Document:

AGREEMENT

         This AGREEMENT (this "Agreement") is made and entered into as of
November 10, 2004 by and between Dennis Mehiel ("Assignee") and Fusion
Telecommunications International, Inc., a Delaware corporation, with a principal
place of business at 420 Lexington Avenue, Suite 518, New York, New York 10170
("Debtor").

         WHEREAS, on or about January 25, 2001, Evelyn Greer ("Assignor")
entered into a Promissory Note and Security Agreement with Debtor ("Note 1") a
copy of which is attached to and made a part of this Agreement as Exhibit A,
Schedule A pursuant to which Assignor loaned Debtor $1,000,000 plus principal
and interest; which interest is currently $108,333.45.

         WHEREAS, Assignor desires to assign her rights and privileges under
Note 1 and Assignee desires to accept such agreement in accordance with the
terms and conditions of the Assignment (Exhibit "A"); and

         WHEREAS, Debtor consents to Assignment of Note 1 under the terms and
conditions set forth herein.

         NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt, adequacy and sufficiency of which is
acknowledged, the parties agree as follows:

         1.       The effective date of the Assignment shall be November 10,
2004 (the "Effective Date").

         2.       A copy of the Assignment Agreement is attached hereto as
Exhibit A and incorporated herein.

         3.       Contemporaneous with the closing of the Assignment, Assignee
and Debtor will amend Note 1 as follows: (i) release the security interest in
65% of the Debtor's accounts receivable; (ii) upon request of the Debtor and
agreement of the Assignee, subordinate the security interest to any lender;
(iii) reduce the interest rate to 6.5%; (iv) extend the maturity date of Note 1
to November 1, 2006; and (v) increase the principal amount of Note 1 to
$1,108,333.45.

         4.       Upon Debtor becoming a public entity, Note 1 will
automatically convert into shares of common stock at the lesser of (i) $3.85 per
share, or (ii) a price that is equal to 80% of the price of a share of common
stock in an initial public offering of Debtor's securities (the "Conversion
Price"). The common stock issued upon conversion will be subject to a one (1)
year lock-up from the date that the Debtor becomes a public entity. In the event
Debtor desires to pre-pay Note 1 or the New Note (as defined herein), Debtor
shall give Assignee 30 days written notice that it intends to pre-pay Note 1 and
the New Note, at which time Assignee shall have 30 days to convert all or a
portion of the principal and accrued interest under Note 1 and the New Note into
shares of common stock at the Conversion Price. Assignee shall have the right to
convert all or a portion of the principal and accrued interest on Note 1 and the
New Note at the Conversion Price at any time while they are outstanding.

         5.       Debtor consents to the assignment and transfer of Note 1 from
Assignor to Assignee.

                                                                               1
<PAGE>

         6.       Marvin S. Rosen and Philip D. Turits hereby agree to
subordinate their promissory notes with Debtor to Note 1 and the New Note until
the later of (i) such time as Debtor becomes a public entity, or (ii) until such
time as Assignee converts Note 1 and the New Note as set forth in paragraphs 4
and 8, or (iii) until Note 1 and the New note is paid in full. The Debtor agrees
to cause Messrs. Rosen and Turits to execute a subordination agreement, in form
acceptable to Assignee, to evidence this subordination, upon request of
Assignee.

         7.       In the event that the Debtor does not consummate an initial
public offering of its securities and a third party purchases more than 50% of
Debtor's outstanding capital stock and all or a portion of the capital stock of
Marvin S. Rosen and Philip D. Turits is included in such sale, Assignee shall
have the right to convert all or any part of Note 1 and the New Note into common
stock and include a pro rata portion of his capital stock in such third party
sale on the same terms as Messrs. Rosen and Turits. The Debtor agrees to cause
Messrs. Rosen and Turtis to execute an agreement to formalize this agreement,
upon the request of Assignee.

         8.       In addition to Note 1, Assignee will purchase a convertible
promissory note (the "New Note") in the amount of $1,400,000 (the "Principal
Amount"). A form of the New Note is attached as Exhibit 2. The New Note shall
have a maturity date of November 9, 2006 and accrue interest at a rate of 6.5%
payable annually; however, if the Debtor becomes a public entity within one (1)
year of the date of the New Note, no interest will be paid or be payable. If the
Debtor becomes a public entity within the second (2nd) year from the date of the
New Note, no interest accrued during the 2nd year will be paid or be payable. In
the event the Company becomes a public entity, upon such date, the Principal
Amount of this New Note shall be automatically converted into common stock, at
the Conversion Price.

         Debtor shall give Assignee 30 days written notice that it intends to
pre-pay the New Note at which time Assignee shall have 30 days to convert all or
a portion of the outstanding principal and accrued interest under the New Note
into shares of common stock at the Conversion Price. The common stock will be
subject to a one (1) year lock-up from the date the Debtor becomes a public
entity should such act occur at a later date.

         9.       In the event that the Debtor intends to redeem all or any
portion of the Series C preferred stock, the Debtor will first give the Assignee
30 days' notice of such intent and the maturity date of the New Note and Note 1
will accelerate to the date of such notice.

         10.      The Conversion Price for Note 1 will be subject to
anti-dilution protection in the exact same manner as set forth in Section 4 of
the New Note.

         11.      The parties agree that all covenants, agreements, and
representations in this Assignment will survive execution of this Agreement.

         12.      This Agreement shall be binding upon the heirs, executors,
administrators, successors, and assigns of the parties to this Agreement.
Assignee and Debtor shall execute and deliver such further and additional
instruments, agreements, and other documents as may be necessary to evidence or
carry out the provisions of this Agreement.

         13.      This Agreement contains the entire understanding of the
parties to this Agreement with respect to the transactions contemplated by this
Agreement and may be amended, modified, supplemented or altered only by a
writing duly executed by all of the parties to this Agreement and any prior
agreements or understandings, whether oral or written are entirely superseded by
this Agreement.

                                                                               2
<PAGE>

      IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first written.

ASSIGNEE

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

DEBTOR

BY:_________________________
MATTHEW D. ROSEN
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

Solely with respect to paragraph 6:

By:_________________________
Marvin Rosen

By:_________________________
Philip Turits

                                                                               3
<PAGE>

                             FORM OF PROMISSORY NOTE

THIS NOTE HAS NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER REGULATIONS PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS NOTE SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE NOTE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.

THIS NOTE MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION
UNDER THE PROVISIONS OF THE 1933 ACT AND UNDER PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS.

