Document:

Exhibit 10.6

Domestic

Each
of the Stock Plan Subcommittee of the Compensation Committee and the
Compensation Committee of the Board of Directors of The Estée Lauder Companies
Inc. reserves the right to change provisions of this Agreement to comply with
the American Jobs Creation Act of 2004.

Restricted Stock Unit Agreement
Under

The Estée Lauder Companies Inc.

Amended and Restated Fiscal 2002 Share Incentive Plan (the “Plan”)

This RESTRICTED STOCK UNIT AGREEMENT
(“Agreement”) provides for the granting by The Estée Lauder Companies
Inc., a Delaware corporation (the “Company”), to the participant, an
employee of the Company or one of its subsidiaries (the “Participant”),
of Stock Units under the Plan representing a notional account equal to a
corresponding number of shares of the Company’s Class A Common Stock, par value
$0.01 (the “Shares”), subject to the terms below (the “Restricted
Stock Units”).  The name of the “Participant,”
the “Grant Date,” the “Number of Restricted Stock Units,” the “Vesting
Commencement Date,” the “Vesting Schedule,” and the “Vesting Period” are stated
in the attached “Notice of Grant” and are incorporated by reference.  The other terms of this award are stated in
this Agreement and in the Plan. Terms not defined in this Agreement are defined
in the Plan, as amended.

1.     Award Grant. The Company
hereby awards to the Participant an award of Restricted Stock Units in respect
of the number of Shares set forth in the Notice of Grant.

2.     Vesting.  The Restricted Stock Units granted
to the Participant will vest and become payable in accordance with the Vesting
Schedule in the Notice of Grant.  This
schedule indicates the vesting date upon which the Participant will be entitled
to receive Shares.  Except as otherwise
provided in this Agreement, any Restricted Stock Units that are unvested when
the Participant terminates employment with the Company will be forfeited.

3.     Payment of Awards.  Each Restricted Stock Unit represents the
right to receive one Share when the Restricted Stock Unit vests.

Upon a Change in Control, (a) each unvested Restricted
Stock Unit will vest and become payable to the Participant in accordance with
the Plan and this paragraph and (b) each vested Restricted Stock Unit not paid
will become payable to the Participant in accordance with the Plan and this
paragraph. Payments upon a Change in Control will be made within two weeks
following the Change in Control.  If the
Shares cease to be outstanding immediately after the Change in Control (e.g.,
due to a merger with and into another entity), then the consideration to be
received per Share will equal the consideration paid to each stockholder per
Share generally upon the Change in Control. 
If the Participant dies before the Change in Control, vested Restricted
Stock Units will become payable in accordance with this paragraph.  If the Participant becomes disabled or is
terminated without Cause before the Change in Control, the Restricted Stock
Units that were to vest pro rata due to disability or termination without Cause
will vest and become payable in accordance with this paragraph.  All other unvested Restricted Stock Units
will be forfeited.

4.     Termination of Employment.
If the Participant’s employment terminates during the Vesting Period, all
unvested Restricted Stock Units will be forfeited except as follows, subject to
Paragraph 3:

(a)                      Death.  If the Participant dies, unvested Restricted
Stock Units will vest on the date of death pro rata based on the number of full
months the Participant was employed during the Vesting Period after the last
vesting date (i.e., the
proration equals a fraction, the numerator of which is the number of full
calendar months of service completed during the Vesting Period after the last
vesting date through the Participant’s death and the denominator of which is
the number of full calendar months after the last vesting date that are
remaining in the Vesting Period).  For
this purpose, “last vesting date” is the grant date if the first vesting date
has not yet occurred.  As an example,
assume a grant to Participant X of Restricted Stock Units for 300 shares with a
three-year Vesting Period and one-third of the units vesting at the end of each
twelve-month period.  If Participant X
dies 18 months after the grant date and six months after the last vesting date,
then the estate or beneficiary of Participant X would be entitled to payment of
50 Shares (before withholding). 
Participant X would have already received 100 Shares (before
withholding) on the first anniversary of the grant date. Payment of the vested
Restricted Stock Units will occur as soon as practicable following the
Participant’s death and in accordance with any applicable laws or Company
procedures regarding the payments.

