Document:

f10qsb0307ex10e.htm

    
      THE
        SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
        THE
        SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THE SECURITIES MAY
        NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN
        FORM,
        SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
        THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT
        TO RULE
        144 OR REGULATION S UNDER SAID ACT.

       

    

     

     

    CALLABLE
      SECURED CONVERTIBLE
      NOTE

     

    Clinton
      Township, Michigan

     

    October 
      15,
      2007                                                                                                                                                        

    $181,800

     

    FOR
      VALUE RECEIVED, MIDNIGHT HOLDINGS
      GROUP, INC.,
a Delaware corporation (hereinafter called the “Borrower”), hereby promises
      to
      pay to the order of AJW Offshore, Ltd. or registered assigns (the “Holder”) the sum of $181,800
      on October 15, 2010 (the “Maturity Date”), and to pay
      interest on the unpaid principal balance hereof at the rate of ten percent
      (10%)
      per annum from October 15, 2007 (the “Issue Date”) until the same
      becomes due and payable, whether at maturity or upon acceleration or by
      prepayment or otherwise.  Any amount of principal or interest on this
      Note which is not paid when due shall bear interest at the rate of fifteen
      percent (15%) per annum from the due date thereof until the same is paid (“Default
      Interest”).  Interest shall commence accruing on the issue
      date, shall be computed on the basis of a 365-day year and the actual number
      of
      days elapsed and shall be payable, quarterly on March 31, June 30,
      September 30 and December 31 of each year beginning on the last day of the
      first full quarter after Issue Date.  All payments due hereunder (to
      the extent not converted into common stock, $.00005 par value per share, of
      the
      Borrower (the “Common
      Stock”) in accordance with the terms hereof) shall be made in lawful
      money of the United States of America.  All payments shall be made at
      such address as the Holder shall hereafter give to the Borrower by written
      notice made in accordance with the provisions of this Note.  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 interest payment date which
      is
      not the 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.  As used in this Note, the term
“business day” shall mean any day other than a Saturday, Sunday or a day on
      which commercial banks in the city of New York, New York are authorized or
      required by law or executive order to 

     

     

     

    
      
        
        

      

      
        Page
          1

        
          

        

      

      
        
        

      

    

     

    remain
      closed.  Each capitalized term used herein, and not otherwise defined,
      shall have the meaning ascribed thereto in that certain Securities Purchase
      Agreement, dated October 15, 2007, pursuant to which this Note was originally
      issued (the “Purchase
      Agreement”).

     

    This
      Note
      is free from all taxes, liens, claims and encumbrances with respect to the
      issue
      thereof and shall not be subject to preemptive rights or other similar rights
      of
      shareholders of the Borrower and will not impose personal liability upon the
      holder thereof.  The obligations of the Borrower under this Note shall
      be secured by that certain Security Agreement by and between the Borrower and
      the Holder of even date herewith.

     

    The
      following terms shall apply to this Note:

     

     

    ARTICLE
      I.    CONVERSION RIGHTS

     

    1.1  Conversion
      Right.  The
      Holder shall
      have the right from time to time, and at any time on or prior to the earlier
      of
      (i) the Maturity Date and (ii) the date of payment of the Default Amount (as
      defined in Article III) pursuant to Section 1.6(a) or Article III, the Optional
      Prepayment Amount (as defined in Section 5.1) or (iii) any payments pursuant
      to
      Section 1.7, each in respect of the remaining outstanding principal amount
      of
      this Note to convert all or any part of the outstanding and unpaid principal
      amount of this Note into fully paid and non-assessable shares of Common Stock,
      as such Common Stock exists on the Issue Date, or any shares of capital stock
      or
      other securities of the Borrower into which such Common Stock shall hereafter
      be
      changed or reclassified at the conversion price  (the “Conversion Price”) determined
      as provided herein (a “Conversion”); provided,
however,
      that in no
      event shall the Holder be entitled to convert any portion of this Note in excess
      of that portion of this Note upon conversion of which the sum of (1) the number
      of shares of Common Stock beneficially owned by the Holder and its affiliates
      (other than shares of Common Stock which may be deemed beneficially owned
      through the ownership of the unconverted portion of the Notes or the unexercised
      or unconverted portion of any other security of the Borrower (including, without
      limitation, the warrants issued by the Borrower pursuant to the Purchase
      Agreement) subject to a limitation on conversion or exercise analogous to the
      limitations contained herein) and (2) the number of shares of Common Stock
      issuable upon the conversion of the portion of this Note with respect to which
      the determination of this proviso is being made, would result in beneficial
      ownership by the Holder and its affiliates of more than 4.9% of the outstanding
      shares of Common Stock.  For purposes of the proviso to the
      immediately preceding sentence, beneficial ownership shall be determined in
      accordance with Section 13(d) of the Securities Exchange Act of 1934, as
      amended, and Regulations 13D-G thereunder, except as otherwise provided in
      clause (1) of such proviso.  The number of shares of Common Stock to
      be issued upon each conversion of this Note shall be determined by dividing
      the
      Conversion Amount (as defined below) by the applicable Conversion Price then
      in
      effect on the date specified in the notice of conversion, in the form attached
      hereto as Exhibit A (the “Notice of Conversion”),
      delivered to the Borrower by the Holder in accordance with Section 1.4 below;
      provided that the Notice of Conversion is submitted by facsimile (or by other
      means resulting in, or reasonably expected to result in, notice) to the Borrower
      before 6:00 p.m., New York, New York time on such conversion date (the “Conversion
      Date”).  The term “Conversion Amount” means, with
      respect to any conversion of this Note, the sum of (1) the principal amount
      of
      this Note to be converted in such 

     

     

     

    
      
        
        

      

      
        Page
          2

        
          

        

      

      
        
        

      

    

     

     

    conversion
      plus (2)
      accrued and unpaid interest, if any, on such principal amount at the interest
      rates provided in this Note to the Conversion Date plus (3) Default
      Interest, if any, on the amounts referred to in the immediately preceding
      clauses (1) and/or (2) plus (4) at the
      Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and
      1.4(g) hereof or pursuant to Section 2(c) of that certain Registration Rights
      Agreement, dated as of October 15, 2007, executed in connection with the initial
      issuance of this Note and the other Notes issued on the Issue Date (the “Registration Rights
      Agreement”).

     

    1.2  Conversion
      Price.

     

    (a)  Calculation
      of Conversion
      Price.  The
      Conversion
      Price shall be the lesser of (i) the Variable Conversion Price (as defined
      herein) and (ii) the Fixed Conversion Price (as defined herein) (subject, in
      each case, to equitable adjustments for stock splits, stock dividends or rights
      offerings by the Borrower relating to the Borrower’s securities or the
      securities of any subsidiary of the Borrower, combinations, recapitalization,
      reclassifications, extraordinary distributions and similar
      events).  The “Variable Conversion Price”
shall mean the Applicable
      Percentage (as defined herein) multiplied by the
      Market Price (as defined herein).  “Market Price” means the
      average of the lowest three (3) Trading Prices (as defined below) for the Common
      Stock during the twenty (20) Trading Day period ending one Trading Day prior
      to
      the date the Conversion Notice is sent by the Holder to the Borrower via
      facsimile (the “Conversion
      Date”).  “Trading Price” means, for
      any
      security as of any date, the intraday trading price on the Over-the-Counter
      Bulletin Board (the “OTCBB”) as reported by a
      reliable reporting service mutually acceptable to and hereafter designated
      by
      Holders of a majority in interest of the Notes and the Borrower or, if the
      OTCBB
      is not the principal trading market for such security, the intraday trading
      price of such security on the principal securities exchange or trading market
      where such security is listed or traded or, if no intraday trading price of
      such
      security is available in any of the foregoing manners, the average of the
      intraday trading prices of any market makers for such security that are listed
      in the “pink sheets” by the National Quotation Bureau, Inc.  If the
      Trading Price cannot be calculated for such security on such date in the manner
      provided above, the Trading Price shall be the fair market value as mutually
      determined by the Borrower and the holders of a majority in interest of the
      Notes being converted for which the calculation of the Trading Price is required
      in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any
      day on which the Common Stock is traded for any period on the OTCBB, or on
      the
      principal securities exchange or other securities market on which the Common
      Stock is then being traded.  “Applicable Percentage” shall
      mean 25%; provided, however, that the Applicable Percentage shall be increased
      to (i) 30% in the event that the Registration Statement (as defined in the
      Registration Rights Agreement) is filed on or before the Filing Date (as defined
      in the Registration Rights Agreement) and (ii) 40% in the event that the
      Registration Statement (as defined in the Registration Rights Agreement) becomes
      effective on or before the Effectiveness Deadline) as defined in the
      Registration Rights Agreement).  The “Fixed Conversion Price” shall
      mean $.02.

     

    (b)  Conversion
      Price During
      Major Announcements.  Notwithstanding
      anything contained in Section 1.2(a) to the contrary, in the event the Borrower
      (i) makes a public announcement that it intends to consolidate or merge with
      any
      other corporation (other than a merger in which the Borrower is the surviving
      or
      continuing corporation and its capital stock is unchanged) or sell or transfer
      all or substantially all of the 

     

     

     

    
      
        
        

      

      
        Page
          3

        
          

        

      

      
        
        

      

    

     

     

    assets
      of
      the Borrower or (ii) any person, group or entity (including the Borrower)
      publicly announces a tender offer to purchase 50% or more of the Borrower’s
      Common Stock (or any other takeover scheme) (the date of the announcement
      referred to in clause (i) or (ii) is hereinafter referred to as
      the  “Announcement
      Date”), then the Conversion Price shall, effective upon the Announcement
      Date and continuing through the Adjusted Conversion Price Termination Date
      (as
      defined below), be equal to the lower of (x) the Conversion Price which would
      have been applicable for a Conversion occurring on the Announcement Date and
      (y)
      the Conversion Price that would otherwise be in effect. From and after the
      Adjusted Conversion Price Termination Date, the Conversion Price shall be
      determined as set forth in this Section 1.2(a).  For purposes
      hereof,  “Adjusted
      Conversion Price Termination Date” shall mean, with respect to any
      proposed transaction or tender offer (or takeover scheme) for which a public
      announcement as contemplated by this Section 1.2(b) has been made, the date
      upon
      which the Borrower (in the case of clause (i) above) or the person, group or
      entity (in the case of clause (ii) above) consummates or publicly announces
      the
      termination or abandonment of the proposed transaction or tender offer (or
      takeover scheme) which caused this Section 1.2(b) to become
      operative.

     

    1.3  Authorized
      Shares.  Subject
      to the
      completion of the Charter Amendment Actions (as defined in the Purchase
      Agreement), the Borrower covenants that during the period the conversion right
      exists, the Borrower will reserve from its authorized and unissued Common Stock
      a sufficient number of shares, free from preemptive rights, to provide for
      the
      issuance of Common Stock upon the full conversion of this Note and the other
      Notes issued pursuant to the Purchase Agreement.  The Borrower is
      required at all times to have authorized and reserved two times the number
      of
      shares that is actually issuable upon full conversion of the Notes (based on
      the
      Conversion Price of the Notes or the Exercise Price of the Warrants in effect
      from time to time) (the “Reserved
      Amount”).  The Reserved Amount shall be increased from time to
      time in accordance with the Borrower’s obligations pursuant to Section 4(h) of
      the Purchase Agreement.  The Borrower represents that upon issuance,
      such shares will be duly and validly issued, fully paid and
      non-assessable.  In addition, if the Borrower shall issue any
      securities or make any change to its capital structure which would change the
      number of shares of Common Stock into which the Notes shall be convertible
      at
      the then current Conversion Price, the Borrower shall at the same time make
      proper provision so that thereafter there shall be a sufficient number of shares
      of Common Stock authorized and reserved, free from preemptive rights, for
      conversion of the outstanding Notes.  The Borrower (i) acknowledges
      that it has irrevocably instructed its transfer agent to issue certificates
      for
      the Common Stock issuable upon conversion of this Note, and (ii) agrees
      that its issuance of this Note shall constitute full authority to its officers
      and agents who are charged with the duty of executing stock certificates to
      execute and issue the necessary certificates for shares of Common Stock in
      accordance with the terms and conditions of this Note.

     

    If,
      at
      any time a Holder of this Note submits a Notice of Conversion, and the Borrower
      does not have sufficient authorized but unissued shares of Common Stock
      available to effect such conversion in accordance with the provisions of this
      Article I (a “Conversion
      Default”), subject to Section 4.8, the Borrower shall issue to the Holder
      all of the shares of Common Stock which are then available to effect such
      conversion.  The portion of this Note which the Holder included in its
      Conversion Notice and which exceeds the amount which is then convertible into
      available shares of Common Stock (the “Excess Amount”) shall,

     

     

     

    
      
        
        

      

      
        Page
          4

        
          

        

      

      
        
        

      

    

     

     

     

    notwithstanding
      anything to the contrary contained herein, not be convertible into Common Stock
      in accordance with the terms hereof until (and at the Holder’s option at any
      time after) the date additional shares of Common Stock are authorized by the
      Borrower to permit such conversion, at which time the Conversion Price in
      respect thereof shall be the lesser of (i) the Conversion Price on the
      Conversion Default Date (as defined below) and (ii) the Conversion Price on
      the
      Conversion Date thereafter elected by the Holder in respect
      thereof.  In addition, the Borrower shall pay to the Holder payments
      (“Conversion Default
      Payments”) for a Conversion Default in the amount of (x) the sum of (1)
      the then
      outstanding principal amount of this Note plus (2) accrued
      and
      unpaid interest on the unpaid principal amount of this Note through the
      Authorization Date (as defined below) plus (3) Default
      Interest, if any, on the amounts referred to in clauses (1) and/or (2), multiplied by (y)
      .24, multiplied
      by (z) (N/365), where N = the number of days from the day the holder
      submits a Notice of Conversion giving rise to a Conversion Default (the “Conversion Default Date”) to
      the date (the “Authorization
      Date”) that the Borrower authorizes a sufficient number of shares of
      Common Stock to effect conversion of the full outstanding principal balance
      of
      this Note.  The Borrower shall use its best efforts to authorize a
      sufficient number of shares of Common Stock as soon as practicable following
      the
      earlier of (i) such time that the Holder notifies the Borrower or that the
      Borrower otherwise becomes aware that there are or likely will be insufficient
      authorized and unissued shares to allow full conversion thereof and (ii) a
      Conversion Default.  The Borrower shall send notice to the Holder of
      the authorization of additional shares of Common Stock, the Authorization Date
      and the amount of Holder’s accrued Conversion Default Payments.  The
      accrued Conversion Default Payments for each calendar month shall be paid in
      cash or shall be convertible into Common Stock (at such time as there are
      sufficient authorized shares of Common Stock) at the applicable Conversion
      Price, at the Borrower’s option, as follows:

     

    (a)  In
      the
      event the Borrower elects to make such payment in cash, cash payment shall
      be
      made to Holder by the fifth (5th)
      day of the month
      following the month in which it has accrued; and

     

    

    (b)   In
      the event the Borrower elects to make such payment in Common Stock, the Holder
      may convert such payment amount into Common Stock at the Conversion Price (as
      in
      effect at the time of conversion) at any time after the fifth day of the month
      following the month in which it has accrued in accordance with the terms of
      this
      Article I (so long as there is then a sufficient number of authorized shares
      of
      Common Stock).

     

    

    The
      Borrower’s election shall be made in writing to the Holder at any time prior to
      6:00 p.m., New York, New York time, on the third day of the month following
      the
      month in which Conversion Default payments have accrued.  If no
      election is made, the Borrower shall be deemed to have elected to remit Common
      Stock.  Nothing herein shall limit the Holder’s right to pursue actual
      damages (to the extent in excess of the Conversion Default Payments) for the
      Borrower’s failure to maintain a sufficient number of authorized shares of
      Common Stock, and each holder shall have the right to pursue all remedies
      available at law or in equity (including degree of specific performance and/or
      injunctive relief).

     

    1.4  Method
      of
      Conversion.

     

     

    
      
        
        

      

      
        Page
          5

        
          

        

      

      
        
        

      

    

     

     

    (a)  Mechanics
      of
      Conversion.  Subject
      to
      Section 1.1, this Note may be converted by the Holder in whole or in part at
      any
      time from time to time after the Issue Date, by (A) submitting to the
      Borrower a Notice of Conversion (by facsimile or other reasonable means of
      communication dispatched on the Conversion Date prior to 6:00 p.m., New York,
      New York time) and (B) subject to Section 1.4(b), surrendering this Note at
      the principal office of the Borrower.

     

    (b)  Surrender
      of Note Upon
      Conversion.  Notwithstanding
      anything to the contrary set forth herein, upon conversion of this Note in
      accordance with the terms hereof, the Holder shall not be required to physically
      surrender this Note to the Borrower unless the entire unpaid principal amount
      of
      this Note is so converted.  The Holder and the Borrower shall maintain
      records showing the principal amount so converted and the dates of such
      conversions or shall use such other method, reasonably satisfactory to the
      Holder and the Borrower, so as not to require physical surrender of this Note
      upon each such conversion.  In the event of any dispute or
      discrepancy, such records of the Borrower shall be controlling and determinative
      in the absence of manifest error.  Notwithstanding the foregoing, if
      any portion of this Note is converted as aforesaid, the Holder may not transfer
      this Note unless the Holder first physically surrenders this Note to the
      Borrower, whereupon the Borrower will forthwith issue and deliver upon the
      order
      of the Holder a new Note of like tenor, registered as the Holder (upon payment
      by the Holder of any applicable transfer taxes) may request, representing in
      the
      aggregate the remaining unpaid principal amount of this Note.  The
      Holder and any assignee, by acceptance of this Note, acknowledge and agree
      that,
      by reason of the provisions of this paragraph, following conversion of a portion
      of this Note, the unpaid and unconverted principal amount of this Note
      represented by this Note may be less than the amount stated on the face
      hereof.

     

    (c)  Payment
      of
      Taxes.  The
      Borrower
      shall not be required to pay any tax which may be payable in respect of any
      transfer involved in the issue and delivery of shares of Common Stock or other
      securities or property on conversion of this Note in a name other than that
      of
      the Holder (or in street name), and the Borrower shall not be required to issue
      or deliver any such shares or other securities or property unless and until
      the
      person or persons (other than the Holder or the custodian in whose street name
      such shares are to be held for the Holder’s account) requesting the issuance
      thereof shall have paid to the Borrower the amount of any such tax or shall
      have
      established to the satisfaction of the Borrower that such tax has been
      paid.

     

    (d)  Delivery
      of Common Stock
      Upon Conversion.  Upon
      receipt by
      the Borrower from the Holder of a facsimile transmission (or other reasonable
      means of communication) of a Notice of Conversion meeting the requirements
      for
      conversion as provided in this Section 1.4, the Borrower shall issue and deliver
      or cause to be issued and delivered to or upon the order of the Holder
      certificates for the Common Stock issuable upon such conversion within five
      (5)
      business days after such receipt (and, solely in the case of conversion of
      the
      entire unpaid principal amount hereof, surrender of this Note) (such second
      business day being hereinafter referred to as the “Deadline”) in accordance with
      the terms hereof and the Purchase Agreement (including, without limitation,
      in
      accordance with the requirements of Section 2(g) of the Purchase Agreement
      that
      certificates for shares of Common Stock issued on or after the effective date
      of
      the Registration Statement upon conversion of this Note shall not bear any
      restrictive legend).

     

     

    
      
        
        

      

      
        Page
          6

        
          

        

      

      
        
        

      

    

     

    (e)  Obligation
      of Borrower to
      Deliver Common Stock.  Upon
      receipt by
      the Borrower of a Notice of Conversion, the Holder shall be deemed to be the
      holder of record of the Common Stock issuable upon such conversion, the
      outstanding principal amount and the amount of accrued and unpaid interest
      on
      this Note shall be reduced to reflect such conversion, and, unless the Borrower
      defaults on its obligations under this Article I, all rights with respect to
      the
      portion of this Note being so converted shall forthwith terminate except the
      right to receive the Common Stock or other securities, cash or other assets,
      as
      herein provided, on such conversion.  If the Holder shall have given a
      Notice of Conversion as provided herein, the Borrower’s obligation to issue and
      deliver the certificates for Common Stock shall be absolute and unconditional,
      irrespective of the absence of any action by the Holder to enforce the same,
      any
      waiver or consent with respect to any provision thereof, the recovery of any
      judgment against any person or any action to enforce the same, any failure
      or
      delay in the enforcement of any other obligation of the Borrower to the holder
      of record, or any setoff, counterclaim, recoupment, limitation or termination,
      or any breach or alleged breach by the Holder of any obligation to the Borrower,
      and irrespective of any other circumstance which might otherwise limit such
      obligation of the Borrower to the Holder in connection with such
      conversion.  The Conversion Date specified in the Notice of Conversion
      shall be the Conversion Date so long as the Notice of Conversion is received
      by
      the Borrower before 6:00 p.m., New York, New York time, on such
      date.

     

    (f)  Delivery
      of Common Stock by
      Electronic Transfer.  In lieu
      of
      delivering physical certificates representing the Common Stock issuable upon
      conversion, provided the Borrower’s transfer agent is participating in the
      Depository Trust Company (“DTC”) Fast Automated
      Securities Transfer (“FAST”) program, upon request
      of the Holder and its compliance with the provisions contained in Section 1.1
      and in this Section 1.4, the Borrower shall use its best efforts to cause its
      transfer agent to electronically transmit the Common Stock issuable upon
      conversion to the Holder by crediting the account of Holder’s Prime Broker with
      DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

     

    (g)  Failure
      to Deliver Common
      Stock Prior to Deadline.  Without
      in any
      way limiting the Holder’s right to pursue other remedies, including actual
      damages and/or equitable relief, the parties agree that if delivery of the
      Common Stock issuable upon conversion of this Note is more than two (2) days
      after the Deadline (other than a failure due to the circumstances described
      in
      Section 1.3 above, which failure shall be governed by such Section) the Borrower
      shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline
      that the Borrower fails to deliver such Common Stock.  Such cash
      amount shall be paid to Holder by the fifth day of the month following the
      month
      in which it has accrued or, at the option of the Holder (by written notice
      to
      the Borrower by the first day of the month following the month in which it
      has
      accrued), shall be added to the principal amount of this Note, in which event
      interest shall accrue thereon in accordance with the terms of this Note and
      such
      additional principal amount shall be convertible into Common Stock in accordance
      with the terms of this Note.

     

    1.5  Concerning
      the
      Shares.  The
      shares of
      Common Stock issuable upon conversion of this Note may not be sold or
      transferred unless  (i) such shares are sold pursuant to an effective
      registration statement under the Act or (ii) the Borrower or its transfer agent
      shall have been furnished with an opinion of  counsel (which opinion
      shall be in form, substance and 

     

     

    
      
        
        

      

      
        Page
          7

        
          

        

      

      
        
        

      

    

     

    scope
      customary for opinions of counsel in comparable transactions) to the effect
      that
      the shares to be sold or transferred may be sold or transferred pursuant to
      an
      exemption from such registration or (iii) such shares are sold or
      transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares
      are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who
      agrees to sell or otherwise transfer the shares only in accordance with this
      Section 1.5 and who is an Accredited Investor (as defined in the Purchase
      Agreement).  Except as otherwise provided in the Purchase Agreement
      (and subject to the removal provisions set forth below), until such time as
      the
      shares of Common Stock issuable upon conversion of this Note have been
      registered under the Act as contemplated by the Registration Rights Agreement
      or
      otherwise may be sold pursuant to Rule 144 without any restriction as to the
      number of securities as of a particular date that can then be immediately sold,
      each certificate for shares of Common Stock issuable upon conversion of this
      Note that has not been so included in an effective registration statement or
      that has not been sold pursuant to an effective registration statement or an
      exemption that permits removal of the legend, shall bear a legend substantially
      in the following form, as appropriate:

     

     

    
      “THE
        SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
        THE
        SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES MAY NOT BE SOLD,
        TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
        FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
        AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
        REGISTRATION IS NOT REQUIRED UNDER SAID ACT  UNLESS SOLD PURSUANT TO
        RULE 144 OR REGULATION S UNDER SAID ACT.”

       

    

    The
      legend set forth above shall be removed and the Borrower shall issue to the
      Holder a new certificate therefor free of any transfer legend if (i) the
      Borrower or its transfer agent shall have received an opinion of counsel, in
      form, substance and scope customary for opinions of counsel in comparable
      transactions, to the effect that a public sale or transfer of such Common Stock
      may be made without registration under the Act and the shares are so sold or
      transferred, (ii) such Holder provides the Borrower or its transfer agent with
      reasonable assurances that the Common Stock issuable upon conversion of this
      Note (to the extent such securities are deemed to have been acquired on the
      same
      date) can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock
      issuable upon conversion of this Note, such security is registered for sale
      by
      the Holder under an effective registration statement filed under the Act or
      otherwise may be sold pursuant to Rule 144 without any restriction as to the
      number of securities as of a particular date that can then be immediately
      sold.  Nothing in this Note shall (i) limit the Borrower’s obligation
      under the Registration Rights Agreement or (ii) affect in any way the Holder’s
      obligations to comply with applicable prospectus delivery requirements upon
      the
      resale of the securities referred to herein.

     

     

    1.6  Effect
      of Certain
      Events.

     

    (a)  Effect
      of Merger,
      Consolidation, Etc.  At the
      option of
      the Holder, the sale, conveyance or disposition of all or substantially all
      of
      the assets of the Borrower, the effectuation by the Borrower of a transaction or
      series of related transactions in 

     

     

    
      
        
        

      

      
        Page
          8

        
          

        

      

      
        
        

      

    

     

     

    which
      more than 50% of the voting power of the Borrower is disposed of, or the
      consolidation, merger or other business combination of the Borrower with or
      into
      any other Person (as defined below) or Persons when the Borrower is not the
      survivor shall either:  (i) be deemed to be an Event of Default (as
      defined in Article III) pursuant to which the Borrower shall be required to
      pay
      to the Holder upon the consummation of and as a condition to such transaction
      an
      amount equal to the Default Amount (as defined in Article III) or (ii) be
      treated pursuant to Section 1.6(b) hereof.  “Person” shall mean any
      individual, corporation, limited liability company, partnership, association,
      trust or other entity or organization.

     

    (b)  Adjustment
      Due to Merger,
      Consolidation, Etc.  If,
      at any time
      when this Note is issued and outstanding and prior to conversion of all of
      the
      Notes, there shall be any merger, consolidation, exchange of shares,
      recapitalization, reorganization, or other similar event, as a result of which
      shares of Common Stock of the Borrower shall be changed into the same or a
      different number of shares of another class or classes of stock or securities
      of
      the Borrower or another entity, or in case of any sale or conveyance of all
      or
      substantially all of the assets of the Borrower other than in connection with
      a
      plan of complete liquidation of the Borrower, then the Holder of this Note
      shall
      thereafter have the right to receive upon conversion of this Note, upon the
      basis and upon the terms and conditions specified herein and in lieu of the
      shares of Common Stock immediately theretofore issuable upon conversion, such
      stock, securities or assets which the Holder would have been entitled to receive
      in such transaction had this Note been converted in full immediately prior
      to
      such transaction (without regard to any limitations on conversion set forth
      herein), and in any such case appropriate provisions shall be made with respect
      to the rights and interests of the Holder of this Note to the end that the
      provisions hereof (including, without limitation, provisions for adjustment
      of
      the Conversion Price and of the number of shares issuable upon conversion of
      the
      Note) shall thereafter be applicable, as nearly as may be practicable in
      relation to any securities or assets thereafter deliverable upon the conversion
      hereof.  The Borrower shall not effect any transaction described in
      this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty
      (30) days prior written notice (but in any event at least fifteen (15) days
      prior written notice) of the record date of the special meeting of shareholders
      to approve, or if there is no such record date, the consummation of, such
      merger, consolidation, exchange of shares, recapitalization, reorganization
      or
      other similar event or sale of assets (during which time the Holder shall be
      entitled to convert this Note) and (b) the resulting successor or acquiring
      entity (if not the Borrower) assumes by written instrument the obligations
      of
      this Section 1.6(b).  The above provisions shall similarly apply to
      successive consolidations, mergers, sales, transfers or share
      exchanges.

     

    (c)  Adjustment
      Due to
      Distribution.  If the
      Borrower
      shall declare or make any distribution of its assets (or rights to acquire
      its
      assets) to holders of Common Stock as a dividend, stock repurchase, by way
      of
      return of capital or otherwise (including any dividend or distribution to the
      Borrower’s shareholders in cash or shares (or rights to acquire shares) of
      capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the
      Holder of this Note shall be entitled, upon any conversion of this Note after
      the date of record for determining shareholders entitled to such Distribution,
      to receive the amount of such assets which would have been payable to the Holder
      with respect to the shares of Common Stock issuable upon such conversion had
      such Holder been the holder of such shares of Common Stock on the record date
      for the determination of shareholders entitled to such
      Distribution.

     

     

    
      
        
        

      

      
        Page
          9

        
          

        

      

      
        
        

      

    

     

     

     

    (d)  Adjustment
      Due to Dilutive
      Issuance.  If,
      at any time
      when any Notes are issued and outstanding, the Borrower issues or sells, or
      in
      accordance with this Section 1.6(d) hereof is deemed to have issued or sold,
      any
      shares of Common Stock for no consideration or for a consideration per share
      (before deduction of reasonable expenses or commissions or underwriting
      discounts or allowances in connection therewith) less than the Fixed Conversion
      Price in effect on the date of such issuance (or deemed issuance) of such shares
      of Common Stock (a “Dilutive
      Issuance”), then immediately upon the Dilutive Issuance, the Fixed
      Conversion Price will be reduced to the amount of the consideration per share
      received by the Borrower in such Dilutive Issuance; provided that only
      one adjustment will be made for each Dilutive Issuance.

     

    The
      Borrower shall be deemed to have issued or sold shares of Common Stock if the
      Borrower in any manner issues or grants any warrants, rights or options, whether
      or not immediately exercisable, to subscribe for or to purchase Common Stock
      or
      other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such
      warrants, rights and options to purchase Common Stock or Convertible Securities
      are hereinafter referred to as “Options”) and the price per
      share for which Common Stock is issuable upon the exercise of such Options
      is
      less than the Fixed Conversion Price then in effect, then the Fixed Conversion
      Price shall be equal to such price per share.  For purposes of the
      preceding sentence, the “price per share for which Common Stock is issuable upon
      the exercise of such Options” is determined by dividing (i) the total amount, if
      any, received or receivable by the Borrower as consideration for the issuance
      or
      granting of all such Options, plus the minimum aggregate amount of additional
      consideration, if any, payable to the Borrower upon the exercise of all such
      Options, plus, in the case of Convertible Securities issuable upon the exercise
      of such Options, the minimum aggregate amount of additional consideration
      payable upon the conversion or exchange thereof at the time such Convertible
      Securities first become convertible or exchangeable, by (ii) the maximum total
      number of shares of Common Stock issuable upon the exercise of all such Options
      (assuming full conversion of Convertible Securities, if
      applicable).  No further adjustment to the Conversion Price will be
      made upon the actual issuance of such Common Stock upon the exercise of such
      Options or upon the conversion or exchange of Convertible Securities issuable
      upon exercise of such Options.

     

    Additionally,
      the Borrower shall be deemed to have issued or sold shares of Common Stock
      if
      the Borrower in any manner issues or sells any Convertible Securities, whether
      or not immediately convertible (other than where the same are issuable upon
      the
      exercise of Options), and the price per share for which Common Stock is issuable
      upon such conversion or exchange is less than the Fixed Conversion Price then
      in
      effect, then the Fixed Conversion Price shall be equal to such price per
      share.  For the purposes of the preceding sentence, the “price per
      share for which Common Stock is issuable upon such conversion or exchange” is
      determined by dividing (i) the total amount, if any, received or receivable
      by
      the Borrower as consideration for the issuance or sale of all such Convertible
      Securities, plus the minimum aggregate amount of additional consideration,
      if
      any, payable to the Borrower upon the conversion or exchange thereof at the
      time
      such Convertible Securities first become convertible or exchangeable, by (ii)
      the maximum total number of shares of Common Stock issuable upon the conversion
      or exchange of all such Convertible Securities.  No further adjustment
      to the Fixed Conversion Price will be made upon the actual issuance of such
      Common Stock upon conversion or exchange of such Convertible
      Securities.

     

     

     

    
      
        
        

      

      
        Page
          10

        
          

        

      

      
        
        

      

    

     

    (e)  Purchase
      Rights.  If,
      at any time
      when any Notes are issued and outstanding, the Borrower issues any convertible
      securities or rights to purchase stock, warrants, securities or other property
      (the “Purchase Rights”)
      pro rata to the record holders of any class of Common Stock, then the Holder
      of
      this Note will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which such Holder could have
      acquired if such Holder had held the number of shares of Common Stock acquirable
      upon complete conversion of this Note (without regard to any limitations on
      conversion contained herein) 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.

     

    (f)  Notice
      of
      Adjustments.  Upon
      the
      occurrence of each adjustment or readjustment of the Conversion Price as a
      result of the events described in this Section 1.6, the Borrower, at its
      expense, shall promptly compute such adjustment or readjustment and prepare
      and
      furnish to the Holder of a certificate setting forth such adjustment or
      readjustment and showing in detail the facts upon which such adjustment or
      readjustment is based.  The Borrower shall, upon the written request
      at any time of the Holder, furnish to such Holder a like certificate setting
      forth (i) such adjustment or readjustment, (ii) the Conversion Price at the
      time
      in effect and (iii) the number of shares of Common Stock and the amount, if
      any,
      of other securities or property which at the time would be received upon
      conversion of the Note.

     

    1.7  Trading
      Market
      Limitations.
Unless
      permitted by the applicable rules and regulations of the principal
      securities market on which the Common Stock is then listed or traded, in no
      event shall the Borrower issue upon conversion of or otherwise pursuant to
      this
      Note and the other Notes issued pursuant to the Purchase Agreement more than
      the
      maximum number of shares of Common Stock that the Borrower can issue pursuant
      to
      any rule of the principal United States securities market on which the Common
      Stock is then traded (the “Maximum Share Amount”), which
      shall be 19.99% of the total shares outstanding on the Closing Date (as defined
      in the Purchase Agreement), subject to equitable adjustment from time to time
      for stock splits, stock dividends, combinations, capital reorganizations and
      similar events relating to the Common Stock occurring after the date
      hereof.  Once the Maximum Share Amount has been issued (the date of
      which is hereinafter referred to as the “Maximum Conversion Date”), if
      the Borrower fails to eliminate any prohibitions under applicable law or the
      rules or regulations of any stock exchange, interdealer quotation system or
      other self-regulatory organization with jurisdiction over the Borrower or any
      of
      its securities on the Borrower’s ability to issue shares of Common Stock in
      excess of the Maximum Share Amount (a “Trading Market Prepayment
      Event”), in lieu of any further right to convert this Note, and in full
      satisfaction of the Borrower’s obligations under this Note, the Borrower shall
      pay to the Holder, within fifteen (15) business days of the Maximum Conversion
      Date (the “Trading Market
      Prepayment Date”), an amount equal to 130% times the
sum
      of (a) the then
      outstanding principal amount of this Note immediately following the Maximum
      Conversion Date, plus (b) accrued
      and
      unpaid interest on the unpaid principal amount of this Note to the Trading
      Market Prepayment Date, plus (c) Default
      Interest, if any, on the amounts referred to in clause (a) and/or (b) above,
      plus (d) any
      optional amounts that may be added thereto at the Maximum Conversion Date by
      the
      Holder in accordance with the terms hereof (the then outstanding principal
      amount of this Note immediately following the Maximum Conversion Date, plus the amounts
      referred to in clauses (b), (c) and (d) above shall collectively be referred
      

     

     

    
      
        
        

      

      
        Page
          11

        
          

        

      

      
        
        

      

    

     

    to
      as the
“Remaining Convertible
      Amount”).  With respect to each Holder of Notes, the Maximum
      Share Amount shall refer to such Holder’s prorata
      share thereof
      determined in accordance with Section 4.8 below.  In the event that
      the sum of (x) the aggregate number of shares of Common Stock issued upon
      conversion of this Note and the other Notes issued pursuant to the Purchase
      Agreement plus
      (y) the aggregate number of shares of Common Stock that remain issuable upon
      conversion of this Note and the other Notes issued pursuant to the Purchase
      Agreement, represents at least one hundred percent (100%) of the Maximum Share
      Amount (the “Triggering
      Event”), the Borrower will use its best efforts to seek and obtain
      Shareholder Approval (or obtain such other relief as will allow conversions
      hereunder in excess of the Maximum Share Amount) as soon as practicable
      following the Triggering Event and before the Maximum Conversion
      Date.  As used herein, “Shareholder Approval” means
      approval by the shareholders of the Borrower to authorize the issuance of the
      full number of shares of Common Stock which would be issuable upon full
      conversion of the then outstanding Notes but for the Maximum Share
      Amount.

     

    1.8  Status
      as
      Shareholder.  Upon
      submission
      of a Notice of Conversion by a Holder, (i) the shares covered thereby (other
      than the shares, if any, which cannot be issued because their issuance would
      exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share
      Amount) shall be deemed converted into shares of Common Stock and (ii) the
      Holder’s rights as a Holder of such converted portion of this Note shall cease
      and terminate, excepting only the right to receive certificates for such shares
      of Common Stock and to any remedies provided herein or otherwise available
      at
      law or in equity to such Holder because of a failure by the Borrower to comply
      with the terms  of this Note.  Notwithstanding the
      foregoing, if a Holder has not received certificates for all shares of Common
      Stock prior to the tenth (10th) business day after the expiration of the
      Deadline with respect to a conversion of any portion of this Note for any
      reason, then (unless the Holder otherwise elects to retain its status as a
      holder of Common Stock by so notifying the Borrower) the Holder shall regain
      the
      rights of a Holder of this Note with respect to such unconverted portions of
      this Note and the Borrower shall, as soon as practicable, return such
      unconverted Note to the Holder or, if the Note has not been surrendered, adjust
      its records to reflect that such portion of this Note has not been
      converted.  In all cases, the Holder shall retain all of its rights
      and remedies (including, without limitation, (i) the right to receive Conversion
      Default Payments pursuant to Section 1.3 to the extent required thereby for
      such
      Conversion Default and any subsequent Conversion Default and (ii) the right
      to
      have the Conversion Price with respect to subsequent conversions determined
      in
      accordance with Section 1.3) for the Borrower’s failure to convert this
      Note.ARTICLE
      II.    CERTAIN COVENANTS

     

    2.1  Distributions
      on Capital
      Stock.  So long
      as the
      Borrower shall have any obligation under this Note, the Borrower shall not
      without the Holder’s written consent (a) pay, declare or set apart for such
      payment, any dividend or other distribution (whether in cash, property or other
      securities) on shares of capital stock other than dividends on shares of Common
      Stock solely in the form of additional shares of Common Stock or (b) directly
      or
      indirectly or through any subsidiary make any other payment or distribution
      in
      respect of its capital stock except for distributions pursuant to any
      shareholders’ rights plan which is approved by a majority of the Borrower’s
      disinterested directors.

     

     

    
      
        
        

      

      
        Page
          12

        
          

        

      

      
        
        

      

    

     

     

    2.2  Restriction
      on Stock
      Repurchases.  So long
      as the
      Borrower shall have any obligation under this Note, the Borrower shall not
      without the Holder’s written consent redeem, repurchase or otherwise acquire
      (whether for cash or in exchange for property or other securities or otherwise)
      in any one transaction or series of related transactions any shares of capital
      stock of the Borrower or any warrants, rights or options to purchase or acquire
      any such shares.

     

    2.3  Borrowings.  So
      long as the
      Borrower shall have any obligation under this Note, the Borrower shall not,
      without the Holder’s written consent, create, incur, assume or suffer to exist
      any liability for borrowed money in excess of $50,000, except (a) borrowings
      in
      existence or committed on the date hereof and of which the Borrower has informed
      Holder in writing prior to the date hereof, (b) indebtedness to trade creditors
      or financial institutions incurred in the ordinary course of business or (c)
      borrowings, the proceeds of which shall be used to repay this Note.

     

    2.4  Sale
      of
      Assets.  So long
      as the
      Borrower shall have any obligation under this Note, the Borrower shall not,
      without the Holder’s written consent, sell, lease or otherwise dispose of any
      significant portion of its assets outside the ordinary course of
      business.  Any consent to the disposition of any assets may be
      conditioned on a specified use of the proceeds of disposition.