                  FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

                        6.5% CONVERTIBLE PROMISSORY NOTE

US$1,400,000.00                                                November 10, 2004

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC., a Delaware corporation (the
"Company"), the principal office of which is located at 420 Lexington Avenue,
Suite 518, New York, New York 10170, for value received hereby promises to pay
to the order of Dennis Mehiel or his assignee (the "Holder"), the sum of
US$1,400,000.00 or such lesser amount as shall then equal the outstanding
principal amount hereof (the "Principal Amount") and any unpaid accrued interest
hereon (together with the Principal Amount, the "Outstanding Amount") as set
forth below, on November 10, 2006, (the "Maturity Date"). Payment for all
amounts due hereunder shall be made by mail to the registered address of the
Holder.

The following is a statement of the rights of the Holder of this Note and
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:

1.       INTEREST.

         (i) The Company shall pay interest (computed on the basis of a 365-day
year) at a rate of six and 1/2 percent (6.5%) per annum on the Principal Amount
during the period beginning on the date of issuance of this Note and ending on
the later of the date the Outstanding Amount is paid in full or the date of the
final conversion.

         (ii) Notwithstanding the foregoing, if the Company becomes a public
entity, with a class of securities registered under the Securities Exchange Act
of 1934 within one (1) year of the date of the Note, no interest will be paid or
be payable. If the Company becomes a public entity within the second (2nd) year
from the date of this Note, no interest accrued during the second (2nd) year
will be paid or be payable. The Company may pre-pay the Note without a penalty.

2.       EVENTS OF DEFAULT. If one or more of the following described "Events of
Default" shall occur,

                  a.       The Company shall fail to perform or observe in any
material respect any

                                                                               4
<PAGE>

covenant, term, provision, condition, agreement or obligation of the Company
under this Note and such failure shall continue uncured for a period of ten (10)
days after written notice from the Holder specifically describing such failure
or, if such failure is by its nature curable but not curable within thirty (30)
days from the date of such notice, if the Company shall have failed to commence
within such thirty (30) day period in good faith to cure such failure and shall
have failed to cure such failure within a reasonable time longer than thirty
(30) days; or

                  b.       A trustee, liquidator or receiver shall be appointed
by the Company or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after such
appointment; or

                  c.       Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of
the Company and shall not be dismissed within thirty (30) calendar days
thereafter;

                  d.       Bankruptcy reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief or debtors shall be instituted by or against the Company and, if
instituted against the Company, the Company shall by any action or answer
approve of, consent to or acquiesce in any such proceedings or admit the
material allegations of, or default in answering a petition filed in any such
proceeding or such proceedings shall not be dismissed within sixty (60) days
thereafter.

                  e.       Any Event of Default under the promissory note
between the Company and Evelyn Greer as Trustee dated on or around January 25,
2001, which is being assigned to the Holder.

3.       CONVERSION.

         3.1      AUTOMATIC CONVERSION. In the event the Company becomes a
public entity, with a class of securities registered under the Securities
Exchange Act of 1934, upon such date, the Outstanding Amount of this Note shall
be automatically converted into Common Stock, at the lesser of (i) $3.85 per
share, or (ii) 80% of price of a share of common stock in an initial public
offering (the "Conversion Price"). The Common Stock will be subject to a one (1)
year lock-up.

         3.2      OPTIONAL CONVERSION. The Holder shall have the right to
convert the Outstanding Amount on this Note in whole or in part into common
stock at the Conversion Price at any time until the Maturity Date.

         3.3      DELIVERY OF STOCK CERTIFICATES. As promptly as practicable
after the conversion of this Note (but in no case later than ten (10) business
days after receipt of the Note and the signed Notice of Conversion), the
Company, at its expense, will issue and deliver by express courier service for
delivery to the Holder of this Note a certificate or certificates for the number
of full shares of Common Stock issuable upon such conversion, pursuant to
Section (4.1) of this Note.

The share certificates shall bear a restrictive legend in substantially the
following form:

         THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933, AS AMENDED ("SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
         STATE AND MAY NOT BE SOLD,

                                                                               5
<PAGE>

         TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
         REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE
         FOREGOING LAWS. ACCORDINGLY, THIS WARRANT MAY NOT BE SOLD, TRANSFERRED
         OR OTHERWISE DISPOSED OF UNLESS (i) PURSUANT TO AN EFFECTIVE
         REGISTRATION UNDER THE SECURITIES ACT OR (ii) IN A TRANSACTION EXEMPT
         FROM REGISTRATION UNDER THE SECURITIES ACT AND UNDER PROVISIONS OF
         APPLICABLE STATE SECURITIES LAWS. HEDGING TRANSACTIONS RELATED TO THESE
         SECURITIES ARE PROHIBITED UNLESS CONDUCTED IN COMPLIANCE WITH THE
         SECURITIES ACT. THE SECURITIES ARE SUBJECT TO A TRANSFER RESTRICTION.

         3.4      MECHANICS AND EFFECT OF CONVERSION. No fractional shares of
Common Stock shall be issued upon conversion of this Note. In lieu of the
Company issuing any fractional shares to the Holder upon the conversion of this
Note, the Company shall pay to the Holder the amount of outstanding principal
that is not so converted, such payment to be in the form as provided below. Upon
conversion of this Note, the Company shall be forever released from all its
obligations and liabilities under this Note, except that the Company shall be
obligated to pay the Holder, upon conversion, any interest accrued and unpaid or
unconverted to and including the date of such conversion, and no more.

         3.5      The Company shall give Holder 30 days written notice that it
intends to pre-pay this Note at which time Holder shall have 30 days to convert
all or a portion of the outstanding principal and accrued interest under this
Note into shares of common stock at the Conversion Price. The common stock
issuable upon conversion will be subject to a one (1) year lock-up from the date
the Company becomes a public entity should such act occur at a later date. The
Company may otherwise pre-pay this Note without a penalty.

4.       CONVERSION PRICE ADJUSTMENTS.

         4.1      ADJUSTMENTS FOR STOCK SPLITS AND SUBDIVISIONS. In the event
the Company should at any time or from time to time after the date of issuance
hereof fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or the distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as "Common Stock Equivalents")
without payment of any consideration by such holder for the additional shares of
Common Stock or the Common Stock Equivalents (including the additional shares of
Common Stock' issuable upon conversion or exercise thereof), then, as of such
record date (or the date of such dividend distribution, split or subdivision if
no record date is fixed), the Conversion Price of this Note shall be
appropriately decreased so that the number of shares of Common Stock issuable
upon conversion of this Note shall be increased in proportion to such increase
of outstanding shares.

         4.2      ADJUSTMENTS FOR REVERSE STOCK SPLITS. If the number of shares
of Common Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then following the record
date of such combination, the Conversion Price for this Note shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion hereof shall be decreased in proportion to such decrease in
outstanding shares.