(b)                     Retirement.  If the Participant formally retires under the
terms of The Estée Lauder Companies Retirement Growth Account Plan (or an
affiliate or a successor plan or program of similar purpose), the unvested
Restricted Stock Units will continue to vest and be paid in accordance with the
Vesting Schedule.   Vesting and payment
in respect of any unvested Restricted Stock Unit after retirement will be
subject to satisfaction of the conditions precedent that the Participant
neither (i) competes with, takes employment with, or renders services to a
competitor of the Company, its subsidiaries, or affiliates without the Company’s
written consent, nor (ii) conducts himself or herself in a manner adversely
affecting the Company.

(c)                      Disability.  If the Participant becomes totally and
permanently disabled (as determined under the Company’s long-term disability
program), the unvested Restricted Stock Units will vest pro rata for full
months employed during the Vesting Period (determined under the proration
methodology in paragraph 4(a)) on the next vesting date during the Vesting Period.  The vested Restricted Stock Units will be
paid in accordance with the Vesting Schedule (i.e., on the next vesting date
during the Vesting Period).

(d)                     Termination
of Employment Without Cause.  If the
Participant’s employment is terminated at the instance of the Company or
relevant subsidiary without Cause (as defined below), any unvested Restricted
Stock Units will vest pro rata for full months employed during the Vesting
Period (determined under the proration methodology in paragraph 4(a)) on the next
vesting date during the Vesting Period. Restricted Stock Units will be paid in
accordance with the Vesting Schedule and payment in respect of any unvested
Restricted Stock Unit after last day of active employment will be subject to
satisfaction of the conditions precedent that the Participant neither (i)
competes with, takes employment with, or renders services to a competitor of
the Company, its subsidiaries, or affiliates without the Company’s written
consent, nor (ii) conducts himself or herself in a manner adversely affecting
the Company.

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(e)                      Termination
of Employment By Employee.  If the
Participant voluntarily terminates his or her employment (e.g., by voluntarily resigning) other
than due to retirement or disability, which are subject to paragraphs 4(b) and
4(c) above, respectively, all Restricted Stock Units that are not vested as of
the effective date of resignation will be forfeited.

(f)                      Termination
of Employment With Cause.  If the
Participant is terminated for Cause, all Restricted Stock Units that are not
vested as of the effective date of resignation will be forfeited.  For this purpose, “Cause” is defined in the
employment agreement in effect between the Participant and the Company or any
subsidiary, including an employment agreement entered into after the Grant
Date.  In the absence of an employment
agreement, “Cause” means any breach by the Participant of any of his or her
material obligations under any Company policy or procedure, including, without
limitation, the Code of Corporate Conduct.

5.     No Rights of Stock Ownership.
This grant of Restricted Stock Units does not entitle the Participant to any
interest in or to any voting or other rights normally attributable to Share
ownership.

6.     Withholding. Regardless of
any action the Company or the Participant’s employer (the “Employer”) takes
with respect to any or all income tax, social security, payroll tax, or other
tax-related withholding (“Tax-Related Items”), Participant acknowledges that
the ultimate liability for all Tax-Related Items legally due by Participant is
and remains his or her responsibility. 
Furthermore, Participant acknowledges that the Company and/or the
Employer (i) make no representations or undertakings regarding the treatment of
any Tax-Related Items in connection with any aspect of the Restricted Stock
Units, including the grant of the Restricted Stock Units, the vesting of the
Restricted Stock Units, the delivery of Shares, the subsequent sale of Shares
acquired under the Plan and the receipt of any dividends; and (ii) do not
commit to structure the terms of the grant of the Restricted Stock Units or any
aspect of Participant’s participation in the Plan to reduce or eliminate his or
her liability for Tax-Related Items.