     

    2.5  Advances
      and
      Loans.  So long
      as the
      Borrower shall have any obligation under this Note, the Borrower shall not,
      without the Holder’s written consent, lend money, give credit or make advances
      to any person, firm, joint venture or corporation, including, without
      limitation, officers, directors, employees, subsidiaries and affiliates of
      the
      Borrower, except loans, credits or advances (a) in existence or committed on
      the
      date hereof and which the Borrower has informed Holder in writing prior to
      the
      date hereof, (b) made in the ordinary course of business or (c) not in excess
      of
      $50,000.

     

    2.6  Contingent
      Liabilities.  So long
      as the
      Borrower shall have any obligation under this Note, the Borrower shall not,
      without the Holder’s written consent, assume, guarantee, endorse, contingently
      agree to purchase or otherwise become liable upon the obligation of any person,
      firm, partnership, joint venture or corporation, except by the endorsement
      of
      negotiable instruments for deposit or collection and except assumptions,
      guarantees, endorsements and contingencies (a) in existence or committed on
      the
      date hereof and which the Borrower has informed Holder in writing prior to
      the
      date hereof, and (b) similar transactions in the ordinary course of
      business.

     

     

    ARTICLE
      III.     EVENTS OF DEFAULT

     

    If
      any of
      the following events of default (each, an “Event of Default”) shall
      occur:

     

    3.1  Failure
      to Pay Principal or
      Interest.  The
      Borrower
      fails to pay the principal hereof or interest thereon when due on this Note,
      whether at maturity, upon a Trading Market Prepayment Event pursuant to Section
      1.7, upon acceleration or otherwise;

     

     

    
      
        
        

      

      
        Page
          13

        
          

        

      

      
        
        

      

    

     

    3.2  Conversion
      and the
      Shares.  The
      Borrower
      fails to issue shares of Common Stock to the Holder (or announces or threatens
      that it will not honor its obligation to do so) upon exercise by the Holder
      of
      the conversion rights of the Holder in accordance with the terms of this Note
      (for a period of at least sixty (60) days, if such failure is solely as a result
      of the circumstances governed by Section 1.3 and the Borrower is using its
      best
      efforts to authorize a sufficient number of shares of Common Stock as soon
      as
      practicable), fails to transfer or cause its transfer agent to transfer
      (electronically or in certificated form) any certificate for shares of Common
      Stock issued to the Holder upon conversion of or otherwise pursuant to this
      Note
      as and when required by this Note or the Registration Rights Agreement, or
      fails
      to remove any restrictive legend (or to withdraw any stop transfer instructions
      in respect thereof) on any certificate for any shares of Common Stock issued
      to
      the Holder upon conversion of or otherwise pursuant to this Note as and when
      required by this Note or the Registration Rights Agreement (or makes any
      announcement, statement or threat that it does not intend to honor the
      obligations described in this paragraph) and any such failure shall continue
      uncured (or any announcement, statement or threat not to honor its obligations
      shall not be rescinded in writing) for ten (10) days after the Borrower shall
      have been notified thereof in writing by the Holder;

     

    3.3  Failure
      to Timely File
      Registration or Effect Registration.  The
      Borrower
      fails to file the Registration Statement within sixty (60) days following the
      Closing Date (as defined in the Purchase Agreement) or obtain effectiveness
      with
      the Securities and Exchange Commission of the Registration Statement within
      two
      hundred fifty (250) days following the Closing Date (as defined in the Purchase
      Agreement) or such Registration Statement lapses in effect (or sales cannot
      otherwise be made thereunder effective, whether by reason of the Borrower’s
      failure to amend or supplement the prospectus included therein in accordance
      with the Registration Rights Agreement or otherwise) for more than twenty (20)
      consecutive days or forty (40) days in any twelve month period after the
      Registration Statement becomes effective;

     

    3.4  Breach
      of
      Covenants.  The
      Borrower
      breaches any material covenant or other material term or condition contained
      in
      Sections 1.3, 1.6 or 1.7 of this Note, or Sections 4(c), 4(e), 4(h), 4(i),
      4(j)
      or 5 of the Purchase Agreement and such breach continues for a period of ten
      (10) days after written notice thereof to the Borrower from the
      Holder;

     

    3.5  Breach
      of Representations
      and Warranties.  Any
      representation or warranty of the Borrower made herein or in any agreement,
      statement or certificate given in writing pursuant hereto or in connection
      herewith (including, without limitation, the Purchase Agreement and the
      Registration Rights Agreement), shall be false or misleading in any material
      respect when made and the breach of which has (or with the passage of time
      will
      have) a material adverse effect on the rights of the Holder with respect to
      this
      Note, the Purchase Agreement or the Registration Rights Agreement;

     

    3.6  Receiver
      or
      Trustee.  The
      Borrower or
      any subsidiary of the Borrower shall make an assignment for the benefit of
      creditors, or apply for or consent to the appointment of a receiver or trustee
      for it or for a substantial part of its property or business, or such a receiver
      or trustee shall otherwise be appointed;

     

     

    
      
        
        

      

      
        Page
          14

        
          

        

      

      
        
        

      

    

     

    3.7  Judgments.  Any
      money
      judgment, writ or similar process shall be entered or filed against the Borrower
      or any subsidiary of the Borrower or any of its property or other assets for
      more than $50,000, and shall remain unvacated, unbonded or unstayed for a period
      of twenty (20) days unless otherwise consented to by the Holder, which consent
      will not be unreasonably withheld;

     

    3.8  Bankruptcy.  Bankruptcy,
      insolvency, reorganization or liquidation proceedings or other proceedings
      for
      relief under any bankruptcy law or any law for the relief of debtors shall
      be
      instituted by or against the Borrower or any subsidiary of the
      Borrower;

     

    3.9  Delisting
      of Common
      Stock.  The
      Borrower
      shall fail to maintain the listing of the Common Stock on at least one of the
      OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the
      Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock
      Exchange; or

     

    3.10  Default
      Under Other
      Notes.  An Event
      of
      Default has occurred and is continuing under any of the other Notes issued
      pursuant to the Purchase Agreement, then, upon the occurrence and during the
      continuation of any Event of Default specified in Section 3.1, 3.2, 3.3, 3.4,
      3.5, 3.7, 3.9, or 3.10, at the option of the Holders of a majority of the
      aggregate principal amount of the outstanding Notes issued pursuant to the
      Purchase Agreement exercisable through the delivery of written notice to the
      Borrower by such Holders (the “Default Notice”), and upon the
      occurrence of an Event of Default specified in Section 3.6 or 3.8, the Notes
      shall become immediately due and payable and the Borrower shall pay to the
      Holder, in full satisfaction of its obligations hereunder, an amount equal
      to
      the greater of (i) 130% times the sum
      of (w) the then
      outstanding principal amount of this Note plus (x) accrued
      and
      unpaid interest on the unpaid principal amount of this Note to the date of
      payment (the “Mandatory
      Prepayment Date”) plus (y)
      Default
      Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any
      amounts
      owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to
      Section 2(c) of the Registration Rights Agreement (the then outstanding
      principal amount of this Note to the date of payment plus the amounts
      referred to in clauses (x), (y) and (z) shall collectively be known as the
      “Default Sum”) or (ii)
      the “parity value” of the Default Sum to be prepaid, where parity value means
      (a) the highest number of shares of Common Stock issuable upon conversion of
      or
      otherwise pursuant to such Default Sum in accordance with Article I, treating
      the Trading Day immediately preceding the Mandatory Prepayment Date as the
      “Conversion Date” for purposes of determining the lowest applicable Conversion
      Price, unless the Default Event arises as a result of a breach in respect of
      a
      specific Conversion Date in which case such Conversion Date shall be the
      Conversion Date), multiplied by (b) the
      highest Closing Price for the Common Stock during the period beginning on the
      date of first occurrence of the Event of Default and ending one day prior to
      the
      Mandatory Prepayment Date (the “Default Amount”) and all other
      amounts payable hereunder shall immediately become due and payable, all without
      demand, presentment or notice, all of which hereby are expressly waived,
      together with all costs, including, without limitation, legal fees and expenses,
      of collection, and the Holder shall be entitled to exercise all other rights
      and
      remedies available at law or in equity.  If the Borrower fails to pay
      the Default Amount within five (5) business days of written notice that such
      amount is due and payable, then the Holder shall have the right at any time,
      so
      long as the Borrower remains in default (and so long and to the extent that
      there are sufficient authorized shares), to require the Borrower, upon written
      notice, to immediately issue, in lieu of the Default Amount, 

     

     

    
      
        
        

      

      
        Page
          15

        
          

        

      

      
        
        

      

    

     

     

    the
      number of shares of Common Stock of the Borrower equal to the Default Amount
      divided by the Conversion Price then in effect.

     

    ARTICLE
      IV.     MISCELLANEOUS

     

    4.1  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 privileges.  All
      rights and remedies existing hereunder are cumulative to, and not exclusive
      of,
      any rights or remedies otherwise available.

     

    4.2  Notices.  Any
      notice herein
      required or permitted to be given shall be in writing and may be personally
      served or delivered by courier or sent by United States mail and shall be deemed
      to have been given upon receipt if personally served (which shall include
      telephone line facsimile transmission) or sent by courier or three (3) days
      after being deposited in the United States mail, certified, with postage
      pre-paid and properly addressed, if sent by mail.  For the purposes
      hereof, the address of the Holder shall be as shown on the records of the
      Borrower; and the address of the Borrower shall be 22600 Hall Road, Suite 205
      Clinton Township, MI 48036, facsimile number: 586-468-8768.  Both the
      Holder and the Borrower may change the address for service by service of written
      notice to the other as herein provided.

     

    4.3  Amendments.  This
      Note and any
      provision hereof may only be amended by an instrument in writing signed by
      the
      Borrower and the Holder.  The term “Note” and all reference thereto,
      as used throughout this instrument, shall mean this instrument (and the other
      Notes issued pursuant to the Purchase Agreement) as originally executed, or
      if
      later amended or supplemented, then as so amended or supplemented.

     

    4.4  Assignability.  This
      Note shall
      be binding upon the Borrower and its successors and assigns, and shall inure
      to
      be the benefit of the Holder and its successors and assigns.  Each
      transferee of this Note must be an “accredited investor” (as defined in Rule
      501(a) of the 1933 Act).  Notwithstanding anything in this Note to the
      contrary, this Note may be pledged as collateral in connection with a bonafide
      margin account
      or other lending arrangement.

     

    4.5  Cost
      of
      Collection.  If default
      is
      made in the payment of this Note, the Borrower shall pay the Holder hereof
      costs
      of collection, including reasonable attorneys’ fees.

     

    4.6  Governing
      Law.  THIS
      NOTE SHALL
      BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
      OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
      SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE
      BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
      FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING
      UNDER THIS NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
      TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE
      

     

     

     

    
      
        
        

      

      
        Page
          16

        
          

        

      

      
        
        

      

    

     

     

     

    THE
      DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
      PROCEEDING.  BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
      PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
      SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
      PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
      PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
      A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
      CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
      OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
      ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND
      EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
      CONNECTION WITH SUCH DISPUTE.

     

    4.7  Certain
      Amounts.  Whenever
      pursuant
      to this Note the Borrower is required to pay an amount in excess of the
      outstanding principal amount (or the portion thereof required to be paid at
      that
      time) plus accrued and unpaid interest plus Default Interest on such interest,
      the Borrower and the Holder agree that the actual damages to the Holder from
      the
      receipt of cash payment on this Note may be difficult to determine and the
      amount to be so paid by the Borrower represents stipulated damages and not
      a
      penalty and is intended to compensate the Holder in part for loss of the
      opportunity to convert this Note and to earn a return from the sale of shares
      of
      Common Stock acquired upon conversion of this Note at a price in excess of
      the
      price paid for such shares pursuant to this Note.  The Borrower and
      the Holder hereby agree that such amount of stipulated damages is not plainly
      disproportionate to the possible loss to the Holder from the receipt of a cash
      payment without the opportunity to convert this Note into shares of Common
      Stock.

     

    4.8  Allocations
      of Maximum Share
      Amount and Reserved Amount.  The
      Maximum Share
      Amount and Reserved Amount shall be allocated pro rata among the Holders of
      Notes based on the principal amount of such Notes issued to each
      Holder.  Each increase to the Maximum Share Amount and Reserved Amount
      shall be allocated pro rata among the Holders of Notes based on the principal
      amount of such Notes held by each Holder at the time of the increase in the
      Maximum Share Amount or Reserved Amount.  In the event a Holder shall
      sell or otherwise transfer any of such Holder’s Notes, each transferee shall be
      allocated a pro rata portion of such transferor’s Maximum Share Amount and
      Reserved Amount.  Any portion of the Maximum Share Amount or Reserved
      Amount which remains allocated to any person or entity which does not hold
      any
      Notes shall be allocated to the remaining Holders of Notes, pro rata based
      on
      the principal amount of such Notes then held by such Holders.

     

    4.9  Damages
      Shares.  The
      shares of
      Common Stock that may be issuable to the Holder pursuant to Sections 1.3 and
      1.4(g) hereof and pursuant to Section 2(c) of the Registration Rights Agreement
      (“Damages Shares”) shall
      be treated as Common Stock issuable upon conversion of this Note for all
      purposes hereof and shall be subject to all of the limitations and afforded
      all
      of the rights of the other shares of Common Stock issuable hereunder, including
      without limitation, the right to be included in the Registration Statement
      filed
      pursuant to the Registration Rights Agreement.  For purposes of
      calculating interest payable on the outstanding principal amount hereof, except
      as otherwise provided herein, amounts convertible into Damages

     

     

     

    
      
        
        

      

      
        Page
          17

        
          

        

      

      
        
        

      

    

     

     

     Shares
      (“Damages Amounts”)
      shall not bear interest but must be converted prior to the conversion of any
      outstanding principal amount hereof, until the outstanding Damages Amounts
      is
      zero.

     

    4.10  Denominations.  At
      the request of
      the Holder, upon surrender of this Note, the Borrower shall promptly issue
      new
      Notes in the aggregate outstanding principal amount hereof, in the form hereof,
      in such denominations of at least $50,000 as the Holder shall
      request.

     

    4.11  Purchase
      Agreement.  By its
      acceptance
      of this Note, each Holder agrees to be bound by the applicable terms of the
      Purchase Agreement.

     

    4.12  Notice
      of Corporate
      Events.  Except
      as
      otherwise provided below, the Holder of this Note shall have no rights as a
      Holder of Common Stock unless and only to the extent that it converts this
      Note
      into Common Stock.  The Borrower shall provide the Holder with prior
      notification of any meeting of the Borrower’s shareholders (and copies of proxy
      materials and other information sent to shareholders).  In the event
      of any taking by the Borrower of a record of its shareholders for the purpose
      of
      determining shareholders who are entitled to receive payment of any dividend
      or
      other distribution, any right to subscribe for, purchase or otherwise acquire
      (including by way of merger, consolidation, reclassification or
      recapitalization) any share of any class or any other securities or property,
      or
      to receive any other right, or for the purpose of determining shareholders
      who
      are entitled to vote in connection with any proposed sale, lease or conveyance
      of all or substantially all of the assets of the Borrower or any proposed
      liquidation, dissolution or winding up of the Borrower, the Borrower shall
      mail
      a notice to the Holder, at least twenty (20) days prior to the record date
      specified therein (or thirty (30) days prior to the consummation of the
      transaction or event, whichever is earlier), of the date on which any such
      record is to be taken for the purpose of such dividend, distribution, right
      or
      other event, and a brief statement regarding the amount and character of such
      dividend, distribution, right or other event to the extent known at such
      time.  The Borrower shall make a public announcement of any event
      requiring notification to the Holder hereunder substantially simultaneously
      with
      the notification to the Holder in accordance with the terms of this Section
      4.12.

     

    4.13  Remedies.  The
      Borrower
      acknowledges that a breach by it of its obligations hereunder will cause
      irreparable harm to the Holder, by vitiating the intent and purpose of the
      transaction contemplated hereby.  Accordingly, the Borrower
      acknowledges that the remedy at law for a breach of its obligations under this
      Note will be inadequate and agrees, in the event of a breach or threatened
      breach by the Borrower of the provisions of this Note, that the Holder shall
      be
      entitled, in addition to all other available remedies at law or in equity,
      and
      in addition to the penalties assessable herein, to an injunction or injunctions
      restraining, preventing or curing any breach of this Note and to enforce
      specifically the terms and provisions thereof, without the necessity of showing
      economic loss and without any bond or other security being
      required.

     

     

    
      
        
        

      

      
        Page
          18

        
          

        

      

      
        
        

      

    

     

     

     

    ARTICLE
      V.     CALL OPTION

     

    5.1  Call
      Option.  Notwithstanding
      anything to the contrary contained in this Article V, so long as (i) no
      Event of Default or Trading Market Prepayment Event shall have occurred and
      be
      continuing, (ii) the Borrower has a sufficient number of authorized shares
      of Common Stock reserved for issuance upon full conversion of the Notes, then
      at
      any time after the Issue Date, and (iii) the Common Stock is trading at or
      below $.04 per share, the Borrower shall have the right, exercisable on not
      less
      than ten (10) Trading Days prior written notice to the Holders of the Notes
      (which notice may not be sent to the Holders of the Notes until the Borrower
      is
      permitted to prepay the Notes pursuant to this Section 5.1), to prepay all
      of
      the outstanding Notes in accordance with this Section 5.1.  Any notice
      of prepayment hereunder (an “Optional Prepayment”) shall be
      delivered to the Holders of the Notes at their registered addresses appearing
      on
      the books and records of the Borrower and shall state (1) that the Borrower
      is
      exercising its right to prepay all of the Notes issued on the Issue Date and
      (2)
      the date of prepayment (the “Optional Prepayment
      Notice”).  On the date fixed for prepayment (the “Optional Prepayment
      Date”),
      the Borrower shall make payment of the Optional Prepayment Amount (as defined
      below) to or upon the order of the Holders as specified by the Holders in
      writing to the Borrower at least one (1) business day prior to the Optional
      Prepayment Date.  If the Borrower exercises its right to prepay the
      Notes, the Borrower shall make payment to the holders of an amount in cash
      (the
“Optional Prepayment
      Amount”) equal to either (i) 135% (for prepayments occurring within
      thirty (30) days of the Issue Date), (ii) 145% for prepayments occurring
      between thirty-one (31) and ninety (90) days of the Issue Date, or (iii) 150%
      (for prepayments occurring after the ninetieth (90th)
      day following
      the Issue Date), multiplied by the sum of (w) the then outstanding principal
      amount of this Note plus (x) accrued
      and unpaid interest on the unpaid principal amount of this Note to the Optional
      Prepayment Date plus (y) Default
      Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any
      amounts
      owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to
      Section 2(c) of the Registration Rights Agreement (the then outstanding
      principal amount of this Note to the date of payment plus the amounts
      referred to in clauses (x), (y) and (z) shall collectively be known as the
      “Optional Prepayment
      Sum”). Notwithstanding notice of an Optional Prepayment, the Holders
      shall at all times prior to the Optional Prepayment Date maintain the right
      to
      convert all or any portion of the Notes in accordance with Article I and any
      portion of Notes so converted after receipt of an Optional Prepayment Notice
      and
      prior to the Optional Prepayment Date set forth in such notice and payment
      of
      the aggregate Optional Prepayment Amount shall be deducted from the principal
      amount of Notes which are otherwise subject to prepayment pursuant to such
      notice.  If the Borrower delivers an Optional Prepayment Notice and
      fails to pay the Optional Prepayment Amount due to the Holders of the Notes
      within two (2) business days following the Optional Prepayment Date, the
      Borrower shall forever forfeit its right to redeem the Notes pursuant to this
      Section 5.1.

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

     

    
      
        
        

      

      
        Page
          19

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF, Borrower
      has caused this Note to be signed in its name by its duly authorized officer
      as
      of the date first above written.

     

    

    MIDNIGHT
      HOLDINGS GROUP,
      INC.

    

     

    By:
/s/Nicholas
      Cocco            

    Nicholas
      Cocco   
               

    Chief
      Executive Officer       

     

     

     

     

     

     

    
      
        
        

      

      
        Page
          20

        
          

        

      

      
        
        

      

    

     

     

     

     

    EXHIBIT
      A

     

    NOTICE
      OF
      CONVERSION

     

    (To
      be
      Executed by the Registered Holder

     

    in
      order
      to Convert the Notes)

     

    The
      undersigned hereby irrevocably elects to convert $__________ principal amount
      of
      the Note (defined below) into shares of common stock, par value $.00005 per
      share (“Common Stock”),
      of Midnight Holdings Group, Inc., a Delaware corporation (the “Borrower”) according to the
      conditions of the convertible Notes of the Borrower dated as of October 15,
      2007
      (the “Notes”), as of the date written below.  If securities are to be
      issued in the name of a person other than the undersigned, the undersigned
      will
      pay all transfer taxes payable with respect thereto and is delivering herewith
      such certificates.  No fee will be charged to the Holder for any
      conversion, except for transfer taxes, if any.  A copy of each Note is
      attached hereto (or evidence of loss, theft or destruction
      thereof).

     

    The
      Borrower shall electronically transmit the Common Stock issuable pursuant to
      this Notice of Conversion to the account of the undersigned or its nominee
      with
      DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

     

    Name
      of
      DTC Prime
      Broker:                                                                                                                     

    Account
      Number:                                                                                                                     

     

    In
      lieu
      of receiving shares of Common Stock issuable pursuant to this Notice of
      Conversion by way of a DWAC Transfer, the undersigned hereby requests that
      the
      Borrower issue a certificate or certificates for the number of shares of Common
      Stock set forth below (which numbers are based on the Holder’s calculation
      attached hereto) in the name(s) specified immediately below or, if additional
      space is necessary, on an attachment hereto:

     

    Name:                                                                                                                     

    Address:                                                                                                                     

     

    The
      undersigned represents and warrants that all offers and sales by the undersigned
      of the securities issuable to the undersigned upon conversion of the Notes
      shall
      be made pursuant to registration of the securities under the Securities Act
      of
      1933, as amended (the “Act”), or pursuant to
      an
      exemption from registration under the Act.

     

    Date
      of
      Conversion:___________________________

    Applicable
      Conversion Price:____________________

    Number
      of
      Shares of Common Stock to be Issued Pursuant to

    Conversion
      of the Notes:______________

    Signature:___________________________________

    Name:______________________________________

    Address:____________________________________

     

    The
      Borrower shall issue and deliver shares of Common Stock to an overnight courier
      not later than three business days following receipt of the original Note(s)
      to
      be converted, and shall make payments pursuant to the Notes for the number
      of
      business days such issuance and delivery is late.

     

     

     

     

    
      
        
        

      

      
        Page
          21

        
          

        

      

      
        
        

      

    

     
       

    

     

     

     

     

     

    
      

      

    

    
       

       

      
        THE
          SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
          THE
          SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THE SECURITIES MAY
          NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
          STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN
          FORM,
          SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
          THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT
          TO RULE
          144 OR REGULATION S UNDER SAID ACT.

      

       

      
        CALLABLE
          SECURED CONVERTIBLE
          NOTE

         

        Clinton
          Township, Michigan

         

        October
          15,
          2007                                                                                                                                                                      

        $27,900

         

        FOR
          VALUE RECEIVED, MIDNIGHT HOLDINGS
          GROUP, INC.,
a Delaware corporation (hereinafter called the “Borrower”), hereby
          promises to
          pay to the order of AJW Partners, LLC or registered assigns (the “Holder”) the sum of $27,900
          on
          October 15, 2010 (the “Maturity
          Date”), and to pay interest on the unpaid principal balance hereof at
          the
          rate of ten percent (10%) per annum from October 15, 2007 (the “Issue Date”) until the same
          becomes due and payable, whether at maturity or upon acceleration or by
          prepayment or otherwise.  Any amount of principal or interest on this
          Note which is not paid when due shall bear interest at the rate of fifteen
          percent (15%) per annum from the due date thereof until the same is paid
          (“Default
          Interest”).  Interest shall commence accruing on the issue
          date, shall be computed on the basis of a 365-day year and the actual number
          of
          days elapsed and shall be payable, quarterly on March 31, June 30,
          September 30 and December 31 of each year beginning on the last day of the
          first full quarter after Issue Date.  All payments due hereunder (to
          the extent not converted into common stock, $.00005 par value per share, of the
          Borrower (the “Common
          Stock”) in accordance with the terms hereof) shall be made in lawful
          money of the United States of America.  All payments shall be made at
          such address as the Holder shall hereafter give to the Borrower by written
          notice made in accordance with the provisions of this Note.  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 interest payment date which
          is
          not the 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.  As used in this Note, the term
“business day” shall mean any day other than a Saturday, Sunday or a day on
          which commercial banks in the city of New York, New York are authorized
          or
          required by law or executive order to 

         

         

        
           

           

          
            
              
              

            

            
              Page
                1

              
                

              

            

            
              
              

            

          

           

          remain
            closed.  Each capitalized term used herein, and not otherwise defined,
            shall have the meaning ascribed thereto in that certain Securities Purchase
            Agreement, dated October 15, 2007, pursuant to which this Note was originally
            issued (the “Purchase
            Agreement”).

           

          This
            Note
            is free from all taxes, liens, claims and encumbrances with respect to
            the issue
            thereof and shall not be subject to preemptive rights or other similar
            rights of
            shareholders of the Borrower and will not impose personal liability upon
            the
            holder thereof.  The obligations of the Borrower under this Note shall
            be secured by that certain Security Agreement by and between the Borrower
            and
            the Holder of even date herewith.

           

          The
            following terms shall apply to this Note:

           

           

          ARTICLE
            I.    CONVERSION RIGHTS

           

          1.1  Conversion
            Right.  The
            Holder shall
            have the right from time to time, and at any time on or prior to the
            earlier of
            (i) the Maturity Date and (ii) the date of payment of the Default Amount
            (as
            defined in Article III) pursuant to Section 1.6(a) or Article III, the
            Optional
            Prepayment Amount (as defined in Section 5.1) or (iii) any payments pursuant
            to
            Section 1.7, each in respect of the remaining outstanding principal amount
            of
            this Note to convert all or any part of the outstanding and unpaid principal
            amount of this Note into fully paid and non-assessable shares of Common
            Stock,
            as such Common Stock exists on the Issue Date, or any shares of capital
            stock or
            other securities of the Borrower into which such Common Stock shall hereafter
            be
            changed or reclassified at the conversion price  (the “Conversion Price”) determined
            as provided herein (a “Conversion”); provided,
however,
            that in no
            event shall the Holder be entitled to convert any portion of this Note
            in excess
            of that portion of this Note upon conversion of which the sum of (1)
            the number
            of shares of Common Stock beneficially owned by the Holder and its affiliates
            (other than shares of Common Stock which may be deemed beneficially owned
            through the ownership of the unconverted portion of the Notes or the
            unexercised
            or unconverted portion of any other security of the Borrower (including,
            without
            limitation, the warrants issued by the Borrower pursuant to the Purchase
            Agreement) subject to a limitation on conversion or exercise analogous
            to the
            limitations contained herein) and (2) the number of shares of Common
            Stock
            issuable upon the conversion of the portion of this Note with respect
            to which
            the determination of this proviso is being made, would result in beneficial
            ownership by the Holder and its affiliates of more than 4.9% of the outstanding
            shares of Common Stock.  For purposes of the proviso to the
            immediately preceding sentence, beneficial ownership shall be determined
            in
            accordance with Section 13(d) of the Securities Exchange Act of 1934,
            as
            amended, and Regulations 13D-G thereunder, except as otherwise provided
            in
            clause (1) of such proviso.  The number of shares of Common Stock to
            be issued upon each conversion of this Note shall be determined by dividing
            the
            Conversion Amount (as defined below) by the applicable Conversion Price
            then in
            effect on the date specified in the notice of conversion, in the form
            attached
            hereto as Exhibit A (the “Notice of Conversion”),
            delivered to the Borrower by the Holder in accordance with Section 1.4
            below;
            provided that the Notice of Conversion is submitted by facsimile (or
            by other
            means resulting in, or reasonably expected to result in, notice) to the
            Borrower
            before 6:00 p.m., New York, New York time on such conversion date (the
“Conversion
            Date”).  The term “Conversion Amount”
means,
            with
            respect to any conversion of this Note, the sum of (1) the principal
            amount of
            this Note to be converted in such 

           

           

           

          
            
              
              

            

            
              Page
                2

              
                

              

            

            
              
              

            

          

           

           

          conversion
            plus (2)
            accrued and unpaid interest, if any, on such principal amount at the
            interest
            rates provided in this Note to the Conversion Date plus (3)
            Default
            Interest, if any, on the amounts referred to in the immediately preceding
            clauses (1) and/or (2) plus (4)
            at the
            Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and
            1.4(g) hereof or pursuant to Section 2(c) of that certain Registration
            Rights
            Agreement, dated as of October 15, 2007, executed in connection with
            the initial
            issuance of this Note and the other Notes issued on the Issue Date (the
“Registration Rights
            Agreement”).

           

          1.2  Conversion
            Price.

           

          (a)  Calculation
            of Conversion
            Price.  The
            Conversion
            Price shall be the lesser of (i) the Variable Conversion Price (as defined
            herein) and (ii) the Fixed Conversion Price (as defined herein) (subject,
            in
            each case, to equitable adjustments for stock splits, stock dividends
            or rights
            offerings by the Borrower relating to the Borrower’s securities or the
            securities of any subsidiary of the Borrower, combinations, recapitalization,
            reclassifications, extraordinary distributions and similar
            events).  The “Variable Conversion
            Price”
shall mean the Applicable Percentage (as defined herein) multiplied
            by the
            Market Price (as defined herein).  “Market Price” means the
            average of the lowest three (3) Trading Prices (as defined below) for
            the Common
            Stock during the twenty (20) Trading Day period ending one Trading Day
            prior to
            the date the Conversion Notice is sent by the Holder to the Borrower
            via
            facsimile (the “Conversion
            Date”).  “Trading Price”
means,
            for any
            security as of any date, the intraday trading price on the Over-the-Counter
            Bulletin Board (the “OTCBB”) as reported
            by a
            reliable reporting service mutually acceptable to and hereafter designated
            by
            Holders of a majority in interest of the Notes and the Borrower or, if
            the OTCBB
            is not the principal trading market for such security, the intraday trading
            price of such security on the principal securities exchange or trading
            market
            where such security is listed or traded or, if no intraday trading price
            of such
            security is available in any of the foregoing manners, the average of
            the
            intraday trading prices of any market makers for such security that are
            listed
            in the “pink sheets” by the National Quotation Bureau, Inc.  If the
            Trading Price cannot be calculated for such security on such date in
            the manner
            provided above, the Trading Price shall be the fair market value as mutually
            determined by the Borrower and the holders of a majority in interest
            of the
            Notes being converted for which the calculation of the Trading Price
            is required
            in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any
            day on which the Common Stock is traded for any period on the OTCBB,
            or on the
            principal securities exchange or other securities market on which the
            Common
            Stock is then being traded.  “Applicable Percentage” shall
            mean 25%; provided, however, that the Applicable Percentage shall be
            increased
            to (i) 30% in the event that the Registration Statement (as defined in
            the
            Registration Rights Agreement) is filed on or before the Filing Date
            (as defined
            in the Registration Rights Agreement) and (ii) 40% in the event that
            the
            Registration Statement (as defined in the Registration Rights Agreement)
            becomes
            effective on or before the Effectiveness Deadline) as defined in the
            Registration Rights Agreement).  The “Fixed Conversion Price” shall
            mean $.02.

           

          (b)  Conversion
            Price During
            Major Announcements.  Notwithstanding
            anything contained in Section 1.2(a) to the contrary, in the event the
            Borrower
            (i) makes a public announcement that it intends to consolidate or merge
            with any
            other corporation (other than a merger in which the Borrower is the surviving
            or
            continuing corporation and its capital stock is unchanged) or sell or
            transfer
            all or substantially all of the 

           

           

           

          
            
              
              

            

            
              Page
                3

              
                

              

            

            
              
              

            

          

           

           

          assets
            of
            the Borrower or (ii) any person, group or entity (including the Borrower)
            publicly announces a tender offer to purchase 50% or more of the Borrower’s
            Common Stock (or any other takeover scheme) (the date of the announcement
            referred to in clause (i) or (ii) is hereinafter referred to as
            the  “Announcement
            Date”), then the Conversion Price shall, effective upon the Announcement
            Date and continuing through the Adjusted Conversion Price Termination
            Date (as
            defined below), be equal to the lower of (x) the Conversion Price which
            would
            have been applicable for a Conversion occurring on the Announcement Date
            and (y)
            the Conversion Price that would otherwise be in effect. From and after
            the
            Adjusted Conversion Price Termination Date, the Conversion Price shall
            be
            determined as set forth in this Section 1.2(a).  For purposes
            hereof,  “Adjusted
            Conversion Price Termination Date” shall mean, with respect to any
            proposed transaction or tender offer (or takeover scheme) for which a
            public
            announcement as contemplated by this Section 1.2(b) has been made, the
            date upon
            which the Borrower (in the case of clause (i) above) or the person, group
            or
            entity (in the case of clause (ii) above) consummates or publicly announces
            the
            termination or abandonment of the proposed transaction or tender offer
            (or
            takeover scheme) which caused this Section 1.2(b) to become
            operative.

           

          1.3  Authorized
            Shares.  Subject
            to the
            completion of the Charter Amendment Actions (as defined in the Purchase
            Agreement), the Borrower covenants that during the period the conversion
            right
            exists, the Borrower will reserve from its authorized and unissued Common
            Stock
            a sufficient number of shares, free from preemptive rights, to provide
            for the
            issuance of Common Stock upon the full conversion of this Note and the
            other
            Notes issued pursuant to the Purchase Agreement.  The Borrower is
            required at all times to have authorized and reserved two times the number
            of
            shares that is actually issuable upon full conversion of the Notes (based
            on the
            Conversion Price of the Notes or the Exercise Price of the Warrants in
            effect
            from time to time) (the “Reserved
            Amount”).  The Reserved Amount shall be increased from time to
            time in accordance with the Borrower’s obligations pursuant to Section 4(h) of
            the Purchase Agreement.  The Borrower represents that upon issuance,
            such shares will be duly and validly issued, fully paid and
            non-assessable.  In addition, if the Borrower shall issue any
            securities or make any change to its capital structure which would change
            the
            number of shares of Common Stock into which the Notes shall be convertible
            at
            the then current Conversion Price, the Borrower shall at the same time
            make
            proper provision so that thereafter there shall be a sufficient number
            of shares
            of Common Stock authorized and reserved, free from preemptive rights,
            for
            conversion of the outstanding Notes.  The Borrower (i) acknowledges
            that it has irrevocably instructed its transfer agent to issue certificates
            for
            the Common Stock issuable upon conversion of this Note, and (ii) agrees
            that its issuance of this Note shall constitute full authority to its
            officers
            and agents who are charged with the duty of executing stock certificates
            to
            execute and issue the necessary certificates for shares of Common Stock
            in
            accordance with the terms and conditions of this Note.

           

          If,
            at
            any time a Holder of this Note submits a Notice of Conversion, and the
            Borrower
            does not have sufficient authorized but unissued shares of Common Stock
            available to effect such conversion in accordance with the provisions
            of this
            Article I (a “Conversion
            Default”), subject to Section 4.8, the Borrower shall issue to the Holder
            all of the shares of Common Stock which are then available to effect
            such
            conversion.  The portion of this Note which the Holder included in its
            Conversion Notice and which exceeds the amount which is then convertible
            into
            available shares of Common Stock (the “Excess Amount”) shall,

           

           

           

          
            
              
              

            

            
              Page
                4

              
                

              

            

            
              
              

            

          

           

           

           

          notwithstanding
            anything to the contrary contained herein, not be convertible into Common
            Stock
            in accordance with the terms hereof until (and at the Holder’s option at any
            time after) the date additional shares of Common Stock are authorized
            by the
            Borrower to permit such conversion, at which time the Conversion Price
            in
            respect thereof shall be the lesser of (i) the Conversion Price on the
            Conversion Default Date (as defined below) and (ii) the Conversion Price
            on the
            Conversion Date thereafter elected by the Holder in respect
            thereof.  In addition, the Borrower shall pay to the Holder payments
            (“Conversion Default
            Payments”) for a Conversion Default in the amount of (x) the sum
            of (1) the then
            outstanding principal amount of this Note plus (2)
            accrued and
            unpaid interest on the unpaid principal amount of this Note through the
            Authorization Date (as defined below) plus (3)
            Default
            Interest, if any, on the amounts referred to in clauses (1) and/or (2),
multiplied
            by (y)
            .24, multiplied
            by (z) (N/365), where N = the number of days from the day the holder
            submits a Notice of Conversion giving rise to a Conversion Default (the
“Conversion Default
            Date”) to
            the date (the “Authorization
            Date”) that the Borrower authorizes a sufficient number of shares of
            Common Stock to effect conversion of the full outstanding principal balance
            of
            this Note.  The Borrower shall use its best efforts to authorize a
            sufficient number of shares of Common Stock as soon as practicable following
            the
            earlier of (i) such time that the Holder notifies the Borrower or that
            the
            Borrower otherwise becomes aware that there are or likely will be insufficient
            authorized and unissued shares to allow full conversion thereof and (ii)
            a
            Conversion Default.  The Borrower shall send notice to the Holder of
            the authorization of additional shares of Common Stock, the Authorization
            Date
            and the amount of Holder’s accrued Conversion Default Payments.  The
            accrued Conversion Default Payments for each calendar month shall be
            paid in
            cash or shall be convertible into Common Stock (at such time as there
            are
            sufficient authorized shares of Common Stock) at the applicable Conversion
            Price, at the Borrower’s option, as follows:

           

          (a)  In
            the
            event the Borrower elects to make such payment in cash, cash payment
            shall be
            made to Holder by the fifth (5th)
            day of the month
            following the month in which it has accrued; and

           

          

          (b)   In
            the event the Borrower elects to make such payment in Common Stock, the
            Holder
            may convert such payment amount into Common Stock at the Conversion Price
            (as in
            effect at the time of conversion) at any time after the fifth day of
            the month
            following the month in which it has accrued in accordance with the terms
            of this
            Article I (so long as there is then a sufficient number of authorized
            shares of
            Common Stock).

           

          

          The
            Borrower’s election shall be made in writing to the Holder at any time prior to
            6:00 p.m., New York, New York time, on the third day of the month following
            the
            month in which Conversion Default payments have accrued.  If no
            election is made, the Borrower shall be deemed to have elected to remit
            Common
            Stock.  Nothing herein shall limit the Holder’s right to pursue actual
            damages (to the extent in excess of the Conversion Default Payments)
            for the
            Borrower’s failure to maintain a sufficient number of authorized shares of
            Common Stock, and each holder shall have the right to pursue all remedies
            available at law or in equity (including degree of specific performance
            and/or
            injunctive relief).

           

          1.4  Method
            of
            Conversion.

           

           

          
            
              
              

            

            
              Page
                5

              
                

              

            

            
              
              

            

          

           

           

          (a)  Mechanics
            of
            Conversion.  Subject
            to
            Section 1.1, this Note may be converted by the Holder in whole or in
            part at any
            time from time to time after the Issue Date, by (A) submitting to the
            Borrower a Notice of Conversion (by facsimile or other reasonable means
            of
            communication dispatched on the Conversion Date prior to 6:00 p.m., New
            York,
            New York time) and (B) subject to Section 1.4(b), surrendering this Note at
            the principal office of the Borrower.

           

          (b)  Surrender
            of Note Upon
            Conversion.  Notwithstanding
            anything to the contrary set forth herein, upon conversion of this Note
            in
            accordance with the terms hereof, the Holder shall not be required to
            physically
            surrender this Note to the Borrower unless the entire unpaid principal
            amount of
            this Note is so converted.  The Holder and the Borrower shall maintain
            records showing the principal amount so converted and the dates of such
            conversions or shall use such other method, reasonably satisfactory to
            the
            Holder and the Borrower, so as not to require physical surrender of this
            Note
            upon each such conversion.  In the event of any dispute or
            discrepancy, such records of the Borrower shall be controlling and determinative
            in the absence of manifest error.  Notwithstanding the foregoing, if
            any portion of this Note is converted as aforesaid, the Holder may not
            transfer
            this Note unless the Holder first physically surrenders this Note to
            the
            Borrower, whereupon the Borrower will forthwith issue and deliver upon
            the order
            of the Holder a new Note of like tenor, registered as the Holder (upon
            payment
            by the Holder of any applicable transfer taxes) may request, representing
            in the
            aggregate the remaining unpaid principal amount of this Note.  The
            Holder and any assignee, by acceptance of this Note, acknowledge and
            agree that,
            by reason of the provisions of this paragraph, following conversion of
            a portion
            of this Note, the unpaid and unconverted principal amount of this Note
            represented by this Note may be less than the amount stated on the face
            hereof.