                                                                               6
<PAGE>

5.       ACCELERATION. In the event that the Company chooses to redeem its all
or any portion of the outstanding Series C preferred stock, the Company will
give the Holder 30 days' notice of its intention to redeem and the Maturity Date
of this Note will accelerate to the date of such notice.

6.       MERGER. If the Company merges or consolidates with another corporation
or sells or transfers all or substantially all of its assets to another person
and the Holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee shall amend this Note to provide that it may
thereafter be converted on the terms and subject to the conditions set forth
above into the kind and amount of stock, entities or property receivable upon
such merger, consolidation, sale or transfer by a Holder of the number of shares
of Common Stock into which this Note might have been converted immediately
before such merger, consolidation, sale or transfer, subject to adjustments
which shall be as nearly equivalent as may be practicable to adjustments
provided for in Section 4.

The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes the
obligations of the Company under this Note and immediately after such
transaction no Event of Default exists. Any reference herein to the Company
shall refer to such surviving or transferee corporation and the obligations of
the Company shall terminate upon such assumption.

7.       ASSIGNMENT. Subject to the restrictions or transfer described below,
the rights and obligations of the Company and the Holder of this Note shall be
binding upon and benefit the successors, assigns, heirs, administrators, and
transferees of the parties.

8.       WAIVER AND AMENDMENT. This Note and the Purchase Agreement constitute
the full and entire understanding and agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements with respect to
the subject matter hereof. Any provision of this Note may be amended, waived or
modified upon the written consent of the Company and Holder thereof.

9.       RESTRICTIONS ON TRANSFER. This Note and the Common Stock issuable upon
the conversion hereof have not been registered under the Securities Act of 1933,
as amended, (the "Securities Act") and have been sold pursuant to an exemption
from registration under the 1933 Act. The Common Stock issuable upon the
conversion of this Note may only be offered or sold pursuant to registration
under or an exemption from the Securities Act.

10.      NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if made by hand delivery, by an express courier company, by registered or
certified mail, or by facsimile transmission, at the respective addresses and/or
facsimile number of the parties as set forth herein.

11.      GOVERNING LAW; INTERPRETATION. This Agreement, and all exhibits
attached, shall be governed by and construed under the laws of the State of New
York and the laws applicable therein without regard to its choice of law
principles. All disputes should be determined and litigated in the courts of New
York.

Any legal action or proceeding in connection with this Agreement or the
performance hereof may be brought in the state courts located in New York, and
the parties hereby irrevocably submit to the non-exclusive jurisdiction of such
courts for the purpose of any such action or proceeding.

                                                                               7
<PAGE>

12.      HEADING; REFERENCES. All headings used herein are used for convenience
only and shall not be used to construe or interpret this Note. Except where
otherwise indicated, all references herein to Sections refer to Sections hereof.

13.      ATTORNEY'S FEES. Should any party bring an action to enforce the terms
of this Note, then the prevailing party in the action shall be entitled to
recovery of its attorney's fees from the other party.

IN WITNESS WHEREOF, the Company has caused this Note to be issued this 10th day
of November 2004.

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

By:

Name:
Title:
Address:
Facsimile:

HOLDER: DENNIS MEHIEL

By:

Name:
Title:
Address:

                                                                               8THIS NOTE AND THE SHARES OF COMMON STOCK  ISSUABLE UPON  CONVERSION OF THIS NOTE
HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL
(i) A REGISTRATION  STATEMENT  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES  ACT")  SHALL HAVE BECOME  EFFECTIVE  WITH  RESPECT  THERETO OR (ii)
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL  REASONABLY  SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE SECURITIES ACT IS NOT REQUIRED
IN CONNECTION  WITH SUCH PROPOSED  TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF
ANY APPLICABLE  STATE  SECURITIES  LAWS.  THIS LEGEND SHALL BE ENDORSED UPON ANY
NOTE ISSUED IN  EXCHANGE  FOR THIS NOTE OR ANY SHARES OF COMMON  STOCK  ISSUABLE
UPON CONVERSION OF THIS NOTE.

THIS NOTE AND THE RIGHTS AND  OBLIGATIONS OF THE COMPANY AND PAYEE HEREUNDER ARE
SUBJECT TO THE  SUBORDINATION  PROVISIONS SET FORTH IN SECTION 2 HEREOF.  IN THE
EVENT OF A CONFLICT BETWEEN ANY TERMS OF THIS NOTE AND THE TERMS OF SUCH SECTION
2, THE TERMS OF SECTION 2 SHALL GOVERN.

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

                  FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

No. 2                                                                $125,000.00
                                                                   April 9, 1999

                          CONVERTIBLE SUBORDINATED NOTE

                  Fusion  Telecommunications  International,  Inc.,  a  Delaware
corporation (the "Company"),  for value received,  hereby promises to pay to the
order of Marvin Rosen (the  "Payee") on April 9, 2004 (the  "Maturity  Date") at
the  offices  of the  Company,  the  principal  sum of One  Hundred  Twenty-Five
Thousand Dollars  ($125,000.00) or such lesser principal amount as shall at such
time be outstanding  hereunder  (the  "Principal  Amount").  Each payment by the
Company  pursuant to this Note shall be made without set-off or counterclaim and
shall  be made in  lawful  currency  of the  United  States  of  America  and in
immediately available funds. Interest on this Note shall accrue on the Principal
Amount  outstanding from time to time at a rate per annum computed in accordance
with Section 3 hereof.

         The amount of all repayments of principal,  interest  rates  applicable
thereto and  interest  accrued  thereon  shall be recorded on the records of the
Payee and,  prior to any transfer of, or any action to collect,  this Note shall
be endorsed on this Note. Any such  recordation or endorsement  shall constitute
PRIMA FACIE evidence of the accuracy of the information so recorded or endorsed,
but the failure to record any such  amount or rate shall not limit or  otherwise
affect the obligations of the Company hereunder to make payments of principal or
interest when due. All payments by the Company  hereunder shall be applied first
to pay any  interest  which is due,  but  unpaid,  then to reduce the  Principal
Amount.

                  The Company (i) waives presentment,  demand, protest or notice
of any kind in  connection  with this Note and (ii)  agrees to pay to the holder
hereof, on demand, all costs and

<PAGE>

expenses  (including  reasonable legal fees and expenses) incurred in connection
with the enforcement and collection of this Note.