Prior
to the relevant taxable event, Participant shall pay or make adequate
arrangements satisfactory to the Company and/or the Employer to satisfy all
withholding obligations of the Company and/or the Employer.  In this regard, Participant authorizes the
Company and/or the Employer to withhold all applicable Tax-Related Items
legally payable by Participant from his or her wages or other cash compensation
paid by the Company and/or the Employer or from proceeds of the sale of the
Shares acquired under the Plan.  Alternatively,
or in addition, the Company may (i) sell or arrange for the sale of Shares that
Participant acquires under the Plan to meet the withholding obligation for the
Tax-Related Items, and/or (ii) withhold in Shares, provided that the Company
only withholds the amount of Shares necessary to satisfy the minimum
withholding amount.  If the Company
satisfies the Tax-Related Item withholding obligation by withholding a number
of Shares as described herein, Participant will be deemed to have been issued
the full number of Shares due to Participant at vesting, notwithstanding that a
number of the Shares is held back solely for purposes of such Tax-Related
Items.

Finally, Participant shall pay to the Company or the
Employer any amount of Tax-Related Items that the Company or the Employer may
be required to withhold as a result of his or her participation in the Plan
that cannot be satisfied by the means previously described.  The Company may refuse to issue Shares under
the Plan and refuse to deliver the Shares if Participant fails to comply with
his or her obligations in connection with the Tax-Related Items as described in
this paragraph.

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7.     Nonassignability. This
award may not be assigned, pledged, or transferred, except, if the Participant
dies, to a designated beneficiary or by will or by the laws of descent and
distribution. The foregoing restrictions do not apply to transfers under a
court order, including, but not limited to, any domestic relations order.

8.     Effect Upon
Employment. The Participant’s right to continue to serve the
Company or any of its subsidiaries as an officer, employee, or otherwise, is
not enlarged or otherwise affected by an award hereunder.  Nothing in this Agreement or the Plan gives the Participant any right
to continue in the employ of the Company or any of its subsidiaries or to
interfere in any way with any right the Company or any subsidiary may have to
terminate his or her employment at any time. 
Payment of Shares is not secured by a trust, insurance contract or other
funding medium, and the Participant does not have any interest in any fund or
specific asset of the Company by reason of this Award or the account
established on his or her behalf.  A
Restricted Stock Unit award confers no rights as a shareholder of the Company
until Shares are actually delivered to the Participant.

9.     Notices.  Any notice required or permitted under this
Agreement is deemed to have been duly given if delivered, telecopied, or mailed
(certified or registered mail, return receipt requested) or sent by
internationally-recognized courier guaranteeing next day delivery (a) to the
Participant at the address on file in the Company’s (or relevant subsidiary’s)
personnel records or (b) to the Company, attention Stock Plan Administration at
its principal executive offices, which are currently located at 767 Fifth
Avenue, New York, NY 10153.

10.  Disclosure and Use of Information.

a.     By
signing and returning the attached Notice of Grant, and as a condition of the
grant of the Restricted Stock Units, the Participant hereby expressly and
unambiguously consents to the collection, use, and transfer of personal data as
described in this paragraph by and among, as necessary and applicable, the
Employer, the Company and its subsidiaries and by any agent of the Company or
its subsidiaries for the exclusive purpose of implementing, administering and
managing Participant’s participation in the Plan.

b.     The
Participant understands that the Employer, the Company and/or its other  subsidiaries holds, by means of an automated
data file or otherwise, certain personal information about the Participant,
including, but not limited to, name, home address and telephone number, date of
birth, social insurance number, salary, nationality, job title, any shares or
directorships held in the Company, details of all Restricted Stock Units or
other entitlement to shares awarded, canceled, exercised, vested, unvested, or
outstanding in the Participant’s favor, for purposes of managing and
administering the Plan (“Data”).

c.     The
Participant also understands that part or all of his or her Data may be held by
the Company or its subsidiaries in connection with managing and administering
previous award or incentive plans or for other purposes, pursuant to a
prior  transfer made with the Participant’s
consent in respect of any previous grant of restricted stock units or other
awards.

