  one or more classes of its outstanding shares of Common Stock into a
smaller  number  of  shares, the Conversion Price in effect immediately prior to
such  combination  will  be  proportionately  increased.

          (c)     Other Events.  If any event occurs of the type contemplated by
                  ------------
the  provisions  of  this  Section  7  but  not  expressly  provided for by such
provisions  (including,  without  limitation, the granting of stock appreciation
rights,  phantom  stock  rights  or other rights with equity features), then the
Company's  Board  of  Directors  will  make  an  appropriate  adjustment  in the
Conversion  Price  so  as  to  protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined  pursuant  to  this  Section  7.

          (d)     Notices.
                  -------

               (i)     Immediately  upon  any adjustment of the Conversion Price
pursuant  to this Section 7, the Company will give written notice thereof to the
Holder,  setting  forth in reasonable detail, and certifying, the calculation of
such  adjustment.  In  the  case  of  a  dispute as to the determination of such
adjustment,  then  such  dispute  shall  be  resolved  in  accordance  with  the
procedures  set  forth  in  Section  24.

               (ii)     The  Company  will give written notice to each Holder at
least  ten  (10) Business Days prior to the date on which the Company closes its
books  or  takes  a record (I) with respect to any dividend or distribution upon
the  Common  Stock,  (II)  with  respect  to  any pro rata subscription offer to
holders  of Common Stock or (III) for determining rights to vote with respect to
any Fundamental Transaction or Liquidation Event, provided that such information
shall  be  made  known to the public prior to or in conjunction with such notice
being  provided  to  such  Holder.

               (iii)     The  Company  will  also  give  written  notice to each
Holder  no  later than (i) ten (10) Business Days prior to the date on which any
Fundamental  Transaction  or Liquidation Event will take place and (ii) the date
upon which such Fundamental Transaction or Liquidation Event is announced to the
public;  provided  that such information shall be made known to the public prior
to  or  in  conjunction  with  such  notice  being  provided  to  such  Holder.

     (8)     COMPANY  REDEMPTION.  The  Company  may  prepay  (a  "COMPANY
             -------------------
REDEMPTION")  all or any portion of this Note (the "COMPANY REDEMPTION AMOUNT"),
subject,  however to the payment of a prepayment penalty which shall be equal to
110%  of  the  outstanding  Principal, together with accrued and unpaid Interest
with  respect  to  such  Company  Redemption  Amount and accrued and unpaid Late
Charges  with  respect  to  such Company Redemption Amount and Interest.  If the
Company elects a Company Redemption, then the Company Redemption Amount which is
to  be  paid  to  the  Holder on the applicable Company Redemption Date shall be
redeemed  by  the Company on such Company Redemption Date, and the Company shall
pay  to  the  Holder  on  such  Company  Redemption  Date,  by  wire transfer of
immediately  available  funds, an amount in cash equal to the Company Redemption
Amount.


                                      -10-
<PAGE>
     (9)     MANDATORY  REDEMPTION AT MATURITY.  If any Notes remain outstanding
             ---------------------------------
on  the  Maturity Date, the Company shall redeem such Notes in cash in an amount
equal to the outstanding Principal plus any accrued but unpaid Interest and Late
Charges  (the  "MATURITY  DATE  REDEMPTION  PRICE").  The  Company shall pay the
Maturity  Date  Redemption  Price  on  the  Maturity  Date  by  wire transfer of
immediately  available funds to an account designated in writing by such Holder.
If  the Company fails to redeem all of the Principal outstanding on the Maturity
Date  by  payment of the Maturity Date Redemption Price, then in addition to any
remedy  such  Holder may have under any Transaction Document, (I) the applicable
Maturity  Date  Redemption Price payable in respect of such unredeemed Principal
shall  bear interest at the rate of 3.0% per month, prorated for partial months,
until  paid  in  full,  and (II) any Holder shall have the option to require the
Company  to  convert any or all of such Holder's Note and for which the Maturity
Date  Redemption  Price  (together  with any interest thereon) has not been paid
into  shares of Common Stock equal to the number which results from dividing the
Maturity  Date  Redemption  Price  (together  with  any interest thereon) by the
Conversion Price.  If the Company has failed to pay the Maturity Date Redemption
Price  in  a  timely  manner as described above, then the Maturity Date shall be
automatically  extended  for  the  Note  until the date the Holders receive such
shares of Common Stock or Maturity Date Redemption Price.  All redemptions shall
be  made  on  a  pro-rata  basis  to  all  holders  of  the  Notes.

     (10)     NONCIRCUMVENTION.  The  Company  hereby  covenants and agrees that
              ----------------
the  Company  will not, by amendment of its Certificate of Incorporation, Bylaws
or through any reorganization, transfer of assets, consolidation, merger, scheme
of arrangement, 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
of  this  Note,  and  will  at  all  times  in  good  faith carry out all of the
provisions  of  this  Note and take all action as may be required to protect the
rights  of  the  Holder  of  this  Note.