                  This Note is issued in connection with a private  placement of
identical Notes (collectively,  the "Notes"),  the terms of which are more fully
set forth in the  Confidential  Private  Placement  Memorandum dated February 8,
1999, as amended and restated on April 29, 1999,  May 11, 1999 and May 27, 1999,
and pursuant to a Subscription Agreement, between the Company and the Payee (the
"Subscription Agreement"), a copy of which agreement is available for inspection
at the Company's principal office. Notwithstanding any provision to the contrary
contained  herein,   this  Note  is  subject  and  entitled  to  certain  terms,
conditions,  covenants and agreements  contained in the Subscription  Agreement.
Any transferee of this Note, by its acceptance  hereof,  assumes the obligations
of the Payee in the  Subscription  Agreement  with respect to the conditions and
procedures for transfer of this Note.  Reference to the  Subscription  Agreement
shall in no way impair the absolute and unconditional  obligation of the Company
to pay both principal hereof and interest hereon as provided herein.

         1.       PREPAYMENT.  The Principal Amount of this Note may be prepaid,
in whole or in part, without penalty, at any time or from time to time after the
third anniversary of the date of this Note or earlier pursuant to the provisions
of  Section  6B  hereof  upon  10  business  days'  prior  written  notice  (the
"Prepayment  Notice")  to  the  Payee.  Principal  Amounts  repaid  may  not  be
reborrowed.

         2.       SUBORDINATION.  The Company,  for itself,  its  successors and
assigns,  covenants and agrees, and the Payee and each successive holder of this
Note, by its acceptance of this Note,  likewise  covenants and agrees (expressly
for the  benefit  of the  present  and future  holders  of the  Senior  Debt (as
hereinafter  defined)),  that the payment of principal of, and interest on, this
Note is hereby  expressly  subordinated in right of payment to the prior payment
in full of the principal  of,  premium (if any) and interest on, all Senior Debt
of the Company (other than the Notes), whether outstanding on the date hereof or
hereafter  incurred or  created.  "Senior  Debt"  means,  collectively,  (i) all
Indebtedness  for  Borrowed  Money (and all  renewals,  extensions,  refundings,
amendments and modifications of any such Indebtedness for Borrowed Money);  (ii)
all other indebtedness  incurred prior to the issuance of the Notes which by its
terms is senior to the Notes;  and (iii) all payment  obligations of the Company
pursuant to any capitalized lease with an entity that is not an affiliate of the
Company,  unless by the terms of the instrument  creating or evidencing any such
indebtedness it is expressly  provided that such indebtedness is not superior in
right of payment to the Notes.

                  "Indebtedness  for  Borrowed  Money"  means  (i)  all  payment
obligations  of the Company to a bank,  insurance  company,  finance  company or
other institutional  lender or other entity regularly engaged in the business of
extending  credit in the form of borrowed money,  provided such entity is not an
affiliate of the Company (each of the foregoing,  an "Institutional  Lender") in
respect  of  extensions  of credit to the  Company  (or to a  subsidiary  of the
Company to the extent such obligations are guaranteed by the Company pursuant to
a written  guarantee  executed by the  appropriate  officers of the Company) and
(ii) all  obligations,  contingent or otherwise,  relative to the face amount of
all letters of credit,  whether or not drawn, and banker's acceptances,  in each
case

                                       2
<PAGE>

issued for the account of the Company (other than such as may be for the benefit
of an affiliate of the Company).

                  The  provisions  of this  Section 2 are not for the benefit of
the Company,  but are solely for the purpose of defining the relative  rights of
the holders of the Senior Debt,  on the one hand,  and the holders of the Notes,
on the other hand.  Nothing  contained  herein (i) shall impair,  as between the
Company and the holder of this Note, the  obligations of the Company,  which are
absolute and  unconditional,  to pay to the holder hereof all amounts payable in
respect  of this  Note as and when the same  shall  become  due and  payable  in
accordance  with the terms  hereof or (ii) is  intended  to or shall  affect the
relative rights of the holder of this Note and the creditors of the Company,  or
(iii) shall prevent the holder of this Note from  exercising all rights,  powers
and remedies otherwise permitted by applicable law or upon a default or Event of
Default under this Note as set forth in these subordination provisions.

         3.       COMPUTATION OF INTEREST.

                  A.       BASE INTEREST  RATE.  Subject to  subsections B and C
below, the outstanding Principal Amount shall bear interest at the rate of seven
and one-quarter percent (7.25%) per annum.

                  B.       PENALTY  INTEREST.  After the Maturity Date, the rate
of interest  applicable to the unpaid  Principal Amount shall be 2% in excess of
that  otherwise  applicable  pursuant to subsection A above,  but in no event in
excess of the Maximum Rate provided in subsection C below.

                  C.       MAXIMUM  RATE.  In the  event  that it is  determined
that,  under  the  laws  relating  to usury  applicable  to the  Company  or the
indebtedness  evidenced by this Note  ("Applicable  Usury  Laws"),  the interest
charges and fees payable by the Company in connection  herewith or in connection
with any other  document or  instrument  executed and  delivered  in  connection
herewith  cause the  effective  interest  rate  applicable  to the  indebtedness
evidenced by this Note to exceed the maximum  rate allowed by law (the  "Maximum
Rate"),  then such interest shall be recalculated for the period in question and
any excess  over the  Maximum  Rate paid with  respect to such  period  shall be
credited,   without  further  agreement  or  notice,  to  the  Principal  Amount
outstanding  hereunder to reduce said balance by such amount with the same force
and effect as though the Company had specifically  designated such extra sums to
be so  applied  to  principal  and the Payee had  agreed  to accept  such  extra
payment(s) as a premium-free  prepayment.  All such deemed  prepayments shall be
applied to the  principal  balance  payable at  maturity.  In no event shall any
agreed-to or actual  exaction as  consideration  for this Note exceed the limits
imposed or provided by Applicable  Usury Laws in the  jurisdiction  in which the
Company  is  resident  applicable  to  the  use  or  detention  of  money  or to
forbearance in seeking its collection in the  jurisdiction  in which the Company
is resident.

                  D.       INTEREST  PAYMENT DATES.  Accrued and unpaid interest
shall be payable (i) semi-annually on January 31 and July 31, (ii) upon maturity
(whether at the Maturity Date, by  acceleration  or  otherwise),  (iii) upon any
prepayment,  on the amount  prepaid and (iv) after  maturity  until paid in

                                       3
<PAGE>

full (after as well as before judgment),  on demand.  Each of the dates referred
to in clauses (i), (ii), (iii), and (iv) is sometimes hereinafter referred to as
an "Interest Payment Date." All computations of interest hereunder shall be made
based on the actual number of days elapsed in a year of 365 days  (including the
first day but excluding the last day during which any such  Principal  Amount is
outstanding).  The Principal  Amount of this Note together with interest accrued
and unpaid  thereon  shall be payable on the  Maturity  Date unless this Note is
converted in accordance with Section 6 hereof.