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d.     The
Participant further understands that the Employer may transfer Data to the
Company or its subsidiaries as necessary to implement, administer, and manage
his or her participation in the Plan. 
The Company and its subsidiaries may transfer data among themselves, and
each, in turn, may further transfer Data to any third parties assisting the
Company in the implementation, administration, and management of the Plan (“Data
Recipients”).

e.     The
Participant understands that the Company, its subsidiaries, and the Data
Recipients are or may be located in his or her country of residence or
elsewhere. The Participant authorizes the Employer, the Company, its
subsidiaries, and the Data Recipients to receive, possess, use, retain, and
transfer Data in electronic or other form to implement, administer, and manage
his or her participation in the Plan, including any transfer of Data that the
Administrator deems appropriate for the administration of the Plan and any
transfer of Shares on his or her behalf to a broker or third party with whom
the Shares may be deposited.

f.      The
Participant understands that he or she may request a list with the names and
addresses of any potential recipients of the Data by contacting his or her
local human resources representative.

g.     The
Participant understands that Data will be held as long as is reasonably
necessary to implement, administer and manage his or her participation in the
Plan and he or she may oppose the processing and transfer of his or her Data
and may, at any time, review the Data, request that any necessary amendments be
made to it, or withdraw his or her consent by notifying the Company in writing.
The Participant further understands that withdrawing consent may affect his or her
ability to participate in the Plan.

11.  Discretionary
Nature and Acceptance of Award.  By accepting this Award, the Participant
agrees to be bound by the terms of this Agreement and acknowledges that:

a.     The Plan
is established voluntarily by the Company, it is discretionary in nature, and
it may be modified, amended, suspended or terminated by the Company at any
time, unless otherwise provided in the Plan and this Agreement;

b.     The award
of Restricted Stock Units is voluntary and occasional, and does not create any
contractual or other right to receive future awards of Restricted Stock Units,
or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units
have been awarded repeatedly in the past.

c.     All
decisions with respect to future awards, if any, will be at the sole discretion
of the Company;

d.     Participant’s
participation in the Plan is voluntary;

e.     Participant’s
participation in the Plan shall not create a right to further employment with
the Employer and shall not interfere with the ability of the Company or the
Employer to terminate Participant’s employment at any time;

f.      Restricted
Stock Units are an extraordinary item that does not constitute compensation of
any kind for services of any kind rendered to the Company or any subsidiary,
and which is outside the scope of Participant’s employment or service contract,
if any;

 5
 

g.     The
Restricted Stock Units are not part of normal or expected compensation or
salary for any purposes, including, but not limited to, calculating any
severance, resignation, termination, redundancy, end of service payments,
bonuses, long-service awards, pension or retirement or welfare benefits or
similar payments and in no event should be considered as compensation for, or
relating in any way to, past services for the Company or any subsidiary;

h.     In the
event the Participant is not an employee of the Company, the Restricted Stock
Units and Participant’s participation in the Plan will not be interpreted to
form an employment or service contract or relationship with the Company; and
furthermore, the Restricted Stock Units and Participant’s participation in the
Plan will not be interpreted to form an employment or service contract with any
subsidiary of the Company;

i.      The
future value of the underlying Shares is unknown and cannot be predicted with
certainty;

j.      In
consideration of the award of the Restricted Stock Units, no claim or
entitlement to compensation or damages shall arise from termination of the
Restricted Stock Units or diminution in value of the Restricted Stock Units, or
Shares acquired upon vesting of the Restricted Stock Units, resulting from
termination of Participant’s employment by the Company or any subsidiary (for
any reason whatsoever and whether or not in breach of local labor laws) and in
consideration of the award of the Restricted Stock Units, Participant
irrevocably releases the Company and any subsidiary from any such claim that
may arise; if, notwithstanding the foregoing, any such claim is found by a
court of competent jurisdiction to have arisen, then, by signing the Notice of
Grant, Participant shall be deemed irrevocably to have waived his or her right
to pursue or seek remedy for any such claim or entitlement;

