Document:

Exhibit 4.14

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

                        CALLABLE SECURED CONVERTIBLE NOTE

Houston, Texas
December 30, 2004                                                         $4,000

                  FOR VALUE  RECEIVED,  SHARP  HOLDING  CORPORATION,  a Delaware
corporation  (hereinafter called the "Borrower"),  hereby promises to pay to the
order of NEW  MILLENNIUM  CAPITAL  PARTNERS II, LLC or  registered  assigns (the
"HOLDER") the sum of Four Thousand Dollars  ($4,000),  on December 30, 2006 (the
"MATURITY DATE"),  and to pay interest on the unpaid principal balance hereof at
the rate of eight  percent  (8%) per annum from  December  30,  2004 (the "ISSUE
DATE")  until the same  becomes  due and  payable,  whether at  maturity or upon
acceleration or by prepayment or otherwise.  Any amount of principal or interest
on this  Note  which is not paid  when due shall  bear  interest  at the rate of
fifteen percent (15%) per annum from the due date thereof until the same is paid
("DEFAULT INTEREST").  Interest shall commence accruing on the issue date, shall
be computed on the basis of a 365-day year and the actual number of days elapsed
and shall be payable monthly, provided that $213.33 of interest shall be paid on
the Issue Date.  All payments due hereunder  (to the extent not  converted  into
Common Stock, par value $.001 per share, of the Borrower (the "COMMON STOCK") in
accordance  with the terms  hereof)  shall be made in lawful money of the United
States of America  or, at the option of the  Borrower,  in whole or in part,  in
shares  of  Common  Stock  valued at the then  applicable  Conversion  Price (as
defined herein).  All payments shall be made at such address as the Holder shall
hereafter  give to the Borrower by written  notice made in  accordance  with the
provisions of this Note. Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a business  day, the same shall instead
be due on the next  succeeding  day which is a business  day and, in the case of
any  interest  payment  date which is not the date on which this Note is paid in
full,  the extension of the due date thereof shall not be taken into account for
purposes of determining the amount of interest due on such date. As used in this
Note, the term  "business day" shall mean any day other than a Saturday,  Sunday
or a day on  which  commercial  banks  in the  city of New  York,  New  York are

<PAGE>

authorized  or  required  by law or  executive  order  to  remain  closed.  Each
capitalized term used herein, and not otherwise defined,  shall have the meaning
ascribed thereto in that certain Securities Purchase  Agreement,  dated November
30,  2004,  pursuant to which this Note was  originally  issued  (the  "PURCHASE
AGREEMENT").

         This Note is free from all taxes,  liens,  claims and encumbrances with
respect to the issue  thereof and shall not be subject to  preemptive  rights or
other  similar  rights  of  shareholders  of the  Borrower  and will not  impose
personal  liability  upon the holder  thereof.  The  obligations of the Borrower
under this Note shall be secured by that  certain  Security  Agreement  and that
certain Intellectual Property Security Agreement,  each dated November 30, 2004,
by and between the Borrower and the Holder.

         The following terms shall apply to this Note:

                          ARTICLE I. CONVERSION RIGHTS

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

                                       2
<PAGE>

"CONVERSION  DATE").  The term  "CONVERSION  AMOUNT" means,  with respect to any
conversion of this Note, the sum of (1) the principal  amount of this Note to be
converted in such  conversion plus (2) accrued and unpaid  interest,  if any, on
such  principal  amount  at the  interest  rates  provided  in this  Note to the
Conversion Date plus (3) Default Interest, if any, on the amounts referred to in
the  immediately  preceding  clauses  (1)  and/or  (2) plus (4) at the  Holder's
option,  any amounts  owed to the Holder  pursuant  to  Sections  1.3 and 1.4(g)
hereof  or  pursuant  to  Section  2(c)  of  that  certain  Registration  Rights
Agreement,  dated as of  November  30,  2004,  executed in  connection  with the
initial  issuance of this Note and the other Notes issued on the Issue Date (the
"REGISTRATION RIGHTS AGREEMENT").

                  1.2      CONVERSION PRICE.

                           (a) CALCULATION OF CONVERSION  PRICE.  The Conversion
Price  shall be the  lesser of (i) the  Variable  Conversion  Price (as  defined
herein) and (ii) the Fixed  Conversion  Price (as defined herein)  (subject,  in
each case, to equitable  adjustments for stock splits, stock dividends or rights
offerings  by  the  Borrower  relating  to  the  Borrower's  securities  or  the
securities of any  subsidiary of the Borrower,  combinations,  recapitalization,
reclassifications,   extraordinary   distributions  and  similar  events).   The
"VARIABLE  CONVERSION  PRICE" shall mean the  Applicable  Percentage (as defined
herein) multiplied by the Market Price (as defined herein). "MARKET PRICE" means
the average of the lowest  three (3) Trading  Prices (as defined  below) for the
Common Stock  during the twenty (20)  Trading Day period  ending one Trading Day
prior to the date the  Conversion  Notice is sent by the Holder to the  Borrower
via facsimile (the "CONVERSION  DATE").  "TRADING PRICE" means, for any security
as of any date,  the intraday  trading  price on the  Over-the-Counter  Bulletin
Board (the  "OTCBB")  as  reported  by a  reliable  reporting  service  mutually
acceptable to and  hereafter  designated by Holders of a majority in interest of
the Notes and the Borrower or, if the OTCBB is not the principal  trading market
for such security,  the intraday trading price of such security on the principal
securities  exchange or trading  market where such  security is listed or traded
or, if no intraday  trading  price of such  security is  available in any of the
foregoing  manners,  the average of the  intraday  trading  prices of any market
makers for such  security  that are listed in the "pink  sheets" by the National
Quotation  Bureau,  Inc.  If the Trading  Price  cannot be  calculated  for such
security on such date in the manner provided  above,  the Trading Price shall be
the fair market value as mutually  determined by the Borrower and the holders of
a majority in interest of the Notes being converted for which the calculation of
the Trading Price is required in order to determine the Conversion Price of such
Notes.  "TRADING DAY" shall mean any day on which the Common Stock is traded for
any  period on the  OTCBB,  or on the  principal  securities  exchange  or other
securities  market on which the Common Stock is then being  traded.  "APPLICABLE
PERCENTAGE" shall mean 65.0%. The "FIXED CONVERSION PRICE" shall mean $.21.