     (11)     RESERVATION  OF  AUTHORIZED  SHARES.
              -----------------------------------

          (a)     Reservation.  The  Company  shall initially reserve out of its
                  -----------
authorized and unissued Common Stock a number of shares of Common Stock for each
of the Notes equal to 130% of the Conversion Rate with respect to the Conversion
Amount  of  each such Note as of the Issuance Date.  So long as any of the Notes
are outstanding, the Company shall take all action necessary to reserve and keep
available  out  of  its  authorized  and  unissued  Common Stock, solely for the
purpose  of  effecting the Conversion of the Notes, 130% of the number of shares
of Common Stock as shall from time to time be necessary to effect the Conversion
of all of the Notes then outstanding pursuant to Sections 2 and 3; provided that
at  no  time shall the number of shares of Common Stock so reserved be less than
the  number  of shares required to be reserved by the previous sentence (without
regard  to any limitations on Conversions) (the "REQUIRED RESERVE AMOUNT").  The
initial  number  of shares of Common Stock reserved for Conversions of the Notes
and  each  increase  in  the number of shares so reserved shall be allocated pro
rata  among  the holders of the Notes based on the principal amount of the Notes
held  by  each  holder  at  the  Closing  (as defined in the Securities Exchange
Agreement) or increase in the number of reserved shares, as the case may be (the
"AUTHORIZED  SHARE  ALLOCATION").  In  the  event  that  a  holder shall sell or
otherwise  transfer  any  of  such  holder's  Notes,  each  transferee  shall be
allocated  a pro rata portion of such holder's Authorized Share Allocation.  Any
shares of Common Stock reserved and allocated to any Person which ceases to hold
any  Notes  shall be allocated to the remaining holders of Notes, pro rata based
on  the  principal  amount  of  the  Notes  then  held  by  such  holders.

          (b)     Insufficient  Authorized  Shares.  If at any time while any of
                  --------------------------------
the  Notes  remain  outstanding the Company does not have a sufficient number of
authorized  and  unreserved  shares of Common Stock to satisfy its obligation to
reserve for issuance upon Conversion of the Notes at least a number of shares of
Common  Stock  equal  to  the  Required  Reserve  Amount  (an  "AUTHORIZED SHARE
FAILURE"),  then  the  Company  shall  immediately  take all action necessary to
increase the Company's authorized shares of Common Stock to an amount sufficient
to  allow  the Company to reserve the Required Reserve Amount for the Notes then
outstanding.  Without limiting the generality of the foregoing sentence, as soon
as  practicable after the date of the occurrence of an Authorized Share Failure,
but  in  no  event  later  than  sixty  (60)  days  after the occurrence of such
Authorized  Share  Failure, the Company shall hold a meeting of its stockholders
for  the  approval  of  an increase in the number of authorized shares of Common
Stock.  In  connection  with  such  meeting,  the  Company  shall  provide  each
stockholder with a proxy statement and shall use its best efforts to solicit its
stockholders' approval of such increase in authorized shares of Common Stock and
to  cause  its  board  of  directors  to recommend to the stockholders that they
approve  such  proposal.

     (12)     HOLDER'S  REDEMPTIONS.
              ---------------------


                                      -11-
<PAGE>
          (a)     Mechanics.  The  Company shall deliver the applicable Event of
                  ---------
Default  Redemption  Price  to  the  Holder  within five Business Days after the
Company's  receipt  of  the Holder's Event of Default Redemption Notice.  If the
Holder  has  submitted  a Change of Control Redemption Notice in accordance with
Section  5(b),  the  Company  shall  deliver  the  applicable  Change of Control
Redemption Price to the Holder concurrently with the consummation of such Change
of  Control  if such notice is received prior to the consummation of such Change
of Control and within five (5) Business Days after the Company's receipt of such
notice  otherwise.  The  Company  shall deliver the Company Redemption Amount to
the Holder on the Company Redemption Date.  In the event of a redemption of less
than all of the Conversion Amount of this Note, the Company shall promptly cause
to  be issued and delivered to the Holder a new Note (in accordance with Section
17(d))  representing  the outstanding Principal which has not been redeemed.  In
the  event  that the Company does not pay the applicable Redemption Price to the
Holder  within  the  time  period required, at any time thereafter and until the
Company  pays  such  unpaid  Redemption Price in full, the Holder shall have the
option,  in lieu of redemption, to require the Company to promptly return to the
Holder  all  or any portion of this Note representing the Conversion Amount that
was  submitted  for  redemption  and  for  which the applicable Redemption Price
(together  with any Late Charges thereon) has not been paid.  Upon the Company's
receipt  of  such notice, (x) the applicable Redemption Notice shall be null and
void  with  respect to such Conversion Amount, (y) the Company shall immediately
return  this Note, or issue a new Note (in accordance with Section 17(d)) to the
Holder  representing  the  sum of such Conversion Amount to be redeemed together
with  accrued  and  unpaid  Interest  with respect to such Conversion Amount and
accrued  and  unpaid  Late  Charges  with  respect to such Conversion Amount and
Interest  and  (z)  the Conversion Price of this Note or such new Notes shall be
adjusted  to  the lesser of (A) the Conversion Price as in effect on the date on
which  the applicable Redemption Notice is voided and (B) the lowest Closing Bid
Price  of the Common Stock during the period beginning on and including the date
on which the applicable Redemption Notice is delivered to the Company and ending
on  and  including the date on which the applicable Redemption Notice is voided.
The  Holder's  delivery  of a notice voiding a Redemption Notice and exercise of
its  rights  following such notice shall not affect the Company's obligations to
make  any  payments of Late Charges which have accrued prior to the date of such
notice  with  respect  to  the  Conversion  Amount  subject  to  such  notice.