         4.       COVENANTS OF COMPANY

                  A.       AFFIRMATIVE  COVENANTS.  The  Company  covenants  and
agrees  that,  so long as this Note shall be  outstanding,  it will  perform the
obligations set forth in this Section 4A:

                           (i)      TAXES AND LEVIES. The Company will file when
due all federal,  state and local  income tax returns and will  promptly pay and
discharge all taxes,  assessments,  and  governmental  charges or levies imposed
upon the Company or upon its income and  profits,  or upon any of its  property,
before the same shall become delinquent, except where the failure to file and/or
make payment would not have a material adverse effect on the Company, as well as
all claims for labor,  materials and supplies which,  if unpaid,  might become a
lien or charge  upon any  material  properties  or any  material  part  thereof;
PROVIDED,  HOWEVER,  that the Company shall not be required to pay and discharge
any such tax, assessment,  charge, levy or claim so long as the validity thereof
shall be  contested  in good faith by  appropriate  proceedings  and the Company
shall set aside on its books  adequate  reserves in  accordance  with  generally
accepted   accounting   principles  ("GAAP")  with  respect  to  any  such  tax,
assessment, charge, levy or claim so contested;

                           (ii)     MAINTENANCE  OF EXISTENCE.  The Company will
do or cause to be done all things  reasonably  necessary to preserve and keep in
full force and effect its corporate existence,  rights and franchises and comply
with all laws  applicable  to the  Company,  except  where the failure to comply
would not have a material adverse effect on the Company;

                           (iii)    MAINTENANCE  OF  PROPERTY.  The Company will
maintain, preserve, protect and keep its material property used or useful in the
conduct of its business in good repair,  working order and  condition,  and from
time to time make all needful and proper  repairs,  renewals,  replacements  and
improvements  thereto  as shall be  reasonably  required  in the  conduct of its
business;

                           (iv)     INSURANCE.  The Company  will, to the extent
necessary  for  the  operation  of its  business,  keep  adequately  insured  by
financially  sound  reputable  insurers,  all  property of a  character  usually
insured by similar  corporations  and carry such other  insurance  as is usually
carried by similar corporations;

                           (v)      BOOKS AND  RECORDS.  The Company will at all
times keep true and correct  books,  records and accounts  reflecting all of its
business  affairs  and  transactions  in

                                       4
<PAGE>

accordance with GAAP.  Such books and records shall be open at reasonable  times
and upon reasonable notice to the inspection of the Payee or its agents;

                           (vi)     NOTICE OF CERTAIN  EVENTS.  The Company will
give prompt  written  notice (with a description  in  reasonable  detail) to the
Payee of:

                                    (a)      the  occurrence  of  any  Event  of
         Default or any event  which,  with the giving of notice or the lapse of
         time, would constitute an Event of Default;

                                    (b)      the  occurrence of any  litigation,
         arbitration or governmental  investigation or proceeding not previously
         disclosed  by the  Company  to the  Payee  in  writing  which  has been
         instituted or, to the knowledge of the Company, is threatened,  against
         the  Company or to which any of its  properties,  assets or revenues is
         subject which, if adversely determined, would reasonably be expected to
         have a material adverse effect on the Company;

                                    (c)      the  occurrence  of  any  event  of
         default or any event  which,  with the giving of notice or the lapse of
         time,  would  constitute  an event of  default  under any  document  or
         instrument  evidencing or governing any  indebtedness of the Company in
         the  principal  amount  exceeding  $1,000,000  and the  delivery of any
         notice effecting the acceleration of any such indebtedness;

                                    (d)      any  material  adverse  development
         which  shall  occur  in any  litigation,  arbitration  or  governmental
         investigation or proceeding  previously disclosed by the Company to the
         Payee; and

                                    (e)      the   occurrence   of   any   other
         circumstance  which has a  reasonable  likelihood  of having a material
         adverse effect on the Company;

                           (vii)    COMPLIANCE   WITH  LAWS.  The  Company  will
comply in all material  respects with all  applicable  federal,  state and local
laws, rules, regulations and orders.

                  B.       NEGATIVE COVENANTS.  The Company covenants and agrees
that, so long as this Note shall be outstanding, it will perform the obligations
set forth in this Section 4B:

                           (i)      LIQUIDATION,  DISSOLUTION.  The Company will
not liquidate or dissolve,  consolidate  with, or merge into or with,  any other
corporation  or other  entity,  PROVIDED THAT this clause (i) shall not restrict
any  consolidation or merger with an entity which has a tangible net worth equal
to or greater than the Company's at the time of transfer and such entity assumes
the obligations under the Notes;

                           (ii)     SALES OF ASSETS.  The Company will not sell,
transfer,  lease or otherwise  dispose of, or grant  options,  warrants or other
rights with respect to, all or substantially  all of its properties or assets to
any person or entity,  PROVIDED  THAT this  clause (ii) shall not  restrict  any
disposition made to an entity which has a tangible net worth equal to or greater
than  the  Company's  at the  time of  transfer  and  such  entity  assumes  the
obligations under the Notes;

                                       5
<PAGE>

         5.       EVENTS OF DEFAULT

                  A.       The term  "EVENT OF  DEFAULT"  shall  mean any of the
events set forth in this Section 5A:

                           (i)      NON-PAYMENT  OF  OBLIGATIONS.   The  Company
shall  default  in the  payment of  principal  on this Note when and as the same
shall become due and payable, whether by acceleration or otherwise or, within 10
business days of its becoming due, accrued interest on this Note;

                           (ii)     NON-PERFORMANCE  OF  AFFIRMATIVE  COVENANTS.
The Company shall default in the due  observance or  performance of any covenant
set forth in Section 4A, which  default shall  continue  uncured for 10 business
days after it has been discovered or should have been discovered by the Company;

                           (iii)    NON-PERFORMANCE OF NEGATIVE  COVENANTS.  The
Company shall default in the due  observance or  performance of any covenant set
forth in Section 4B;

                           (iv)     NON-PERFORMANCE  OF OTHER  OBLIGATIONS.  The
Company shall default in the due observance or performance of any other material
covenant or  agreement  on the part of the  Company to be observed or  performed
pursuant  to the terms  hereof,  which  default  shall  continue  uncured for 10
business days after written  notice thereof  specifying  such default shall have
been given to the Company by the holder of this Note (or its agent);

                           (v)      BANKRUPTCY,  INSOLVENCY,  ETC.  The  Company
shall:

                                    (a)      become  insolvent or generally fail
         or be unable to pay,  or admit in writing  its  inability  to pay,  its
         debts as they become due;