                           (B)  CONVERSION  PRICE  DURING  MAJOR  ANNOUNCEMENTS.
Notwithstanding  anything  contained in Section  1.2(a) to the contrary,  in the
event  the  Borrower  (i)  makes  a  public  announcement  that  it  intends  to
consolidate  or merge with any other  corporation  (other than a merger in which
the Borrower is the surviving or continuing corporation and its capital stock is
unchanged)  or sell or transfer  all or  substantially  all of the assets of the
Borrower or (ii) any person,  group or entity (including the Borrower)  publicly
announces a tender offer to purchase 50% or more of the Borrower's  Common Stock
(or any other  takeover  scheme)  (the date of the  announcement  referred to in
clause (i) or (ii) is hereinafter referred to as the "ANNOUNCEMENT  DATE"), then

                                       3
<PAGE>

the Conversion Price shall,  effective upon the Announcement Date and continuing
through the Adjusted  Conversion Price  Termination Date (as defined below),  be
equal to the lower of (x) the Conversion  Price which would have been applicable
for a Conversion occurring on the Announcement Date and (y) the Conversion Price
that would otherwise be in effect.  From and after the Adjusted Conversion Price
Termination  Date, the Conversion Price shall be determined as set forth in this
Section 1.2(a).  For purposes hereof,  "ADJUSTED  CONVERSION  PRICE  TERMINATION
DATE" shall mean,  with respect to any proposed  transaction or tender offer (or
takeover scheme) for which a public announcement as contemplated by this Section
1.2(b) has been made,  the date upon which the  Borrower  (in the case of clause
(i) above) or the  person,  group or entity (in the case of clause  (ii)  above)
consummates or publicly announces the termination or abandonment of the proposed
transaction  or tender  offer (or  takeover  scheme)  which  caused this Section
1.2(b) to become operative.

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

                  If,  at any time a Holder  of this  Note  submits  a Notice of
Conversion,  and the Borrower does not have  sufficient  authorized but unissued
shares of Common Stock  available to effect such  conversion in accordance  with
the  provisions of this Article I (a "CONVERSION  DEFAULT"),  subject to Section
4.8,  the  Borrower  shall issue to the Holder all of the shares of Common Stock
which are then  available  to effect such  conversion.  The portion of this Note
which the Holder included in its Conversion  Notice and which exceeds the amount
which is then  convertible  into  available  shares of Common Stock (the "EXCESS
AMOUNT") shall,  notwithstanding  anything to the contrary contained herein, not
be convertible  into Common Stock in accordance with the terms hereof until (and
at the Holder's option at any time after) the date  additional  shares of Common
Stock are  authorized by the Borrower to permit such  conversion,  at which time
the  Conversion  Price  in  respect  thereof  shall  be the  lesser  of (i)  the

                                       4
<PAGE>

Conversion Price on the Conversion  Default Date (as defined below) and (ii) the
Conversion  Price on the  Conversion  Date  thereafter  elected by the Holder in
respect  thereof.  In addition,  the Borrower  shall pay to the Holder  payments
("CONVERSION  DEFAULT  PAYMENTS") for a Conversion  Default in the amount of (x)
the sum of (1) the then  outstanding  principal  amount  of this  Note  plus (2)
accrued and unpaid interest on the unpaid  principal amount of this Note through
the Authorization Date (as defined below) plus (3) Default Interest,  if any, on
the  amounts  referred  to in clauses  (1) and/or  (2),  multiplied  by (y) .24,
multiplied by (z) (N/365),  where N = the number of days from the day the holder
submits  a  Notice  of  Conversion  giving  rise to a  Conversion  Default  (the
"CONVERSION  DEFAULT  DATE") to the date  (the  "AUTHORIZATION  DATE")  that the
Borrower  authorizes  a  sufficient  number of shares of Common  Stock to effect
conversion of the full outstanding  principal balance of this Note. The Borrower
shall use its best efforts to authorize a sufficient  number of shares of Common
Stock as soon as  practicable  following  the  earlier of (i) such time that the
Holder notifies the Borrower or that the Borrower  otherwise  becomes aware that
there are or likely will be insufficient authorized and unissued shares to allow
full conversion thereof and (ii) a Conversion  Default.  The Borrower shall send
notice to the Holder of the  authorization of additional shares of Common Stock,
the  Authorization  Date and the amount of Holder's accrued  Conversion  Default
Payments.  The accrued Conversion Default Payments for each calendar month shall
be paid in cash or shall be convertible into Common Stock (at such time as there
are sufficient  authorized shares of Common Stock) at the applicable  Conversion
Price, at the Borrower's option, as follows:

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

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

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

                  1.4      METHOD OF CONVERSION.

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

                           (b)    SURRENDER    OF    NOTE    UPON    CONVERSION.
Notwithstanding  anything to the contrary set forth herein,  upon  conversion of
this Note in accordance with the terms hereof,  the Holder shall not be required
to  physically  surrender  this Note to the  Borrower  unless the entire  unpaid
principal amount of this Note is so converted. The Holder and the Borrower shall

                                       5
<PAGE>

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

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

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

                           (e)  OBLIGATION OF BORROWER TO DELIVER  COMMON STOCK.
Upon  receipt by the  Borrower of a Notice of  Conversion,  the Holder  shall be
deemed  to be the  holder  of  record of the  Common  Stock  issuable  upon such
conversion,  the  outstanding  principal  amount and the  amount of accrued  and

                                       6
<PAGE>

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

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

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

                  1.5 CONCERNING THE SHARES. The shares of Common Stock issuable
upon  conversion  of this Note may not be sold or  transferred  unless  (i) such
shares are sold pursuant to an effective registration statement under the Act or
(ii) the  Borrower  or its  transfer  agent  shall have been  furnished  with an
opinion  of  counsel  (which  opinion  shall be in  form,  substance  and  scope
customary for opinions of counsel in comparable transactions) to the effect that
the shares to be sold or transferred  may be sold or transferred  pursuant to an
exemption  from such  registration  or (iii) such shares are sold or transferred
pursuant to Rule 144 under the Act (or a successor  rule)  ("RULE  144") or (iv)

                                       7
<PAGE>

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

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

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

                  1.6 EFFECT OF CERTAIN EVENTS.

                           (a)  EFFECT OF  MERGER,  CONSOLIDATION,  ETC.  At the
option  of  the  Holder,   the  sale,   conveyance  or  disposition  of  all  or
substantially  all of  the  assets  of the  Borrower,  the  effectuation  by the
Borrower of a transaction or series of related  transactions  in which more than
50% of the voting power of the  Borrower is disposed  of, or the  consolidation,
merger or other  business  combination  of the  Borrower  with or into any other
Person (as defined below) or Persons when the Borrower is not the survivor shall
either:  (i) be deemed to be an Event of Default  (as  defined  in Article  III)

                                       8
<PAGE>

pursuant to which the  Borrower  shall be required to pay to the Holder upon the
consummation  of and as a condition to such  transaction  an amount equal to the
Default  Amount  (as  defined in Article  III) or (ii) be  treated  pursuant  to
Section 1.6(b) hereof. "PERSON" shall mean any individual,  corporation, limited
liability  company,   partnership,   association,   trust  or  other  entity  or
organization.