          (b)     Redemption  by  Other  Holders.  Upon the Company's receipt of
                  ------------------------------
notice from any of the holders of the Other Notes for redemption or repayment as
a  result  of  an  event  or  occurrence  substantially similar to the events or
occurrences  described  in  Section  4(b)  or  Section  5(b)  (each,  an  "OTHER
REDEMPTION  NOTICE"),  the  Company  shall  immediately forward to the Holder by
facsimile  a  copy  of such notice.  If the Company receives a Redemption Notice
and  one  or  more  Other  Redemption Notices, during the seven (7) Business Day
period  beginning  on  and  including  the date which is three (3) Business Days
prior  to  the Company's receipt of the Holder's Redemption Notice and ending on
and  including  the  date  which  is three (3) Business Days after the Company's
receipt  of  the  Holder's Redemption Notice and the Company is unable to redeem
all  principal,  interest and other amounts designated in such Redemption Notice
and  such  Other  Redemption Notices received during such seven (7) Business Day
period,  then the Company shall redeem a pro rata amount from each holder of the
Notes  (including  the  Holder)  based  on  the  principal  amount  of the Notes
submitted  for  redemption  pursuant  to  such  Redemption Notice and such Other
Redemption  Notices  received  by  the  Company  during  such seven Business Day
period.

     (13)     VOTING  RIGHTS.  The  Holder  shall  have  no voting rights as the
              --------------
holder  of  this Note, except as required by law, including, but not limited to,
the  General Corporation Law of the State of Delaware, and as expressly provided
in  this  Note.

     (14)     PARTICIPATION.  If  converted,  The  Holder, as the holder of this
              -------------
Note, shall be entitled to receive such dividends paid and distributions made to
the  holders  of  Common Stock to the same extent as if the Holder had converted
this  Note  into  Common  Stock (without regard to any limitations on Conversion
herein or elsewhere) and had held such shares of Common Stock on the record date
for  such  dividends  and  distributions.  Payments under the preceding sentence
shall  be  made concurrently with the dividend or distribution to the holders of
Common  Stock.

     (15)     VOTE  TO  ISSUE,  OR  CHANGE THE TERMS OF, NOTES.  The affirmative
              ------------------------------------------------
vote  at a meeting duly called for such purpose or the written consent without a
meeting of the Required Holders shall be required for any change or amendment to
this  Note  or  the  Other  Notes.


                                      -12-
<PAGE>
     (16)     TRANSFER.  This  Note  and  any shares of Common Stock issued upon
              --------
Conversion  of  this  Note  may be offered, sold, assigned or transferred by the
Holder  without  the  consent  of the Company, subject only to the provisions of
Section  2(f)  of  the  Securities  Exchange Agreement and the Securities Act of
1933,  as  amended.

     (17)     REISSUANCE  OF  THIS  NOTE.
              --------------------------

          (a)     Transfer.  If this Note is to be transferred, the Holder shall
                  --------
surrender  this  Note to the Company, whereupon the Company will forthwith issue
and  deliver upon the order of the Holder a new Note (in accordance with Section
17(d)),  registered  as  the  Holder  may  request, representing the outstanding
Principal  being  transferred  by  the  Holder  and,  if  less  then  the entire
outstanding  Principal  is  being  transferred,  a  new Note (in accordance with
Section  17(d))  to  the Holder representing the outstanding Principal not being
transferred.  The  Holder  and  any  assignee,  by  acceptance  of  this  Note,
acknowledge  and  agree  that,  by reason of the provisions of Section 3(c)(iii)
following  Conversion or redemption of any portion of this Note, the outstanding
Principal  represented by this Note may be less than the Principal stated on the
face  of  this  Note.

          (b)     Lost,  Stolen  or Mutilated Note.  Upon receipt by the Company
                  --------------------------------
of  evidence  reasonably  satisfactory  to  the  Company  of  the  loss,  theft,
destruction  or  mutilation  of  this  Note,  and, in the case of loss, theft or
destruction,  of any indemnification undertaking by the Holder to the Company in
customary  form  and, in the case of mutilation, upon surrender and cancellation
of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance  with  Section  17(d))  representing  the  outstanding  Principal.

          (c)     Note  Exchangeable  for Different Denominations.  This Note is
                  -----------------------------------------------
exchangeable, upon the surrender hereof by the Holder at the principal office of
the  Company,  for  a new Note or Notes (in accordance with Section 17(d) and in
principal  amounts  of  at  least  $100,000)  representing  in the aggregate the
outstanding  Principal  of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of  such  surrender.

          (d)     Issuance  of  New  Notes.  Whenever the Company is required to
                  ------------------------
issue  a new Note pursuant to the terms of this Note, such new Note (i) shall be
of  like tenor with this Note, (ii) shall represent, as indicated on the face of
such new Note, the Principal remaining outstanding (or in the case of a new Note
being  issued  pursuant  to  Section  17(a)  or  Section  17(c),  the  Principal
designated  by  the Holder which, when added to the principal represented by the
other  new  Notes  issued  in connection with such issuance, does not exceed the
Principal  remaining  outstanding  under  this  Note  immediately  prior to such
issuance  of  new Notes), (iii) shall have an issuance date, as indicated on the
face of such new Note, which is the same as the Issuance Date of this Note, (iv)
shall  have the same rights and conditions as this Note, and (v) shall represent
accrued  Interest  and  Late Charges on the Principal and Interest of this Note,
from  the  Issuance  Date.