           

          (c)  Payment
            of
            Taxes.  The
            Borrower
            shall not be required to pay any tax which may be payable in respect
            of any
            transfer involved in the issue and delivery of shares of Common Stock
            or other
            securities or property on conversion of this Note in a name other than
            that of
            the Holder (or in street name), and the Borrower shall not be required
            to issue
            or deliver any such shares or other securities or property unless and
            until the
            person or persons (other than the Holder or the custodian in whose street
            name
            such shares are to be held for the Holder’s account) requesting the issuance
            thereof shall have paid to the Borrower the amount of any such tax or
            shall have
            established to the satisfaction of the Borrower that such tax has been
            paid.

           

          (d)  Delivery
            of Common Stock
            Upon Conversion.  Upon
            receipt by
            the Borrower from the Holder of a facsimile transmission (or other reasonable
            means of communication) of a Notice of Conversion meeting the requirements
            for
            conversion as provided in this Section 1.4, the Borrower shall issue
            and deliver
            or cause to be issued and delivered to or upon the order of the Holder
            certificates for the Common Stock issuable upon such conversion within
            five (5)
            business days after such receipt (and, solely in the case of conversion
            of the
            entire unpaid principal amount hereof, surrender of this Note) (such
            second
            business day being hereinafter referred to as the “Deadline”) in accordance
            with
            the terms hereof and the Purchase Agreement (including, without limitation,
            in
            accordance with the requirements of Section 2(g) of the Purchase Agreement
            that
            certificates for shares of Common Stock issued on or after the effective
            date of
            the Registration Statement upon conversion of this Note shall not bear
            any
            restrictive legend).

           

           

          
            
              
              

            

            
              Page
                6

              
                

              

            

            
              
              

            

          

           

          (e)  Obligation
            of Borrower to
            Deliver Common Stock.  Upon
            receipt by
            the Borrower of a Notice of Conversion, the Holder shall be deemed to
            be the
            holder of record of the Common Stock issuable upon such conversion, the
            outstanding principal amount and the amount of accrued and unpaid interest
            on
            this Note shall be reduced to reflect such conversion, and, unless the
            Borrower
            defaults on its obligations under this Article I, all rights with respect
            to the
            portion of this Note being so converted shall forthwith terminate except
            the
            right to receive the Common Stock or other securities, cash or other
            assets, as
            herein provided, on such conversion.  If the Holder shall have given a
            Notice of Conversion as provided herein, the Borrower’s obligation to issue and
            deliver the certificates for Common Stock shall be absolute and unconditional,
            irrespective of the absence of any action by the Holder to enforce the
            same, any
            waiver or consent with respect to any provision thereof, the recovery
            of any
            judgment against any person or any action to enforce the same, any failure
            or
            delay in the enforcement of any other obligation of the Borrower to the
            holder
            of record, or any setoff, counterclaim, recoupment, limitation or termination,
            or any breach or alleged breach by the Holder of any obligation to the
            Borrower,
            and irrespective of any other circumstance which might otherwise limit
            such
            obligation of the Borrower to the Holder in connection with such
            conversion.  The Conversion Date specified in the Notice of Conversion
            shall be the Conversion Date so long as the Notice of Conversion is received
            by
            the Borrower before 6:00 p.m., New York, New York time, on such
            date.

           

          (f)  Delivery
            of Common Stock by
            Electronic Transfer.  In
            lieu of
            delivering physical certificates representing the Common Stock issuable
            upon
            conversion, provided the Borrower’s transfer agent is participating in the
            Depository Trust Company (“DTC”) Fast Automated
            Securities Transfer (“FAST”) program, upon
            request
            of the Holder and its compliance with the provisions contained in Section
            1.1
            and in this Section 1.4, the Borrower shall use its best efforts to cause
            its
            transfer agent to electronically transmit the Common Stock issuable upon
            conversion to the Holder by crediting the account of Holder’s Prime Broker with
            DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

           

          (g)  Failure
            to Deliver Common
            Stock Prior to Deadline.  Without
            in any
            way limiting the Holder’s right to pursue other remedies, including actual
            damages and/or equitable relief, the parties agree that if delivery of
            the
            Common Stock issuable upon conversion of this Note is more than two (2)
            days
            after the Deadline (other than a failure due to the circumstances described
            in
            Section 1.3 above, which failure shall be governed by such Section) the
            Borrower
            shall pay to the Holder $2,000 per day in cash, for each day beyond the
            Deadline
            that the Borrower fails to deliver such Common Stock.  Such cash
            amount shall be paid to Holder by the fifth day of the month following
            the month
            in which it has accrued or, at the option of the Holder (by written notice
            to
            the Borrower by the first day of the month following the month in which
            it has
            accrued), shall be added to the principal amount of this Note, in which
            event
            interest shall accrue thereon in accordance with the terms of this Note
            and such
            additional principal amount shall be convertible into Common Stock in
            accordance
            with the terms of this Note.

           

          1.5  Concerning
            the
            Shares.  The
            shares of
            Common Stock issuable upon conversion of this Note may not be sold or
            transferred unless  (i) such shares are sold pursuant to an effective
            registration statement under the Act or (ii) the Borrower or its transfer
            agent
            shall have been furnished with an opinion of  counsel (which opinion
            shall be in form, substance and 

           

           

          
            
              
              

            

            
              Page
                7

              
                

              

            

            
              
              

            

          

           

          scope
            customary for opinions of counsel in comparable transactions) to the
            effect that
            the shares to be sold or transferred may be sold or transferred pursuant
            to an
            exemption from such registration or (iii) such shares are sold or
            transferred pursuant to Rule 144 under the Act (or a successor rule)
            (“Rule 144”) or (iv) such
            shares
            are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who
            agrees to sell or otherwise transfer the shares only in accordance with
            this
            Section 1.5 and who is an Accredited Investor (as defined in the Purchase
            Agreement).  Except as otherwise provided in the Purchase Agreement
            (and subject to the removal provisions set forth below), until such time
            as the
            shares of Common Stock issuable upon conversion of this Note have been
            registered under the Act as contemplated by the Registration Rights Agreement
            or
            otherwise may be sold pursuant to Rule 144 without any restriction as
            to the
            number of securities as of a particular date that can then be immediately
            sold,
            each certificate for shares of Common Stock issuable upon conversion
            of this
            Note that has not been so included in an effective registration statement
            or
            that has not been sold pursuant to an effective registration statement
            or an
            exemption that permits removal of the legend, shall bear a legend substantially
            in the following form, as appropriate:

           

          
            “THE
              SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
              UNDER THE
              SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES MAY NOT BE SOLD,
              TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
              STATEMENT
              FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
              SUBSTANCE
              AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS,
              THAT
              REGISTRATION IS NOT REQUIRED UNDER SAID ACT  UNLESS SOLD PURSUANT TO
              RULE 144 OR REGULATION S UNDER SAID ACT.”

             

          

          The
            legend set forth above shall be removed and the Borrower shall issue
            to the
            Holder a new certificate therefor free of any transfer legend if (i)
            the
            Borrower or its transfer agent shall have received an opinion of counsel,
            in
            form, substance and scope customary for opinions of counsel in comparable
            transactions, to the effect that a public sale or transfer of such Common
            Stock
            may be made without registration under the Act and the shares are so
            sold or
            transferred, (ii) such Holder provides the Borrower or its transfer agent
            with
            reasonable assurances that the Common Stock issuable upon conversion
            of this
            Note (to the extent such securities are deemed to have been acquired
            on the same
            date) can be sold pursuant to Rule 144 or (iii) in the case of the Common
            Stock
            issuable upon conversion of this Note, such security is registered for
            sale by
            the Holder under an effective registration statement filed under the
            Act or
            otherwise may be sold pursuant to Rule 144 without any restriction as
            to the
            number of securities as of a particular date that can then be immediately
            sold.  Nothing in this Note shall (i) limit the Borrower’s obligation
            under the Registration Rights Agreement or (ii) affect in any way the
            Holder’s
            obligations to comply with applicable prospectus delivery requirements
            upon the
            resale of the securities referred to herein.

           

           

          1.6  Effect
            of Certain
            Events.

           

          (a)  Effect
            of Merger,
            Consolidation, Etc.  At
            the option of
            the Holder, the sale, conveyance or disposition of all or substantially
            all of
            the assets of the Borrower, the effectuation by the Borrower of a transaction
            or
            series of related transactions in 

           

           

          
            
              
              

            

            
              Page
                8

              
                

              

            

            
              
              

            

          

           

           

          which
            more than 50% of the voting power of the Borrower is disposed of, or
            the
            consolidation, merger or other business combination of the Borrower with
            or into
            any other Person (as defined below) or Persons when the Borrower is not
            the
            survivor shall either:  (i) be deemed to be an Event of Default (as
            defined in Article III) pursuant to which the Borrower shall be required
            to pay
            to the Holder upon the consummation of and as a condition to such transaction
            an
            amount equal to the Default Amount (as defined in Article III) or (ii)
            be
            treated pursuant to Section 1.6(b) hereof.  “Person” shall mean any
            individual, corporation, limited liability company, partnership, association,
            trust or other entity or organization.

           

          (b)  Adjustment
            Due to Merger,
            Consolidation, Etc.  If,
            at any time
            when this Note is issued and outstanding and prior to conversion of all
            of the
            Notes, there shall be any merger, consolidation, exchange of shares,
            recapitalization, reorganization, or other similar event, as a result
            of which
            shares of Common Stock of the Borrower shall be changed into the same
            or a
            different number of shares of another class or classes of stock or securities
            of
            the Borrower or another entity, or in case of any sale or conveyance
            of all or
            substantially all of the assets of the Borrower other than in connection
            with a
            plan of complete liquidation of the Borrower, then the Holder of this
            Note shall
            thereafter have the right to receive upon conversion of this Note, upon
            the
            basis and upon the terms and conditions specified herein and in lieu
            of the
            shares of Common Stock immediately theretofore issuable upon conversion,
            such
            stock, securities or assets which the Holder would have been entitled
            to receive
            in such transaction had this Note been converted in full immediately
            prior to
            such transaction (without regard to any limitations on conversion set
            forth
            herein), and in any such case appropriate provisions shall be made with
            respect
            to the rights and interests of the Holder of this Note to the end that
            the
            provisions hereof (including, without limitation, provisions for adjustment
            of
            the Conversion Price and of the number of shares issuable upon conversion
            of the
            Note) shall thereafter be applicable, as nearly as may be practicable
            in
            relation to any securities or assets thereafter deliverable upon the
            conversion
            hereof.  The Borrower shall not effect any transaction described in
            this Section 1.6(b) unless (a) it first gives, to the extent practicable,
            thirty
            (30) days prior written notice (but in any event at least fifteen (15)
            days
            prior written notice) of the record date of the special meeting of shareholders
            to approve, or if there is no such record date, the consummation of,
            such
            merger, consolidation, exchange of shares, recapitalization, reorganization
            or
            other similar event or sale of assets (during which time the Holder shall
            be
            entitled to convert this Note) and (b) the resulting successor or acquiring
            entity (if not the Borrower) assumes by written instrument the obligations
            of
            this Section 1.6(b).  The above provisions shall similarly apply to
            successive consolidations, mergers, sales, transfers or share
            exchanges.

           

          (c)  Adjustment
            Due to
            Distribution.  If
            the Borrower
            shall declare or make any distribution of its assets (or rights to acquire
            its
            assets) to holders of Common Stock as a dividend, stock repurchase, by
            way of
            return of capital or otherwise (including any dividend or distribution
            to the
            Borrower’s shareholders in cash or shares (or rights to acquire shares) of
            capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the
            Holder of this Note shall be entitled, upon any conversion of this Note
            after
            the date of record for determining shareholders entitled to such Distribution,
            to receive the amount of such assets which would have been payable to
            the Holder
            with respect to the shares of Common Stock issuable upon such conversion
            had
            such Holder been the holder of such shares of Common Stock on the record
            date
            for the determination of shareholders entitled to such
            Distribution.

           

           

          
            
              
              

            

            
              Page
                9

              
                

              

            

            
              
              

            

          

           

           

           

          (d)  Adjustment
            Due to Dilutive
            Issuance.  If,
            at any time
            when any Notes are issued and outstanding, the Borrower issues or sells,
            or in
            accordance with this Section 1.6(d) hereof is deemed to have issued or
            sold, any
            shares of Common Stock for no consideration or for a consideration per
            share
            (before deduction of reasonable expenses or commissions or underwriting
            discounts or allowances in connection therewith) less than the Fixed
            Conversion
            Price in effect on the date of such issuance (or deemed issuance) of
            such shares
            of Common Stock (a “Dilutive
            Issuance”), then immediately upon the Dilutive Issuance, the Fixed
            Conversion Price will be reduced to the amount of the consideration per
            share
            received by the Borrower in such Dilutive Issuance; provided that
            only
            one adjustment will be made for each Dilutive Issuance.

           

          The
            Borrower shall be deemed to have issued or sold shares of Common Stock
            if the
            Borrower in any manner issues or grants any warrants, rights or options,
            whether
            or not immediately exercisable, to subscribe for or to purchase Common
            Stock or
            other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such
            warrants, rights and options to purchase Common Stock or Convertible
            Securities
            are hereinafter referred to as “Options”) and the price
            per
            share for which Common Stock is issuable upon the exercise of such Options
            is
            less than the Fixed Conversion Price then in effect, then the Fixed Conversion
            Price shall be equal to such price per share.  For purposes of the
            preceding sentence, the “price per share for which Common Stock is issuable upon
            the exercise of such Options” is determined by dividing (i) the total amount, if
            any, received or receivable by the Borrower as consideration for the
            issuance or
            granting of all such Options, plus the minimum aggregate amount of additional
            consideration, if any, payable to the Borrower upon the exercise of all
            such
            Options, plus, in the case of Convertible Securities issuable upon the
            exercise
            of such Options, the minimum aggregate amount of additional consideration
            payable upon the conversion or exchange thereof at the time such Convertible
            Securities first become convertible or exchangeable, by (ii) the maximum
            total
            number of shares of Common Stock issuable upon the exercise of all such
            Options
            (assuming full conversion of Convertible Securities, if
            applicable).  No further adjustment to the Conversion Price will be
            made upon the actual issuance of such Common Stock upon the exercise
            of such
            Options or upon the conversion or exchange of Convertible Securities
            issuable
            upon exercise of such Options.

           

          Additionally,
            the Borrower shall be deemed to have issued or sold shares of Common
            Stock if
            the Borrower in any manner issues or sells any Convertible Securities,
            whether
            or not immediately convertible (other than where the same are issuable
            upon the
            exercise of Options), and the price per share for which Common Stock
            is issuable
            upon such conversion or exchange is less than the Fixed Conversion Price
            then in
            effect, then the Fixed Conversion Price shall be equal to such price
            per
            share.  For the purposes of the preceding sentence, the “price per
            share for which Common Stock is issuable upon such conversion or exchange” is
            determined by dividing (i) the total amount, if any, received or receivable
            by
            the Borrower as consideration for the issuance or sale of all such Convertible
            Securities, plus the minimum aggregate amount of additional consideration,
            if
            any, payable to the Borrower upon the conversion or exchange thereof
            at the time
            such Convertible Securities first become convertible or exchangeable,
            by (ii)
            the maximum total number of shares of Common Stock issuable upon the
            conversion
            or exchange of all such Convertible Securities.  No further adjustment
            to the Fixed Conversion Price will be made upon the actual issuance of
            such
            Common Stock upon conversion or exchange of such Convertible
            Securities.

           

           

           

          
            
              
              

            

            
              Page
                10

              
                

              

            

            
              
              

            

          

           

          (e)  Purchase
            Rights.  If,
            at any time
            when any Notes are issued and outstanding, the Borrower issues any convertible
            securities or rights to purchase stock, warrants, securities or other
            property
            (the “Purchase Rights”)
            pro rata to the record holders of any class of Common Stock, then the
            Holder of
            this Note will be entitled to acquire, upon the terms applicable to such
            Purchase Rights, the aggregate Purchase Rights which such Holder could
            have
            acquired if such Holder had held the number of shares of Common Stock
            acquirable
            upon complete conversion of this Note (without regard to any limitations
            on
            conversion contained herein) 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.

           

          (f)  Notice
            of
            Adjustments.  Upon
            the
            occurrence of each adjustment or readjustment of the Conversion Price
            as a
            result of the events described in this Section 1.6, the Borrower, at
            its
            expense, shall promptly compute such adjustment or readjustment and prepare
            and
            furnish to the Holder of a certificate setting forth such adjustment
            or
            readjustment and showing in detail the facts upon which such adjustment
            or
            readjustment is based.  The Borrower shall, upon the written request
            at any time of the Holder, furnish to such Holder a like certificate
            setting
            forth (i) such adjustment or readjustment, (ii) the Conversion Price
            at the time
            in effect and (iii) the number of shares of Common Stock and the amount,
            if any,
            of other securities or property which at the time would be received upon
            conversion of the Note.

           

          1.7  Trading
            Market
            Limitations.
Unless
            permitted by the applicable rules and regulations of the principal
            securities market on which the Common Stock is then listed or traded,
            in no
            event shall the Borrower issue upon conversion of or otherwise pursuant
            to this
            Note and the other Notes issued pursuant to the Purchase Agreement more
            than the
            maximum number of shares of Common Stock that the Borrower can issue
            pursuant to
            any rule of the principal United States securities market on which the
            Common
            Stock is then traded (the “Maximum Share Amount”), which
            shall be 19.99% of the total shares outstanding on the Closing Date (as
            defined
            in the Purchase Agreement), subject to equitable adjustment from time
            to time
            for stock splits, stock dividends, combinations, capital reorganizations
            and
            similar events relating to the Common Stock occurring after the date
            hereof.  Once the Maximum Share Amount has been issued (the date of
            which is hereinafter referred to as the “Maximum Conversion
            Date”), if
            the Borrower fails to eliminate any prohibitions under applicable law
            or the
            rules or regulations of any stock exchange, interdealer quotation system
            or
            other self-regulatory organization with jurisdiction over the Borrower
            or any of
            its securities on the Borrower’s ability to issue shares of Common Stock in
            excess of the Maximum Share Amount (a “Trading Market Prepayment
            Event”), in lieu of any further right to convert this Note, and in full
            satisfaction of the Borrower’s obligations under this Note, the Borrower shall
            pay to the Holder, within fifteen (15) business days of the Maximum Conversion
            Date (the “Trading Market
            Prepayment Date”), an amount equal to 130% times
            the sum of
            (a) the then
            outstanding principal amount of this Note immediately following the Maximum
            Conversion Date, plus (b)
            accrued and
            unpaid interest on the unpaid principal amount of this Note to the Trading
            Market Prepayment Date, plus (c)
            Default
            Interest, if any, on the amounts referred to in clause (a) and/or (b)
            above,
plus (d)
            any
            optional amounts that may be added thereto at the Maximum Conversion
            Date by the
            Holder in accordance with the terms hereof (the then outstanding principal
            amount of this Note immediately following the Maximum Conversion Date,
plus the
            amounts
            referred to in clauses (b), (c) and (d) above shall collectively be referred
            

           

           

          
            
              
              

            

            
              Page
                11

              
                

              

            

            
              
              

            

          

           

          to
            as the
“Remaining Convertible
            Amount”).  With respect to each Holder of Notes, the Maximum
            Share Amount shall refer to such Holder’s prorata
            share thereof
            determined in accordance with Section 4.8 below.  In the event that
            the sum of (x) the aggregate number of shares of Common Stock issued
            upon
            conversion of this Note and the other Notes issued pursuant to the Purchase
            Agreement plus
            (y) the aggregate number of shares of Common Stock that remain issuable
            upon
            conversion of this Note and the other Notes issued pursuant to the Purchase
            Agreement, represents at least one hundred percent (100%) of the Maximum
            Share
            Amount (the “Triggering
            Event”), the Borrower will use its best efforts to seek and obtain
            Shareholder Approval (or obtain such other relief as will allow conversions
            hereunder in excess of the Maximum Share Amount) as soon as practicable
            following the Triggering Event and before the Maximum Conversion
            Date.  As used herein, “Shareholder Approval” means
            approval by the shareholders of the Borrower to authorize the issuance
            of the
            full number of shares of Common Stock which would be issuable upon full
            conversion of the then outstanding Notes but for the Maximum Share
            Amount.

           

          1.8  Status
            as
            Shareholder.  Upon
            submission
            of a Notice of Conversion by a Holder, (i) the shares covered thereby
            (other
            than the shares, if any, which cannot be issued because their issuance
            would
            exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share
            Amount) shall be deemed converted into shares of Common Stock and (ii)
            the
            Holder’s rights as a Holder of such converted portion of this Note shall cease
            and terminate, excepting only the right to receive certificates for such
            shares
            of Common Stock and to any remedies provided herein or otherwise available
            at
            law or in equity to such Holder because of a failure by the Borrower
            to comply
            with the terms  of this Note.  Notwithstanding the
            foregoing, if a Holder has not received certificates for all shares of
            Common
            Stock prior to the tenth (10th) business day after the expiration of
            the
            Deadline with respect to a conversion of any portion of this Note for
            any
            reason, then (unless the Holder otherwise elects to retain its status
            as a
            holder of Common Stock by so notifying the Borrower) the Holder shall
            regain the
            rights of a Holder of this Note with respect to such unconverted portions
            of
            this Note and the Borrower shall, as soon as practicable, return such
            unconverted Note to the Holder or, if the Note has not been surrendered,
            adjust
            its records to reflect that such portion of this Note has not been
            converted.  In all cases, the Holder shall retain all of its rights
            and remedies (including, without limitation, (i) the right to receive
            Conversion
            Default Payments pursuant to Section 1.3 to the extent required thereby
            for such
            Conversion Default and any subsequent Conversion Default and (ii) the
            right to
            have the Conversion Price with respect to subsequent conversions determined
            in
            accordance with Section 1.3) for the Borrower’s failure to convert this
            Note.ARTICLE
            II.    CERTAIN COVENANTS

           

          2.1  Distributions
            on Capital
            Stock.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not
            without the Holder’s written consent (a) pay, declare or set apart for such
            payment, any dividend or other distribution (whether in cash, property
            or other
            securities) on shares of capital stock other than dividends on shares
            of Common
            Stock solely in the form of additional shares of Common Stock or (b)
            directly or
            indirectly or through any subsidiary make any other payment or distribution
            in
            respect of its capital stock except for distributions pursuant to any
            shareholders’ rights plan which is approved by a majority of the Borrower’s
            disinterested directors.

           

           

          
            
              
              

            

            
              Page
                12

              
                

              

            

            
              
              

            

          

           

           

          2.2  Restriction
            on Stock
            Repurchases.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not
            without the Holder’s written consent redeem, repurchase or otherwise acquire
            (whether for cash or in exchange for property or other securities or
            otherwise)
            in any one transaction or series of related transactions any shares of
            capital
            stock of the Borrower or any warrants, rights or options to purchase
            or acquire
            any such shares.

           

          2.3  Borrowings.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not,
            without the Holder’s written consent, create, incur, assume or suffer to exist
            any liability for borrowed money in excess of $50,000, except (a) borrowings
            in
            existence or committed on the date hereof and of which the Borrower has
            informed
            Holder in writing prior to the date hereof, (b) indebtedness to trade
            creditors
            or financial institutions incurred in the ordinary course of business
            or (c)
            borrowings, the proceeds of which shall be used to repay this Note.

           

          2.4  Sale
            of
            Assets.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not,
            without the Holder’s written consent, sell, lease or otherwise dispose of any
            significant portion of its assets outside the ordinary course of
            business.  Any consent to the disposition of any assets may be
            conditioned on a specified use of the proceeds of disposition.

           

          2.5  Advances
            and
            Loans.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not,
            without the Holder’s written consent, lend money, give credit or make advances
            to any person, firm, joint venture or corporation, including, without
            limitation, officers, directors, employees, subsidiaries and affiliates
            of the
            Borrower, except loans, credits or advances (a) in existence or committed
            on the
            date hereof and which the Borrower has informed Holder in writing prior
            to the
            date hereof, (b) made in the ordinary course of business or (c) not in
            excess of
            $50,000.

           

          2.6  Contingent
            Liabilities.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not,
            without the Holder’s written consent, assume, guarantee, endorse, contingently
            agree to purchase or otherwise become liable upon the obligation of any
            person,
            firm, partnership, joint venture or corporation, except by the endorsement
            of
            negotiable instruments for deposit or collection and except assumptions,
            guarantees, endorsements and contingencies (a) in existence or committed
            on the
            date hereof and which the Borrower has informed Holder in writing prior
            to the
            date hereof, and (b) similar transactions in the ordinary course of
            business.

           

           

          ARTICLE
            III.     EVENTS OF DEFAULT

           

          If
            any of
            the following events of default (each, an “Event of Default”) shall
            occur:

           

          3.1  Failure
            to Pay Principal or
            Interest.  The
            Borrower
            fails to pay the principal hereof or interest thereon when due on this
            Note,
            whether at maturity, upon a Trading Market Prepayment Event pursuant
            to Section
            1.7, upon acceleration or otherwise;

           

           

          
            
              
              

            

            
              Page
                13

              
                

              

            

            
              
              

            

          

           

          3.2  Conversion
            and the
            Shares.  The
            Borrower
            fails to issue shares of Common Stock to the Holder (or announces or
            threatens
            that it will not honor its obligation to do so) upon exercise by the
            Holder of
            the conversion rights of the Holder in accordance with the terms of this
            Note
            (for a period of at least sixty (60) days, if such failure is solely
            as a result
            of the circumstances governed by Section 1.3 and the Borrower is using
            its best
            efforts to authorize a sufficient number of shares of Common Stock as
            soon as
            practicable), fails to transfer or cause its transfer agent to transfer
            (electronically or in certificated form) any certificate for shares of
            Common
            Stock issued to the Holder upon conversion of or otherwise pursuant to
            this Note
            as and when required by this Note or the Registration Rights Agreement,
            or fails
            to remove any restrictive legend (or to withdraw any stop transfer instructions
            in respect thereof) on any certificate for any shares of Common Stock
            issued to
            the Holder upon conversion of or otherwise pursuant to this Note as and
            when
            required by this Note or the Registration Rights Agreement (or makes
            any
            announcement, statement or threat that it does not intend to honor the
            obligations described in this paragraph) and any such failure shall continue
            uncured (or any announcement, statement or threat not to honor its obligations
            shall not be rescinded in writing) for ten (10) days after the Borrower
            shall
            have been notified thereof in writing by the Holder;

           

          3.3  Failure
            to Timely File
            Registration or Effect Registration.  The
            Borrower
            fails to file the Registration Statement within sixty (60) days following
            the
            Closing Date (as defined in the Purchase Agreement) or obtain effectiveness
            with
            the Securities and Exchange Commission of the Registration Statement
            within two
            hundred fifty (250) days following the Closing Date (as defined in the
            Purchase
            Agreement) or such Registration Statement lapses in effect (or sales
            cannot
            otherwise be made thereunder effective, whether by reason of the Borrower’s
            failure to amend or supplement the prospectus included therein in accordance
            with the Registration Rights Agreement or otherwise) for more than twenty
            (20)
            consecutive days or forty (40) days in any twelve month period after
            the
            Registration Statement becomes effective;

           

          3.4  Breach
            of
            Covenants.  The
            Borrower
            breaches any material covenant or other material term or condition contained
            in
            Sections 1.3, 1.6 or 1.7 of this Note, or Sections 4(c), 4(e), 4(h),
            4(i), 4(j)
            or 5 of the Purchase Agreement and such breach continues for a period
            of ten
            (10) days after written notice thereof to the Borrower from the
            Holder;

           

          3.5  Breach
            of Representations
            and Warranties.  Any
            representation or warranty of the Borrower made herein or in any agreement,
            statement or certificate given in writing pursuant hereto or in connection
            herewith (including, without limitation, the Purchase Agreement and the
            Registration Rights Agreement), shall be false or misleading in any material
            respect when made and the breach of which has (or with the passage of
            time will
            have) a material adverse effect on the rights of the Holder with respect
            to this
            Note, the Purchase Agreement or the Registration Rights Agreement;

           

          3.6  Receiver
            or
            Trustee.  The
            Borrower or
            any subsidiary of the Borrower shall make an assignment for the benefit
            of
            creditors, or apply for or consent to the appointment of a receiver or
            trustee
            for it or for a substantial part of its property or business, or such
            a receiver
            or trustee shall otherwise be appointed;

           

           

          
            
              
              

            

            
              Page
                14

              
                

              

            

            
              
              

            

          

           

          3.7  Judgments.  Any
            money
            judgment, writ or similar process shall be entered or filed against the
            Borrower
            or any subsidiary of the Borrower or any of its property or other assets
            for
            more than $50,000, and shall remain unvacated, unbonded or unstayed for
            a period
            of twenty (20) days unless otherwise consented to by the Holder, which
            consent
            will not be unreasonably withheld;

           

          3.8  Bankruptcy.  Bankruptcy,
            insolvency, reorganization or liquidation proceedings or other proceedings
            for
            relief under any bankruptcy law or any law for the relief of debtors
            shall be
            instituted by or against the Borrower or any subsidiary of the
            Borrower;

           

          3.9  Delisting
            of Common
            Stock.  The
            Borrower
            shall fail to maintain the listing of the Common Stock on at least one
            of the
            OTCBB or an equivalent replacement exchange, the Nasdaq National Market,
            the
            Nasdaq SmallCap Market, the New York Stock Exchange, or the American
            Stock
            Exchange; or

           

          3.10  Default
            Under Other
            Notes.  An
            Event of
            Default has occurred and is continuing under any of the other Notes issued
            pursuant to the Purchase Agreement, then, upon the occurrence and during
            the
            continuation of any Event of Default specified in Section 3.1, 3.2, 3.3,
            3.4,
            3.5, 3.7, 3.9, or 3.10, at the option of the Holders of a majority of
            the
            aggregate principal amount of the outstanding Notes issued pursuant to
            the
            Purchase Agreement exercisable through the delivery of written notice
            to the
            Borrower by such Holders (the “Default Notice”), and upon
            the
            occurrence of an Event of Default specified in Section 3.6 or 3.8, the
            Notes
            shall become immediately due and payable and the Borrower shall pay to
            the
            Holder, in full satisfaction of its obligations hereunder, an amount
            equal to
            the greater of (i) 130% times the
sum
            of (w) the then
            outstanding principal amount of this Note plus (x)
            accrued and
            unpaid interest on the unpaid principal amount of this Note to the date
            of
            payment (the “Mandatory
            Prepayment Date”) plus
            (y) Default
            Interest, if any, on the amounts referred to in clauses (w) and/or (x)
plus (z)
            any amounts
            owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant
            to
            Section 2(c) of the Registration Rights Agreement (the then outstanding
            principal amount of this Note to the date of payment plus the
            amounts
            referred to in clauses (x), (y) and (z) shall collectively be known as
            the
“Default Sum”) or (ii)
            the “parity value” of the Default Sum to be prepaid, where parity value means
            (a) the highest number of shares of Common Stock issuable upon conversion
            of or
            otherwise pursuant to such Default Sum in accordance with Article I,
            treating
            the Trading Day immediately preceding the Mandatory Prepayment Date as
            the
“Conversion Date” for purposes of determining the lowest applicable Conversion
            Price, unless the Default Event arises as a result of a breach in respect
            of a
            specific Conversion Date in which case such Conversion Date shall be
            the
            Conversion Date), multiplied
            by (b) the
            highest Closing Price for the Common Stock during the period beginning
            on the
            date of first occurrence of the Event of Default and ending one day prior
            to the
            Mandatory Prepayment Date (the “Default Amount”) and all other
            amounts payable hereunder shall immediately become due and payable, all
            without
            demand, presentment or notice, all of which hereby are expressly waived,
            together with all costs, including, without limitation, legal fees and
            expenses,
            of collection, and the Holder shall be entitled to exercise all other
            rights and
            remedies available at law or in equity.  If the Borrower fails to pay
            the Default Amount within five (5) business days of written notice that
            such
            amount is due and payable, then the Holder shall have the right at any
            time, so
            long as the Borrower remains in default (and so long and to the extent
            that
            there are sufficient authorized shares), to require the Borrower, upon
            written
            notice, to immediately issue, in lieu of the Default Amount, 

           

           

          
            
              
              

            

            
              Page
                15

              
                

              

            

            
              
              

            

          

           

           

          the
            number of shares of Common Stock of the Borrower equal to the Default
            Amount
            divided by the Conversion Price then in effect.

           

          ARTICLE
            IV.     MISCELLANEOUS

           

          4.1  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 privileges.  All
            rights and remedies existing hereunder are cumulative to, and not exclusive
            of,
            any rights or remedies otherwise available.

           

          4.2  Notices.  Any
            notice herein
            required or permitted to be given shall be in writing and may be personally
            served or delivered by courier or sent by United States mail and shall
            be deemed
            to have been given upon receipt if personally served (which shall include
            telephone line facsimile transmission) or sent by courier or three (3)
            days
            after being deposited in the United States mail, certified, with postage
            pre-paid and properly addressed, if sent by mail.  For the purposes
            hereof, the address of the Holder shall be as shown on the records of
            the
            Borrower; and the address of the Borrower shall be 22600 Hall Road, Suite
            205
            Clinton Township, MI 48036, facsimile number: 586-468-8768.  Both the
            Holder and the Borrower may change the address for service by service
            of written
            notice to the other as herein provided.

           

          4.3  Amendments.  This
            Note and any
            provision hereof may only be amended by an instrument in writing signed
            by the
            Borrower and the Holder.  The term “Note” and all reference thereto,
            as used throughout this instrument, shall mean this instrument (and the
            other
            Notes issued pursuant to the Purchase Agreement) as originally executed,
            or if
            later amended or supplemented, then as so amended or supplemented.

           

          4.4  Assignability.  This
            Note shall
            be binding upon the Borrower and its successors and assigns, and shall
            inure to
            be the benefit of the Holder and its successors and assigns.  Each
            transferee of this Note must be an “accredited investor” (as defined in Rule
            501(a) of the 1933 Act).  Notwithstanding anything in this Note to the
            contrary, this Note may be pledged as collateral in connection with a
bonafide
            margin account
            or other lending arrangement.

           

          4.5  Cost
            of
            Collection.  If
            default is
            made in the payment of this Note, the Borrower shall pay the Holder hereof
            costs
            of collection, including reasonable attorneys’ fees.

           

          4.6  Governing
            Law.  THIS
            NOTE SHALL
            BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
            THE STATE
            OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
            WITHIN
            SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE
            BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
            FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE
            ARISING
            UNDER THIS NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR
            THE
            TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY
            WAIVE

           

           

           

          
            
              
              

            

            
              Page
                16

              
                

              

            

            
              
              

            

          

           

           

           

          THE
            DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
            PROCEEDING.  BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
            PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
            SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
            PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
            PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
            A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL
            BE
            CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH
            JUDGMENT
            OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
            ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES
            AND
            EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
            CONNECTION WITH SUCH DISPUTE.

           

          4.7  Certain
            Amounts.  Whenever
            pursuant
            to this Note the Borrower is required to pay an amount in excess of the
            outstanding principal amount (or the portion thereof required to be paid
            at that
            time) plus accrued and unpaid interest plus Default Interest on such
            interest,
            the Borrower and the Holder agree that the actual damages to the Holder
            from the
            receipt of cash payment on this Note may be difficult to determine and
            the
            amount to be so paid by the Borrower represents stipulated damages and
            not a
            penalty and is intended to compensate the Holder in part for loss of
            the
            opportunity to convert this Note and to earn a return from the sale of
            shares of
            Common Stock acquired upon conversion of this Note at a price in excess
            of the
            price paid for such shares pursuant to this Note.  The Borrower and
            the Holder hereby agree that such amount of stipulated damages is not
            plainly
            disproportionate to the possible loss to the Holder from the receipt
            of a cash
            payment without the opportunity to convert this Note into shares of Common
            Stock.

           

          4.8  Allocations
            of Maximum Share
            Amount and Reserved Amount.  The
            Maximum Share
            Amount and Reserved Amount shall be allocated pro rata among the Holders
            of
            Notes based on the principal amount of such Notes issued to each
            Holder.  Each increase to the Maximum Share Amount and Reserved Amount
            shall be allocated pro rata among the Holders of Notes based on the principal
            amount of such Notes held by each Holder at the time of the increase
            in the
            Maximum Share Amount or Reserved Amount.  In the event a Holder shall
            sell or otherwise transfer any of such Holder’s Notes, each transferee shall be
            allocated a pro rata portion of such transferor’s Maximum Share Amount and
            Reserved Amount.  Any portion of the Maximum Share Amount or Reserved
            Amount which remains allocated to any person or entity which does not
            hold any
            Notes shall be allocated to the remaining Holders of Notes, pro rata
            based on
            the principal amount of such Notes then held by such Holders.

           

          4.9  Damages
            Shares.  The
            shares of
            Common Stock that may be issuable to the Holder pursuant to Sections
            1.3 and
            1.4(g) hereof and pursuant to Section 2(c) of the Registration Rights
            Agreement
            (“Damages Shares”) shall
            be treated as Common Stock issuable upon conversion of this Note for
            all
            purposes hereof and shall be subject to all of the limitations and afforded
            all
            of the rights of the other shares of Common Stock issuable hereunder,
            including
            without limitation, the right to be included in the Registration Statement
            filed
            pursuant to the Registration Rights Agreement.  For purposes of
            calculating interest payable on the outstanding principal amount hereof,
            except
            as otherwise provided herein, amounts convertible into Damages

           

           

           

          
            
              
              

            

            
              Page
                17

              
                

              

            

            
              
              

            

          

           

           

           Shares
            (“Damages Amounts”)
            shall not bear interest but must be converted prior to the conversion
            of any
            outstanding principal amount hereof, until the outstanding Damages Amounts
            is
            zero.

           

          4.10  Denominations.  At
            the request of
            the Holder, upon surrender of this Note, the Borrower shall promptly
            issue new
            Notes in the aggregate outstanding principal amount hereof, in the form
            hereof,
            in such denominations of at least $50,000 as the Holder shall
            request.

           

          4.11  Purchase
            Agreement.  By
            its acceptance
            of this Note, each Holder agrees to be bound by the applicable terms
            of the
            Purchase Agreement.

           

          4.12  Notice
            of Corporate
            Events.  Except
            as
            otherwise provided below, the Holder of this Note shall have no rights
            as a
            Holder of Common Stock unless and only to the extent that it converts
            this Note
            into Common Stock.  The Borrower shall provide the Holder with prior
            notification of any meeting of the Borrower’s shareholders (and copies of proxy
            materials and other information sent to shareholders).  In the event
            of any taking by the Borrower of a record of its shareholders for the
            purpose of
            determining shareholders who are entitled to receive payment of any dividend
            or
            other distribution, any right to subscribe for, purchase or otherwise
            acquire
            (including by way of merger, consolidation, reclassification or
            recapitalization) any share of any class or any other securities or property,
            or
            to receive any other right, or for the purpose of determining shareholders
            who
            are entitled to vote in connection with any proposed sale, lease or conveyance
            of all or substantially all of the assets of the Borrower or any proposed
            liquidation, dissolution or winding up of the Borrower, the Borrower
            shall mail
            a notice to the Holder, at least twenty (20) days prior to the record
            date
            specified therein (or thirty (30) days prior to the consummation of the
            transaction or event, whichever is earlier), of the date on which any
            such
            record is to be taken for the purpose of such dividend, distribution,
            right or
            other event, and a brief statement regarding the amount and character
            of such
            dividend, distribution, right or other event to the extent known at such
            time.  The Borrower shall make a public announcement of any event
            requiring notification to the Holder hereunder substantially simultaneously
            with
            the notification to the Holder in accordance with the terms of this Section
            4.12.