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

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

                           (d) ADJUSTMENT DUE TO DILUTIVE  ISSUANCE.  If, at any
time when any Notes are issued and outstanding, the Borrower issues or sells, or
in accordance  with this Section 1.6(d) hereof is deemed to have issued or sold,

                                       9
<PAGE>

any shares of Common Stock for no consideration or for a consideration per share
(before  deduction  of  reasonable   expenses  or  commissions  or  underwriting
discounts or allowances in connection  therewith) less than the Fixed Conversion
Price in effect on the date of such issuance (or deemed issuance) of such shares
of Common  Stock (a "DILUTIVE  ISSUANCE"),  then  immediately  upon the Dilutive
Issuance,  the Fixed  Conversion  Price  will be  reduced  to the  amount of the
consideration  per share  received by the  Borrower in such  Dilutive  Issuance;
provided that only one adjustment will be made for each Dilutive Issuance.

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

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

                                       10
<PAGE>

                           (e) PURCHASE  RIGHTS.  If, at any time when any Notes
are issued and  outstanding,  the Borrower issues any convertible  securities or
rights to purchase stock, warrants,  securities or other property (the "PURCHASE
RIGHTS") pro rata to the record  holders of any class of Common Stock,  then the
Holder of this Note will be entitled to acquire,  upon the terms  applicable  to
such Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon  complete  conversion of this Note (without  regard to any  limitations  on
conversion  contained herein)  immediately  before the date on which a record is
taken for the grant,  issuance  or sale of such  Purchase  Rights or, if no such
record is taken,  the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

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

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

                                       11
<PAGE>

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

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

                         ARTICLE II. CERTAIN COVENANTS

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

                                       12
<PAGE>

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

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

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

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

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

                         ARTICLE III. EVENTS OF DEFAULT

                  If any of the following  events of default (each, an "EVENT OF
DEFAULT") shall occur:

                  3.1 FAILURE TO PAY PRINCIPAL OR INTEREST.  The Borrower  fails
to pay the principal hereof or interest  thereon when due on this Note,  whether
at maturity,  upon a Trading  Market  Prepayment  Event pursuant to Section 1.7,
upon acceleration or otherwise;

                                       13
<PAGE>

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

                  3.3  FAILURE TO EFFECT  REGISTRATION.  The  Borrower  fails to
obtain  effectiveness  with  the  Securities  and  Exchange  Commission  of  the
Registration  Statement within one hundred five (105) days following the Closing
Date (as  defined in the  Purchase  Agreement)  or such  Registration  Statement
lapses in effect  (or  sales  cannot  otherwise  be made  thereunder  effective,
whether  by  reason  of the  Borrower's  failure  to  amend  or  supplement  the
prospectus included therein in accordance with the Registration Rights Agreement
or otherwise) for more than twenty (20)  consecutive  days or forty (40) days in
any twelve month period after the Registration Statement becomes effective;

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

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

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

                  3.7 JUDGMENTS.  Any money  judgment,  writ or similar  process
shall be entered or filed against the Borrower or any subsidiary of the Borrower
or any of its property or other assets for more than  $50,000,  and shall remain

                                       14
<PAGE>

unvacated,  unbonded  or  unstayed  for a period  of  twenty  (20)  days  unless
otherwise  consented to by the Holder,  which  consent will not be  unreasonably
withheld;

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

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

                  3.10  DEFAULT  UNDER  OTHER  NOTES.  An Event of  Default  has
occurred and is continuing  under any of the other Notes issued  pursuant to the
Purchase Agreement,

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

                                       15
<PAGE>

                           ARTICLE IV. MISCELLANEOUS

                  4.1 FAILURE OR INDULGENCE  NOT WAIVER.  No failure or delay on
the  part of the  Holder  in the  exercise  of any  power,  right  or  privilege
hereunder  shall  operate as a waiver  thereof,  nor shall any single or partial
exercise  of any  such  power,  right or  privilege  preclude  other or  further
exercise  thereof or of any other  right,  power or  privileges.  All rights and
remedies existing  hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.

                  4.2  NOTICES.  Any notice  herein  required or permitted to be
given shall be in writing and may be  personally  served or delivered by courier
or sent by United  States  mail and shall be  deemed  to have  been  given  upon
receipt if  personally  served  (which shall include  telephone  line  facsimile
transmission)  or sent by courier or three (3) days after being deposited in the
United States mail, certified,  with postage pre-paid and properly addressed, if
sent by mail.  For the  purposes  hereof,  the address of the Holder shall be as
shown on the records of the Borrower;  and the address of the Borrower  shall be
13231 Champion Forest Drive, Suite 213, Houston,  Texas 77069, facsimile number:
713-960-9360.  Both the Holder and the  Borrower  may  change  the  address  for
service by service of written notice to the other as herein provided.

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

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

                  4.5 COST OF  COLLECTION.  If default is made in the payment of
this  Note,  the  Borrower  shall pay the  Holder  hereof  costs of  collection,
including reasonable attorneys' fees.