     (18)     REMEDIES,  CHARACTERIZATIONS,  OTHER  OBLIGATIONS,  BREACHES  AND
              -----------------------------------------------------------------
INJUNCTIVE  RELIEF.  The  remedies provided in this Note shall be cumulative and
------------------
in addition to all other remedies available under this Note and any of the other
Transaction  Documents  at  law  or  in  equity  (including a decree of specific
performance  and/or other injunctive relief), and nothing herein shall limit the
Holder's right to pursue actual and consequential damages for any failure by the
Company  to  comply  with the terms of this Note.  Amounts set forth or provided
for  herein  with  respect  to  payments,  Conversion  and  the  like  (and  the
computation thereof) shall be the amounts to be received by the Holder and shall
not,  except as expressly provided herein, be subject to any other obligation of
the  Company  (or  the  performance  thereof).  The  Company acknowledges that a
breach  by  it  of  its obligations hereunder will cause irreparable harm to the
Holder  and  that  the remedy at law for any such breach may be inadequate.  The
Company  therefore  agrees  that,  in the event of any such breach or threatened
breach,  the  Holder  shall  be  entitled,  in  addition  to all other available
remedies,  to  an  injunction  restraining  any breach, without the necessity of
showing  economic  loss  and  without any bond or other security being required.

     (19)     PAYMENT  OF  COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) this
              ----------------------------------------------------
Note  is  placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action  to  collect  amounts due under this Note or to enforce the provisions of
this  Note  or  (b) there occurs any bankruptcy, reorganization, receivership of
the  Company  or  other  proceedings  affecting  Company  creditors'  rights and
involving  a  claim  under  this  Note,  then  the  Company  shall pay the costs


                                      -13-
<PAGE>
incurred  by  the  Holder  for  such  collection,  enforcement  or  action or in
connection  with  such  bankruptcy,  reorganization,  receivership  or  other
proceeding,  including,  but  not limited to, attorneys' fees and disbursements.

     (20)     CONSTRUCTION;  HEADINGS.  This  Note shall be deemed to be jointly
              -----------------------
drafted  by  the  Company and all the Holders and shall not be construed against
any person as the drafter hereof.  The headings of this Note are for convenience
of  reference  and shall not form part of, or affect the interpretation of, this
Note.

     (21)     FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part
              --------------------------------
of  the  Holder in the exercise of any power, right or privilege hereunder shall
operate  as  a  waiver  thereof, nor shall any single or partial exercise of any
such  power, right or privilege preclude other or further exercise thereof or of
any  other  right,  power  or  privilege.

     (22)     DISPUTE  RESOLUTION.  In  the  case  of  a  dispute  as  to  the
              -------------------
determination  of  the  Closing  Bid  Price  or  the  Closing  Sale Price or the
arithmetic  calculation  of  the  Conversion  Rate  or the Redemption Price, the
Company  shall submit the disputed determinations or arithmetic calculations via
facsimile  within  one  (1)  Business  Day of receipt, or deemed receipt, of the
Conversion  Notice  or  Redemption  Notice  or  other  event giving rise to such
dispute,  as  the case may be, to the Holder.  If the Company fails to object to
the  calculation of the number of Escrow Shares to be released or otherwise with
respect  to  the  Conversion Notice, within said time, then the Company shall be
deemed  to  have  waived  any  objections to said calculation and the Conversion
Notice. In the case of a dispute, the Company shall instruct the Escrow Agent to
transfer to the Holder the number of Common Shares that is not disputed, if any,
and  shall  transmit an explanation of the disputed determinations or arithmetic
calculations  to  the  Holder  and  Escrow  Agent  via  facsimile within one (1)
Business  Day  of  receipt  of  such Holder's Conversion Notice or other date of
determination.  If  the  Holder  and  the  Company are unable to agree upon such
determination  or  calculation  within  one  (1)  Business  Day of such disputed
determination  or arithmetic calculation being submitted to the Holder, then the
Company  shall,  within  one  Business Day submit via facsimile (a) the disputed
determination  of  the  Closing  Bid  Price  or  the  Closing  Sale  Price to an
independent,  reputable  investment bank selected by the Company and approved by
the  Holder or (b) the disputed arithmetic calculation of the Conversion Rate or
the  Redemption  Price  to  the  Company's independent, outside accountant.  The
Company,  at  the  Company's  expense,  shall  cause  the investment bank or the
accountant,  as  the  case may be, to perform the determinations or calculations
and  notify  the  Company  and  the  Holder of the results no later than one (1)
Business  Day  from  the  time  it  receives  the  disputed  determinations  or
calculations.  Such  investment  bank's  or  accountant's  determination  or
calculation,  as  the  case  may  be,  shall  be binding upon all parties absent
manifest  error.