k.     In the
event of termination of Participant’s employment (whether or not in breach of
local labor laws), Participant’s right to receive Restricted Stock Units under
the Plan and to vest in such Restricted Stock Units, if any, will terminate
effective as of the date that Participant is no longer actively employed and
will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden
leave” or similar period pursuant to local law); the Administrator shall have
the exclusive discretion to determine when Participant is no longer actively
employed for purposes of this Agreement;

l.      The
Company is not providing any tax, legal or financial advice, nor is the Company
making any recommendations regarding Participant’s participation in the Plan or
Participant’s acquisition or sale of the underlying Shares; and

m.    Participant
is hereby advised to consult with Participant’s own personal tax, legal and
financial advisors regarding Participant’s participation in the Plan before
taking any action related to the Plan.

12.  Failure to Enforce Not a Waiver.  The Company’s failure to enforce at any time
any provision of this Agreement does not constitute a waiver of that provision
or of any other provision of this Agreement.

13.  Governing Law.  This Agreement is governed by and is to be construed
according to the laws of the State of New York, that apply to agreements made
and performed in that state, without regard to its choice of law
provisions.  For purposes of litigating
any dispute that arises under the Restricted Stock Units or this Agreement, the
parties hereby submit to and consent to the jurisdiction of the State of New
York, and agree that such litigation will be conducted in the courts of New
York County, New York, or 

 6
 

the
federal courts for the United States for the Southern District of New York, and
no other courts, where the Restricted Stock Units are made and/or to be
performed.

14.  Partial Invalidity.  The invalidity or illegality of any provision
of this Agreement will be deemed not to affect the validity of any other provision.

15.  Section
409A Compliance. This Agreement is
intended to comply with section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), and any regulations, rulings, or guidance provided
thereunder.  The Company reserves the
unilateral right to amend this Agreement upon written notice to the Participant
in order to prevent taxation under Code section 409A.

16.  Electronic
Delivery.  The Company
may, in its sole discretion, decide to deliver any documents related to
Restricted Stock Units awarded under the Plan or future Restricted Stock Units
that may be awarded under the Plan by electronic means or request Participant’s
consent to participate in the Plan by electronic means.  Participant hereby consents to receive such
documents by electronic delivery and agrees to participate in the Plan through
any on-line or electronic system established and maintained by the Company or
another third party designated by the Company.

	
  

  	
  The Estée Lauder Companies
  Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Amy DiGeso

  
	
   

  	
  Executive Vice
  President,

  
	
   

  	
  Global Human
  Resources

  

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Notice of Grant Under

The Estée Lauder Companies Inc.

Amended and
Restated Fiscal 2002 Share Incentive Plan (The “Plan”)

This
is to confirm that you were awarded a grant of Restricted Stock Units at the
most recent meeting of the Stock Plan Subcommittee of the Compensation
Committee of the Board of Directors representing the right upon vesting of such
units to receive shares of Class A Common Stock of The Estée Lauder Companies
Inc. (the “Shares”), subject to the terms of the Plan and the Restricted Stock
Unit Agreement.  This award was made in
recognition of the significant contributions you have made as a key employee of
the Company, and to motivate you to achieve future successes by aligning your
interests more closely with those of our stockholders.  This Restricted Stock Unit award is granted
under and governed by the terms and conditions of the Plan and the Restricted
Stock Unit Agreement (the “Agreement”) made part hereof. The Agreement and
Summary Plan Description are being sent to you in a separate email.  Please read these documents and keep them for
future reference.  The specific terms of
your award are as follows:

Participant:                            (LAST
NAME, FIRST NAME)

	
  SSN or Global Identification
  Number:

  	
   

  	
  (*)

  
	
   

  	
   

  	
   

  
	
  Employee
  Identification Number:

  	
   

  	
  (*)

  
	
   

  	
   

  	
   

  
	
  Number of
  Restricted Stock Units:

  	
   

  	
  (*)

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
  (*)

  
	
   

  	
   

  	
   

  
	
  Vesting
  Commencement Date

  	
   

  	
  (*)

  

 

Vesting Schedule:  Subject to Participant’s continuous
employment, this Restricted Stock Unit grant shall vest as to the number of
Shares set forth below:

	
  Shares

  	
   

  	
  Vesting Date

  
	
   

  	
   

  	
   

  
	
  (*)

  	
   

  	
  (*)

  
	
  (*)

  	
   

  	
  (*)

  
	
  (*)

  	
   

  	
  (*)

  

 

Vesting
Period:  The Vesting Commencement Date
through and including the applicable date set forth in the Vesting Schedule.