                  4.6 GOVERNING  LAW.  THIS NOTE SHALL BE ENFORCED,  GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED  ENTIRELY WITHIN SUCH STATE,  WITHOUT REGARD
TO THE  PRINCIPLES  OF  CONFLICT OF LAWS.  THE  BORROWER  HEREBY  SUBMITS TO THE
EXCLUSIVE  JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE  ARISING  UNDER THIS NOTE,  THE  AGREEMENTS
ENTERED INTO IN CONNECTION  HEREWITH OR THE TRANSACTIONS  CONTEMPLATED HEREBY OR
THEREBY.  BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE  MAINTENANCE  OF SUCH SUIT OR  PROCEEDING.  BOTH PARTIES  FURTHER AGREE THAT
SERVICE OF PROCESS  UPON A PARTY  MAILED BY FIRST  CLASS MAIL SHALL BE DEEMED IN
EVERY  RESPECT  EFFECTIVE  SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR

                                       16
<PAGE>

PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY  OTHER  MANNER   PERMITTED  BY  LAW.   BOTH  PARTIES   AGREE  THAT  A  FINAL
NON-APPEALABLE  JUDGMENT IN ANY SUCH SUIT OR PROCEEDING  SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER  JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL  MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE  ARISING  UNDER
THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES,  INCLUDING  ATTORNEYS'
FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

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

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

                  4.9  DAMAGES  SHARES.  The shares of Common  Stock that may be
issuable to the Holder  pursuant to Sections 1.3 and 1.4(g)  hereof and pursuant
to Section 2(c) of the Registration Rights Agreement ("DAMAGES SHARES") shall be
treated as Common Stock  issuable upon  conversion of this Note for all purposes
hereof and shall be subject to all of the  limitations  and  afforded all of the
rights of the other shares of Common Stock issuable hereunder, including without
limitation,  the  right  to be  included  in the  Registration  Statement  filed
pursuant to the  Registration  Rights  Agreement.  For  purposes of  calculating
interest payable on the outstanding principal amount hereof, except as otherwise
provided herein,  amounts  convertible  into Damages Shares ("DAMAGES  AMOUNTS")
shall not bear  interest but must be converted  prior to the  conversion  of any
outstanding  principal amount hereof,  until the outstanding  Damages Amounts is
zero.

                                       17
<PAGE>

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

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

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

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

                             ARTICLE V. CALL OPTION

                  5.1 CALL  OPTION.  Notwithstanding  anything  to the  contrary
contained  in this  Article  V, so long as (i) no Event of  Default  or  Trading
Market Prepayment Event shall have occurred and be continuing, (ii) the Borrower
has a  sufficient  number of  authorized  shares of Common  Stock  reserved  for
issuance  upon full  conversion  of the Notes,  then at any time after the Issue

                                       18
<PAGE>

Date,  and (iii) the Common  Stock is  trading  at or below $.21 per share,  the
Borrower  shall have the right,  exercisable  on not less than ten (10)  Trading
Days prior  written  notice to the Holders of the Notes (which notice may not be
sent to the Holders of the Notes until the  Borrower is  permitted to prepay the
Notes pursuant to this Section 5.1), to prepay all of the  outstanding  Notes in
accordance  with this  Section  5.1.  Any  notice of  prepayment  hereunder  (an
"OPTIONAL  PREPAYMENT")  shall be delivered to the Holders of the Notes at their
registered  addresses  appearing  on the books and records of the  Borrower  and
shall state (1) that the Borrower is  exercising  its right to prepay all of the
Notes  issued on the Issue Date and (2) the date of  prepayment  (the  "OPTIONAL
PREPAYMENT NOTICE").  On the date fixed for prepayment (the "OPTIONAL PREPAYMENT
DATE"),  the Borrower shall make payment of the Optional  Prepayment  Amount (as
defined  below) to or upon the order of the Holders as  specified by the Holders
in writing to the  Borrower at least one (1)  business day prior to the Optional
Prepayment  Date. If the Borrower  exercises its right to prepay the Notes,  the
Borrower  shall make payment to the holders of an amount in cash (the  "OPTIONAL
PREPAYMENT  AMOUNT") equal to either (i) 130% (for prepayments  occurring within
thirty  (30) days of the Issue  Date),  (ii)  140%  (for  prepayments  occurring
between the  thirty-first  (31st) and sixtieth  (60th) day  following  the Issue
Date) and (iii) 150% (for  prepayments  occurring  after the sixtieth (60th) day
following  the Issue Date),  multiplied  by the sum of (w) the then  outstanding
principal amount of this Note plus (x) accrued and unpaid interest on the unpaid
principal  amount of this Note to the Optional  Prepayment Date plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any
amounts  owed to the  Holder  pursuant  to  Sections  1.3 and  1.4(g)  hereof or
pursuant  to  Section  2(c)  of the  Registration  Rights  Agreement  (the  then
outstanding  principal  amount  of this  Note to the  date of  payment  plus the
amounts  referred to in clauses (x), (y) and (z) shall  collectively be known as
the  "OPTIONAL   PREPAYMENT  SUM").   Notwithstanding   notice  of  an  Optional
Prepayment, the Holders shall at all times prior to the Optional Prepayment Date
maintain the right to convert all or any portion of the Notes in accordance with
Article I and any  portion of Notes so  converted  after  receipt of an Optional
Prepayment  Notice and prior to the Optional  Prepayment  Date set forth in such
notice and payment of the aggregate Optional Prepayment Amount shall be deducted
from the  principal  amount of Notes which are  otherwise  subject to prepayment
pursuant to such notice. If the Borrower delivers an Optional  Prepayment Notice
and fails to pay the Optional  Prepayment Amount due to the Holders of the Notes
within two (2)  business  days  following  the  Optional  Prepayment  Date,  the
Borrower  shall forever  forfeit its right to redeem the Notes  pursuant to this
Section 5.1.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       19
<PAGE>

                  IN WITNESS WHEREOF, Borrower has caused this Note to be signed
in its name by its duly authorized officer this 30th day of December, 2004.

                                         SHARP HOLDING CORPORATION

                                         By: ______________________________
                                             George Sharp
                                             Chief Executive Officer

                                       20
<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION
                    (To be Executed by the Registered Holder
                         in order to Convert the Notes)

                  The   undersigned   hereby   irrevocably   elects  to  convert
$__________  principal  amount of the Note (defined below) into shares of common
stock, par value $.001 per share ("COMMON STOCK"), of Sharp Holding Corporation,
a Delaware  corporation  (the  "BORROWER")  according to the  conditions  of the
convertible  Notes of the Borrower  dated as of December 30, 2004 (the "NOTES"),
as of the date written  below.  If securities  are to be issued in the name of a
person other than the  undersigned,  the undersigned will pay all transfer taxes
payable with respect thereto and is delivering  herewith such  certificates.  No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any. A copy of each Note is attached  hereto (or  evidence of loss,  theft or
destruction thereof).