           

          4.13  Remedies.  The
            Borrower
            acknowledges that a breach by it of its obligations hereunder will cause
            irreparable harm to the Holder, by vitiating the intent and purpose of
            the
            transaction contemplated hereby.  Accordingly, the Borrower
            acknowledges that the remedy at law for a breach of its obligations under
            this
            Note will be inadequate and agrees, in the event of a breach or threatened
            breach by the Borrower of the provisions of this Note, that the Holder
            shall be
            entitled, in addition to all other available remedies at law or in equity,
            and
            in addition to the penalties assessable herein, to an injunction or injunctions
            restraining, preventing or curing any breach of this Note and to enforce
            specifically the terms and provisions thereof, without the necessity
            of showing
            economic loss and without any bond or other security being
            required.

           

           

          
            
              
              

            

            
              Page
                18

              
                

              

            

            
              
              

            

          

           

           

           

          ARTICLE
            V.     CALL OPTION

           

          5.1  Call
            Option.  Notwithstanding
            anything to the contrary contained in this Article V, so long as (i) no
            Event of Default or Trading Market Prepayment Event shall have occurred
            and be
            continuing, (ii) the Borrower has a sufficient number of authorized shares
            of Common Stock reserved for issuance upon full conversion of the Notes,
            then at
            any time after the Issue Date, and (iii) the Common Stock is trading at or
            below $.04 per share, the Borrower shall have the right, exercisable
            on not less
            than ten (10) Trading Days prior written notice to the Holders of the
            Notes
            (which notice may not be sent to the Holders of the Notes until the Borrower
            is
            permitted to prepay the Notes pursuant to this Section 5.1), to prepay
            all of
            the outstanding Notes in accordance with this Section 5.1.  Any notice
            of prepayment hereunder (an “Optional Prepayment”) shall be
            delivered to the Holders of the Notes at their registered addresses appearing
            on
            the books and records of the Borrower and shall state (1) that the Borrower
            is
            exercising its right to prepay all of the Notes issued on the Issue Date
            and (2)
            the date of prepayment (the “Optional Prepayment
            Notice”).  On the date fixed for prepayment (the “Optional Prepayment
            Date”),
            the Borrower shall make payment of the Optional Prepayment Amount (as
            defined
            below) to or upon the order of the Holders as specified by the Holders
            in
            writing to the Borrower at least one (1) business day prior to the Optional
            Prepayment Date.  If the Borrower exercises its right to prepay the
            Notes, the Borrower shall make payment to the holders of an amount in
            cash (the
“Optional Prepayment
            Amount”) equal to either (i) 135% (for prepayments occurring within
            thirty (30) days of the Issue Date), (ii) 145% for prepayments occurring
            between thirty-one (31) and ninety (90) days of the Issue Date, or (iii)
            150%
            (for prepayments occurring after the ninetieth (90th)
            day following
            the Issue Date), multiplied by the sum of (w) the then outstanding principal
            amount of this Note plus (x) accrued
            and unpaid interest on the unpaid principal amount of this Note to the
            Optional
            Prepayment Date plus (y)
            Default
            Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z)
            any amounts
            owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant
            to
            Section 2(c) of the Registration Rights Agreement (the then outstanding
            principal amount of this Note to the date of payment plus the
            amounts
            referred to in clauses (x), (y) and (z) shall collectively be known as
            the
“Optional Prepayment
            Sum”). Notwithstanding notice of an Optional Prepayment, the Holders
            shall at all times prior to the Optional Prepayment Date maintain the
            right to
            convert all or any portion of the Notes in accordance with Article I
            and any
            portion of Notes so converted after receipt of an Optional Prepayment
            Notice and
            prior to the Optional Prepayment Date set forth in such notice and payment
            of
            the aggregate Optional Prepayment Amount shall be deducted from the principal
            amount of Notes which are otherwise subject to prepayment pursuant to
            such
            notice.  If the Borrower delivers an Optional Prepayment Notice and
            fails to pay the Optional Prepayment Amount due to the Holders of the
            Notes
            within two (2) business days following the Optional Prepayment Date,
            the
            Borrower shall forever forfeit its right to redeem the Notes pursuant
            to this
            Section 5.1.

           

          

           

          [REMAINDER
            OF PAGE INTENTIONALLY LEFT BLANK]

           

           

          
            
              
              

            

            
              Page
                19

              
                

              

            

            
              
              

            

          

           

           

          IN
            WITNESS WHEREOF, Borrower
            has caused this Note to be signed in its name by its duly authorized
            officer as
            of the date first above written.

           

          

          MIDNIGHT
            HOLDINGS GROUP,
            INC.

          

           

          By:
/s/Nicholas
            Cocco              
  

          Nicholas
            Cocco                      

           Chief
            Executive Officer          

           

           

           

           

           

           

          
            
              
              

            

            
              Page
                20

              
                

              

            

            
              
              

            

          

           

           

           

           

          EXHIBIT
            A

           

          NOTICE
            OF
            CONVERSION

           

          (To
            be
            Executed by the Registered Holder

           

          in
            order
            to Convert the Notes)

           

          The
            undersigned hereby irrevocably elects to convert $__________ principal
            amount of
            the Note (defined below) into shares of common stock, par value $.00005
            per
            share (“Common Stock”),
            of Midnight Holdings Group, Inc., a Delaware corporation (the “Borrower”) according
            to the
            conditions of the convertible Notes of the Borrower dated as of October
            15, 2007
            (the “Notes”), as of the date written below.  If securities are to be
            issued in the name of a person other than the undersigned, the undersigned
            will
            pay all transfer taxes payable with respect thereto and is delivering
            herewith
            such certificates.  No fee will be charged to the Holder for any
            conversion, except for transfer taxes, if any.  A copy of each Note is
            attached hereto (or evidence of loss, theft or destruction
            thereof).

           

          The
            Borrower shall electronically transmit the Common Stock issuable pursuant
            to
            this Notice of Conversion to the account of the undersigned or its nominee
            with
            DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

           

          Name
            of
            DTC Prime
            Broker:                                                                                                                     

          Account
            Number:                                                                                                                     

           

          In
            lieu
            of receiving shares of Common Stock issuable pursuant to this Notice
            of
            Conversion by way of a DWAC Transfer, the undersigned hereby requests
            that the
            Borrower issue a certificate or certificates for the number of shares
            of Common
            Stock set forth below (which numbers are based on the Holder’s calculation
            attached hereto) in the name(s) specified immediately below or, if additional
            space is necessary, on an attachment hereto:

           

          Name:                                                                                                                     

          Address:                                                                                                                     

           

          The
            undersigned represents and warrants that all offers and sales by the
            undersigned
            of the securities issuable to the undersigned upon conversion of the
            Notes shall
            be made pursuant to registration of the securities under the Securities
            Act of
            1933, as amended (the “Act”), or pursuant
            to an
            exemption from registration under the Act.

           

          Date
            of
            Conversion:___________________________

          Applicable
            Conversion Price:____________________

          Number
            of
            Shares of Common Stock to be Issued Pursuant to

          Conversion
            of the Notes:______________

          Signature:___________________________________

          Name:______________________________________

          Address:____________________________________

           

          The
            Borrower shall issue and deliver shares of Common Stock to an overnight
            courier
            not later than three business days following receipt of the original
            Note(s) to
            be converted, and shall make payments pursuant to the Notes for the number
            of
            business days such issuance and delivery is late.

           

           

           

           

          
            
              
              

            

            
              Page
                21

              
                

              

            

            
              
              

            

          

           

        

         

      

       

       

      
        

        

      

    

     

    
      THE
        SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
        THE
        SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THE SECURITIES MAY
        NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN
        FORM,
        SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
        THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT
        TO RULE
        144 OR REGULATION S UNDER SAID ACT.

       

    

    
      
        CALLABLE
          SECURED CONVERTIBLE
          NOTE

         

        Clinton
          Township, Michigan

         

        October
          15,
          2007                                                                                                                            

           $86,700

         

        FOR
          VALUE RECEIVED, MIDNIGHT HOLDINGS
          GROUP, INC.,
a Delaware corporation (hereinafter called the “Borrower”), hereby
          promises to
          pay to the order of AJW Qualified Partners, LLC or registered assigns (the
          “Holder”) the sum of
          $86,700 on October 15, 2010 (the “Maturity Date”), and to pay
          interest on the unpaid principal balance hereof at the rate of ten percent
          (10%)
          per annum from October 15, 2007 (the “Issue Date”) until the same
          becomes due and payable, whether at maturity or upon acceleration or by
          prepayment or otherwise.  Any amount of principal or interest on this
          Note which is not paid when due shall bear interest at the rate of fifteen
          percent (15%) per annum from the due date thereof until the same is paid
          (“Default
          Interest”).  Interest shall commence accruing on the issue
          date, shall be computed on the basis of a 365-day year and the actual number
          of
          days elapsed and shall be payable, quarterly on March 31, June 30,
          September 30 and December 31 of each year beginning on the last day of the
          first full quarter after Issue Date.  All payments due hereunder (to
          the extent not converted into common stock, $.00005 par value per share,
          of the
          Borrower (the “Common
          Stock”) in accordance with the terms hereof) shall be made in lawful
          money of the United States of America.  All payments shall be made at
          such address as the Holder shall hereafter give to the Borrower by written
          notice made in accordance with the provisions of this Note.  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 interest payment date which
          is
          not the 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.  As used in this Note, the term
“business day” shall mean any day other than a Saturday, Sunday or a day on
          which commercial banks in the city of New York, New York are authorized
          or
          required by law or executive order to 

         

         

         

         

        
           

           

          
            
              
              

            

            
              Page
                1

              
                

              

            

            
              
              

            

          

           

          remain
            closed.  Each capitalized term used herein, and not otherwise defined,
            shall have the meaning ascribed thereto in that certain Securities Purchase
            Agreement, dated October 15, 2007, pursuant to which this Note was originally
            issued (the “Purchase
            Agreement”).

           

          This
            Note
            is free from all taxes, liens, claims and encumbrances with respect to
            the issue
            thereof and shall not be subject to preemptive rights or other similar
            rights of
            shareholders of the Borrower and will not impose personal liability upon
            the
            holder thereof.  The obligations of the Borrower under this Note shall
            be secured by that certain Security Agreement by and between the Borrower
            and
            the Holder of even date herewith.

           

          The
            following terms shall apply to this Note:

           

           

          ARTICLE
            I.    CONVERSION RIGHTS

           

          1.1  Conversion
            Right.  The
            Holder shall
            have the right from time to time, and at any time on or prior to the
            earlier of
            (i) the Maturity Date and (ii) the date of payment of the Default Amount
            (as
            defined in Article III) pursuant to Section 1.6(a) or Article III, the
            Optional
            Prepayment Amount (as defined in Section 5.1) or (iii) any payments pursuant
            to
            Section 1.7, each in respect of the remaining outstanding principal amount
            of
            this Note to convert all or any part of the outstanding and unpaid principal
            amount of this Note into fully paid and non-assessable shares of Common
            Stock,
            as such Common Stock exists on the Issue Date, or any shares of capital
            stock or
            other securities of the Borrower into which such Common Stock shall hereafter
            be
            changed or reclassified at the conversion price  (the “Conversion Price”) determined
            as provided herein (a “Conversion”); provided,
however,
            that in no
            event shall the Holder be entitled to convert any portion of this Note
            in excess
            of that portion of this Note upon conversion of which the sum of (1)
            the number
            of shares of Common Stock beneficially owned by the Holder and its affiliates
            (other than shares of Common Stock which may be deemed beneficially owned
            through the ownership of the unconverted portion of the Notes or the
            unexercised
            or unconverted portion of any other security of the Borrower (including,
            without
            limitation, the warrants issued by the Borrower pursuant to the Purchase
            Agreement) subject to a limitation on conversion or exercise analogous
            to the
            limitations contained herein) and (2) the number of shares of Common
            Stock
            issuable upon the conversion of the portion of this Note with respect
            to which
            the determination of this proviso is being made, would result in beneficial
            ownership by the Holder and its affiliates of more than 4.9% of the outstanding
            shares of Common Stock.  For purposes of the proviso to the
            immediately preceding sentence, beneficial ownership shall be determined
            in
            accordance with Section 13(d) of the Securities Exchange Act of 1934,
            as
            amended, and Regulations 13D-G thereunder, except as otherwise provided
            in
            clause (1) of such proviso.  The number of shares of Common Stock to
            be issued upon each conversion of this Note shall be determined by dividing
            the
            Conversion Amount (as defined below) by the applicable Conversion Price
            then in
            effect on the date specified in the notice of conversion, in the form
            attached
            hereto as Exhibit A (the “Notice of Conversion”),
            delivered to the Borrower by the Holder in accordance with Section 1.4
            below;
            provided that the Notice of Conversion is submitted by facsimile (or
            by other
            means resulting in, or reasonably expected to result in, notice) to the
            Borrower
            before 6:00 p.m., New York, New York time on such conversion date (the
“Conversion
            Date”).  The term “Conversion Amount”
means,
            with
            respect to any conversion of this Note, the sum of (1) the principal
            amount of
            this Note to be converted in such 

           

           

           

          
            
              
              

            

            
              Page
                2

              
                

              

            

            
              
              

            

          

           

           

          conversion
            plus (2)
            accrued and unpaid interest, if any, on such principal amount at the
            interest
            rates provided in this Note to the Conversion Date plus (3)
            Default
            Interest, if any, on the amounts referred to in the immediately preceding
            clauses (1) and/or (2) plus (4)
            at the
            Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and
            1.4(g) hereof or pursuant to Section 2(c) of that certain Registration
            Rights
            Agreement, dated as of October 15, 2007, executed in connection with
            the initial
            issuance of this Note and the other Notes issued on the Issue Date (the
“Registration Rights
            Agreement”).

           

          1.2  Conversion
            Price.

           

          (a)  Calculation
            of Conversion
            Price.  The
            Conversion
            Price shall be the lesser of (i) the Variable Conversion Price (as defined
            herein) and (ii) the Fixed Conversion Price (as defined herein) (subject,
            in
            each case, to equitable adjustments for stock splits, stock dividends
            or rights
            offerings by the Borrower relating to the Borrower’s securities or the
            securities of any subsidiary of the Borrower, combinations, recapitalization,
            reclassifications, extraordinary distributions and similar
            events).  The “Variable Conversion
            Price”
shall mean the Applicable Percentage (as defined herein) multiplied
            by the
            Market Price (as defined herein).  “Market Price” means the
            average of the lowest three (3) Trading Prices (as defined below) for
            the Common
            Stock during the twenty (20) Trading Day period ending one Trading Day
            prior to
            the date the Conversion Notice is sent by the Holder to the Borrower
            via
            facsimile (the “Conversion
            Date”).  “Trading Price”
means,
            for any
            security as of any date, the intraday trading price on the Over-the-Counter
            Bulletin Board (the “OTCBB”) as reported
            by a
            reliable reporting service mutually acceptable to and hereafter designated
            by
            Holders of a majority in interest of the Notes and the Borrower or, if
            the OTCBB
            is not the principal trading market for such security, the intraday trading
            price of such security on the principal securities exchange or trading
            market
            where such security is listed or traded or, if no intraday trading price
            of such
            security is available in any of the foregoing manners, the average of
            the
            intraday trading prices of any market makers for such security that are
            listed
            in the “pink sheets” by the National Quotation Bureau, Inc.  If the
            Trading Price cannot be calculated for such security on such date in
            the manner
            provided above, the Trading Price shall be the fair market value as mutually
            determined by the Borrower and the holders of a majority in interest
            of the
            Notes being converted for which the calculation of the Trading Price
            is required
            in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any
            day on which the Common Stock is traded for any period on the OTCBB,
            or on the
            principal securities exchange or other securities market on which the
            Common
            Stock is then being traded.  “Applicable Percentage” shall
            mean 25%; provided, however, that the Applicable Percentage shall be
            increased
            to (i) 30% in the event that the Registration Statement (as defined in
            the
            Registration Rights Agreement) is filed on or before the Filing Date
            (as defined
            in the Registration Rights Agreement) and (ii) 40% in the event that
            the
            Registration Statement (as defined in the Registration Rights Agreement)
            becomes
            effective on or before the Effectiveness Deadline) as defined in the
            Registration Rights Agreement).  The “Fixed Conversion Price” shall
            mean $.02.

           

          (b)  Conversion
            Price During
            Major Announcements.  Notwithstanding
            anything contained in Section 1.2(a) to the contrary, in the event the
            Borrower
            (i) makes a public announcement that it intends to consolidate or merge
            with any
            other corporation (other than a merger in which the Borrower is the surviving
            or
            continuing corporation and its capital stock is unchanged) or sell or
            transfer
            all or substantially all of the 

           

           

           

          
            
              
              

            

            
              Page
                3

              
                

              

            

            
              
              

            

          

           

           

          assets
            of
            the Borrower or (ii) any person, group or entity (including the Borrower)
            publicly announces a tender offer to purchase 50% or more of the Borrower’s
            Common Stock (or any other takeover scheme) (the date of the announcement
            referred to in clause (i) or (ii) is hereinafter referred to as
            the  “Announcement
            Date”), then the Conversion Price shall, effective upon the Announcement
            Date and continuing through the Adjusted Conversion Price Termination
            Date (as
            defined below), be equal to the lower of (x) the Conversion Price which
            would
            have been applicable for a Conversion occurring on the Announcement Date
            and (y)
            the Conversion Price that would otherwise be in effect. From and after
            the
            Adjusted Conversion Price Termination Date, the Conversion Price shall
            be
            determined as set forth in this Section 1.2(a).  For purposes
            hereof,  “Adjusted
            Conversion Price Termination Date” shall mean, with respect to any
            proposed transaction or tender offer (or takeover scheme) for which a
            public
            announcement as contemplated by this Section 1.2(b) has been made, the
            date upon
            which the Borrower (in the case of clause (i) above) or the person, group
            or
            entity (in the case of clause (ii) above) consummates or publicly announces
            the
            termination or abandonment of the proposed transaction or tender offer
            (or
            takeover scheme) which caused this Section 1.2(b) to become
            operative.

           

          1.3  Authorized
            Shares.  Subject
            to the
            completion of the Charter Amendment Actions (as defined in the Purchase
            Agreement), the Borrower covenants that during the period the conversion
            right
            exists, the Borrower will reserve from its authorized and unissued Common
            Stock
            a sufficient number of shares, free from preemptive rights, to provide
            for the
            issuance of Common Stock upon the full conversion of this Note and the
            other
            Notes issued pursuant to the Purchase Agreement.  The Borrower is
            required at all times to have authorized and reserved two times the number
            of
            shares that is actually issuable upon full conversion of the Notes (based
            on the
            Conversion Price of the Notes or the Exercise Price of the Warrants in
            effect
            from time to time) (the “Reserved
            Amount”).  The Reserved Amount shall be increased from time to
            time in accordance with the Borrower’s obligations pursuant to Section 4(h) of
            the Purchase Agreement.  The Borrower represents that upon issuance,
            such shares will be duly and validly issued, fully paid and
            non-assessable.  In addition, if the Borrower shall issue any
            securities or make any change to its capital structure which would change
            the
            number of shares of Common Stock into which the Notes shall be convertible
            at
            the then current Conversion Price, the Borrower shall at the same time
            make
            proper provision so that thereafter there shall be a sufficient number
            of shares
            of Common Stock authorized and reserved, free from preemptive rights,
            for
            conversion of the outstanding Notes.  The Borrower (i) acknowledges
            that it has irrevocably instructed its transfer agent to issue certificates
            for
            the Common Stock issuable upon conversion of this Note, and (ii) agrees
            that its issuance of this Note shall constitute full authority to its
            officers
            and agents who are charged with the duty of executing stock certificates
            to
            execute and issue the necessary certificates for shares of Common Stock
            in
            accordance with the terms and conditions of this Note.

           

          If,
            at
            any time a Holder of this Note submits a Notice of Conversion, and the
            Borrower
            does not have sufficient authorized but unissued shares of Common Stock
            available to effect such conversion in accordance with the provisions
            of this
            Article I (a “Conversion
            Default”), subject to Section 4.8, the Borrower shall issue to the Holder
            all of the shares of Common Stock which are then available to effect
            such
            conversion.  The portion of this Note which the Holder included in its
            Conversion Notice and which exceeds the amount which is then convertible
            into
            available shares of Common Stock (the “Excess Amount”) shall,

           

           

           

          
            
              
              

            

            
              Page
                4

              
                

              

            

            
              
              

            

          

           

           

           

          notwithstanding
            anything to the contrary contained herein, not be convertible into Common
            Stock
            in accordance with the terms hereof until (and at the Holder’s option at any
            time after) the date additional shares of Common Stock are authorized
            by the
            Borrower to permit such conversion, at which time the Conversion Price
            in
            respect thereof shall be the lesser of (i) the Conversion Price on the
            Conversion Default Date (as defined below) and (ii) the Conversion Price
            on the
            Conversion Date thereafter elected by the Holder in respect
            thereof.  In addition, the Borrower shall pay to the Holder payments
            (“Conversion Default
            Payments”) for a Conversion Default in the amount of (x) the sum
            of (1) the then
            outstanding principal amount of this Note plus (2)
            accrued and
            unpaid interest on the unpaid principal amount of this Note through the
            Authorization Date (as defined below) plus (3)
            Default
            Interest, if any, on the amounts referred to in clauses (1) and/or (2),
multiplied
            by (y)
            .24, multiplied
            by (z) (N/365), where N = the number of days from the day the holder
            submits a Notice of Conversion giving rise to a Conversion Default (the
“Conversion Default
            Date”) to
            the date (the “Authorization
            Date”) that the Borrower authorizes a sufficient number of shares of
            Common Stock to effect conversion of the full outstanding principal balance
            of
            this Note.  The Borrower shall use its best efforts to authorize a
            sufficient number of shares of Common Stock as soon as practicable following
            the
            earlier of (i) such time that the Holder notifies the Borrower or that
            the
            Borrower otherwise becomes aware that there are or likely will be insufficient
            authorized and unissued shares to allow full conversion thereof and (ii)
            a
            Conversion Default.  The Borrower shall send notice to the Holder of
            the authorization of additional shares of Common Stock, the Authorization
            Date
            and the amount of Holder’s accrued Conversion Default Payments.  The
            accrued Conversion Default Payments for each calendar month shall be
            paid in
            cash or shall be convertible into Common Stock (at such time as there
            are
            sufficient authorized shares of Common Stock) at the applicable Conversion
            Price, at the Borrower’s option, as follows:

           

          (a)  In
            the
            event the Borrower elects to make such payment in cash, cash payment
            shall be
            made to Holder by the fifth (5th)
            day of the month
            following the month in which it has accrued; and

           

          

          (b)   In
            the event the Borrower elects to make such payment in Common Stock, the
            Holder
            may convert such payment amount into Common Stock at the Conversion Price
            (as in
            effect at the time of conversion) at any time after the fifth day of
            the month
            following the month in which it has accrued in accordance with the terms
            of this
            Article I (so long as there is then a sufficient number of authorized
            shares of
            Common Stock).

           

          

          The
            Borrower’s election shall be made in writing to the Holder at any time prior to
            6:00 p.m., New York, New York time, on the third day of the month following
            the
            month in which Conversion Default payments have accrued.  If no
            election is made, the Borrower shall be deemed to have elected to remit
            Common
            Stock.  Nothing herein shall limit the Holder’s right to pursue actual
            damages (to the extent in excess of the Conversion Default Payments)
            for the
            Borrower’s failure to maintain a sufficient number of authorized shares of
            Common Stock, and each holder shall have the right to pursue all remedies
            available at law or in equity (including degree of specific performance
            and/or
            injunctive relief).

           

          1.4  Method
            of
            Conversion.

           

           

          
            
              
              

            

            
              Page
                5

              
                

              

            

            
              
              

            

          

           

           

          (a)  Mechanics
            of
            Conversion.  Subject
            to
            Section 1.1, this Note may be converted by the Holder in whole or in
            part at any
            time from time to time after the Issue Date, by (A) submitting to the
            Borrower a Notice of Conversion (by facsimile or other reasonable means
            of
            communication dispatched on the Conversion Date prior to 6:00 p.m., New
            York,
            New York time) and (B) subject to Section 1.4(b), surrendering this Note at
            the principal office of the Borrower.

           

          (b)  Surrender
            of Note Upon
            Conversion.  Notwithstanding
            anything to the contrary set forth herein, upon conversion of this Note
            in
            accordance with the terms hereof, the Holder shall not be required to
            physically
            surrender this Note to the Borrower unless the entire unpaid principal
            amount of
            this Note is so converted.  The Holder and the Borrower shall maintain
            records showing the principal amount so converted and the dates of such
            conversions or shall use such other method, reasonably satisfactory to
            the
            Holder and the Borrower, so as not to require physical surrender of this
            Note
            upon each such conversion.  In the event of any dispute or
            discrepancy, such records of the Borrower shall be controlling and determinative
            in the absence of manifest error.  Notwithstanding the foregoing, if
            any portion of this Note is converted as aforesaid, the Holder may not
            transfer
            this Note unless the Holder first physically surrenders this Note to
            the
            Borrower, whereupon the Borrower will forthwith issue and deliver upon
            the order
            of the Holder a new Note of like tenor, registered as the Holder (upon
            payment
            by the Holder of any applicable transfer taxes) may request, representing
            in the
            aggregate the remaining unpaid principal amount of this Note.  The
            Holder and any assignee, by acceptance of this Note, acknowledge and
            agree that,
            by reason of the provisions of this paragraph, following conversion of
            a portion
            of this Note, the unpaid and unconverted principal amount of this Note
            represented by this Note may be less than the amount stated on the face
            hereof.

           

          (c)  Payment
            of
            Taxes.  The
            Borrower
            shall not be required to pay any tax which may be payable in respect
            of any
            transfer involved in the issue and delivery of shares of Common Stock
            or other
            securities or property on conversion of this Note in a name other than
            that of
            the Holder (or in street name), and the Borrower shall not be required
            to issue
            or deliver any such shares or other securities or property unless and
            until the
            person or persons (other than the Holder or the custodian in whose street
            name
            such shares are to be held for the Holder’s account) requesting the issuance
            thereof shall have paid to the Borrower the amount of any such tax or
            shall have
            established to the satisfaction of the Borrower that such tax has been
            paid.

           

          (d)  Delivery
            of Common Stock
            Upon Conversion.  Upon
            receipt by
            the Borrower from the Holder of a facsimile transmission (or other reasonable
            means of communication) of a Notice of Conversion meeting the requirements
            for
            conversion as provided in this Section 1.4, the Borrower shall issue
            and deliver
            or cause to be issued and delivered to or upon the order of the Holder
            certificates for the Common Stock issuable upon such conversion within
            five (5)
            business days after such receipt (and, solely in the case of conversion
            of the
            entire unpaid principal amount hereof, surrender of this Note) (such
            second
            business day being hereinafter referred to as the “Deadline”) in accordance
            with
            the terms hereof and the Purchase Agreement (including, without limitation,
            in
            accordance with the requirements of Section 2(g) of the Purchase Agreement
            that
            certificates for shares of Common Stock issued on or after the effective
            date of
            the Registration Statement upon conversion of this Note shall not bear
            any
            restrictive legend).

           

           

          
            
              
              

            

            
              Page
                6

              
                

              

            

            
              
              

            

          

           

          (e)  Obligation
            of Borrower to
            Deliver Common Stock.  Upon
            receipt by
            the Borrower of a Notice of Conversion, the Holder shall be deemed to
            be the
            holder of record of the Common Stock issuable upon such conversion, the
            outstanding principal amount and the amount of accrued and unpaid interest
            on
            this Note shall be reduced to reflect such conversion, and, unless the
            Borrower
            defaults on its obligations under this Article I, all rights with respect
            to the
            portion of this Note being so converted shall forthwith terminate except
            the
            right to receive the Common Stock or other securities, cash or other
            assets, as
            herein provided, on such conversion.  If the Holder shall have given a
            Notice of Conversion as provided herein, the Borrower’s obligation to issue and
            deliver the certificates for Common Stock shall be absolute and unconditional,
            irrespective of the absence of any action by the Holder to enforce the
            same, any
            waiver or consent with respect to any provision thereof, the recovery
            of any
            judgment against any person or any action to enforce the same, any failure
            or
            delay in the enforcement of any other obligation of the Borrower to the
            holder
            of record, or any setoff, counterclaim, recoupment, limitation or termination,
            or any breach or alleged breach by the Holder of any obligation to the
            Borrower,
            and irrespective of any other circumstance which might otherwise limit
            such
            obligation of the Borrower to the Holder in connection with such
            conversion.  The Conversion Date specified in the Notice of Conversion
            shall be the Conversion Date so long as the Notice of Conversion is received
            by
            the Borrower before 6:00 p.m., New York, New York time, on such
            date.

           

          (f)  Delivery
            of Common Stock by
            Electronic Transfer.  In
            lieu of
            delivering physical certificates representing the Common Stock issuable
            upon
            conversion, provided the Borrower’s transfer agent is participating in the
            Depository Trust Company (“DTC”) Fast Automated
            Securities Transfer (“FAST”) program, upon
            request
            of the Holder and its compliance with the provisions contained in Section
            1.1
            and in this Section 1.4, the Borrower shall use its best efforts to cause
            its
            transfer agent to electronically transmit the Common Stock issuable upon
            conversion to the Holder by crediting the account of Holder’s Prime Broker with
            DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

           

          (g)  Failure
            to Deliver Common
            Stock Prior to Deadline.  Without
            in any
            way limiting the Holder’s right to pursue other remedies, including actual
            damages and/or equitable relief, the parties agree that if delivery of
            the
            Common Stock issuable upon conversion of this Note is more than two (2)
            days
            after the Deadline (other than a failure due to the circumstances described
            in
            Section 1.3 above, which failure shall be governed by such Section) the
            Borrower
            shall pay to the Holder $2,000 per day in cash, for each day beyond the
            Deadline
            that the Borrower fails to deliver such Common Stock.  Such cash
            amount shall be paid to Holder by the fifth day of the month following
            the month
            in which it has accrued or, at the option of the Holder (by written notice
            to
            the Borrower by the first day of the month following the month in which
            it has
            accrued), shall be added to the principal amount of this Note, in which
            event
            interest shall accrue thereon in accordance with the terms of this Note
            and such
            additional principal amount shall be convertible into Common Stock in
            accordance
            with the terms of this Note.

           

          1.5  Concerning
            the
            Shares.  The
            shares of
            Common Stock issuable upon conversion of this Note may not be sold or
            transferred unless  (i) such shares are sold pursuant to an effective
            registration statement under the Act or (ii) the Borrower or its transfer
            agent
            shall have been furnished with an opinion of  counsel (which opinion
            shall be in form, substance and 

           

           

          
            
              
              

            

            
              Page
                7

              
                

              

            

            
              
              

            

          

           

          scope
            customary for opinions of counsel in comparable transactions) to the
            effect that
            the shares to be sold or transferred may be sold or transferred pursuant
            to an
            exemption from such registration or (iii) such shares are sold or
            transferred pursuant to Rule 144 under the Act (or a successor rule)
            (“Rule 144”) or (iv) such
            shares
            are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who
            agrees to sell or otherwise transfer the shares only in accordance with
            this
            Section 1.5 and who is an Accredited Investor (as defined in the Purchase
            Agreement).  Except as otherwise provided in the Purchase Agreement
            (and subject to the removal provisions set forth below), until such time
            as the
            shares of Common Stock issuable upon conversion of this Note have been
            registered under the Act as contemplated by the Registration Rights Agreement
            or
            otherwise may be sold pursuant to Rule 144 without any restriction as
            to the
            number of securities as of a particular date that can then be immediately
            sold,
            each certificate for shares of Common Stock issuable upon conversion
            of this
            Note that has not been so included in an effective registration statement
            or
            that has not been sold pursuant to an effective registration statement
            or an
            exemption that permits removal of the legend, shall bear a legend substantially
            in the following form, as appropriate:

           

           

          
            “THE
              SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
              UNDER THE
              SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES MAY NOT BE SOLD,
              TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
              STATEMENT
              FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
              SUBSTANCE
              AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS,
              THAT
              REGISTRATION IS NOT REQUIRED UNDER SAID ACT  UNLESS SOLD PURSUANT TO
              RULE 144 OR REGULATION S UNDER SAID ACT.”

          

           

          The
            legend set forth above shall be removed and the Borrower shall issue
            to the
            Holder a new certificate therefor free of any transfer legend if (i)
            the
            Borrower or its transfer agent shall have received an opinion of counsel,
            in
            form, substance and scope customary for opinions of counsel in comparable
            transactions, to the effect that a public sale or transfer of such Common
            Stock
            may be made without registration under the Act and the shares are so
            sold or
            transferred, (ii) such Holder provides the Borrower or its transfer agent
            with
            reasonable assurances that the Common Stock issuable upon conversion
            of this
            Note (to the extent such securities are deemed to have been acquired
            on the same
            date) can be sold pursuant to Rule 144 or (iii) in the case of the Common
            Stock
            issuable upon conversion of this Note, such security is registered for
            sale by
            the Holder under an effective registration statement filed under the
            Act or
            otherwise may be sold pursuant to Rule 144 without any restriction as
            to the
            number of securities as of a particular date that can then be immediately
            sold.  Nothing in this Note shall (i) limit the Borrower’s obligation
            under the Registration Rights Agreement or (ii) affect in any way the
            Holder’s
            obligations to comply with applicable prospectus delivery requirements
            upon the
            resale of the securities referred to herein.

           

           

          1.6  Effect
            of Certain
            Events.

           

          (a)  Effect
            of Merger,
            Consolidation, Etc.  At
            the option of
            the Holder, the sale, conveyance or disposition of all or substantially
            all of
            the assets of the Borrower, the effectuation by the Borrower of a transaction
            or
            series of related transactions in 

           

           

          
            
              
              

            

            
              Page
                8

              
                

              

            

            
              
              

            

          

           

           

          which
            more than 50% of the voting power of the Borrower is disposed of, or
            the
            consolidation, merger or other business combination of the Borrower with
            or into
            any other Person (as defined below) or Persons when the Borrower is not
            the
            survivor shall either:  (i) be deemed to be an Event of Default (as
            defined in Article III) pursuant to which the Borrower shall be required
            to pay
            to the Holder upon the consummation of and as a condition to such transaction
            an
            amount equal to the Default Amount (as defined in Article III) or (ii)
            be
            treated pursuant to Section 1.6(b) hereof.  “Person” shall mean any
            individual, corporation, limited liability company, partnership, association,
            trust or other entity or organization.

           

          (b)  Adjustment
            Due to Merger,
            Consolidation, Etc.  If,
            at any time
            when this Note is issued and outstanding and prior to conversion of all
            of the
            Notes, there shall be any merger, consolidation, exchange of shares,
            recapitalization, reorganization, or other similar event, as a result
            of which
            shares of Common Stock of the Borrower shall be changed into the same
            or a
            different number of shares of another class or classes of stock or securities
            of
            the Borrower or another entity, or in case of any sale or conveyance
            of all or
            substantially all of the assets of the Borrower other than in connection
            with a
            plan of complete liquidation of the Borrower, then the Holder of this
            Note shall
            thereafter have the right to receive upon conversion of this Note, upon
            the
            basis and upon the terms and conditions specified herein and in lieu
            of the
            shares of Common Stock immediately theretofore issuable upon conversion,
            such
            stock, securities or assets which the Holder would have been entitled
            to receive
            in such transaction had this Note been converted in full immediately
            prior to
            such transaction (without regard to any limitations on conversion set
            forth
            herein), and in any such case appropriate provisions shall be made with
            respect
            to the rights and interests of the Holder of this Note to the end that
            the
            provisions hereof (including, without limitation, provisions for adjustment
            of
            the Conversion Price and of the number of shares issuable upon conversion
            of the
            Note) shall thereafter be applicable, as nearly as may be practicable
            in
            relation to any securities or assets thereafter deliverable upon the
            conversion
            hereof.  The Borrower shall not effect any transaction described in
            this Section 1.6(b) unless (a) it first gives, to the extent practicable,
            thirty
            (30) days prior written notice (but in any event at least fifteen (15)
            days
            prior written notice) of the record date of the special meeting of shareholders
            to approve, or if there is no such record date, the consummation of,
            such
            merger, consolidation, exchange of shares, recapitalization, reorganization
            or
            other similar event or sale of assets (during which time the Holder shall
            be
            entitled to convert this Note) and (b) the resulting successor or acquiring
            entity (if not the Borrower) assumes by written instrument the obligations
            of
            this Section 1.6(b).  The above provisions shall similarly apply to
            successive consolidations, mergers, sales, transfers or share
            exchanges.

           

          (c)  Adjustment
            Due to
            Distribution.  If
            the Borrower
            shall declare or make any distribution of its assets (or rights to acquire
            its
            assets) to holders of Common Stock as a dividend, stock repurchase, by
            way of
            return of capital or otherwise (including any dividend or distribution
            to the
            Borrower’s shareholders in cash or shares (or rights to acquire shares) of
            capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the
            Holder of this Note shall be entitled, upon any conversion of this Note
            after
            the date of record for determining shareholders entitled to such Distribution,
            to receive the amount of such assets which would have been payable to
            the Holder
            with respect to the shares of Common Stock issuable upon such conversion
            had
            such Holder been the holder of such shares of Common Stock on the record
            date
            for the determination of shareholders entitled to such
            Distribution.

           

           

          
            
              
              

            

            
              Page
                9

              
                

              

            

            
              
              

            

          

           

           

           

          (d)  Adjustment
            Due to Dilutive
            Issuance.  If,
            at any time
            when any Notes are issued and outstanding, the Borrower issues or sells,
            or in
            accordance with this Section 1.6(d) hereof is deemed to have issued or
            sold, any
            shares of Common Stock for no consideration or for a consideration per
            share
            (before deduction of reasonable expenses or commissions or underwriting
            discounts or allowances in connection therewith) less than the Fixed
            Conversion
            Price in effect on the date of such issuance (or deemed issuance) of
            such shares
            of Common Stock (a “Dilutive
            Issuance”), then immediately upon the Dilutive Issuance, the Fixed
            Conversion Price will be reduced to the amount of the consideration per
            share
            received by the Borrower in such Dilutive Issuance; provided that
            only
            one adjustment will be made for each Dilutive Issuance.

           

          The
            Borrower shall be deemed to have issued or sold shares of Common Stock
            if the
            Borrower in any manner issues or grants any warrants, rights or options,
            whether
            or not immediately exercisable, to subscribe for or to purchase Common
            Stock or
            other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such
            warrants, rights and options to purchase Common Stock or Convertible
            Securities
            are hereinafter referred to as “Options”) and the price
            per
            share for which Common Stock is issuable upon the exercise of such Options
            is
            less than the Fixed Conversion Price then in effect, then the Fixed Conversion
            Price shall be equal to such price per share.  For purposes of the
            preceding sentence, the “price per share for which Common Stock is issuable upon
            the exercise of such Options” is determined by dividing (i) the total amount, if
            any, received or receivable by the Borrower as consideration for the
            issuance or
            granting of all such Options, plus the minimum aggregate amount of additional
            consideration, if any, payable to the Borrower upon the exercise of all
            such
            Options, plus, in the case of Convertible Securities issuable upon the
            exercise
            of such Options, the minimum aggregate amount of additional consideration
            payable upon the conversion or exchange thereof at the time such Convertible
            Securities first become convertible or exchangeable, by (ii) the maximum
            total
            number of shares of Common Stock issuable upon the exercise of all such
            Options
            (assuming full conversion of Convertible Securities, if
            applicable).  No further adjustment to the Conversion Price will be
            made upon the actual issuance of such Common Stock upon the exercise
            of such
            Options or upon the conversion or exchange of Convertible Securities
            issuable
            upon exercise of such Options.

           

          Additionally,
            the Borrower shall be deemed to have issued or sold shares of Common
            Stock if
            the Borrower in any manner issues or sells any Convertible Securities,
            whether
            or not immediately convertible (other than where the same are issuable
            upon the
            exercise of Options), and the price per share for which Common Stock
            is issuable
            upon such conversion or exchange is less than the Fixed Conversion Price
            then in
            effect, then the Fixed Conversion Price shall be equal to such price
            per
            share.  For the purposes of the preceding sentence, the “price per
            share for which Common Stock is issuable upon such conversion or exchange” is
            determined by dividing (i) the total amount, if any, received or receivable
            by
            the Borrower as consideration for the issuance or sale of all such Convertible
            Securities, plus the minimum aggregate amount of additional consideration,
            if
            any, payable to the Borrower upon the conversion or exchange thereof
            at the time
            such Convertible Securities first become convertible or exchangeable,
            by (ii)
            the maximum total number of shares of Common Stock issuable upon the
            conversion
            or exchange of all such Convertible Securities.  No further adjustment
            to the Fixed Conversion Price will be made upon the actual issuance of
            such
            Common Stock upon conversion or exchange of such Convertible
            Securities.