     (23)     NOTICES;  PAYMENTS.
              ------------------

          (a)     Notices.  Whenever  notice  is required to be given under this
                  -------
Note, unless otherwise provided herein, such notice shall be given in accordance
with  Section  10(f)  of  the  Securities Exchange Agreement.  The Company shall
provide  the  Holder with prompt written notice of all actions taken pursuant to
this  Note,  including in reasonable detail a description of such action and the
reason therefore.  Without limiting the generality of the foregoing, the Company
will  give  written  notice to the Holder (i) immediately upon any adjustment of
the  Conversion  Price,  setting forth in reasonable detail, and certifying, the
calculation  of  such  adjustment and (ii) at least 20 days prior to the date on
which  the  Company  closes  its books or takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any pro rata
subscription  offer  to holders of Common Stock or (C) for determining rights to
vote  with  respect  to any Fundamental Transaction, dissolution or liquidation,
provided  in  each  case that such information shall be made known to the public
prior  to  or  in  conjunction  with  such  notice being provided to the Holder.

          (b)     Payments.  Whenever  any  payment of cash is to be made by the
                  --------
Company  to  any  Person  pursuant  to  this Note, such payment shall be made in
lawful  money of the United States of America by a check drawn on the account of
the  Company  and  sent  via  overnight  courier  service to such Person at such
address  as previously provided to the Company in writing (which address, in the
case  of each of the Holders, shall initially be as set forth on the Schedule of
Buyers  attached to the Securities Exchange Agreement); provided that the Holder
may  elect  to  receive  a  payment  of  cash  via  wire transfer of immediately
available  funds  by providing the Company with prior written notice setting out
such  request  and the Holder's wire transfer instructions.  Whenever any amount
expressed  to  be due by the terms of this Note is due on any day which is not a
Business  Day, the same shall instead be due on the next succeeding day which is
a  Business  Day  and,  in  the  case  of  any Installment Date which is not the


                                      -14-
<PAGE>
date  on  which this Note is paid in full, the extension of the due date thereof
shall  not  be  taken  into  account  for  purposes of determining the amount of
Interest  due  on such date.  Any amount of Principal or other amounts due under
the Transaction Documents, other than Interest, which is not paid when due shall
result  in  a late charge being incurred and payable by the Company in an amount
equal to interest on such amount at the rate of eighteen percent (18%) per annum
from  the  date  such  amount  was  due  until  the  same is paid in full ("LATE
CHARGE").

     (24)     CANCELLATION.  After  all  Principal,  accrued  Interest and other
              ------------
amounts  at  any  time owed on this Note have been paid in full, this Note shall
automatically  be  deemed  canceled,  shall  be  surrendered  to the Company for
cancellation  and  shall  not  be  reissued.

     (25)     WAIVER  OF  NOTICE.  To  the  extent permitted by law, the Company
              ------------------
hereby  waives  demand,  notice,  protest  and  all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this  Note  and  the  Securities  Exchange  Agreement.

     (26)     GOVERNING  LAW.  This  Note  shall  be  construed  and enforced in
              --------------
accordance  with,  and  all  questions  concerning  the  construction, validity,
interpretation  and  performance of this Note shall be governed by, the internal
laws  of  the  State  of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other  than  the  State  of  New  York.

     (27)     CERTAIN  DEFINITIONS.  For  purposes  of  this Note, the following
              --------------------
terms  shall  have  the  following  meanings:

          (a)     "APPROVED  STOCK  PLAN"  means any employee benefit plan which
has  been  approved  by the Board of Directors of the Company, pursuant to which
the  Company's securities may be issued to any employee, officer or director for
services  provided  to  the  Company.

          (b)     "BLOOMBERG"  means  Bloomberg  Financial  Markets.

          (c)     "BUSINESS  DAY"  means  any day other than Saturday, Sunday or
other  day  on  which commercial banks in The City of New York are authorized or
required  by  law  to  remain  closed.

          (d)     "CHANGE  OF  CONTROL"  means any Fundamental Transaction other
than  (i)  any  reorganization,  recapitalization  or  reclassification in which
holders  of the Company's voting power immediately prior to such reorganization,
recapitalization  or  reclassification  continue  after  such  reorganization,
recapitalization  or  reclassification  to  hold publicly traded securities and,
directly  or  indirectly,  the  voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent  if  other  than  a  corporation)  of  such  entity or entities, (ii)
pursuant  to  a migratory merger effected solely for the purpose of changing the
jurisdiction  of incorporation of the Company or (iii) a Fundamental Transaction
that has been previously authorized by a written consent of the Required Holders
prior  to  the  consummation  of  such  Fundamental  Transaction.

          (e)     "CLOSING  BID  PRICE"  and "CLOSING SALE PRICE" means, for any
security  as  of  any  date,  the  last closing bid price and last closing trade
price,  respectively,  for such security on the Principal Market, as reported by
Bloomberg,  or,  if  the Principal Market begins to operate on an extended hours
basis  and  does not designate the closing bid price or the closing trade price,
as  the  case may be, then the last bid price or last trade price, respectively,
of such security prior to 5:00:00 p.m., New York Time, as reported by Bloomberg,
or,  if the Principal Market is not the principal securities exchange or trading
market  for  such  security,  the  last  closing  bid price or last trade price,
respectively,  of  such security on the principal securities exchange or trading
market  where  such security is listed or traded as reported by Bloomberg, or if
the  foregoing  do  not  apply,  the last closing bid price or last trade price,
respectively,  of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price  or  last  trade  price,  respectively,  is  reported for such security by
Bloomberg,  the  average  of the bid prices, or the ask prices, respectively, of
any  market  makers  for  such security as reported in the "pink sheets" by Pink
Sheets  LLC  (formerly the National Quotation Bureau, Inc.).  If the Closing Bid
Price  or  the  Closing  Sale  Price  cannot  be  calculated for a security on a
particular  date  on  any  of  the  foregoing  bases,