                                    (b)      apply for, consent to, or acquiesce
         in, the  appointment  of a  trustee,  receiver,  sequestrator  or other
         custodian  for the  Company or any of its  property,  or make a general
         assignment for the benefit of creditors;

                                    (c)      in the absence of such application,
         consent or acquiesce in, permit or suffer to exist the appointment of a
         trustee,  receiver,  sequestrator or other custodian for the Company or
         for any part of its property, and such trustee, receiver,  sequestrator
         or other custodian shall not be discharged within 30 days; or

                                    (d)      permit   or  suffer  to  exist  the
         commencement of any  bankruptcy,  reorganization,  debt  arrangement or
         other case or proceeding under any bankruptcy or insolvency law, or any
         dissolution,  winding up or liquidation  proceeding,  in respect of the
         Company and, if such case or proceeding is not commenced by the Company
         or  converted to a voluntary  case,  such case or  proceeding  shall be
         consented  to or  acquiesced  in by the

                                       6
<PAGE>

         Company  or shall  result in the entry of an order for  relief or shall
         remain for 60 days undismissed.

                           (vi)     BREACH    OF    WARRANTY.    Any    material
representation  or  warranty  of  the  Company  contained  in  the  Subscription
Agreement is or shall be incorrect in any material respect when made.

                  B.       ACTION  IF  BANKRUPTCY.   If  any  Event  of  Default
described  in  clauses  (v)(a)  through  (d) of  Section  5A  shall  occur,  the
outstanding  Principal Amount of this Note and all other  obligations  hereunder
shall automatically be and become immediately due and payable, without notice or
demand.

                  C.       ACTION  IF OTHER  EVENT OF  DEFAULT.  If any Event of
Default (other than any Event of Default described in clauses (v)(a) through (d)
of Section 5A) shall occur for any reason, whether voluntary or involuntary, and
be continuing, the Required Holders may, upon notice to the Company, declare all
or any portion of the outstanding  Principal Amount of this Note,  together with
interest accrued thereon, to be due and payable and any or all other obligations
hereunder to be due and payable,  whereupon the full unpaid Principal Amount (or
any portion  thereof so demanded),  such accrued  interest and any and all other
such obligations  which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand, or presentment.

                  D.       REMEDIES. Subject to the provisions of Section 5C and
7A  hereof,  in case any Event of Default  shall  occur and be  continuing,  the
holders of not less than 25% of the outstanding  aggregate  Principal  Amount of
the Notes may proceed to protect and enforce its rights by a proceeding  seeking
the specific  performance of any covenant or agreement contained in this Note or
in aid of the  exercise  of any power  granted  in this Note or may  proceed  to
enforce  the  payment of this Note or to enforce  any other  legal or  equitable
rights as such holder shall determine.

         6.       CONVERSION OF NOTE.

                  A.       AUTOMATIC CONVERSION ON QUALIFIED PUBLIC OFFERING. In
the  event  of  a  Qualified  Public  Offering  (as  hereinafter  defined),  the
outstanding  Principal  Amount of this Note shall, at the sole discretion of the
Company,  be  automatically  converted at the closing of such  Qualified  Public
Offering,  without any action by the holder hereof,  into shares of Common Stock
of the Company at a price  equal to $8.00 per share,  subject to  adjustment  as
provided  in Section 6D below (the  "Conversion  Price").  A  "Qualified  Public
Offering"  means an  underwritten  public  offering  of the Common  Stock of the
Company  registered  under the Securities Act of 1933, as amended,  in which the
initial  public  offering price at which such stock is offered equals or exceeds
125% of the  Conversion  Price (i.e.  $10.00 per share) and the aggregate  gross
proceeds,  prior to deduction for underwriting discounts and commissions,  equal
or exceed  $10,000,000.  The shares of Common Stock issuable upon  conversion of
this Note at the  Conversion  Price are  referred  to herein as the  "Conversion
Shares."

                                       7
<PAGE>

                  B.       PREPAYMENT OR AUTOMATIC CONVERSION UPON OTHER EVENTS.
If (i) the  average  closing  bid  price of the  Company's  Common  Stock for 30
consecutive  trading  days ending  within 10 days of the date of the  Conversion
Notice (as defined in Section 6E) or Prepayment  Notice,  equals or exceeds 125%
of the Conversion  Price (i.e.  $10.00 per share) and (ii) either a registration
statement  covering the  Conversion  Shares has been  declared  effective by the
Securities  and Exchange  Commission or at least two years has elapsed since the
issuance date of the Note, the outstanding Principal Amount of this Note may, at
the sole  discretion  of the  Company,  be either (i)  automatically  converted,
without  any action by the holder  hereof,  into  shares of Common  Stock of the
Company at the Conversion Price or (ii) prepaid, together with accrued interest.
In addition,  in the event the Company  completes a merger or  consolidation  in
which it is not the surviving entity,  the outstanding  Principal Amount of this
Note may, at the sole  discretion  of the Company,  be either (i)  automatically
converted,  without any action by the holder hereof, into shares of Common Stock
of the Company at the  Conversion  Price if the cash  consideration  paid in the
merger  or  consolidation  equals  or  exceeds  125%  of  the  Conversion  Price
(i.e.$10.00 per share) or (ii) prepaid, together with accrued interest.

                  C.       OPTIONAL CONVERSION.  The Payee shall have the right,
at its option, at any time up to and including the Maturity Date, to convert the
outstanding  Principal  Amount of this Note into shares of the Company's  Common
Stock at the  Conversion  Price.  The Payee's  right to convert this Note may be
exercised  during the 10  business  day  period  after  receipt of a  Prepayment
Notice.

                  D.       ADJUSTMENT OF CONVERSION  PRICE. The Conversion Price
in  effect  at any time and the  number  and kind of  securities  issuable  upon
conversion  of the Notes shall be subject to  adjustment  from time to time upon
the happening of certain events as follows:

                           (i)      In case the  Company  shall  (i)  declare  a
dividend or make a  distribution  on its reclassify  its  outstanding  shares of
Common Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding  shares  of  Common  Stock  into a smaller  number  of  shares,  the
applicable  Conversion  Price in effect at the time of the record  date for such
dividend  or  distribution  or  of  the  effective  date  of  such  subdivision,
combination  or  reclassification  shall be  adjusted so that it shall equal the
number of shares  determined by multiplying the Conversion  Price by a fraction,
the  denominator  of  which  shall be the  number  of  shares  of  Common  Stock
outstanding after giving effect to such action, and the numerator of which shall
be the number of shares of Common Stock  outstanding  immediately  prior to such
action.  Such adjustment  shall be made  successively  whenever any event listed
above shall occur.