Questions
regarding the award can be directed to (*)

If
you wish to accept this grant, please sign
this Notice of Grant and return immediately to:

Compensation
Department

767 Fifth Avenue, 43rd Floor

New York, New York 10153

Attention:  (*)

Any
dividends earned on vested Shares, after applicable withholding, that are held
in an account for Participant at Mellon Investor Services LLC (or its
successor) engaged by The Estée Lauder Companies Inc. for the purposes of
holding the Shares for Participant upon vesting (the “Agent”), will be
automatically reinvested in accordance with Agent’s applicable procedures in
additional whole and fractional shares Company Class A
Common Stock unless you notify Thomas Fellenbaum or
Patricia Zakrzewski in writing prior to the Vesting Date set forth above
that you do not wish to have your dividends reinvested.

The
undersigned hereby accepts, and agrees to, all terms and provisions of the
Agreement, including those contained in this Notice of Grant.

	
  By

  	
   

  	
   

  	
  Date

  	
   

  

 

Enclosure:
Restricted Stock Unit Q&A

 8Exhibit 10.1

EXHIBIT 10.1

Dated:  August __, 2006

NEITHER THIS BRIDGE NOTE NOR THE SECURITIES INTO WHICH THIS BRIDGE NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

		
	No. CD-__

	$_______

THE QUANTUM GROUP, INC.

8% Subordinated Secured Convertible Bridge Note

Due March 31, 2007

This Subordinated Secured Bridge Note (the “Bridge Note”) is issued by THE QUANTUM GROUP, INC., a Nevada corporation (the “Obligor”), to ______________ (the “Holder”).

FOR VALUE RECEIVED, the Obligor hereby promises to pay to the Holder or its successors and assigns the principal sum of ________________ Dollars ($_______), together with accrued but unpaid interest on or before the “Maturity Date” as herewithin defined in accordance with the following terms:

Interest.  Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to 8%.  Interest shall be calculated on the basis of a 360-day year and the actual number of days elapsed, to the extent permitted by applicable law.  Interest hereunder will be paid to the Holder or its assignee in whose name this Bridge Note is registered on the records of the Obligor regarding registration and transfers of Bridge Notes (the “Bridge Note Register”) on the Maturity Date.  In the event the principal of the Bridge Note shall not be paid at the Maturity Date, interest shall be accrued at the rate of 1.5% per month until principal and all accrued interest have been paid.

Maturity Date.  This Bridge Note together with all accrued interest shall be due and payable at the earlier of (a) the closing of a secondary public offering of the Obligor’s securities in an aggregate amount of approximately $8,000,000 with Newbridge Securities Corporation (“Newbridge”) as managing underwriter (the “Secondary Public Offering”) or (b) on March 31, 2007, provided however that such date may be extended for up to 60-days upon prior written notice from Newbridge to the Obligor and the Holder. 

This Bridge Note is subject to the following additional provisions:

Section 1.

Dissolution Event.  In the event the Obligor has a dissolution event, which shall consist of a change in control, a financing of at least $4,000,000 (excluding the SPO), a merger whereby the Obligor is not the surviving entity or sale of all or substantially all of the assets of the Obligor, then the Bridge Note holders shall have the option to demand payment of

the principal and any accrued interest and such payment shall be made within 20 days of such event, otherwise the Bridge Note holders may convert as per the Conversion Price defined herein.

Section 2.

Conversion and Adjustment.

(a)

Upon written request until such time the Bridge Notes are repaid (including any accrued interest), the Bridge Note holders (at their sole discretion) shall have the right to convert (from time to time, in whole or part) the Bridge Notes into shares of common stock of the Obligor, as described at the Conversion Price described below.