                                      -15-
<PAGE>
the  Closing  Bid  Price  or the Closing Sale Price, as the case may be, of such
security  on  such date shall be the fair market value as mutually determined by
the  Company  and the Holder.  If the Company and the Holder are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
pursuant  to  Section  24.  All such determinations to be appropriately adjusted
for  any  stock  dividend,  stock  split,  stock  combination  or  other similar
transaction  during  the  applicable  calculation  period.

          (f)     "CLOSING  DATE"  shall  have  the  meaning  set  forth  in the
Securities  Exchange  Agreement,  which  date  is the date the Company initially
issued  Notes  pursuant  to  the  terms  of  the  Securities Exchange Agreement.

          (g)     "COMPANY CONVERSION PRICE" means, as of any Conversion Date or
other  date  of  determination,  the  applicable  Conversion  Price.  All  such
determinations to be appropriately adjusted for any stock split, stock dividend,
stock combination or other similar transaction that proportionately decreases or
increases  the  Common  Stock  the  applicable such Company Conversion Measuring
Period.

          (h)     "CONVERTIBLE  SECURITIES" means any stock or securities (other
than  Options)  directly  or  indirectly  convertible  into  or  exercisable  or
exchangeable  for  Common  Stock.

          (i)     "ELIGIBLE  MARKET"  means  the  Principal Market, The New York
Stock Exchange, Inc., the American Stock Exchange or The Nasdaq SmallCap Market.

          (j)     "EXCLUDED  SECURITIES"  means  any  Common  Stock  issued  or
issuable: (i) in connection with any Approved Stock Plan or shares of the Common
Stock  issued  pursuant  to  any S-8 Registration Statement filed by the Company
with the SEC; (ii) upon Conversion of the Notes or the exercise of the Warrants;
(iii)  pursuant to a bona fide firm commitment underwritten public offering with
a  nationally  recognized  underwriter  which  generates  gross  proceeds to the
Company  in  excess  of  $25,000,000  (other than an "at-the-market offering" as
defined  in  Rule  415(a)(4)  under  the  1933  Act and "equity lines"); (iv) in
connection  with  the  payment  of  any  Interest  Shares  on  the Notes; (v) in
connection  with  any acquisition by the Company, whether through an acquisition
of stock or a merger of any business, assets or technologies the primary purpose
of  which  is  not  to  raise  equity capital in an amount not to exceed, in the
aggregate  20%  of  the outstanding shares of Common Stock in any calendar year;
(vi)  upon  Conversion  of  any  Options  or  Convertible  Securities  which are
outstanding  on  the  day immediately preceding the Issuance Date, provided that
the terms of such Options or Convertible Securities are not amended, modified or
changed  on  or after the Issuance Date; (vii) the issuance of any shares of the
Common  Stock  in  settlement  of  debts  or  disputes  of  the  Company  or any
Subsidiary;  (viii)  the issuance of any shares of the Common Stock to employees
or  consultants for services rendered to the Company or any Subsidiary; (ix) the
issuance  of  any  shares  of  the Common Stock to any lender in connection with
financings  of  the  Company  or  any Subsidiary; and (viii) as may be otherwise
provided  in  the  Securities  Exchange  Agreement  or  in  this  Note.

          (k)     "FISCAL  QUARTER" means each of the fiscal quarters adopted by
the  Company  for  financial reporting purposes that correspond to the Company's
fiscal  year  that  ends on December 31, or such other fiscal quarter adopted by
the  Company  for  financial  reporting  purposes  in  accordance  with  GAAP.

          (l)     "FUNDAMENTAL  TRANSACTION"  means  that (i) the Company shall,
directly  or indirectly, in one or more related transactions, (A) consolidate or
merge  with  or  into  (whether or not the Company is the surviving corporation)
another  Person,  or  (B) sell, assign, transfer, convey or otherwise dispose of
all  or  substantially all of the properties or assets of the Company to another
Person, or (C) allow another Person to make a purchase, tender or exchange offer
that  is  accepted by the holders of more than the 50% of the outstanding shares
of  Common Stock (not including any shares of Common Stock held by the Person or
Persons  making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), or (D) consummate a share
purchase agreement or other business combination (including, without limitation,
a  reorganization,  recapitalization,  spin-off  or  scheme of arrangement) with
another  Person  whereby  such  other  Person  acquires more than the 50% of the
outstanding  shares  of  Common  Stock (not including any shares of Common Stock
held  by  the other Person or other Persons making or party to, or associated or
affiliated  with  the  other  Persons  making  or  party to, such stock purchase
agreement  or  other  business  combination), or (v) reorganize, recapitalize or
reclassify  its Common Stock or (ii) any "person" or "group" (as these terms are
used  for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of
1934,  as amended) is or shall become the "beneficial owner" (as defined in Rule
13d-3  under  the

                                      -16-
<PAGE>
Securities  Exchange Act of 1934, as amended), directly or indirectly, of 50% of
the  issued  and outstanding Common Stock or the aggregate ordinary voting power
represented  by  issued  and  outstanding  Common  Stock.  Provided,  however,
notwithstanding  anything  herein  contained  or in any of the other Transaction
Documents,  any  consolidation  of  a  Subsidiary  into  another  Subsidiary  or
Subsidiaries  shall  not  be  deemed  to  be  a  Fundamental  Transaction.