                           (ii)     REORGANIZATION  OF THE  COMPANY.  Subject to
the provisions of Sections 1 and 6B hereof, in case of any  reclassification  or
capital reorganization, or in case of any consolidation or merger of the Company
with or into another corporation (other than a merger with a subsidiary in which
merger the Company is the  continuing  corporation  and which does not result in
any reclassification or capital reorganization) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety,
the Company shall, as a condition

                                       8
<PAGE>

precedent to such transaction, cause effective provisions to be made so that the
holder of this Note shall have the right thereafter upon conversion of this Note
in  accordance  with the  provisions of this Section 6, to purchase the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification,   capital  reorganization,   consolidation,  merger,  sale  or
conveyance  by a holder of the number of shares of Common Stock which might have
been  received  upon  conversion  of  this  Note   immediately   prior  to  such
reclassification,  consolidation, merger, sale or conveyance. Any such provision
shall include  provision for adjustments  which shall be as nearly equivalent as
may be  practicable  to the  adjustments  provided for in this Note. The Company
shall  not  effect  any such  consolidation,  merger,  sale,  transfer  or other
disposition in which it is not exercising its options under Section 1 or Section
6B hereof,  unless prior to or simultaneously with the consummation  thereof the
successor   corporation  (if  other  than  the  Company)   resulting  from  such
consolidation  or merger or the  corporation  purchasing or otherwise  acquiring
such  properties  shall  assume,  by written  instrument  executed and mailed or
delivered  to the  holder  of  this  Note at the  last  address  of such  holder
appearing on the books of the Company,  the obligation to deliver to such holder
such shares of stock, securities,  cash or properties as, in accordance with the
foregoing  provisions,  such  holder  may be  entitled  to  acquire.  The  above
provisions   of   this   paragraph   shall   similarly   apply   to   successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers or
other dispositions.  Nothing herein shall be construed as to require the consent
of the  holder  to any  such  reorganization,  reclassification,  consolidation,
merger, sale, transfer or other disposition.

                  E.       MECHANICS OF CONVERSION.

                           (i)      AUTOMATIC  CONVERSION.   In  the  event  the
Company  determines to force  conversion of the Notes pursuant to the provisions
of  Sections  6A or 6B  hereof,  it shall  deliver  to the Payee at its  address
appearing  on the  records  of the  Company  a written  notice  of the  imminent
conversion of this Note (the "Conversion Notice"),  requesting surrender of this
Note for  cancellation and written  instructions  regarding the registration and
delivery  of  certificates  for the  Conversion  Shares.  In the event the Payee
receives a Conversion Notice, the Payee shall be required to surrender this Note
for  cancellation  as of either the date of the  closing of a  Qualified  Public
Offering or, with respect to a  conversion  pursuant to Section 6B,  within five
business days of the Conversion Notice (the "Conversion  Date"), but the failure
of the Payee so to surrender  this Note shall not affect the  conversion  of the
outstanding  Principal Amount into Conversion Shares,  provided that if the Note
is not  surrendered,  an affidavit of lost note shall be provided.  No holder of
this Note shall be entitled upon  conversion of this Note to have the Conversion
Shares  registered  in the  name of  another  person  or  entity  without  first
complying with all applicable  restrictions on the transfer of this Note. In the
event the Payee does not provide the Company with written instructions regarding
the  registration and delivery of certificates  for the Conversion  Shares,  the
Company  shall issue such shares in the name of the Payee and shall forward such
certificates  to the  Payee  at its  address  appearing  on the  records  of the
Company. The person entitled to receive the Conversion Shares shall be deemed to
have  become the holder of record of such shares at the close of business on the
Conversion  Date and the person entitled to receive share  certificates  for the
Conversion  Shares  shall be  regarded  for all  corporate  purposes  after  the
Conversion Date as the record holder of the number of Conversion

                                       9
<PAGE>

Shares to which it is  entitled  upon the  conversion.  The  Company may rely on
record ownership of this Note for all corporate  purposes,  notwithstanding  any
contrary notice.  After the Conversion Date, this Note shall,  until surrendered
to the  Company,  represent  the right to receive  the  Conversion  Shares  plus
accrued and unpaid  interest on the Principal  Amount of this Note through,  but
excluding the Conversion Date.

                           (ii)     OPTIONAL CONVERSION.  Before the Payee shall
be  entitled  to  convert  this Note into  Conversion  Shares,  the Payee  shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Company,  and shall give written  notice to the Company at its  principal
corporate  office,  of the election to convert the same and shall state  therein
the name or names in which the  certificate or  certificates  for the Conversion
Shares are to be issued.  The Company shall, as soon as practicable  thereafter,
issue and  deliver  to the Payee,  or to the  nominee or  nominees  of Payee,  a
certificate or  certificates  for the number of Conversion  Shares to which such
holder shall be entitled as aforesaid.  Such conversion  shall be deemed to have
been  made  immediately  prior  to the  close  of  business  on the date of such
surrender  of the Note to be  converted,  and the person or persons  entitled to
receive the Conversion Shares issuable upon such conversion shall be treated for
all  purposes as the record  holder or holders of such shares of Common Stock as
of such date.

                  F.       CASH  PAYMENTS.   No  fractional   shares  (or  scrip
representing  fractional shares) of Common Stock shall be issued upon conversion
of this Note. In the event that the  conversion of the Principal  Amount of this
Note would  result in the issuance of a fractional  share of Common  Stock,  the
Company  shall pay a cash  adjustment  in lieu of such  fractional  share to the
holder of this Note based upon the Conversion  Price. Upon the surrender of this
Note, accrued and unpaid interest on the Principal Amount of this Note converted
pursuant  to Section  5A, 5B or 5C shall be paid by the Company to the holder of
this Note through but excluding the Conversion Date.

                  G.       STAMP  TAXES,   ETC.   The  Company   shall  pay  all
documentary,  stamp or other transactional taxes attributable to the issuance or
delivery  of shares of Common  Stock upon  conversion  of this  Note;  provided,
however,  that the  Company  shall not be required to pay any taxes which may be
payable in respect of any  transfer  involved in the issuance or delivery of any
certificate  for such  shares in a name  other  than that of the  holder of this
Note,  and the  Company  shall  not be  required  to issue or  deliver  any such
certificate  unless and until the person  requesting the issuance  thereof shall
have paid to the Company the amount of such tax or shall have established to the
Company's satisfaction that such tax has been paid.

                  H.       VALIDITY OF STOCK.  All shares of Common  Stock which
may be issued upon conversion of this Note will, upon issuance by the Company in
accordance with the terms of this Note, be validly  issued,  free from all taxes
and liens with respect to the issuance  thereof (other than those created by the
holders),  free from all  pre-emptive  or  similar  rights  and  fully  paid and
non-assessable.