(b)

The Conversion Price (“Conversion Price”) shall be equal to 70% of the offering price of any of the Obligor’s subsequent securities offerings, including the SPO.  An offering shall not include the issuance of (i) shares of common stock or options to consultants, employees, officers and directors of the Obligor, (ii) securities upon the exercise or exchange of or conversion of any securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Obligor’s common stock issued and outstanding on the closing of the Financing Agreement for Sale of Bridge Securities dated August __, 2006 (the “Financing Agreement”), and (iii) securities issued pursuant to acquisitions or strategic transactions.  

(c)

The Holder shall effect conversions by delivering to the Obligor a completed notice in the form attached hereto as Exhibit A (a “Conversion Notice”).  The date on which a Conversion Notice is delivered is the “Conversion Date.”  Unless the Holder is converting the entire principal amount outstanding under this Bridge Note, the Holder is not required to physically surrender this Bridge Note to the Obligor in order to effect conversions.  Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Bridge Note plus all accrued and unpaid interest thereon in an amount equal to the applicable conversion.  The Holder and the Obligor shall maintain records showing the principal amount converted and the date of such conversions.  In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.

(d)

If the Obligor, at any time while this Bridge Note is outstanding, shall (i) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger number of shares, (iii) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of shares of the Common Stock any shares of capital stock of the Obligor, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event.  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re­classification.

(e)

Upon a conversion hereunder the Obligor shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Closing Bid Price of the Obligor’s Common Stock on the Conversion Date.  If the Obligor elects not, or is 

2

unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

(f)

The issuance of certificates for shares of the Common Stock (or other securities) on conversion of this Bridge Note shall be made without charge to the Holder thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Obligor shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such Bridge Note so converted and the Obligor shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Obligor the amount of such tax or shall have established to the satisfaction of the Obligor that such tax has been paid.

Section 3.

Registration Rights and Reservation of Shares.  As provided under the Subscription Agreement executed by the Holder and accepted by the Obligor, the Bridge Note Holder shall have registration rights to register the common shares issuable upon the conversion of the Bridge Note.  The Obligor shall at all times reserve for such number of shares of its common stock as shall be required for issuance and delivery upon conversion of the Bridge Notes.

Section 4.

Notice.  Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

If to the Obligor, to:

The Quantum Group, Inc.

3420 Fairlane Farms Road, Suite C

Wellington, Florida 33414

Attention: Noel Guillama

Telephone: (561) 798-9800

Facsimile: (561) 396-3456

or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) business days prior to the effectiveness of such change.  Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

Section 5.

This Bridge Note shall not entitle the Holder to any of the rights of a stockholder of the Obligor, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Obligor, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

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Section 6.

Repayment of this Bridge Note shall be secured by a lien on all tangible and intangible assets of the Obligor as described in that certain Security Agreement executed contemporaneously herewith.

Section 7.

In the event of an occurrence of any event of default specified below, the principal of, and all accrued and unpaid interest on, this Bridge Note shall be come due and payable as specified below.  In the event of an event of default under this Bridge Note, a default may only be called by holders of at least fifty percent (50%) of the aggregate principal amount of the Bridge Notes then outstanding, including High Capital Funding, LLC.  

The following shall constitute an event of default:

(a)

Obligor fails to make any payment hereunder when due, which failure has not been cured within 10 days following such due date.

(b)

The Obligor breaches any material covenant or other term or condition of this Bridge Note, the Financing Agreement or the Security Agreement executed in connection with this Bridge Note in any material respect and such breach, if subject to cure, continues for a period of ten (10) days after written notice to the Obligor.

(c)

Obligor files a petition to take advantage of any insolvency act; makes an assignment for the benefit of its creditors; commences a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself of a whole or any substantial part of its property; files a petition or answer seeking reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state.