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

          (n)     "INSTALLMENT  AMOUNT"  means  with  respect to any Installment
Date, the lesser of (A) with respect each Installment Date, the amount set forth
opposite  such date on Exhibit II attached hereto (in each case, plus the sum of
any accrued and unpaid Interest with respect thereto and accrued and unpaid Late
Charges  with  respect  thereto and Interest and any accrued and unpaid interest
thereon),  and  (B) the Principal amount (plus the sum of any accrued and unpaid
Interest  with  respect  to  such  Principal  amount and accrued and unpaid Late
Charges  with  respect  to  such  Principal  amount and Interest any accrued and
unpaid  interest  thereon)  under  this Note as of such Installment Date, as any
such  Installment  Amount  may  be  reduced  pursuant to the terms of this Note,
whether  upon  Conversion, redemption or otherwise.  For the avoidance of doubt,
any  accrued  and  unpaid interest which may be paid pursuant to this definition
shall  be deducted from the total interest to be paid on any subsequent Interest
Payment  Date.  In  the  event  the  Holder shall sell or otherwise transfer any
portion  of  this  Note, the transferee shall be allocated a pro rata portion of
the  each  unpaid  Installment  Amount  hereunder.

          (o)     "INSTALLMENT  DATE"  means May 15, 2007 and the first calendar
day of July 2007 and each subsequent calendar month through May 1, 2008, and any
other  Installment  Date  scheduled  by the Holder in connection with a Deferral
Amount  pursuant  to  Section  8(b)  hereof.

          (p)     "ISSUANCE  DATE"  means  the  Issuance  Date.

          (q)     "LIQUIDATION  EVENT"  means  the  voluntary  or  involuntary
liquidation,  dissolution  or winding up of the Company or such Subsidiaries the
assets  of  which  constitute  all  or  substantially all of the business of the
Company and its Subsidiaries taken as a whole, in a single transaction or series
of  transactions.

          (r)     "OPTIONS"  means  any rights, warrants or options to subscribe
for  or  purchase  shares  of  Common  Stock  or  Convertible  Securities.

          (s)     "PARENT  ENTITY" of a Person means an entity that, directly or
indirectly,  controls the applicable Person and whose common stock or equivalent
equity  security is quoted or listed on an Eligible Market, or, if there is more
than  one  such  Person  or  Parent Entity, the Person or Parent Entity with the
largest  public  market  capitalization  as  of  the date of consummation of the
Fundamental  Transaction.

          (t)     "PAYMENT  MONTH"  means  each  of: the period beginning on and
including  the  Issuance Date and ending on and including May 31, 2007; and each
of  the  monthly  periods  commencing  on  the  first  day of June 2007 and each
subsequent month and ending on the last day of each such calendar month, so long
as  Principal  or  Interest  or  Late  Charges  are  outstanding under the Note.

          (u)     "PERMITTED  LIENS"  means  subject  to the Securities Exchange
Agreement (i) any Lien for taxes not yet due or delinquent or being contested in
good  faith  by  appropriate  proceedings  for which adequate reserves have been
established  in  accordance  with  GAAP,  (ii) any statutory Lien arising in the
ordinary course of business by operation of law with respect to a liability that
is  not  yet due or delinquent, (iii) any Lien created by operation of law, such
as materialmen's liens, mechanics' liens and other similar liens, arising in the
ordinary  course  of business with respect to a liability that is not yet due or
delinquent or that are being contested in good faith by appropriate proceedings,
and  (iv)  any  Lien  described  in  the  Company's SEC documents as of the date
hereof.

          (v)     "PERSON"  means  an individual, a limited liability company, a
partnership,  a  joint  venture,  a  corporation,  a  trust,  an  unincorporated
organization,  any  other  entity  and  a government or any department or agency
thereof.


                                      -17-
<PAGE>
          (w)     "PRINCIPAL  MARKET"  means  The  National  Association  of
Securities  Dealers  Inc.'s  Over-The-Counter  Bulletin  Board.

          (x)     "REDEMPTION  PREMIUM"  means  (i) in the case of the Events of
Default  described  in  Section 4(a)(i) - (vi) and (ix) - (xii), 120% or (ii) in
the case of the Events of Default described in Section 4(a)(vii) - (viii), 100%.

          (y)     "REGISTRATION  RIGHTS  AGREEMENT"  means  that  certain
registration  rights  agreement  dated  as of the Issuance Date by and among the
Company  and  the  initial holders of the Notes relating to, among other things,
the  registration  of the resale of the Common Stock issuable upon Conversion of
the  Notes  and  exercise  of  the  Warrants.

          (z)     "REQUIRED  HOLDERS" means the holders of Notes representing at
least  a  majority  of  the  aggregate  principal  amount  of  the  Notes  then
outstanding.