           

           

           

          
            
              
              

            

            
              Page
                10

              
                

              

            

            
              
              

            

          

           

          (e)  Purchase
            Rights.  If,
            at any time
            when any Notes are issued and outstanding, the Borrower issues any convertible
            securities or rights to purchase stock, warrants, securities or other
            property
            (the “Purchase Rights”)
            pro rata to the record holders of any class of Common Stock, then the
            Holder of
            this Note will be entitled to acquire, upon the terms applicable to such
            Purchase Rights, the aggregate Purchase Rights which such Holder could
            have
            acquired if such Holder had held the number of shares of Common Stock
            acquirable
            upon complete conversion of this Note (without regard to any limitations
            on
            conversion contained herein) 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.

           

          (f)  Notice
            of
            Adjustments.  Upon
            the
            occurrence of each adjustment or readjustment of the Conversion Price
            as a
            result of the events described in this Section 1.6, the Borrower, at its
            expense, shall promptly compute such adjustment or readjustment and prepare
            and
            furnish to the Holder of a certificate setting forth such adjustment
            or
            readjustment and showing in detail the facts upon which such adjustment
            or
            readjustment is based.  The Borrower shall, upon the written request
            at any time of the Holder, furnish to such Holder a like certificate
            setting
            forth (i) such adjustment or readjustment, (ii) the Conversion Price
            at the time
            in effect and (iii) the number of shares of Common Stock and the amount,
            if any,
            of other securities or property which at the time would be received upon
            conversion of the Note.

           

          1.7  Trading
            Market
            Limitations.
Unless
            permitted by the applicable rules and regulations of the principal
            securities market on which the Common Stock is then listed or traded,
            in no
            event shall the Borrower issue upon conversion of or otherwise pursuant
            to this
            Note and the other Notes issued pursuant to the Purchase Agreement more
            than the
            maximum number of shares of Common Stock that the Borrower can issue
            pursuant to
            any rule of the principal United States securities market on which the
            Common
            Stock is then traded (the “Maximum Share Amount”), which
            shall be 19.99% of the total shares outstanding on the Closing Date (as
            defined
            in the Purchase Agreement), subject to equitable adjustment from time
            to time
            for stock splits, stock dividends, combinations, capital reorganizations
            and
            similar events relating to the Common Stock occurring after the date
            hereof.  Once the Maximum Share Amount has been issued (the date of
            which is hereinafter referred to as the “Maximum Conversion
            Date”), if
            the Borrower fails to eliminate any prohibitions under applicable law
            or the
            rules or regulations of any stock exchange, interdealer quotation system
            or
            other self-regulatory organization with jurisdiction over the Borrower
            or any of
            its securities on the Borrower’s ability to issue shares of Common Stock in
            excess of the Maximum Share Amount (a “Trading Market Prepayment
            Event”), in lieu of any further right to convert this Note, and in full
            satisfaction of the Borrower’s obligations under this Note, the Borrower shall
            pay to the Holder, within fifteen (15) business days of the Maximum Conversion
            Date (the “Trading Market
            Prepayment Date”), an amount equal to 130% times
            the sum of
            (a) the then
            outstanding principal amount of this Note immediately following the Maximum
            Conversion Date, plus (b)
            accrued and
            unpaid interest on the unpaid principal amount of this Note to the Trading
            Market Prepayment Date, plus (c)
            Default
            Interest, if any, on the amounts referred to in clause (a) and/or (b)
            above,
plus (d)
            any
            optional amounts that may be added thereto at the Maximum Conversion
            Date by the
            Holder in accordance with the terms hereof (the then outstanding principal
            amount of this Note immediately following the Maximum Conversion Date,
plus the
            amounts
            referred to in clauses (b), (c) and (d) above shall collectively be referred
            

           

           

          
            
              
              

            

            
              Page
                11

              
                

              

            

            
              
              

            

          

           

          to
            as the
“Remaining Convertible
            Amount”).  With respect to each Holder of Notes, the Maximum
            Share Amount shall refer to such Holder’s prorata
            share thereof
            determined in accordance with Section 4.8 below.  In the event that
            the sum of (x) the aggregate number of shares of Common Stock issued
            upon
            conversion of this Note and the other Notes issued pursuant to the Purchase
            Agreement plus
            (y) the aggregate number of shares of Common Stock that remain issuable
            upon
            conversion of this Note and the other Notes issued pursuant to the Purchase
            Agreement, represents at least one hundred percent (100%) of the Maximum
            Share
            Amount (the “Triggering
            Event”), the Borrower will use its best efforts to seek and obtain
            Shareholder Approval (or obtain such other relief as will allow conversions
            hereunder in excess of the Maximum Share Amount) as soon as practicable
            following the Triggering Event and before the Maximum Conversion
            Date.  As used herein, “Shareholder Approval” means
            approval by the shareholders of the Borrower to authorize the issuance
            of the
            full number of shares of Common Stock which would be issuable upon full
            conversion of the then outstanding Notes but for the Maximum Share
            Amount.

           

          1.8  Status
            as
            Shareholder.  Upon
            submission
            of a Notice of Conversion by a Holder, (i) the shares covered thereby
            (other
            than the shares, if any, which cannot be issued because their issuance
            would
            exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share
            Amount) shall be deemed converted into shares of Common Stock and (ii)
            the
            Holder’s rights as a Holder of such converted portion of this Note shall cease
            and terminate, excepting only the right to receive certificates for such
            shares
            of Common Stock and to any remedies provided herein or otherwise available
            at
            law or in equity to such Holder because of a failure by the Borrower
            to comply
            with the terms  of this Note.  Notwithstanding the
            foregoing, if a Holder has not received certificates for all shares of
            Common
            Stock prior to the tenth (10th) business day after the expiration of
            the
            Deadline with respect to a conversion of any portion of this Note for
            any
            reason, then (unless the Holder otherwise elects to retain its status
            as a
            holder of Common Stock by so notifying the Borrower) the Holder shall
            regain the
            rights of a Holder of this Note with respect to such unconverted portions
            of
            this Note and the Borrower shall, as soon as practicable, return such
            unconverted Note to the Holder or, if the Note has not been surrendered,
            adjust
            its records to reflect that such portion of this Note has not been
            converted.  In all cases, the Holder shall retain all of its rights
            and remedies (including, without limitation, (i) the right to receive
            Conversion
            Default Payments pursuant to Section 1.3 to the extent required thereby
            for such
            Conversion Default and any subsequent Conversion Default and (ii) the
            right to
            have the Conversion Price with respect to subsequent conversions determined
            in
            accordance with Section 1.3) for the Borrower’s failure to convert this
            Note.ARTICLE
            II.    CERTAIN COVENANTS

           

          2.1  Distributions
            on Capital
            Stock.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not
            without the Holder’s written consent (a) pay, declare or set apart for such
            payment, any dividend or other distribution (whether in cash, property
            or other
            securities) on shares of capital stock other than dividends on shares
            of Common
            Stock solely in the form of additional shares of Common Stock or (b)
            directly or
            indirectly or through any subsidiary make any other payment or distribution
            in
            respect of its capital stock except for distributions pursuant to any
            shareholders’ rights plan which is approved by a majority of the Borrower’s
            disinterested directors.

           

           

          
            
              
              

            

            
              Page
                12

              
                

              

            

            
              
              

            

          

           

           

          2.2  Restriction
            on Stock
            Repurchases.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not
            without the Holder’s written consent redeem, repurchase or otherwise acquire
            (whether for cash or in exchange for property or other securities or
            otherwise)
            in any one transaction or series of related transactions any shares of
            capital
            stock of the Borrower or any warrants, rights or options to purchase
            or acquire
            any such shares.

           

          2.3  Borrowings.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not,
            without the Holder’s written consent, create, incur, assume or suffer to exist
            any liability for borrowed money in excess of $50,000, except (a) borrowings
            in
            existence or committed on the date hereof and of which the Borrower has
            informed
            Holder in writing prior to the date hereof, (b) indebtedness to trade
            creditors
            or financial institutions incurred in the ordinary course of business
            or (c)
            borrowings, the proceeds of which shall be used to repay this Note.

           

          2.4  Sale
            of
            Assets.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not,
            without the Holder’s written consent, sell, lease or otherwise dispose of any
            significant portion of its assets outside the ordinary course of
            business.  Any consent to the disposition of any assets may be
            conditioned on a specified use of the proceeds of disposition.

           

          2.5  Advances
            and
            Loans.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not,
            without the Holder’s written consent, lend money, give credit or make advances
            to any person, firm, joint venture or corporation, including, without
            limitation, officers, directors, employees, subsidiaries and affiliates
            of the
            Borrower, except loans, credits or advances (a) in existence or committed
            on the
            date hereof and which the Borrower has informed Holder in writing prior
            to the
            date hereof, (b) made in the ordinary course of business or (c) not in
            excess of
            $50,000.

           

          2.6  Contingent
            Liabilities.  So
            long as the
            Borrower shall have any obligation under this Note, the Borrower shall
            not,
            without the Holder’s written consent, assume, guarantee, endorse, contingently
            agree to purchase or otherwise become liable upon the obligation of any
            person,
            firm, partnership, joint venture or corporation, except by the endorsement
            of
            negotiable instruments for deposit or collection and except assumptions,
            guarantees, endorsements and contingencies (a) in existence or committed
            on the
            date hereof and which the Borrower has informed Holder in writing prior
            to the
            date hereof, and (b) similar transactions in the ordinary course of
            business.

           

           

          ARTICLE
            III.     EVENTS OF DEFAULT

           

          If
            any of
            the following events of default (each, an “Event of Default”) shall
            occur:

           

          3.1  Failure
            to Pay Principal or
            Interest.  The
            Borrower
            fails to pay the principal hereof or interest thereon when due on this
            Note,
            whether at maturity, upon a Trading Market Prepayment Event pursuant
            to Section
            1.7, upon acceleration or otherwise;

           

           

          
            
              
              

            

            
              Page
                13

              
                

              

            

            
              
              

            

          

           

          3.2  Conversion
            and the
            Shares.  The
            Borrower
            fails to issue shares of Common Stock to the Holder (or announces or
            threatens
            that it will not honor its obligation to do so) upon exercise by the
            Holder of
            the conversion rights of the Holder in accordance with the terms of this
            Note
            (for a period of at least sixty (60) days, if such failure is solely
            as a result
            of the circumstances governed by Section 1.3 and the Borrower is using
            its best
            efforts to authorize a sufficient number of shares of Common Stock as
            soon as
            practicable), fails to transfer or cause its transfer agent to transfer
            (electronically or in certificated form) any certificate for shares of
            Common
            Stock issued to the Holder upon conversion of or otherwise pursuant to
            this Note
            as and when required by this Note or the Registration Rights Agreement,
            or fails
            to remove any restrictive legend (or to withdraw any stop transfer instructions
            in respect thereof) on any certificate for any shares of Common Stock
            issued to
            the Holder upon conversion of or otherwise pursuant to this Note as and
            when
            required by this Note or the Registration Rights Agreement (or makes
            any
            announcement, statement or threat that it does not intend to honor the
            obligations described in this paragraph) and any such failure shall continue
            uncured (or any announcement, statement or threat not to honor its obligations
            shall not be rescinded in writing) for ten (10) days after the Borrower
            shall
            have been notified thereof in writing by the Holder;

           

          3.3  Failure
            to Timely File
            Registration or Effect Registration.  The
            Borrower
            fails to file the Registration Statement within sixty (60) days following
            the
            Closing Date (as defined in the Purchase Agreement) or obtain effectiveness
            with
            the Securities and Exchange Commission of the Registration Statement
            within two
            hundred fifty (250) days following the Closing Date (as defined in the
            Purchase
            Agreement) or such Registration Statement lapses in effect (or sales
            cannot
            otherwise be made thereunder effective, whether by reason of the Borrower’s
            failure to amend or supplement the prospectus included therein in accordance
            with the Registration Rights Agreement or otherwise) for more than twenty
            (20)
            consecutive days or forty (40) days in any twelve month period after
            the
            Registration Statement becomes effective;

           

          3.4  Breach
            of
            Covenants.  The
            Borrower
            breaches any material covenant or other material term or condition contained
            in
            Sections 1.3, 1.6 or 1.7 of this Note, or Sections 4(c), 4(e), 4(h),
            4(i), 4(j)
            or 5 of the Purchase Agreement and such breach continues for a period
            of ten
            (10) days after written notice thereof to the Borrower from the
            Holder;

           

          3.5  Breach
            of Representations
            and Warranties.  Any
            representation or warranty of the Borrower made herein or in any agreement,
            statement or certificate given in writing pursuant hereto or in connection
            herewith (including, without limitation, the Purchase Agreement and the
            Registration Rights Agreement), shall be false or misleading in any material
            respect when made and the breach of which has (or with the passage of
            time will
            have) a material adverse effect on the rights of the Holder with respect
            to this
            Note, the Purchase Agreement or the Registration Rights Agreement;

           

          3.6  Receiver
            or
            Trustee.  The
            Borrower or
            any subsidiary of the Borrower shall make an assignment for the benefit
            of
            creditors, or apply for or consent to the appointment of a receiver or
            trustee
            for it or for a substantial part of its property or business, or such
            a receiver
            or trustee shall otherwise be appointed;

           

           

          
            
              
              

            

            
              Page
                14

              
                

              

            

            
              
              

            

          

           

          3.7  Judgments.  Any
            money
            judgment, writ or similar process shall be entered or filed against the
            Borrower
            or any subsidiary of the Borrower or any of its property or other assets
            for
            more than $50,000, and shall remain unvacated, unbonded or unstayed for
            a period
            of twenty (20) days unless otherwise consented to by the Holder, which
            consent
            will not be unreasonably withheld;

           

          3.8  Bankruptcy.  Bankruptcy,
            insolvency, reorganization or liquidation proceedings or other proceedings
            for
            relief under any bankruptcy law or any law for the relief of debtors
            shall be
            instituted by or against the Borrower or any subsidiary of the
            Borrower;

           

          3.9  Delisting
            of Common
            Stock.  The
            Borrower
            shall fail to maintain the listing of the Common Stock on at least one
            of the
            OTCBB or an equivalent replacement exchange, the Nasdaq National Market,
            the
            Nasdaq SmallCap Market, the New York Stock Exchange, or the American
            Stock
            Exchange; or

           

          3.10  Default
            Under Other
            Notes.  An
            Event of
            Default has occurred and is continuing under any of the other Notes issued
            pursuant to the Purchase Agreement, then, upon the occurrence and during
            the
            continuation of any Event of Default specified in Section 3.1, 3.2, 3.3,
            3.4,
            3.5, 3.7, 3.9, or 3.10, at the option of the Holders of a majority of
            the
            aggregate principal amount of the outstanding Notes issued pursuant to
            the
            Purchase Agreement exercisable through the delivery of written notice
            to the
            Borrower by such Holders (the “Default Notice”), and upon
            the
            occurrence of an Event of Default specified in Section 3.6 or 3.8, the
            Notes
            shall become immediately due and payable and the Borrower shall pay to
            the
            Holder, in full satisfaction of its obligations hereunder, an amount
            equal to
            the greater of (i) 130% times the
sum
            of (w) the then
            outstanding principal amount of this Note plus (x)
            accrued and
            unpaid interest on the unpaid principal amount of this Note to the date
            of
            payment (the “Mandatory
            Prepayment Date”) plus
            (y) Default
            Interest, if any, on the amounts referred to in clauses (w) and/or (x)
plus (z)
            any amounts
            owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant
            to
            Section 2(c) of the Registration Rights Agreement (the then outstanding
            principal amount of this Note to the date of payment plus the
            amounts
            referred to in clauses (x), (y) and (z) shall collectively be known as
            the
“Default Sum”) or (ii)
            the “parity value” of the Default Sum to be prepaid, where parity value means
            (a) the highest number of shares of Common Stock issuable upon conversion
            of or
            otherwise pursuant to such Default Sum in accordance with Article I,
            treating
            the Trading Day immediately preceding the Mandatory Prepayment Date as
            the
“Conversion Date” for purposes of determining the lowest applicable Conversion
            Price, unless the Default Event arises as a result of a breach in respect
            of a
            specific Conversion Date in which case such Conversion Date shall be
            the
            Conversion Date), multiplied
            by (b) the
            highest Closing Price for the Common Stock during the period beginning
            on the
            date of first occurrence of the Event of Default and ending one day prior
            to the
            Mandatory Prepayment Date (the “Default Amount”) and all other
            amounts payable hereunder shall immediately become due and payable, all
            without
            demand, presentment or notice, all of which hereby are expressly waived,
            together with all costs, including, without limitation, legal fees and
            expenses,
            of collection, and the Holder shall be entitled to exercise all other
            rights and
            remedies available at law or in equity.  If the Borrower fails to pay
            the Default Amount within five (5) business days of written notice that
            such
            amount is due and payable, then the Holder shall have the right at any
            time, so
            long as the Borrower remains in default (and so long and to the extent
            that
            there are sufficient authorized shares), to require the Borrower, upon
            written
            notice, to immediately issue, in lieu of the Default Amount, 

           

           

          
            
              
              

            

            
              Page
                15

              
                

              

            

            
              
              

            

          

           

           

          the
            number of shares of Common Stock of the Borrower equal to the Default
            Amount
            divided by the Conversion Price then in effect.

           

          ARTICLE
            IV.     MISCELLANEOUS

           

          4.1  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 privileges.  All
            rights and remedies existing hereunder are cumulative to, and not exclusive
            of,
            any rights or remedies otherwise available.

           

          4.2  Notices.  Any
            notice herein
            required or permitted to be given shall be in writing and may be personally
            served or delivered by courier or sent by United States mail and shall
            be deemed
            to have been given upon receipt if personally served (which shall include
            telephone line facsimile transmission) or sent by courier or three (3)
            days
            after being deposited in the United States mail, certified, with postage
            pre-paid and properly addressed, if sent by mail.  For the purposes
            hereof, the address of the Holder shall be as shown on the records of
            the
            Borrower; and the address of the Borrower shall be 22600 Hall Road, Suite
            205
            Clinton Township, MI 48036, facsimile number: 586-468-8768.  Both the
            Holder and the Borrower may change the address for service by service
            of written
            notice to the other as herein provided.

           

          4.3  Amendments.  This
            Note and any
            provision hereof may only be amended by an instrument in writing signed
            by the
            Borrower and the Holder.  The term “Note” and all reference thereto,
            as used throughout this instrument, shall mean this instrument (and the
            other
            Notes issued pursuant to the Purchase Agreement) as originally executed,
            or if
            later amended or supplemented, then as so amended or supplemented.

           

          4.4  Assignability.  This
            Note shall
            be binding upon the Borrower and its successors and assigns, and shall
            inure to
            be the benefit of the Holder and its successors and assigns.  Each
            transferee of this Note must be an “accredited investor” (as defined in Rule
            501(a) of the 1933 Act).  Notwithstanding anything in this Note to the
            contrary, this Note may be pledged as collateral in connection with a
bonafide
            margin account
            or other lending arrangement.

           

          4.5  Cost
            of
            Collection.  If
            default is
            made in the payment of this Note, the Borrower shall pay the Holder hereof
            costs
            of collection, including reasonable attorneys’ fees.

           

          4.6  Governing
            Law.  THIS
            NOTE SHALL
            BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
            THE STATE
            OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
            WITHIN
            SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE
            BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
            FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE
            ARISING
            UNDER THIS NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR
            THE
            TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY
            WAIVE

           

           

           

          
            
              
              

            

            
              Page
                16

              
                

              

            

            
              
              

            

          

           

           

           

          THE
            DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
            PROCEEDING.  BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
            PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
            SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
            PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
            PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
            A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL
            BE
            CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH
            JUDGMENT
            OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
            ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES
            AND
            EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
            CONNECTION WITH SUCH DISPUTE.

           

          4.7  Certain
            Amounts.  Whenever
            pursuant
            to this Note the Borrower is required to pay an amount in excess of the
            outstanding principal amount (or the portion thereof required to be paid
            at that
            time) plus accrued and unpaid interest plus Default Interest on such
            interest,
            the Borrower and the Holder agree that the actual damages to the Holder
            from the
            receipt of cash payment on this Note may be difficult to determine and
            the
            amount to be so paid by the Borrower represents stipulated damages and
            not a
            penalty and is intended to compensate the Holder in part for loss of
            the
            opportunity to convert this Note and to earn a return from the sale of
            shares of
            Common Stock acquired upon conversion of this Note at a price in excess
            of the
            price paid for such shares pursuant to this Note.  The Borrower and
            the Holder hereby agree that such amount of stipulated damages is not
            plainly
            disproportionate to the possible loss to the Holder from the receipt
            of a cash
            payment without the opportunity to convert this Note into shares of Common
            Stock.

           

          4.8  Allocations
            of Maximum Share
            Amount and Reserved Amount.  The
            Maximum Share
            Amount and Reserved Amount shall be allocated pro rata among the Holders
            of
            Notes based on the principal amount of such Notes issued to each
            Holder.  Each increase to the Maximum Share Amount and Reserved Amount
            shall be allocated pro rata among the Holders of Notes based on the principal
            amount of such Notes held by each Holder at the time of the increase
            in the
            Maximum Share Amount or Reserved Amount.  In the event a Holder shall
            sell or otherwise transfer any of such Holder’s Notes, each transferee shall be
            allocated a pro rata portion of such transferor’s Maximum Share Amount and
            Reserved Amount.  Any portion of the Maximum Share Amount or Reserved
            Amount which remains allocated to any person or entity which does not
            hold any
            Notes shall be allocated to the remaining Holders of Notes, pro rata
            based on
            the principal amount of such Notes then held by such Holders.

           

          4.9  Damages
            Shares.  The
            shares of
            Common Stock that may be issuable to the Holder pursuant to Sections
            1.3 and
            1.4(g) hereof and pursuant to Section 2(c) of the Registration Rights
            Agreement
            (“Damages Shares”) shall
            be treated as Common Stock issuable upon conversion of this Note for
            all
            purposes hereof and shall be subject to all of the limitations and afforded
            all
            of the rights of the other shares of Common Stock issuable hereunder,
            including
            without limitation, the right to be included in the Registration Statement
            filed
            pursuant to the Registration Rights Agreement.  For purposes of
            calculating interest payable on the outstanding principal amount hereof,
            except
            as otherwise provided herein, amounts convertible into Damages

           

           

           

          
            
              
              

            

            
              Page
                17

              
                

              

            

            
              
              

            

          

           

           

           Shares
            (“Damages Amounts”)
            shall not bear interest but must be converted prior to the conversion
            of any
            outstanding principal amount hereof, until the outstanding Damages Amounts
            is
            zero.

           

          4.10  Denominations.  At
            the request of
            the Holder, upon surrender of this Note, the Borrower shall promptly
            issue new
            Notes in the aggregate outstanding principal amount hereof, in the form
            hereof,
            in such denominations of at least $50,000 as the Holder shall
            request.

           

          4.11  Purchase
            Agreement.  By
            its acceptance
            of this Note, each Holder agrees to be bound by the applicable terms
            of the
            Purchase Agreement.

           

          4.12  Notice
            of Corporate
            Events.  Except
            as
            otherwise provided below, the Holder of this Note shall have no rights
            as a
            Holder of Common Stock unless and only to the extent that it converts
            this Note
            into Common Stock.  The Borrower shall provide the Holder with prior
            notification of any meeting of the Borrower’s shareholders (and copies of proxy
            materials and other information sent to shareholders).  In the event
            of any taking by the Borrower of a record of its shareholders for the
            purpose of
            determining shareholders who are entitled to receive payment of any dividend
            or
            other distribution, any right to subscribe for, purchase or otherwise
            acquire
            (including by way of merger, consolidation, reclassification or
            recapitalization) any share of any class or any other securities or property,
            or
            to receive any other right, or for the purpose of determining shareholders
            who
            are entitled to vote in connection with any proposed sale, lease or conveyance
            of all or substantially all of the assets of the Borrower or any proposed
            liquidation, dissolution or winding up of the Borrower, the Borrower
            shall mail
            a notice to the Holder, at least twenty (20) days prior to the record
            date
            specified therein (or thirty (30) days prior to the consummation of the
            transaction or event, whichever is earlier), of the date on which any
            such
            record is to be taken for the purpose of such dividend, distribution,
            right or
            other event, and a brief statement regarding the amount and character
            of such
            dividend, distribution, right or other event to the extent known at such
            time.  The Borrower shall make a public announcement of any event
            requiring notification to the Holder hereunder substantially simultaneously
            with
            the notification to the Holder in accordance with the terms of this Section
            4.12.

           

          4.13  Remedies.  The
            Borrower
            acknowledges that a breach by it of its obligations hereunder will cause
            irreparable harm to the Holder, by vitiating the intent and purpose of
            the
            transaction contemplated hereby.  Accordingly, the Borrower
            acknowledges that the remedy at law for a breach of its obligations under
            this
            Note will be inadequate and agrees, in the event of a breach or threatened
            breach by the Borrower of the provisions of this Note, that the Holder
            shall be
            entitled, in addition to all other available remedies at law or in equity,
            and
            in addition to the penalties assessable herein, to an injunction or injunctions
            restraining, preventing or curing any breach of this Note and to enforce
            specifically the terms and provisions thereof, without the necessity
            of showing
            economic loss and without any bond or other security being
            required.

           

           

          
            
              
              

            

            
              Page
                18

              
                

              

            

            
              
              

            

          

           

           

           

          ARTICLE
            V.     CALL OPTION

           

          5.1  Call
            Option.  Notwithstanding
            anything to the contrary contained in this Article V, so long as (i) no
            Event of Default or Trading Market Prepayment Event shall have occurred
            and be
            continuing, (ii) the Borrower has a sufficient number of authorized shares
            of Common Stock reserved for issuance upon full conversion of the Notes,
            then at
            any time after the Issue Date, and (iii) the Common Stock is trading at or
            below $.04 per share, the Borrower shall have the right, exercisable
            on not less
            than ten (10) Trading Days prior written notice to the Holders of the
            Notes
            (which notice may not be sent to the Holders of the Notes until the Borrower
            is
            permitted to prepay the Notes pursuant to this Section 5.1), to prepay
            all of
            the outstanding Notes in accordance with this Section 5.1.  Any notice
            of prepayment hereunder (an “Optional Prepayment”) shall be
            delivered to the Holders of the Notes at their registered addresses appearing
            on
            the books and records of the Borrower and shall state (1) that the Borrower
            is
            exercising its right to prepay all of the Notes issued on the Issue Date
            and (2)
            the date of prepayment (the “Optional Prepayment
            Notice”).  On the date fixed for prepayment (the “Optional Prepayment
            Date”),
            the Borrower shall make payment of the Optional Prepayment Amount (as
            defined
            below) to or upon the order of the Holders as specified by the Holders
            in
            writing to the Borrower at least one (1) business day prior to the Optional
            Prepayment Date.  If the Borrower exercises its right to prepay the
            Notes, the Borrower shall make payment to the holders of an amount in
            cash (the
“Optional Prepayment
            Amount”) equal to either (i) 135% (for prepayments occurring within
            thirty (30) days of the Issue Date), (ii) 145% for prepayments occurring
            between thirty-one (31) and ninety (90) days of the Issue Date, or (iii)
            150%
            (for prepayments occurring after the ninetieth (90th)
            day following
            the Issue Date), multiplied by the sum of (w) the then outstanding principal
            amount of this Note plus (x) accrued
            and unpaid interest on the unpaid principal amount of this Note to the
            Optional
            Prepayment Date plus (y)
            Default
            Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z)
            any amounts
            owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant
            to
            Section 2(c) of the Registration Rights Agreement (the then outstanding
            principal amount of this Note to the date of payment plus the
            amounts
            referred to in clauses (x), (y) and (z) shall collectively be known as
            the
“Optional Prepayment
            Sum”). Notwithstanding notice of an Optional Prepayment, the Holders
            shall at all times prior to the Optional Prepayment Date maintain the
            right to
            convert all or any portion of the Notes in accordance with Article I
            and any
            portion of Notes so converted after receipt of an Optional Prepayment
            Notice and
            prior to the Optional Prepayment Date set forth in such notice and payment
            of
            the aggregate Optional Prepayment Amount shall be deducted from the principal
            amount of Notes which are otherwise subject to prepayment pursuant to
            such
            notice.  If the Borrower delivers an Optional Prepayment Notice and
            fails to pay the Optional Prepayment Amount due to the Holders of the
            Notes
            within two (2) business days following the Optional Prepayment Date,
            the
            Borrower shall forever forfeit its right to redeem the Notes pursuant
            to this
            Section 5.1.

           

          

           

          [REMAINDER
            OF PAGE INTENTIONALLY LEFT BLANK]

           

           

          
            
              
              

            

            
              Page
                19

              
                

              

            

            
              
              

            

          

           

           

          IN
            WITNESS WHEREOF, Borrower
            has caused this Note to be signed in its name by its duly authorized
            officer as
            of the date first above written.

           

          

          MIDNIGHT
            HOLDINGS GROUP,
            INC.

          

           

          By:
/s/Nicholas
            Cocco                 

          Nicholas
            Cocco                       

          Chief
            Executive Officer          

           

           

           

           

           

           

          
            
              
              

            

            
              Page
                20

              
                

              

            

            
              
              

            

          

           

           

           

           

          EXHIBIT
            A

           

          NOTICE
            OF
            CONVERSION

           

          (To
            be
            Executed by the Registered Holder

           

          in
            order
            to Convert the Notes)

           

          The
            undersigned hereby irrevocably elects to convert $__________ principal
            amount of
            the Note (defined below) into shares of common stock, par value $.00005
            per
            share (“Common Stock”),
            of Midnight Holdings Group, Inc., a Delaware corporation (the “Borrower”) according
            to the
            conditions of the convertible Notes of the Borrower dated as of October
            15, 2007
            (the “Notes”), as of the date written below.  If securities are to be
            issued in the name of a person other than the undersigned, the undersigned
            will
            pay all transfer taxes payable with respect thereto and is delivering
            herewith
            such certificates.  No fee will be charged to the Holder for any
            conversion, except for transfer taxes, if any.  A copy of each Note is
            attached hereto (or evidence of loss, theft or destruction
            thereof).

           

          The
            Borrower shall electronically transmit the Common Stock issuable pursuant
            to
            this Notice of Conversion to the account of the undersigned or its nominee
            with
            DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

           

          Name
            of
            DTC Prime
            Broker:                                                                                                                     

          Account
            Number:                                                                                                                     

           

          In
            lieu
            of receiving shares of Common Stock issuable pursuant to this Notice
            of
            Conversion by way of a DWAC Transfer, the undersigned hereby requests
            that the
            Borrower issue a certificate or certificates for the number of shares
            of Common
            Stock set forth below (which numbers are based on the Holder’s calculation
            attached hereto) in the name(s) specified immediately below or, if additional
            space is necessary, on an attachment hereto:

           

          Name:                                                                                                                     

          Address:                                                                                                                     

           

          The
            undersigned represents and warrants that all offers and sales by the
            undersigned
            of the securities issuable to the undersigned upon conversion of the
            Notes shall
            be made pursuant to registration of the securities under the Securities
            Act of
            1933, as amended (the “Act”), or pursuant
            to an
            exemption from registration under the Act.

           

          Date
            of
            Conversion:___________________________

          Applicable
            Conversion Price:____________________

          Number
            of
            Shares of Common Stock to be Issued Pursuant to

          Conversion
            of the Notes:______________

          Signature:___________________________________

          Name:______________________________________

          Address:____________________________________

           

          The
            Borrower shall issue and deliver shares of Common Stock to an overnight
            courier
            not later than three business days following receipt of the original
            Note(s) to
            be converted, and shall make payments pursuant to the Notes for the number
            of
            business days such issuance and delivery is late.

           

           

           

           

          
            
              
              

            

            
              Page
                21

              
                

              

            

            
              
              

            

          

           

        

         

      

       

      
        

        

      

      
         

        
          THE
            SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
            THE
            SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THE SECURITIES MAY
            NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
            STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL
            IN FORM,
            SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
            THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT
            TO RULE
            144 OR REGULATION S UNDER SAID ACT.

           

        

        CALLABLE
          SECURED CONVERTIBLE
          NOTE

        
          
             

            Clinton
              Township, Michigan

             

            October
              15,
              2007                                                                                                    

             $3,600

             

            FOR
              VALUE RECEIVED, MIDNIGHT
              HOLDINGS GROUP, INC.,
a Delaware corporation (hereinafter called the “Borrower”),
              hereby promises to
              pay to the order of New Millennium Capital Partners II, LLC or registered
              assigns (the “Holder”)
              the sum of $3,600 on October 15, 2010 (the “Maturity Date”), and to
              pay
              interest on the unpaid principal balance hereof at the rate of ten
              percent (10%)
              per annum from October 15, 2007 (the “Issue Date”) until the
              same
              becomes due and payable, whether at maturity or upon acceleration or
              by
              prepayment or otherwise.  Any amount of principal or interest on this
              Note which is not paid when due shall bear interest at the rate of
              fifteen
              percent (15%) per annum from the due date thereof until the same is
              paid (“Default
              Interest”).  Interest shall commence accruing on the issue
              date, shall be computed on the basis of a 365-day year and the actual
              number of
              days elapsed and shall be payable, quarterly on March 31, June 30,
              September 30 and December 31 of each year beginning on the last day of the
              first full quarter after Issue Date.  All payments due hereunder (to
              the extent not converted into common stock, $.00005 par value per share,
              of the
              Borrower (the “Common
              Stock”) in accordance with the terms hereof) shall be made in lawful
              money of the United States of America.  All payments shall be made at
              such address as the Holder shall hereafter give to the Borrower by
              written
              notice made in accordance with the provisions of this Note.  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 interest payment date
              which is
              not the 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.  As used in this Note, the term
“business day” shall mean any day other than a Saturday, Sunday or a day on
              which commercial banks in the city of New York, New York are authorized
              or
              required by law or executive order to 

             

             

             

             

            
               

               

              
                
                  
                  

                

                
                  Page
                    1

                  
                    

                  

                

                
                  
                  

                

              

               

              remain
                closed.  Each capitalized term used herein, and not otherwise defined,
                shall have the meaning ascribed thereto in that certain Securities
                Purchase
                Agreement, dated October 15, 2007, pursuant to which this Note was
                originally
                issued (the “Purchase
                Agreement”).

               

              This
                Note
                is free from all taxes, liens, claims and encumbrances with respect
                to the issue
                thereof and shall not be subject to preemptive rights or other similar
                rights of
                shareholders of the Borrower and will not impose personal liability
                upon the
                holder thereof.  The obligations of the Borrower under this Note shall
                be secured by that certain Security Agreement by and between the
                Borrower and
                the Holder of even date herewith.

               

              The
                following terms shall apply to this Note:

               

               

              ARTICLE
                I.    CONVERSION RIGHTS

               

              1.1  Conversion
                Right.  The
                Holder shall
                have the right from time to time, and at any time on or prior to
                the earlier of
                (i) the Maturity Date and (ii) the date of payment of the Default
                Amount (as
                defined in Article III) pursuant to Section 1.6(a) or Article III,
                the Optional
                Prepayment Amount (as defined in Section 5.1) or (iii) any payments
                pursuant to
                Section 1.7, each in respect of the remaining outstanding principal
                amount of
                this Note to convert all or any part of the outstanding and unpaid
                principal
                amount of this Note into fully paid and non-assessable shares of
                Common Stock,
                as such Common Stock exists on the Issue Date, or any shares of capital
                stock or
                other securities of the Borrower into which such Common Stock shall
                hereafter be
                changed or reclassified at the conversion price  (the “Conversion Price”) determined
                as provided herein (a “Conversion”); provided,
however,
                that in no
                event shall the Holder be entitled to convert any portion of this
                Note in excess
                of that portion of this Note upon conversion of which the sum of
                (1) the number
                of shares of Common Stock beneficially owned by the Holder and its
                affiliates
                (other than shares of Common Stock which may be deemed beneficially
                owned
                through the ownership of the unconverted portion of the Notes or
                the unexercised
                or unconverted portion of any other security of the Borrower (including,
                without
                limitation, the warrants issued by the Borrower pursuant to the Purchase
                Agreement) subject to a limitation on conversion or exercise analogous
                to the
                limitations contained herein) and (2) the number of shares of Common
                Stock
                issuable upon the conversion of the portion of this Note with respect
                to which
                the determination of this proviso is being made, would result in
                beneficial
                ownership by the Holder and its affiliates of more than 4.9% of the
                outstanding
                shares of Common Stock.  For purposes of the proviso to the
                immediately preceding sentence, beneficial ownership shall be determined
                in
                accordance with Section 13(d) of the Securities Exchange Act of 1934,
                as
                amended, and Regulations 13D-G thereunder, except as otherwise provided
                in
                clause (1) of such proviso.  The number of shares of Common Stock to
                be issued upon each conversion of this Note shall be determined by
                dividing the
                Conversion Amount (as defined below) by the applicable Conversion
                Price then in
                effect on the date specified in the notice of conversion, in the
                form attached
                hereto as Exhibit A (the “Notice of Conversion”),
                delivered to the Borrower by the Holder in accordance with Section
                1.4 below;
                provided that the Notice of Conversion is submitted by facsimile
                (or by other
                means resulting in, or reasonably expected to result in, notice)
                to the Borrower
                before 6:00 p.m., New York, New York time on such conversion date
                (the “Conversion
                Date”).  The term “Conversion
                Amount” means, with
                respect to any conversion of this Note, the sum of (1) the principal
                amount of
                this Note to be converted in such 

               

               

               

              
                
                  
                  

                

                
                  Page
                    2

                  
                    

                  

                

                
                  
                  

                

              

               

               

              conversion
                plus
                (2)
                accrued and unpaid interest, if any, on such principal amount at
                the interest
                rates provided in this Note to the Conversion Date plus
                (3) Default
                Interest, if any, on the amounts referred to in the immediately preceding
                clauses (1) and/or (2) plus
                (4) at the
                Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3
                and
                1.4(g) hereof or pursuant to Section 2(c) of that certain Registration
                Rights
                Agreement, dated as of October 15, 2007, executed in connection with
                the initial
                issuance of this Note and the other Notes issued on the Issue Date
                (the “Registration Rights
                Agreement”).

               

              1.2  Conversion
                Price.

               

              (a)  Calculation
                of Conversion
                Price.  The
                Conversion
                Price shall be the lesser of (i) the Variable Conversion Price (as
                defined
                herein) and (ii) the Fixed Conversion Price (as defined herein) (subject,
                in
                each case, to equitable adjustments for stock splits, stock dividends
                or rights
                offerings by the Borrower relating to the Borrower’s securities or the
                securities of any subsidiary of the Borrower, combinations, recapitalization,
                reclassifications, extraordinary distributions and similar
                events).  The “Variable Conversion
                Price”
shall mean the Applicable Percentage (as defined herein) multiplied
                by the
                Market Price (as defined herein).  “Market Price”
means the
                average of the lowest three (3) Trading Prices (as defined below)
                for the Common
                Stock during the twenty (20) Trading Day period ending one Trading
                Day prior to
                the date the Conversion Notice is sent by the Holder to the Borrower
                via
                facsimile (the “Conversion
                Date”).  “Trading
                Price” means, for any
                security as of any date, the intraday trading price on the Over-the-Counter
                Bulletin Board (the “OTCBB”) as reported
                by a
                reliable reporting service mutually acceptable to and hereafter designated
                by
                Holders of a majority in interest of the Notes and the Borrower or,
                if the OTCBB
                is not the principal trading market for such security, the intraday
                trading
                price of such security on the principal securities exchange or trading
                market
                where such security is listed or traded or, if no intraday trading
                price of such
                security is available in any of the foregoing manners, the average
                of the
                intraday trading prices of any market makers for such security that
                are listed
                in the “pink sheets” by the National Quotation Bureau, Inc.  If the
                Trading Price cannot be calculated for such security on such date
                in the manner
                provided above, the Trading Price shall be the fair market value
                as mutually
                determined by the Borrower and the holders of a majority in interest
                of the
                Notes being converted for which the calculation of the Trading Price
                is required
                in order to determine the Conversion Price of such Notes.  “Trading Day”
shall mean
                any
                day on which the Common Stock is traded for any period on the OTCBB,
                or on the
                principal securities exchange or other securities market on which
                the Common
                Stock is then being traded.  “Applicable Percentage”
shall
                mean 25%; provided, however, that the Applicable Percentage shall
                be increased
                to (i) 30% in the event that the Registration Statement (as defined
                in the
                Registration Rights Agreement) is filed on or before the Filing Date
                (as defined
                in the Registration Rights Agreement) and (ii) 40% in the event that
                the
                Registration Statement (as defined in the Registration Rights Agreement)
                becomes
                effective on or before the Effectiveness Deadline) as defined in
                the
                Registration Rights Agreement).  The “Fixed Conversion
                Price” shall
                mean $.02.