(d)

A court of competent jurisdiction enters an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of Obligor or of the whole or any substantial part of its properties, or approves a petition filed against Obligor seeking reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statue of the United States of America or any state; or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction assumes custody or control of Obligor or of the whole or any substantial part of its properties; or there is commenced against Obligor any proceeding for any of the foregoing relief and such proceeding or petition remains undismissed for a period of 30-days; or if Obligor by any act indicates its consent to or approval of any such proceeding or petition.

(e)

If (i) any judgment remaining unpaid, unstayed or undismissed for a period of 60-days is rendered against Obligor, which by itself or together with all other such judgments rendered against Obligor remaining unpaid, unstayed or undismissed for a period of 60-days, is in excess of $100,000, or (ii) there is any attachment or execution against Obligor’s properties remaining unstayed or undismissed for a period of 60-days, which by itself or together with all other attachments and executions against Obligor’s properties remaining unstayed or undismissed for a period of 60-days is for an amount in excess of $100,000.

Section 8.

If this Bridge Note is mutilated, lost, stolen or destroyed, the Obligor shall execute and deliver, in exchange and substitution for and upon cancellation of the mutilated Bridge Note, or in lieu of or in substitution for a lost, stolen or destroyed Bridge Note, a new Bridge Note for the principal amount of this Bridge Note so mutilated, lost, stolen or destroyed 

4

but only upon receipt of evidence of such loss, theft or destruction of such Bridge Note, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Obligor.

Section 9.

This Bridge Note shall be governed by and construed in accordance with the laws of the State of Nevada.  Each of the parties consents to the jurisdiction of the applicable State or Federal Court located in Las Vegas, Nevada in connection with any dispute arising under this Bridge Note and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum conveniens to the bringing of any such proceeding in such jurisdictions.

Section 10.

If the Obligor fails to materially comply with the terms of this Bridge Note, then the Obligor shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Bridge Note, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.

Section 11.

Any waiver by the Holder of a breach of any provision of this Bridge Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Bridge Note.  The failure of the Holder to insist upon strict adherence to any term of this Bridge Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Bridge Note.  Any waiver must be in writing.

Section 12.

If any provision of this Bridge Note is invalid, illegal or unenforceable, the balance of this Bridge Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest.  The Obligor covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Obligor from paying all or any portion of the principal of or interest on this Bridge Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Obligor (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

Section 13.

Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, which for the purposes of hereof means any day except Saturday, Sunday and any day which shall be a Federal legal holiday in the United States or day on which banking institutions are authorized or required by law or other government action to close, such payment shall be made on the next succeeding Business Day.

5

Section 14.

If there are any inconsistencies between this Bridge Note and the Financing Agreement between the Bridge Note Purchasers and the Company dated August __, 2006, the Financing Agreement shall govern.

Section 15.

THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

IN WITNESS WHEREOF, the Obligor has caused this Bridge Note to be duly executed by a duly authorized officer as of the date set forth above.

			
	 
	THE QUANTUM GROUP, INC.

	 
	 
	 

	 
	 
	 

	                                                                                    

	By

	                                                             

	 
	Name:

	 
	Title:

6

EXHIBIT “1”

EXHIBIT “A”

NOTICE OF CONVERSION

(To be executed by the Holder in order to convert the Bridge Note)

TO:

_______________________

The undersigned hereby irrevocably elects to convert _________ of the principal amount of the above Bridge Note into Shares of Common Stock (or other securities) of The Quantum Group, Inc., according to the conditions stated therein, as of the Conversion Date written below.

		
	Conversion Date:

	 

	Applicable Conversion Price:

	 

	Signature:

	 

	Name:

	 

	Social Security # or Tax ID #

	 

	Address:

	 

	Amount to be converted:

	 

	Amount of Bridge Note unconverted:

	 

	Conversion Price per share:

	 

	Number of shares of Common

Stock to be issued:

	 

	Please issue the shares of

Common Stock in the following

name and to the following address:

	 

	Issue to:

	 

	Authorized Signature:

	 

	Name:

	 

	Title:

	 

	Phone Number:

	 

	Broker DTC Participant Code:

	 

	Account Number:

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