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

         Name of DTC Prime Broker:
                                  ----------------------------------------------
         Account Number:
                        --------------------------------------------------------

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

         Name:
              ------------------------------------------------------------------
         Address:
                 ---------------------------------------------------------------

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

                  Date of Conversion:___________________________
                  Applicable Conversion Price:____________________
                  Number of Shares of Common Stock to be Issued Pursuant to
                  Conversion of the Notes:______________
                  Signature:___________________________________
                  Name:______________________________________
                  Address:____________________________________

                                       21
<PAGE>

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

                                       22Exhibit 14.5

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

                        CALLABLE SECURED CONVERTIBLE NOTE

Houston, Texas
December 30, 2004                                                        $82,000

                  FOR VALUE  RECEIVED,  SHARP  HOLDING  CORPORATION,  a Delaware
corporation  (hereinafter called the "BORROWER"),  hereby promises to pay to the
order of AJW QUALIFIED  PARTNERS,  LLC or registered  assigns (the "Holder") the
sum of  Eighty-Two  Thousand  Dollars  ($82,000),  on  December  30,  2006  (the
"MATURITY DATE"),  and to pay interest on the unpaid principal balance hereof at
the rate of eight  percent  (8%) per annum from  December  30,  2004 (the "ISSUE
DATE")  until the same  becomes  due and  payable,  whether at  maturity or upon
acceleration or by prepayment or otherwise.  Any amount of principal or interest
on this  Note  which is not paid  when due shall  bear  interest  at the rate of
fifteen percent (15%) per annum from the due date thereof until the same is paid
("DEFAULT INTEREST").  Interest shall commence accruing on the issue date, shall
be computed on the basis of a 365-day year and the actual number of days elapsed
and shall be payable monthly,  provided that $4,373.33 of interest shall be paid
on the Issue Date.  All payments due hereunder (to the extent not converted into
Common Stock, par value $.001 per share, of the Borrower (the "COMMON STOCK") in
accordance  with the terms  hereof)  shall be made in lawful money of the United
States of America  or, at the option of the  Borrower,  in whole or in part,  in
shares  of  Common  Stock  valued at the then  applicable  Conversion  Price (as
defined herein).  All payments shall be made at such address as the Holder shall
hereafter  give to the Borrower by written  notice made in  accordance  with the
provisions of this Note. Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a business  day, the same shall instead
be due on the next  succeeding  day which is a business  day and, in the case of
any  interest  payment  date which is not the date on which this Note is paid in
full,  the extension of the due date thereof shall not be taken into account for
purposes of determining the amount of interest due on such date. As used in this
Note, the term  "business day" shall mean any day other than a Saturday,  Sunday
or a day on  which  commercial  banks  in the  city of New  York,  New  York are

<PAGE>

authorized  or  required  by law or  executive  order  to  remain  closed.  Each
capitalized term used herein, and not otherwise defined,  shall have the meaning
ascribed thereto in that certain Securities Purchase  Agreement,  dated November
30,  2004,  pursuant to which this Note was  originally  issued  (the  "PURCHASE
AGREEMENT").

         This Note is free from all taxes,  liens,  claims and encumbrances with
respect to the issue  thereof and shall not be subject to  preemptive  rights or
other  similar  rights  of  shareholders  of the  Borrower  and will not  impose
personal  liability  upon the holder  thereof.  The  obligations of the Borrower
under this Note shall be secured by that  certain  Security  Agreement  and that
certain Intellectual Property Security Agreement,  each dated November 30, 2004,
by and between the Borrower and the Holder.

         The following terms shall apply to this Note:

                          ARTICLE I. CONVERSION RIGHTS

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

                                       2
<PAGE>

"CONVERSION  DATE").  The term  "CONVERSION  AMOUNT" means,  with respect to any
conversion of this Note, the sum of (1) the principal  amount of this Note to be
converted in such  conversion plus (2) accrued and unpaid  interest,  if any, on
such  principal  amount  at the  interest  rates  provided  in this  Note to the
Conversion Date plus (3) Default Interest, if any, on the amounts referred to in
the  immediately  preceding  clauses  (1)  and/or  (2) plus (4) at the  Holder's
option,  any amounts  owed to the Holder  pursuant  to  Sections  1.3 and 1.4(g)
hereof  or  pursuant  to  Section  2(c)  of  that  certain  Registration  Rights
Agreement,  dated as of  November  30,  2004,  executed in  connection  with the
initial  issuance of this Note and the other Notes issued on the Issue Date (the
"REGISTRATION RIGHTS AGREEMENT").

                  1.2      CONVERSION PRICE.

                           (a) CALCULATION OF CONVERSION  PRICE.  The Conversion
Price  shall be the  lesser of (i) the  Variable  Conversion  Price (as  defined
herein) and (ii) the Fixed  Conversion  Price (as defined herein)  (subject,  in
each case, to equitable  adjustments for stock splits, stock dividends or rights
offerings  by  the  Borrower  relating  to  the  Borrower's  securities  or  the
securities of any  subsidiary of the Borrower,  combinations,  recapitalization,
reclassifications,   extraordinary   distributions  and  similar  events).   The
"VARIABLE  CONVERSION  PRICE" shall mean the  Applicable  Percentage (as defined
herein) multiplied by the Market Price (as defined herein). "MARKET PRICE" means
the average of the lowest  three (3) Trading  Prices (as defined  below) for the
Common Stock  during the twenty (20)  Trading Day period  ending one Trading Day
prior to the date the  Conversion  Notice is sent by the Holder to the  Borrower
via facsimile (the "CONVERSION  DATE").  "TRADING PRICE" means, for any security
as of any date,  the intraday  trading  price on the  Over-the-Counter  Bulletin
Board (the  "OTCBB")  as  reported  by a  reliable  reporting  service  mutually
acceptable to and  hereafter  designated by Holders of a majority in interest of
the Notes and the Borrower or, if the OTCBB is not the principal  trading market
for such security,  the intraday trading price of such security on the principal
securities  exchange or trading  market where such  security is listed or traded
or, if no intraday  trading  price of such  security is  available in any of the
foregoing  manners,  the average of the  intraday  trading  prices of any market
makers for such  security  that are listed in the "pink  sheets" by the National
Quotation  Bureau,  Inc.  If the Trading  Price  cannot be  calculated  for such
security on such date in the manner provided  above,  the Trading Price shall be
the fair market value as mutually  determined by the Borrower and the holders of
a majority in interest of the Notes being converted for which the calculation of
the Trading Price is required in order to determine the Conversion Price of such
Notes.  "TRADING DAY" shall mean any day on which the Common Stock is traded for
any  period on the  OTCBB,  or on the  principal  securities  exchange  or other
securities  market on which the Common Stock is then being  traded.  "APPLICABLE
PERCENTAGE" shall mean 65.0%. The "FIXED CONVERSION PRICE" shall mean $.21.