               

              (b)  Conversion
                Price During
                Major Announcements.  Notwithstanding
                anything contained in Section 1.2(a) to the contrary, in the event
                the Borrower
                (i) makes a public announcement that it intends to consolidate or
                merge with any
                other corporation (other than a merger in which the Borrower is the
                surviving or
                continuing corporation and its capital stock is unchanged) or sell
                or transfer
                all or substantially all of the 

               

               

               

              
                
                  
                  

                

                
                  Page
                    3

                  
                    

                  

                

                
                  
                  

                

              

               

               

              assets
                of
                the Borrower or (ii) any person, group or entity (including the Borrower)
                publicly announces a tender offer to purchase 50% or more of the
                Borrower’s
                Common Stock (or any other takeover scheme) (the date of the announcement
                referred to in clause (i) or (ii) is hereinafter referred to as
                the  “Announcement
                Date”), then the Conversion Price shall, effective upon the Announcement
                Date and continuing through the Adjusted Conversion Price Termination
                Date (as
                defined below), be equal to the lower of (x) the Conversion Price
                which would
                have been applicable for a Conversion occurring on the Announcement
                Date and (y)
                the Conversion Price that would otherwise be in effect. From and
                after the
                Adjusted Conversion Price Termination Date, the Conversion Price
                shall be
                determined as set forth in this Section 1.2(a).  For purposes
                hereof,  “Adjusted
                Conversion Price Termination Date” shall mean, with respect to any
                proposed transaction or tender offer (or takeover scheme) for which
                a public
                announcement as contemplated by this Section 1.2(b) has been made,
                the date upon
                which the Borrower (in the case of clause (i) above) or the person,
                group or
                entity (in the case of clause (ii) above) consummates or publicly
                announces the
                termination or abandonment of the proposed transaction or tender
                offer (or
                takeover scheme) which caused this Section 1.2(b) to become
                operative.

               

              1.3  Authorized
                Shares.  Subject
                to the
                completion of the Charter Amendment Actions (as defined in the Purchase
                Agreement), the Borrower covenants that during the period the conversion
                right
                exists, the Borrower will reserve from its authorized and unissued
                Common Stock
                a sufficient number of shares, free from preemptive rights, to provide
                for the
                issuance of Common Stock upon the full conversion of this Note and
                the other
                Notes issued pursuant to the Purchase Agreement.  The Borrower is
                required at all times to have authorized and reserved two times the
                number of
                shares that is actually issuable upon full conversion of the Notes
                (based on the
                Conversion Price of the Notes or the Exercise Price of the Warrants
                in effect
                from time to time) (the “Reserved
                Amount”).  The Reserved Amount shall be increased from time to
                time in accordance with the Borrower’s obligations pursuant to Section 4(h) of
                the Purchase Agreement.  The Borrower represents that upon issuance,
                such shares will be duly and validly issued, fully paid and
                non-assessable.  In addition, if the Borrower shall issue any
                securities or make any change to its capital structure which would
                change the
                number of shares of Common Stock into which the Notes shall be convertible
                at
                the then current Conversion Price, the Borrower shall at the same
                time make
                proper provision so that thereafter there shall be a sufficient number
                of shares
                of Common Stock authorized and reserved, free from preemptive rights,
                for
                conversion of the outstanding Notes.  The Borrower (i) acknowledges
                that it has irrevocably instructed its transfer agent to issue certificates
                for
                the Common Stock issuable upon conversion of this Note, and (ii) agrees
                that its issuance of this Note shall constitute full authority to
                its officers
                and agents who are charged with the duty of executing stock certificates
                to
                execute and issue the necessary certificates for shares of Common
                Stock in
                accordance with the terms and conditions of this Note.

               

              If,
                at
                any time a Holder of this Note submits a Notice of Conversion, and
                the Borrower
                does not have sufficient authorized but unissued shares of Common
                Stock
                available to effect such conversion in accordance with the provisions
                of this
                Article I (a “Conversion
                Default”), subject to Section 4.8, the Borrower shall issue to the
                Holder
                all of the shares of Common Stock which are then available to effect
                such
                conversion.  The portion of this Note which the Holder included in its
                Conversion Notice and which exceeds the amount which is then convertible
                into
                available shares of Common Stock (the “Excess Amount”) shall,
                

               

               

               

              
                
                  
                  

                

                
                  Page
                    4

                  
                    

                  

                

                
                  
                  

                

              

               

               

               

              notwithstanding
                anything to the contrary contained herein, not be convertible into
                Common Stock
                in accordance with the terms hereof until (and at the Holder’s option at any
                time after) the date additional shares of Common Stock are authorized
                by the
                Borrower to permit such conversion, at which time the Conversion
                Price in
                respect thereof shall be the lesser of (i) the Conversion Price on
                the
                Conversion Default Date (as defined below) and (ii) the Conversion
                Price on the
                Conversion Date thereafter elected by the Holder in respect
                thereof.  In addition, the Borrower shall pay to the Holder payments
                (“Conversion Default
                Payments”) for a Conversion Default in the amount of (x) the sum
                of (1) the then
                outstanding principal amount of this Note plus
                (2) accrued and
                unpaid interest on the unpaid principal amount of this Note through
                the
                Authorization Date (as defined below) plus
                (3) Default
                Interest, if any, on the amounts referred to in clauses (1) and/or
                (2), multiplied
                by (y)
                .24, multiplied
                by (z) (N/365), where N = the number of days from the day the
                holder
                submits a Notice of Conversion giving rise to a Conversion Default
                (the “Conversion Default
                Date”) to
                the date (the “Authorization
                Date”) that the Borrower authorizes a sufficient number of shares
                of
                Common Stock to effect conversion of the full outstanding principal
                balance of
                this Note.  The Borrower shall use its best efforts to authorize a
                sufficient number of shares of Common Stock as soon as practicable
                following the
                earlier of (i) such time that the Holder notifies the Borrower or
                that the
                Borrower otherwise becomes aware that there are or likely will be
                insufficient
                authorized and unissued shares to allow full conversion thereof and
                (ii) a
                Conversion Default.  The Borrower shall send notice to the Holder of
                the authorization of additional shares of Common Stock, the Authorization
                Date
                and the amount of Holder’s accrued Conversion Default Payments.  The
                accrued Conversion Default Payments for each calendar month shall
                be paid in
                cash or shall be convertible into Common Stock (at such time as there
                are
                sufficient authorized shares of Common Stock) at the applicable Conversion
                Price, at the Borrower’s option, as follows:

               

              (a)  In
                the
                event the Borrower elects to make such payment in cash, cash payment
                shall be
                made to Holder by the fifth (5th)
                day of the month
                following the month in which it has accrued; and

               

              

              (b)   In
                the event the Borrower elects to make such payment in Common Stock,
                the Holder
                may convert such payment amount into Common Stock at the Conversion
                Price (as in
                effect at the time of conversion) at any time after the fifth day
                of the month
                following the month in which it has accrued in accordance with the
                terms of this
                Article I (so long as there is then a sufficient number of authorized
                shares of
                Common Stock).

               

              

              The
                Borrower’s election shall be made in writing to the Holder at any time prior
                to
                6:00 p.m., New York, New York time, on the third day of the month
                following the
                month in which Conversion Default payments have accrued.  If no
                election is made, the Borrower shall be deemed to have elected to
                remit Common
                Stock.  Nothing herein shall limit the Holder’s right to pursue actual
                damages (to the extent in excess of the Conversion Default Payments)
                for the
                Borrower’s failure to maintain a sufficient number of authorized shares of
                Common Stock, and each holder shall have the right to pursue all
                remedies
                available at law or in equity (including degree of specific performance
                and/or
                injunctive relief).

               

              1.4  Method
                of
                Conversion.

               

               

              
                
                  
                  

                

                
                  Page
                    5

                  
                    

                  

                

                
                  
                  

                

              

               

               

              (a)  Mechanics
                of
                Conversion.  Subject
                to
                Section 1.1, this Note may be converted by the Holder in whole or
                in part at any
                time from time to time after the Issue Date, by (A) submitting to the
                Borrower a Notice of Conversion (by facsimile or other reasonable
                means of
                communication dispatched on the Conversion Date prior to 6:00 p.m.,
                New York,
                New York time) and (B) subject to Section 1.4(b), surrendering this Note at
                the principal office of the Borrower.

               

              (b)  Surrender
                of Note Upon
                Conversion.  Notwithstanding
                anything to the contrary set forth herein, upon conversion of this
                Note in
                accordance with the terms hereof, the Holder shall not be required
                to physically
                surrender this Note to the Borrower unless the entire unpaid principal
                amount of
                this Note is so converted.  The Holder and the Borrower shall maintain
                records showing the principal amount so converted and the dates of
                such
                conversions or shall use such other method, reasonably satisfactory
                to the
                Holder and the Borrower, so as not to require physical surrender
                of this Note
                upon each such conversion.  In the event of any dispute or
                discrepancy, such records of the Borrower shall be controlling and
                determinative
                in the absence of manifest error.  Notwithstanding the foregoing, if
                any portion of this Note is converted as aforesaid, the Holder may
                not transfer
                this Note unless the Holder first physically surrenders this Note
                to the
                Borrower, whereupon the Borrower will forthwith issue and deliver
                upon the order
                of the Holder a new Note of like tenor, registered as the Holder
                (upon payment
                by the Holder of any applicable transfer taxes) may request, representing
                in the
                aggregate the remaining unpaid principal amount of this Note.  The
                Holder and any assignee, by acceptance of this Note, acknowledge
                and agree that,
                by reason of the provisions of this paragraph, following conversion
                of a portion
                of this Note, the unpaid and unconverted principal amount of this
                Note
                represented by this Note may be less than the amount stated on the
                face
                hereof.

               

              (c)  Payment
                of
                Taxes.  The
                Borrower
                shall not be required to pay any tax which may be payable in respect
                of any
                transfer involved in the issue and delivery of shares of Common Stock
                or other
                securities or property on conversion of this Note in a name other
                than that of
                the Holder (or in street name), and the Borrower shall not be required
                to issue
                or deliver any such shares or other securities or property unless
                and until the
                person or persons (other than the Holder or the custodian in whose
                street name
                such shares are to be held for the Holder’s account) requesting the issuance
                thereof shall have paid to the Borrower the amount of any such tax
                or shall have
                established to the satisfaction of the Borrower that such tax has
                been
                paid.

               

              (d)  Delivery
                of Common Stock
                Upon Conversion.  Upon
                receipt by
                the Borrower from the Holder of a facsimile transmission (or other
                reasonable
                means of communication) of a Notice of Conversion meeting the requirements
                for
                conversion as provided in this Section 1.4, the Borrower shall issue
                and deliver
                or cause to be issued and delivered to or upon the order of the Holder
                certificates for the Common Stock issuable upon such conversion within
                five (5)
                business days after such receipt (and, solely in the case of conversion
                of the
                entire unpaid principal amount hereof, surrender of this Note) (such
                second
                business day being hereinafter referred to as the “Deadline”) in accordance
                with
                the terms hereof and the Purchase Agreement (including, without limitation,
                in
                accordance with the requirements of Section 2(g) of the Purchase
                Agreement that
                certificates for shares of Common Stock issued on or after the effective
                date of
                the Registration Statement upon conversion of this Note shall not
                bear any
                restrictive legend).

               

               

              
                
                  
                  

                

                
                  Page
                    6

                  
                    

                  

                

                
                  
                  

                

              

               

              (e)  Obligation
                of Borrower to
                Deliver Common Stock.  Upon
                receipt by
                the Borrower of a Notice of Conversion, the Holder shall be deemed
                to be the
                holder of record of the Common Stock issuable upon such conversion,
                the
                outstanding principal amount and the amount of accrued and unpaid
                interest on
                this Note shall be reduced to reflect such conversion, and, unless
                the Borrower
                defaults on its obligations under this Article I, all rights with
                respect to the
                portion of this Note being so converted shall forthwith terminate
                except the
                right to receive the Common Stock or other securities, cash or other
                assets, as
                herein provided, on such conversion.  If the Holder shall have given a
                Notice of Conversion as provided herein, the Borrower’s obligation to issue and
                deliver the certificates for Common Stock shall be absolute and unconditional,
                irrespective of the absence of any action by the Holder to enforce
                the same, any
                waiver or consent with respect to any provision thereof, the recovery
                of any
                judgment against any person or any action to enforce the same, any
                failure or
                delay in the enforcement of any other obligation of the Borrower
                to the holder
                of record, or any setoff, counterclaim, recoupment, limitation or
                termination,
                or any breach or alleged breach by the Holder of any obligation to
                the Borrower,
                and irrespective of any other circumstance which might otherwise
                limit such
                obligation of the Borrower to the Holder in connection with such
                conversion.  The Conversion Date specified in the Notice of Conversion
                shall be the Conversion Date so long as the Notice of Conversion
                is received by
                the Borrower before 6:00 p.m., New York, New York time, on such
                date.

               

              (f)  Delivery
                of Common Stock by
                Electronic Transfer.  In
                lieu of
                delivering physical certificates representing the Common Stock issuable
                upon
                conversion, provided the Borrower’s transfer agent is participating in the
                Depository Trust Company (“DTC”) Fast Automated
                Securities Transfer (“FAST”) program,
                upon request
                of the Holder and its compliance with the provisions contained in
                Section 1.1
                and in this Section 1.4, the Borrower shall use its best efforts
                to cause its
                transfer agent to electronically transmit the Common Stock issuable
                upon
                conversion to the Holder by crediting the account of Holder’s Prime Broker with
                DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

               

              (g)  Failure
                to Deliver Common
                Stock Prior to Deadline.  Without
                in any
                way limiting the Holder’s right to pursue other remedies, including actual
                damages and/or equitable relief, the parties agree that if delivery
                of the
                Common Stock issuable upon conversion of this Note is more than two
                (2) days
                after the Deadline (other than a failure due to the circumstances
                described in
                Section 1.3 above, which failure shall be governed by such Section)
                the Borrower
                shall pay to the Holder $2,000 per day in cash, for each day beyond
                the Deadline
                that the Borrower fails to deliver such Common Stock.  Such cash
                amount shall be paid to Holder by the fifth day of the month following
                the month
                in which it has accrued or, at the option of the Holder (by written
                notice to
                the Borrower by the first day of the month following the month in
                which it has
                accrued), shall be added to the principal amount of this Note, in
                which event
                interest shall accrue thereon in accordance with the terms of this
                Note and such
                additional principal amount shall be convertible into Common Stock
                in accordance
                with the terms of this Note.

               

              1.5  Concerning
                the
                Shares.  The
                shares of
                Common Stock issuable upon conversion of this Note may not be sold
                or
                transferred unless  (i) such shares are sold pursuant to an effective
                registration statement under the Act or (ii) the Borrower or its
                transfer agent
                shall have been furnished with an opinion of  counsel (which opinion
                shall be in form, substance and 

               

               

              
                
                  
                  

                

                
                  Page
                    7

                  
                    

                  

                

                
                  
                  

                

              

               

              scope
                customary for opinions of counsel in comparable transactions) to
                the effect that
                the shares to be sold or transferred may be sold or transferred pursuant
                to an
                exemption from such registration or (iii) such shares are sold or
                transferred pursuant to Rule 144 under the Act (or a successor rule)
                (“Rule 144”) or (iv)
                such shares
                are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who
                agrees to sell or otherwise transfer the shares only in accordance
                with this
                Section 1.5 and who is an Accredited Investor (as defined in the
                Purchase
                Agreement).  Except as otherwise provided in the Purchase Agreement
                (and subject to the removal provisions set forth below), until such
                time as the
                shares of Common Stock issuable upon conversion of this Note have
                been
                registered under the Act as contemplated by the Registration Rights
                Agreement or
                otherwise may be sold pursuant to Rule 144 without any restriction
                as to the
                number of securities as of a particular date that can then be immediately
                sold,
                each certificate for shares of Common Stock issuable upon conversion
                of this
                Note that has not been so included in an effective registration statement
                or
                that has not been sold pursuant to an effective registration statement
                or an
                exemption that permits removal of the legend, shall bear a legend
                substantially
                in the following form, as appropriate:

               

               

              
                “THE
                  SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
                  UNDER THE
                  SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES MAY NOT BE SOLD,
                  TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
                  STATEMENT
                  FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN
                  FORM, SUBSTANCE
                  AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS,
                  THAT
                  REGISTRATION IS NOT REQUIRED UNDER SAID ACT  UNLESS SOLD PURSUANT TO
                  RULE 144 OR REGULATION S UNDER SAID ACT.”

                 

              

              The
                legend set forth above shall be removed and the Borrower shall issue
                to the
                Holder a new certificate therefor free of any transfer legend if
                (i) the
                Borrower or its transfer agent shall have received an opinion of
                counsel, in
                form, substance and scope customary for opinions of counsel in comparable
                transactions, to the effect that a public sale or transfer of such
                Common Stock
                may be made without registration under the Act and the shares are
                so sold or
                transferred, (ii) such Holder provides the Borrower or its transfer
                agent with
                reasonable assurances that the Common Stock issuable upon conversion
                of this
                Note (to the extent such securities are deemed to have been acquired
                on the same
                date) can be sold pursuant to Rule 144 or (iii) in the case of the
                Common Stock
                issuable upon conversion of this Note, such security is registered
                for sale by
                the Holder under an effective registration statement filed under
                the Act or
                otherwise may be sold pursuant to Rule 144 without any restriction
                as to the
                number of securities as of a particular date that can then be immediately
                sold.  Nothing in this Note shall (i) limit the Borrower’s obligation
                under the Registration Rights Agreement or (ii) affect in any way
                the Holder’s
                obligations to comply with applicable prospectus delivery requirements
                upon the
                resale of the securities referred to herein.

               

               

              1.6  Effect
                of Certain
                Events.

               

              (a)  Effect
                of Merger,
                Consolidation, Etc.  At
                the option of
                the Holder, the sale, conveyance or disposition of all or substantially
                all of
                the assets of the Borrower, the effectuation by the Borrower of a
                transaction or
                series of related transactions in 

               

               

              
                
                  
                  

                

                
                  Page
                    8

                  
                    

                  

                

                
                  
                  

                

              

               

               

              which
                more than 50% of the voting power of the Borrower is disposed of,
                or the
                consolidation, merger or other business combination of the Borrower
                with or into
                any other Person (as defined below) or Persons when the Borrower
                is not the
                survivor shall either:  (i) be deemed to be an Event of Default (as
                defined in Article III) pursuant to which the Borrower shall be required
                to pay
                to the Holder upon the consummation of and as a condition to such
                transaction an
                amount equal to the Default Amount (as defined in Article III) or
                (ii) be
                treated pursuant to Section 1.6(b) hereof.  “Person”
shall mean
                any
                individual, corporation, limited liability company, partnership,
                association,
                trust or other entity or organization.

               

              (b)  Adjustment
                Due to Merger,
                Consolidation, Etc.  If,
                at any time
                when this Note is issued and outstanding and prior to conversion
                of all of the
                Notes, there shall be any merger, consolidation, exchange of shares,
                recapitalization, reorganization, or other similar event, as a result
                of which
                shares of Common Stock of the Borrower shall be changed into the
                same or a
                different number of shares of another class or classes of stock or
                securities of
                the Borrower or another entity, or in case of any sale or conveyance
                of all or
                substantially all of the assets of the Borrower other than in connection
                with a
                plan of complete liquidation of the Borrower, then the Holder of
                this Note shall
                thereafter have the right to receive upon conversion of this Note,
                upon the
                basis and upon the terms and conditions specified herein and in lieu
                of the
                shares of Common Stock immediately theretofore issuable upon conversion,
                such
                stock, securities or assets which the Holder would have been entitled
                to receive
                in such transaction had this Note been converted in full immediately
                prior to
                such transaction (without regard to any limitations on conversion
                set forth
                herein), and in any such case appropriate provisions shall be made
                with respect
                to the rights and interests of the Holder of this Note to the end
                that the
                provisions hereof (including, without limitation, provisions for
                adjustment of
                the Conversion Price and of the number of shares issuable upon conversion
                of the
                Note) shall thereafter be applicable, as nearly as may be practicable
                in
                relation to any securities or assets thereafter deliverable upon
                the conversion
                hereof.  The Borrower shall not effect any transaction described in
                this Section 1.6(b) unless (a) it first gives, to the extent practicable,
                thirty
                (30) days prior written notice (but in any event at least fifteen
                (15) days
                prior written notice) of the record date of the special meeting of
                shareholders
                to approve, or if there is no such record date, the consummation
                of, such
                merger, consolidation, exchange of shares, recapitalization, reorganization
                or
                other similar event or sale of assets (during which time the Holder
                shall be
                entitled to convert this Note) and (b) the resulting successor or
                acquiring
                entity (if not the Borrower) assumes by written instrument the obligations
                of
                this Section 1.6(b).  The above provisions shall similarly apply to
                successive consolidations, mergers, sales, transfers or share
                exchanges.

               

              (c)  Adjustment
                Due to
                Distribution.  If
                the Borrower
                shall declare or make any distribution of its assets (or rights to
                acquire its
                assets) to holders of Common Stock as a dividend, stock repurchase,
                by way of
                return of capital or otherwise (including any dividend or distribution
                to the
                Borrower’s shareholders in cash or shares (or rights to acquire shares) of
                capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then
                the
                Holder of this Note shall be entitled, upon any conversion of this
                Note after
                the date of record for determining shareholders entitled to such
                Distribution,
                to receive the amount of such assets which would have been payable
                to the Holder
                with respect to the shares of Common Stock issuable upon such conversion
                had
                such Holder been the holder of such shares of Common Stock on the
                record date
                for the determination of shareholders entitled to such
                Distribution.

               

               

              
                
                  
                  

                

                
                  Page
                    9

                  
                    

                  

                

                
                  
                  

                

              

               

               

               

              (d)  Adjustment
                Due to Dilutive
                Issuance.  If,
                at any time
                when any Notes are issued and outstanding, the Borrower issues or
                sells, or in
                accordance with this Section 1.6(d) hereof is deemed to have issued
                or sold, any
                shares of Common Stock for no consideration or for a consideration
                per share
                (before deduction of reasonable expenses or commissions or underwriting
                discounts or allowances in connection therewith) less than the Fixed
                Conversion
                Price in effect on the date of such issuance (or deemed issuance)
                of such shares
                of Common Stock (a “Dilutive
                Issuance”), then immediately upon the Dilutive Issuance, the Fixed
                Conversion Price will be reduced to the amount of the consideration
                per share
                received by the Borrower in such Dilutive Issuance; provided
                that only
                one adjustment will be made for each Dilutive Issuance.

               

              The
                Borrower shall be deemed to have issued or sold shares of Common
                Stock if the
                Borrower in any manner issues or grants any warrants, rights or options,
                whether
                or not immediately exercisable, to subscribe for or to purchase Common
                Stock or
                other securities convertible into or exchangeable for Common Stock
                (“Convertible Securities”) (such
                warrants, rights and options to purchase Common Stock or Convertible
                Securities
                are hereinafter referred to as “Options”) and the
                price per
                share for which Common Stock is issuable upon the exercise of such
                Options is
                less than the Fixed Conversion Price then in effect, then the Fixed
                Conversion
                Price shall be equal to such price per share.  For purposes of the
                preceding sentence, the “price per share for which Common Stock is issuable upon
                the exercise of such Options” is determined by dividing (i) the total amount, if
                any, received or receivable by the Borrower as consideration for
                the issuance or
                granting of all such Options, plus the minimum aggregate amount of
                additional
                consideration, if any, payable to the Borrower upon the exercise
                of all such
                Options, plus, in the case of Convertible Securities issuable upon
                the exercise
                of such Options, the minimum aggregate amount of additional consideration
                payable upon the conversion or exchange thereof at the time such
                Convertible
                Securities first become convertible or exchangeable, by (ii) the
                maximum total
                number of shares of Common Stock issuable upon the exercise of all
                such Options
                (assuming full conversion of Convertible Securities, if
                applicable).  No further adjustment to the Conversion Price will be
                made upon the actual issuance of such Common Stock upon the exercise
                of such
                Options or upon the conversion or exchange of Convertible Securities
                issuable
                upon exercise of such Options.

               

              Additionally,
                the Borrower shall be deemed to have issued or sold shares of Common
                Stock if
                the Borrower in any manner issues or sells any Convertible Securities,
                whether
                or not immediately convertible (other than where the same are issuable
                upon the
                exercise of Options), and the price per share for which Common Stock
                is issuable
                upon such conversion or exchange is less than the Fixed Conversion
                Price then in
                effect, then the Fixed Conversion Price shall be equal to such price
                per
                share.  For the purposes of the preceding sentence, the “price per
                share for which Common Stock is issuable upon such conversion or
                exchange” is
                determined by dividing (i) the total amount, if any, received or
                receivable by
                the Borrower as consideration for the issuance or sale of all such
                Convertible
                Securities, plus the minimum aggregate amount of additional consideration,
                if
                any, payable to the Borrower upon the conversion or exchange thereof
                at the time
                such Convertible Securities first become convertible or exchangeable,
                by (ii)
                the maximum total number of shares of Common Stock issuable upon
                the conversion
                or exchange of all such Convertible Securities.  No further adjustment
                to the Fixed Conversion Price will be made upon the actual issuance
                of such
                Common Stock upon conversion or exchange of such Convertible
                Securities.

               

               

               

              
                
                  
                  

                

                
                  Page
                    10

                  
                    

                  

                

                
                  
                  

                

              

               

              (e)  Purchase
                Rights.  If,
                at any time
                when any Notes are issued and outstanding, the Borrower issues any
                convertible
                securities or rights to purchase stock, warrants, securities or other
                property
                (the “Purchase Rights”)
                pro rata to the record holders of any class of Common Stock, then
                the Holder of
                this Note will be entitled to acquire, upon the terms applicable
                to such
                Purchase Rights, the aggregate Purchase Rights which such Holder
                could have
                acquired if such Holder had held the number of shares of Common Stock
                acquirable
                upon complete conversion of this Note (without regard to any limitations
                on
                conversion contained herein) 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.

               

              (f)  Notice
                of
                Adjustments.  Upon
                the
                occurrence of each adjustment or readjustment of the Conversion Price
                as a
                result of the events described in this Section 1.6, the Borrower,
                at its
                expense, shall promptly compute such adjustment or readjustment and
                prepare and
                furnish to the Holder of a certificate setting forth such adjustment
                or
                readjustment and showing in detail the facts upon which such adjustment
                or
                readjustment is based.  The Borrower shall, upon the written request
                at any time of the Holder, furnish to such Holder a like certificate
                setting
                forth (i) such adjustment or readjustment, (ii) the Conversion Price
                at the time
                in effect and (iii) the number of shares of Common Stock and the
                amount, if any,
                of other securities or property which at the time would be received
                upon
                conversion of the Note.

               

              1.7  Trading
                Market
                Limitations.
                Unless permitted by the applicable rules and regulations of
                the principal
                securities market on which the Common Stock is then listed or traded,
                in no
                event shall the Borrower issue upon conversion of or otherwise pursuant
                to this
                Note and the other Notes issued pursuant to the Purchase Agreement
                more than the
                maximum number of shares of Common Stock that the Borrower can issue
                pursuant to
                any rule of the principal United States securities market on which
                the Common
                Stock is then traded (the “Maximum Share Amount”), which
                shall be 19.99% of the total shares outstanding on the Closing Date
                (as defined
                in the Purchase Agreement), subject to equitable adjustment from
                time to time
                for stock splits, stock dividends, combinations, capital reorganizations
                and
                similar events relating to the Common Stock occurring after the date
                hereof.  Once the Maximum Share Amount has been issued (the date of
                which is hereinafter referred to as the “Maximum Conversion
                Date”), if
                the Borrower fails to eliminate any prohibitions under applicable
                law or the
                rules or regulations of any stock exchange, interdealer quotation
                system or
                other self-regulatory organization with jurisdiction over the Borrower
                or any of
                its securities on the Borrower’s ability to issue shares of Common Stock in
                excess of the Maximum Share Amount (a “Trading Market
                Prepayment
                Event”), in lieu of any further right to convert this Note, and
                in full
                satisfaction of the Borrower’s obligations under this Note, the Borrower shall
                pay to the Holder, within fifteen (15) business days of the Maximum
                Conversion
                Date (the “Trading Market
                Prepayment Date”), an amount equal to 130% times
                the sum
                of (a) the then
                outstanding principal amount of this Note immediately following the
                Maximum
                Conversion Date, plus
                (b) accrued and
                unpaid interest on the unpaid principal amount of this Note to the
                Trading
                Market Prepayment Date, plus
                (c) Default
                Interest, if any, on the amounts referred to in clause (a) and/or
                (b) above,
plus
                (d) any
                optional amounts that may be added thereto at the Maximum Conversion
                Date by the
                Holder in accordance with the terms hereof (the then outstanding
                principal
                amount of this Note immediately following the Maximum Conversion
                Date, plus
                the amounts
                referred to in clauses (b), (c) and (d) above shall collectively
                be referred

               

               

              
                
                  
                  

                

                
                  Page
                    11

                  
                    

                  

                

                
                  
                  

                

              

               

              to
                as the
“Remaining Convertible
                Amount”).  With respect to each Holder of Notes, the Maximum
                Share Amount shall refer to such Holder’s prorata
                share thereof
                determined in accordance with Section 4.8 below.  In the event that
                the sum of (x) the aggregate number of shares of Common Stock issued
                upon
                conversion of this Note and the other Notes issued pursuant to the
                Purchase
                Agreement plus
                (y) the aggregate number of shares of Common Stock that remain issuable
                upon
                conversion of this Note and the other Notes issued pursuant to the
                Purchase
                Agreement, represents at least one hundred percent (100%) of the
                Maximum Share
                Amount (the “Triggering
                Event”), the Borrower will use its best efforts to seek and obtain
                Shareholder Approval (or obtain such other relief as will allow conversions
                hereunder in excess of the Maximum Share Amount) as soon as practicable
                following the Triggering Event and before the Maximum Conversion
                Date.  As used herein, “Shareholder Approval”
means
                approval by the shareholders of the Borrower to authorize the issuance
                of the
                full number of shares of Common Stock which would be issuable upon
                full
                conversion of the then outstanding Notes but for the Maximum Share
                Amount.

               

              1.8  Status
                as
                Shareholder.  Upon
                submission
                of a Notice of Conversion by a Holder, (i) the shares covered thereby
                (other
                than the shares, if any, which cannot be issued because their issuance
                would
                exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share
                Amount) shall be deemed converted into shares of Common Stock and
                (ii) the
                Holder’s rights as a Holder of such converted portion of this Note shall
                cease
                and terminate, excepting only the right to receive certificates for
                such shares
                of Common Stock and to any remedies provided herein or otherwise
                available at
                law or in equity to such Holder because of a failure by the Borrower
                to comply
                with the terms  of this Note.  Notwithstanding the
                foregoing, if a Holder has not received certificates for all shares
                of Common
                Stock prior to the tenth (10th) business day after the expiration
                of the
                Deadline with respect to a conversion of any portion of this Note
                for any
                reason, then (unless the Holder otherwise elects to retain its status
                as a
                holder of Common Stock by so notifying the Borrower) the Holder shall
                regain the
                rights of a Holder of this Note with respect to such unconverted
                portions of
                this Note and the Borrower shall, as soon as practicable, return
                such
                unconverted Note to the Holder or, if the Note has not been surrendered,
                adjust
                its records to reflect that such portion of this Note has not been
                converted.  In all cases, the Holder shall retain all of its rights
                and remedies (including, without limitation, (i) the right to receive
                Conversion
                Default Payments pursuant to Section 1.3 to the extent required thereby
                for such
                Conversion Default and any subsequent Conversion Default and (ii)
                the right to
                have the Conversion Price with respect to subsequent conversions
                determined in
                accordance with Section 1.3) for the Borrower’s failure to convert this
                Note.ARTICLE
                II.    CERTAIN COVENANTS

               

              2.1  Distributions
                on Capital
                Stock.  So
                long as the
                Borrower shall have any obligation under this Note, the Borrower
                shall not
                without the Holder’s written consent (a) pay, declare or set apart for such
                payment, any dividend or other distribution (whether in cash, property
                or other
                securities) on shares of capital stock other than dividends on shares
                of Common
                Stock solely in the form of additional shares of Common Stock or
                (b) directly or
                indirectly or through any subsidiary make any other payment or distribution
                in
                respect of its capital stock except for distributions pursuant to
                any
                shareholders’ rights plan which is approved by a majority of the Borrower’s
                disinterested directors.

               

               

              
                
                  
                  

                

                
                  Page
                    12

                  
                    

                  

                

                
                  
                  

                

              

               

               

              2.2  Restriction
                on Stock
                Repurchases.  So
                long as the
                Borrower shall have any obligation under this Note, the Borrower
                shall not
                without the Holder’s written consent redeem, repurchase or otherwise acquire
                (whether for cash or in exchange for property or other securities
                or otherwise)
                in any one transaction or series of related transactions any shares
                of capital
                stock of the Borrower or any warrants, rights or options to purchase
                or acquire
                any such shares.

               

              2.3  Borrowings.  So
                long as the
                Borrower shall have any obligation under this Note, the Borrower
                shall not,
                without the Holder’s written consent, create, incur, assume or suffer to exist
                any liability for borrowed money in excess of $50,000, except (a)
                borrowings in
                existence or committed on the date hereof and of which the Borrower
                has informed
                Holder in writing prior to the date hereof, (b) indebtedness to trade
                creditors
                or financial institutions incurred in the ordinary course of business
                or (c)
                borrowings, the proceeds of which shall be used to repay this Note.

               

              2.4  Sale
                of
                Assets.  So
                long as the
                Borrower shall have any obligation under this Note, the Borrower
                shall not,
                without the Holder’s written consent, sell, lease or otherwise dispose of any
                significant portion of its assets outside the ordinary course of
                business.  Any consent to the disposition of any assets may be
                conditioned on a specified use of the proceeds of disposition.

               

              2.5  Advances
                and
                Loans.  So
                long as the
                Borrower shall have any obligation under this Note, the Borrower
                shall not,
                without the Holder’s written consent, lend money, give credit or make advances
                to any person, firm, joint venture or corporation, including, without
                limitation, officers, directors, employees, subsidiaries and affiliates
                of the
                Borrower, except loans, credits or advances (a) in existence or committed
                on the
                date hereof and which the Borrower has informed Holder in writing
                prior to the
                date hereof, (b) made in the ordinary course of business or (c) not
                in excess of
                $50,000.

               

              2.6  Contingent
                Liabilities.  So
                long as the
                Borrower shall have any obligation under this Note, the Borrower
                shall not,
                without the Holder’s written consent, assume, guarantee, endorse, contingently
                agree to purchase or otherwise become liable upon the obligation
                of any person,
                firm, partnership, joint venture or corporation, except by the endorsement
                of
                negotiable instruments for deposit or collection and except assumptions,
                guarantees, endorsements and contingencies (a) in existence or committed
                on the
                date hereof and which the Borrower has informed Holder in writing
                prior to the
                date hereof, and (b) similar transactions in the ordinary course
                of
                business.

               

               

              ARTICLE
                III.     EVENTS OF DEFAULT

               

              If
                any of
                the following events of default (each, an “Event of Default”) shall
                occur:

               

              3.1  Failure
                to Pay Principal or
                Interest.  The
                Borrower
                fails to pay the principal hereof or interest thereon when due on
                this Note,
                whether at maturity, upon a Trading Market Prepayment Event pursuant
                to Section
                1.7, upon acceleration or otherwise;

               

               

              
                
                  
                  

                

                
                  Page
                    13

                  
                    

                  

                

                
                  
                  

                

              

               

              3.2  Conversion
                and the
                Shares.  The
                Borrower
                fails to issue shares of Common Stock to the Holder (or announces
                or threatens
                that it will not honor its obligation to do so) upon exercise by
                the Holder of
                the conversion rights of the Holder in accordance with the terms
                of this Note
                (for a period of at least sixty (60) days, if such failure is solely
                as a result
                of the circumstances governed by Section 1.3 and the Borrower is
                using its best
                efforts to authorize a sufficient number of shares of Common Stock
                as soon as
                practicable), fails to transfer or cause its transfer agent to transfer
                (electronically or in certificated form) any certificate for shares
                of Common
                Stock issued to the Holder upon conversion of or otherwise pursuant
                to this Note
                as and when required by this Note or the Registration Rights Agreement,
                or fails
                to remove any restrictive legend (or to withdraw any stop transfer
                instructions
                in respect thereof) on any certificate for any shares of Common Stock
                issued to
                the Holder upon conversion of or otherwise pursuant to this Note
                as and when
                required by this Note or the Registration Rights Agreement (or makes
                any
                announcement, statement or threat that it does not intend to honor
                the
                obligations described in this paragraph) and any such failure shall
                continue
                uncured (or any announcement, statement or threat not to honor its
                obligations
                shall not be rescinded in writing) for ten (10) days after the Borrower
                shall
                have been notified thereof in writing by the Holder;

               

              3.3  Failure
                to Timely File
                Registration or Effect Registration.  The
                Borrower
                fails to file the Registration Statement within sixty (60) days following
                the
                Closing Date (as defined in the Purchase Agreement) or obtain effectiveness
                with
                the Securities and Exchange Commission of the Registration Statement
                within two
                hundred fifty (250) days following the Closing Date (as defined in
                the Purchase
                Agreement) or such Registration Statement lapses in effect (or sales
                cannot
                otherwise be made thereunder effective, whether by reason of the
                Borrower’s
                failure to amend or supplement the prospectus included therein in
                accordance
                with the Registration Rights Agreement or otherwise) for more than
                twenty (20)
                consecutive days or forty (40) days in any twelve month period after
                the
                Registration Statement becomes effective;

               

              3.4  Breach
                of
                Covenants.  The
                Borrower
                breaches any material covenant or other material term or condition
                contained in
                Sections 1.3, 1.6 or 1.7 of this Note, or Sections 4(c), 4(e), 4(h),
                4(i), 4(j)
                or 5 of the Purchase Agreement and such breach continues for a period
                of ten
                (10) days after written notice thereof to the Borrower from the
                Holder;

               

              3.5  Breach
                of Representations
                and Warranties.  Any
                representation or warranty of the Borrower made herein or in any
                agreement,
                statement or certificate given in writing pursuant hereto or in connection
                herewith (including, without limitation, the Purchase Agreement and
                the
                Registration Rights Agreement), shall be false or misleading in any
                material
                respect when made and the breach of which has (or with the passage
                of time will
                have) a material adverse effect on the rights of the Holder with
                respect to this
                Note, the Purchase Agreement or the Registration Rights Agreement;

               

              3.6  Receiver
                or
                Trustee.  The
                Borrower or
                any subsidiary of the Borrower shall make an assignment for the benefit
                of
                creditors, or apply for or consent to the appointment of a receiver
                or trustee
                for it or for a substantial part of its property or business, or
                such a receiver
                or trustee shall otherwise be appointed;

               

               

              
                
                  
                  

                

                
                  Page
                    14

                  
                    

                  

                

                
                  
                  

                

              

               

              3.7  Judgments.  Any
                money
                judgment, writ or similar process shall be entered or filed against
                the Borrower
                or any subsidiary of the Borrower or any of its property or other
                assets for
                more than $50,000, and shall remain unvacated, unbonded or unstayed
                for a period
                of twenty (20) days unless otherwise consented to by the Holder,
                which consent
                will not be unreasonably withheld;

               

              3.8  Bankruptcy.  Bankruptcy,
                insolvency, reorganization or liquidation proceedings or other proceedings
                for
                relief under any bankruptcy law or any law for the relief of debtors
                shall be
                instituted by or against the Borrower or any subsidiary of the
                Borrower;

               

              3.9  Delisting
                of Common
                Stock.  The
                Borrower
                shall fail to maintain the listing of the Common Stock on at least
                one of the
                OTCBB or an equivalent replacement exchange, the Nasdaq National
                Market, the
                Nasdaq SmallCap Market, the New York Stock Exchange, or the American
                Stock
                Exchange; or

               

              3.10  Default
                Under Other
                Notes.  An
                Event of
                Default has occurred and is continuing under any of the other Notes
                issued
                pursuant to the Purchase Agreement, then, upon the occurrence and
                during the
                continuation of any Event of Default specified in Section 3.1, 3.2,
                3.3, 3.4,
                3.5, 3.7, 3.9, or 3.10, at the option of the Holders of a majority
                of the
                aggregate principal amount of the outstanding Notes issued pursuant
                to the
                Purchase Agreement exercisable through the delivery of written notice
                to the
                Borrower by such Holders (the “Default Notice”), and upon
                the
                occurrence of an Event of Default specified in Section 3.6 or 3.8,
                the Notes
                shall become immediately due and payable and the Borrower shall pay
                to the
                Holder, in full satisfaction of its obligations hereunder, an amount
                equal to
                the greater of (i) 130% times
                the sum
                of (w) the then
                outstanding principal amount of this Note plus
                (x) accrued and
                unpaid interest on the unpaid principal amount of this Note to the
                date of
                payment (the “Mandatory
                Prepayment Date”) plus
                (y) Default
                Interest, if any, on the amounts referred to in clauses (w) and/or
                (x) plus
                (z) any amounts
                owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or
                pursuant to
                Section 2(c) of the Registration Rights Agreement (the then outstanding
                principal amount of this Note to the date of payment plus
                the amounts
                referred to in clauses (x), (y) and (z) shall collectively be known
                as the
“Default Sum”) or (ii)
                the “parity value” of the Default Sum to be prepaid, where parity value means
                (a) the highest number of shares of Common Stock issuable upon conversion
                of or
                otherwise pursuant to such Default Sum in accordance with Article
                I, treating
                the Trading Day immediately preceding the Mandatory Prepayment Date
                as the
“Conversion Date” for purposes of determining the lowest applicable Conversion
                Price, unless the Default Event arises as a result of a breach in
                respect of a
                specific Conversion Date in which case such Conversion Date shall
                be the
                Conversion Date), multiplied
                by (b) the
                highest Closing Price for the Common Stock during the period beginning
                on the
                date of first occurrence of the Event of Default and ending one day
                prior to the
                Mandatory Prepayment Date (the “Default Amount”) and all
                other
                amounts payable hereunder shall immediately become due and payable,
                all without
                demand, presentment or notice, all of which hereby are expressly
                waived,
                together with all costs, including, without limitation, legal fees
                and expenses,
                of collection, and the Holder shall be entitled to exercise all other
                rights and
                remedies available at law or in equity.  If the Borrower fails to pay
                the Default Amount within five (5) business days of written notice
                that such
                amount is due and payable, then the Holder shall have the right at
                any time, so
                long as the Borrower remains in default (and so long and to the extent
                that
                there are sufficient authorized shares), to require the Borrower,
                upon written
                notice, to immediately issue, in lieu of the Default Amount, 

               

               

              
                
                  
                  

                

                
                  Page
                    15

                  
                    

                  

                

                
                  
                  

                

              

               

               

              the
                number of shares of Common Stock of the Borrower equal to the Default
                Amount
                divided by the Conversion Price then in effect.