                  I.       RESERVATION  OF SHARES.  The  Company  covenants  and
agrees that it will at all times have  authorized  and reserved,  solely for the
purpose of such possible conversion,  out of its authorized but unissued shares,
a sufficient number of shares of its Common Stock to provide for the exercise in
full of the conversion rights contained in this Note.

                                       10
<PAGE>

                  J.       NOTICE OF CERTAIN TRANSACTIONS. In case at any time:

                           (i)      The Company shall declare any dividend upon,
or other distribution in respect of, its Common Stock; or

                           (ii)     The Company shall offer for  subscription to
the holders of its Common Stock any  additional  shares of stock of any class or
any other securities convertible into shares of stock or any rights to subscribe
thereto; or

                           (iii)    There shall be any capital reorganization or
reclassification  of the  capital  stock  of the  Company,  or a sale  of all or
substantially all of the assets of the Company,  or a consolidation or merger of
the Company with another  corporation  (other than a merger with a subsidiary in
which merger the Company is the continuing corporation and which does not result
in any reclassification); or

                           (iv)     There  shall be a voluntary  or  involuntary
dissolution; liquidation or winding-up of the Company;

                  then,  in any one or more of said  cases,  the  Company  shall
cause  to be  mailed  to the  registered  holder  of this  Note at the  earliest
practicable time (and, in any event not less than 20 days before any record date
or other date set for  definitive  action),  written notice of the date on which
the  books  of the  Company  shall  close or a  record  shall be taken  for such
dividend,   distribution   or  subscription   rights  or  such   reorganization,
reclassification,  sale,  consolidation,  merger or dissolution,  liquidation or
winding-up  shall take place,  as the case may be.  Such  notice  shall also set
forth such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion  Price and the
kind and  amount  of the  shares  of stock and  other  securities  and  property
deliverable upon the conversion of this Note. Such notice shall also specify the
date as of which the holders of the Common Stock of record shall  participate in
said  dividend,  distribution  or  subscription  rights or shall be  entitled to
exchange their Common Stock for securities or other  property  deliverable  upon
such   reorganization,   reclassification,   sale,   consolidation,   merger  or
dissolution, liquidation or winding-up, as the case may be.

Nothing  herein  shall be construed as the consent of the holder of this Note to
any action otherwise  prohibited by the terms of this Note or as a waiver of any
such prohibition.

         7.       AMENDMENTS AND WAIVERS.

                  A.       The  provisions of this Note may from time to time be
amended,  modified or waived,  if such  amendment,  modification or waiver is in
writing and  consented to by the Company and the holders of not less than 50% in
principal amount of the Notes (the "Required Holders");  PROVIDED, HOWEVER, that
no such amendment, modification or waiver:

                                       11
<PAGE>

                           (i)      which would modify this  Section 7A,  change
the definition of "Required Holders",  extend the Maturity Date for more than 90
days, or subject the Payee under each Note to any additional  obligations  shall
be made without the consent of the Payee of each Note, or

                           (iii)    which would reduce the amount of any payment
or  prepayment  of  principal  of or interest on any  Principal  Amount  payable
hereunder  (or  reduce  the  Principal  Amount  of or rate of  interest  payable
hereunder)  shall be made  without  the  consent  of the  holder of each Note so
affected.

                  B.       No  failure  or  delay  on the  part of the  Payee in
exercising any power or right under this Note shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right preclude any
other or further  exercise  thereof or the exercise of any other power or right.
No notice to or demand on the Company in any case shall entitle it to any notice
or demand in similar or other circumstances.  No waiver or approval by the Payee
shall,  except  as may be  otherwise  stated  in such  waiver  or  approval,  be
applicable to subsequent  transactions.  No waiver or approval  hereunder  shall
require any similar or  dissimilar  waiver or approval  thereafter to be granted
hereunder.

                  C.       INVALIDATION.  To the extent that the Company makes a
payment or  payments  to the Payee,  and such  payment or  payments  or any part
thereof are subsequently for any reason  invalidated,  set aside and/or required
to be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause,  then to the extent of such
recovery,  the obligation or part thereof  originally  intended to be satisfied,
and all rights and  remedies  therefor,  shall be revived and  continued in full
force and effect as if such  payment  had not been made or such  enforcement  or
setoff had not occurred.

                  D.       MAILING.  After any waiver,  amendment or  supplement
under this section becomes  effective,  the Company shall mail to the holders of
the Notes a copy thereof.

         8.       MISCELLANEOUS

                  A.       REGISTERED HOLDER. The Company may consider and treat
the person in whose name this Note shall be  registered  as the  absolute  owner
thereof for all purposes  whatsoever (whether or not this Note shall be overdue)
and the Company shall not be affected by any notice to the contrary.  In case of
transfer of this Note by operation of law, the  transferee  agrees to notify the
Company of such transfer and of its address,  and to submit appropriate evidence
regarding  such  transfer so that this Note may be registered in the name of the
transferee.  This Note is  transferable  only on the books of the Company by the
holder hereof, in person or by attorney, on the surrender hereof, duly endorsed.
Communications  sent to any  registered  owner shall be effective as against all
holders or  transferees  of the Note not  registered  at the time of sending the
communication.

                  B.       GOVERNING  LAW.  This Note shall be  governed  by and
construed in accordance with the laws of the State of New York.  Sections 5-1401
and 5-1402 of the General  Obligations  Law

                                       12
<PAGE>

of the State of New York shall apply to this Note and the Company  hereby waives
any right to stay or dismiss on the basis of FORUM NON  CONVENIENS any action or
proceeding  brought  before the  courts of the State of New York  sitting in New
York County or of United States of America for the Southern District of New York
and hereby submits to the jurisdiction of such courts.

                  C.       NOTICES. All notices required or permitted under this
Note shall be given in accordance with the Subscription Agreement.

                  D.       WAIVER  OF JURY  TRIAL.  THE  PAYEE  AND THE  COMPANY
HEREBY KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY  WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER,  OR IN  CONNECTION  WITH,  THIS NOTE OR ANY OTHER  DOCUMENT OR INSTRUMENT
EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT,  COURSE
OF DEALING,  STATEMENTS (WHETHER VERBAL OR WRITTEN),  OR ACTIONS OF THE PAYEE OR
THE COMPANY.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S PURCHASING
THIS NOTE.

         IN WITNESS  WHEREOF,  the  Company has caused this Note to be signed in
its name by its duly authorized officer.

                  FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

                  By___________________________
                    Name: Dale M. Gregory
                    Title: President

                                       13

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