                           (b)  CONVERSION  PRICE  DURING  MAJOR  ANNOUNCEMENTS.
Notwithstanding  anything  contained in Section  1.2(a) to the contrary,  in the
event  the  Borrower  (i)  makes  a  public  announcement  that  it  intends  to
consolidate  or merge with any other  corporation  (other than a merger in which
the Borrower is the surviving or continuing corporation and its capital stock is
unchanged)  or sell or transfer  all or  substantially  all of the assets of the
Borrower or (ii) any person,  group or entity (including the Borrower)  publicly
announces a tender offer to purchase 50% or more of the Borrower's  Common Stock
(or any other  takeover  scheme)  (the date of the  announcement  referred to in
clause (i) or (ii) is hereinafter referred to as the "ANNOUNCEMENT  DATE"), then

                                       3
<PAGE>

the Conversion Price shall,  effective upon the Announcement Date and continuing
through the Adjusted  Conversion Price  Termination Date (as defined below),  be
equal to the lower of (x) the Conversion  Price which would have been applicable
for a Conversion occurring on the Announcement Date and (y) the Conversion Price
that would otherwise be in effect.  From and after the Adjusted Conversion Price
Termination  Date, the Conversion Price shall be determined as set forth in this
Section 1.2(a).  For purposes hereof,  "ADJUSTED  CONVERSION  PRICE  TERMINATION
DATE" shall mean,  with respect to any proposed  transaction or tender offer (or
takeover scheme) for which a public announcement as contemplated by this Section
1.2(b) has been made,  the date upon which the  Borrower  (in the case of clause
(i) above) or the  person,  group or entity (in the case of clause  (ii)  above)
consummates or publicly announces the termination or abandonment of the proposed
transaction  or tender  offer (or  takeover  scheme)  which  caused this Section
1.2(b) to become operative.

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

                  If,  at any time a Holder  of this  Note  submits  a Notice of
Conversion,  and the Borrower does not have  sufficient  authorized but unissued
shares of Common Stock  available to effect such  conversion in accordance  with
the  provisions of this Article I (a "CONVERSION  DEFAULT"),  subject to Section
4.8,  the  Borrower  shall issue to the Holder all of the shares of Common Stock
which are then  available  to effect such  conversion.  The portion of this Note
which the Holder included in its Conversion  Notice and which exceeds the amount
which is then  convertible  into  available  shares of Common Stock (the "EXCESS
AMOUNT") shall,  notwithstanding  anything to the contrary contained herein, not
be convertible  into Common Stock in accordance with the terms hereof until (and
at the Holder's option at any time after) the date  additional  shares of Common
Stock are  authorized by the Borrower to permit such  conversion,  at which time
the  Conversion  Price  in  respect  thereof  shall  be the  lesser  of (i)  the
Conversion Price on the Conversion  Default Date (as defined below) and (ii) the
Conversion  Price on the  Conversion  Date  thereafter  elected by the Holder in
respect  thereof.  In addition,  the Borrower  shall pay to the Holder  payments
("CONVERSION  DEFAULT  PAYMENTS") for a Conversion  Default in the amount of (x)
the sum of (1) the then  outstanding  principal  amount  of this  Note  plus (2)
accrued and unpaid interest on the unpaid  principal amount of this Note through
the Authorization Date (as defined below) plus (3) Default Interest,  if any, on
the  amounts  referred  to in clauses  (1) and/or  (2),  multiplied  by (y) .24,
multiplied by (z) (N/365),  where N = the number of days from the day the holder
submits  a  Notice  of  Conversion  giving  rise to a  Conversion  Default  (the
"CONVERSION  DEFAULT  DATE") to the date  (the  "AUTHORIZATION  DATE")  that the
Borrower  authorizes  a  sufficient  number of shares of Common  Stock to effect
conversion of the full outstanding  principal balance of this Note. The Borrower
shall use its best efforts to authorize a sufficient  number of shares of Common
Stock as soon as  practicable  following  the  earlier of (i) such time that the

                                       4
<PAGE>

Holder notifies the Borrower or that the Borrower  otherwise  becomes aware that
there are or likely will be insufficient authorized and unissued shares to allow
full conversion thereof and (ii) a Conversion  Default.  The Borrower shall send
notice to the Holder of the  authorization of additional shares of Common Stock,
the  Authorization  Date and the amount of Holder's accrued  Conversion  Default
Payments.  The accrued Conversion Default Payments for each calendar month shall
be paid in cash or shall be convertible into Common Stock (at such time as there
are sufficient  authorized shares of Common Stock) at the applicable  Conversion
Price, at the Borrower's option, as follows:

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

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

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

                  1.4      METHOD OF CONVERSION.

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

                                       5
<PAGE>

subject to Section 1.4(b), surrendering this Note at the principal office of the
Borrower.

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

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

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

                           (e)  OBLIGATION OF BORROWER TO DELIVER  COMMON STOCK.
Upon  receipt by the  Borrower of a Notice of  Conversion,  the Holder  shall be
deemed  to be the  holder  of  record of the  Common  Stock  issuable  upon such
conversion,  the  outstanding  principal  amount and the  amount of accrued  and

                                       6
<PAGE>

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

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

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

                  1.5 CONCERNING THE SHARES. The shares of Common Stock issuable
upon  conversion  of this Note may not be sold or  transferred  unless  (i) such
shares are sold pursuant to an effective registration statement under the Act or
(ii) the  Borrower  or its  transfer  agent  shall have been  furnished  with an
opinion  of  counsel  (which  opinion  shall be in  form,  substance  and  scope
customary for opinions of counsel in comparable transactions) to the effect that
the shares to be sold or transferred  may be sold or transferred  pursuant to an
exemption  from such  registration  or (iii) such shares are sold or transferred

                                       7
<PAGE>

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

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

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

                  1.6      EFFECT OF CERTAIN EVENTS.

                           (a)  EFFECT OF  MERGER,  CONSOLIDATION,  ETC.  At the
option  of  the  Holder,   the  sale,   conveyance  or  disposition  of  all  or
substantially  all of  the  assets  of the  Borrower,  the  effectuation  by the
Borrower of a transaction or series of related  transactions  in which more than
50% of the voting power of the  Borrower is disposed  of, or the  consolidation,
merger or other  business  combination  of the  Borrower  with or into any other
Person (as defined below) or Persons when the Borrower is not the survivor shall
either:  (i) be deemed to be an Event of Default  (as  defined  in Article  III)

                                       8
<PAGE>

pursuant to which the  Borrower  shall be required to pay to the Holder upon the
consummation  of and as a condition to such  transaction  an amount equal to the
Default  Amount  (as  defined in Article  III) or (ii) be  treated  pursuant  to
Section 1.6(b) hereof. "PERSON" shall mean any individual,  corporation, limited
liability  company,   partnership,   association,   trust  or  other  entity  or
organization.