               

              ARTICLE
                IV.     MISCELLANEOUS

               

              4.1  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 privileges.  All
                rights and remedies existing hereunder are cumulative to, and not
                exclusive of,
                any rights or remedies otherwise available.

               

              4.2  Notices.  Any
                notice herein
                required or permitted to be given shall be in writing and may be
                personally
                served or delivered by courier or sent by United States mail and
                shall be deemed
                to have been given upon receipt if personally served (which shall
                include
                telephone line facsimile transmission) or sent by courier or three
                (3) days
                after being deposited in the United States mail, certified, with
                postage
                pre-paid and properly addressed, if sent by mail.  For the purposes
                hereof, the address of the Holder shall be as shown on the records
                of the
                Borrower; and the address of the Borrower shall be 22600 Hall Road,
                Suite 205
                Clinton Township, MI 48036, facsimile number: 586-468-8768.  Both the
                Holder and the Borrower may change the address for service by service
                of written
                notice to the other as herein provided.

               

              4.3  Amendments.  This
                Note and any
                provision hereof may only be amended by an instrument in writing
                signed by the
                Borrower and the Holder.  The term “Note” and all reference thereto,
                as used throughout this instrument, shall mean this instrument (and
                the other
                Notes issued pursuant to the Purchase Agreement) as originally executed,
                or if
                later amended or supplemented, then as so amended or supplemented.

               

              4.4  Assignability.  This
                Note shall
                be binding upon the Borrower and its successors and assigns, and
                shall inure to
                be the benefit of the Holder and its successors and assigns.  Each
                transferee of this Note must be an “accredited investor” (as defined in Rule
                501(a) of the 1933 Act).  Notwithstanding anything in this Note to the
                contrary, this Note may be pledged as collateral in connection with
                a bonafide
                margin account
                or other lending arrangement.

               

              4.5  Cost
                of
                Collection.  If
                default is
                made in the payment of this Note, the Borrower shall pay the Holder
                hereof costs
                of collection, including reasonable attorneys’ fees.

               

              4.6  Governing
                Law.  THIS
                NOTE SHALL
                BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
                OF THE STATE
                OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
                WITHIN
                SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE
                BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED
                STATES
                FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY
                DISPUTE ARISING
                UNDER THIS NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH
                OR THE
                TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY
                WAIVE

               

               

               

              
                
                  
                  

                

                
                  Page
                    16

                  
                    

                  

                

                
                  
                  

                

              

               

               

               

              THE
                DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT
                OR
                PROCEEDING.  BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
                PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT
                EFFECTIVE
                SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
                PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
                PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
                A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL
                BE
                CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON
                SUCH JUDGMENT
                OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
                ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL
                FEES AND
                EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
                CONNECTION WITH SUCH DISPUTE.

               

              4.7  Certain
                Amounts.  Whenever
                pursuant
                to this Note the Borrower is required to pay an amount in excess
                of the
                outstanding principal amount (or the portion thereof required to
                be paid at that
                time) plus accrued and unpaid interest plus Default Interest on such
                interest,
                the Borrower and the Holder agree that the actual damages to the
                Holder from the
                receipt of cash payment on this Note may be difficult to determine
                and the
                amount to be so paid by the Borrower represents stipulated damages
                and not a
                penalty and is intended to compensate the Holder in part for loss
                of the
                opportunity to convert this Note and to earn a return from the sale
                of shares of
                Common Stock acquired upon conversion of this Note at a price in
                excess of the
                price paid for such shares pursuant to this Note.  The Borrower and
                the Holder hereby agree that such amount of stipulated damages is
                not plainly
                disproportionate to the possible loss to the Holder from the receipt
                of a cash
                payment without the opportunity to convert this Note into shares
                of Common
                Stock.

               

              4.8  Allocations
                of Maximum Share
                Amount and Reserved Amount.  The
                Maximum Share
                Amount and Reserved Amount shall be allocated pro rata among the
                Holders of
                Notes based on the principal amount of such Notes issued to each
                Holder.  Each increase to the Maximum Share Amount and Reserved Amount
                shall be allocated pro rata among the Holders of Notes based on the
                principal
                amount of such Notes held by each Holder at the time of the increase
                in the
                Maximum Share Amount or Reserved Amount.  In the event a Holder shall
                sell or otherwise transfer any of such Holder’s Notes, each transferee shall be
                allocated a pro rata portion of such transferor’s Maximum Share Amount and
                Reserved Amount.  Any portion of the Maximum Share Amount or Reserved
                Amount which remains allocated to any person or entity which does
                not hold any
                Notes shall be allocated to the remaining Holders of Notes, pro rata
                based on
                the principal amount of such Notes then held by such Holders.

               

              4.9  Damages
                Shares.  The
                shares of
                Common Stock that may be issuable to the Holder pursuant to Sections
                1.3 and
                1.4(g) hereof and pursuant to Section 2(c) of the Registration Rights
                Agreement
                (“Damages Shares”) shall
                be treated as Common Stock issuable upon conversion of this Note
                for all
                purposes hereof and shall be subject to all of the limitations and
                afforded all
                of the rights of the other shares of Common Stock issuable hereunder,
                including
                without limitation, the right to be included in the Registration
                Statement filed
                pursuant to the Registration Rights Agreement.  For purposes of
                calculating interest payable on the outstanding principal amount
                hereof, except
                as otherwise provided herein, amounts convertible into Damages

               

               

               

              
                
                  
                  

                

                
                  Page
                    17

                  
                    

                  

                

                
                  
                  

                

              

               

               

               Shares
                (“Damages Amounts”)
                shall not bear interest but must be converted prior to the conversion
                of any
                outstanding principal amount hereof, until the outstanding Damages
                Amounts is
                zero.

               

              4.10  Denominations.  At
                the request of
                the Holder, upon surrender of this Note, the Borrower shall promptly
                issue new
                Notes in the aggregate outstanding principal amount hereof, in the
                form hereof,
                in such denominations of at least $50,000 as the Holder shall
                request.

               

              4.11  Purchase
                Agreement.  By
                its acceptance
                of this Note, each Holder agrees to be bound by the applicable terms
                of the
                Purchase Agreement.

               

              4.12  Notice
                of Corporate
                Events.  Except
                as
                otherwise provided below, the Holder of this Note shall have no rights
                as a
                Holder of Common Stock unless and only to the extent that it converts
                this Note
                into Common Stock.  The Borrower shall provide the Holder with prior
                notification of any meeting of the Borrower’s shareholders (and copies of proxy
                materials and other information sent to shareholders).  In the event
                of any taking by the Borrower of a record of its shareholders for
                the purpose of
                determining shareholders who are entitled to receive payment of any
                dividend or
                other distribution, any right to subscribe for, purchase or otherwise
                acquire
                (including by way of merger, consolidation, reclassification or
                recapitalization) any share of any class or any other securities
                or property, or
                to receive any other right, or for the purpose of determining shareholders
                who
                are entitled to vote in connection with any proposed sale, lease
                or conveyance
                of all or substantially all of the assets of the Borrower or any
                proposed
                liquidation, dissolution or winding up of the Borrower, the Borrower
                shall mail
                a notice to the Holder, at least twenty (20) days prior to the record
                date
                specified therein (or thirty (30) days prior to the consummation
                of the
                transaction or event, whichever is earlier), of the date on which
                any such
                record is to be taken for the purpose of such dividend, distribution,
                right or
                other event, and a brief statement regarding the amount and character
                of such
                dividend, distribution, right or other event to the extent known
                at such
                time.  The Borrower shall make a public announcement of any event
                requiring notification to the Holder hereunder substantially simultaneously
                with
                the notification to the Holder in accordance with the terms of this
                Section
                4.12.

               

              4.13  Remedies.  The
                Borrower
                acknowledges that a breach by it of its obligations hereunder will
                cause
                irreparable harm to the Holder, by vitiating the intent and purpose
                of the
                transaction contemplated hereby.  Accordingly, the Borrower
                acknowledges that the remedy at law for a breach of its obligations
                under this
                Note will be inadequate and agrees, in the event of a breach or threatened
                breach by the Borrower of the provisions of this Note, that the Holder
                shall be
                entitled, in addition to all other available remedies at law or in
                equity, and
                in addition to the penalties assessable herein, to an injunction
                or injunctions
                restraining, preventing or curing any breach of this Note and to
                enforce
                specifically the terms and provisions thereof, without the necessity
                of showing
                economic loss and without any bond or other security being
                required.

               

               

              
                
                  
                  

                

                
                  Page
                    18

                  
                    

                  

                

                
                  
                  

                

              

               

               

               

              ARTICLE
                V.     CALL OPTION

               

              5.1  Call
                Option.  Notwithstanding
                anything to the contrary contained in this Article V, so long as
                (i) no
                Event of Default or Trading Market Prepayment Event shall have occurred
                and be
                continuing, (ii) the Borrower has a sufficient number of authorized shares
                of Common Stock reserved for issuance upon full conversion of the
                Notes, then at
                any time after the Issue Date, and (iii) the Common Stock is trading at or
                below $.04 per share, the Borrower shall have the right, exercisable
                on not less
                than ten (10) Trading Days prior written notice to the Holders of
                the Notes
                (which notice may not be sent to the Holders of the Notes until the
                Borrower is
                permitted to prepay the Notes pursuant to this Section 5.1), to prepay
                all of
                the outstanding Notes in accordance with this Section 5.1.  Any notice
                of prepayment hereunder (an “Optional Prepayment”) shall
                be
                delivered to the Holders of the Notes at their registered addresses
                appearing on
                the books and records of the Borrower and shall state (1) that the
                Borrower is
                exercising its right to prepay all of the Notes issued on the Issue
                Date and (2)
                the date of prepayment (the “Optional Prepayment
                Notice”).  On the date fixed for prepayment (the “Optional
                Prepayment Date”),
                the Borrower shall make payment of the Optional Prepayment Amount
                (as defined
                below) to or upon the order of the Holders as specified by the Holders
                in
                writing to the Borrower at least one (1) business day prior to the
                Optional
                Prepayment Date.  If the Borrower exercises its right to prepay the
                Notes, the Borrower shall make payment to the holders of an amount
                in cash (the
“Optional Prepayment
                Amount”) equal to either (i) 135% (for prepayments occurring within
                thirty (30) days of the Issue Date), (ii) 145% for prepayments occurring
                between thirty-one (31) and ninety (90) days of the Issue Date, or
                (iii) 150%
                (for prepayments occurring after the ninetieth (90th)
                day following
                the Issue Date), multiplied by the sum of (w) the then outstanding
                principal
                amount of this Note plus
                (x) accrued
                and unpaid interest on the unpaid principal amount of this Note to
                the Optional
                Prepayment Date plus
                (y) Default
                Interest, if any, on the amounts referred to in clauses (w) and (x)
plus
                (z) any amounts
                owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or
                pursuant to
                Section 2(c) of the Registration Rights Agreement (the then outstanding
                principal amount of this Note to the date of payment plus
                the amounts
                referred to in clauses (x), (y) and (z) shall collectively be known
                as the
“Optional Prepayment
                Sum”). Notwithstanding notice of an Optional Prepayment, the Holders
                shall at all times prior to the Optional Prepayment Date maintain
                the right to
                convert all or any portion of the Notes in accordance with Article
                I and any
                portion of Notes so converted after receipt of an Optional Prepayment
                Notice and
                prior to the Optional Prepayment Date set forth in such notice and
                payment of
                the aggregate Optional Prepayment Amount shall be deducted from the
                principal
                amount of Notes which are otherwise subject to prepayment pursuant
                to such
                notice.  If the Borrower delivers an Optional Prepayment Notice and
                fails to pay the Optional Prepayment Amount due to the Holders of
                the Notes
                within two (2) business days following the Optional Prepayment Date,
                the
                Borrower shall forever forfeit its right to redeem the Notes pursuant
                to this
                Section 5.1.

               

              

               

              [REMAINDER
                OF PAGE INTENTIONALLY LEFT BLANK]

               

               

              
                
                  
                  

                

                
                  Page
                    19

                  
                    

                  

                

                
                  
                  

                

              

               

               

              IN
                WITNESS WHEREOF, Borrower
                has caused this Note to be signed in its name by its duly authorized
                officer as
                of the date first above written.

               

              

              MIDNIGHT
                HOLDINGS GROUP,
                INC.

              

               

              By:
/s/Nicholas
                Cocco                  

              Nicholas
                Cocco                       

              Chief 
                Executive Officer          

               

               

               

               

               

               

              
                
                  
                  

                

                
                  Page
                    20

                  
                    

                  

                

                
                  
                  

                

              

               

               

               

               

              EXHIBIT
                A

               

              NOTICE
                OF
                CONVERSION

               

              (To
                be
                Executed by the Registered Holder

               

              in
                order
                to Convert the Notes)

               

              The
                undersigned hereby irrevocably elects to convert $__________ principal
                amount of
                the Note (defined below) into shares of common stock, par value $.00005
                per
                share (“Common Stock”),
                of Midnight Holdings Group, Inc., a Delaware corporation (the “Borrower”) according
                to the
                conditions of the convertible Notes of the Borrower dated as of October
                15, 2007
                (the “Notes”), as of the date written below.  If securities are to be
                issued in the name of a person other than the undersigned, the undersigned
                will
                pay all transfer taxes payable with respect thereto and is delivering
                herewith
                such certificates.  No fee will be charged to the Holder for any
                conversion, except for transfer taxes, if any.  A copy of each Note is
                attached hereto (or evidence of loss, theft or destruction
                thereof).

               

              The
                Borrower shall electronically transmit the Common Stock issuable
                pursuant to
                this Notice of Conversion to the account of the undersigned or its
                nominee with
                DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

               

              Name
                of
                DTC Prime
                Broker:                                                                                                                     

              Account
                Number:                                                                                                                     

               

              In
                lieu
                of receiving shares of Common Stock issuable pursuant to this Notice
                of
                Conversion by way of a DWAC Transfer, the undersigned hereby requests
                that the
                Borrower issue a certificate or certificates for the number of shares
                of Common
                Stock set forth below (which numbers are based on the Holder’s calculation
                attached hereto) in the name(s) specified immediately below or, if
                additional
                space is necessary, on an attachment hereto:

               

              Name:                                                                                                                     

              Address:                                                                                                                     

               

              The
                undersigned represents and warrants that all offers and sales by
                the undersigned
                of the securities issuable to the undersigned upon conversion of
                the Notes shall
                be made pursuant to registration of the securities under the Securities
                Act of
                1933, as amended (the “Act”), or pursuant
                to an
                exemption from registration under the Act.

               

              Date
                of
                Conversion:___________________________

              Applicable
                Conversion Price:____________________

              Number
                of
                Shares of Common Stock to be Issued Pursuant to

              Conversion
                of the Notes:______________

              Signature:___________________________________

              Name:______________________________________

              Address:____________________________________

               

              The
                Borrower shall issue and deliver shares of Common Stock to an overnight
                courier
                not later than three business days following receipt of the original
                Note(s) to
                be converted, and shall make payments pursuant to the Notes for the
                number of
                business days such issuance and delivery is late.

               

               

               

               Page
                21f10qsb0307ex10g.htm

    SECURITIES
      PURCHASE
      AGREEMENT

    

    SECURITIES
      PURCHASE AGREEMENT (this “Agreement”), dated as of
      October 19, 2007, by and among Midnight Holdings Group, Inc., a Delaware
      corporation, with headquarters located at 22600 Hall Road, Suite 205, Clinton
      Township, MI  48036 (the “Company”), and each of the
      purchasers set forth on the signature pages hereto (the “Buyers”).

     

    WHEREAS:

     

    A.  The
      Company and the Buyers are executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by the rules and
      regulations as promulgated by the United States Securities and Exchange
      Commission (the “SEC”)
      under the Securities Act of 1933, as amended (the “1933 Act”);

     

    B.  Buyers
      desire to purchase and the Company desires to issue and sell, upon the terms
      and
      conditions set forth in this Agreement (i) 10% secured convertible notes of
      the Company, in the form attached hereto as Exhibit “A”, in the aggregate
      principal amount of Three Hundred Sixty-Seven Thousand Six Hundred Forty-Five
      Dollars ($367,645) (together with any note(s) issued in replacement thereof
      or
      otherwise with respect thereto in accordance with the terms thereof, the “Notes”), convertible into
      shares of common stock, par value $.00005 per share, of the Company (the “Common Stock”), upon the terms
      and subject to the limitations and conditions set forth in such Notes and
      (ii) warrants, in the form attached hereto as Exhibit “B”, to purchase an
      aggregate of Seven Hundred Thirty-Five Thousand Two Hundred Ninety (735,290)
      shares of Common Stock (the “Warrants”);

     

    C.  Each
      Buyer wishes to purchase, upon the terms and conditions stated in this
      Agreement, such principal amount of Notes and number of Warrants as is set
      forth
      immediately below its name on the signature pages hereto; and

     

    D.  Contemporaneous
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement, in the form attached
      hereto as Exhibit “C”
      (the “Registration Rights
      Agreement”), pursuant to which the Company has agreed to provide certain
      registration rights under the 1933 Act and the rules and regulations promulgated
      thereunder, and applicable state securities laws.

     

    NOW
      THEREFORE, the Company and
      each of the Buyers severally (and not jointly) hereby agree as
      follows:

     

    1.  PURCHASE
      AND SALE OF NOTES
      AND WARRANTS.

     

    2.  Purchase
      of Notes and
      Warrants.  On the Closing Date (as defined below), the
      Company shall issue and sell to each Buyer and each Buyer severally agrees
      to
      purchase from the Company such principal amount of Notes and number of Warrants
      as is set forth immediately below such Buyer’s name on the signature pages
      hereto.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.  Form
      of
      Payment.  On the Closing Date (as defined below),
      (i)each Buyer shall pay the purchase price for the Notes (less the purchase
      price paid with respect to any Bridge Note) and the Warrants to be issued and
      sold to it at the Closing (as defined below) (the “Purchase Price”) by wire
      transfer of immediately available funds to the Company, in accordance with
      the
      Company’s written wiring instructions, against delivery of the Notes in the
      principal amount equal to the Purchase Price and the number of Warrants as
      is
      set forth immediately below such Buyer’s name on the signature pages hereto, and
      (ii) the Company shall deliver such Notes and Warrants duly executed on
      behalf of the Company, to such Buyer, against delivery of such Purchase
      Price.

     

    4.  Closing
      Date.  Subject to the satisfaction (or written waiver)
      of the conditions thereto set forth in Section 6 and Section 7 below, the date
      and time of the issuance and sale of the Notes and the Warrants pursuant to
      this
      Agreement (the “Closing
      Date”) shall be 12:00 noon, Eastern Standard Time on October 19, 2007, or
      such other mutually agreed upon time.  The closing of the transactions
      contemplated by this Agreement (the “Closing”) shall occur on the
      Closing Date at such location as may be agreed to by the parties.

     

    5.  BUYERS’
REPRESENTATIONS
      AND
      WARRANTIES.  Each Buyer severally (and not jointly)
      represents and warrants to the Company solely as to such Buyer
      that:

     

    6.  and
      the
      shares of Common Stock issuable upon conversion of or otherwise pursuant to
      the
      Notes (including, without limitation, such additional shares of Common Stock,
      if
      any, as are issuable (i) on account of interest on the Notes, (ii) as
      a result of the events described in Sections 1.3 and 1.4(g) of the Notes and
      Section 2(c) of the Registration Rights Agreement or (iii) in payment of
      the Standard Liquidated Damages Amount (as defined in Section 2(f) below)
      pursuant to this Agreement, such shares of Common Stock being collectively
      referred to herein as the “Conversion Shares”) and the
      Warrants and the shares of Common Stock issuable upon exercise thereof (the
      “Warrant Shares” and,
      collectively with the Notes, Warrants and Conversion Shares, the “Securities”) for its own
      account and not with a present view towards the public sale or distribution
      thereof, except pursuant to sales registered or exempted from registration
      under
      the 1933 Act; provided, however,
      that by
      making the representations herein, such Buyer does not agree to hold any of
      the
      Securities for any minimum or other specific term and reserves the right to
      dispose of the Securities at any time in accordance with or pursuant to a
      registration statement or an exemption under the 1933 Act.

     

    7.  Accredited
      Investor
      Status.  Such Buyer is an “accredited investor” as that
      term is defined in Rule 501(a) of Regulation D (an “Accredited
      Investor”).

     

    8.  Reliance
      on
      Exemptions.  Such Buyer understands that the Securities
      are being offered and sold to it in reliance upon specific exemptions from
      the
      registration requirements of United States federal and state securities laws
      and
      that the Company is relying upon the truth and accuracy of, and such Buyer’s
      compliance with, the representations, warranties, agreements, acknowledgments
      and understandings of such Buyer set forth herein in order to determine the
      availability of such exemptions and the eligibility of such Buyer to acquire
      the
      Securities.

     

    9.  Information.  Such
      Buyer and its respective advisors, if any, have been furnished with all
      materials relating to the business, finances and operations of the Company
      and
      materials relating to the offer and sale of the Securities which have been
      reasonably requested by such Buyer or its advisors.  Such Buyer and
      its respective advisors, if any, have been afforded the opportunity to ask
      questions of the Company.  

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

       

      Notwithstanding
        the foregoing, the Company has not disclosed to such Buyer any material
        nonpublic information and will not disclose such information unless such
        information is disclosed to the public prior to or promptly following such
        disclosure to such Buyer.  Neither such inquiries nor any other due
        diligence investigation conducted by such Buyer or any of its respective
        advisors or representatives shall modify, amend or affect Buyer’s right to rely
        on the Company’s representations and warranties contained in Section 3
        below.  Such Buyer understands that its investment in the Securities
        involves a significant degree of risk.

    

     

    10.  Governmental
      Review.  Such Buyer understands that no United States
      federal or state agency or any other government or governmental agency has
      passed upon or made any recommendation or endorsement of the
      Securities.

     

    11.  Transfer
      or
      Re-sale.  Such Buyer understands that (i) except as
      provided in the Registration Rights Agreement, the sale or re-sale of the
      Securities have not been and are not being registered under the 1933 Act or
      any
      applicable state securities laws, and the Securities may not be transferred
      unless (a) the Securities are sold pursuant to an effective registration
      statement under the 1933 Act, (b) such Buyer shall have delivered to the
      Company an opinion of counsel that shall be in form, substance and scope
      customary for opinions of counsel in comparable transactions to the effect
      that
      the Securities to be sold or transferred may be sold or transferred pursuant
      to
      an exemption from such registration, which opinion shall be accepted by the
      Company, (c) the Securities are sold or transferred to an “affiliate” (as
      defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of such Buyer who
      agrees to sell or otherwise transfer the Securities only in accordance with
      this
      Section 2(f) and who is an Accredited Investor, or (d) the Securities are
      sold pursuant to Rule 144, and such Buyer shall have delivered to the Company
      an
      opinion of counsel that shall be in form, substance and scope customary for
      opinions of counsel in corporate transactions, which opinion shall be accepted
      by the Company; (ii) any sale of such Securities made in reliance on Rule 144
      may be made only in accordance with the terms of said Rule and further, if
      said
      Rule is not applicable, any re-sale of such Securities under circumstances
      in
      which the seller (or the person through whom the sale is made) may be deemed
      to
      be an underwriter (as that term is defined in the 1933 Act) may require
      compliance with some other exemption under the 1933 Act or the rules and
      regulations of the SEC thereunder; and (iii) neither the Company nor any other
      person is under any obligation to register such Securities under the 1933 Act
      or
      any state securities laws or to comply with the terms and conditions of any
      exemption thereunder (in each case, other than pursuant to the Registration
      Rights Agreement).  Notwithstanding the foregoing or anything else
      contained herein to the contrary, subject to applicable law, the Securities
      may
      be pledged as collateral in connection with a bonafide
      margin account
      or other lending arrangement.  In the event that the Company does not
      accept an opinion of counsel provided by such Buyer with respect to the transfer
      of Securities pursuant to an exemption from registration, such as Rule 144,
      and
      such opinion is correct in form and substance, within three (3) business days
      of
      delivery of the opinion to the Company, the Company shall pay to such Buyer
      liquidated damages of three percent (3%) of the outstanding amount of the Notes
      held by such Buyer per month plus accrued and unpaid interest on the Notes,
      prorated for partial months, in cash or shares at the option of the Company
      (“Standard Liquidated Damages
      Amount”).  If the Company elects to pay the Standard Liquidated
      Damages Amount in shares of Common Stock, such shares shall be issued at the
      Conversion Price at the time of payment.

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    12.  Legends.  Such
      Buyer understands that the Notes and the Warrants and, until such time as the
      Conversion Shares and Warrant Shares have been registered under the 1933 Act
      as
      contemplated by the Registration Rights Agreement or otherwise may be sold
      pursuant to Rule 144 without any restriction as to the number of securities
      as
      of a particular date that can then be immediately sold, the Conversion Shares
      and Warrant Shares may bear a restrictive legend in substantially the following
      form (and a stop-transfer order may be placed against transfer of the
      certificates for such Securities):

     

    “The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended.  The securities may not be sold,
      transferred, assigned, or otherwise disposed of in the absence of an effective
      registration statement for the securities under said Act, or an opinion of
      counsel, in form, substance and scope customary for opinions of counsel in
      comparable transactions, that registration is not required under said Act or
      unless sold pursuant to Rule 144 under said Act.”

     

    The
      legend set forth above shall be removed and the Company shall issue a
      certificate without such legend to the holder of any Security upon which it is
      stamped, if, unless otherwise required by applicable state securities laws,
      (a)
      such Security is registered for sale under an effective registration statement
      filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
      any restriction as to the number of securities as of a particular date that
      can
      then be immediately sold, (b) such holder provides the Company with an opinion
      of counsel, in form, substance and scope customary for opinions of counsel
      in
      comparable transactions, to the effect that a public sale or transfer of such
      Security may be made without registration under the 1933 Act, which opinion
      shall be accepted by the Company so that the sale or transfer is effected,
      or
      (c) such holder provides the Company with reasonable assurances that such
      Security shall be sold pursuant to Rule 144.  Such Buyer agrees to
      sell all Securities, including those represented by a certificate(s) from which
      the legend has been removed, in compliance with applicable prospectus delivery
      requirements, if any.

     

    13.  Authorization;
      Enforcement. This Agreement and the Registration Rights Agreement
      have been duly and validly authorized.  This Agreement has been duly
      executed and delivered on behalf of such Buyer, and this Agreement constitutes,
      and upon execution and delivery by such Buyer of the Registration Rights
      Agreement, such agreement will constitute, legal, valid and binding agreements
      of such Buyer enforceable in accordance with their respective
      terms.

     

    14.  Residency.  Such
      Buyer is a resident of the jurisdiction set forth immediately below such Buyer’s
      name on the signature pages hereto.

     

    15.  REPRESENTATIONS
      AND
      WARRANTIES OF THE COMPANY.  The Company represents and
      warrants to each Buyer that:

     

    16.  Organization
      and
      Qualification.  The Company and each of its Subsidiaries
      (as defined below), if any, is a corporation duly organized, validly existing
      and in good standing under the laws of the jurisdiction in which it is
      incorporated, with full power and authority (corporate and other) to own, lease,
      use and operate its properties and to carry on its business as and where now
      owned, leased, used, operated and conducted.  Schedule 3(a) sets forth a
      list of all of the Subsidiaries (as defined below) of the Company and the
      jurisdiction in which each is incorporated.  

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

       

      The
        Company and each of its Subsidiaries is duly qualified as a foreign corporation
        to do business and is in good standing in every jurisdiction in which its
        ownership or use of property or the nature of the business conducted by it
        makes
        such qualification necessary except where the failure to be so qualified
        or in
        good standing would not have a Material Adverse Effect.  “Material Adverse Effect” means
        any material adverse effect on the business, operations, assets, financial
        condition or prospects of the Company or its Subsidiaries, if any, taken
        as a
        whole, or on the transactions contemplated hereby or by the agreements or
        instruments to be entered into in connection herewith.  “Subsidiaries” means any
        corporation or other organization, whether incorporated or unincorporated,
        in
        which the Company owns, directly or indirectly, all of the equity or other
        ownership interests.

    

     

    17.  Authorization;
      Enforcement.  (i) The Company has all requisite
      corporate power and authority to enter into and perform this Agreement, the
      Registration Rights Agreement, the Notes and the Warrants and, subject to the
      adoption of necessary resolutions by the Board of Directors and the stockholders
      of the Company to consummate the transactions contemplated hereby and thereby
      and to issue the Securities, in accordance with the terms hereof and thereof,
      (ii) the execution and delivery of this Agreement, the Registration Rights
      Agreement, the Notes and the Warrants by the Company and, the consummation
      by it
      of the transactions contemplated hereby and thereby (including, without
      limitation, the issuance of the Notes and the Warrants and the issuance and
      reservation for issuance of the Conversion Shares and Warrant Shares issuable
      upon conversion or exercise thereof) have been duly authorized by the Company’s
      Board of Directors and no further consent or authorization of the Company,
      its
      Board of Directors, or its shareholders is required, (iii) this Agreement has
      been duly executed and delivered by the Company by its authorized
      representative, and such authorized representative is the true and official
      representative with authority to sign this Agreement and the other documents
      executed in connection herewith and bind the Company accordingly, and (iv)
      this
      Agreement constitutes, and upon execution and delivery by the Company of the
      Registration Rights Agreement, the Notes and the Warrants, each of such
      instruments will constitute, a legal, valid and binding obligation of the
      Company enforceable against the Company in accordance with its respective
      terms.

     

    18.  Capitalization.  Except
      as set forth on Schedule
      3(c), as of June 30, 2006 hereof, the authorized capital stock of the
      Company consists of (i) 1,000,000,000 shares of Common Stock, par value
      $0.00005, of which 470,050,001 shares are issued and outstanding and (ii)
      10,000,000 shares of preferred stock, par value $0.001, of which no shares
      are
      issued and outstanding.  All of such outstanding shares of capital stock
      are, or upon issuance will be, duly authorized, validly issued, fully paid
      and
      nonassessable.  No shares of capital stock of the Company are subject to
      preemptive rights or any other similar rights of the shareholders of the Company
      or any liens or encumbrances imposed through the actions or failure to act
      of
      the Company.  Except as disclosed in Schedule 3(c), as of the date
      of this Agreement, (i) there are no outstanding options, warrants, scrip, rights
      to subscribe for, puts, calls, rights of first refusal, agreements,
      understandings, claims or other commitments or rights of any character
      whatsoever relating to, or securities or rights convertible into or exchangeable
      for any shares of capital stock of the Company or any of its Subsidiaries,
      or
      arrangements by which the Company or any of its Subsidiaries is or may become
      bound to issue additional shares of capital stock of the Company or any of
      its
      Subsidiaries, 

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

       

      (ii)
        there are no agreements or arrangements under which the Company or any of
        its
        Subsidiaries is obligated to register the sale of any of its or their securities
        under the 1933 Act (except the Registration Rights Agreement) and (iii) there
        are no anti-dilution or price adjustment provisions contained in any security
        issued by the Company (or in any agreement providing rights to security holders)
        that will be triggered by the issuance of the Notes, the Warrants, the
        Conversion Shares or Warrant Shares.  The Company has made available to
        each Buyer true copies of the Certificate of Incorporation as in effect on
        the
        date hereof, the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms
        of
        all securities convertible into or exercisable for Common Stock of the Company
        and the material rights of the holders thereof in respect
        thereto.

    

     

    19.  Issuance
      of
      Shares.  The Conversion Shares and Warrant Shares are
      duly authorized and reserved for issuance and, upon conversion of the Notes
      and
      exercise of the Warrants in accordance with their respective terms, will be
      validly issued, fully paid and non-assessable, and free from all taxes, liens,
      claims and encumbrances with respect to the issue thereof and shall not be
      subject to preemptive rights or other similar rights of shareholders of the
      Company and will not impose personal liability upon the holder
      thereof.

     

    20.  Acknowledgment
      of
      Dilution.  The Company understands and acknowledges the
      potentially dilutive effect to the Common Stock upon the issuance of the
      Conversion Shares and Warrant Shares upon conversion of the Note or exercise
      of
      the Warrants.  The Company further acknowledges that its obligation to
      issue Conversion Shares and Warrant Shares upon conversion of the Notes or
      exercise of the Warrants in accordance with this Agreement, the Notes and the
      Warrants is absolute and unconditional regardless of the dilutive effect that
      such issuance may have on the ownership interests of other shareholders of
      the
      Company.

     

    21.  No
      Conflicts.  The execution, delivery and performance of
      this Agreement, the Registration Rights Agreement, the Notes and the Warrants
      by
      the Company and the consummation by the Company of the transactions contemplated
      hereby and thereby (including, without limitation, the issuance and reservation
      for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
      with or result in a violation of any provision of the Certificate of
      Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
      of any provision of, or constitute a default (or an event which with notice
      or
      lapse of time or both could become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation of, any
      agreement, indenture, patent, patent license or instrument to which the Company
      or any of its Subsidiaries is a party, or (iii)  result in a violation
      of any law, rule, regulation, order, judgment or decree (including federal
      and
      state securities laws and regulations and regulations of any self-regulatory
      organizations to which the Company or its securities are currently subject)
      applicable to the Company or any of its Subsidiaries or by which any property
      or
      asset of the Company or any of its Subsidiaries is bound or affected (except
      for
      such conflicts, defaults, terminations, amendments, accelerations, cancellations
      and violations as would not, individually or in the aggregate, have a Material
      Adverse Effect).  

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

       

      Neither
        the Company nor any of its Subsidiaries is in violation of its Certificate
        of
        Incorporation, By-laws or other organizational documents and neither the
        Company
        nor any of its Subsidiaries is in default (and no event has occurred which
        with
        notice or lapse of time or both could put the Company or any of its Subsidiaries
        in default) under, and neither the Company nor any of its Subsidiaries has
        taken
        any action or failed to take any action that would give to others any rights
        of
        termination, amendment, acceleration or cancellation of, any agreement,
        indenture or instrument to which the Company or any of its Subsidiaries is
        a
        party or by which any property or assets of the Company or any of its
        Subsidiaries is bound or affected, except for possible defaults as would
        not,
        individually or in the aggregate, have a Material Adverse Effect. The businesses
        of the Company and its Subsidiaries, if any, are not being conducted, and
        shall
        not be conducted so long as a Buyer owns any of the Securities, in violation
        of
        any law, ordinance or regulation of any governmental entity, which violation
        would cause a Material Adverse Effect.  Except as specifically
        contemplated by this Agreement and as required under the 1933 Act and any
        applicable state securities laws, the Company is not required to obtain any
        consent, authorization or order of, or make any filing or registration with,
        any
        court, governmental agency, regulatory agency, self regulatory organization
        or
        stock market or any third party in order for it to execute, deliver or perform
        any of its obligations under this Agreement, the Registration Rights Agreement,
        the Notes or the Warrants in accordance with the terms hereof or thereof
        or to
        issue and sell the Notes and Warrants in accordance with the terms hereof
        and to
        issue the Conversion Shares upon conversion of the Notes and the Warrant
        Shares
        upon exercise of the Warrants.  All consents, authorizations, orders,
        filings and registrations which the Company is required to obtain pursuant
        to
        the preceding sentence have been obtained or will be obtained promptly after
        Closing effected on or prior to the date hereof.

    

     

    22.  Absence
      of Certain
      Changes.  Since December 31, 2005, there has been no
      material adverse change and no material adverse development in the assets,
      liabilities, business, properties, operations, financial condition, results
      of
      operations or prospects of the Company or any of its Subsidiaries.

     

    23.  Absence
      of
      Litigation.  There is no action, suit, claim,
      proceeding, inquiry or investigation before or by any court, public board,
      government agency, self-regulatory organization or body pending or, to the
      knowledge of the Company or any of its Subsidiaries, threatened against or
      affecting the Company or any of its Subsidiaries, or their officers or directors
      in their capacity as such, that could have a Material Adverse
      Effect.  Schedule
      3(h) contains a complete list and summary description of any pending or
      threatened proceeding against or affecting the Company or any of its
      Subsidiaries, without regard to whether it would have a Material Adverse
      Effect.  The Company and its Subsidiaries are unaware of any facts or
      circumstances which might give rise to any of the foregoing.

     

    24.  Patents,
      Copyrights,
      etc.  The Company and each of its Subsidiaries owns or
      possesses the requisite licenses or rights to use all patents, patent
      applications, patent rights, inventions, know-how, trade secrets, trademarks,
      trademark applications, service marks, service names, trade names and copyrights
      (“Intellectual
      Property”) necessary to enable it to conduct its business as now operated
      (and, to the best of the Company’s knowledge, as presently contemplated to be
      operated in the future); there is no claim or action by any person pertaining
      to, or proceeding pending, or to the Company’s knowledge threatened, which
      challenges the right of the Company or of a Subsidiary with respect to any
      Intellectual Property necessary to enable it to conduct its business as now
      operated (and, to the best of the Company’s knowledge, as presently contemplated
      to be operated in the future); to the best of the Company’s knowledge, the
      Company’s or its Subsidiaries’ current and intended products, services and
      processes do not infringe on any Intellectual Property or other rights held
      by
      any person; and the Company is unaware of any facts or circumstances which
      might
      give rise to any of the foregoing.  The Company and each of its
      Subsidiaries have taken reasonable security measures to protect the secrecy,
      confidentiality and value of their Intellectual Property.