          (aa)     "SEC"  means  the  United  States  Securities  and  Exchange
Commission.

          (bb)     "SECURITIES EXCHANGE AGREEMENT" means that certain Securities
Exchange  Agreement  dated  as of the Issuance Date by and among the Company and
the initial holders of the Notes pursuant to which the Company issued the Notes.

          (cc)     "SUCCESSOR  ENTITY"  means  the  Person,  which  may  be  the
Company,  formed  by, resulting from or surviving any Fundamental Transaction or
the  Person  with  which  such  Fundamental  Transaction  shall  have been made,
provided  that if such Person is not a publicly traded entity whose common stock
or  equivalent  equity  security  is quoted or listed for trading on an Eligible
Market,  Successor  Entity  shall  mean  such  Person's  Parent  Entity.

          (dd)     "TRADING  DAY"  means  any  day  on which the Common Stock is
traded on the Principal Market, or, if the Principal Market is not the principal
trading  market  for the Common Stock, then on the principal securities exchange
or  securities  market  on  which the Common Stock is then traded; provided that
"Trading  Day"  shall not include any day on which the Common Stock is scheduled
to  trade on such exchange or market for less than 4.5 hours or any day that the
Common  Stock is suspended from trading during the final hour of trading on such
exchange  or market (or if such exchange or market does not designate in advance
the  closing  time  of  trading on such exchange or market, then during the hour
ending  at  5:00:00  p.m.,  New  York  Time).

     (28)     DISCLOSURE.  Upon receipt or delivery by the Company of any notice
              ----------
in  accordance with the terms of this Note, unless the Company has in good faith
determined  that the matters relating to such notice do not constitute material,
nonpublic  information  relating to the Company or its Subsidiaries, the Company
shall  within  one  (1) Business Day after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 8-K or
otherwise.  In  the  event  that  the  Company  believes  that a notice contains
material, nonpublic information relating to the Company or its Subsidiaries, the
Company so shall indicate to such Holder contemporaneously with delivery of such
notice,  and  in the absence of any such indication, the Holder shall be allowed
to  presume that all matters relating to such notice do not constitute material,
nonpublic  information  relating  to  the  Company  or  its  Subsidiaries.

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


                                  CHARYS  HOLDING  COMPANY,  INC.


                                  By
                                    --------------------------------------------
                                      Billy V. Ray, Jr. Chief Executive Officer


                                      -18-
<PAGE>
                                     EXHIBIT

                          CHARYS HOLDING COMPANY, INC.
                                CONVERSION NOTICE

Reference  is  made  to the Subordinated Unsecured Convertible Note (the "NOTE")
issued  to  the undersigned by Charys Holding Company, Inc. (the "COMPANY").  In
accordance  with  and  pursuant  to  the  Note, the undersigned hereby elects to
convert  the  Conversion  Amount  (as defined in the Note) of the Note indicated
below  into  shares  of  Common  Stock  par  value $0.001 per share (the "COMMON
STOCK")  of  the  Company,  as  of  the  date  specified  below.


     Date  of  Conversion:
                             ---------------------------------------------------

     Aggregate  Conversion  Amount  to  be  converted:
                                                         -----------------------

Please  confirm  the  following  information:

     Conversion  Price:
                         -------------------------------------------------------

     Number  of  shares  of  Common  Stock  to  be  issued:
                                                             -------------------

Please  issue  the  Common  Stock  into which the Note is being converted in the
following  name  and  to  the  following  address:

     Issue  to:
                  --------------------------------------------------------------

                  --------------------------------------------------------------

                  --------------------------------------------------------------


     Facsimile  Number:
                          ------------------------------------------------------

     Authorization:
                     -----------------------------------------------------------

                By:
                     -----------------------------------------------------------

                     Title:
                            ----------------------------------------------------

Dated:
      --------------------------------------------------------------------------

     Account  Number:
                        --------------------------------------------------------
     (if electronic book entry transfer)

     Transaction  Code  Number:
                                  ----------------------------------------------
     (if electronic book entry transfer)

Installment Amounts to be reduced and amount of reduction:
                                                           ---------------------


<PAGE>
                                 ACKNOWLEDGMENT

     The Company hereby acknowledges this Conversion Notice and hereby directs
____________ to issue the above indicated number of shares of Common Stock in
accordance with the Conversion Notice.


                                  CHARYS  HOLDING  COMPANY,  INC.


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


<PAGE>
<TABLE>
<CAPTION>
--------------------------------
EXHIBIT  II (UBS)
--------------------------------
DATE            PAYMENT ($)
--------------  ----------------
<S>             <C>
5/15/2007                100,000
--------------  ----------------
7/1/2007               89,532.78
--------------  ----------------
8/1/2007              169,495.68
--------------  ----------------
9/1/2007              145,236.01
--------------  ----------------
10/1/2007             144,248.56
--------------  ----------------
11/1/2007             143,261.10
--------------  ----------------
12/1/2007             163,448.81
--------------  ----------------
1/1/2008              162,306.96
--------------  ----------------
2/1/2008              161,165.10
--------------  ----------------
3/1/2008              160,023.24
--------------  ----------------
4/1/2008              158,881.38
--------------  ----------------
5/01/2008             157,739.52
--------------------------------
</TABLE>