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

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

                           (d) ADJUSTMENT DUE TO DILUTIVE  ISSUANCE.  If, at any
time when any Notes are issued and outstanding, the Borrower issues or sells, or
in accordance  with this Section 1.6(d) hereof is deemed to have issued or sold,

                                       9
<PAGE>

any shares of Common Stock for no consideration or for a consideration per share
(before  deduction  of  reasonable   expenses  or  commissions  or  underwriting
discounts or allowances in connection  therewith) less than the Fixed Conversion
Price in effect on the date of such issuance (or deemed issuance) of such shares
of Common  Stock (a "DILUTIVE  ISSUANCE"),  then  immediately  upon the Dilutive
Issuance,  the Fixed  Conversion  Price  will be  reduced  to the  amount of the
consideration  per share  received by the  Borrower in such  Dilutive  Issuance;
provided that only one adjustment will be made for each Dilutive Issuance.

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

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

                                       10
<PAGE>

                           (e) PURCHASE  RIGHTS.  If, at any time when any Notes
are issued and  outstanding,  the Borrower issues any convertible  securities or
rights to purchase stock, warrants,  securities or other property (the "PURCHASE
Rights") pro rata to the record  holders of any class of Common Stock,  then the
Holder of this Note will be entitled to acquire,  upon the terms  applicable  to
such Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon  complete  conversion of this Note (without  regard to any  limitations  on
conversion  contained herein)  immediately  before the date on which a record is
taken for the grant,  issuance  or sale of such  Purchase  Rights or, if no such
record is taken,  the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

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

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

                                       11
<PAGE>

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

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

                         ARTICLE II. CERTAIN COVENANTS

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

                                       12
<PAGE>

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

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

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

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

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

                         ARTICLE III. EVENTS OF DEFAULT

                  If any of the following  events of default (each, an "EVENT OF
DEFAULT") shall occur:

                  3.1 FAILURE TO PAY PRINCIPAL OR INTEREST.  The Borrower  fails
to pay the principal hereof or interest  thereon when due on this Note,  whether
at maturity,  upon a Trading  Market  Prepayment  Event pursuant to Section 1.7,
upon acceleration or otherwise;

                                       13
<PAGE>

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

                  3.3  FAILURE TO EFFECT  REGISTRATION.  The  Borrower  fails to
obtain  effectiveness  with  the  Securities  and  Exchange  Commission  of  the
Registration  Statement within one hundred five (105) days following the Closing
Date (as  defined in the  Purchase  Agreement)  or such  Registration  Statement
lapses in effect  (or  sales  cannot  otherwise  be made  thereunder  effective,
whether  by  reason  of the  Borrower's  failure  to  amend  or  supplement  the
prospectus included therein in accordance with the Registration Rights Agreement
or otherwise) for more than twenty (20)  consecutive  days or forty (40) days in
any twelve month period after the Registration Statement becomes effective;

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

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

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

                  3.7 JUDGMENTS.  Any money  judgment,  writ or similar  process
shall be entered or filed against the Borrower or any subsidiary of the Borrower
or any of its property or other assets for more than  $50,000,  and shall remain

                                       14
<PAGE>

unvacated,  unbonded  or  unstayed  for a period  of  twenty  (20)  days  unless
otherwise  consented to by the Holder,  which  consent will not be  unreasonably
withheld;

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

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

                  3.10  DEFAULT  UNDER  OTHER  NOTES.  An Event of  Default  has
occurred and is continuing  under any of the other Notes issued  pursuant to the
Purchase Agreement,

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

                                       15
<PAGE>

                            ARTICLE IV. MISCELLANEOUS

                  4.1 FAILURE OR INDULGENCE  NOT WAIVER.  No failure or delay on
the  part of the  Holder  in the  exercise  of any  power,  right  or  privilege
hereunder  shall  operate as a waiver  thereof,  nor shall any single or partial
exercise  of any  such  power,  right or  privilege  preclude  other or  further
exercise  thereof or of any other  right,  power or  privileges.  All rights and
remedies existing  hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.

                  4.2  NOTICES.  Any notice  herein  required or permitted to be
given shall be in writing and may be  personally  served or delivered by courier
or sent by United  States  mail and shall be  deemed  to have  been  given  upon
receipt if  personally  served  (which shall include  telephone  line  facsimile
transmission)  or sent by courier or three (3) days after being deposited in the
United States mail, certified,  with postage pre-paid and properly addressed, if
sent by mail.  For the  purposes  hereof,  the address of the Holder shall be as
shown on the records of the Borrower;  and the address of the Borrower  shall be
13231 Champion Forest Drive, Suite 213, Houston,  Texas 77069, facsimile number:
713-960-9360.  Both the Holder and the  Borrower  may  change  the  address  for
service by service of written notice to the other as herein provided.

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

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

                  4.5 COST OF  COLLECTION.  If default is made in the payment of
this  Note,  the  Borrower  shall pay the  Holder  hereof  costs of  collection,
including reasonable attorneys' fees.

                  4.6 GOVERNING  LAW.  THIS NOTE SHALL BE ENFORCED,  GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED  ENTIRELY WITHIN SUCH STATE,  WITHOUT REGARD
TO THE  PRINCIPLES  OF  CONFLICT OF LAWS.  THE  BORROWER  HEREBY  SUBMITS TO THE
EXCLUSIVE  JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE  ARISING  UNDER THIS NOTE,  THE  AGREEMENTS
ENTERED INTO IN CONNECTION  HEREWITH OR THE TRANSACTIONS  CONTEMPLATED HEREBY OR
THEREBY.  BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE  MAINTENANCE  OF SUCH SUIT OR  PROCEEDING.  BOTH PARTIES  FURTHER AGREE THAT
SERVICE OF PROCESS  UPON A PARTY  MAILED BY FIRST  CLASS MAIL SHALL BE DEEMED IN
EVERY  RESPECT  EFFECTIVE  SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN

                                       16
<PAGE>

ANY  OTHER  MANNER   PERMITTED  BY  LAW.   BOTH  PARTIES   AGREE  THAT  A  FINAL
NON-APPEALABLE  JUDGMENT IN ANY SUCH SUIT OR PROCEEDING  SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER  JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL  MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE  ARISING  UNDER
THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES,  INCLUDING  ATTORNEYS'
FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

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

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

                  4.9  DAMAGES  SHARES.  The shares of Common  Stock that may be
issuable to the Holder  pursuant to Sections 1.3 and 1.4(g)  hereof and pursuant
to Section 2(c) of the Registration Rights Agreement ("DAMAGES SHARES") shall be
treated as Common Stock  issuable upon  conversion of this Note for all purposes
hereof and shall be subject to all of the  limitations  and  afforded all of the
rights of the other shares of Common Stock issuable hereunder, including without
limitation,  the  right  to be  included  in the  Registration  Statement  filed
pursuant to the  Registration  Rights  Agreement.  For  purposes of  calculating
interest payable on the outstanding principal amount hereof, except as otherwise
provided herein,  amounts  convertible  into Damages Shares ("DAMAGES  AMOUNTS")
shall not bear  interest but must be converted  prior to the  conversion  of any
outstanding  principal amount hereof,  until the outstanding  Damages Amounts is
zero.

                                       17
<PAGE>

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

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

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

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

                             ARTICLE V. CALL OPTION

                  5.1 CALL  OPTION.  Notwithstanding  anything  to the  contrary
contained  in this  Article  V, so long as (i) no Event of  Default  or  Trading
Market Prepayment Event shall have occurred and be continuing, (ii) the Borrower
has a  sufficient  number of  authorized  shares of Common  Stock  reserved  for
issuance  upon full  conversion  of the Notes,  then at any time after the Issue

                                       18
<PAGE>

Date,  and (iii) the Common  Stock is  trading  at or below $.21 per share,  the
Borrower  shall have the right,  exercisable  on not less than ten (10)  Trading
Days prior  written  notice to the Holders of the Notes (which notice may not be
sent to the Holders of the Notes until the  Borrower is  permitted to prepay the
Notes pursuant to this Section 5.1), to prepay all of the  outstanding  Notes in
accordance  with this  Section  5.1.  Any  notice of  prepayment  hereunder  (an
"OPTIONAL  PREPAYMENT")  shall be delivered to the Holders of the Notes at their
registered  addresses  appearing  on the books and records of the  Borrower  and
shall state (1) that the Borrower is  exercising  its right to prepay all of the
Notes  issued on the Issue Date and (2) the date of  prepayment  (the  "OPTIONAL
PREPAYMENT NOTICE").  On the date fixed for prepayment (the "OPTIONAL PREPAYMENT
Date"),  the Borrower shall make payment of the Optional  Prepayment  Amount (as
defined  below) to or upon the order of the Holders as  specified by the Holders
in writing to the  Borrower at least one (1)  business day prior to the Optional
Prepayment  Date. If the Borrower  exercises its right to prepay the Notes,  the
Borrower  shall make payment to the holders of an amount in cash (the  "OPTIONAL
PREPAYMENT  AMOUNT") equal to either (i) 130% (for prepayments  occurring within
thirty  (30) days of the Issue  Date),  (ii)  140%  (for  prepayments  occurring
between the  thirty-first  (31st) and sixtieth  (60th) day  following  the Issue
Date) and (iii) 150% (for  prepayments  occurring  after the sixtieth (60th) day
following  the Issue Date),  multiplied  by the sum of (w) the then  outstanding
principal amount of this Note plus (x) accrued and unpaid interest on the unpaid
principal  amount of this Note to the Optional  Prepayment Date plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any
amounts  owed to the  Holder  pursuant  to  Sections  1.3 and  1.4(g)  hereof or
pursuant  to  Section  2(c)  of the  Registration  Rights  Agreement  (the  then
outstanding  principal  amount  of this  Note to the  date of  payment  plus the
amounts  referred to in clauses (x), (y) and (z) shall  collectively be known as
the  "OPTIONAL   PREPAYMENT  SUM").   Notwithstanding   notice  of  an  Optional
Prepayment, the Holders shall at all times prior to the Optional Prepayment Date
maintain the right to convert all or any portion of the Notes in accordance with
Article I and any  portion of Notes so  converted  after  receipt of an Optional
Prepayment  Notice and prior to the Optional  Prepayment  Date set forth in such
notice and payment of the aggregate Optional Prepayment Amount shall be deducted
from the  principal  amount of Notes which are  otherwise  subject to prepayment
pursuant to such notice. If the Borrower delivers an Optional  Prepayment Notice
and fails to pay the Optional  Prepayment Amount due to the Holders of the Notes
within two (2)  business  days  following  the  Optional  Prepayment  Date,  the
Borrower  shall forever  forfeit its right to redeem the Notes  pursuant to this
Section 5.1.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       19
<PAGE>

                  IN WITNESS WHEREOF, Borrower has caused this Note to be signed
in its name by its duly authorized officer this 30th day of December, 2004.

                                            SHARP HOLDING CORPORATION

                                            By: ______________________________
                                                George Sharp
                                                Chief Executive Officer

                                       20
<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION
                    (To be Executed by the Registered Holder
                         in order to Convert the Notes)

                  The   undersigned   hereby   irrevocably   elects  to  convert
$__________  principal  amount of the Note (defined below) into shares of common
stock, par value $.001 per share ("COMMON STOCK"), of Sharp Holding Corporation,
a Delaware  corporation  (the  "BORROWER")  according to the  conditions  of the
convertible  Notes of the Borrower  dated as of December 30, 2004 (the "NOTES"),
as of the date written  below.  If securities  are to be issued in the name of a
person other than the  undersigned,  the undersigned will pay all transfer taxes
payable with respect thereto and is delivering  herewith such  certificates.  No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any. A copy of each Note is attached  hereto (or  evidence of loss,  theft or
destruction thereof).

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

         Name of DTC Prime Broker:
                                  ----------------------------------------------
         Account Number:
                        --------------------------------------------------------

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

         Name:
              ------------------------------------------------------------------
         Address:
                 ---------------------------------------------------------------

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

                  Date of Conversion:___________________________
                  Applicable Conversion Price:____________________
                  Number of Shares of Common Stock to be Issued Pursuant to
                  Conversion of the Notes:______________
                  Signature:___________________________________
                  Name:______________________________________
                  Address:____________________________________

                                       21
<PAGE>

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

                                       2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00076-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00076-of-00352.parquet"}]]