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    25.  No
      Materially Adverse
      Contracts, Etc.  Neither the Company nor any of its
      Subsidiaries is subject to any charter, corporate or other legal restriction,
      or
      any judgment, decree, order, rule or regulation which in the judgment of the
      Company’s officers has or is expected in the future to have a Material Adverse
      Effect.  Neither the Company nor any of its Subsidiaries is a party to
      any contract or agreement which in the judgment of the Company’s officers has or
      is expected to have a Material Adverse Effect.

     

    26.  Tax
      Status.  Except as set forth on Schedule 3(k), the
      Company and
      each of its Subsidiaries has made or filed all federal, state and foreign income
      and all other tax returns, reports and declarations required by any jurisdiction
      to which it is subject (unless and only to the extent that the Company and
      each
      of its Subsidiaries has set aside on its books provisions reasonably adequate
      for the payment of all unpaid and unreported taxes) and has paid all taxes
      and
      other governmental assessments and charges that are material in amount, shown
      or
      determined to be due on such returns, reports and declarations, except those
      being contested in good faith and has set aside on its books provisions
      reasonably adequate for the payment of all taxes for periods subsequent to
      the
      periods to which such returns, reports or declarations apply.  To the
      Company’s knowledge, there are no unpaid taxes in any material amount claimed to
      be due by the taxing authority of any jurisdiction.  The Company has
      not executed a waiver with respect to the statute of limitations relating to
      the
      assessment or collection of any foreign, federal, state or local
      tax.  Except as set forth on Schedule 3(k), none of the
      Company’s tax returns is presently being audited by any taxing
      authority.

     

    27.  Certain
      Transactions.  Except as set forth on Schedule 3(l) and
      except for
      arm’s length transactions pursuant to which the Company or any of its
      Subsidiaries makes payments in the ordinary course of business upon terms no
      less favorable than the Company or any of its Subsidiaries could obtain from
      third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the
      officers, directors, or employees of the Company is presently a party to any
      transaction with the Company or any of its Subsidiaries (other than for services
      as employees, officers and directors), including any contract, agreement or
      other arrangement providing for the furnishing of services to or by, providing
      for rental of real or personal property to or from, or otherwise requiring
      payments to or from any officer, director or such employee or, to the knowledge
      of the Company, any corporation, partnership, trust or other entity in which
      any
      officer, director, or any such employee has a substantial interest or is an
      officer, director, trustee or partner.

     

    28.  Disclosure.  All
      information relating to or concerning the Company or any of its Subsidiaries
      set
      forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
      hereof and otherwise in connection with the transactions contemplated hereby
      is,
      to the knowledge of the Company, true and correct in all material respects
      and
      the Company has not omitted to state any material fact necessary in order to
      make the statements made herein or therein, in light of the circumstances under
      which they were made, not misleading.  To the knowledge of the
      Company, no event or circumstance has occurred or exists with respect to the
      Company or any of its Subsidiaries or its or their business, properties,
      prospects, operations or financial conditions, which, under applicable law,
      rule
      or regulation, requires public disclosure or announcement by the Company but
      which has not been so publicly announced or disclosed (assuming for this purpose
      that the Company’s reports filed under the 1934 Act are being incorporated into
      an effective registration statement filed by the Company under the 1933
      Act).

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    29.  Acknowledgment
      Regarding
      Buyers’ Purchase of Securities.  The Company
      acknowledges and agrees that the Buyers are acting solely in the capacity of
      arm’s length purchasers with respect to this Agreement and the transactions
      contemplated hereby.  The Company further acknowledges that no Buyer
      is acting as a financial advisor or fiduciary of the Company (or in any similar
      capacity) with respect to this Agreement and the transactions contemplated
      hereby and any statement made by any Buyer or any of their respective
      representatives or agents in connection with this Agreement and the transactions
      contemplated hereby is not advice or a recommendation and is merely incidental
      to the Buyers’ purchase of the Securities.  The Company further
      represents to each Buyer that the Company’s decision to enter into this
      Agreement has been based solely on the independent evaluation of the Company
      and
      its representatives.

     

    30.  No
      Integrated
      Offering.  Except for sales of securities to the Buyers
      and affiliates thereof heretofore consummated, neither the Company, nor any
      of
      its affiliates, nor any person acting on its or their behalf, has directly
      or
      indirectly made any offers or sales in any security or solicited any offers
      to
      buy any security under circumstances that would require registration under
      the
      1933 Act of the issuance of the Securities to the Buyers.  The
      issuance of the Securities to the Buyers will not be integrated with any other
      issuance of the Company’s securities (past, current or future) for purposes of
      any shareholder approval provisions applicable to the Company or its
      securities.

     

    31.  No
      Brokers.  The Company has taken no action which would
      give rise to any claim by any person for brokerage commissions, transaction
      fees
      or similar payments relating to this Agreement or the transactions contemplated
      hereby.

     

    32.  Permits;
      Compliance.  The Company and each of its Subsidiaries is
      in possession of all material franchises, grants, authorizations, licenses,
      permits, easements, variances, exemptions, consents, certificates, approvals
      and
      orders necessary to own, lease and operate its properties and to carry on its
      business as it is now being conducted (collectively, the “Company Permits”), and there
      is no action pending or, to the knowledge of the Company, threatened regarding
      suspension or cancellation of any of the Company Permits.  Neither the
      Company nor any of its Subsidiaries is in conflict with, or in default or
      violation of, any of the Company Permits, except for any such conflicts,
      defaults or violations which, individually or in the aggregate, would not
      reasonably be expected to have a Material Adverse Effect.  Since
      December 31, 2005, neither the Company nor any of its Subsidiaries has received
      any notification with respect to possible conflicts, defaults or violations
      of
      applicable laws, except for notices relating to possible conflicts, defaults
      or
      violations, which conflicts, defaults or violations would not have a Material
      Adverse Effect.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    a.  Environmental
      Matters.

     

    (i)  There
      are, to the Company’s knowledge, with respect to the Company or any of its
      Subsidiaries or any predecessor of the Company, no present violations of
      Environmental Laws (as defined below), releases of any material into the
      environment, actions, activities, circumstances, conditions, events, incidents,
      or contractual obligations which may give rise to any common law environmental
      liability or any liability under the Comprehensive Environmental Response,
      Compensation and Liability Act of 1980 or similar federal, state, local or
      foreign laws and neither the Company nor any of its Subsidiaries has received
      any notice with respect to any of the foregoing, nor is any action pending
      or,
      to the Company’s knowledge, threatened in connection with any of the
      foregoing.  The term “Environmental Laws” means all
      material federal, state, local or foreign laws relating to pollution or
      protection of human health or the environment (including, without limitation,
      ambient air, surface water, groundwater, land surface or subsurface strata),
      including, without limitation, laws relating to emissions, discharges, releases
      or threatened releases of chemicals, pollutants contaminants, or toxic or
      hazardous substances or wastes (collectively, “Hazardous Materials”) into the
      environment, or otherwise relating to the manufacture, processing, distribution,
      use, treatment, storage, disposal, transport or handling of Hazardous Materials,
      as well as all authorizations, codes, decrees, demands or demand letters,
      injunctions, judgments, licenses, notices or notice letters, orders, permits,
      plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    (ii)  Other
      than those that are or were stored, used or disposed of in compliance with
      applicable law, no Hazardous Materials are contained on or about any real
      property currently owned, leased or used by the Company or any of its
      Subsidiaries, and no Hazardous Materials were released on or about any real
      property previously owned, leased or used by the Company or any of its
      Subsidiaries during the period the property was owned, leased or used by the
      Company or any of its Subsidiaries, except in the normal course of the Company’s
      or any of its Subsidiaries’ business.

     

    (iii)  There
      are
      no underground storage tanks on or under any real property owned, leased or
      used
      by the Company or any of its Subsidiaries that are not in compliance with
      applicable law.

     

    33.  Title
      to
      Property.  Except as set forth on Schedule 3(s), the
      Company and
      its Subsidiaries have good and marketable title to all real property and good
      and marketable title to all personal property owned by them which is material
      to
      the business of the Company and its Subsidiaries, in each case free and clear
      of
      all liens and encumbrances and, to the knowledge of the Company, defects or
      such
      as would not have a Material Adverse Effect.  To the knowledge of the
      Company, any real property and facilities held under lease by the Company and
      its Subsidiaries are held by them under valid, subsisting and enforceable leases
      with such exceptions as would not have a Material Adverse Effect.

     

    34.  Insurance.  The
      Company and each of its Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its Subsidiaries are engaged.  Neither the
      Company nor any such Subsidiary has any reason to believe that it will not
      be
      able to renew its existing insurance coverage as and when such coverage expires
      or to obtain similar coverage from similar insurers as may be necessary to
      continue its business at a cost that would not have a Material Adverse
      Effect.  The Company has provided to Buyer true and correct copies of
      all policies relating to directors’ and officers’ liability coverage, errors and
      omissions coverage, and commercial general liability coverage.

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    35.  Internal
      Accounting
      Controls.  The Company and each of its Subsidiaries
      maintain a system of internal accounting controls sufficient, in the judgment
      of
      the Company’s board of directors, to provide reasonable assurance that (i)
      transactions are executed in accordance with management’s general or specific
      authorizations, (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with generally accepted
      accounting principles and to maintain asset accountability, (iii) access to
      assets is permitted only in accordance with management’s general or specific
      authorization and (iv) the recorded accountability for assets is compared with
      the existing assets at reasonable intervals and appropriate action is taken
      with
      respect to any differences.

     

    36.  Foreign
      Corrupt
      Practices.  Neither the Company, nor any of its
      Subsidiaries, nor any director, officer, agent, employee or other person acting
      on behalf of the Company or any Subsidiary has, in the course of his actions
      for, or on behalf of, the Company, used any corporate funds for any unlawful
      contribution, gift, entertainment or other unlawful expenses relating to
      political activity; made any direct or indirect unlawful payment to any foreign
      or domestic government official or employee from corporate funds; violated
      or is
      in violation of any provision of the U.S. Foreign Corrupt Practices Act of
      1977,
      as amended, or made any bribe, rebate, payoff, influence payment, kickback
      or
      other unlawful payment to any foreign or domestic government official or
      employee.

     

    37.  Solvency.  The
      Company (after giving effect to the transactions contemplated by this Agreement)
      is solvent (i.e., its assets
      have
      a fair market value in excess of the amount required to pay its probable
      liabilities on its existing debts as they become absolute and matured) and
      currently the Company has no information that would lead it to reasonably
      conclude that the Company would not, after giving effect to the transaction
      contemplated by this Agreement, have the ability to, nor does it intend to
      take
      any action that would impair its ability to, pay its debts from time to time
      incurred in connection therewith as such debts mature.

     

    38.  No
      Investment
      Company.  The Company is not, and upon the issuance and
      sale of the Securities as contemplated by this Agreement will not be an
“investment company” required to be registered under the Investment Company Act
      of 1940 (an “Investment
      Company”).  The Company is not controlled by an Investment
      Company.

     

    39.  Breach
      of Representations
      and Warranties by the Company.  If the Company breaches
      any of the representations or warranties set forth in this Section 3, and in
      addition to any other remedies available to the Buyers pursuant to this
      Agreement, the Company shall pay to the Buyers the Standard Liquidated Damages
      Amount in cash or in shares of Common Stock at the option of the Company, until
      such breach is cured.  If the Company elects to pay the Standard
      Liquidated Damages Amounts in shares of Common Stock, such shares shall be
      issued at the Conversion Price at the time of payment.

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    40.  COVENANTS.

     

    41.  Best
      Efforts.  The parties shall use their best efforts to
      satisfy timely each of the conditions agreed to thereby described in Section
      6
      and 7 of this Agreement.

     

    42.  Form
      D; Blue Sky
      Laws.  The Company agrees to file a Form D with respect
      to the Securities as required under Regulation D and to make available a copy
      thereof to each Buyer promptly after such filing.  The Company shall,
      on, before or promptly after the Closing Date, take such action as the Company
      shall reasonably determine is necessary to qualify the Securities for sale
      to
      the Buyers under applicable securities or “blue sky” laws of the states of the
      United States (or to obtain an exemption from such qualification), and shall
      make available evidence of any such action so taken to each Buyer on or prior
      to
      the Closing Date.

     

    43.  Reporting
      Status;
      Eligibility to Use Form S-3, SB-2 or Form

     

    S-1. The
      Company represents
      and warrants that it shall use its best efforts to meet the requirements for
      the
      use of Form S-3 (or if the Company is not eligible for the use of Form S-3
      as of
      the Filing Date (as defined in the Registration Rights Agreement), the Company
      may use  the form of registration for which it is eligible at that
      time) for registration of the sale by the Buyer of the Registrable Securities
      (as defined in the Registration Rights Agreement).  So long as any
      Buyer beneficially owns any of the Securities, the Company shall use its best
      efforts to timely file all reports required to be filed with the SEC pursuant
      to
      the 1934 Act, and the Company shall not terminate its status as an issuer
      required to file reports under the 1934 Act even if the 1934 Act or the rules
      and regulations thereunder would permit such termination.  The Company
      further agrees that it shall use its best efforts to file all reports required
      to be filed by the Company with the SEC in a timely manner so as to become
      eligible, and thereafter to maintain its eligibility, for the use of Form
      S-3.  The Company shall issue a press release describing the materials
      terms of the transaction contemplated hereby as soon as practicable following
      the Closing Date but in no event more than five (5) business days of the Closing
      Date, which press release shall be subject to prior review by the
      Buyers.  The Company agrees that such press release shall not disclose
      the name of the Buyers unless expressly consented to in writing by the Buyers
      or
      unless required by applicable law or regulation, and then only to the extent
      of
      such requirement.

     

    44.  Use
      of
      Proceeds.  The Company shall use the proceeds from the
      sale of the Notes and the Warrants for general working capital purposes and
      shall not, directly or indirectly, use such proceeds for any loan to or
      investment in any other corporation, partnership, enterprise or other person
      (except in connection with its currently existing direct or indirect
      Subsidiaries.

     

    45.  Future
      Offerings.  Subject to the exceptions described below,
      the Company will not, without the prior written consent of a
      majority-in-interest of the Buyers, not to be unreasonably withheld, negotiate
      or contract with any party to obtain additional equity financing (including
      debt
      financing with an equity component) that involves (A) the issuance of Common
      Stock at a discount to the market price of the Common Stock on the date of
      issuance (taking into account the value of any warrants or options to acquire
      Common Stock issued in connection therewith) or (B) the issuance of convertible
      securities that are convertible into an indeterminate number of shares of Common
      Stock or (C) the issuance of warrants during the period (the “Lock-up Period”) beginning on
      the Closing Date and ending on the later of (i) two hundred seventy (270) days
      from the Closing Date and (ii) one hundred eighty (180) days from the date
      the
      Registration Statement (as defined in the Registration Rights Agreement) is
      declared effective (plus any days in which sales cannot be made
      thereunder).  

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

       

      In
        addition, subject to the exceptions described below, the Company will not
        conduct any equity financing (including debt with an equity component) (“Future Offerings”) during the
        period beginning on the Closing Date and ending two (2) years after the end
        of
        the Lock-up Period unless it shall have first delivered to each Buyer, at
        least
        twenty (20) business days prior to the closing of such Future Offering, written
        notice describing the proposed Future Offering, including the terms and
        conditions thereof and proposed definitive documentation to be entered into
        in
        connection therewith, and providing each Buyer an option during the fifteen
        (15)
        day period following delivery of such notice to purchase its pro rata share
        (based on the ratio that the aggregate principal amount of Notes purchased
        by it
        hereunder bears to the aggregate principal amount of Notes purchased hereunder)
        of the securities being offered in the Future Offering on the same terms
        as
        contemplated by such Future Offering (the limitations referred to in this
        sentence and the preceding sentence are collectively referred to as the “Capital Raising
        Limitations”).  In the event
        the terms
        and conditions of a proposed Future Offering are amended in any respect after
        delivery of the notice to the Buyers concerning the proposed Future Offering,
        the Company shall deliver a new notice to each Buyer describing the amended
        terms and conditions of the proposed Future Offering and each Buyer thereafter
        shall have an option during the fifteen (15) day period following delivery
        of
        such new notice to purchase its pro rata share of the securities being offered
        on the same terms as contemplated by such proposed Future Offering, as
        amended.  The foregoing sentence shall apply to successive amendments
        to the terms and conditions of any proposed Future Offering.  The
        Capital Raising Limitations shall not apply to any transaction involving
        (i)
        issuances of securities in a firm commitment underwritten public offering
        (excluding a continuous offering pursuant to Rule 415 under the 1933 Act)
        or
        (ii) issuances of securities as consideration for a merger, consolidation
        or
        purchase of assets, or in connection with any strategic partnership or joint
        venture (the primary purpose of which is not to raise equity capital), or
        in
        connection with the disposition or acquisition of a business, product or
        license
        by the Company.  The Capital Raising Limitations also shall not apply
        to the issuance of securities upon exercise or conversion of the Company’s
        options, warrants or other convertible securities outstanding as of the date
        hereof or to the grant of additional options or warrants, or the issuance
        of
        additional securities, under any Company stock option or restricted stock
        plan
        approved by the shareholders of the Company.

    

     

    46.  Expenses.  At
      the Closing, the Company shall reimburse Buyers for expenses incurred by them
      in
      connection with the negotiation, preparation, execution, delivery and
      performance of this Agreement and the other agreements to be executed in
      connection herewith (“Documents”), including,
      without limitation, attorneys’ and consultants’ fees and expenses, transfer
      agent fees, fees for stock quotation services, fees relating to any amendments
      or modifications of the Documents or any consents or waivers of provisions
      in
      the Documents, fees for the preparation of opinions of counsel, escrow fees,
      and
      costs of restructuring the transactions contemplated by the Documents in an
      amount not to exceed $30,000.  When possible, the Company must pay
      these fees directly, otherwise the Company must make immediate payment for
      reimbursement to the Buyers for all fees and expenses immediately upon written
      notice by the Buyer or the submission of an invoice by the Buyer.  If
      the Company fails to reimburse the Buyer in full within three (3) business
      days
      of the written notice or submission of invoice by the Buyer, the Company shall
      pay interest on the total amount of fees to be reimbursed at a rate of 15%
      per
      annum.

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    47.  Financial
      Information.  The Company agrees to send the following
      reports to each Buyer until such Buyer transfers, assigns, or sells all of
      the
      Securities: (i) within ten (10) days after the filing with the SEC, a copy
      of its Annual Report on Form 10-KSB its Quarterly Reports on Form 10-QSB and
      any
      Current Reports on Form 8-K; (ii) within one (1) day after release, copies
      of all press releases issued by the Company or any of its Subsidiaries; and
      (iii) contemporaneously with the making available or giving to the
      shareholders of the Company, copies of any notices or other information the
      Company makes available or gives to such shareholders.

     

    48.  Authorization
      and
      Reservation of Shares.  The Company shall at all times
      have authorized, and reserved for the purpose of issuance, a sufficient number
      of shares of Common Stock to provide for the full conversion or exercise of
      the
      outstanding Notes and Warrants and issuance of the Conversion Shares and Warrant
      Shares in connection therewith (based on the Conversion Price of the Notes
      or
      Exercise Price of the Warrants in effect from time to time) and as otherwise
      required by the Notes.  The Company shall not reduce the number of
      shares of Common Stock reserved for issuance upon conversion of Notes and
      exercise of the Warrants without the consent of each Buyer.  The
      Company shall at all times maintain the number of shares of Common Stock so
      reserved for issuance at an amount (“Reserved Amount”) equal to no
      less than two (2) times the number that is then actually issuable upon full
      conversion of the Notes and upon exercise of the Warrants (based on the
      Conversion Price of the Notes or the Exercise Price of the Warrants in effect
      from time to time).  If at any time the number of shares of Common
      Stock authorized and reserved for issuance (“Authorized and Reserved
      Shares”) is below the Reserved Amount, the Company will promptly take all
      corporate action necessary to authorize and reserve a sufficient number of
      shares, including, without limitation, calling a special meeting of shareholders
      to authorize additional shares to meet the Company’s obligations under this
      Section 4(h), in the case of an insufficient number of authorized shares, obtain
      shareholder approval of an increase in such authorized number of shares, and
      voting the management shares of the Company in favor of an increase in the
      authorized shares of the Company to ensure that the number of authorized shares
      is sufficient to meet the Reserved Amount.  If the Company fails to
      obtain such shareholder approval within sixty (60) days following the date
      on
      which the number of Reserved Amount exceeds the Authorized and Reserved Shares,
      the Company shall pay to the Buyers the Standard Liquidated Damages Amount,
      in
      cash or in shares of Common Stock at the option of each Buyer.  If a
      Buyer elects to be paid the Standard Liquidated Damages Amount in shares of
      Common Stock, such shares shall be issued at the Conversion Price at the time
      of
      payment.  In order to ensure that the Company has authorized a
      sufficient amount of shares to meet the Reserved Amount at all times, the
      Company shall use its best efforts to deliver to a representative for the Buyers
      at the end of every month a list detailing (1) the current amount of shares
      authorized by the Company and reserved for the Buyers; and (2) amount of shares
      issuable upon conversion of the Notes and upon exercise of the Warrants and
      as
      payment of interest accrued on the Notes for one year.  If the Company
      fails to provide such list within five (5) business days of having received
      a
      written demand therefor, the Company shall pay the Standard Liquidated Damages
      Amount, in cash or in shares of Common Stock at the option of the Buyer, until
      the list is delivered.  If the Buyer elects to be paid the Standard
      Liquidated Damages Amount in shares of Common Stock, such shares shall be issued
      at the Conversion Price at the time of payment.

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    49.  Listing.  The
      Company shall use its best efforts to secure the listing of the Conversion
      Shares and Warrant Shares upon each national securities exchange or automated
      quotation system, if any, upon which shares of Common Stock are then listed
      (subject to official notice of issuance) and, so long as any Buyer owns any
      of
      the Securities, shall maintain, so long as any other shares of Common Stock
      shall be so listed, such listing of all Conversion Shares and Warrant Shares
      from time to time issuable upon conversion of the Notes or exercise of the
      Warrants.  The Company will use best efforts to obtain and, so long as
      any Buyer owns any of the Securities, maintain the listing and trading of its
      Common Stock on the OTCBB or any equivalent replacement exchange, the Nasdaq
      National Market (“Nasdaq”), the Nasdaq SmallCap
      Market (“Nasdaq
      SmallCap”), the New York Stock Exchange (“NYSE”), or the American
      Stock
      Exchange (“AMEX”) and
      will comply in all respects with the Company’s reporting, filing and other
      obligations under the bylaws or rules of the National Association of Securities
      Dealers (“NASD”) and
      such exchanges, as applicable.  The Company shall promptly provide to
      each Buyer copies of any notices it receives from the OTCBB and any other
      exchanges or quotation systems on which the Common Stock is then listed
      regarding the continued eligibility of the Common Stock for listing on such
      exchanges and quotation systems.

     

    50.  Corporate
      Existence.  So long as a Buyer beneficially owns any
      Notes or Warrants, the Company shall maintain its corporate existence and shall
      not sell all or substantially all of the Company’s assets, except in the event
      of a merger or consolidation or sale of all or substantially all of the
      Company’s assets, where the surviving or successor entity in such transaction
      (i) assumes the Company’s obligations hereunder and under the agreements and
      instruments entered into in connection herewith and (ii) is a publicly traded
      corporation whose Common Stock is listed for trading on the OTCBB, Nasdaq,
      Nasdaq SmallCap, NYSE or AMEX.

     

    51.  No
      Integration.  The Company shall not make any offers or
      sales of any security (other than the Securities) under circumstances that
      would
      require registration of the Securities being offered or sold hereunder under
      the
      1933 Act or cause the offering of the Securities to be integrated with any
      other
      offering of securities by the Company for the purpose of any stockholder
      approval provision applicable to the Company or its securities.

     

    52.  Breach
      of
      Covenants.  If the
      Company
      breaches any of the covenants set forth in this Section 4, and in addition
      to
      any other remedies available to the Buyers pursuant to this Agreement, the
      Company shall pay to the Buyers the Standard Liquidated Damages Amount, in
      cash
      or in shares of Common Stock at the option of the Company, until such breach
      is
      cured.  If the Company elects to pay the Standard Liquidated Damages
      Amount in shares, such shares shall be issued at the Conversion Price at the
      time of payment.

     

    53.  TRANSFER
      AGENT
      INSTRUCTIONS.  The Company shall issue irrevocable
      instructions to its transfer agent to issue certificates, registered in the
      name
      of each Buyer or its nominee, for the Conversion Shares and Warrant Shares
      in
      such amounts as specified from time to time by each Buyer to the Company upon
      conversion of the Notes or exercise of the Warrants in accordance with the
      terms
      thereof (the “Irrevocable
      Transfer Agent Instructions”).  

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

       

      Prior
        to
        registration of the Conversion Shares and Warrant Shares under the 1933 Act
        or
        the date on which the Conversion Shares and Warrant Shares may be sold pursuant
        to Rule 144 without any restriction as to the number of Securities as of
        a
        particular date that can then be immediately sold, all such certificates
        shall
        bear the restrictive legend specified in Section 2(g) of this
        Agreement.  The Company warrants that no instruction other than the
        Irrevocable Transfer Agent Instructions referred to in this Section 5, and
        stop
        transfer instructions to give effect to Section 2(f) hereof (in the case
        of the
        Conversion Shares and Warrant Shares, prior to registration of the Conversion
        Shares and Warrant Shares under the 1933 Act or the date on which the Conversion
        Shares and Warrant Shares may be sold pursuant to Rule 144 without any
        restriction as to the number of Securities as of a particular date that can
        then
        be immediately sold), will be given by the Company to its transfer agent
        and
        that the Securities shall otherwise be freely transferable on the books and
        records of the Company, subject to and to the extent provided in this Agreement
        and the Registration Rights Agreement.  Nothing in this Section shall
        affect in any way each Buyer’s obligations and agreement set forth in Section
        2(g) hereof to comply with all applicable prospectus delivery requirements,
        if
        any, upon re-sale of the Securities.  If a Buyer provides the Company
        with (i) an opinion of counsel in form, substance and scope customary for
        opinions in comparable transactions, to the effect that a public sale or
        transfer of such Securities may be made without registration under the 1933
        Act
        and such sale or transfer is effected or (ii) the Buyer provides reasonable
        assurances that the Securities can be sold pursuant to Rule 144, the Company
        shall permit the transfer, and, in the case of the Conversion Shares and
        Warrant
        Shares, promptly instruct its transfer agent to issue one or more certificates,
        free from restrictive legend, in such name and in such denominations as
        specified by such Buyer.  The Company acknowledges that a breach by it
        of its obligations hereunder will cause irreparable harm to the Buyers, by
        vitiating the intent and purpose of the transactions contemplated
        hereby.  Accordingly, the Company acknowledges that the remedy at law
        for a breach of its obligations under this Section 5 may be inadequate and
        agrees, in the event of a breach or threatened breach by the Company of the
        provisions of this Section, that the Buyers shall be entitled, in addition
        to
        all other available remedies, to an injunction restraining any breach and
        requiring immediate transfer, without the necessity of showing economic loss
        and
        without any bond or other security being required.

    

     

    54.  CONDITIONS
      TO THE COMPANY’S
      OBLIGATION TO SELL.  The obligation of the Company
      hereunder to issue and sell the Notes and Warrants to a Buyer at the Closing
      is
      subject to the satisfaction, at or before the Closing Date of each of the
      following conditions thereto, provided that these conditions are for the
      Company’s sole benefit and may be waived by the Company at any time in its sole
      discretion:

     

    55.  The
      applicable Buyer shall have executed this Agreement and the Registration Rights
      Agreement, and delivered the same to the Company.

     

    56.  The
      applicable Buyer shall have delivered the Purchase Price in accordance with
      Section 1(b) above.

     

    57.  The
      representations and warranties of the applicable Buyer shall be true and correct
      in all material respects as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date), and the applicable Buyer shall have performed, satisfied
      and complied in all material respects with the covenants, agreements and
      conditions required by this Agreement to be performed, satisfied or complied
      with by the applicable Buyer at or prior to the Closing Date.

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

     

    58.  No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    59.  CONDITIONS
      TO EACH BUYER’S
      OBLIGATION TO PURCHASE.  The obligation of each Buyer
      hereunder to purchase the Notes and Warrants at the Closing is subject to the
      satisfaction, at or before the Closing Date of each of the following conditions,
      provided that these conditions are for such Buyer’s sole benefit and may be
      waived by such Buyer at any time in its sole discretion:

     

    60.  The
      Company shall have executed this Agreement and the Registration Rights
      Agreement, and delivered the same to the Buyer.

     

    61.  The
      Company shall have delivered to such Buyer duly executed Notes (in such
      denominations as the Buyer shall request) and Warrants in accordance with
      Section 1(b) above.

     

    62.  The
      Irrevocable Transfer Agent Instructions, in form and substance satisfactory
      to a
      majority-in-interest of the Buyers, shall have been delivered to and
      acknowledged in writing by the Company’s Transfer Agent.

     

    63.  The
      representations and warranties of the Company shall be true and correct in
      all
      material respects as of the date when made and as of the Closing Date as though
      made at such time (except for representations and warranties that speak as
      of a
      specific date) and the Company shall have performed, satisfied and complied
      in
      all material respects with the covenants, agreements and conditions required
      by
      this Agreement to be performed, satisfied or complied with by the Company at
      or
      prior to the Closing Date.  The Buyer shall have received a
      certificate or certificates, executed by the chief executive officer of the
      Company, dated as of the Closing Date, to the foregoing effect and as to such
      other matters as may be reasonably requested by such Buyer including, but not
      limited to certificates with respect to the Company’s Articles of Incorporation,
      By-laws and Board of Directors’ resolutions relating to the transactions
      contemplated hereby.

     

    64.  No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    65.  No
      event
      shall have occurred which could reasonably be expected to have a Material
      Adverse Effect on the Company.

     

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    66.  The
      Buyer
      shall have received an officer’s certificate described in Section 3(c) above,
      dated as of the Closing Date.

     

    67.  GOVERNING
      LAW;
      MISCELLANEOUS.

     

    68.  Governing
      Law.  THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND
      CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
      AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
      TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY
      SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED
      IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT,
      THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
      CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE
      OF AN
      INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
      PROCEEDING.  BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
      PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
      SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
      PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
      PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
      A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
      CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
      OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
      ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES
      AND
      EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
      CONNECTION WITH SUCH DISPUTE.

     

    69.  Counterparts;
      Signatures by
      Facsimile.  This Agreement may be executed in one or
      more counterparts, each of which shall be deemed an original but all of which
      shall constitute one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other
      party.  This Agreement, once executed by a party, may be delivered to
      the other party hereto by facsimile transmission of a copy of this Agreement
      bearing the signature of the party so delivering this Agreement.

     

    70.  Headings.  The
      headings of this Agreement are for convenience of reference only and shall
      not
      form part of, or affect the interpretation of, this Agreement.

     

    71.  Severability.  In
      the event that any provision of this Agreement is invalid or unenforceable
      under
      any applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law.  Any provision
      hereof which may prove invalid or unenforceable under any law shall not affect
      the validity or enforceability of any other provision hereof.

     

    72.  Entire
      Agreement;
      Amendments.  This Agreement and the instruments
      referenced herein contain the entire understanding of the parties with respect
      to the matters covered herein and therein and, except as specifically set forth
      herein or therein, neither the Company nor the Buyer makes any representation,
      warranty, covenant or undertaking with respect to such matters.  No
      provision of this Agreement may be waived or amended other than by an instrument
      in writing signed by the party to be charged with enforcement.

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    73.  Notices.  Any
      notices required or permitted to be given under the terms of this Agreement
      shall be sent by certified or registered mail (return receipt requested) or
      delivered personally or by courier (including a recognized overnight delivery
      service) or by facsimile and shall be effective five days after being placed
      in
      the mail, if mailed by regular United States mail, or upon receipt, if delivered
      personally or by courier (including a recognized overnight delivery service)
      or
      by facsimile, in each case addressed to a party.  The addresses for
      such communications shall be:

     

    If
      to the
      Company:

    

    Midnight
      Holdings Group, Inc.

    22600
      Hall Road, Suite 205

    Clinton
      Township, MI  48036

    Attention:  Chief
      Executive Officer

    Telephone:  586-468-8741

    Facsimile:   586-468-8768

     

    With
      a
      copy to:

     

    Anslow
      & Jaclin, LLP

    195
      Route
      9 South, Suite 204

    Manalapan,
      NJ  07726

    Attention:  Gregg
      E. Jaclin, Esq.

    Telephone:  732-409-1212

    Facsimile:   732-577-1188

     

    If
      to a
      Buyer:  To the address set forth immediately below such Buyer’s name
      on the signature pages hereto.

     

    With
      copy
      to:

    

    Ballard
      Spahr Andrews & Ingersoll, LLP

    1735
      Market Street

    51st
      Floor

    Philadelphia,
      Pennsylvania  19103

    Attention:  Gerald
      J. Guarcini, Esq.

    Telephone:  215-864-8625

    Facsimile:  215-864-8999

    Email:  guarcini@ballardspahr.com

     

    Each
      party shall provide notice to the other party of any change in
      address.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

     

    74.  Successors
      and
      Assigns.  This Agreement shall be binding upon and inure
      to the benefit of the parties and their successors and
      assigns.  Neither the Company nor any Buyer shall assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of the other.  Notwithstanding the foregoing, subject to
      Section 2(f), any Buyer may assign its rights hereunder to any person who
      is an “Accredited Investor” that purchases Securities in a private transaction
      from a Buyer or to any of its “affiliates,” as that term is defined under the
      1934 Act, without the consent of the Company.

     

    75.  Third
      Party
      Beneficiaries.  This Agreement is intended for the
      benefit of the parties hereto and their respective permitted successors and
      assigns, and is not for the benefit of, nor may any provision hereof be enforced
      by, any other person.

     

    76.  Survival.  The
      representations and warranties of the Company and the agreements and covenants
      set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder
      notwithstanding any due diligence investigation conducted by or on behalf of
      the
      Buyers.  The Company agrees to indemnify and hold harmless each of the
      Buyers and all their officers, directors, employees and agents for loss or
      damage arising as a result of or related to any breach or alleged breach by
      the
      Company of any of its representations, warranties and covenants set forth in
      Sections 3 and 4 hereof or any of its covenants and obligations under this
      Agreement or the Registration Rights Agreement, including advancement of
      reasonable expenses as they are incurred.

     

    77.  Publicity.  The
      Company and each of the Buyers shall have the right to review a reasonable
      period of time before issuance of any press releases, SEC, OTCBB or NASD
      filings, or any other public statements with respect to the transactions
      contemplated hereby; provided, however,
      that the
      Company shall be entitled, without the prior approval of each of the Buyers,
      to
      make any press release or SEC, OTCBB (or other applicable trading market) or
      NASD filings with respect to such transactions as is required by applicable
      law
      and regulations (although each of the Buyers shall be consulted by the Company
      in connection with any such press release prior to its release and shall be
      provided with a copy thereof and be given an opportunity to comment
      thereon).

     

    78.  Further
      Assurances.  Each party shall do and perform, or cause
      to be done and performed, all such further acts and things, and shall execute
      and deliver all such other agreements, certificates, instruments and documents,
      as the other party may reasonably request in order to carry out the intent
      and
      accomplish the purposes of this Agreement and the consummation of the
      transactions contemplated hereby.

     

    79.  No
      Strict
      Construction.  The language used in this Agreement will
      be deemed to be the language chosen by the parties to express their mutual
      intent, and no rules of strict construction will be applied against any
      party.

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    E.  Remedies.  The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to the Buyers by vitiating the intent and purpose of the
      transaction contemplated hereby.  Accordingly, the Company
      acknowledges that the remedy at law for a breach of its obligations under this
      Agreement will be inadequate and agrees, in the event of a breach or threatened
      breach by the Company of the provisions of this Agreement, that the Buyers
      shall
      be entitled, in addition to all other available remedies at law or in equity,
      and in addition to the penalties assessable herein, to an injunction or
      injunctions restraining, preventing or curing any breach of this Agreement
      and
      to enforce specifically the terms and provisions hereof, without the necessity
      of showing economic loss and without any bond or other security being
      required.

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF, the
      undersigned Buyers and the Company have caused this Agreement to be duly
      executed as of the date first above written.

     

    

    

    MIDNIGHT
      HOLDINGS GROUP,
      INC.

     

    

    

    /s/ 
Nicholas
      Cocco                    

    Nicholas
      Cocco

    Chief
      Executive Officer

    

    

    AJW
      PARTNERS, LLC

    By:  SMS
      Group, LLC

    

    

    /s/ 
Corey
      S.
      Ribotsky                  

    Corey
      S.
      Ribotsky

    Manager

    

    

    RESIDENCE:  Delaware

    

    ADDRESS:            1044
      Northern Boulevard

    Suite
      302

    Roslyn,
      New
      York  11576

    Facsimile:  (516)
      739-7115

    Telephone:  (516)
      739-7110

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

    

    Aggregate
      Principal Amount of
      Notes:                                                                                                           $

    Number
      of
      Warrants:

    Aggregate
      Remaining Purchase Price (after

    accounting
      for any principal of Bridge
      Note):                                                                                                $

    

    

    

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    

    

    AJW
      OFFSHORE,
      LTD.

    By:  First
      Street Manager II, LLC

    

    

    /s/ 
Corey
      S.
      Ribotsky                  

    Corey
      S.
      Ribotsky

    Manager

    

    

    RESIDENCE:         Cayman
      Islands

    

    ADDRESS:            AJW
      Offshore, Ltd.

    P.O.
      Box
      32021 SMB

    Grand
      Cayman, Cayman Island, B.W.I.

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

    

    Aggregate
      Principal Amount of
      Notes:                                                                                                           $

    Number
      of
      Warrants:

    Aggregate
      Remaining Purchase Price (after

    accounting
      for any principal of Bridge
      Note):                                                                                                $

    

    

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    
 

    AJW
      QUALIFIED PARTNERS,
      LLC

     

    By:  AJW
      Manager, LLC

     

    /s/ 
Corey
      S.
      Ribotsky                  

    Corey
      S.
      Ribotsky

    Manager

     

    

    

    RESIDENCE:         New
      York

    

    ADDRESS:           
      1044 Northern Boulevard

    Suite
      302

    Roslyn,
      New
      York  11576

    Facsimile:                                (516)
      739-7115

    Telephone:                             
      (516) 739-7110

    

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

    

    Aggregate
      Principal Amount of
      Notes:                                                                                                           $

    Number
      of
      Warrants:

    Aggregate
      Remaining Purchase Price (after

    accounting
      for any principal of Bridge
      Note):                                                                                                $

    

    

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

     

     

    NEW
      MILLENNIUM CAPITAL PARTNERS II,
      LLC

     

    By:  First
      Street Manager II, LLP

     

    /s/ 
Corey
      S.
      Ribotsky                  

    Corey
      S.
      Ribotsky

    Manager

     

    

    

    RESIDENCE:         
      New York

    

    ADDRESS:            1044
      Northern Boulevard

    Suite
      302

    Roslyn,
      New
      York  11576

    Facsimile:                                (516)
      739-7115

    Telephone:                              (516)
      739-7110

    

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

    

    

    Aggregate
      Principal Amount of
      Notes:                                                                                                           $

    Number
      of
      Warrants:

    Aggregate
      Remaining Purchase Price (after

    accounting
      for any principal of Bridge
      Note):                                                                                                $

     

     

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    
 

    

     Exhibit
      A

    

    

    FORM
      OF
      NOTE

    

    (See
      Attached)

    

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    
 

    Exhibit
      B

    

    

    FORM
      OF
      WARRANT

    

    (See
      Attached)

    

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    
 

    Exhibit
      C

    

    

    FORM
      OF REGISTRATION RIGHTS
      AGREEMENT

    

    (See
      Attached)

    

    

     

     

     

     

    
 

    
28

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}]]